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Exhibit 10.2 EARN-IN AGREEMENT AMENDMENT         This Earn-in Agreement Amendment (“EIA Amendment”) is made as of February 28, 2006 between HECLA VENTURES CORP., a Nevada corporation duly qualified to do business and in good standing in the state of Nevada, whose principal address is 6500 Mineral Drive, Coeur d’Alene, Idaho 83815-8788 (hereinafter referred to as “Hecla Ventures”) and its Guarantor and parent company, Hecla Mining Company and RODEO CREEK GOLD INC., a Nevada corporation whose address is c/o Richard Harris, Ste. 260-6121 Lakeside Drive, Reno, NV 89511 (hereinafter referred to as “Rodeo Creek”) which is qualified to do business and is in good standing in the State of Nevada and its Guarantor and indirect parent company, Great Basin Gold Ltd. RECITALS         A.        WHEREAS the Parties entered into an Earn-in Agreement effective August 2, 2002 (the “Earn-In Agreement”) which the parties desire to amend hereby;         B.        AND WHEREAS the Parties are engaged in a legal dispute in connection with the Earn-in Agreement which this EIA Amendment will resolve and settle;         NOW, THEREFORE, in consideration of the payments provided for herein and the mutual promises set forth below, the Parties hereby agree to the provisions of this EIA Amendment. PART I DEFINITIONS         1.1       Capitalized terms herein shall have the meanings set forth in the Earn-in Agreement except as hereby amended.         1.2       “Feasibility Study” the existing definition in the Earn-in Agreement is hereby amended by adding to the existing definition the following sentence: “The Feasibility Study shall be either produced by, or endorsed by, an internationally recognized mining engineering firm which is independent of the parties.”         1.3       “Commercial Production” the existing definition in the Earn-in Agreement is hereby deleted and replaced with the following: “Commercial Production” means the establishment of a mine on the Properties in the manner and at the production level recommended by the Feasibility Study and achievement of Commercial Production shall be deemed to occur upon the first operation of such mine at a minimum of 75% of the life of mine scheduled average production rate provided for in the Feasibility Study during any consecutive 30 day period. -------------------------------------------------------------------------------- - 2 - PART II TERM OF EARN-IN AGREEMENT         2.1       Article III of the Earn-in Agreement is amended by substituting the following in its entirety: “ARTICLE III TERM OF EARN-IN AGREEMENT                The Term of this Earn-in Agreement shall commence as of the Effective Date and shall automatically terminate on the earlier of (i) August 2, 2009 or (ii) the date that Hecla Ventures vests in its 50% Interest pursuant to Article V, unless this Earn-in Agreement is earlier terminated pursuant to Article VIII, or earlier terminated pursuant to Article XIII on account of Hecla Ventures failing to meet the requirements of Article V, or unless this Earn-in Agreement is extended by amendment hereof upon the Parties’ mutual written agreement.                The parties hereby agree deadlines included in this article shall be extended for a period of time equal to the time that Hecla Ventures determines, acting reasonably, it is prohibited from advancing or completing the requirements of this article (for example, lack of legal access), by the action or inaction of Great Basin Gold, Rodeo Creek, or any third party who holds an interest in or a contractual right effecting any portion of the Properties. During any period in which Hecla Ventures determines, acting reasonably, it is prohibited from advancing the activities associated with Stage II and/or vesting by lack of legal access to any portion of the Properties due to action or inaction of Great Basin Gold or Rodeo Creek or any third party who holds an interest in or a contractual right effecting any portion of the Properties, Rodeo Creek will pay 100% of the Project’s holding costs, as well as all costs during a 60-day remobilization period at the recommencement of operations.                The language in the preceding paragraph shall also apply to Hecla Ventures’ obligations under section 3.1 below, and any other provisions in the Earn-in Agreement. The provisions in section 2.1 shall not restrict or preclude Hecla Ventures’ from exercising any other rights or remedies provided for at law or under the Earn-in Agreement.         2.2        Section 8.4 of the Earn-in Agreement is hereby deleted from the Agreement and Hecla agrees that completion by it of the Attachment A activities is no longer optional but a commitment and that material changes from Attachment A (which supersedes Exhibit E to the EIA) will only be made with Rodeo Creek’s consent. -------------------------------------------------------------------------------- - 3 - PART III INITIAL CONTRIBUTION AND REQUIRED EARN-IN EXPENDITURES         3.1       Section 5.1(c) of the Earn-in Agreement is hereby deleted and substituted with the following:   “5.1      (c)      Hecla Ventures hereby commits to complete and fund, at whatever cost, 100% of the remaining Stage I Earn-in Activities and to complete all such activities (except preparation and delivery of the Feasibility Study) by March 31, 2007, failing which Rodeo Creek may, in addition to any other rights it may have, terminate Hecla Ventures’ Earn-in rights hereunder pursuant to Article XIII. Hecla Ventures also agrees that it is a condition to Hecla Ventures vesting in a 50% Participating Interest in the Properties that it achieves Commercial Production by August 2, 2009 failing which Hecla Venture’s Earn-in rights under this Agreement may also be terminated by Rodeo Creek pursuant to Article XIII.   Each party will be obligated to fund its share of the Stage II Earn-in Activities. However, Hecla Ventures shall fund Rodeo Creek’s portion of Stage II Expenditures towards achieving Commercial Production until the later of (i) 30 days after Hecla has delivered to Rodeo Creek the Feasibility Study and (ii) the date on which the amount Hecla Ventures’ Stage II Earn-in Expenditures, when aggregated with its Stage I Earn-in Expenditures, exceeds $21.8 million. Thereupon Rodeo Creek shall be obligated to pay its portion of Hecla’s Ventures’ Stage II Expenditures. In addition, no later than 120 days after Hecla has delivered to Rodeo Creek the Feasibility Study, Rodeo Creek will be obligated to repay Hecla Ventures for any and all Stage II expenditures that Hecla Ventures funded on behalf of Rodeo Creek. Hecla Ventures will send Rodeo Creek invoices for 50% of Stage II costs following the submission of the Feasibility Study. If Rodeo Creek fails to remit full payment of the invoices within 30 days of the invoice date for their share of Stage II Expenditures, the failure to pay will be deemed a default in making a cash call and Hecla Ventures shall have all rights and remedies as provided in section 10.3 and 6.4 of Exhibit F to the Earn-In Agreement (the Joint Operating Agreement). In lieu of the rights and remedies provided in sections 10.3 and 6.4, Hecla Ventures shall have the right to elect to be repaid for any amounts due and in default from Rodeo Creek hereunder by retaining and marketing Rodeo Creek’s first share of production under the Joint Operating Agreement until Hecla Ventures has received four times the amount of the default. In the event Rodeo Creek funds 100% of any Stage II activities and Hecla Ventures does not pay its portion, Rodeo Creek retains the same rights and remedies against Hecla Ventures as stated above. All expenditures incurred by Hecla Ventures in furtherance of Commercial Production, other than those expenditures specifically incurred in connection with the completion of the Stage I Earn-in Activities described in Attachment A, shall be deemed to be incurred for Stage II Earn-in Activities and they (plus the Feasibility Study) shall require the prior approval of the Management Committee as if Article VII of the Joint Operating Agreement were in effect and notwithstanding that Hecla Ventures has not yet vested and the Joint Operating Agreement is not otherwise effective. On approval of a Stage II development budget, and commencement of Stage II underground excavations or construction of Stage II infrastructure by Hecla Ventures, it shall, within ten (10) days thereafter, issue to Great Basin one million (1,000,000) Hecla Mining Warrants, (“Tranche 2”) in the form of the Warrant Agreement in Exhibit G exercisable at the Exercise Price and in accordance with the terms and conditions of the Warrant Agreement.” -------------------------------------------------------------------------------- - 4 -         3.2       Sections 5.2, 5.4 and 5.5 of the Earn-in Agreement are hereby deleted and substituted with the following:   “5.2      Reasonable Earn-in Activities.  Hecla Ventures’ Stage I Earn-in Activities shall be conducted in accordance with Attachment A hereto. The Parties hereby approve the program and budget for Stage I Earn-in Activities   5.4      Completion of Required Earn-in Expenditures.  Upon completion of Stage I Earn-in Activities, excluding preparation and delivery of the Feasibility Study, Hecla Ventures shall provide notice to Rodeo Creek that it (i) has completed Stage I Earn-in activities, (ii) intends to begin Stage II activities, and (iii) submits a proposed budget for Stage II activities. Together with the notice, Hecla Ventures shall provide to Rodeo Creek with a certification of expenses incurred during Stage I activities. Rodeo Creek may, at its own expense, commence an audit of Hecla Ventures’ Stage I expenditures by a licensed accounting firm. If Rodeo Creek chooses to audit Stage I expenditures, Hecla Ventures must be given written notice of Rodeo Creek’s intent to audit within 30 days of delivery of the Feasibility Study, and the audit engagement must commence within 45 days of delivery of the Feasibility Study. Unless such notice is received within 30 days, all expenditures for Stage I activities are deemed approved. Hecla Ventures shall provide a similar certification, and Rodeo Creek shall provide similar notices and abide by the same time frames upon the completion of Stage II Earn-in Activities.   5.5      Stage II Earn-in Activities and Transfer of Property.  Hecla shall have earned a vested undivided Participating Interest in the Properties subject to the Joint Operating Agreement by (i) completing all Stage I Earn-in Activities (except the Feasibility Study) by March 31, 2007, (ii) delivering the Feasibility Study, (iii) achieving Commercial Production by August 2, 2009, and (iv) issuing to Great Basin an additional one million (1,000,000) Hecla Mining Warrants (“Tranche 3”) the date Commercial Production is achieved, in the form of the Warrant agreement in Exhibit G. The Tranche 3 warrants will be exercisable at the Exercise Price and in accordance with the terms and conditions of the Warrant Agreement and dated and priced on the date that Hecla gives notice under Section 5.4 to Rodeo Creek that Commercial Production has been achieved. Upon Hecla Ventures vesting:        (a)        Rodeo Creek shall convey to Hecla Ventures an undivided fifty percent (50%) of Rodeo Creek’s interest in the Properties, by executing, acknowledging and delivering to Hecla Ventures a good and sufficient conveyance in the form of Exhibit C to this Earn-in Agreement;        (b)        Rodeo Creek and Hecla Ventures shall cause to become effective the Joint Operating Agreement in the form of the attached Exhibit F, which shall include the Properties and shall have an effective date as of the date of the above-described vesting; and        (c)        Rodeo Creek shall issue to Hecla Ventures the Great Basin Warrants set forth in Exhibit E and H. -------------------------------------------------------------------------------- - 5 - PART IV OPERATIONS AND GOVERNANCE         4.1       Section 9.1(a), Management Committee – Organization and Composition, of the Earn-In Agreement, is hereby amended by deleting the second sentence of Section 9.1(a) and substituting the following:   “The Management Committee shall consist of two (2) members appointed by Rodeo Creek, one of whom shall be Mr. Walter Segsworth or other person acceptable to Hecla, and two (2) members appointed by Hecla Ventures, one of whom shall be Mr. Art Brown or other person acceptable to Great Basin.”         4.2       Section 9.5, Parameters for Hecla Ventures’ Earn-in Activities, of the Earn-In Agreement is hereby amended by deleting the last two sentences thereof and substituting the following:   “Except as otherwise provided in section 5.1(c), proceeds from all Products (to a maximum of fifty thousand (50,000) gold ounces or equivalent) produced from the Area of Interest during the term of this Earn-in Agreement shall be distributed to Hecla Ventures and Rodeo Creek as follows: (i) one hundred percent (100%) of ounces recovered in connection with Stage I Earn-in Activities, to Hecla Ventures up to the aggregate of Hecla Ventures’ actual costs of Stage I Earn-in Activities, not to exceed $21.8 million plus fifteen percent (15%) and (ii) all other Stage I ounces and all of the ounces recovered in connection with Stage II Earn-in Activities, as to fifty percent (50%) to each of Hecla Ventures and Rodeo Creek. All ounces produced after the first 50,000 ounces shall be distributed according to the Participating Interests of the parties, subject to the Purchase Price Royalty.” PART V SETTLEMENT OF LITIGATION AND MUTUAL RELEASES         5.1       On execution of this EIA Amendment, Hecla Ventures and Hecla Mining shall dismiss with prejudice the legal proceedings initiated by them against Rodeo Creek and Great Basin in Nevada. By execution hereof, all the Parties agree that there are no longer any outstanding claims or allegations of default or breaches of the Earn-In Agreement, by or in respect of any of the Parties, and this EIA Amendment shall constitute a mutual general release by each of the Parties of each other Party from any action or claim arising to the date hereof in connection with the Earn-In Agreement. Thereupon, the only rights and obligations existing between the Parties are as contemplated by the Earn-In Agreement, as amended by this EIA Amendment. -------------------------------------------------------------------------------- - 6 - PART VI CONFIRMATION OF OTHER EARN-IN AGREEMENT TERMS         6.1        In all other respects the representations, warranties and covenants of the Parties contained in the Earn-in Agreement and the terms and conditions therein provided are hereby confirmed by the Parties to be in full force and effect, unamended.         IN WITNESS WHEREOF the Parties have executed this EIA Amendment as of the date first above written. HECLA VENTURES CORP. RODEO CREEK GOLD INC.   By: /s/ Phillips S. Baker, Jr. By: /s/ Ferdi Dippenaar Authorized Signatory Authorized Signatory   Phillips S. Baker, Jr. Ferdi Dippenaar Print Name Print Name   Director Director Title Title         IN WITNESS WHEREOF the Guarantors have executed this EIA Amendment as of the date first above written. HECLA MINING COMPANY GREAT BASIN GOLD LTD.   By: /s/ Phillips S. Baker, Jr. By: /s/ Ferdi Dippenaar Authorized Signatory Authorized Signatory   Phillips S. Baker, Jr. Ferdi Dippenaar Print Name Print Name   President and CEO President and CEO Title Title --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- TRANSITIONAL AGREEMENT This Transitional Agreement (this “Agreement”) is entered into this February 13, 2006 by and between Bluestar Health, Inc., a Colorado corporation (“Bluestar” or the “Company”), Alfred Oglesby, an individual (“Oglesby”), and Gold Leaf Homes, Inc., a Texas corporation (“Gold Leaf’). Each of Bluestar, Oglesby, and Gold Leaf shall be referred to as a “Party” and collectively as the “Parties.” RECITALS WHEREAS, Bluestar, Gold Leaf, and Tom Redmon (“Redmon”) are parties to that certain Asset Purchase Agreement of even date herewith (the “Asset Purchase Agreement”); WHEREAS, in connection with the Asset Purchase Agreement, the Parties have agreed to the additional terms and conditions set forth herein. NOW, THEREFORE, FOR good and adequate consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the Parties agree as follows: AGREEMENT 1.    Oglesby shall receive a bonus of 3% of the revenues of each company or assets acquired by the Company during the term of this Agreement, payable quarterly in either (i) cash or (ii) common stock of the Company, at Consultant’s discretion. If paid in common stock of the Company, the stock will be valued at the three (3) day average closing bid price of the Company’s common stock for the three (3) days immediately preceding the end of the applicable quarter. 2.    Oglesby will sell to Gold Leaf a total of two hundred fifty thousand (250,000) shares of common stock of the Company (the “Shares”). As consideration for the Shares, Gold Leaf shall pay the total purchase price of $150,000 (the “Purchase Price”). The Purchase Price shall be paid $60,000 at the Closing (as defined in the Asset Purchase Agreement) (the “Initial Payment”), and the balance payable, without interest, as follows: (a) $20,000 is due on the first of each month for four (4) consecutive months, beginning March 1, 2006, and (b) $10,000 is due on July 1, 2006 (the “Subsequent Payments”). 3.    The Company agrees that for the term of this Agreement:   (a)    the Company will not issue shares of its common stock that will be registered on a Form S-8 for a period of twelve (12) months without Oglesby’s written consent; (b)    the Company will not issue preferred stock or effectuate a reverse stock split without Oglesby written consent; Page 1 of 4 -------------------------------------------------------------------------------- (c)    the Company will increase revenues in 2006 by at least 10% over 2005 numbers; (d)    the Company will complete at least one acquisition of another company in the same or a related industry to the Company in 2006; (e)    the Company will remove the restrictive legend on any shares of Company stock owned by Oglesby or his assigns as soon as possible in compliance with Federal and state securities laws and upon request by Oglesby. In the event all of the items listed above are not completed as outlined, then Oglesby shall have the right to demand transfer of all the shares of the Company’s stock held in escrow pursuant to that certain Escrow Agreement of even date herewith be transferred to him or his assigns. 4.    Representations of Oglesby and Gold Leaf. (a)    Oglesby hereby represents and warrants that: (i)    Oglesby has title in and to the Shares free and clear of all liens, security interests, pledges, encumbrances, charges, restrictions, demands and claims, of any kind and nature whatsoever. (ii)    Oglesby shall transfer title, in and to the Shares, to Gold Leaf free and clear of all liens, security interests, pledges, encumbrances, charges, restrictions, demands and claims, of any kind and nature whatsoever, whether direct or indirect or contingent. (iii)    Oglesby has the full right, power and authority to enter into this Agreement and to carry out and consummate the transaction contemplated herein. This Agreement constitutes the legal, valid and binding obligation of Oglesby. (b)    Gold Leaf hereby represents and warrants that: (i)    Gold Leaf has the full right, power and authority to enter into this Agreement and to carry out and consummate the transaction contemplated herein. This Agreement constitutes the legal, valid and binding obligation of Gold Leaf. (ii)    Gold Leaf acknowledges that investment in the Shares involves substantial risks and is suitable only for persons of adequate financial means who can bear the economic risk of an investment in the Shares for an indefinite period of time. Gold Leaf further represents that it: Page 2 of 4 --------------------------------------------------------------------------------   (1) has adequate means of providing for its current needs and possible personal contingencies, has no need for liquidity in its investment in the Shares, is able to bear the substantial economic risks of an investment in the Shares for an indefinite period, and, at the present time, can afford a complete loss of its investment;   (2) does not have an overall commitment to investments which are not readily marketable that is disproportionate to its net worth, and that its investment in the Shares will not cause such overall commitment to become excessive;   (3) has such knowledge and experience in financial, tax and business matters that it is capable of evaluating the merits and risks of an investment in the Shares;     (4) has been given the opportunity to ask questions of and to receive answers from persons acting on Bluestar’s behalf concerning the terms and conditions of this transaction and also has been given the opportunity to obtain any additional information which Oglesby possesses or can acquire without unreasonable effort or expense. As a result, Gold Leaf is cognizant of the financial condition, capitalization, and the operations of Bluestar, has available full information concerning their affairs and has been able to evaluate the merits and risks of the investment in the Shares.   (5) Gold Leaf further acknowledges that the Shares are restricted securities under Rule 144 of the Act, and, therefore, when transferred by Oglesby to Gold Leaf will contain a restrictive legend substantially similar to the following:   THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Page 3 of 4 -------------------------------------------------------------------------------- 5.    This Agreement shall last for a period of two (2) years from the date of Closing (as defined in the Asset Purchase Agreement). 6.    This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas, including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. 7.    The Parties submit to the jurisdiction of the Courts of the State of Texas or a Federal Court empanelled in the State of Texas, County of Harris, for the resolution of all legal disputes arising under the terms of this Agreement, including, but not limited to, enforcement of any arbitration award. 8.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. 9.    Except as otherwise provided herein, if a dispute should arise between the parties including, but not limited to arbitration, the prevailing party shall be reimbursed by the nonprevailing party for all reasonable expenses incurred in resolving such dispute, including reasonable attorneys' fees exclusive of such amount of attorneys' fees as shall be a premium for result or for risk of loss under a continency fee arrangement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date first written hereinabove. “Company”   “Oglesby”       Bluestar Health, Inc.                 /s/ Alfred Oglesby   /s/ Alfred Oglesby By:    Alfred Oglesby   Alfred Oglesby, an individual Its:    President                 “Gold Leaf”           Gold Leaf Homes, Inc.                 /s/ Tom Redmon     By:    Tom Redmon     Its:    President       Page 4 of 4 --------------------------------------------------------------------------------

  EXHIBIT 10.3 LINE OF CREDIT NOTE       $35,000,000   Denver, Colorado     July 25, 2006      FOR VALUE RECEIVED, the undersigned JOHN B. SANFILIPPO & SON, INC., a Delaware corporation (hereinafter referred to as “Borrower”), promises to pay to the order of LASALLE BANK NATIONAL ASSOCIATION (hereinafter referred to as “Lender”), at such place as U.S. Bank National Association, as agent for the Lender, may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Thirty Five Million Dollars ($35,000,000) or so much thereof as may be advanced and be outstanding, together with interest on any and all principal amounts outstanding calculated in accordance with the provisions set forth below. This Note is issued under that certain Amended and Restated Credit Agreement of even date herewith (as the same may be amended, replaced, restated and/or supplemented from time to time, the “Credit Agreement”) between Borrower, U.S. Bank National Association, a national banking association, as agent (the “Agent”), Lender and the other lenders identified therein (collectively the “Lenders”).      Capitalized terms used and not defined herein shall have the meanings given to such terms in the Credit Agreement.      The outstanding Loans hereunder shall be maintained as more fully provided in the Credit Agreement. The Borrower shall have the right to make prepayments of principal only in accordance with the Credit Agreement.      Borrower shall pay interest on the unpaid principal amount of each Loan made by the Lender from the date of such Loan until such principal amount shall be paid in full, at the times and at the rates per annum set forth in the Credit Agreement.      The unpaid balance of this obligation at any time shall be the total amounts advanced hereunder by the Lender, together with accrued and unpaid interest, less the amount of payments made hereon by or for the Borrower, which balance may be endorsed hereon from time to time by the Lender.      In addition to the repayment requirements imposed upon the Borrower under the Credit Agreement, together with the agreements referred to therein, the principal and interest owing under this Note shall be due and payable in full on the Maturity Date, without presentment, demand, protest or further notice (including without limitation, notice of intent to accelerate and notice of acceleration) of any kind, all of which are expressly waived by the Borrower. Time is of the essence hereof.      Interim payments made by Borrower pursuant to and in accordance with the Credit   --------------------------------------------------------------------------------   Agreement shall be applied as provided therein.      Should any Matured Default occur and be continuing, then all sums of principal and interest outstanding hereunder may be declared immediately due and payable in accordance with the Credit Agreement, without presentment, demand or notice of dishonor, all of which are expressly waived, and the Lender may have no further obligation to make Loans pursuant to the terms of the Credit Agreement.      The obligations of the Borrower to the Lender hereunder and under the Credit Agreement are secured by the Collateral granted to the Agent, for the ratable benefit of the Lenders pursuant to and as set forth in the Credit Agreement.      This Note shall be construed in accordance with the laws of the State of Colorado.                   JOHN B. SANFILIPPO & SON, INC., a Delaware corporation                       By   /s/ Michael J. Valentine                           Its Chief Financial Officer     - 2 -

EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of June 2, 2006, by and between YOUNG INNOVATIONS, INC., a Missouri corporation ("Employer"), and Stephen T. Yaggy, of Fort Wayne, Indiana ("Employee"). Capitalized terms are defined in the Appendix to this Agreement. In consideration of Employer's employment of Employee, the terms, conditions and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and Employer, intending to be legally bound, hereby agree as follows: 1.        EMPLOYMENT. Employer hereby agrees to employ Employee and Employee agrees to accept such employment upon the terms and conditions herein set forth. 2.            TERM. The initial term of employment hereunder shall commence on the date hereof and shall expire on June 2, 2007 (such period, the "Term"); PROVIDED, HOWEVER, that the Term shall automatically be extended for an additional period of one year on June 2, 2007 and on each June 2 thereafter unless Employer or Employee delivers written notice of the intention not to extend the Term not later than six (6) months prior to its expiration. 3.            POSITION AND DUTIES. Employee hereby agrees to serve as Vice President or in such other capacity to which Employee may be promoted during the term hereof. Employee shall devote his full business time and attention to the management, development and enhancement of the business of Employer and perform such duties as are necessary and required of the Vice President or in such capacity as Employee may then be serving. During the Term, Employee may not undertake any other employment, engagements, consulting or other outside activities that in the opinion of the Board of Directors interfere with the effective carrying out of Employee's duties hereunder, PROVIDED, HOWEVER, that nothing herein shall prevent Employee from engaging in community and/or charitable activities, so long as such activities, either singly or in the aggregate, do not interfere with the proper performance of his duties and responsibilities to Employer.   4. COMPENSATION AND BENEFITS. (a)          BASE SALARY. Employer shall pay to Employee salary at the rate of $130,000 per year during the Term hereof, or such higher amounts as shall be recommended and approved by the Compensation Committee of the Board of Directors (in each case, the "Base Salary"). (b)          BONUS COMPENSATION. In addition to Base Salary, Employee shall be entitled to receive bonus compensation as recommended and approved by the Compensation Committee of the Board of Directors (the "BONUS COMPENSATION"). (c)          HOLIDAYS, VACATION TIME AND SICK LEAVE. Employee shall be entitled to paid holidays, vacation and sick leave as is consistent with Employer's policy for executive employees with respect to such matters as of the date hereof.     --------------------------------------------------------------------------------     (d)          OTHER BENEFITS. Subject to Employer's rules, policies and regulations as in effect from time to time, Employee shall be entitled to all other rights and benefits for which Employee may be eligible under any: (i) group life insurance, disability or accident, death or dismemberment insurance, (ii) medical and/or dental insurance program, (iii) 401(k) benefit plan, or (iv) other employee benefits that Employer may, in its sole discretion, make generally available to employees of Employer of the same level and responsibility as Employee; PROVIDED, HOWEVER, that nothing herein shall obligate Employer to establish or maintain any of such benefits or benefit plans. (e)          AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an automobile allowance consistent with Employer’s policy for executive employees with respect to such matters as of the date hereof. 5.            SUPPLEMENTAL PAYMENT UPON A CHANGE IN CONTROL. If a Change In Control (as hereafter defined) occurs and Employee is employed by Employer on the date of the Change In Control or Employee demonstrates that Employee would have been employed by Employer on the date of the Change In Control but for steps taken at the request of a third party to effect the Change In Control or Employee's termination was without Cause and arose in connection with or anticipation of such Change In Control, then Employee shall have the additional rights set forth in this Section 5. Namely, Employer shall, within thirty (30) days immediately following the date of the Change In Control, pay to Employee a lump sum cash amount equal to Employee’s then current annual base salary plus an amount equal to the maximum Bonus Compensation for the year in which the Change In Control occurs that Employee would have been eligible to receive under Employer’s bonus program (the “Change of Control Payment”); provided however, in no event may the aggregate present value of such payments to Employee exceed 2.9999 times the “base amount” (as such term is used in Section 280G(b)(3) of the Code), and Employee agrees to reduce the amount permitted to be paid pursuant to this Agreement (including amounts specified under Sections 5 and 6 hereto) which may be subject to Section 280G of the Code to comply with this limitation. Employer shall engage its accounting firm to determine the “base amount” and all amounts payable in connection with a Change In Control; provided, however, that if the accounting firm is serving as accountant or auditor for the person, entity or group effecting the Change In Control, Employer shall appoint another nationally recognized accounting firm which shall provide Employee with detailed supporting calculations for its conclusions. All fees and expenses of the accounting firm shall be borne solely by Employer.   6. TERMINATION OF EMPLOYMENT. (a)          PERMANENT DISABILITY. In the event of the Permanent Disability (as defined below) of Employee. Employer may terminate this Agreement by giving notice to Employee of its intention to terminate and this Agreement shall terminate at the end of the month following the month in which notice is given. In the event of such termination, Employer shall pay (offset by any such amounts payable under Employer’s benefit plans or insurance) all amounts of Base Salary and Bonus Compensation accrued pursuant to Section 4 above through the date of termination, which payment shall constitute full and complete satisfaction of Employer’s obligations hereunder. Notwithstanding the foregoing, all payments hereunder shall   - 2 -   --------------------------------------------------------------------------------   end upon the earlier to occur of Employee's attaining the age of sixty-five (65) or the cessation of such Permanent Disability (whether as a result of recovery, rehabilitation, death or otherwise). (b)          DEATH. In the event of Employee's death, Employer shall pay to Employee's personal representative (on behalf of Employee's estate), within sixty (60) days after Employer receives written notice of such representative's appointment, all amounts of Base Salary and Bonus Compensation accrued pursuant to Section 4 above as of the date of Employee's death, which payment shall constitute full and complete satisfaction of Employer's obligations hereunder. Employee and his dependents shall also be entitled to any continuation of health insurance coverage rights, if any, under applicable law. (c)          TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION WITHOUT GOOD REASON. Employer may in its sole discretion terminate this Agreement and Employee's employment with Employer for Cause (as defined in the Appendix) at any time and with or without advance notice to Employee. If Employee's employment is terminated for Cause, or if Employee Voluntarily Terminates (as defined in the Appendix) his employment with Employer without Good Reason (as defined in the Appendix), Employer shall promptly pay to Employee all amounts of Base Salary accrued pursuant to Section 4 above through the date of termination (but not Bonus Compensation), whereupon Employer shall have no further obligations to Employee under this Agreement. Employee and his dependents shall also be entitled to any continuation health insurance coverage rights, if any, under applicable law. (d)          TERMINATION WITHOUT CAUSE; VOLUNTARY TERMINATION WITH GOOD REASON. Employer may terminate this Agreement and Employee's employment with Employer without Cause at any time, with or without notice, for any reason or no reason (and no reason need be given). Employee may terminate this Agreement and Voluntarily Terminate his employment with Employer with Good Reason upon thirty (30) days' prior written notice to Employer, provided that Employer does not correct the circumstances giving Employee Good Reason during such thirty (30) day period. In the event Employee's employment with Employer is terminated pursuant to this Section 6(d) and such termination is not in connection with a Change In Control, (i) Employer shall pay to Employee all amounts of Base Salary and Bonus Compensation accrued pursuant to Section 4 above through the date of termination, and (ii) Employee shall be relieved of his obligations under Sections 1 and 3 hereof. In addition, if Employee's employment with Employer is terminated pursuant to this Section 6(d) and such termination is not in connection with a Change In Control, Employer shall pay to Employee the Base Salary that Employee would have earned under this Agreement for the remaining Term together with all reasonable attorneys' or other professional fees and costs incurred by Employee in enforcing his rights under this Section 6(d). Employer may also require Employee to fully and completely release any and all claims for breach of this Agreement at the time of termination as a condition to receiving such payments under this Section 6(d). Employee and his dependents shall also be entitled to any continuation health insurance coverage rights, if any, under applicable law. Any lump sum payment shall be made as soon as practicable following the effective date of Employee’s termination (but in no event later than the fifteenth day of the third month after the date of termination), unless Employer reasonably determines that Code Section 409A will result in the imposition of additional tax on account of such payment before the expiration of the 6-month period described in Section 409A(a)(2)(B)(i) of the Code in which case such payment will be paid on the date that is six (6) months and one (1) day following the   - 3 -   --------------------------------------------------------------------------------   date of Employee’s separation from service (as defined in Code Section 409A) or, if earlier, the date of death of Employee. (e)          MUTUAL AGREEMENT. This Agreement may be terminated by the mutual written agreement of Employer and Employee. Employee's rights and obligations, in such event, shall be as set forth in that agreement.   7. EMPLOYEE COVENANTS. (a)          CONSIDERATION AND ACKNOWLEDGEMENTS. Employee acknowledges and agrees that the covenants described in this Section 7 are essential terms of this Agreement and that the Agreement would not be entered into by Employer in the absence of the covenants described herein. Employee acknowledges and agrees that the covenants set forth in this Section are necessary for the protection of the business interests of Employer. Employee further acknowledges that these covenants are supported by adequate consideration as set forth elsewhere in this Agreement, that full compliance with these covenants will not prevent Employee from earning a livelihood following the termination of his employment, and that these covenants do not place undue restraint on Employee and are not in conflict with any public interest . Employee acknowledges and agrees that the covenants set forth in this Section 7 are reasonable and enforceable in every respect under applicable law. (b)          DEFINITIONS. As used in this Section 7, the following terms have the following meanings: (i)           "Employer" shall mean Young Innovations, Inc., including and any parent, subsidiary or affiliate as of the date of this Agreement or at any time during the term of Employee’s employment. (ii)          "Confidential Information" shall include any and all information not generally available to the public through legitimate means regarding any past, current or anticipated future business, product, system service, process, or practice of Employer, as well as any and all information relating to Employer's business, research, development, purchasing, accounting, advertising, marketing, manufacturing, merchandising and selling . Confidential Information includes but is not limited to information that may constitute a "trade secret" under applicable law. (c)          Employee hereby acknowledges and agrees that all personal property and equipment furnished to or prepared by Employee in the course of or incident to his employment by Employer, belongs to Employer and shall be promptly returned to Employer upon termination of Employee's employment. The term "PERSONAL PROPERTY" includes, without limitation, all books, manuals, records, reports, notes, contracts, requests for proposals, bids, lists, blueprints, and other documents, or materials, or copies thereof (including computer files), and all other proprietary information relating to the business of Employer or any of its affiliates. Following termination, Employee will not retain any written or other tangible material containing any proprietary information of Employer or any of its affiliates. (d)          Upon termination of employment, Employee shall be deemed to have resigned from all offices and directorships then held with Employer and each of its affiliates.   - 4 -   --------------------------------------------------------------------------------     (e)          The representations and warranties contained herein and Employee's obligations under Sections 7 and 10 shall survive termination of employment and the expiration of the Term of this Agreement. (f)           CONFIDENTIALITY . Except as necessary to perform his job duties, Employee agrees not to use any Confidential Information, or disclose any Confidential Information to any person or entity, either during or at any time after his employment, without Employer's prior written consent, unless required to do so by a court of competent jurisdiction, or by an administrative or legislative body (including a committee thereof) with purported or apparent jurisdiction to order Employee to divulge, disclose or make accessible such information. (g)          NON-SOLICITATION. Employee agrees that during the term of his employment that he will not directly or indirectly solicit any other employee to leave the employ of Employer or to carry out, directly or indirectly, any such activity; provided, however, that Employer shall not be in violation of this provision if an employee decides to join the new employer of Employee if Employee did not intentionally direct or solicit such employee to leave. (h)          INVENTIONS AND PATENTS . Employee agrees to promptly and fully disclose in writing and does hereby assign to Employer every invention, innovation, copyright, or improvement made or conceived by Employee during the period of his employment that relates directly or indirectly to his employment with Employer. Employee further agrees that both during and after his employment, without charge to Employer but at Employer's expense, he will execute, acknowledge and deliver any documents, including applications for Letters Patent, as may be necessary, or in the opinion of Employer, advisable to (a) obtain, enjoy and/or enforce Letters Patent for those inventions, innovations or improvements in the United States and in any other country; (b) obtain, enjoy or enforce the right to claim the priority of the first filed patent application anywhere in the world; or (c) vest title in Employer and its successors, assigns or nominees. Additionally, Employee agrees that for a period of one (1) year after termination of his employment, any invention, development, innovation, or improvement within the scope of this Section shall be presumed to have been made during the term of his employment. Employee shall have the burden of clearly and convincingly establishing otherwise. This Agreement does not apply to any invention for which no equipment, supplies, facility or trade secret information of Employer was used and which was developed entirely on Employee's own time, and (1) which does not relate (a) directly to the business of Employer or (b) to Employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by employee for Employer. (i)           ENFORCEMENT OF THESE COVENANTS. Employee acknowledges that full compliance with all of the covenants set forth in this Section 7 is necessary to enable Employer to do business with its customers. In the event of a breach of any of these covenants, Employee therefore acknowledges and agrees that Employer shall be entitled to injunctive relief, regardless of whether or not Employer has complied with this Agreement, and Employer shall further be entitled to such other relief, including money damages, as may be deemed appropriate by a court of competent jurisdiction. In the event of a court action based upon an alleged breach of any of these covenants, the prevailing party (as determined by court ruling on the merits of the   - 5 -   --------------------------------------------------------------------------------   dispute) will be reimbursed by the other party for reasonable attorneys' fees and costs incurred as a result of the dispute. If any court should at any time find any one of these covenants to be unenforceable or unreasonable as to scope, territory or period of time, then the scope, territory or period of time of the covenant shall be that determined by the court to be reasonable, and the parties hereby agree that the court has the authority to so modify any of these covenants as necessary to make the covenant enforceable. (j)           EXISTENCE OF OTHER OBLIGATIONS. Employee represents and warrants that he is not currently subject to any contractual or other obligations to any former employer or other entity, including but not limited to obligations not to use or disclose confidential information, or to refrain from competing with any person or entity. (k)          WAIVER. Employee agrees that Employer's failure to enforce any of the covenants of this Section 7 in any particular instance shall not be deemed to be a waiver of the covenant in that or any subsequent instance, nor shall it be deemed a waiver by Employer of any other rights at law or under this Agreement. 8.            JURISDICTION; SERVICE OF PROCESS. Each of the parties hereto agrees that any action or proceeding initiated or otherwise brought to judicial proceedings by either Employee or Employer concerning the subject matter of this Agreement shall be litigated in the United States District Court for the Northern District of Illinois or, in the event such court cannot or will not exercise jurisdiction, in the state courts of the State of Illinois (the "COURTS"). Each of the parties hereto expressly submits to the jurisdiction and venue of the Courts and consents to process being served in any suit, action or proceeding of the nature referred to above either (a) by the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to his or its address as set forth herein or (b) by serving a copy thereof upon such party's authorized agent for service of process (to the extent permitted by applicable law, regardless of whether the appointment of such agent for service of process for any reason shall prove to be ineffective or such agent for service of process shall accept or acknowledge such service); PROVIDED that, to the extent lawful and practicable, written notice of said service upon said agent shall be mailed by registered or certified mail, postage prepaid, return receipt requested, to the party at his or its address as set forth herein. Each party hereto agrees that such service, to the fullest extent permitted by law, (i) shall be deemed in every respect effective service of process upon him or it in any such suit, action or proceeding and (ii) shall be taken and held to be valid personal service upon and personal delivery to him or it. Each party hereto waives any claim that the Courts are an inconvenient forum or an improper forum based on lack of venue or jurisdiction. 9.            INJUNCTIVE RELIEF. Employee acknowledges that damages would be an inadequate remedy for Employee's breach of any of the provisions of Section 7 of this Agreement, and that breach of any of such provisions will result in immeasurable and irreparable harm to Employer. Therefore, in addition to any other remedy to which Employer may be entitled by reason of Employee's breach or threatened breach of any such provision, Employer shall be entitled to seek and obtain a temporary restraining order, a preliminary and/or permanent injunction, or any other form of equitable relief from any court of competent jurisdiction restraining Employee from committing or continuing any breach of such provisions, without the necessity of posting a bond. It is further agreed that the existence of any claim or cause of action   - 6 -   --------------------------------------------------------------------------------   on the part of Employee against Employer, whether arising from this Agreement or otherwise, shall in no way constitute a defense to the enforcement of the provisions of Section 7 of this Agreement.   10. MISCELLANEOUS. (a)          NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given (i) when made, if delivered personally, (ii) three (3) days after being mailed by certified or registered mail, postage prepaid, return receipt requested, or (iii) two (2) days after delivery to a reputable overnight courier service, to the parties, their successors in interest or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid: To Employer: Young Innovations, Inc. 13705 Shoreline Court East Earth City, MO 63045 Attention: President To Employee, to his home address as recorded in the payroll records of Employer from time to time. (b)          GOVERNING LAW. This Agreement shall be governed as to its validity and effect by the internal laws of the State of Illinois, without regard to its rules regarding conflicts of law. (c)          SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of (i) the heirs, executors and legal representatives of Employee, upon Employee's death, and (ii) any successor of Employer, and any such successor shall be deemed substituted for Employer under the terms hereof for all purposes. As used in this Agreement, "successor" shall include any person, firm, corporation or other business entity that at any time, whether by purchase, merger, consolidation or otherwise, directly or indirectly acquires a majority of the assets, business or stock of Employer. (d)          NO REPRESENTATIONS. No person or entity has made or has the authority to make any representations or promises on behalf of any of the parties which are inconsistent with the representations or promises contained in this Agreement, and this Agreement has not been executed in reliance on any representations or promises not set forth herein. Specifically, no promises, warranties or representations have been made by anyone on any topic or subject matter related to Employee's relationship with Employer or any of its executives or employees, including but not limited to any promises, warranties or representations regarding future employment, compensation, commissions and benefits, any entitlement to stock, stock rights, stock incentive plan benefits, profits, debt and equity interests in Employer or any of its affiliated companies or regarding the termination of Employee's employment. In this regard, Employee agrees that no promises, warranties or representations shall be deemed to be made in   - 7 -   --------------------------------------------------------------------------------   the future unless they are set forth in writing and signed by an authorized representative of Employer. (e)          AMENDMENTS. This Agreement may be modified only by a written instrument executed by the parties that is designated as an amendment to this Agreement. (f)           COUNTERPARTS. This Agreement is being executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (g)          SEVERABILITY AND NON-WAIVER. Any provision of this agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this Section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. No waiver of any provision or violation of this Agreement by Employer shall be implied by Employer's forbearance or failure to take action. (h)          VOLUNTARY AND KNOWLEDGEABLE ACT. Employee represents and warrants that Employee has read and understands each and every provision of this Agreement and has freely and voluntarily entered into this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EMPLOYER YOUNG INNOVATIONS, INC. By:       /s/ Arthur L. Herbst, Jr., President EMPLOYEE By:       /s/ Stephen T. Yaggy   Stephen T. Yaggy     - 8 -   --------------------------------------------------------------------------------     APPENDIX EMPLOYMENT AGREEMENT Definitions The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated): DEFINITIONS. For the purposes of this Agreement the following terms and phrases shall have the following meanings: 1.            AFFILIATE(S) shall have the same meaning ascribed to such term in the Exchange Act.   2. BOARD shall mean the board of directors of Employer. 3.            CAUSE shall mean (i) violation of any agreement or law relating to non-competition, trade secrets, inventions, non-solicitation or confidentiality between Employee and Employer or an affiliate, (ii) willful, intentional or bad faith conduct that materially injures Employer or an Affiliate, (iii) commission of a felony, an act of fraud or the misappropriation of property; (iv) gross neglect or moral turpitude; and (v) violation of Employer’s Code of Ethics. 4.            CHANGE IN CONTROL shall mean and be deemed to occur upon the first of the following events: (a)          the acquisition, after the date hereof, by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the combined voting power of the Voting Securities of Employer then outstanding after giving effect to such acquisition; or (b)          Employer is merged or consolidated or reorganized into or with another company or other legal entity, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the Voting Securities of such company or entity immediately after such transaction is held in the aggregate by the holders of Voting Securities of Employer immediately prior to such merger, consolidation or reorganization; or (c)          Employer sells or otherwise transfers all or substantially all of its assets (including but not limited to its Subsidiaries) to another company or legal entity in one transaction or a series of related transactions, and as a result of such sale(s) or transfer(s), less than a majority of the combined voting power of the then outstanding Voting Securities of such company or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Securities of Employer immediately prior to such sale or transfer; or (d)          approval by the Board or the stockholders of Employer of a complete or substantial liquidation or dissolution of Employer; or   - 9 -   --------------------------------------------------------------------------------     (e)          the majority of the members of the Board being replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of members of the Board immediately prior to such appointment or election. Notwithstanding the foregoing, unless otherwise determined in a specific case by majority vote of the Board, a Change in Control shall not be deemed to have occurred solely because (a) Employer, (b) a Subsidiary, (c) any one or more members of executive management of Employer or its Affiliates, (d) any employee stock ownership plan or any other employee benefit plan of Employer or any Subsidiary or (e) any combination of the Persons referred to in the preceding clauses (a) through (d) becomes the actual or beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the Voting Securities of Employer.   5. CODE shall mean the Internal Revenue Code of 1986, as amended.     6. EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended. 7.            GOOD REASON shall mean, with respect to a Voluntary Termination, (i) a material and adverse change in Employee's duties, responsibilities or status with Employer or an affiliate made without Cause, (ii) a reduction in the annual compensation or total benefit package of Employee (other than a comparable reduction in cash compensation or benefits generally affecting substantially all officers or executive employees of Employer), (iii) a change in Employee's job location beyond an area outside of a 25-mile radius of Employee's principal office or (iv) the Board of Directors of Employer otherwise determines that a Voluntary Termination by Employee is for "Good Reason" under the circumstances then prevailing; provided, however, that Good Reason will not be deemed to exist unless Employee provides written notice to Employer within 60 days after the occurrence of the event specified above and Employer fails to cure the event to Employee's reasonable satisfaction within 60 days after Employer receives such notice. 8.            PERMANENT DISABILITY shall have the meaning set forth in Section 22(e)(3) of the Code. 9.            PERSON shall have the same meaning as ascribed to such term in Sections 13(d) and 14(d)(2) of the Exchange Act; provided, however, that for purposes of this Agreement, neither Employer nor any trustee or fiduciary acting in such capacity for an employee benefit plan sponsored or maintained by Employer or any entity controlled by Employer, shall be deemed to be a "person". 10.          QUALIFIED DEPENDENTS shall mean Employee's spouse and unmarried children less than 19 years old; provided, that the 19 year age limit does not apply to a child who: i) is enrolled as a full time student in school and ii) has not attained the age of 23 years. 11.          SUBSIDIARY shall mean a company or other entity (a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (b) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, or unincorporated association), but more than fifty percent (50%) of whose ownership interest representing the right generally to   - 10 -   --------------------------------------------------------------------------------   make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by Employer. 12.          VOLUNTARY TERMINATION shall mean the termination by Employee of his employment by Employer by voluntary resignation or any other means other than death, retirement or Permanent Disability and other than simultaneous with or following termination for Cause or an event which, whether or not known to Employer at the time of such Voluntary Termination by such Executive, would constitute Cause. 13.          VOTING SECURITIES shall mean with respect to any Person, any securities entitled to vote (including by the execution of action by written consent) generally in the election of directors of such Person (together with direct or indirect options or other rights to acquire any such securities).     - 11 -      

-------------------------------------------------------------------------------- GENERAL SECURITY AGREEMENT PTL Acquisition Corp. (the “Debtor”) mortgages and charges in favour of Albion Services Ltd., The Tsang Family Trust, Century Electronics, Anthony Lee, Paul Heathcote, David McAlpine and Marylin Lee (the “Secured Party”), and grants to the Secured Party a security interest in, all of the Debtor’s present and after-acquired personal property, including all inventory, equipment and fixtures, all contracts, accounts and other intangibles, and all securities, instruments, chattel paper, money and documents of title, and also all of the Debtor’s present and after-acquired real property and other assets and undertaking, (collectively, the “Charged Property”) to secure payment and performance of all present and future debts, liabilities and other obligations of the Debtor to the Secured Party (collectively, the “Secured Obligations”). The Debtor will not sell, lease or otherwise dispose of any Charged Property except that, until default, the Debtor may deal with inventory, accounts and money in the ordinary course of business. The Debtor will not allow any Charged Property to be situate outside of British Columbia. The Debtor will not allow the Debtor’s chief executive office, main place of business or principal residence to be located outside of British Columbia, nor will the Debtor change its name or have any other form of name (except upon 10 days’ prior written notice to the Secured Party). The Debtor will be in default under this agreement if default is made in payment or performance of any of the Secured Obligations, or if there is a default under any document evidencing any of the Secured Obligations, or if the Secured Party in good faith believes that the prospect of payment or performance of any of the Secured Obligations is or is about to be impaired or that any of the Charged Property is or is about to be placed in jeopardy. Upon a default hereunder, the Secured Party will have all the rights and remedies of a secured party under the British Columbia Personal Property Security Act and of a mortgagee at law or in equity and, in addition, will be entitled to declare payment and performance of all of the Secured Obligations to be immediately due, and will be entitled to appoint any legal person as receiver or receiver and manager (a “Receiver”) of all or any part of the Charged Property. Any Receiver so appointed will have all the rights and remedies of the Secured Party (except the right to appoint a Receiver). Without limiting the rights and remedies referred to above, the Secured Party and any Receiver may, after default, use any or all of the Charged Property in the manner and to the extent it considers commercially reasonable, and may sell, lease or otherwise dispose of the same either for cash or in any manner involving deferred payment. Neither the Secured Party nor any Receiver will be obligated to take any necessary or other steps to preserve rights against others with respect to any securities, instruments or chattel paper now or hereafter in its possession. The Debtor acknowledges receipt of a copy of this agreement and waives its right to receive copies of all financing statements, financing change statements and verification statements that may be filed or issued with respect to the security interests created hereby. Dated: _____________________, 2006 PTL ACQUISITION CORP.         Per:     Authorized Signatory --------------------------------------------------------------------------------

  Exhibit 10.2 STANDARD MICROSYSTEMS CORPORATION 2006 EMPLOYEE STOCK APPRECIATION RIGHT PLAN SAR GRANT AGREEMENT        WHEREAS, Standard Microsystems Corporation (“SMSC”) established the Standard Microsystems Corporation 2006 Employee Stock Appreciation Right Plan (the “SAR Plan”) as adopted by the Board of Directors as of September 1, 2006; and        WHEREAS, SMSC wishes to grant the employee or consultant designated below certain Stock Appreciation Rights (“SARs”) under the SAR Plan, a copy of which is attached hereto.        NOW, THEREFORE, in accordance with the terms of the SAR Plan, the employee or consultant is hereby granted SARs as follows: 1.   Grantee. «FirstName» «MI» «LastName» (the “Grantee”).   2.   SAR Grant. SMSC hereby grants to the Grantee the right to exercise «TotalShares» SARs under the SAR Plan. The SAR Grant is in all respects limited and conditioned as hereinafter provided, and is subject in all respects to the Plan’s terms and conditions as they may be amended from time to time in accordance with the Plan (which terms and conditions shall automatically be incorporated herein by reference and made a part hereof, and shall control in the event of any conflict with any other terms of this Agreement).   3.   Grant Date. The date of this SAR Grant is «OptionDate».   4.   Exercise Price. The exercise price per SAR (the “Exercise Price”) shall be $«OptionPrice». It is the determination of the Compensation Committee of the Board of Directors that the Exercise Price is not less than 100% of the fair market value of SMSC Shares on the Grant Date.   5.   Term. Unless earlier terminated pursuant to provisions of the SAR Plan, the SARs shall expire on «ExpirationDatePeriod5» (the “Expiration Date”), which shall be the tenth anniversary after the Grant Date.   6.   Vesting of SAR Grants. The Grantee shall be entitled to exercise ___% of the SAR Grant on each anniversary date of the Grant Date. Regardless of the applicable vesting schedule, all SAR Grants shall become immediately exercisable in the event of death or Disability, retirement after age 65, or as otherwise determined within the discretion of the Compensation Committee, prior to becoming 100% vested in the SAR Grant. 1 --------------------------------------------------------------------------------       The Grantee may exercise the SAR Grant in whole or in part at any time or times prior to the expiration or other termination of the SAR Grant. All SAR Grants must generally be exercised following any termination of employment or consulting relationships. However, in the event of death or Disability, the Grantee or the Grantee’s estate may generally exercise the SAR Grant for a period of up to 12 months after the occurrence of such event, and the Grantee may generally exercise the SAR Grants for up to 3 months after a termination of employment or consultancy for any other reason, in accordance with Section 6 of the Plan.   7.   Exercise of SAR Grant. Subject to the terms and conditions of this SAR Agreement and the SAR Plan, all SARs may be exercised by notification to a designated member of the Finance Department, in accordance with reasonable procedures established by the Committee or SMSC. Notice of the date of exercise should be provided before the close of the market session on the date of exercise. All payments shall be determined based upon the closing price of the market on the business day coinciding with the exercise date. A Grantee may also select an exercise date which is within 1 week from the date of an election. A Grantee may withdraw an election to exercise any SAR Grant at any time prior to the close of the market on the proposed date of exercise. However, designated SMSC Associates will require advance approval to exercise any SAR Grants, in accordance with the SMSC Trading Policy.       An election not received by the Company before the close of the market on any business day, for any reasons, including the failure of any electronic or other transmission, shall result in an election being effective as of the next business day, unless revoked.   8.   Payment of SAR Grant. Payment of the SAR Grant shall be made in cash within 10 business days of any exercise.   9.   Non-Transferability of SARs. The SAR Grant is not assignable or transferable by the Grantee, otherwise than by will or by the laws of descent and distribution. During the lifetime of the Grantee, the SARs shall be exercisable only by the Grantee, or in the event of Disability, by the Grantee’s legal representative.   10.   Withholding of Taxes. The exercise of the SARs shall be subject to all applicable federal, state, and local tax withholding requirements.   11.   Governing Law. This Agreement shall be governed by the laws of the State of New York. 2 --------------------------------------------------------------------------------                                               STANDARD MICROSYSTEMS CORPORATION                               By:      Steven J Bilodeau                                      Chairman of the Board, C.E.O. & President                       ACCEPTED AND AGREED:                                                       Grantee                 3

  Exhibit 10.2 * Confidential Treatment Requested Under 17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2 EXECUTIVE BONUS AGREEMENT FOR ARTHUR S. PRZYBYL      This Executive Bonus Agreement (the “Agreement”) is entered into between Akorn, Inc., a Louisiana corporation (the “Corporation”), and Arthur S. Przybyl (the “Participant”), effective April 27, 2006. The purpose of the Agreement is to reward the service, performance, productivity and loyalty of the Participant by providing the Participant with a prospective bonus to be paid in accordance with the terms of this Agreement.      IN CONSIDERATION of the mutual promises made and other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Participant agree as follows: 1. Amount of Payment. The Participant is eligible to receive a one-time cash bonus equal to the sum of Sections 1.1 and 1.2, below:      1.1 Bonus. A bonus up to $300,000 (75% of the Participant’s annual base compensation rate (“Base Comp”)) for achieving all of the following performance measurements in 2006, or, if one or more but not all of these performance measurements are achieved, Participant is eligible to receive a portion of that amount in accordance with the sum of the following:           1.1.1 Financial Results.                (a) Earnings Per Share. $50,000 (12.5% of Base Comp) will be awarded for achieving earnings per share of at least $0.01.                (b) EBIDTA. $50,000 (12.5% of Base Comp) will be awarded for achieving an “EBITDA” of at least [...***...]. “EBITDA” means earning before interest, taxes, depreciation and amortization.                (c) Net Revenue. $50,000 (12.5% of Base Comp) will be awarded for achieving net revenue of at least [...***...].           1.1.2 Capital Raise. $50,000 (12.5% of Base Comp) will be awarded for conducting a successful capital raise that is approved by the Board of Directors of the Corporation (the “Board”).           1.1.3 ANDAs. $50,000 (12.5% of Base Comp) will be awarded if the Corporation files at least twenty (20) new abbreviated new drug applications (“ANDAs”) with the United States Food and Drug Administration (“FDA”) and launches (introduces to the market) ten (10) new ANDA products.           1.1.4 Lyophilization Facility. $50,000 (12.5% of Base Comp) will be awarded for both (i) achieving fully operational status for commercial production at the Corporation’s * CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed separately with the Securities & Exchange Commission. 1 --------------------------------------------------------------------------------   * Confidential Treatment Requested Under 17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2 lyophilization facility and (ii) ensuring the Corporation’s lyophilization facility is (x) ready for inspection by the FDA and, should the FDA inspect the facility, (y) approved by the FDA; provided that each (i) and (ii) occur no later than December 31, 2006.      1.2 Over Achievement Bonus. If, and only if, all of the performance measurements (and the entire bonus) set forth in Section 1.1 above have been achieved in full, a bonus of up to $100,000 (25% of Base Comp) for over achievement of the EBITDA performance measures in accordance with the sum of the following:           1.2.1 If the Corporation’s EBITDA is at least [...***...], Participant shall receive an additional $50,000 (12.5% of Base Comp); and           1.2.2 If the Corporation’s EBITDA is at least [...***...], Participant will receive an additional $50,000 (for a total of $100,000, or 25% of Base Comp). 2. Calculating the Bonus. All bonus calculations shall be made by the Chief Financial Officer of the Corporation, subject to the review and approval of the Compensation Committee of the Board (the “Committee”). The calculation and payment of bonuses under this Agreement shall be made within 30 days from the Corporation’s receipt of its audited financial statements. All bonuses under this Agreement shall be payable in cash or in other consideration as determined in the sole discretion of the Committee. 3. No Agreement to Employ. Nothing in this Agreement shall affect any right with respect to continuance of the Participant’s employment by the Corporation or any of its affiliates. The right of the Corporation or any of its affiliates to terminate at will the Participant’s employment at any time (whether by dismissal, discharge or otherwise), with or without cause, is specifically reserved. 4. Unfunded and Unsecured Obligation. The amount payable to the Participant hereunder is merely an unfunded and unsecured promise to pay money pursuant to this Agreement. The Corporation is not required to segregate funds for this purpose and all amounts payable hereunder are subject to the rights of all secured and unsecured creditors of the Corporation. The Participant shall not have any security interest in any asset of the Corporation as a result of this Agreement, and the Participant shall be merely an unsecured creditor of the Corporation with respect to amounts payable hereunder. 5. Tax Consequences. The Participant acknowledges that he has considered the advisability of consulting with his or her own tax advisors as to the specific tax consequences of participating in the Agreement, including the applicable federal, state, local and foreign tax consequences, and that the Corporation has no responsibility for the tax consequences related to the Participant’s participation in the Agreement other than the Corporation’s duty to satisfy its withholding obligations. 6. Administrator. The Committee, or such other committee or persons as the Committee may designate from time to time, is designated as the “Administrator” with authority to control and manage the operation and administration of this Agreement. * CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed separately with the Securities & Exchange Commission. 2 --------------------------------------------------------------------------------        6.1 Powers of the Administrator. The Administrator shall have full discretionary power to administer the Agreement in all of its details. For this purpose the Administrator’s discretionary power shall include, but shall not be limited to, the following authority:           6.1.1 to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Agreement or required to comply with applicable law;           6.1.2 to interpret the Agreement;           6.1.3 to decide all questions concerning the Agreement and the eligibility of any person to participate in the Agreement;           6.1.4 to compute the amounts to be distributed under the Agreement, and to determine the person or persons to whom such amounts will be distributed;           6.1.5 to authorize payments under the Agreement;           6.1.6 to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Internal Revenue Code of 1986, as amended (the “Code”), and applicable regulations, or under other federal, state or local law and regulations; and           6.1.7 to allocate and delegate its ministerial duties and responsibilities and to appoint such agents, counsel, accountants and consultant as may be required or desired to assist in administering the Agreement.      6.2 Effect of Interpretation or Determination. Any interpretation of the Agreement or other determination with respect to the Agreement by the Administrator shall be final and conclusive on all persons in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously.      6.3 Reliance on Information or Advice. In administering the Agreement, the Administrator shall be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any accountant, counsel or other expert who is employed or engaged by the Corporation or by the Administrator on the Corporation’s behalf.      6.4 Limitation on Rights and Authority of Participants. The Participant expressly acknowledges that nothing contained herein shall be construed to: (i) grant the Participant any ownership interest or other rights as a shareholder of the Corporation or any other entity; (ii) create a partnership; or (iii) give the Participant any right or authority with respect to the property except as expressly provided herein. 7. Amendment. The Committee reserves the power at any time or times to amend the provisions of the Agreement to any extent and in any manner that it may deem advisable. 3 --------------------------------------------------------------------------------   However, the Committee shall not have the power to amend the Agreement retroactively in such a manner as would reduce the accrued vested benefit of the Participant, except as otherwise permitted or required by law. 8. Savings Clause. The parties intend for this Agreement to comply in form and in operation with Section 409A of the Code. Notwithstanding any other provision of this Agreement, the Committee shall be permitted to amend or eliminate any provision or term of this Agreement to the extent that such provision or term violates or conflicts with the requirements of Section 409A or the compliance by the Corporation or Participant with such provision or term will result in a violation of Section 409A. 9. Limitation of Rights. The establishment of the Agreement, any amendments thereof, the creation of any fund or account or the payment of any benefits shall not be construed as giving to the Participant or other person any legal or equitable right against the Corporation or the Administrator, except as provided herein, and in no event shall the terms of employment or service of any Participant be modified or in any way be affected hereby. 10. Entire Agreement. The Agreement and the Executive Employment Agreement dated April 24, 2006 between the Corporation and the Participant constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof, and supersede all prior agreements, understandings, inducements or conditions, express or implied, oral or written, relating to the subject matter hereof and thereof. The express terms of the Agreement control and supersede any course of performance and/or usage of trade inconsistent with any of the terms hereof. 11. Assignment by the Corporation. The rights and obligations of the Corporation hereunder are fully assignable at the sole discretion of the Corporation. 12. Severability. The provisions of the Agreement are severable. Except as otherwise provided herein, in the event that one or more of the provisions contained in the Agreement or in any other agreement referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect the remaining provisions of the Agreement. Further a court of competent jurisdiction shall have the authority to rewrite, interpret or construe the terms of the Agreement so as to render them enforceable to the maximum extent allowed by law, consistent with the intent of the parties as evidenced hereby. 13. Attorney Fees. If any legal action is necessary to enforce the terms of the Agreement, the prevailing party shall be entitled to recover, in addition to other amounts to which the prevailing party may be entitled, actual attorneys’ fees and costs. 14. Counterparts. The Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 15. Governing Law. The Agreement shall be construed, administered and enforced according to the laws of the State of Illinois, without regard to its conflicts of laws rules. 4 --------------------------------------------------------------------------------        IN WITNESS HEREOF, the parties have executed this Agreement as of the date set forth above.               AKORN, INC.:       PARTICIPANT: Corporation                           By:        /s/ Jeffrey A. Whitnell            /s/ Arthur S. Przybyl                           Arthur S. Przybyl Its:   Chief Financial Officer         5

INVESTOR REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 24, 2006, by and among NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and the undersigned investors listed on Schedule I attached hereto (each, an “Investor” and collectively, the “Investors”).   WHEREAS:   A. In connection with the Securities Purchase Agreement by and among the parties hereto of even date herewith (the “Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to the Investors secured convertible debentures (the “Convertible Debentures”) which shall be convertible into that number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), pursuant to the terms of the Securities Purchase Agreement for an aggregate purchase price of up to Five Million Dollars ($5,000,000). Capitalized terms not defined herein shall have the meaning ascribed to them in the Securities Purchase Agreement.   B. To induce the Investors to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws.   NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investors hereby agree as follows:   1.  DEFINITIONS.   As used in this Agreement, the following terms shall have the following meanings:   (a)  “Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.   (b)  “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “SEC”).   (c)  “Registrable Securities” means the shares of Common Stock issuable to the Investors upon conversion of the Convertible Debentures pursuant to the Securities Purchase Agreement and the Warrant Shares, as this term is defined in the Securities Purchase Agreement.   (d)  “Registration Statement” means a registration statement under the Securities Act which covers the Registrable Securities.       --------------------------------------------------------------------------------   2.  REGISTRATION.   (a)  Subject to the terms and conditions of this Agreement, the Company shall prepare and file, no later than thirty (30) days from the date hereof (the “Scheduled Filing Deadline”), with the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) under the Securities Act (the “Initial Registration Statement”) for the resale by the Investors of the Registrable Securities, which includes at least 76,277,650 shares of Common Stock to be issued upon conversion of the Convertible Debentures as well as one hundred seventy five million (175,000,000) Warrant Shares. The Company shall cause the Registration Statement to remain effective until all of the Registrable Securities have been sold. Prior to the filing of the Registration Statement with the SEC, the Company shall furnish a copy of the Initial Registration Statement to the Investors for their review and comment. The Investors shall furnish comments on the Initial Registration Statement to the Company within twenty-four (24) hours of the receipt thereof from the Company.   (b)  Effectiveness of the Initial Registration Statement. The Company shall use its best efforts (i) to have the Initial Registration Statement declared effective by the SEC no later than ninety (90) days from the date hereof (the “Scheduled Effective Deadline”) and (ii) to insure that the Initial Registration Statement and any subsequent Registration Statement remains in effect until all of the Registrable Securities have been sold, subject to the terms and conditions of this Agreement.   (c)  Failure to File or Obtain Effectiveness of the Registration Statement. In the event the Registration Statement is not filed by the Scheduled Filing Deadline or is not declared effective by the SEC on or before the Scheduled Effective Date, or if after the Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to the Registration Statement (whether because of a failure to keep the Registration Statement effective, failure to disclose such information as is necessary for sales to be made pursuant to the Registration Statement, failure to register sufficient shares of Common Stock or otherwise) then as partial relief for the damages to any holder of Registrable Securities by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies at law or in equity), the Company will pay as liquidated damages (the “Liquidated Damages”) to the holder, at the holder’s option, either a cash amount or shares of the Company’s Common Stock within three (3) business days, after demand therefore, equal to two percent (2%) of the liquidated value of the Convertible Debentures outstanding as Liquidated Damages for each thirty (30) day period after the Scheduled Filing Deadline or the Scheduled Effective Date as the case may be. Notwithstanding anything herein to the contrary, in no event shall Liquidated Damages exceed twenty percent (20%) of the aggregate Purchase Price for all Investors.   (d)  Liquidated Damages. The Company and the Investor hereto acknowledge and agree that the sums payable under subsection 2(c) above shall constitute liquidated damages and not penalties and are in addition to all other rights of the Investor, including the right to call a default. The parties further acknowledge that (i) the amount of loss or damages likely to be incurred is incapable or is difficult to precisely estimate, (ii) the amounts specified in such subsections bear a reasonable relationship to, and are not plainly or grossly disproportionate to, the probable loss likely to be incurred in connection with any failure by the Company to obtain or maintain the effectiveness of a Registration Statement, (iii) one of the reasons for the Company and the Investor reaching an agreement as to such amounts was the uncertainty and cost of litigation regarding the question of actual damages, and (iv) the Company and the Investor are sophisticated business parties and have been represented by sophisticated and able legal counsel and negotiated this Agreement at arm’s length.     2 --------------------------------------------------------------------------------   3.  RELATED OBLIGATIONS.   (a)  The Company shall keep the Registration Statement effective pursuant to Rule 415 at all times until the date on which the Investor shall have sold all the Registrable Securities covered by such Registration Statement (the “Registration Period”), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall 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 in which they were made, not misleading.   (b)  The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall incorporate such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.   (c)  The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) at least one (1) copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.     3 --------------------------------------------------------------------------------   (d)  The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its articles of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.   (e)  As promptly as practicable after becoming aware of such event or development, the Company shall notify each Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to each Investor. The Company shall also promptly notify each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each Investor by facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.   (f)  The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.   (g)  At the reasonable request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.     4 --------------------------------------------------------------------------------   (h)  The Company shall make available for inspection by (i) any Investor and (ii) one (1) firm of accountants or other agents retained by the Investors (collectively, the “Inspectors”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree, and each Investor hereby agrees, to hold in strict confidence and shall not make any disclosure (except to an Investor) or use any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector and the Investor has knowledge. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.   (i)  The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.   (j)  The Company shall use its best efforts either to cause all the Registrable Securities covered by a Registration Statement (i) to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).   (k)  The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.     5 --------------------------------------------------------------------------------   (l)  The Company shall use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.   (m)  The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve (12) month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement.   (n)  The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.   (o)  Within two (2) business days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.   (p)  The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investors of Registrable Securities pursuant to a Registration Statement.   4.  OBLIGATIONS OF THE INVESTORS.   Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not yet settled.     6 --------------------------------------------------------------------------------   5.  EXPENSES OF REGISTRATION.   All expenses incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers, legal and accounting fees shall be paid by the Company.   6.  INDEMNIFICATION.   With respect to Registrable Securities which are included in a Registration Statement under this Agreement:   (a)  To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation there under relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse the Investors and each such controlling person promptly as such expenses are incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9 hereof.     7 --------------------------------------------------------------------------------   (b)  In connection with a Registration Statement, each Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees, representatives, or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), such Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to each Investor prior to such Investor’s use of the prospectus to which the Claim relates.   (c)  Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one (1) counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.     8 --------------------------------------------------------------------------------   (d)  The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.   (e)  The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.   7.  CONTRIBUTION.   To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.   8.  REPORTS UNDER THE EXCHANGE ACT.   With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”) the Company agrees to:     9 --------------------------------------------------------------------------------   (a)  make and keep public information available, as those terms are understood and defined in Rule 144;   (b)  file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 4(c) of the Securities Purchase Agreement) and the filing of such reports and other documents as are required by the applicable provisions of Rule 144; and   (c)  furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.   9.  AMENDMENT OF REGISTRATION RIGHTS.   Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to fewer than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.   10.  MISCELLANEOUS.   (a)  A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities or owns the right to receive the Registrable Securities. If the Company receives conflicting instructions, notices or elections from two (2) or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.   (b)  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:     10 --------------------------------------------------------------------------------   If to the Company, to: Neomedia Technologies, Inc.   2201 Second Street, Suite #600   Fort Myers, FL 33901   Attention: Charles T. Jensen, President   Telephone: (239) 337-3434   Facsimile: (239) 337-3668     With Copy to: Kirkpatrick & Lockhart Nicholson Graham LLP   201 South Biscayne Boulevard - Suite 2000   Miami, FL 33131-2399   Attention: Clayton E. Parker, Esq.   Telephone: (305) 539-3300   Facsimile: (305) 358-7095       If to an Investor, to its address and facsimile number on the Schedule of Investors attached hereto, with copies to such Investor’s representatives as set forth on the Schedule of Investors or to such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.   (c)  Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.   (d)  The laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and the Investors as its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the Superior Courts of the State of New Jersey, sitting in Hudson County, New Jersey and federal courts for the District of New Jersey sitting Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.     11 --------------------------------------------------------------------------------   (e)  This Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase Agreement and related documents including the Convertible Debenture and the Pledge and Security Agreement dated the date hereof (the “Security Agreement”) and the Warrants constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase Agreement and related documents including the Convertible Debenture, and the Security Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.   (f)  This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.   (g)  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.   (h)  This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.   (i)  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.   The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.   (j)  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.     12 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have caused this Investor Registration Rights Agreement to be duly executed as of day and year first above written.     COMPANY:   NEOMEDIA TECHNOLOGIES, INC.       By:/s/ Charles T. Jensen    Name:  Charles T. Jensen   Title:  President & Chief Executive Officer       13 --------------------------------------------------------------------------------     SCHEDULE I   SCHEDULE OF INVESTORS   Name   Signature   Address/Facsimile Number of Investors                     Cornell Capital Partners, LP   By: Yorkville Advisors, LLC   101 Hudson Street - Suite 3700     Its: General Partner   Jersey City, NJ 07303         Facsimile: (201) 985-8266               By: _____________________              Name: Mark Angelo         Its: Portfolio Manager               With a copy to:   David Gonzalez, Esq.   101 Hudson Street - Suite 3700         Jersey City, NJ 07302         Facsimile: (201) 985-8266               --------------------------------------------------------------------------------   EXHIBIT A   FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT   Attention:    Re: NEOMEDIA TECHNOLOGIES, INC. Ladies and Gentlemen: We are counsel to Neomedia Technologies, Inc., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into by and among the Company and the investors named therein (collectively, the “Investors”) pursuant to which the Company issued to the Investors shares of its Common Stock, par value $0.01 per share (the “Common Stock”). Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Investors (the “Investor Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ____, the Company filed a Registration Statement on Form ________ (File No. 333-_____________) (the “Registration Statement”) with the Securities and Exchange SEC (the “SEC”) relating to the Registrable Securities which names each of the Investors as a selling stockholder there under.   In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement.   Very truly yours, [Law Firm] By:________________________      cc: [LIST NAMES OF INVESTORS]     --------------------------------------------------------------------------------  

  Exhibit 10.3 SCHEDULE A TO EXHIBIT 10.2      Rurban Financial Corp. (the “Registrant”) has entered into First Amendments to Supplemental Executive Retirement Agreements with the executive officers of the Registrant identified below, which First Amendments to Supplemental Executive Retirement Agreements are substantially identical to the First Amendment to Supplemental Executive Retirement Agreement, executed May 16, 2006 and effective as of March 1, 2006, by and between the Registrant and Kenneth A. Joyce, President and Chief Executive Officer of the Registrant, a copy of which was filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 (the “June 30, 2006 Form 10-Q”).      In accordance with Rule 12b-31 promulgated under the Securities Exchange Act of 1934 and Item 601(b)(10)(iii) of Regulation S-K, the following table identifies those executive officers of the Registrant with whom the Registrant has entered into First Amendments to Supplemental Executive Retirement Agreements similar to that included as Exhibit 10.2 to the June 30, 2006 Form 10-Q:                       Effective Date   Execution Date Name   Current Offices Held with Registrant   of Agreement   of Agreement               Duane L. Sinn   Executive Vice President and Chief Financial Officer of Rurban Financial Corp.; Treasurer and Director of Rurban Operations Corp.   March 1, 2006   May 17, 2006               Henry R. Thiemann   President, Chief Executive Officer and Director of Exchange Bank; President, Chief Executive Officer and Director of RFCBC, Inc.   March 1, 2006*   May 19, 2006               Mark A. Klein   President, Chief Executive Officer and Director of The State Bank and Trust Company   March 1, 2006   May 30, 2006   *   Remains subject to approval by the Federal Reserve Board and the FDIC.

  Exhibit 10.1 PURCHASE AND SALE AGREEMENT between THE HOUSTON EXPLORATION COMPANY as Seller and MERIT MANAGEMENT PARTNERS I, L.P., MERIT MANAGEMENT PARTNERS II, L.P., MERIT MANAGEMENT PARTNERS III, L.P., MERIT ENERGY PARTNERS III, L.P., MERIT ENERGY PARTNERS D-III, L.P., MERIT ENERGY PARTNERS E-III, L.P. AND MERIT ENERGY PARTNERS F-III, L.P. as Buyer Dated February 28, 2006   --------------------------------------------------------------------------------   TABLE OF CONTENTS                       Page   ARTICLE I DEFINITIONS AND INTERPRETATION     1   1.1   Defined Terms     1   1.2   References     12   1.3   Articles     12   1.4   Number and Gender     12                 ARTICLE II PURCHASE AND SALE     13   2.1   Purchase and Sale     13   2.2   Excluded Assets     14   2.3   Revenues and Expenses     14                 ARTICLE III PURCHASE PRICE     14   3.1   Purchase Price     14   3.2   Deposit     15   3.3   Adjustments to Purchase Price     15   3.4   Adjustment Methodology     17   3.5   Preliminary Settlement Statement     17   3.6   Final Settlement Statement     18   3.7   Disputes     18   3.8   Allocation of Purchase Price / Allocated Values     19   3.9   Interim Settle Up     19                 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER     19   4.1   Organization, Existence     19   4.2   Authorization     19   4.3   No Conflicts     20   4.4   Consents     20   4.5   Litigation     20   4.6   Material Contracts     20   4.7   No Violation of Laws     20   4.8   Insurance     20   4.9   Hurricane Damage     21   4.10   Wells     21   4.11   Preferential Rights     21   4.12   Royalties, Etc     21   4.13   Personal Property     21   4.14   Current Commitments     21   4.15   Environmental     21   4.16   Production Taxes     22   4.17   Brokers’ Fees     22   4.18   Accuracy of Data     22   4.19   Affiliated Contracts     22   i --------------------------------------------------------------------------------                         Page   4.20   Sales Contracts     22   4.21   Hedging     23   4.22   Limitations     23                 ARTICLE V BUYER’S REPRESENTATIONS AND WARRANTIES     23   5.1   Organization; Existence     23   5.2   Authorization     23   5.3   No Conflicts     23   5.4   Consents     23   5.5   Bankruptcy     24   5.6   Litigation     24   5.7   Financing     24   5.8   Regulatory     24   5.9   Independent Evaluation     24   5.10   Brokers’ Fees     24   5.11   NORM, Wastes and Other Substances     24                 ARTICLE VI COVENANTS     25   6.1   Conduct of Business     25   6.2   HSR Act     26   6.3   Bonds, Letters of Credit and Guarantees     26   6.4   Cooperation with Seller Retained Litigation, Etc     26   6.5   Cooperation with Respect to Insurance Claims     26   6.6   Plugging, Abandonment, Decommissioning and Other Costs     27   6.7   Record Retention     27   6.8   Notifications     27                 ARTICLE VII BUYER’S CONDITIONS TO CLOSING     27   7.1   Representations     27   7.2   Performance     28   7.3   No Legal Proceedings     28   7.4   Title Defects and Environmental Defects     28   7.5   HSR Act     28                 ARTICLE VIII SELLER’S CONDITIONS TO CLOSING     28   8.1   Representations     28   8.2   Performance     28   8.3   No Legal Proceedings     28   8.4   Title Defects and Environmental Defects     29   8.5   HSR Act     29   8.6   Replacement Bonds, Letters of Credit and Guarantees     29   8.7   Insurance     29                 ARTICLE IX CLOSING     29   9.1   Date of Closing     29   9.2   Place of Closing     29   9.3   Closing Obligations     29   ii --------------------------------------------------------------------------------                         Page   9.4   Records     31                 ARTICLE X ACCESS/DISCLAIMERS     31   10.1   Access     31   10.2   Confidentiality     33   10.3   Disclaimers     33                 ARTICLE XI TITLE MATTERS; CASUALTIES; TRANSFER RESTRICTIONS     34   11.1   Seller’s Title     34   11.2   Notice of Title Defects; Defect Adjustments     34   11.3   Casualty or Condemnation Loss     39   11.4   Preferential Purchase Rights and Consents to Assign     40                 ARTICLE XII ENVIRONMENTAL MATTERS     42   12.1   Environmental Defects     42   12.2   NORM, Wastes and Other Substances     42                 ARTICLE XIII ASSUMPTION; INDEMNIFICATION; SURVIVAL     45   13.1   Assumption of Obligations by Buyer     45   13.2   Indemnities of Seller     45   13.3   Indemnities of Buyer     46   13.4   Express Negligence     46   13.5   Indemnification Procedures     46   13.6   Survival     48   13.7   Non Compensatory Damages     49   13.8   Disclaimer of Application of Anti Indemnity Statutes     49   13.9   Buyer Credit Support     49                 ARTICLE XIV TERMINATION, DEFAULT AND REMEDIES     50   14.1   Right of Termination     50   14.2   Effect of Termination     50                 ARTICLE XV MISCELLANEOUS     50   15.1   Exhibits and Schedules     50   15.2   Expenses and Taxes     51   15.3   Assignment     51   15.4   Preparation of Agreement     52   15.5   Publicity     52   15.6   Notices     52   15.7   Removal of Name     53   15.8   Further Cooperation     53   15.9   Filings, Notices and Certain Governmental Approvals     53   15.10   Entire Agreement; Conflicts     53   15.11   Parties in Interest     54   15.12   Amendment     54   15.13   Waiver; Rights Cumulative     54   15.14   Governing Law; Jurisdiction, Venue; Jury Waiver     54   iii --------------------------------------------------------------------------------                         Page   15.15   Severability     54   15.16   Counterparts     55   15.17   Like Kind Exchange     55   15.18   Certain Governmental Approvals     55   15.19   Adequacy of Supplemental Bonds or Arrangements for the Pledge of Securities     56   15.20   Special Offshore Interests     57   iv --------------------------------------------------------------------------------   EXHIBITS AND SCHEDULES       Exhibits                 Exhibit A   Well (WI/NRI), Encumbrances Exhibit B   Form of Bill of Sale Exhibit C   Form of Assignment of Record Title to Oil and Gas Lease Exhibit D   Form of Assignment of Oil and Gas Lease Operating Rights Exhibit E   Form of Assignment of Right of Way Exhibit F   Form of Assignment of Contract Rights Exhibit G   Form of Title Indemnity Agreement Exhibit H   Form of Access Agreement       Schedules           Schedule 1.1(j)   Contested Mechanics’ or Similar Liens Schedule 1.1(k)   Contested Liens Under Leases or Operating Agreements Schedule 2.1(i)   Excluded Geologic Data Schedule 3.3   Oil and Gas Imbalances Schedule 3.8   Allocated Values Schedule 4.4   Consents Schedule 4.5   Litigation Schedule 4.6   Material Contracts Schedule 4.7   Violation of Laws Schedule 4.8   Insurance Schedule 4.9   Hurricane Damage Schedule 4.10   Wells Schedule 4.11   Preferential Rights Schedule 4.13   Personal Property Schedule 4.14   AFEs Schedule 4.15   Environmental Schedule 4.16   Production Taxes Schedule 4.20   Sales Contracts Schedule 6.1   Conduct of Business Schedule 13.1   Retained Litigation v --------------------------------------------------------------------------------   PURCHASE AND SALE AGREEMENT      THIS PURCHASE AND SALE AGREEMENT (as may be amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) is executed this 28th day of February, 2006, between The Houston Exploration Company, a Delaware corporation (“Seller”), and Merit Management Partners I, L.P., Merit Management Partners II, L.P., Merit Management Partners III, L.P., Merit Energy Partners III, L.P., Merit Energy Partners D-III, L.P., Merit Energy Partners E-III, L.P. and Merit Energy Partners F-III, L.P., all Delaware limited partnerships (collectively, “Buyer”). Recitals:      Seller desires to sell and convey, and Buyer desires to purchase and pay for, the Assets (as hereinafter defined) effective as of the Effective Time (as hereinafter defined).      NOW, THEREFORE, for and in consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION      1.1 Defined Terms. In addition to the terms defined in the introductory paragraph and elsewhere in this Agreement, for purposes hereof, the following expressions and terms shall have the meanings set forth in this Article I, unless the context otherwise requires:      “Access Agreement” shall have the meaning set forth in Section 12.1(b)(iv).      “Accounting Arbitrator” shall have the meaning set forth in Section 3.7.      “Adjusted Purchase Price” shall have the meaning set forth in Section 3.3.      “AFEs” shall have the meaning set forth in Section 4.14.      “Affected Well” shall have the meaning set forth in Section 11.2(g)(v).      “Affiliate” shall mean any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, another Person. The term “control” and its derivatives with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.      “Aggregate Deductible” shall mean $4,000,000.      “Agreement” shall have the meaning set forth in the first paragraph herein. 1 --------------------------------------------------------------------------------        “Allocated Value,” with respect to any Asset, means the amount set forth on Schedule 3.8 for such Asset.      “Applicable Contracts” means all Contracts by which the Properties and other Assets are bound or that primarily relate to the Properties or other Assets and (in each case) that will be binding on the Assets or Buyer after the Closing, including, without limitation; farmin and farmout agreements; bottomhole agreements; crude oil, condensate and natural gas purchase and sale, gathering, transportation and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; saltwater disposal agreements; facilities or equipment leases; crossing agreements; letters of no objection; platform use agreements; production handling agreements; and other similar contracts and agreements, of Seller and primarily related to the Properties or other Assets, but exclusive of any master service agreements.      “Assets” shall have the meaning set forth in Section 2.1.      “Assignments” means the Assignments of Record Title to Oil and Gas Lease(s), substantially in the form attached as Exhibit C, the Assignments of Oil and Gas Lease(s) Operating Rights, substantially in the form attached as Exhibit D, the Assignments of Rights of Way, substantially in the form attached as Exhibit E and assignments of Seller’s rights, obligations and interests in all contracts and agreements transferred to Buyer in this transaction, including the operating agreements and other contracts described on Exhibit A, substantially in the form of Exhibit F.      “Assumed Obligations” shall have the meaning set forth in Section 13.1.      “Buyer” shall have the meaning set forth in the first paragraph of this Agreement.      “Buyer Indemnified Parties” shall have the meaning set forth in Section 13.2.      “Buyer’s Representatives” shall have the meaning set forth in Section 10.1(a).      “Claim” shall have the meaning set forth in Section 13.5(c).      “Claim Notice” shall have the meaning set forth in Section 13.5(c).      “Closing” shall have the meaning set forth in Section 9.1.      “Closing Date” shall have the meaning set forth in Section 9.1.      “Code” means the Internal Revenue Code of 1986, as amended.      “Confidentiality Agreement” shall mean that certain Confidentiality Agreement between Merit Energy Company and Wachovia Securities dated December 7, 2005.      “Contract” means any written contract, agreement, lease, license or other legally binding arrangement of Seller insofar only as same relates or pertains to the Assets, excluding, however, 2 --------------------------------------------------------------------------------   any (a) Lease, easement, right-of-way, permit or other instrument creating or evidencing an interest in the Assets or a real or immovable property related to or used in connection with the operations of any Assets and (b) master service agreement.      “Cure Period” shall have the meaning set forth in Section 11.2(c).      “Customary Post-Closing Consents” shall mean the consents and approvals for the assignment of the Assets to Buyer that are customarily obtained after the assignment of properties similar to the Assets.      “Defective Support Property” shall have the meaning set forth in Section 11.2(g)(v).      “Defensible Title” shall mean such title of Seller with respect to the Assets that:      (i) with respect to each Well (or the specified zone(s) therein) shown in Exhibit A, entitles Seller as of the Effective Time to receive the Net Revenue Interest shown in Exhibit A for such Well (or the specified zone(s) therein) throughout the duration of the productive life of such Well (or the specified zone(s) therein), except for (A) decreases in connection with those operations in which Seller may be a non-consenting co-owner to the extent identified on Exhibit A, (B) decreases resulting from the establishment or amendment of pools or units, (C) decreases required to allow other working interest owners to make up past underproduction or pipelines to make up past under deliveries (which are covered in Section 3.3), and (D) as otherwise stated in Exhibit A;      (ii) with respect to each Well (or the specified zone(s) therein) shown in Exhibit A, obligates Seller as of the Effective Time to bear the Working Interest shown in Exhibit A for such Well (or the specified zone(s) therein) not greater than the Working Interest shown in Exhibit A for such Well (or the specified zone(s) therein) without increase throughout the productive life of such Well (or the specified zone(s) therein), except (A) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements or applicable Law, (B) increases to the extent that they are accompanied by a proportionate increase in Seller’s Net Revenue Interest and (C) as otherwise stated in Exhibit A; and      (iii) is free and clear of all Encumbrances, other than Permitted Encumbrances.      “Deposit” shall have the meaning set forth in Section 3.2.      “Dispute Notice” shall have the meaning set forth in Section 3.6.      “DOJ” shall mean the Department of Justice.      “Effective Time” shall mean 7:00 a.m. (Central Standard Time) on January 1, 2006.      “Encumbrance” shall mean any lien, security interest, pledge, charge or encumbrance.      “Environmental Arbitrator” shall have the meaning set forth in Section 12.1(e). 3 --------------------------------------------------------------------------------        “Environmental Claim Date” shall have the meaning set forth in Section 12.1(a).      “Environmental Condition” shall mean (a) a condition existing on the date of this Agreement with respect to the air, soil, subsurface, surface waters, ground waters and/or sediments that causes an Asset (or Seller with respect to an Asset) not to be in compliance with any Environmental Law or (b) the existence as of the date of this Agreement with respect to the Assets or their operation of any environmental pollution or contamination caused by or related to any Asset for which remedial or corrective action is presently required (or if known, would be presently required) under Environmental Laws.      “Environmental Defect Notice” shall have the meaning set forth in Section 12.1(a).      “Environmental Laws” means all applicable Laws in effect as of the date of this Agreement relating to the protection of the environment, including, without limitation, those laws relating to the storage, handling, generation, processing, treatment, storage, transportation, disposal or other management of Hazardous Substances.      “Excluded Assets” shall mean all assets of Seller and its Subsidiaries other than the Assets expressly set forth in Section 2.1 hereof. Excluded Assets shall include, without limitation, (a) all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally (including the ownership and operation of the Assets); (b) all trade credits, all accounts, receivables and all other proceeds, income or revenues attributable to the Assets with respect to any period of time prior to the Effective Time to the extent they arise by the first anniversary of the Closing Date; it being understood that following such anniversary, they shall be the property of Buyer; (c) all claims and causes of action of Seller arising under or with respect to any Contracts that are attributable to periods of time prior to the Effective Time to the extent they arise by the first anniversary of the Closing Date, except that any claims or causes of action for indemnification, contribution, breach of contract or duty or similar rights shall continue to be Excluded Assets during the period for which Seller is responsible for the related liabilities in the definition of Excluded Liabilities; it being understood that following such time, they shall be the property of Buyer; (d) all rights and interests of Seller (A) under any agreement of indemnity, (B) under any bond or (C) to any insurance or condemnation proceeds or awards (except with respect to damage from Hurricane Rita and Katrina as set forth in Section 2.1(d)) arising, in each case, from acts, omissions or events or damage to or destruction of property with respect to all periods prior to the Effective Time; (e) all Hydrocarbons produced and sold from the Properties with respect to all periods prior to the Effective Time; (f) all claims of Seller for refunds of or loss carry forwards with respect to (A) production or any other taxes attributable to any period prior to the Effective Time, (B) income or franchise taxes or (C) any taxes attributable to the Excluded Assets; (g) all personal computers and associated peripherals and all radio and telephone equipment; (h) all of Seller’s proprietary and other computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property; (i) all documents and instruments of Seller that may be protected by an attorney-client privilege; (j) all data that cannot be disclosed to Buyer as a result of confidentiality arrangements under agreements with Third Parties; (k) all audit rights as to Third Parties arising (A) under any of the Applicable Contracts or otherwise with respect to any period prior to the Effective Time to the extent they arise by the first anniversary of the Closing Date; it being understood that following such anniversary, they shall be the property of Buyer or (B) with 4 --------------------------------------------------------------------------------   respect to any of the Excluded Assets; (l) all Seismic Data (except to the extent that it becomes Geologic Data); (m) documents prepared or received by Seller with respect to (A) lists of prospective purchasers of the Assets compiled by Seller or its representatives or advisors, (B) bids submitted by other prospective purchasers of the Assets, (C) analyses by Seller of any bids submitted by any prospective purchaser, (D) correspondence between or among Seller, its respective representatives and any prospective purchaser other than Buyer and (E) correspondence between Seller or any of its respective representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement or any similar agreement; and (n) any offices, office leases or personal property located on such sites that are not directly related to any one or more of the Assets. Seller and Buyer recognize that the Excluded Assets may include automation equipment or telemetry equipment that is critical to the operation of some of the Assets. Seller and Buyer recognize that it is not the intent hereof to damage the value of any Asset through the exclusion of such equipment and in the event of the existence of essential equipment, the parties will enter into an agreement that will preserve the value of such Assets.      “Excluded Liabilities” shall mean all obligations and liabilities of Seller to the extent they are:      (i) Operating Expenses attributable to or arising out of the ownership, use or operation of the Assets (except insofar as they are attributable or related to Environmental Conditions) prior to the Effective Time (it being agreed that such obligations or liabilities which are of a continuous or ongoing nature and extend over the Effective Time shall be apportioned between Seller and Buyer on the basis of the respective obligations or liabilities suffered before or after the Effective Time) to the extent they arise by the first anniversary of the Closing Date;      (ii) attributable to or arise out of the off-site disposal of Hazardous Substances prior to the Effective Time to the extent they arise by the first anniversary of the Closing Date;      (iii) attributable to bodily injury and death, personal injury, illness, disease, maintenance, cure, wrongful death, loss of support arising prior to the Effective Time (whether arising out of environmental matters or otherwise) to the extent they arise by the second anniversary of the Closing Date;      (iv) attributable to or arise out of the ownership, use or operation of the Excluded Assets by Seller or an Affiliate of Seller;      (v) attributable to or arise out of the actions, suits or proceedings, if any, set forth on Schedule 13.1, except insofar as they are attributable or relate to the Assets for periods after the Effective Time;      (vi) Third Party Claims for payment of any rentals, royalties, minimum royalty, excess royalty, overriding royalty interests, production payments, and other payments due and/or payable by Seller to mineral and royalty holders and other interest owners prior to the Effective Time under or with respect to the Assets and the 5 --------------------------------------------------------------------------------   Hydrocarbons produced therefrom or attributable thereto to the extent they arise by the first anniversary of the Closing Date, except for any loss of title, Title Defect or other title defect attributable to any failure to properly or timely make any such payment; and      (vii) resulting from Third Party joint interest billing audits to the extent related to time periods prior to the Effective Time and to the extent they arise by the first anniversary of the Closing Date.      “Final Price” shall have the meaning set forth in Section 3.6.      “Final Settlement Statement” shall have the meaning set forth in Section 3.6.      “FTC” shall mean the Federal Trade Commission.      “GAAP” means United States generally accepted accounting principles, consistently applied.      “Geologic Data” means all (i) seismic, geological, geochemical or geophysical data (including cores and other physical samples of materials from wells or tests) belonging to Seller or licensed from third parties relating to the Properties that can be transferred without additional consideration to such third parties (or including such licensed data in the event Buyer agrees to pay such additional consideration), and (ii) interpretations of seismic, geological, geochemical or geophysical data belonging to Seller or licensed from third parties that can be transferred without additional consideration to such third parties (or including such licensed data in the event Buyer agrees to pay such additional consideration).      “Governmental Authority” shall mean any federal, state, local, municipal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental tribunal having or asserting jurisdiction.      “Hazardous Substances” shall mean any substance defined or regulated as a “hazardous substance” or “hazardous waste” under any Environmental Laws.      “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.      “Hydrocarbons” means oil and gas and other hydrocarbons produced or processed in association therewith.      “Imbalance” means (i) any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocable to the interests of Seller therein and the shares of production from the relevant Well to which Seller is entitled and (ii) any marketing imbalance between the quantity of Hydrocarbons required to be delivered by Seller under any Contract relating to the purchase and sale, gathering, transportation, storage, processing or marketing of Hydrocarbons and the quantity of Hydrocarbons actually delivered by Seller pursuant to the relevant Contract, together with any appurtenant rights and obligations concerning future in-kind 6 --------------------------------------------------------------------------------   and/or cash balancing at the wellhead and production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility.      “Indemnified Party” shall have the meaning set forth in Section 13.5(a).      “Indemnifying Party” shall have the meaning set forth in Section 13.5(a).      “Individual Environmental Threshold” shall have the meaning set forth in Section 12.1(d).      “Individual Title Benefit Threshold” shall have the meaning set forth in Section 11.2(i).      “Individual Title Defect Threshold” shall have the meaning set forth in Section 11.2(i).      “Interim Period” shall mean that period of time commencing with the Effective Time and ending at 7:00 a.m. (Central Standard Time) on the Closing Date.      “Knowledge” shall mean with respect to Seller, the actual knowledge (without investigation) of Seller’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Manager — Offshore, Corporate Counsel and Offshore Operations Manager.      “Lands” shall have the meaning set forth in Section 2.1(a).      “Law” shall mean any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, or decree of or by any Governmental Authority.      “Leases” shall have the meaning set forth in Section 2.1(a).      “Liabilities” shall mean any and all claims, causes of actions, payments, charges, judgments, assessments, liabilities, losses, damages, penalties, fines or costs and expenses, including any attorneys’ fees, legal or other expenses incurred in connection therewith and including liabilities, costs, losses and damages for personal injury or death or property damage.      “Material Adverse Effect” shall mean an event, condition or circumstance that, individually or in the aggregate, results in a material adverse effect on the ownership, operations or value of the Assets, taken as a whole and as currently operated as of the date of this Agreement, or a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement; provided, however, that none of the following shall constitute a Material Adverse Effect: (i) any effect resulting from entering into or taking any actions required by this Agreement or the announcement of the transactions contemplated by this Agreement; (ii) any effect resulting from changes in general market, economic, financial or political conditions in the area in which the Assets are located, the United States or worldwide, any disruptions of the capital markets, any acts of God, any outbreak of hostilities or war or any acts of terrorism, (iii) any effect resulting from a change in Laws from and after the date of this Agreement; (iv) any reclassification or recalculation of reserves in the ordinary course of business; (v) any changes in the prices of Hydrocarbons or other changes affecting the oil and gas industry generally; (vi) any results of Seller’s drilling activities after the date of this Agreement or declines in well performance in the absence of gross negligence or willful 7 --------------------------------------------------------------------------------   misconduct on the part of Seller; (vii) any effect resulting from actions taken by Buyer or its Affiliates; (viii) any effect resulting from a change in accounting requirements or principles imposed on the Seller, its business or the Assets by GAAP implemented after the date of this Agreement; and (ix) any effect resulting from any delay in third party transportation or processing due to hurricanes or related repairs.      “Material Contracts” shall have the meaning set forth in Section 4.6.      “MMS” shall mean the Minerals Management Service.      “Net Revenue Interest,” with respect to any Well, means the interest in and to all Hydrocarbons produced, saved and sold from or allocated to such Well, after giving effect to all royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production therefrom.      “NORM” shall mean naturally occurring radioactive material.      “OPA” means the Oil Pollution Act of 1990, as amended.      “Operating Expenses” shall have the meaning set forth in Section 2.3.      “P & A Obligations” shall have the meaning set forth in Section 6.6.      “Permitted Encumbrances” shall mean:      (a) lessor’s royalties, non-participating royalties, overriding royalties, reversionary interests and similar burdens upon, measured by or payable out of production if the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interest of Seller in any Well (or the specified zone(s) therein) to an amount less than the Net Revenue Interest set forth on Exhibit A for such Well (or the specified zone(s) therein) and do not obligate Seller to bear a Working Interest for such Well (or the specified zone(s) therein) in any amount greater than the Working Interest set forth on Exhibit A for such Well (or the specified zone(s) therein) (unless the Net Revenue Interest for such Asset is greater than the Net Revenue Interest set forth on Exhibit A in the same proportion as any increase in such Working Interest);      (b) preferential rights to purchase set forth on Schedule 4.11 and required third party consents to assignments and similar agreements;      (c) liens for taxes or assessments not yet due or delinquent or, if delinquent, that are being contested in good faith in the normal course of business;      (d) Customary Post-Closing Consents;      (e) conventional rights of reassignment;      (f) such Title Defects as Buyer may have waived expressly in writing; 8 --------------------------------------------------------------------------------        (g) all applicable Laws and rights reserved to or vested in any Governmental Authority (i) to control or regulate any Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit or by any provision of Law, to terminate such right, power, franchise grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Assets; (iii) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated and (iv) to enforce any obligations or duties affecting the Assets to any Governmental Authority, with respect to any franchise, grant, license or permit;      (h) rights of a common owner of any interest in rights-of-way or easements currently held by Seller and such common owner as tenants in common or through common ownership;      (i) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way and other rights in the Assets for the purpose of pipelines, transportation lines, distribution lines and other like purposes or for the joint or common use of, rights-of-way, facilities and equipment which do not materially impair the value of the Assets or the use of the Assets as currently owned and operated;      (j) vendors, carriers, warehousemen’s, repairmen’s, mechanics, workmen’s, materialmen’s, construction or other like liens arising by operation of Law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due, or which are being contested in good faith by appropriate proceedings by or on behalf of Seller as identified on Schedule 1.1(j);      (k) liens created under leases and/or operating agreements or by operation of Law in respect of obligations that are not yet due, or that are being contested in good faith by appropriate proceedings by or on behalf of Seller as identified on Schedule 1.1(k);      (l) any encumbrance affecting the Assets which is expressly assumed, bonded or paid by Buyer at or prior to Closing or which is discharged by Seller at or prior to Closing;      (m) any matters referenced on Exhibit A;      (n) the terms and conditions of the Leases and all Material Contracts that do not reduce the Net Revenue Interest of Seller in any Well (or the specified zone(s) therein) to an amount less than the Net Revenue Interest set forth on Exhibit A for such Well (or the specified zone(s) therein) and do not obligate Seller to bear a Working Interest for such Well (or the specified zone(s) therein) in any amount greater than the Working Interest set forth on Exhibit A for such Well (unless the Net Revenue Interest for such Asset is greater than the Net Revenue Interest set forth on Exhibit A in the same proportion as any increase in such Working Interest); and      (o) all other instruments, obligations, defects and irregularities affecting the Assets that do not reduce the Net Revenue Interest of Seller in any Well (or the specified zone(s) therein) to an amount less than the Net Revenue Interest set forth on Exhibit A 9 --------------------------------------------------------------------------------   for such Well (or the specified zone(s) therein) and do not obligate Seller to bear a Working Interest for such Well (or the specified zone(s) therein) in any amount greater than the Working Interest set forth on Exhibit A for such Well (unless the Net Revenue Interest for such Asset is greater than the Net Revenue Interest set forth on Exhibit A in the same proportion as any increase in such Working Interest).      “Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority or any other entity.      “Personal Property” shall have the meaning set forth in Section 2.1(g).      “Preference Notices” shall have the meaning set forth in Section 11.4(b).      “Preference Right Assets” shall have the meaning set forth in Section 11.4(d).      “Preference Rights” shall have the meaning set forth in Section 11.4(a).      “Preliminary Settlement Statement” shall have the meaning set forth in Section 3.5.      “Property” or “Properties” shall have the meaning set forth in Section 2.1(b).      “Purchase Price” shall have the meaning set forth in Section 3.1.      “Qualified Buyer” shall mean any Buyer that, in Seller’s sole discretion, is financially capable of satisfying the Assumed Obligations.      “Qualified Parent Guarantor” shall mean any Parent Guarantor that, in Seller’s sole discretion, is financially capable of satisfying the Assumed Obligations.      “Records” shall have the meaning set forth in Section 2.1(i).      “Remediation” shall mean, with respect to an Environmental Condition, the implementation and completion of any remedial, removal, response, construction, closure, disposal or other corrective actions required under Environmental Laws to correct or remove such Environmental Condition.      “Remediation Amount” shall mean, with respect to an Environmental Condition, the present value as of the Closing Date (using an annual discount rate of ten percent) of the cost (net to Seller’s interest)) of the most cost effective Remediation of such Environmental Condition to a regulatory standard equal to but no more stringent than as required for land use of the Asset as of the Closing Date.      “Seismic Data” means all seismic, geological or geophysical data owned by Third Parties that Seller does not have the right to transfer (or that Seller can only transfer upon payment of additional consideration to such Third Parties).      “Seller” shall have the meaning set forth in the first paragraph of this Agreement. 10 --------------------------------------------------------------------------------        “Seller Indemnified Parties” shall have the meaning set forth in Section 13.3(a).      “Third Party” shall mean any Person other than a party to this Agreement or an Affiliate of a party to this Agreement.      “Title Arbitrator” shall have the meaning set forth in Section 11.2(j).      “Title Benefit” shall mean any right, circumstance or condition that operates (i) to increase the Net Revenue Interest of Seller in any Well (or the specified zone(s) therein) above that shown for such Well in Exhibit A, to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest therein above that shown in Exhibit A, or (ii) to decrease the Working Interest of Seller in any Well (or the specified zone(s) therein) below that shown for such Well (or the specified zone(s) therein) in Exhibit A, to the extent the same causes a decrease in Seller’s Working Interest that is proportionately greater than the decrease in Seller’s Net Revenue Interest therein below that shown in Exhibit A.      “Title Benefit Amount” shall have the meaning set forth in Section 11.2(e).      “Title Benefit Notice” shall have the meaning set forth in Section 11.2(b).      “Title Claim Date” shall have the meaning set forth in Section 11.2(a).      “Title Defect” means any Encumbrance, defect or other matter that causes Seller not to have Defensible Title in and to the Assets as of the Effective Time; provided that the following shall not be considered Title Defects:      (i) defects in the chain of title consisting of the failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, unless Buyer provides affirmative evidence that such failure or omission has resulted in another Person’s superior claim of title to the relevant Asset;      (ii) defects arising out of lack of survey, unless a survey is expressly required by applicable Laws;      (iii) defects arising out of lack of evidence of record of corporate or other entity authorization unless Buyer provides affirmative evidence that such corporate or other entity action was not authorized and results in another Person’s superior claim of title to the relevant Asset;      (iv) defects that have been cured by applicable Laws of limitations or prescription;      (v) the exercise by a Third Party prior to the Closing of a preferential purchase right, which is addressed solely in Section 11.3(b); or      (vi) the failure or refusal of a Third Party to consent on or before the Closing Date to the assignment of an Asset to Buyer, which is addressed solely in Section 11.4(e). 11 --------------------------------------------------------------------------------        “Title Defect Amount” shall have the meaning set forth in Section 11.2(d)(i) of this Agreement.      “Title Defect Notice” shall have the meaning set forth in Section 11.2(a).      “Title Defect Property” shall have the meaning set forth in Section 11.2(a).      “Title Indemnity Agreement” shall have the meaning set forth in Section 11.2(d)(ii).      “Transaction Documents” means those documents executed pursuant to or in connection with this Agreement.      “Treasury Regulations” means the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute, proposed or final Treasury Regulations.      “Wachovia” means Wachovia Capital Markets, LLC.      “Wells” shall have the meaning set forth in Section 2.1(b).      “Working Interest,” with respect to any Well, means the interest in and to such Well that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Well, but without regard to the effect of any royalties, overriding royalties, production payments, net profits interests and other similar burdens upon, measured by or payable out of production therefrom.      1.2 References. The words “hereby,” “herein,” “hereinabove,” “hereinafter,” “hereinbelow,” “hereof,” “hereto,” “hereunder,” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular article, section or provision of this Agreement. References in this Agreement to articles, sections, exhibits or schedules are to such articles, sections, exhibits or schedules of this Agreement unless otherwise specified.      1.3 Articles. This Agreement, for convenience only, has been divided into articles. The rights and other legal relations of the parties hereto shall be determined from this Agreement as an entirety and without regard to the aforesaid division into articles and sections and without regard to headings prefixed to such articles.      1.4 Number and Gender. Whenever the context requires, reference herein made to a single number shall be understood to include the plural; and likewise, the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate; and specific enumeration shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in the singular or plural shall be equally applicable to the plural or singular, as applicable, unless otherwise indicated. 12 --------------------------------------------------------------------------------   ARTICLE II PURCHASE AND SALE      2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agrees to sell and assign and Buyer agrees to purchase and pay for, all of Seller’s right, title and interest in and to the following (less and except for the Excluded Assets) (collectively, the “Assets)”:      (a) the oil and gas leases more particularly described in Exhibit A, subject to any depth restrictions described in Exhibit A, (collectively, the “Leases”), together with any and all other rights, titles and interests of Seller in and to (i) the leasehold estates created thereby, subject to any depth restrictions described in Exhibit A, and to the terms, conditions, covenants and obligations set forth in the Leases and/or Exhibit A, and (ii) the lands covered by the Leases or included in units with which the Leases may have been pooled or unitized, subject to any depth restrictions described in Exhibit A (the “Lands”), including in each case, without limitation, royalty interests, overriding royalty interests, production payments, net profits interests, carried interests, reversionary interests and all other interests of any kind or character;      (b) all oil and gas wells located on the Leases and the Lands or on other leases or lands with which the Leases and/or the Lands may have been pooled or unitized, including those specified on Exhibit A (collectively, the “Wells”) and all Hydrocarbons produced therefrom or allocated thereto from and after the Effective Time (the Leases, the Lands, and the Wells being collectively referred to hereinafter as the “Properties”);      (c) all rights and interests in, under or derived from all unitization and pooling agreements in effect with respect to the Properties and the units created thereby which accrue or are attributable to the interests of Seller in the Properties;      (d) all rights and interests in or to insurance claims, proceeds or unpaid awards with respect to damage to the Assets from Hurricane Rita and Katrina, including those set forth on Schedule 4.9 hereto;      (e) to the extent that they may be assigned, all Applicable Contracts;      (f) to the extent that they may be assigned, all permits, licenses, servitudes, easements and rights-of-way to the extent used primarily in connection with the ownership or operation of the Properties or the Personal Property (as hereinafter defined);      (g) all equipment, machinery, fixtures and other real, moveable and non-moveable personal and mixed property located on the Properties or the other Assets described above as of the Effective Time, including, without limitation, well equipment, casing, rods, tanks, boilers, tubing, pumps, motors, fixtures, machinery, compression equipment, flow lines, pipelines, gathering systems, processing and separation facilities, platforms, structures, materials and other items used primarily in the operation thereof (“Personal Property”);      (h) all Imbalances relating to the Properties or other Assets; 13 --------------------------------------------------------------------------------        (i) except as set forth on Schedule 2.1(i) hereto, the Geologic Data to the extent relating primarily to the Properties; and      (j) all of the rights, titles and interests of Seller in and to all of the original (or copies if originals are not available) files, records, information and data, whether written or electronically stored, primarily relating to the Assets (the “Records”), including, without limitation: (i) land and title records (including abstracts of title, title opinions and title curative documents); (ii) contract files; (iii) correspondence; (iv) operations, engineering, geological, environmental, production and accounting records and (v) facility, field and well records but excluding any of the foregoing items that are Excluded Assets.      2.2 Excluded Assets. Seller shall reserve and retain all of the Excluded Assets.      2.3 Revenues and Expenses. Subject to the provisions hereof, Seller shall remain entitled to all of the rights of ownership (including, without limitation, the right to all production, proceeds of production and other proceeds including overhead payments received from Third Parties, amounts for the handling, processing and transportation of Hydrocarbons and amounts for platform space for or by Third Parties), subject to any applicable time periods set forth in the definition of “Excluded Assets,” and shall remain responsible for all Operating Expenses, in each case attributable to the Assets for the period of time prior to the Effective Time, subject to any applicable time periods set forth in the definition of “Excluded Liabilities.” Subject to the provisions hereof and subject to the occurrence of the Closing, Buyer shall be entitled to all of the rights of ownership (including, without limitation, the right to all production, proceeds of production and other proceeds including overhead payments received from Third Parties, amounts for the handling, processing and transportation of Hydrocarbons and amounts for platform space for or by Third Parties) and shall be responsible for all Operating Expenses, in each case, attributable to the Assets for the period of time from and after the Effective Time, and, to the extent they arise after the first anniversary of the Closing Date, the period of time prior to the Effective Time. All Operating Expenses attributable to the Assets, in each case that are: (i) actually incurred with respect to operations conducted or production prior to the Effective Time shall be paid by or allocated to Seller and (ii) incurred with respect to operations conducted or production after the Effective Time shall be paid by or allocated to Buyer. “Operating Expenses” means all operating expenses (including without limiting the foregoing in any respect, rentals, costs of insurance and ad valorem, property, severance, production and similar taxes based upon or measured by the ownership or operation of the Assets or the production of Hydrocarbons therefrom, but excluding any other taxes) and capital expenditures incurred in the ownership and operation of the Assets and, where applicable, in accordance with any relevant operating or unit agreement and overhead costs charged to the Assets under any relevant operating agreement or unit agreement. ARTICLE III PURCHASE PRICE      3.1 Purchase Price. The purchase price for the Assets shall be $220,000,033 (the “Purchase Price”), payable in United States currency by wire transfer in same day funds as and when provided in this Agreement. 14 --------------------------------------------------------------------------------        3.2 Deposit. Upon execution of this Agreement, Buyer shall deposit by wire transfer in same day funds into escrow with Seller the sum of $11,000,000, representing 5% of the Purchase Price (the “Deposit”). The Deposit shall be applied toward the Purchase Price at the Closing.      (a) If (i) all conditions precedent to the obligations of Buyer set forth in Article VII have been met and (ii) the transactions contemplated by this Agreement are not consummated on or before the Closing Date because of: (A) the failure of Buyer to materially perform any of its obligations hereunder, (B) the failure of any of Buyer’s representations or warranties hereunder to be true and correct in all material respects as of the Closing, then, in such event, Seller shall have the right to terminate this Agreement and retain the Deposit.      (b) If this Agreement is terminated by the mutual written agreement of Buyer and Seller, or if the Closing does not occur on or before the Closing Date for any reason other than as set forth in Section 3.2(a), then Buyer shall be entitled to the prompt return of the Deposit, free of any claims by Seller with respect thereto. Buyer and Seller shall thereupon have the rights and obligations set forth in Section 14.2.      3.3 Adjustments to Purchase Price. The Purchase Price shall be adjusted as follows, and the resulting amount shall be herein called the “Adjusted Purchase Price”:      (a) The Purchase Price shall be adjusted upward by the following amounts (without duplication):      (i) an amount equal to all Operating Expenses and other costs and expenses incurred by Seller that are attributable to the Assets after the Effective Time, whether incurred before or after the Effective Time, including, without limitation, a fixed rate overhead of $200,000 per month;      (ii) the amount of all prepaid expenses attributable to the Assets that are incurred by or on behalf of Seller prior to the Closing Date and that are, in accordance with GAAP, attributable to the period after the Effective Time, including without limitation, (A) bond and insurance premiums incurred by or on behalf of Seller during the Interim Period, (B) royalties or other burdens upon, measured by or payable out of proceeds of production, (C) rentals and other lease maintenance payments, (D) ad valorem, property, severance and production taxes and any other taxes (exclusive of income taxes and the Texas Franchise Tax) based upon or measured by the ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom, and (E) prepayments of Operating Expenses made by or on behalf of Seller to operators of Properties not operated by Seller pursuant to cash calls or otherwise;      (iii) to the extent that Seller is underproduced as of the Effective Date in an aggregate amount greater (or overproduced in a lesser amount) than the net Imbalances for gas set forth in Schedule 3.3, as complete and final settlement of all Imbalances, an amount based on a rate mutually agreeable to Buyer and Seller; 15 --------------------------------------------------------------------------------        (iv) to the extent that Seller is underproduced as of the Effective Date in an aggregate amount greater (or overproduced in a lesser amount) than the net Imbalances for oil set forth in Schedule 3.3, as complete and final settlement of all Imbalances, an amount based on a rate mutually agreeable to Buyer and Seller;      (v) the amount incurred by Seller prior to the Effective Time for repair of hurricane damage to the Assets, as set forth on Schedule 4.9 hereto;      (vi) Title Benefit Amounts as a result of any Title Benefits for which the Title Benefit Amount has been determined prior to the date of the Final Settlement Statement;      (vii) without duplication of any other amounts set forth in this Section 3.3(a), the amount of all taxes prorated to Buyer but paid by Seller in accordance with Section 15.2; and      (viii) any other amount provided for elsewhere in this Agreement or otherwise agreed upon by Seller and Buyer.      (b) The Purchase Price shall be adjusted downward by the following amounts (without duplication):      (i) an amount equal to all proceeds received by the Seller attributable to the sale of Hydrocarbons produced from or allocable to the Assets during the Interim Period, net of Third Party expenses (other than Operating Expenses) directly incurred in earning or receiving such proceeds and for which no adjustment pursuant to Section 3.3(a) is made, and any sales, excise or similar Taxes in connection therewith not reimbursed to Seller by a third party purchaser;      (ii) an amount equal to all other proceeds received by Seller (other than from the sale of Hydrocarbons produced from or allocable to the Assets) to which Buyer is entitled pursuant to Section 2.3;      (iii) if Seller makes the election under Section 11.2(d)(i) with respect to a Title Defect, the Title Defect Amount with respect to such Title Defect if the Title Defect Amount has been determined prior to Closing;      (iv) if Seller makes the election under Section 12.1(b)(i) with respect to an Environmental Defect, the Remediation Amount with respect to such Environmental Defect if the Remediation Amount has been determined prior to Closing;      (v) an amount equal to all amounts received by Seller as (A) overhead payments from Third Parties, (B) handling, processing and transportation fees, (C) platform rental payments, and (D) other payments from Third Parties related to ownership of the Assets, in each case attributable to time periods after the Effective Time; 16 --------------------------------------------------------------------------------        (vi) an amount determined pursuant to Section 11.4(c) or Section 12.1(b)(iii) for any Properties and other Assets excluded from the Assets pursuant to such Sections;      (vii) without duplication of any other amounts set forth in this Section 3.3, the amount of all taxes prorated to Seller but payable by Buyer in accordance with Section 15.2;      (viii) to the extent that Seller is overproduced as of the Effective Date in an aggregate amount greater (or underproduced in a lesser amount) than the net Imbalances for gas as set forth in Schedule 3.3, as complete and final settlement of all such Imbalances, an amount based on a rate of mutually agreeable to Buyer and Seller;      (ix) to the extent that Seller is overproduced as of the Effective Date in an aggregate amount greater (or underproduced in a lesser amount) than the net Imbalances for oil as set forth in Schedule 3.3, as complete and final settlement of all such Imbalances, an amount based on a rate mutually agreeable to Buyer and Seller; and      (x) any other amount provided for elsewhere in this Agreement or otherwise agreed upon by Seller and Buyer. Buyer and Seller agree that neither party shall be charged interest on the Deposit or the Purchase Price. Buyer and Seller agree that any adjustments related to Subsections 3.3(a)(iii) and (iv) and Section 3.3(b)(viii) and (ix) shall be handled on the Final Settlement Statement and not on the Preliminary Settlement Statement or after the payment of the final adjustment pursuant to Section 3.6. It is intended that adjustments pursuant to such Subsections are to be based on the net variance from the amount of underproduction or overproduction shown on Schedule 3.3, as the volumes shown on such schedule are understood to have been accounted for in the Purchase Price. The rate for adjustment for Imbalance variances from the amount shown on Schedule 3.3 is intended to be a reasonable amount (based on such factors as the time period that the Imbalance was accrued, the time period allowed for repayment and the historical or projected price for the product during the time period in question) for those Imbalances discovered and raised by either party within the time frames set forth in Section 3.6. Buyer and Seller agree that any upward adjustments for amounts under Subsection 3.3(a)(v) related to expenses for which Seller has not received reimbursement from Seller’s insurers shall be deferred to the Final Settlement Statement, rather than addressed on the Preliminary Settlement Statement.      3.4 Adjustment Methodology. When available, actual figures will be used for the adjustments to the Purchase Price at the Closing. To the extent actual figures are not available, estimates will be used subject to final adjustments in accordance with Section 3.6.      3.5 Preliminary Settlement Statement. Not less than five business days prior to the Closing, Seller shall prepare and submit to Buyer for review a draft settlement statement (the 17 --------------------------------------------------------------------------------   “Preliminary Settlement Statement”) that shall set forth the Adjusted Purchase Price, reflecting each adjustment made in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement and the calculation of the adjustments used to determine such amount, together with the designation of Seller’s account for the wire transfer of funds as set forth in Section 9.3(d). Within three business day of receipt of the Preliminary Settlement Statement, Buyer will deliver to Seller a written report containing any changes that Buyer proposes to be made to the Preliminary Settlement Statement and an explanation of any such changes and the reasons therefor. The Preliminary Settlement Statement, with any changes agreed upon by the parties, will be used to adjust the Purchase Price at Closing.           3.6 Final Settlement Statement.           (a) On or before 120 days after the Closing, a final settlement statement (the “Final Settlement Statement”) will be prepared by Seller, based on actual income and expenses during the Interim Period and which takes into account all final adjustments made to the Purchase Price and shows the resulting final Purchase Price (“Final Price”). The Final Settlement Statement shall set forth the actual proration of the amounts required by this Agreement. As soon as practicable, and in any event within 60 days, after receipt of the Final Settlement Statement, Buyer shall either agree in writing with the Final Settlement Statement or return a written report containing any proposed changes to the Final Settlement Statement and an explanation of any such changes and the reasons therefor (the “Dispute Notice”). If the Final Price set forth in the Final Settlement Statement is mutually agreed upon by Seller and Buyer, the Final Price shall be paid according thereto. For the avoidance of doubt, any payment owing under this Section 3.6 shall not be subject to the Indemnification Threshold or Indemnification Cap contained in Section 13.5. Any difference in the Adjusted Purchase Price as paid at Closing pursuant to the Preliminary Settlement Statement and the Final Price shall be paid by the owing party without interest within ten days of (i) the Final Settlement Statement or (ii) if the Final Price is disputed, resolution of the Final Price, to the owed party. All amounts paid pursuant to this Section 3.6 shall be delivered in United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant party.           (b) If Seller fails to prepare the Final Settlement Statement within such 120-day period, it shall pay to Buyer interest at the rate of 10% per annum from the 121st day after the Closing until preparation of such Final Settlement Statement on the net amount, if any, owing to Buyer as shown on such Final Settlement Statement.           (c) If Buyer fails to either agree with the Final Settlement Statement or return a Dispute Notice within 60 days of its receipt of the Final Settlement Statement, it shall pay to Seller interest at the rate of 10% per annum from the 61st day after receipt of the Final Settlement Statement on the net amount, if any, owing to Seller as shown on such Final Settlement Statement.           3.7 Disputes. If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice, each of Buyer and Seller shall within 60 days after the earlier of delivery of such Dispute Notice or the deadline for submitting such Dispute Notice under Section 3.6 above, summarize its position with regard to such dispute in a written document of twenty pages or less 18 --------------------------------------------------------------------------------   and submit such summaries to such party as the parties may mutually select (the “Accounting Arbitrator”), together with this Agreement, the Dispute Notice, the Preliminary Settlement Statement, the Final Settlement Statement and any other documentation such party may desire to submit. Within 30 business days after receiving the parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’s position with respect to each matter addressed in any Dispute Notice, based on the materials described above. Any decision rendered by the Accounting Arbitrator pursuant hereto shall include a written statement as to the basis for such decision and shall be final, conclusive and binding on Seller and Buyer and will be enforceable against any of the parties in any court of competent jurisdiction. The costs of such Accounting Arbitrator shall be borne by the non-prevailing party.           3.8 Allocation of Purchase Price / Allocated Values. Buyer and Seller agree that the unadjusted Purchase Price shall be allocated among the Assets as set forth in Schedule 3.8 of this Agreement. The “Allocated Value” for any Asset equals the portion of the unadjusted Purchase Price allocated to such Asset on Schedule 3.8 and such Allocated Value shall be used in calculating adjustments to the Purchase Price as provided herein.           3.9 Interim Settle-Up. The Parties acknowledge that it is not the intent of this Agreement that either party be deprived of material amounts of revenue or be burdened by material amounts of expense until the final adjustment pursuant to Section 3.6. If at any time after Closing either party believes it is owed material revenues or material expense reimbursement, which revenues and expense reimbursement owed shall be netted against revenues and expenses due the other party, it may request payment from the other party, not more frequently than monthly, and such party shall make payment of any undisputed amounts within a commercially reasonable period of time. For purposes of this Section 3.9, material shall mean an amount in excess of $4,000,000. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER      Seller represents and warrants to Buyer the following:           4.1 Organization, Existence. Seller is a corporation duly formed and validly existing under the laws of the State of Delaware. Seller has all requisite power and authority to own and operate its property (including, without limitation, its interests in the Assets) and to carry on its business as now conducted. Seller is duly licensed or qualified to do business as a corporation and is in good standing in all jurisdictions in which such qualification is required by Law.           4.2 Authorization.Seller has full power and authority to enter into and perform this Agreement and the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery and performance by Seller of this Agreement have been duly and validly authorized and approved by all necessary corporate action on the part of Seller. This Agreement is, and the Transaction Documents to which Seller is a party when executed and delivered by Seller will be, the valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, subject to the effects of 19 --------------------------------------------------------------------------------   bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).           4.3 No Conflicts. Subject to the giving of all notices to Third Parties and the receipt of all consents, approvals and waivers from Third Parties in connection with the transactions contemplated hereby, the execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated herein will not (i) conflict with or result in a breach of any provisions of the organizational documents of Seller, (ii) result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any Lease, Applicable Contract, note, bond, mortgage, indenture, license or other material agreement to which any Seller is a party or by which any Seller or the Assets may be bound or (iii) violate any material Law applicable to any Seller or any of the Assets.           4.4 Consents. Except (a) for consents set forth in Schedule 4.4, (b) for Customary Post-Closing Consents, (c) for consents under Contracts that are terminable upon not greater than 90 days’ notice without payment of any fee or are otherwise material, (d) compliance with any applicable requirements of the MMS and (e) compliance with any applicable requirements of the HSR Act, there are no other consents required in connection with the transfer of the Assets or the consummation of the transactions contemplated by this Agreement.           4.5 Litigation. Except as set forth in Schedule 4.5, there is no suit, action, investigation or inquiry by any Person or by or before any Governmental Authority, and no legal, administrative or arbitration proceedings pending, or to Seller’s Knowledge, threatened against Seller or any of the Assets, to which Buyer is a party or which individually or in the aggregate would be material or would materially adversely affect the ability of Seller to consummate the transactions contemplated in this Agreement.           4.6 Material Contracts.           (a) Schedule 4.6 sets forth all Applicable Contracts to which Seller is a party that are material to the Assets (collectively, the “Material Contracts”).           (b) Except as set forth on Schedule 4.6, (i) there exist no defaults under the Material Contracts by Seller or, to Seller’s Knowledge, by any other Person that is a party thereto, and (ii) no event has occurred that with notice or lapse of time or both would constitute any default under any such Material Contract by Seller or, to Seller’s Knowledge, any other Person who is a party thereto. Seller has made available to Buyer copies of each Material Contract and all amendments thereto.           4.7 No Violation of Laws. Except as set forth on Schedule 4.7, to Seller’s Knowledge, Seller has not materially violated any applicable Laws with respect to the ownership or operation of the Assets. This Section 4.7 does not include any matters with respect to Environmental Laws, such matters being addressed exclusively in Section 4.15.           4.8 Insurance. Seller has made available to Buyer a list of, and true and complete copies of, its insurance policies and fidelity bonds relating to the Assets. Schedule 4.8 sets forth 20 --------------------------------------------------------------------------------   all material claims of Seller pending under any of such policies or bonds with respect to the Assets, none of which coverage has been denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. Seller has made available to Buyer true and complete copies of all material correspondence between Seller, its agents and Affiliates and Seller’s insurers or underwriters with respect to the claims listed on Schedule 4.8.           4.9 Hurricane Damage. Schedule 4.9 sets forth as of the date hereof (i) to Seller’s Knowledge, a true and correct list of all material damage to the Assets from Hurricane Rita and Katrina, (ii) Seller’s good faith estimate of the cost to repair such damage, (iii) the cost of such repairs incurred as of the Effective Time and incurred as of the date hereof, (iv) the status and estimated completion date of such repairs and (v) the status of insurance claims with respect to each such repair.           4.10 Wells. Schedule 4.10 sets forth the status as of February 1, 2006 of each of the Wells included in the Assets. The mechanical condition of such Wells does not deviate materially from the well bore schematics made available to Buyer in the data room.           4.11 Preferential Rights. Except as set forth in Schedule 4.11, there are no preferential rights to purchase that are applicable to the transfer of the Assets in connection with the transactions contemplated hereby.           4.12 Royalties, Etc. Seller has timely and properly paid all royalties, overriding royalties and other burdens on production due by Seller with respect the Properties, or if not paid, is contesting such royalties and other burdens in good faith.           4.13 Personal Property. To Seller’s Knowledge, except as set forth in Schedules 4.9 or 4.13(a), taken as a whole, all Personal Property constituting a part of the Assets are in a state of repair so as to be adequate for normal operations, ordinary wear and tear excepted. Schedule 4.13(b) sets forth the Personal Property (including automation equipment and telemetry equipment) used by Seller with respect to the Assets that is not being transferred to Buyer hereunder.           4.14 Current Commitments. Schedule 4.14 sets forth, as of the date of this Agreement, all authorities for expenditures (“AFEs”) relating to the Properties to drill or rework Wells or for other capital expenditures pursuant to any of the Material Contracts or any applicable joint or unit operating agreement for which all of the activities anticipated in such AFEs or commitments have not been completed by the date of this Agreement.           4.15 Environmental.           (a) Except as set forth in Schedule 4.15, Seller has not received written notice from any Person of, and to Seller’s Knowledge there has not been, any release, disposal, event, condition, circumstance, activity, practice or incident concerning the Assets that (i) violates any Environmental Law, (ii) interferes with or prevents compliance by Seller with any Environmental Law; or (iii) gives rise to or results in any liability of Seller to any Person under any Environmental Law. 21 --------------------------------------------------------------------------------             (b) To Seller’s Knowledge, all material reports, studies and written notices from environmental Governmental Authorities specifically addressing environmental matters related to Seller’s ownership or operation of the Properties, which are in Seller’s possession, have been made available to Buyer.           4.16 Production Taxes. Except as disclosed in Schedule 4.16, during the period of Seller’s ownership of the Assets, all ad valorem, property, production, severance and similar taxes and assessments (including penalties and interest) based on or measured by the ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom that have become due and payable before the Effective Time are being properly paid, other than taxes which are being contested in good faith.           4.17 Brokers’ Fees. Seller has incurred no liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any Affiliate of Buyer shall have any responsibility.           4.18 Accuracy of Data. To Seller’s Knowledge, (i) all documents furnished to Buyer by Seller, including, without limitation, all maps, reports and analyses, are true and correct copies of documents contained in Seller’s files, and (ii) all lease operating expense information and data furnished by Seller to Buyer are true and correct in all material respects. The representations and warranties contained in this Section 4.18 shall not be construed to be representations or warranties with respect to the accuracy of any estimates, forecasts or conclusions contained in any document, any such representations or warranties being expressly denied.           4.19 Affiliated Contracts. After Closing, the Assets will not be bound or burdened by any contractual obligation to Seller or an Affiliate of Seller except pursuant to this Agreement.           4.20 Sales Contracts. With respect to any agreement or contract for the sale of hydrocarbons affecting or relating to the Assets (the “Sales Contracts”):           (a) Advance Payments. Except for imbalances or as shown on Schedule 4.20, Seller is not obligated by virtue of (i) any prepayment arrangement, (ii) a “take-or-pay” or similar provision, (iii) a production payment, or (iv) any other arrangement to deliver hydrocarbons produced from the Assets at some future time without then or thereafter receiving full payment therefor.           (b) Carried Payments. Payments for hydrocarbons sold pursuant to each of the Sales Contracts are current (subject to adjustment in accordance with the Sales Contracts) and to the best of Seller’s Knowledge in accordance with the prices set forth in the Sales Contracts.           (c) Terminable Sales Contracts. Except as set forth on Schedule 4.20, no Sales Contract has a term in excess of 90 days, or is not terminable upon notice of 90 days or less. 22 --------------------------------------------------------------------------------             4.21 Hedging. All of Seller’s hedging arrangements and the net profits interest of Transworld pursuant to that certain Purchase and Sale Agreement dated September 3, 2003 with Transworld Exploration and Production Inc. and certain of its affiliates shall be retained by Seller and Buyer shall have no responsibility therefor.           4.22 Limitations. Seller’s representations and warranties are given subject to and are qualified by any matters disclosed by or under this Agreement, including any Schedule attached hereto. ARTICLE V BUYER’S REPRESENTATIONS AND WARRANTIES      Each Buyer hereby jointly and severally represents and warrants to Seller the following:           5.1 Organization; Existence. Each Buyer is duly organized and validly existing under the laws of the State of Delaware and has all requisite power and authority to own and operate its property and to carry on its business as now conducted. Each Buyer is duly licensed or qualified to do business as a limited partnership in all jurisdictions in which such qualification is required by Law.           5.2 Authorization. (a) Each Buyer has full power and authority to enter into and perform this Agreement and the Transaction Documents to which it is a party and the transactions contemplated herein and therein; (b) the execution, delivery and performance by each Buyer of this Agreement have been duly and validly authorized and approved by all necessary partnership action on the part of each Buyer; and (c) this Agreement is, and the Transaction Documents to which each Buyer is a party when executed and delivered by such Buyer will be, the valid and binding obligations of such Buyer, enforceable against Buyer in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).           5.3 No Conflicts. The execution, delivery and performance by each Buyer of this Agreement and the Transaction Documents and the consummation of the transactions contemplated herein and therein will not conflict with or result in a breach of any provisions of the certificate of formation, agreement of limited partnership or other governing documents of any Buyer nor will it violate any Law or Order applicable to any Buyer or any of its property.           5.4 Consents. Except for Customary Post-Closing Consents and compliance with any applicable requirements under the HSR Act, there are no consents or other restrictions on assignment that any Buyer is obligated to obtain or furnish, including, but not limited to, requirements for consents from Third Parties to any assignment (in each case) that would be applicable in connection with the consummation of the transactions contemplated by this Agreement by Buyer. 23 --------------------------------------------------------------------------------             5.5 Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Buyer’s knowledge, threatened against any Buyer.           5.6 Litigation. There is no suit, action, investigation or inquiry by any Person or by or before any Governmental Authority, and no legal, administrative or arbitration proceedings pending, or to Buyer’s knowledge, threatened against any Buyer, or to which any Buyer is a party, that would have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated in this Agreement.           5.7 Financing. Buyer has and shall have as of the Closing Date, sufficient funds on hand with which to pay the Purchase Price and consummate the transactions contemplated by this Agreement.           5.8 Regulatory. Each Buyer is, and after Closing shall continue to be, qualified to own the federal oil, gas and mineral leases in the MMS Gulf of Mexico Outer Continental Shelf Region, including meeting Buyer’s existing or increased bonding or any other bonding and financial requirements of the MMS or other governmental agencies. The consummation of the transactions contemplated in this Agreement will not cause any Buyer to be disqualified as such an owner or to exceed any acreage limitation imposed by any law, statute, rule or regulation. To the extent required by any applicable Laws and except to the extent, if any, that any Buyer will, as of Closing, be covered by the bonds of Third Party operators of the applicable Assets, each Buyer will have as of Closing, and will thereafter continue to maintain, lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, all applicable Laws governing the ownership of such leases, and has filed any and all required reports necessary for such ownership with all Governmental Authorities having jurisdiction over such ownership, including but not limited to adequate financial assurance in accordance with OPA.           5.9 Independent Evaluation. Each Buyer is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities. In making its decision to enter into this Agreement and to consummate the transactions contemplated herein, each Buyer (a) has relied or shall rely solely on its own independent investigation and evaluation of the Assets and the advice of its own legal, tax, economic, insurance, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives or consultants or advisors engaged by Seller, and (b) has satisfied or shall satisfy itself through its own due diligence as to the environmental and physical condition and state of repair of and contractual arrangements and other matters affecting the Assets. Buyer has no knowledge of any fact that results in the breach of any representation, warranty or covenant of Seller given hereunder or of any “scrivener’s error” of the type referred to in Section 11.2(k).           5.10 Brokers’ Fees. No Buyer nor any of their Affiliates has incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Seller or Seller’s Affiliates shall have any responsibility.           5.11 NORM, Wastes and Other Substances. Each Buyer acknowledges that the Assets have been used for exploration, development and production of oil and gas and that there 24 --------------------------------------------------------------------------------   may be petroleum,produced water, wastes or other substances or materials located in, on or under the Assets or associated with the Assets. Equipment and sites included in the Assets may contain asbestos, NORM or other Hazardous Substances. NORM may affix or attach itself to the inside of wells, materials and equipment as scale or in other forms. The wells, materials and equipment located on the Assets or included in the Assets may contain NORM and other wastes or Hazardous Substances. NORM containing material and/or other wastes or Hazardous Substances may have come in contact with various environmental media, including without limitation, water, soils or sediment. Special procedures may be required for the assessment, remediation, removal, transportation or disposal of environmental media, wastes, asbestos, NORM and Hazardous Substances from the Assets. ARTICLE VI COVENANTS           6.1 Conduct of Business. Except as set forth in Schedule 6.1, Seller agrees that from and after the date hereof until Closing, except as expressly contemplated by this Agreement or as expressly consented to in writing by Buyer (which consent will not be unreasonably withheld or delayed), it will:           (a) use customary commercially reasonable efforts to operate, where Seller is the operator, or to cause the operators thereof, where Seller is not the operator, to maintain and operate the Assets in the usual, regular and ordinary manner consistent with past practice;           (b) use commercially reasonable efforts to continue repairs to the Assets for hurricane damage and to preserve and pursue all insurance claims on Schedule 4.9 with respect thereto;           (c) maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with its usual accounting practices;           (d) maintain insurance relating to the Assets of the types and amounts consistent with Seller’s past practices;           (e) not enter into a Material Contract or terminate or materially amend or change the terms of any Material Contract;           (f) not approve any authorization for expenditure in excess of $500,000 relating to the Assets;           (g) not transfer, sell, farm-out, mortgage, pledge or dispose of any material portion of the Assets other than the sale and/or disposal of Hydrocarbons in the ordinary course of business and sales of equipment that is no longer necessary in the operation of the Assets or for which replacement equipment has been obtained; and           (h) not elect to non-consent or fail to timely elect to participate in and thus be deemed to have elected to non-consent, any proposed well or other operation on or relating to the Assets without first consulting with Buyer, and Buyer’s preference with 25 --------------------------------------------------------------------------------   respect to any such proposed well or other operation shall be considered in good faith by Seller.      Buyer acknowledges Seller owns undivided interests in certain of the properties comprising the Assets that it is not the operator thereof, and Buyer agrees that the acts or omissions of the other working interests owners (including the operators) who are not Seller or any Affiliates of Seller shall not constitute a breach of the provisions of this Section 6.1, nor shall any action required by a vote of working interest owners constitute such a breach so long as Seller has voted its interest in a manner that complies with the provisions of this Section 6.1.           6.2 HSR Act. If applicable, within five business days following the execution by Buyer and Seller of this Agreement, Buyer and Seller will each prepare and simultaneously file with the DOJ and the FTC, as applicable, the notification and report form required for the transactions contemplated by this Agreement by the HSR Act, and request early termination of the waiting period thereunder. Buyer and Seller agree to respond promptly to any inquiries from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act. Buyer and Seller shall cooperate with each other and, subject to the terms of the Confidentiality Agreement, shall promptly furnish all information to the other party that is necessary in connection with Buyer’s and Seller’s compliance with the HSR Act. Buyer and Seller shall keep each other fully advised with respect to any requests from or communications with the DOJ or FTC concerning such filings and shall consult with each other with respect to all responses thereto. Each of Seller and Buyer shall use its reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to consummate the transactions contemplated hereby.           6.3 Bonds, Letters of Credit and Guarantees. Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with Governmental Authorities or Third Parties and relating to the Assets are transferable to Buyer. Except to the extent that Buyer will, as of Closing, be covered by the bonds of the operators of the applicable Assets, then on or before the Closing Date, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for such bonds, letters of credit and guarantees, to the extent such replacements are necessary to permit the cancellation as of Closing of the bonds, letters of credit and guarantees posted by Seller and/or its Affiliates.           6.4 Cooperation with Seller Retained Litigation, Etc. Buyer agrees to use reasonable efforts to cooperate with Seller in connection with Seller’s defense and other actions relating to or arising out of the litigation and claims set forth on Schedule 13.1 and with respect to future audits. Buyer agrees to make available Buyer’s employees engaged in, or having information about, the ownership and operation of the Assets, for the purposes of providing testimony, depositions, information and other related activities relating to such litigation, claims and audits.           6.5 Cooperation with Respect to Insurance Claims. From and after the Closing Date, Seller and Buyer shall fully cooperate and shall use their commercially reasonable efforts to work with each other and Seller’s insurers to enable Buyer to expeditiously recover insurance proceeds for damage to the Assets resulting from Hurricanes Rita and Katrina (if any), as set 26 --------------------------------------------------------------------------------   forth on Schedule 4.9 hereto, and Seller shall promptly pay over to Buyer any such proceeds that it receives.           6.6 Plugging, Abandonment, Decommissioning and Other Costs. In addition to its other obligations under this Agreement, Buyer shall comply with all Laws, Leases, Applicable Contracts (including all joint and unit operating agreements) and prevailing industry standards relating to (i) the plugging, abandonment and/or replugging of all Wells, including inactive Wells or temporarily abandoned Wells, included in the Assets, (ii) the dismantling or decommissioning and removal of any Personal Property and other property of whatever kind related to or associated with operations and activities conducted by whomever on the Properties or otherwise, pursuant to the Leases or Applicable Contracts and (iii) the clean up, restoration and/or remediation of the property covered by the Leases or related to the Assets (collectively, the “P&A Obligations”).           6.7 Record Retention. Buyer, for a period of seven years following Closing, will (i) retain the Records, (ii) provide Seller, its Affiliates and its and their officers, employees and representatives with access to the Records (to the extent that Seller has not retained the original or a copy) during normal business hours for review and copying at Seller’s expense and upon reasonable notice, and (iii) provide Seller, its Affiliates and its and their officers, employees and representatives with access, during normal business hours, to materials received or produced after Closing relating to any indemnity claim made under Section 13.2 of this Agreement for review and copying at Seller’s expense. If Buyer shall desire to dispose of or transfer any such Records or other materials upon or after the expiration of such seven-year period, Buyer shall, prior to any disposition, give Seller notice and a reasonable opportunity at Seller’s expense to segregate and remove or copy such Records or other materials as Seller may select.           6.8 Notifications. Each Party shall promptly notify the other Party in writing of any circumstances or facts or matters which become known to it after execution of this Agreement but prior to Closing which are inconsistent in any respect with any Party’s representations and warranties which would if subsisting at Closing be inconsistent with any of those representations and warranties. The Parties agree that the disclosures set forth in the Schedules hereto shall be deemed to be amended, as applicable, with effect on and from the date of such written notification to reflect such circumstances, facts or matters. No supplement or amendment of any Schedule made pursuant to this Section 6.8 shall be deemed to cure any breach of a representation or warranty made by Seller or Buyer in this Agreement unless the parties agree thereto. ARTICLE VII BUYER’S CONDITIONS TO CLOSING      The obligations of Buyer to consummate the transactions provided for herein are subject, at the option of Buyer, to the fulfillment on or prior to the Closing Date of each of the following conditions:           7.1 Representations. The representations and warranties of Seller set forth in this Agreement shall be true and correct on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing 27 --------------------------------------------------------------------------------   Date, except where the failure of such representations or warranties to be so true and correct does not have, and would not have, individually or in the aggregate, a Material Adverse Effect. Notwithstanding, the Seller’s representations and warranties referenced above, there presently exist other provisions in this Agreement pursuant to which price and other adjustments can be made relating to certain of the representations and warranties, which may reduce Material Adverse Effects, by cure or otherwise. The referenced provisions of Article IV and the provisions of this Section 7.1, are not intended to replace or override those adjustment mechanisms, to the extent they are applicable.           7.2 Performance. Seller shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Seller is required prior to or at the Closing Date.           7.3 No Legal Proceedings. No material suit, action or other proceeding shall be pending before any Governmental Authority seeking to restrain, prohibit, enjoin or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.           7.4 Title Defects and Environmental Defects. The sum of (i) all Title Defect Amounts determined under Section 11.2(d)(i) prior to the Closing, less the sum of all Title Benefit Amounts determined under Section 11.2(b) prior to Closing, plus (ii) all Remediation Amounts for environmental defects determined under Article XII prior to the Closing, shall not exceed 15% of the Purchase Price.           7.5 HSR Act. If applicable, the waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired, notice of early termination shall have been received, or a consent order issued by or from applicable Governmental Authorities. ARTICLE VIII SELLER’S CONDITIONS TO CLOSING      The obligations of Seller to consummate the transactions provided for herein are subject, at the option of Seller, to the fulfillment on or prior to the Closing Date of each of the following conditions precedent:           8.1 Representations. The representations and warranties of Buyer set forth in this Agreement shall be true and correct on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date, except where the failure of such representations or warranties to be so true and correct would not have, individually or in the aggregate, a Material Adverse Effect.           8.2 Performance. Buyer shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Buyer is required prior to or at the Closing Date.           8.3 No Legal Proceedings. No material suit, action or other proceeding shall be pending before any Governmental Authority seeking to restrain, prohibit or declare illegal or 28 --------------------------------------------------------------------------------   seeking substantial damages in connection with, the transactions contemplated by this Agreement.           8.4 Title Defects and Environmental Defects. The sum of (i) all Title Defect Amounts determined under Section 11.2(d)(i) prior to the Closing, less the sum of all Title Benefit Amounts determined under Section 11.2(b) prior to Closing, plus (ii) all Remediation Amounts for environmental defects determined under Article XII prior to the Closing, shall not exceed 15% of the Purchase Price.           8.5 HSR Act. If applicable, the waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired, notice of early termination shall have been received or a consent order issued by or from applicable Governmental Authorities.           8.6 Replacement Bonds, Letters of Credit and Guarantees. Buyer shall have obtained, or caused to be obtained, in the name of Buyer, replacements for Seller’s and/or its Affiliates’ bonds, letters of credit and guaranties, if any, to the extent required by Section 6.3.           8.7 Insurance. Buyer shall have furnished Seller with certificates of insurance on forms reasonably acceptable to Seller which list Buyer’s insurance policies relating to the Assets, including (i) insurance which complies with all applicable workers’ compensation and occupational disease laws covering all of Buyer’s employees performing any work or activities as to oil and gas leasehold interests subject to this Agreement, (ii) insurance for all work performed offshore, including insurance to cover claims under the United States Longshoremen’s and Harbor Workers’ Act extended to include the Outer Continental Shelf, (iii) commercial general liability insurance (including contractual liability coverage) and pollution liability insurance, (iv) excess liability insurance (including contractual liability coverage), (v) well control insurance and (vi) such other insurance and proof of financial responsibility as is required under the applicable provisions of OPA or MMS requirements. ARTICLE IX CLOSING           9.1 Date of Closing. Subject to the conditions stated in this Agreement, the sale by Seller and the purchase by Buyer of the Assets pursuant to this Agreement (the “Closing”) shall occur on or before 9:00 a.m. on March 31, 2006, or such other date as Buyer and Seller may agree upon in writing. The date of the Closing shall be the “Closing Date.”           9.2 Place of Closing. The Closing shall be held at the offices of Akin Gump Strauss Hauer & Feld LLP, 1111 Louisiana Street, 44th Floor, Houston, Texas 77002, or at such other place as Seller and Buyer may agree to in writing.           9.3 Closing Obligations. At the Closing, the following documents shall be delivered and the following events shall occur, the execution of each document and the occurrence of each event being a condition precedent to the others and each being deemed to have occurred simultaneously with the others: 29 --------------------------------------------------------------------------------             (a) Seller and Buyer shall execute and deliver the Assignments, in sufficient counterparts to facilitate recording in the applicable counties and parishes adjacent to the Assets.           (b) Seller and Buyer shall execute and deliver the Preliminary Settlement Statement.           (c) Buyer and Seller shall execute and file all forms (and Buyer shall perform all acts) required by the MMS (and other appropriate governmental agencies) to transfer ownership and operatorship of the Assets, where applicable, from Seller to Buyer effective as of the Effective Time.           (d) Buyer shall deliver to Seller, to the account designated in the Preliminary Settlement Statement, by direct bank or wire transfer in same day funds, the Adjusted Purchase Price, less the amount of the Deposit.           (e) Buyer shall deliver to Seller evidence acceptable to Seller that Buyer is qualified to hold title to the Leases with the MMS and to operate (should Buyer’s Affiliate become the operator of the Assets or a portion thereof) the platforms, wells, pipelines and facilities associated therewith, including copies of Buyer’s MMS qualification card and any powers of attorney of those persons executing documents at Closing on behalf of Buyer.           (f) Buyer shall deliver to Seller evidence satisfactory to Seller that Buyer (or its nominated Affiliated operator, if one is designated by Buyer upon Closing) has obtained all lease, pipeline and operating bonds necessary for it to become operator of record by MMS with respect to the Leases and oil and gas properties subject hereto.           (g) Buyer shall deliver to Seller a secretary’s certificate of Buyer’s general partner, including certified resolutions of its general partner, evidencing the approval of Buyer’s general partner of this Agreement and the transactions contemplated hereby and including an incumbency certificate regarding the authority of the person(s) signing this Agreement and any of the Closing documents on behalf of the Buyer.           (h) Where Seller is the designated Operator of a Lease, Buyer shall promptly file all appropriate forms, declarations or bonds with federal and state governmental agencies relative to Buyer’s Affiliate’s assumption of operations from such Seller. Buyer shall also take all actions necessary to qualify as a successor Operator to Seller under any applicable joint operating agreement (subject to the terms of that operating agreement) and to provide appropriate evidence of financial responsibility as required by OPA.           (i) Seller shall deliver to Buyer a secretary’s certificate of Seller, including certified resolutions of its Board of Directors, evidencing the approval of Seller’s Board of Directors of this Agreement and the transactions contemplated hereby and including an incumbency certificate regarding the authority of the person(s) signing this Agreement and any of the Closing documents on behalf of the Seller.           (j) Seller shall deliver to Buyer on forms reasonably acceptable to Buyer transfer orders or letters in lieu thereof directing all purchasers of production to make 30 --------------------------------------------------------------------------------   payment to Buyer of proceeds attributable to production from the Assets from and after the Effective Time, for delivery by Buyer to the purchasers of production.           (k) Seller shall deliver an executed statement described in Treasury Regulation §1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code.           (l) Seller and Buyer shall execute and deliver any other agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered at the Closing.           9.4 Records. In addition to the obligations set forth under Section 9.3 above, within 30 days following the Closing, Seller shall deliver to Buyer possession of the Records. ARTICLE X ACCESS/DISCLAIMERS           10.1 Access.           (a) From and after the date hereof and up to and including the Closing Date (or earlier termination of this Agreement) but subject to applicable laws, the other provisions of this Section 10.1 and obtaining any required consents of Third Parties, including Third Party operators of the Assets (with respect to which consents Seller shall use commercially reasonable efforts to obtain), Seller shall afford to Buyer and its officers, employees, agents, accountants, attorneys, investment bankers and other authorized representatives (“Buyer’s Representatives”) full access, during normal business hours and upon reasonable notice, to the Assets and all Records and other documents in Seller’s or any their respective Affiliates’ possession relating primarily to the Assets. Seller shall also make available to Buyer and Buyer’s Representatives, upon reasonable notice during normal business hours, Seller’s personnel knowledgeable with respect to the Assets in order that Buyer may make such diligence investigation as Buyer considers necessary or appropriate. All investigations and due diligence conducted by Buyer or any Buyer’s Representative shall be conducted at Buyer’s sole cost, risk and expense and any conclusions made from any examination done by Buyer or any Buyer’s Representative shall result from Buyer’s own independent review and judgment.           (b) Buyer shall be entitled to conduct a non-invasive environmental site assessment with respect to the Assets. Seller or its designee shall have the right to accompany Buyer and Buyer’s Representatives whenever they are on site on the Assets. Notwithstanding anything herein to the contrary, Buyer shall not have access to, and shall not be permitted to conduct any environmental due diligence with respect to any Assets where Seller does not have the authority to grant access for such due diligence; provided, however, Seller shall use its commercially reasonable efforts to obtain permission from any Third Party operator to allow Buyer and Buyer’s Representatives such access, it being understood by Buyer that the execution by Buyer of a customary boarding agreement may be a condition of such access. 31 --------------------------------------------------------------------------------             (c) Buyer shall coordinate its environmental site assessments and physical inspections of the Assets with Seller to minimize any inconvenience to or interruption of the conduct of business by Seller. Buyer shall abide by Seller’s, and any Third Party operator’s, safety rules, regulations and operating policies while conducting its due diligence evaluation of the Assets including any environmental or other inspection or assessment of the Assets. Buyer hereby agrees to defend, indemnify and hold harmless each of the Third Party operators and owners of the Assets and Seller Indemnified Parties from and against any and all Liabilities arising out of, resulting from or relating to any field visit, environmental property assessment, or other due diligence activity conducted by Buyer or any Buyer’s Representative with respect to the Assets, even if such Liabilities arise out of or result from, solely or in part, the sole, active, passive, concurrent or comparative negligence, strict liability or other fault or violation of Law of or by any such Third Party operator or owner or Seller Indemnified Party, excepting only Liabilities actually resulting on the account of the gross negligence or willful misconduct of such person.           (d) Upon Seller’s request, Buyer agrees to provide Seller promptly, but not later than the Environmental Claim Date, copies of all reports, test results, and other documentation and data prepared or compiled by Buyer and/or any of Buyer’s Representatives and which contain information collected or generated from Buyer’s due diligence with respect to the Assets. Seller shall not be deemed by its receipt of said documents or otherwise to have made any representation or warranty, expressed, implied or statutory, as to the condition to the Assets or to the accuracy of said documents or the information contained therein.           (e) Upon completion of Buyer’s due diligence, Buyer shall at its sole cost and expense and without any cost or expense to Seller or its Affiliates, (i) repair all damage done to the Assets in connection with Buyer’s due diligence in accordance with recognized industry standards or requirements of Third Party operators, (ii) restore the Assets to the approximate same or better condition than existed prior to commencement of Buyer’s due diligence, to the full extent of any damage related to Buyer’s due diligence, and (iii) remove all equipment, tools or other property brought onto the Assets in connection with Buyer’s due diligence. Any disturbance to the Assets (including, without limitation, any real property, platform or other fixtures associated with such Assets) resulting from Buyer’s due diligence will be promptly corrected by Buyer.           (f) During all periods that Buyer, and/or any of Buyer’s Representatives are on the Assets, Buyer shall maintain, at its sole expense and with insurers reasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller. Coverage under all insurance required to be carried by Buyer hereunder will (i) be primary insurance, (ii) list Seller Indemnified Parties as additional insureds, (iii) waive subrogation against Seller Indemnified Parties, (iv) be maintained for three years following Buyer’s and/or Buyer’s Representatives due diligence activities, and (v) provide for 30 days’ prior notice to Seller in the event of cancellation or modification of the policy or reduction in coverage. Upon request by Seller, Buyer shall provide evidence of such insurance to Seller prior to entering upon the Assets. 32 --------------------------------------------------------------------------------             10.2 Confidentiality. Buyer acknowledges that, pursuant to its right of access to the Records or the Assets, Buyer will become privy to confidential and other information of Seller and that such confidential information shall be held confidential by Buyer and Buyer’s Representatives in accordance with the terms of the Confidentiality Agreement. If the Closing should occur, the foregoing confidentiality restriction on Buyer, including the Confidentiality Agreement, shall terminate (except as to (i) such portion of the Assets that are not conveyed to Buyer pursuant to the provisions of this Agreement, (ii) any assets covered by the Confidentiality Agreement that are not conveyed to the Buyer pursuant to this Agreement; and (iii) the Excluded Assets).           10.3 Disclaimers.           (a) Except as and to the extent expressly set forth in Article IV and elsewhere in this Agreement and the special warranty in the assignments to be executed pursuant hereto, (i) Seller makes no representations or warranties, express, statutory or implied, and (ii) Seller expressly disclaims all liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to Buyer or any of its Affiliates or Representatives (including, without limitation, any opinion, information, projection or advice that may have been provided to Buyer by any officer, director, employee, agent, consultant, representative or advisor of Seller or any of its Affiliates). In particular, except as expressly set forth in Article IV and elsewhere in this Agreement and the special warranty in the assignments to be executed pursuant hereto, and without limiting the generality of the foregoing, Seller expressly disclaims any representation or warranty, express, statutory or implied, as to (i) title to any of the Assets, (ii) the contents, character or nature of any report of any petroleum engineering consultant or any engineering, geological or seismic data or interpretation, relating to the Assets, (iii) the quantity, quality or recoverability of Hydrocarbons in or from the Assets, (iv) any estimates of the value of the Assets or future revenues generated by the Assets, (v) the production of Hydrocarbons from the Assets, (vi) the maintenance, repair, condition, quality, suitability, design or marketability of the Assets, (vii) the content of any information memorandum, reports, brochures, charts or statements prepared by Seller or third parties with respect to the Assets and (viii) any other materials or information that may have been made available to Buyer or its Affiliates, or its or their Representatives in connection with the transactions contemplated by this Agreement or any discussion or presentation relating thereto. Except as expressly set forth in Article IV and elsewhere in this Agreement, Seller further disclaims any representation or warranty, express, statutory or implied, of merchantability, freedom from latent vices or defects, fitness for a particular purpose or conformity to models or samples of materials of any assets, rights of a purchaser under appropriate statutes to claim diminution of consideration or return of the Purchase Price, it being expressly understood and agreed by the parties hereto that Buyer shall be deemed to be obtaining the Assets in their present status, condition and state of repair, “as is” and “where is” with all faults or defects (known or unknown, latent, discoverable or undiscoverable), and that Buyer has made or caused to be made such inspections as Buyer deems appropriate. With respect to any of the Assets that are located in or in 33 --------------------------------------------------------------------------------   federal waters offshore Louisiana, Buyer acknowledges that this waiver has been expressly called to its attention and includes, without limitation, a waiver of warranty against rehibitory vices arising under Louisiana Civil Code Articles 2520 through 2548, inclusive.           (b) Seller and Buyer agree that, to the extent required by applicable Law to be effective, the disclaimers of certain representations and warranties contained in this Section 10.3 are “conspicuous” disclaimers for the purpose of any applicable Law. ARTICLE XI TITLE MATTERS; CASUALTIES; TRANSFER RESTRICTIONS           11.1 Seller’s Title. General Disclaimer of Title Warranties and Representations. Other than the special warranty in the assignments to be executed pursuant hereto, Seller makes no warranty or representation, express, implied, statutory or otherwise, not even as to a return of the Purchase Price, with respect to Seller’s title to any of the Assets and Buyer hereby acknowledges and agrees that, other than pursuant to the special warranty in the assignments to be executed pursuant hereto, Buyer’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Assets shall be as set forth in Section 11.2.           11.2 Notice of Title Defects; Defect Adjustments.           (a) Title Defect Notices. On or before five business days prior to Closing at 11:59 p.m. Central Standard Time, (the “Title Claim Date”), Buyer must deliver claim notices to Seller meeting the requirements of this Section 11.2(a) (collectively the “Title Defect Notices” and individually a “Title Defect Notice”) setting forth any matters which, in Buyer’s reasonable opinion, constitute Title Defects and which Buyer intends to assert as a Title Defect pursuant to this Article XI. For all purposes of this Agreement and notwithstanding anything herein to the contrary, Buyer shall be deemed to have waived, and Seller shall have no liability for, any Title Defect which Buyer fails to assert as a Title Defect by a Title Defect Notice received by Seller on or before the Title Claim Date. To be effective, each Title Defect Notice shall be in writing, and shall include (i) a description of the alleged Title Defect(s), (ii) the Wells (and the applicable zone(s) therein) and/or other Assets affected by the Title Defect (each a “Title Defect Property”), (iii) the Allocated Value of each Title Defect Property, (iv) supporting documents reasonably necessary for Seller to verify the existence of the alleged Title Defect(s), and (v) the amount by which Buyer reasonably believes the Allocated Value of each Title Defect Property is reduced by the alleged Title Defect(s) and the computations upon which Buyer’s belief is based. To give Seller an opportunity to commence reviewing and curing Title Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the Title Claim Date, written notice of all Title Defects discovered by Buyer during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Title Claim Date.           (b) Title Benefit Notices. Seller shall have the right, but not the obligation, to deliver to Buyer on or before the Title Claim Date with respect to each Title Benefit a notice (a “Title Benefit Notice”) including (i) a description of the Title Benefit, (ii) the 34 --------------------------------------------------------------------------------   Wells (and the applicable zone(s) therein) affected by the Title Benefit, and (iii) the amount by which Seller reasonably believes the Allocated Value of those Wells (and the applicable zone(s) therein) is increased by the Title Benefit and the computations upon which Seller’s belief is based. Seller shall be deemed to have waived all Title Benefits of which it has not given notice on or before the Title Claim Date.           (c) Seller’s Right to Cure. Seller shall have the right, but not the obligation, to attempt, at its sole cost, to cure at any time prior to the Closing Date (the “Cure Period”), any Title Defects of which it has been advised by Buyer. In addition, Seller shall have the right to hold back any Title Defect Property from the Closing for a period of up to 30 days to attempt to cure, at Seller’s sole cost, the applicable Title Defect, and the Purchase Price payable at Closing shall be reduced by the Allocated Value of such Property. Any Title Defect Property that is withheld from the initial Closing will be conveyed to Buyer at a subsequent Closing on or before the 40th day following the Closing Date, at which Closing Buyer shall pay to Seller the Allocated Value (subject to the applicable adjustments set forth in this Article XI or in Section 3.3) of such Property, whether or not Seller was able to cure the Title Defect.           (d) Remedies for Title Defects. Subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto in accordance with this Section 11.2 and subject to the rights of the parties pursuant to Section 14.1, in the event that any Title Defect timely asserted by Buyer in accordance with Section 11.2(a) is not waived in writing by Buyer or cured on or before Closing (or subsequent Closing, if applicable, pursuant to subsection (c) above), Seller shall, at its sole option, elect to:      (i) subject to the Individual Title Defect Threshold and the Aggregate Deductible, reduce the Purchase Price by an amount (“Title Defect Amount”) determined pursuant to Section 11.2(g) or 11.2(j) as being the value of such Title Defect;      (ii) indemnify Buyer against all Liability resulting from such Title Defect pursuant to an indemnity agreement (the “Title Indemnity Agreement”) in the form attached hereto as Exhibit G; or      (iii) if applicable, terminate this Agreement pursuant to Section 14.1(a).           Notwithstanding the foregoing, Seller may, at its option notify Buyer at any time on or before 11:59 p.m. Central time on the second business day following the Title Claim Date that Seller disputes the Title Defect and elects to exclude the Title Defect Property from the Assets to be conveyed to Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of the Title Defect Property so excluded, and such disputed Title Defect shall be resolved pursuant to Section 11.2(j). Upon resolution of the dispute under Section 11.2(j), then within ten business days following such resolution, Buyer shall purchase from Seller such Title Defect Property excluded from the conveyance of the Assets at the Closing pursuant to the preceding sentence, under the terms of this Agreement for price equal to the Allocated Value thereof previously 35 --------------------------------------------------------------------------------   withheld from the Purchase Price, adjusted if applicable for any Title Defect Amount and/or Title Benefit Amount associated therewith as determined by the arbitrator under said Section 11.2(j) and adjusted as otherwise provided herein.           (e) Remedies for Title Benefits. With respect to each Well (or specified zone(s) therein) affected by Title Benefits reported under Section 11.2(b), the Purchase Price shall be increased by an amount (the “Title Benefit Amount”) equal to the increase in the Allocated Value for such Well caused by such Title Benefits, as determined pursuant to Section 11.2(h). Notwithstanding anything to the contrary, (i) in no event shall there be any adjustments to the Purchase Price or other remedies provided to Seller for any individual Title Benefit for which the Title Benefit Amount does not exceed $200,000 (the “Individual Title Benefit Threshold”); and (ii) in no event shall there be any adjustments to the Purchase Price or other remedies provided to Seller for any Title Benefit that exceeds the Individual Title Benefit Threshold unless the sum of the Title Benefit Amounts of all such Title Benefits that exceed the Individual Title Benefit Threshold, in the aggregate, exceeds the Aggregate Deductible, after which point Seller shall be entitled to adjustments to the Purchase Price only with respect to such Title Benefits in excess of such Aggregate Deductible.           (f) Exclusive Remedy. Section 11.2(d) shall be the exclusive right and remedy of Buyer with respect to Seller’s failure to have Defensible Title with respect to any Asset, other than pursuant to the special warranty in the assignments to be executed pursuant hereto.           (g) Title Defect Amount. The Title Defect Amount resulting from a Title Defect shall be the amount by which the Allocated Value of the affected Title Defect Property is reduced as a result of the existence of such Title Defect and shall be determined in accordance with the following terms and conditions:      (i) if Buyer and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;      (ii) if the Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property;      (iii) if the Title Defect does not affect the ratio of the Net Revenue Interest to the Working Interest for any Title Defect Property stated in Exhibit A, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest stated in Exhibit A;      (iv) if the Title Defect represents an obligation or Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property 36 --------------------------------------------------------------------------------   affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Title Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect;      (v) If (A) a Title Defect Property is not a Well (or specified zone(s) therein), (B) such Title Defect Property does not have an Allocated Value, (C) the Title Defect with respect to such Title Defect Property causes a loss of title to such Title Defect Property, and (D) the loss of such title to such Title Defect Property will prevent the continued operation or production of a Well (or one or more specified zone(s) therein) shown in Exhibit A (such Well or the specified zone(s) therein being referred to as the “Affected Well”) and the other Assets are not capable of providing an alternative means to support, in all material respects, the continued operation or production of the Affected Well, then such Title Defect Property (a “Defective Support Property”) and such Affected Well(s) shall collectively be considered a single Title Defect Property for purposes of this Article XI; provided, however, that the Title Defect Amount resulting from the Title Defect affecting such Defective Support Property shall be the lesser of (1) the reasonable cost to replace such Defective Support Property, if such Defective Support Property is reasonably capable of being replaced, (2) the reasonable cost of providing an alternative means to support in all material respects the continued operation or production of the Affected Well, or (3) the Title Defect Amount that would otherwise be applicable to such Title Defect under this Article XI.      (vi) the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder; and      (vii) notwithstanding anything to the contrary in this Article XI, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property shall not exceed the Allocated Value of the Title Defect Property.           (h) Title Benefit Amount. The Title Benefit Amount resulting from a Title Benefit shall be determined in accordance with the following methodology, terms and conditions:      (i) if Buyer and Seller agree on the Title Benefit Amount, then that amount shall be the Title Benefit Amount; and      (ii) if the Title Benefit represents a benefit in title of a type not described above, the Title Benefit Amount shall be determined by taking into account the Allocated Value of the affected property, the portion of the subject property affected by the Title Benefit, the legal effect of the Title Benefit, the 37 --------------------------------------------------------------------------------   potential economic effect of the Title Benefit over the life of the subject property, the values placed upon the Title Benefit by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.           (i) Title Deductibles. Notwithstanding anything to the contrary, (i) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any individual Title Defect for which the Title Defect Amount does not exceed $200,000 (“Individual Title Defect Threshold”); and (ii) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any Title Defect that exceeds the Individual Title Defect Threshold unless the sum of (1) the Title Defect Amounts of all such Title Defects that exceed the Individual Title Defect Threshold, in the aggregate, excluding any Title Defects cured by Seller plus (2) the Remediation Amounts of all environmental defects, in the aggregate, excluding any individual Environmental Defect for which the Remediation Amount does not exceed the Individual Environmental Threshold and any environmental defects cured by Seller, exceeds the Aggregate Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other remedies only with respect to such Title Defects in excess of such Aggregate Deductible.           (j) Title Dispute Resolution. Seller and Buyer shall attempt to agree on all Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts prior to Closing. If Seller and Buyer are unable to agree by Closing, the Title Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and finally resolved pursuant to this Section 11.2(j). There shall be a single arbitrator, who shall be a title attorney with at least ten years experience in oil and gas titles involving properties in the regional area in which the Title Defect Properties are located, as selected by mutual agreement of Buyer and Seller within 15 days after the end of the Cure Period, and absent such agreement, by the Houston office of the American Arbitration Association (the “Title Arbitrator”). The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Title Arbitrator’s determination shall be made within 20 days after submission of the matters in dispute and shall be final and binding upon both parties, without right of appeal. In making his determination, the Title Arbitrator shall be bound by the provisions of Sections 11.2(g) and 11.2(h) and, subject to the foregoing, may consider such other matters as in the opinion of the Title Arbitrator are necessary to make a proper determination. The Title Arbitrator, however, may not award the Buyer a greater Title Defect Amount than the Title Defect Amount claimed by Buyer in its applicable Title Defect Notice and may not award Seller a greater Title Benefit Amount than the Title Benefit Amount claimed by Seller in its applicable Title Benefit Notice. The Title Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Title Defect, Title Benefit, Title Defect Amounts and/or Title Benefit Amounts submitted by either party and may not award damages, interest or penalties to either party with respect to any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. The non-prevailing party shall bear the costs and expenses of the Title Arbitrator. To the extent that the award of the Title Arbitrator with respect to any Title Defect Amount or Title Benefit Amount is not taken into account as an 38 --------------------------------------------------------------------------------   adjustment to the Purchase Price pursuant to Section 3.5 or Section 3.6, then within ten days after the Title Arbitrator delivers written notice to Buyer and Seller of his award with respect to a Title Defect Amount or a Title Benefit Amount, and subject to the other terms and provisions hereof, (i) Buyer shall pay to Seller the amount, if any, so awarded by the Title Arbitrator to Seller and (ii) Seller shall pay to Buyer the amount, if any, so awarded by the Title Arbitrator to Buyer.           (k) Scrivener’s Error. Notwithstanding anything set forth in this Article XI, in the event that any of the Working Interests or Net Revenue Interests set forth in Exhibit A differ from Seller’s records, and the parties agree that such difference is attributable to a scrivener’s error, (i) Buyer shall have the right to raise such error as a Title Defect subject to the provisions of this Section 11.2, (ii) Buyer and Seller shall meet and attempt to agree on a Purchase Price adjustment due to such difference, and (iii) the Individual Title Defect Threshold and the Aggregate Deductible shall not apply to any such Purchase Price adjustment.           11.3 Casualty or Condemnation Loss.           (a) Notwithstanding anything herein to the contrary, from and after the Effective Time, subject to the Closing, Buyer shall assume all risk of loss with respect to production of Hydrocarbons through normal depletion (including watering out of any well, collapsed casing or sand infiltration of any well) and the depreciation of Personal Property due to ordinary wear and tear, in each case, with respect to the Assets.           (b) If, after the date of this Agreement but prior to the Closing Date, any portion of the Assets is destroyed by fire or other casualty or is taken in condemnation or under right of eminent domain, and the aggregate amount of any such loss or taking exceeds 15% of the Purchase Price, either party shall have the right to terminate this Agreement and Buyer shall promptly receive back the Deposit. If the aggregate amount of any such loss or taking is 15% or less of the Purchase Price, Buyer shall be required to close. If the loss as a result of such individual casualty or taking exceeds $250,000 and the parties proceed to Closing, Seller shall elect by written notice to Buyer prior to Closing either (i) to cause the Assets affected by such casualty or taking to be repaired or restored to at least its condition prior to such casualty or taking, at Seller’s sole cost, as promptly as reasonably practicable (which work may extend after the Closing Date), or (ii) to indemnify Buyer through a document reasonably acceptable to Seller and Buyer against any costs or expenses that Buyer reasonably incurs to repair the Assets subject to such casualty or taking or (iii) to treat such casualty or taking as a Title Defect with respect to the affected Asset or Assets under Section 11.2 or (iv) Seller, at Closing, shall pay to Buyer all sums paid or payable to Seller by Third Parties by reason of such casualty or taking insofar as with respect to the Assets and shall assign, transfer and set over to Buyer or subrogate Buyer to all of Seller’s right, title and interest (if any) in insurance claims, unpaid awards and other rights against Third Parties (excluding any Liabilities, other than insurance claims, of or against any Seller Indemnified Parties) arising out of such casualty or taking insofar as with respect to the Assets; provided, however, that in the case of (iv), Seller shall reserve and retain (and Buyer shall assign to Seller) all rights, title, interests and claims against Third Parties for the recovery of 39 --------------------------------------------------------------------------------   Seller’s costs and expenses incurred prior to the Closing Date in pursuing or asserting any such insurance claims or other rights against Third Parties or in defending or asserting rights in such condemnation or eminent domain action with respect to the Assets. In the case of (i) — (iii), Seller shall retain all rights to insurance, condemnation awards and other claims against third parties with respect to the casualty or taking except to the extent the parties otherwise agree in writing.           (c) If any action for condemnation or taking under right of eminent domain is pending or threatened with respect to any Asset or portion thereof after the date of this Agreement, but no taking of such Asset or portion thereof occurs prior to the Closing Date, Buyer shall nevertheless be required to close and Seller, at Closing, shall assign, transfer and set over to Buyer or subrogate Buyer to all of Seller’s right, title and interest (if any) in such condemnation or eminent domain action, including any future awards therein, insofar as they are attributable to the Assets threatened to be taken, except that Seller shall reserve and retain (and Buyer shall assign to Seller) all rights, titles, interests and claims against Third Parties for the recovery of Seller’s costs and expenses incurred prior to the Closing in defending or asserting rights in such action with respect to the Assets.      11.4 Preferential Purchase Rights and Consents to Assign.           (a) The provisions of this Section 11.4 shall apply to agreements relating to the Properties which enable or may enable a Third Party to purchase a Property or any part thereof, as a result of the sale of such Property or portion thereof to Buyer (such rights hereafter referred to as “Preference Rights”). Buyer is purchasing the Properties subject to all Preference Rights.           (b) Seller shall send notices of the transactions contemplated hereby to holders of Preference Rights (“Preference Notices”) set forth on Schedule 4.11. The Preference Notices shall be in a form reasonably satisfactory to Buyer, and shall include the Allocated Value of the Property or portion thereof affected by each Preference Right. After receiving a response to a Preference Notice, the Seller shall promptly provide a copy of the response to Buyer at the address set forth in this Agreement. Seller and Buyer agree that the Allocated Value for properties subject to Preference Rights shall be the sole responsibility of Buyer, and Buyer agrees to indemnify Seller and hold Seller harmless from all liability and claims related to the reasonableness of such values.           (c) In the event, and only in such event, the holder of a Preference Right elects to properly exercise such Preference Right and to purchase the Property subject thereto upon the Closing, Seller shall convey on substantially the same terms and conditions set forth in the applicable assignment attached to this Agreement (subject to such modifications as deemed reasonably necessary by Buyer to reflect the relevant Preference Right transaction, the price and the additional terms as contemplated by this Agreement) the Property or portion of the Property subject to the Preference Right to the holder of such Preference Right at the Closing; provided, however, that the Seller shall have no obligation to convey any Property to a Preference Right holder unless and until the Closing occurs and provided further that Seller shall: (i) convey to Buyer at Closing 40 --------------------------------------------------------------------------------   all Property subject to Preference Rights for which the time for election to exercise such Preferential Purchase Right has expired and the Preferential Right has not been properly asserted; and (ii) retain all other Property subject to a Preference Right, subject to Seller’s obligation to convey such Property to Buyer at such delayed Closing date to occur at the time that the election to exercise such Preference Right has expired, and Buyer shall take all such Property with any outstanding obligations or remaining Preference Rights and shall indemnify Seller for any losses incurred in connection therewith as described below. The Purchase Price to be paid at Closing by Buyer shall be reduced by the Allocated Value of all Properties regarding which a Preference Right has been properly exercised and no other adjustments related to such Property(ies) shall be made to the Purchase Price under this Agreement. Notwithstanding the foregoing, any Property that is subject to a Preference Right and held back at the initial Closing will be conveyed to Buyer at a delayed Closing when the time for election to exercise such Preference Right has expired (which shall become the new Closing Date with respect to such Property). At the delayed Closing, Buyer shall pay Seller an amount equal to the amount by which the Purchase Price was reduced on account of the holding back of such retained Property (as adjusted pursuant to Section 3.3 through the new Closing Date therefor).           (d) Buyer acknowledges that Seller desires to sell all of the Assets and would not have entered into this Agreement but for Buyer’s agreement to purchase all of the Assets as herein provided. Accordingly, it is expressly understood and agreed that Seller does not desire to sell any Asset that is subject to a Preference Right (collectively the “Preference Right Assets”) unless the sale of all of the Assets is consummated on the Closing Date in accordance with the terms of this Agreement. In furtherance of the foregoing, Seller’s obligation hereunder to sell the Preference Right Assets to Buyer is expressly conditioned upon the consummation on the Closing Date of the sale of all of the Assets in accordance with the terms of this Agreement, either by conveyance to Buyer or conveyance pursuant to an applicable Preference Right; provided that, nothing herein is intended or shall operate to extend or apply any Preference Right to any portion of the Assets which is not otherwise burdened thereby. Time is of the essence with respect to the parties’ agreement to consummate the sale of the Assets on the Closing Date.           (e) In addition, Seller shall send to each holder of a right to consent to assignment pertaining to the Assets and the transactions contemplated hereby a notice seeking such party’s consent to the transaction contemplated hereby. If Seller fails to obtain a consent prior to the Closing and the failure to obtain such consent would cause the assignment of such Asset to Buyer to be void, then the Seller shall continue to hold the operating rights or other legal title to such Asset as nominee for Buyer. Seller shall not be obligated to incur any expenses, obligations or other liabilities, or be responsible for any Claims, in Seller’s capacity as nominee and Buyer shall indemnify, defend and hold harmless Seller in relation to such Assets. Seller and Buyer, as between themselves, shall treat and deal with such Assets as if full legal and equitable title to such Assets had passed from Seller to Buyer at Closing. If Seller fails to obtain a consent prior to Closing and such consent does not relate to a material Asset or the failure to obtain such consent would not cause the assignment of such Asset to Buyer to be void, then Buyer shall have no rights or remedies against Seller with respect thereto. 41 --------------------------------------------------------------------------------   ARTICLE XII ENVIRONMENTAL MATTERS      12.1 Environmental Defects.           (a) Assertions of Environmental Defects. Buyer must deliver claim notices to Seller meeting the requirements of this Section 12.1(a) (collectively the “Environmental Defect Notices” and individually an “Environmental Defect Notice”) not later than five days prior to Closing (the “Environmental Claim Date”) setting forth any matters which, in Buyer’s reasonable opinion, constitute environmental defects and which Buyer intends to assert as environmental defects pursuant to this Section 12.1. For all purposes of this Agreement, Buyer shall be deemed to have waived any Environmental Defect which Buyer fails to assert as an Environmental Defect by an Environmental Defect Notice received by Seller on or before the Environmental Claim Date. To be effective, each Environmental Defect Notice shall be in writing and shall include (i) a description of the matter constituting the alleged Environmental Defect, (ii) a description of each Asset (or portion thereof) that is affected by the alleged Environmental Defect, (iii) Buyer’s assertion of the Allocated Value of the portion of the Assets affected by the alleged Environmental Defect, (iv) supporting documents reasonably necessary for Seller to verify the existence of the alleged Environmental Defect, and (v) a calculation of the Remediation Amount (itemized in reasonable detail) that Buyer asserts is attributable to such alleged Environmental Defect. Buyer’s calculation of the Remediation Amount included in the Environmental Defect Notice must describe in reasonable detail the Remediation proposed for the Environmental Condition that gives rise to the asserted Environmental Defect and identify all assumptions used by the Buyer in calculating the Remediation Amount, including the standards that Buyer asserts must be met to comply with Environmental Laws. Seller shall have the right, but not the obligation, to cure any claimed Environmental Defect on or before Closing. It shall be Buyer’s sole responsibility to inspect, investigate, and assess any Environmental Conditions prior to the Environmental Claim Date.           (b) Remedies for Environmental Defects. Subject to Seller’s continuing right to dispute the existence of an Environmental Defect and/or the Remediation Amount asserted with respect thereto, in the event that any Environmental Defect timely asserted by Buyer in accordance with Section 12.1(a) is not waived in writing by Buyer or cured on or before Closing, Seller shall, at its sole option, elect to:      (i) subject to the Individual Environmental Threshold and the Aggregate Deductible, reduce the Purchase Price by the Remediation Amount;      (ii) assume responsibility for the Remediation of such Environmental Defect;      (iii) with consent of Buyer which shall not be unreasonably conditioned, withheld or delayed, retain the entirety of the Asset that is subject to such Environmental Defect, together with all associated Assets, in which event 42 --------------------------------------------------------------------------------   the Purchase Price shall be reduced by an amount equal to the Allocated Value of such Asset and such associated Assets; or      (iv) if applicable, terminate this Agreement pursuant to Section 14.1.           If Seller elects the option set forth in clause (i) above, Buyer shall be deemed to have assumed responsibility for Remediation of such Environmental Defect and such Environmental Defect and all Liabilities with respect thereto shall be deemed to constitute Assumed Obligations. If Seller elects the option set forth in clause (ii) above, Seller shall use reasonable efforts to implement such Remediation in a manner which is consistent with the requirements of Environmental Laws in a timely fashion for the type of Remediation that Seller elects to undertake and shall have access to the affected Assets after the Closing Date to implement and complete such Remediation in accordance with an Access Agreement in substantially the form attached hereto as Exhibit H (the “Access Agreement”). Seller will be deemed to have adequately completed the Remediation required in the immediately preceding sentence (A) upon receipt of a certificate or approval from the applicable Governmental Authority that the Remediation has been implemented to the extent necessary to comply with existing regulatory requirements equal to but no more stringent than as required for land use of the Assets as of the Closing Date or (B) upon written consent of Buyer which consent may not be unreasonably withheld).           (c) Exclusive Remedy. Subject to Section 12.1(d), Section 12.1(b) shall be the exclusive right and remedy of Buyer with respect to any Environmental Defect. Buyer hereby waives any claims of cost recovery or contribution from Seller or its Affiliates related to the Assets under any Environmental Law or any other cause of action.           (d) Environmental Deductibles. Notwithstanding anything to the contrary, (i) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any individual Environmental Defect for which the Remediation Amount does not exceed $200,000 (“Individual Environmental Threshold”); and (ii) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any Environmental Defect for which the Remediation Amount exceeds the Individual Environmental Threshold unless (A) the sum of (1) the Remediation Amounts of all such environmental defects that exceed the Individual Environmental Threshold, in the aggregate, excluding any environmental defects cured by Seller, plus (2) the Title Defect Amounts of all Title Defects, in the aggregate, excluding any individual Title Defect for which the Title Defect Amount does not exceed the Individual Title Defect Threshold and any Title Defects cured by Seller, (B) exceeds the Aggregate Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other remedies only with respect to such environmental defects in excess of such Aggregate Deductible.           (e) Environmental Dispute Resolution. Seller and Buyer shall attempt to agree on all environmental defects and Remediation Amounts prior to Closing and as to the completion of Remediation efforts after Closing. If Seller and Buyer are unable to 43 --------------------------------------------------------------------------------   agree by Closing (or, after Closing, as to the completion of Remediation efforts), the environmental defects and/or Remediation Amounts in dispute shall be exclusively and finally resolved by arbitration pursuant to this Section 12.1. There shall be a single arbitrator, who shall be an environmental attorney with at least ten years experience in environmental matters involving offshore oil and gas producing properties in the Gulf of Mexico, as selected by mutual agreement of Buyer and Seller within fifteen days after the Closing Date, and absent such agreement, by the Houston office of the American Arbitration Association (the “Environmental Arbitrator”). The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Article. The Environmental Arbitrator’s determination shall be made within twenty days after submission of the matters in dispute and shall be final and binding upon both parties, without right of appeal. In making his or her determination, the Environmental Arbitrator shall be bound by the provisions set forth in this Section 12.1 and, subject to the foregoing, may consider such other matters as in the opinion of the Environmental Arbitrator are necessary or helpful to make a proper determination. The Environmental Arbitrator, however, may not award the Buyer more than the Remediation Amount claimed by Buyer in its applicable Environmental Defect Notice. The Environmental Arbitrator shall act as an expert for the limited purpose of determining the specific disputed environmental defects and/or Remediation Amounts submitted by either party and may not award damages, interest or penalties to either party with respect to any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. The non-prevailing party shall bear the costs and expenses of the Environmental Arbitrator. To the extent that the award of the Environmental Arbitrator with respect to any Remediation Amount is not taken into account as an adjustment to the Purchase Price pursuant to Section 3.3, then within ten days after the Environmental Arbitrator delivers written notice to Buyer and Seller of his or her award with respect to a Remediation Amount, and subject to Section 12.1 and the other terms and provisions hereof, (i) Buyer shall pay to Seller the amount, if any, so awarded by the Environmental Arbitrator to Seller and (ii) Seller shall pay to Buyer the amount, if any, so awarded by the Environmental Arbitrator to Buyer.           12.2 NORM, Wastes and Other Substances. Buyer acknowledges that the Assets have been used for exploration, development, and production of oil and gas and that there may be petroleum, produced water, wastes, or other substances or materials located in, on or under the Assets or associated with the Assets. Equipment and sites included in the Assets may contain asbestos, NORM or Hazardous Substances. NORM may affix or attach itself to the inside of wells, materials, and equipment as scale, or in other forms. The wells, materials, and equipment located on the Assets or included in the Assets may contain NORM, asbestos and other wastes or Hazardous Substances. NORM containing material and/or other wastes or Hazardous Substances may have come in contact with various environmental media, including without limitation, water, soils or sediment. Special procedures may be required for the assessment, remediation, removal, transportation, or disposal of environmental media, wastes, asbestos, NORM and Hazardous Substances from the Assets. 44 --------------------------------------------------------------------------------   ARTICLE XIII ASSUMPTION; INDEMNIFICATION; SURVIVAL           13.1 Assumption of Obligations by Buyer. Without limiting or otherwise affecting Buyer’s rights to indemnity under this Article XIII and Buyer’s rights under any Title Indemnity Agreement, from and after the Closing, Buyer assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid or discharged) all obligations and Liabilities, known or unknown, with respect to the Assets, regardless of whether such obligations or Liabilities arose prior to, on or after the Effective Time, including but not limited to the P&A Obligations, Environmental Conditions and all other obligations and Liabilities relating in any manner to the use, ownership or operation of the Assets, including but not limited to obligations to (a) furnish makeup gas and/or settle Imbalances according to the terms of applicable gas sales, processing, gathering or transportation Contracts, and (b) pay working interests, royalties, overriding royalties and other interest, owners revenues or proceeds attributable to sales of Hydrocarbons relating to the Properties, (c) properly plug and abandon any and all Wells, including inactive Wells or temporarily abandoned Wells, drilled on the Properties or otherwise pursuant to the Assets, (d) replug any Well, Wellbore or previously plugged Well on the Properties to the extent required or necessary, (e) dismantle or decommission and remove any Personal Property and other property of whatever kind related to or associated with operations and activities conducted by whomever on the Properties or otherwise pursuant to the Assets, (f) clean up, restore and/or remediate the premises covered by or related to the Assets in accordance with applicable agreements and Laws, (g) perform all obligations with respect to any Preferential Purchase Right and consent pertaining to any Asset and the transactions contemplated hereby that are not fully resolved prior to Closing and (h) perform all obligations applicable to or imposed on the lessee or owner under the Leases and the Applicable Contracts, or as required by Laws; and (all of said obligations and Liabilities referenced in this Section 13.1, subject to the exclusions below, are herein referred to as the “Assumed Obligations”); provided, Buyer does not assume any obligations or Liabilities of Seller to the extent that they are:           (i) attributable to or arise out of the ownership, use or operation of the Excluded Assets; or           (ii) Excluded Liabilities.           13.2 Indemnities of Seller. Effective as of the Closing, subject to the limitations in this Article XIII, Seller shall be responsible for, and hereby agrees to defend, indemnify, hold harmless and forever release Buyer and its Affiliates and all of its and their respective stockholders, partners, members, directors, officers, managers, employees, agents and representatives (collectively, “Buyer Indemnified Parties”) from and against any and all liabilities, arising from, based upon, related to or associated with:           (a) any act or omission by Seller involving or relating to the Excluded Assets;           (b) the Excluded Liabilities for the applicable time periods set forth therein; 45 --------------------------------------------------------------------------------             (c) any breach of any representation or warranty made by Seller contained in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.11, and 4.17; and           (d) any breach of Seller’s covenants or agreements contained in Sections 6.5, 11.4.           13.3 Indemnities of Buyer. (a) Effective as of the Closing, each Buyer and each of its successors and assigns shall jointly and severally assume, be responsible for, and hereby agree to defend, indemnify, hold harmless and forever release Seller and its Affiliates and all of their respective stockholders, partners, members, directors, officers, managers, employees, agents and representatives (collectively, “Seller Indemnified Parties”) from and against any and all liabilities arising from, based upon, related to or associated with:           (i) the Assumed Obligations;           (ii) ownership or operation of the Assets after the Effective Time, including, without limitation, the claims and expenses in Section 15.18(b);           (iii) Title Defects related or attributable to the Assets (other than the special warranty in the assignments to be executed pursuant hereto);           (iv) environmental defects related or attributable to the Assets;           (v) the Excluded Liabilities (other than the Excluded Assets) from and after the applicable time periods set forth therein;           (vi) any breach of any representation or warranty made by Buyer contained in Article V; and           (vii) any breach of Buyer’s covenants or agreements contained in Sections 6.3, 6.4, 6.6, and 11.4.           13.4 Express Negligence. The indemnification, release and Assumed Obligations provided for in this Agreement shall be applicable whether or not the liabilities, losses, costs, expenses and damages in question arose or resulted solely or in part from the gross, sole, active, passive, concurrent or comparative negligence, strict liability or other fault or violation of law of or by any Indemnified Party. Buyer and Seller acknowledge that this statement complies with the express negligence rule and is conspicuous.           13.5 Indemnification Procedures. All claims for indemnification under Sections 13.2 and 13.3 shall be asserted and resolved as follows:           (a) Notwithstanding anything to the contrary in this Agreement, the Buyer Indemnified Parties shall not be entitled to indemnification under, and shall not assert any claim for indemnification pursuant to, Sections 13.2(b) or (c) or until the aggregate amount of such claims exceeds .5% of the Purchase Price (the “Indemnification Threshold”), and then shall be entitled to such indemnification from the first dollar. In 46 --------------------------------------------------------------------------------   no event will Buyer be entitled to indemnification under Sections 13.2(b) or (c) once the aggregate of all claims made under such Section equals 15% of the Purchase Price (the “Indemnification Cap”); provided that the Indemnification Threshold and the Indemnification Cap shall not apply with respect to any claim for indemnification asserted under Sections 13.2(a) or (d).           (b) For purposes of this Article XIII, the term “Indemnifying Party” when used in connection with particular Liabilities shall mean the party or parties having an obligation to indemnify another party or parties with respect to such Liabilities pursuant to this Article XIII, and the term “Indemnified Party” when used in connection with particular Liabilities shall mean the party or parties having the right to be indemnified with respect to such Liabilities by another party or parties pursuant to this Article XIII.           (c) To make claim for indemnification under Sections 10.1(c), 13.2 or 13.3, an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 13.5, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Claim and shall enclose a copy of all papers (if any) served with respect to the Claim; provided that the failure of any Indemnified Party to give notice of a Claim as provided in this Section 13.5 shall not relieve the Indemnifying Party of its obligations under Sections 10.1(c), 13.2 or 13.3 (as applicable) except to the extent such failure results in insufficient time being available to permit the Indemnifying Party to effectively defend against the Claim or otherwise materially prejudices the Indemnifying Party’s ability to defend against the claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.           (d) In the case of a claim for indemnification based upon a Claim, the Indemnifying Party shall have 30 days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its liability to defend the Indemnified Party against such Claim at the sole cost and expense of the Indemnifying Party. The Indemnified Party is authorized, prior to and during such 30-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.           (e) If the Indemnifying Party admits its liability, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Claim. The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate in contesting any Claim which the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Claim controlled by the Indemnifying Party pursuant to this Section 13.5(e). An Indemnifying Party shall not, without the written consent of the 47 --------------------------------------------------------------------------------   Indemnified Party, (i) settle any Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the Indemnified Party from all liability in respect of such Claim or (ii) settle any Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages covered by the indemnity).           (f) If the Indemnifying Party does not admit its liability or admits its liability but fails to diligently prosecute or settle the Claim, then the Indemnified Party shall have the right to defend against the Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing, subject to the right of the Indemnifying Party to admit its liability and assume the defense of the Claim at any time prior to settlement or final determination thereof. If the Indemnifying Party has not yet admitted its liability for a Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for ten days following receipt of such notice to (i) admit in writing its liability for the Claim and (ii) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement.           (g) In the case of a claim for indemnification not based upon a Claim, the Indemnifying Party shall have 30 days from its receipt of the Claim Notice to (i) cure the Liabilities complained of, (ii) admit its liability for such Liability or (iii) dispute the claim for such Liabilities. If the Indemnifying Party does not notify the Indemnified Party within such 30-day period that it has cured the Liabilities or that it disputes the claim for such Liabilities, the amount of such Liabilities shall conclusively be deemed a liability of the Indemnifying Party hereunder.      13.6 Survival.           (a) Each representation, warranty, covenant and agreement made herein shall terminate and cease to be of further force and effect as of the Closing or such later date after Closing as is expressly stipulated in this Section for the survival thereof; except as to claims for indemnification permitted by this Article XIII as to which a bona fide Claim Notice with respect to such Claim has been delivered to the applicable Indemnifying Party on or prior to such date. If any Asset becomes a retained Asset and the Closing with respect thereto is delayed pursuant to Section 11.4, the parties’ respective representations, warranties, covenants and agreements provided for in this Agreement with respect to such retained Asset shall survive under this Section 13.6 in relation to such delayed Closing rather than the initial Closing under this Agreement. In addition, the definitions set forth in the Definitions section at the beginning of this Agreement or in any other provision of this Agreement which are used in the representations, warranties, covenants and agreements which survive the Closing pursuant to this Section shall survive the Closing to the extent necessary to give operative effect to such surviving representations, warranties, covenants and agreements. It is expressly agreed that: 48 --------------------------------------------------------------------------------        (i) Sections 4.1, 4.2, 4.3, 4.17, 4.21, 6.4, 6.5, 6.6, 9.4, 11.4, and Article V shall survive the Closing without limitation or for such shorter period of time as may be stipulated in such provisions or allowed by Law.      (ii) The covenants and agreements of the parties in Section 6.7 shall survive the Closing for a period of seven years.      (iii) Sections 4.4, 4.5, 4.8, 4.9, 4.11, and 6.3 shall survive until the first anniversary of the Closing Date.      (iv) The agreements in Section 3.3 shall survive Closing until the Final Settlement Statement has been executed by all parties to this Agreement.      (v) The indemnities in Article XIII shall terminate as of the termination date of each respective covenant or agreement that is subject to indemnification, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Party on or before such termination date. Buyer’s indemnities in Section 13.3 shall be deemed covenants running with the Assets (provided, however, that Buyer and its successors and assigns shall not be released from any of, and shall remain jointly and severally liable to the Seller Indemnified Parties for, the obligations or Liabilities of Buyer under such Article upon any transfer or assignment of any Asset) and Seller’s indemnity set forth in Section 13.2 shall survive the Closing without time limit.           13.7 Non-Compensatory Damages. None of the Buyer Indemnified Parties nor Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, or their respective Affiliates, any indirect, consequential, punitive or exemplary damages or damages for lost profits of any kind arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such party suffers such damages (including costs of defense and reasonable attorney’s fees incurred in connection with defending of such damages) to a Third Party, which damages (including costs of defense and reasonable attorney’s fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder. Subject to the preceding sentence, Buyer, on behalf of each of the Buyer Indemnified Parties, and Seller, on behalf of each of Seller Indemnified Parties, waive any right to recover punitive, special, exemplary and consequential damages, including damages for lost profits, arising in connection with or with respect to this Agreement or the transactions contemplated hereby.           13.8 Disclaimer of Application of Anti-Indemnity Statutes. The parties acknowledge and agree that the provisions of any anti-indemnity statute relating to oilfield services and associated activities shall not be applicable to this Agreement and/or the transactions contemplated hereby.           13.9 Buyer Credit Support. Unless Buyer is a Qualified Buyer, prior to Closing Buyer shall furnish at Closing for the benefit of, and deliver to, Seller (i) a letter of credit in form and substance reasonably satisfactory to Seller or (ii) a Buyer Parent Guaranty, in either case to 49 --------------------------------------------------------------------------------   secure Buyer’s performance of the Assumed Obligations and Buyer’s other obligations under Article XIII and applicable of the Assignments. If at any time Seller determines that Buyer is no longer a Qualified Buyer, or that such Buyer’s Qualified Parent Guarantor is no longer a Qualified Parent Guarantor, then Buyer shall promptly provide such letter of credit or Buyer Parent Guaranty, as applicable. ARTICLE XIV TERMINATION, DEFAULT AND REMEDIES           14.1 Right of Termination. This Agreement and the transactions contemplated herein may be terminated at any time at or prior to Closing:      (a) by Seller, at Seller’s option, if any of the conditions set forth in Article VIII have not been satisfied on or before the Closing Date;      (b) by Buyer, at Buyer’s option, if any of the conditions set forth in Article VII have not been satisfied on or before the Closing Date; or      (c) by Seller or Buyer if the Closing shall not have occurred on or before May 31, 2006; provided, however, that no party shall have the right to terminate this Agreement pursuant to clause (a), (b) or (c) above if such party or its Affiliates are at such time in material breach of any provision of this Agreement.           14.2 Effect of Termination. If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 14.1 hereof, then, except as provided in Section 3.2 and except for the provisions of Sections 1.1, 10.2, 10.3, 13.7 and this Section 14.2 and Article XV (other than Sections 15.2(b), 15.7, 15.8, 15.9 and 15.17), and any other provision hereof which, by its very nature, must survive such termination so as to carry out the stated intent of Buyer and Seller, this Agreement shall forthwith become of no further force or effort and the parties shall have no liability or obligation hereunder except and to the extent such termination results from the material breach by a party of any of its covenants or agreements hereunder. Upon a material breach of this Agreement by Seller that is not cured by the Closing Date, Buyer, at its sole option and as its sole remedy, may (i) enforce specific performance, or (ii) terminate this Agreement. In the event Buyer elects to terminate this Agreement as set forth above, Seller shall immediately return the Performance Deposit to Buyer. ARTICLE XV MISCELLANEOUS           15.1 Exhibits and Schedules. All of the Exhibits and Schedules referred to in this Agreement are hereby incorporated into this Agreement by reference and constitute a part of this Agreement. Each party to this Agreement and its counsel has received a complete set of Exhibits and Schedules prior to and as of the execution of this Agreement. The Seller has or may have set 50 --------------------------------------------------------------------------------   forth information on a Schedule in a section thereof that corresponds to the section of this Agreement to which it relates. A matter set forth in one section of a Schedule need not be set forth in any other Schedule so long as its relevance to such other section of the Schedule or section of the Agreement is reasonably apparent on the face of the information disclosed therein to the Person to which such disclosure is being made. The parties acknowledge and agree that (a) the Schedules to this Agreement may include certain items and information solely for informational purposes for the convenience of Buyer and (b) the disclosure by Seller of any matter in the Schedules shall not be deemed to constitute an acknowledgement by Seller that the matter is required to be disclosed by the terms of this Agreement or that the matter is material.      15.2 Expenses and Taxes.           (a) Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the party incurring the same, including, without limitation, legal and accounting fees, costs and expenses.           (b) All required documentary, filing and recording fees and expenses, including HSR filing fees, in connection with the filing and recording of the assignments, conveyances or other instruments required to convey title to the Assets to Buyer shall be borne by Buyer. Seller shall assume responsibility for, and shall bear and pay, all federal income taxes, state income taxes and other similar taxes (including any applicable interest or penalties) incurred or imposed with respect to the transactions described in this Agreement. Buyer shall assume responsibility for, and shall bear and pay, all state sales and use taxes (including any applicable interest or penalties) incurred or imposed with respect to the transactions described in this Agreement. Seller shall assume responsibility for, and shall bear and pay, all ad valorem, property, severance, production, and similar taxes and assessments based upon or measured by the ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom, but exclusive of income taxes (including any applicable penalties and interest) and assessed against the Assets by any taxing authority for any period prior to the Effective Time, and Buyer shall be responsible for, and shall bear and pay, all such taxes and assessments assessed against the Assets by any taxing authority for any period that begins on or after the Effective Time. For purposes of this Agreement, the foregoing proration of ad valorem and property taxes shall be accomplished at the Closing based on the ratio of the number of days in the year prior to (for Seller) and on and after (for Buyer) the Effective Time to the total number of days in the year as applied to the amount of ad valorem and property taxes for the most recent year for which the amount of such taxes can be finally determined at the Closing. Buyer shall be responsible for payment to the taxing authorities of all ad valorem and property taxes for the current year, except to the extent Seller has paid all or a portion of the ad valorem and property taxes to the taxing authorities for the current tax year.           15.3 Assignment. This Agreement may not be assigned by Buyer without prior written consent of Seller. No assignment of any rights hereunder by Buyer shall relieve Buyer of any obligations and responsibilities hereunder. 51 --------------------------------------------------------------------------------             15.4 Preparation of Agreement. Both Seller and Buyer and their respective counsel participated in the preparation of this Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.           15.5 Publicity. Seller and Buyer shall consult with each other with regard to all press releases or other public or private announcements issued or made at or prior to the Closing concerning this Agreement or the transactions contemplated herein, and, except as may be required by applicable Laws or the applicable rules and regulations of any governmental agency or stock exchange, neither Buyer nor Seller shall issue any such press release or other publicity without the prior written consent of the other party, which shall not be unreasonably withheld (it being agreed that the exclusion of Buyer’s name from a press release by Seller shall be reasonable if requested by Buyer).           15.6 Notices. All notices and communications required or permitted to be given hereunder shall be in writing and shall be delivered personally, or sent by nationally recognized overnight courier, or mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, or sent by facsimile transmission (provided any such facsimile transmission is confirmed either orally or by written confirmation), addressed to the appropriate party at the address for such party shown below or at such other address as such party shall have theretofore designated by written notice delivered to the party giving such notice:               If to Seller:   The Houston Exploration Company         1100 Louisiana Street         Suite 2000         Houston, Texas 77002         Attn: Jeffrey Sherrick         Fax: 713-830-6885               with a copy to:   Akin, Gump, Strauss, Hauer & Feld LLP         1111 Louisiana Street         44th Floor         Houston, Texas 77002         Attn: Christine LaFollette                    Jennifer De la Rosa         Fax: 713-236-0822               If to Buyer:   Merit Energy Company         13727 Noel Road, Suite 500         Dallas, Texas 75240         Attn: General Counsel         Fax: 972-960-8420           Any notice given in accordance herewith shall be deemed to have been given when delivered to the addressee in person or by courier, or transmitted by facsimile transmission during normal business hours, or upon actual receipt by the addressee after such notice has either been delivered to an overnight courier or deposited in the United States Mail, as the case may be. 52 --------------------------------------------------------------------------------   The parties hereto may change the address, telephone numbers and facsimile numbers to which such communications are to be addressed by giving written notice to the other parties in the manner provided in this Section 15.6.           15.7 Removal of Name. As promptly as practicable, but in any case within 30 days after the Closing Date, Buyer shall eliminate the names “The Houston Exploration Company” and any variants thereof from the Assets acquired pursuant to this Agreement and, except with respect to such grace period for eliminating existing usage, shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.           15.8 Further Cooperation. Without causing any representation or warranty to survive the Closing, Buyer and Seller shall execute and deliver, or shall cause to be executed and delivered from time to time, such further instruments of conveyance and transfer, and shall take such other actions as any party may reasonably request, to convey and deliver the Assets to Buyer, to perfect Buyer’s title thereto, and to accomplish the orderly transfer of the Assets to Buyer in the manner contemplated by this Agreement, whether before or after the Closing. If any party hereto receives monies belonging to the other, such amount shall immediately be paid over to the proper party. If an invoice or other evidence of an obligation is received by a party, which is partially an obligation of both Seller and Buyer, then the parties shall consult with each other and each shall promptly pay its portion of such obligation to the obligee.           15.9 Filings, Notices and Certain Governmental Approvals. Promptly after Closing Buyer shall (a) record the Assignments of the Assets and all federal assignments executed at the Closing in all applicable real property records and/or, if applicable, all state or federal agencies, (b) send notices to vendors supplying goods and services for the Assets of the assignment of the Properties to Buyer and, if applicable, the designation of Buyer as the operator thereof, (c) actively pursue the unconditional approval of all applicable Governmental Authorities of the Assignments of the Assets to Buyer and the designation of Buyer (if applicable), as the operator thereof and (d) actively pursue all other consents and approvals that may be required in connection with the assignment of the Assets to Buyer and the assumption of the liabilities assumed by Buyer hereunder, that shall not have been obtained prior to Closing. Buyer obligates itself to take any and all action required by any Governmental Authority in order to obtain such unconditional approval, including but not limited to, the posting of any and all bonds or other security that may be required in excess of any applicable or existing lease, pipeline or area-wide bond.           15.10 Entire Agreement; Conflicts. This Agreement, the exhibits hereto and the Confidentiality Agreement collectively constitute the entire agreement among Seller and Buyer pertaining to the subject matter hereof and supersede all prior agreements, understanding, negotiations and discussion, whether oral or written, of the parties pertaining to the subject matter hereof. There are no warranties, representations or other agreements among the parties relating to the subject matter hereof except as specifically set forth in this Agreement or the assignments and other documents expressly contemplated hereby, and neither Seller nor Buyer shall be bound by or liable for any alleged representation, promise, inducement or statements of intention not so set forth. In the event of a conflict between the terms and provisions of this Agreement and the terms and provisions of any exhibit hereto, the terms and provisions of this Agreement shall govern 53 --------------------------------------------------------------------------------   and control; provided, however, that the inclusion in any of the exhibits hereto of terms and provisions not addressed in this Agreement shall not be deemed a conflict, and all such additional provisions shall be given full force and effect, subject to the provisions of this Section 15.10.           15.11 Parties in Interest. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of Seller and Buyer and their respective legal representatives, successors and assigns. No other person shall have any right, benefit, priority or interest hereunder or as a result hereof or have standing to require satisfaction of the provisions hereof in accordance with their terms.           15.12 Amendment. This Agreement may be amended only by an instrument in writing executed by the parties hereto against whom enforcement is sought.           15.13 Waiver; Rights Cumulative. Any of the terms, covenants, representations, warranties or conditions hereof may be waived only by a written instrument executed by or on behalf of the party hereto waiving compliance. No course of dealing on the part of Seller or Buyer, or their respective officers, employees, agents or representatives, nor any failure by Seller or Buyer to exercise any of its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such party at a later time to enforce the performance of such provision. No waiver by any party of any condition, or any breach of any term, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty. The rights of Seller and Buyer under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.           15.14 Governing Law; Jurisdiction, Venue; Jury Waiver. This Agreement and the legal relations among the parties shall be governed and construed in accordance with the laws of the State of Texas, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. All of the parties hereto consent to the exercise of jurisdiction in personam by the courts of the State of Texas for any action arising out of this Agreement or the other Transaction Documents. All actions or proceedings with respect to, arising directly or indirectly in connection with, out of, related to, or from this Agreement or the other Transaction Documents shall be exclusively litigated in courts having situs in Houston, Harris County, Texas. Each party hereto waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any action, suit or proceeding arising out of or relating to this Agreement.           15.15 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an 54 --------------------------------------------------------------------------------   acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.           15.16 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a party by facsimile transmission shall be deemed an original signature hereto.           15.17 Like-Kind Exchange. Buyer agrees to cooperate fully with Seller in facilitating a tax-deferred, like-kind exchange of the Assets pursuant to Section 1031 of the U.S. Internal Revenue Code of 1986, as amended, the U.S. Treasury Regulations promulgated thereunder, and U.S. Revenue Procedure 2000-37 (“Rev. Proc. 2000-37”). At Seller’s request, Buyer shall execute all documents, conveyances and other instruments necessary for Seller to effectuate a like-kind exchange. For purposes of this Section 15.17, cooperation by Buyer shall include (i) executing with immediate delivery, before, on or after Closing, any documents and agreements reasonably requested by Seller for such purpose and (ii) any other action reasonably requested by Seller for such purpose, including for the purpose of satisfying the requirements set forth in Rev. Proc. 2000-37; provided, however, that Buyer shall not be obligated to incur any costs or liabilities or postpone the Closing in connection therewith.           15.18 Certain Governmental Approvals. Buyer shall use its best efforts after Closing to obtain the unconditional approval by the MMS of (i) the Assignments of Record Title to Oil and Gas Lease(s) in the form attached hereto as Exhibit C; (ii) the Assignments of Oil and Gas Lease Operating Rights in the form attached hereto as Exhibit D; and (iii) the Assignments of Rights of Way in the form attached hereto as Exhibit E. In the event Buyer or its nominated operator is elected successor operator under the operating agreements applicable to any of the Leases, Buyer also obligates itself to ensure that it or the successor operator makes application to the MMS to qualify as operator with respect to that portion of the Assets it will operate. Buyer shall take any actions reasonably required of it by the MMS or any other regulatory agencies to obtain all requisite regulatory approvals, including but not limited to, the purchase and posting of any and all bonds, supplemental bonds or other securities which may be required of it pursuant to OPA and 30 C.F.R §§ 250.7, 256.58, 256.59, and 256.61 in excess of any existing lease, pipeline or area-wide bond(s). Until the governmental approval with respect to an assignment described in this Section 15.18 is obtained, however, the following shall occur:           (a) Seller shall continue to hold the operating rights and record title to the applicable Assets as nominee for Buyer;           (b) Buyer’s indemnity under Section 13.3 shall include any and all claims, expenses of any kind or character relating to the Assets accruing after the Effective Time including but not limited to any bonding or regulatory costs incurred by Seller;           (c) Seller shall act as Buyer’s nominee with respect to the Assets but shall be authorized to act only upon and in accordance with Buyer’s specific written instructions, and Seller shall have no authority, responsibility or discretion to perform any tasks or functions with respect to the Assets other than those which are purely administrative or ministerial in nature, unless otherwise specifically requested and authorized by Buyer in writing; and 55 --------------------------------------------------------------------------------             (d) Buyer shall continue to maintain and provide at its cost the insurance coverages as reviewed by Seller under Section 8.7 of this Agreement.           If the MMS does not, within twelve months from the Closing Date, approve all (i) the Assignments of Record Title of the Leases into Buyer, (ii) the Assignments of Oil and Gas Lease Operating Rights into Buyer, and (iii) the Assignments of Rights of Way into Buyer, then:           (w) As to those assignments that the MMS has approved, the transaction contemplated by this Agreement will proceed as to those Assets in accordance with the terms and conditions of this Agreement, mutatis mutandis; and           (x) As to those assignments that the MMS has not approved due to a reason other than the MMS’s delay in addressing otherwise valid filings by Buyer, Seller, at its option, may either:           (i) continue to hold the operating rights, title to the Leases and the rights of way as Buyer’s nominee, or,           (ii) upon 30 days’ notice to Buyer, rescind the purchase and sale of the Assets that are the subject of such non-approvals and terminate this Agreement as to those Assets, but only as to those Assets.           (y) The exercise by Seller of the option to rescind as specified in the preceding clause (x)(ii), however, shall be predicated upon Seller’s reasonable determination either that (i) Buyer has failed to comply with the requirements of 30 C.F.R. § 256.64 and not taken any and all actions required by MMS to obtain such approval, or (ii) there had been a Material Adverse Effect on the financial condition of Buyer after Closing.           (z) Upon such termination and rescission, this Agreement shall be null and void as between Buyer and Seller with respect to the non-approved Assets, and (i) Buyer shall return to Seller the assignments and any and all other documents, materials and data previously delivered to Buyer with respect to such Assets; and (ii) Seller shall return to Buyer the Purchase Price allocated to such Assets in Schedule 3.8, without interest, less the proceeds of production net of all expenses, capital expenditures, royalties, and costs of operations (including plugging and abandonment expenses but excluding mortgage interest and any burdens or encumbrances created by Buyer which shall be released prior to this payment) attributable to the Leases and other rights from and after the Effective Time. In no event, however, shall Seller ever be required to reimburse Buyer for any expenditures associated with workovers, recompletions, or the drilling, completion or plugging and abandonment of wells drilled or work performed by Buyer on or with respect to such Assets unless same were necessary to perpetuate the related Leases or operating rights or other rights. Seller shall not be liable to Buyer if MMS approvals are not obtained, except as expressly provided in this Section 15.18.           15.19 Adequacy of Supplemental Bonds or Arrangements for the Pledge of Securities. Prior to execution hereof, Buyer shall confer with the MMS regarding the amounts and terms for the posting of supplemental bonds or pledge of securities pursuant to the 56 --------------------------------------------------------------------------------   provisions of 30 C.F.R §§ 256.61 and 250.7, and within a reasonable time of any MMS determination pursuant to such regulations, Buyer (directly or through its representative) shall satisfy the MMS requirements concerning same, including all financial responsibility requirements under OPA.           15.20 Special Offshore Interests. The Parties acknowledge and agree that certain of the offshore Assets are in the nature of contract rights that are not recognized by the MMS as “record title” or “operating rights,” and that, accordingly, the MMS will not approve, and Buyer and Seller do not expect the MMS to approve, the assignment of these interests from Seller to Buyer. Buyer shall ensure nevertheless that the assignment documents relating to such interests are appropriately filed in the “non-required filing” system of the MMS. Such interests shall be excluded from the scope of Section 15.18 for all purposes. 57 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.           SELLER:           THE HOUSTON EXPLORATION COMPANY                   By:     /s/ Jeffery B. Sherrick                       Name:    Jeffrey B. Sherrick         Title:    Senior Vice President — Business Development               BUYER:      MERIT MANAGEMENT PARTNERS I, L.P.      MERIT MANAGEMENT PARTNERS II, L.P.      MERIT MANAGEMENT PARTNERS III, L.P.      MERIT ENERGY PARTNERS III, L.P.      By: MERIT ENERGY COMPANY, General Partner                   By:     /s/ Fred N. Diem                            Fred N. Diem, Vice President               MERIT ENERGY PARTNERS D-III, L.P.     By: MERIT MANAGEMENT PARTNERS I, General Partner     By: MERIT ENERGY COMPANY, General Partner                   By:     /s/ Fred N. Diem                            Fred N. Diem, Vice President               MERIT ENERGY PARTNERS E-III, L.P.     By: MERIT MANAGEMENT PARTNERS II, L.P., General Partner     By: MERIT ENERGY COMPANY, Sole Member                   By:     /s/ Fred N. Diem                            Fred N. Diem, Vice President               MERIT ENERGY PARTNERS F-III, L.P.     By: MERIT MANAGEMENT PARTNERS III, L.P., General Partner     By: MERIT ENERGY COMPANY, Sole Member                   By:     /s/ Fred N. Diem                            Fred N. Diem, Vice President      

AGREEMENT THIS AGREEMENT, dated as of May 31, 2006, is entered into between Quincy Investments Corp., a Bahamas International Business Company (“Quincy”) and Naturade, Inc., a Delaware corporation (“Naturade”) (Quincy and Naturade are collectively referred to herein as “Debtor”), and Symbiotics, Inc. (“Symbiotics”), an Arizona corporation, and Symco, Incorporated (“Symco”), a Nevada corporation (Symbiotics and Symco are collectively referred to herein as (“Creditor”.) RECITALS A. The Debtor and the Creditor have entered into a PROMISSORY NOTE dated as of July 22, 2005 (the “Note”). Capitalized terms used herein have the meanings given to them in the Note unless otherwise specified. B. The Debtor has requested that the Creditor amend the payment provisions of the Note. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:   1.   Creditor will convert $492,360 in principal on the Note to 6,000 shares of Series D Convertible Preferred Stock (“Series D) to be issued by Naturade on or before August 31, 2006.   a.   The shares of the Series D will be convertible into 1,200,000 shares of Naturade Common Stock at any time by the Creditor.   2.   The remaining Note principal and interest of $1,000,000 will be paid on a straight line basis over 30 months with an interest rate of 7% per annum beginning June 15, 2006.   3.   In consideration for the above, Naturade will issue the creditor 500,000 shares of Naturade Common Stock. IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above written. SIGNATURE PAGES FOLLOWS NATURADE, INC. By: /s/Stephen M. Kasprisin Stephen M. Kasprisin Chief Financial Officer SYMBIOTICS, INC.       By: /s/Douglas Wyatt     Name: Title:   Douglas Wyatt President SYMCO, INCORPORATED       By: /s/Douglas Wyatt     Name: Title:   Douglas Wyatt President QUINCY INVESTMENTS CORP.       By: /s/Peter H. Pocklington   Name: Title:   Peter H. Pocklington Chairman      

  Exhibit 10.68 EXECUTION COPY COLLATERAL MANAGEMENT AGREEMENT           This Collateral Management Agreement, dated as of December 20, 2006 (the “Agreement”), is entered into by and between CAPITALSOURCE REAL ESTATE LOAN TRUST 2006-A, a Delaware statutory trust (together with successors and assigns permitted hereunder, the “Issuer”), and CAPITALSOURCE FINANCE LLC, a limited liability company organized under the laws of the State of Delaware (“CapitalSource” and, together with its successors and assigns the “Collateral Manager”). Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Indenture, dated as of December 20, 2006 (the “Indenture”), by and among the Issuer, Wells Fargo Bank, N.A., a national banking association, as trustee (in such capacity, the “Trustee”), calculation agent, transfer agent, custodial securities intermediary, backup advancing agent and notes registrar, and CapitalSource, as advancing agent.           WHEREAS, the Issuer desires to engage the Collateral Manager to provide the services described herein and the Collateral Manager desires to provide such services;           NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto hereby agree as follows:           1. Management Services. The Collateral Manager is hereby appointed as the Issuer’s exclusive agent to provide to the Issuer certain services in relation to the Assets specified herein and in the Indenture. Accordingly, the Collateral Manager accepts such appointment and shall provide to the Issuer the following services (in accordance with all applicable requirements of the Indenture, the Servicing Agreement and this Agreement including without limitation the Collateral Manager Servicing Standard):           (a) determining specific Collateral Obligations to be purchased or Collateral Obligations to be sold and the timing of such purchases and sales, in each case as permitted by the Indenture;           (b) determining specific Eligible Investments to be purchased or sold and the timing of such purchases and sales, in each case as permitted by the Indenture;           (c) effecting or directing the purchase of Collateral Obligations and Eligible Investments, effecting or directing the sale of Collateral Obligations and Eligible Investments, and directing the investment or reinvestment of proceeds therefrom, in each case as permitted by the Indenture;           (d) negotiating with the issuers of Collateral Obligations as to proposed modifications or waivers of the documentation governing such Collateral Obligations;           (e) subject to clause (w), taking action, or advising the Trustee with respect to actions to be taken, with respect to the Issuer’s exercise of any rights (including, without limitation, voting rights, tender rights and rights arising in connection with the bankruptcy or insolvency of an issuer or the consensual or non judicial restructuring of the debt or equity of an issuer) or remedies in connection with the Collateral Obligations and Eligible Investments, as provided in the related Underlying Instruments, including in connection with an Offer or a   --------------------------------------------------------------------------------   default, and participating in the committees or other groups formed by creditors of an issuer, or taking any other action with respect to Collateral Obligations and Eligible Investments which the Collateral Manager determines in the reasonable exercise of the Collateral Manager’s business judgment is in the best interests of the Noteholders and the Certificateholder in accordance with and as permitted by the terms of the Indenture;           (f) consulting with the Rating Agencies at such times as may be reasonably requested by the Rating Agencies and providing to the Rating Agencies any information reasonably requested in connection with the Rating Agencies’ maintenance of their ratings of the Notes and their assigning credit indicators to Collateral Obligations, if applicable;           (g) determining whether specific Collateral Obligations are Credit Risk Securities, Defaulted Securities or Written Down Securities and determining whether such Collateral Obligations, and any other Collateral Obligations that are permitted or required to be sold pursuant to the Indenture, should be sold, and directing the Trustee to effect a disposition of any such Collateral Obligations, subject to and in accordance with the Indenture;           (h) (i) monitoring the Assets on an ongoing basis and (ii) providing or causing to be provided to the Issuer and/or the other applicable parties specified in the Indenture all reports, schedules and certificates which relate to the Assets and which the Issuer is required to prepare and deliver under the Indenture, which are not prepared and delivered by the Trustee on behalf of the Issuer under the Indenture, in the form and containing all information required thereby (including, in the case of the Monthly Reports and the Note Valuation Reports, providing to the Trustee the information as specified in Section 10.12 of the Indenture in sufficient time for the Trustee to prepare the Monthly Reports and the Note Valuation Reports) and, if applicable, in sufficient time for the Issuer to review such required reports and schedules and to deliver them to the parties entitled thereto under the Indenture;           (i) managing the Issuer’s investments in accordance with the Indenture, including the limitations relating to the Eligibility Criteria, the Coverage Tests, the Collateral Quality Tests, the Replenishment Criteria and the other requirements of the Indenture, and taking any action that the Collateral Manager deems appropriate and consistent with the Indenture, the Collateral Manager Servicing Standard, the applicable provisions of the Servicing Agreement and the standard of care set forth herein with respect to any portion of the Assets that does not constitute Collateral Obligations or Eligible Investments;           (j) monitoring all Hedge Agreements and determining whether and when the Issuer should exercise any rights available under any Hedge Agreement, and causing the Issuer to enter into additional or replacement Hedge Agreements or terminating (in part or in whole) existing Hedge Agreements, in each case in accordance with the Indenture;           (k) providing notification promptly, in writing, to the Trustee and the Issuer upon receiving actual notice that a Collateral Obligation is subject to an Offer or has become a Defaulted Security, a Written Down Security or a Credit Risk Security in time for the next Monthly Report; provided, however, that if such next Monthly Report is due within five (5) Business Days of the Issuer receiving such actual notice, the Issuer shall deliver such notice as soon as reasonably practicable following such delivery of such notice; - 2 - --------------------------------------------------------------------------------             (l) providing notification promptly, in writing, to the Trustee and the Issuer upon becoming actually aware of a Default or an Event of Default under the Indenture;           (m) determining (subject to the Indenture) whether, in light of the composition of Collateral Obligations, general market conditions and other factors considered pertinent by the Collateral Manager, investments in additional Collateral Obligations would, at any time during the Replenishment Period, be either impractical or not beneficial to the Noteholders and the Certificateholder;           (n) if the Collateral Manager elects to amortize the Notes pursuant to and in accordance with Section 9.7 of the Indenture, providing notification, in writing, to the Trustee, the Issuer and each Hedge Counterparty of (A) such election and (B) the amount of proceeds that will be used to so amortize the Notes;           (o) taking reasonable action on behalf of the Issuer to effect any Optional Redemption, any Tax Redemption, any Auction Call Redemption or any Clean-up Call in accordance with the Indenture;           (p) on the Stated Maturity of the Notes or in connection with any Optional Redemption, any Tax Redemption, any Auction Call Redemption or any Clean-up Call, liquidating any remaining Hedge Agreements;           (q) monitoring the ratings of the Collateral Obligations and the Issuer’s compliance with the covenants by the Issuer in the Indenture;           (r) assisting the Issuer in (i) taking any action in order to effect and/or maintain the listing of any of the Notes on the Irish Stock Exchange or (ii) obtaining any waiver from the Irish Stock Exchange, or (iii) providing other information related to the Issuer that is reasonably available to the Collateral Manager, in each case, when specifically requested by the Irish Stock Exchange;           (s) complying with such other duties and responsibilities as may be specifically required of the Collateral Manager by the Indenture, this Agreement or the Class A-1R Note Purchase Agreement;           (t) complying in all material respects with the applicable provisions of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), with respect to the Issuer;           (u) in order to render the Securities eligible for resale pursuant to Rule 144A under the Securities Act, while any of such Securities remain outstanding, making available, upon request, to any Holder or prospective purchaser of such Securities, additional information regarding the Issuer and the Assets if such information is reasonably available to the Collateral Manager and constitutes Rule 144A Information required to be furnished by the Issuer pursuant to Section 7.13 of the Indenture, unless the Issuer furnishes information to the United States Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; - 3 - --------------------------------------------------------------------------------             (v) upon reasonable request, assisting the Trustee or the Issuer with respect to such actions to be taken after the Closing Date, as is necessary to maintain the clearing and transfer of the Offered Notes (other than the Class A-1R Notes) through DTC; and           (w) in accordance with the Collateral Manager Servicing Standard (but subject to the applicable provisions of the Servicing Agreement), enforcing the rights of the Issuer as holder of the Collateral Obligations, including without limitation taking such action as is necessary to enforce the Issuer’s rights with respect to remedies related to breaches of representations, warranties or covenants in the Underlying Instruments for the benefit of the Issuer or to breaches of representations, warranties or covenants in the Collateral Obligations Purchase Agreements.           In furtherance of the foregoing, the Issuer hereby appoints the Collateral Manager as the Issuer’s true and lawful agent and attorney-in-fact, with full power of substitution and full authority in the Issuer’s name, place and stead and without any necessary further approval of the Issuer, in connection with the performance of the Collateral Manager’s duties provided for in this Agreement, including the following powers: (i) in accordance with the terms and conditions of the Indenture and this Agreement, to buy, sell, exchange, convert and otherwise trade Collateral Obligations and Eligible Investments, and (ii) to execute (under hand, under seal or as a deed) and deliver all necessary and appropriate documents and instruments on behalf of the Issuer to the extent necessary or appropriate to perform the services referred to in (a) through (w) above of this Section 1 and under the Indenture. The foregoing power of attorney is a continuing power, coupled with an interest, and shall remain in full force and effect until revoked by the Issuer in writing by virtue of the termination of this Agreement pursuant to Section 12 hereof or an assignment of this Agreement pursuant to Section 17 hereof; provided that any such revocation shall not affect any transaction initiated prior to such revocation. Nevertheless, if so requested by the Collateral Manager, a purchaser of a Collateral Obligation or Eligible Investment or a Hedge Counterparty, the Issuer shall ratify and confirm any such sale or other disposition by executing and delivering to the Collateral Manager, such purchaser or such Hedge Counterparty all proper bills of sale, assignments, releases and other instruments as may be designated in any such request.           The Collateral Manager does not hereby guarantee that sufficient funds will be available on any Payment Date to satisfy any payment obligations of the Issuer. Notwithstanding anything to the contrary in this Agreement, the Collateral Manager shall perform its obligations hereunder and under the Indenture in accordance with the Collateral Manager Servicing Standard. In addition, the Collateral Manager shall use commercially reasonable efforts to ensure that (i) inquiries are made, to the extent practicable, from sources available to it, with respect to the occurrence of any default or event of default in respect of any Collateral Obligation under any Underlying Instrument and (ii) commitments to purchase Collateral Obligations and Eligible Investments are made by the Collateral Manager only if, in the Collateral Manager’s commercially reasonable judgment at the time of such commitment, payment at settlement in respect of any such purchase could be made without any breach or violation of, or default under, the terms of the Indenture or this Agreement. The Collateral Manager shall comply with and perform all the duties and functions that have been specifically delegated to the Collateral Manager under the Indenture subject to the Collateral Manager Servicing Standard. The Collateral Manager shall be bound to follow any amendment, - 4 - --------------------------------------------------------------------------------   supplement or modification to the Indenture of which it has received written notice at least ten (10) Business Days prior to the execution and delivery thereof by the parties thereto; provided, however, that, with respect to any amendment, supplement, modification or waiver to the Indenture which may, in the reasonable judgment of the Collateral Manager, affect the Collateral Manager, the Collateral Manager shall not be bound thereby (and the Issuer agrees that it will not permit any such amendment, supplement, modification or waiver to become effective) unless the Collateral Manager has been given prior written notice thereof and gives its written consent thereto (which consent shall not be unreasonably withheld) to the Trustee, the Class A-1R Note Agent and the Issuer prior to the effectiveness thereof. The Collateral Manager shall not be required to take any action or cause any action to be taken hereunder or under the Indenture or Servicing Agreement which is reasonably likely to result in the violation of any law, decree, order, rule or regulation of any court or regulatory, administrative or governmental agency, body or authority.           The Collateral Manager shall take all actions reasonably requested by the Trustee to facilitate the perfection of the Trustee’s security interest in the Assets pursuant to the Indenture.           2. Delegation of Duties. The Collateral Manager may delegate to third parties (including its Affiliates), which it shall select with reasonable care, and employ third parties to execute any or all of the duties and obligations of the Collateral Manager hereunder; provided, however, that (i) the Collateral Manager shall not be relieved of any of its duties and liabilities hereunder as a result of such delegation to or employment of third parties, (ii) the Collateral Manager shall be solely responsible for the fees and expenses payable to any such third party, except as set forth in Section 6 hereof, and (iii) such delegation does not constitute an “assignment” under the Advisers Act.           3. Purchase and Sale Transactions; Brokerage.           (a) The Collateral Manager shall seek to obtain the best overall terms for all orders placed with respect to the Assets that are Securities (which, for the avoidance of doubt, will not include Loans originated or acquired by the Seller or an Affiliate of the Seller), considering all reasonable circumstances, including, if applicable, the conditions or terms of early redemption of the Securities, it being understood that the Collateral Manager has no obligation to obtain the lowest prices available. Subject to the foregoing objective, the Collateral Manager may take into consideration all factors the Collateral Manager reasonably determines to be relevant, including, without limitation, timing, general relevant trends and research and other brokerage services and support equipment and services related thereto furnished to the Collateral Manager or its Affiliates by brokers and dealers in compliance with Section 28(e) of the Exchange Act or, if Section 28(e) of the Exchange Act is not applicable, in accordance with the provisions set forth herein and other relevant factors. Such services may be used in connection with the other advisory activities or investment operations of the Collateral Manager and/or its Affiliates. In addition, the Collateral Manager may take into account available prices, rates of brokerage commissions and size and difficulty of the order, in addition to other relevant factors (such as, without limitation, execution capabilities, reliability (based on total trading rather than individual trading), integrity, financial condition in general, execution and operational capabilities of competing brokers and/or dealers, and the value of the ongoing relationship with - 5 - --------------------------------------------------------------------------------   such brokers and/or dealers), without having to demonstrate that such factors are of a direct benefit to the Issuer in any specific transaction. The Issuer acknowledges and agrees that (i) the determination by the Collateral Manager of any benefit to the Issuer is subjective and represents the Collateral Manager’s evaluation at the time that the Issuer will be benefited by relatively better purchase or sales prices, lower brokerage commissions and beneficial timing of transactions or a combination of any of these and/or other factors and (ii) the Collateral Manager shall be fully protected with respect to any such determination to the extent the Collateral Manager acts in good faith, and in accordance with the Collateral Manager Servicing Standard (to the extent applicable), and without gross negligence, willful misconduct or reckless disregard of the obligations of the Issuer hereunder or under the terms of the Indenture.           The Collateral Manager may aggregate sales and purchase orders of securities placed with respect to the Assets with similar orders being made simultaneously for other accounts managed by the Collateral Manager or with accounts of the Affiliates of the Collateral Manager if in the Collateral Manager’s reasonable judgment, exercised in good faith, such aggregation will not have an adverse effect on the Issuer. When any such aggregate sales or purchase orders occur, the objective of the Collateral Manager (and any of its Affiliates involved in such transactions) shall be to allocate the executions among the accounts in a manner fair and equitable to all such accounts and generally to seek to allocate securities available for investment to all such accounts pro rata in proportion to the optimum amount sought by the Collateral Manager for each respective account. In connection with the foregoing, the objective of the Collateral Manager shall be to allocate investment opportunities and the purchases or sales of instruments in a manner believed by the Collateral Manager, in good faith, taking into account the Collateral Manager’s Servicing Standard (to the extent applicable), to be fair and equitable.           In connection with any purchase of Assets other than Securities, the objective of the Collateral Manager shall be to allocate such Assets (and the aggregate purchase price paid for such Assets) among the Collateral Manager’s clients (including the Issuer) in a manner believed by the Collateral Manager to be fair and equitable. The Issuer acknowledges and agrees that the Collateral Manager shall be fully protected with respect to any such allocation to the extent the Collateral Manager acts in good faith, taking into account the Collateral Manager’s Servicing Standard (to the extent applicable), and without gross negligence, willful misconduct or reckless disregard of the obligations of the Issuer hereunder or under the terms of the Indenture.           All purchases and sales of Eligible Investments and Collateral Obligations by the Collateral Manager on behalf of the Issuer shall be conducted in compliance with all applicable laws (including, without limitation, Section 206(3) of the Advisers Act) and the terms of the Indenture. After (and excluding) the Closing Date, the Collateral Manager shall cause any purchase or sale of any Collateral Obligation or Eligible Investment to be conducted on an arm’s-length basis or, if applicable, in compliance with Section 3(b) hereof. The parties hereto acknowledge and agree that all purchases (including, without limitation, purchases from Affiliates of the Collateral Manager) of Eligible Investments and Collateral Obligations by the Collateral Manager on behalf of the Issuer on the Closing Date (including, without limitation, all such purchases from Affiliates of the Collateral Manager) in a manner contemplated by the final Offering Memorandum, dated December 20, 2006 (the “Offering Memorandum”), related to the Classes of Notes offered thereby (or any supplement thereto) are hereby approved. - 6 - --------------------------------------------------------------------------------             (b) The Collateral Manager, subject to and in accordance with the Indenture, may effect direct trades between the Issuer and the Collateral Manager or any of its Affiliates acting as principal or agent (any such transaction, a “Related Party Trade”); provided, however, that a Related Party Trade after (and excluding) the Closing Date may be effected only if the purchase price in respect of any Collateral Obligation acquired by the Issuer from a Seller pursuant to such a direct trade may not exceed the Principal Balance thereof plus accrued and unpaid interest thereon (or, in the case of a Preferred Equity Security, all accrued and unpaid dividends or other distributions not attributable to the return of capital by its governing documents).           4. Representations and Warranties of the Issuer. The Issuer represents and warrants to the Collateral Manager that:           (a) the Issuer (i) has been duly formed as a Delaware statutory trust and is validly existing under the laws of the State of Delaware, (ii) has full power and authority to own the Issuer’s assets and the securities proposed to be owned by the Issuer and included among the Assets and to transact the business for which the Issuer was organized, and (iii) is duly qualified under the laws of each jurisdiction where the Issuer’s ownership or lease of property or the conduct of the Issuer’s business requires or the performance of the Issuer’s obligations under this Agreement and the Indenture would require such qualification, except for failures to be so qualified that would not in the aggregate have a material adverse effect on the business, operations, assets or financial condition of the Issuer or the ability of the Issuer to perform its obligations under, or on the validity or enforceability of, this Agreement and the Indenture; the Issuer has full power and authority to execute, deliver and perform the Issuer’s obligations hereunder and thereunder; this Agreement and the Indenture have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding agreements enforceable against the Issuer in accordance with their terms except that the enforceability thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect relating to creditors’ rights and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law);           (b) no consent, approval, authorization or order of or declaration or filing with any government, governmental instrumentality or court or other Person is required for the performance by the Issuer of its duties hereunder or under the Indenture, except those that may be required under state securities or “blue sky” laws or the applicable laws of any jurisdiction outside of the United States, and such as have been duly made or obtained;           (c) neither the execution, delivery and performance of this Agreement or the Indenture nor the performance by the Issuer of its duties hereunder or thereunder (i) conflicts with or will violate or result in a default under the Issuer’s Governing Documents or any material contract or agreement to which the Issuer is a party or by which it or its assets may be bound, or any law, decree, order, rule, or regulation applicable to the Issuer of any court or regulatory, administrative or governmental agency, body or authority or arbitrator having jurisdiction over the Issuer or its properties, or (other than as contemplated or permitted by the Indenture) will result in a lien on any of the property of the Issuer and (ii) would have a material adverse effect upon the ability of the Issuer to perform its duties under this Agreement or the Indenture; - 7 - --------------------------------------------------------------------------------             (d) the Issuer and its Affiliates are not in violation of any Federal or state laws or regulations, and there is no charge, investigation, action, suit or proceeding before or by any court or regulatory agency pending or, to the best knowledge of the Issuer, threatened that, in any case, would have a material adverse effect upon the ability of the Issuer to perform its duties under this Agreement or the Indenture;           (e) the Issuer is not an “investment company” under the Investment Company Act; and           (f) the assets of the Issuer do not and will not at any time constitute the assets of any plan subject to the fiduciary responsibility provisions of ERISA or of any plan within the meaning of Section 4975(e)(1) of the Code.           5. Representations and Warranties of the Collateral Manager. The Collateral Manager represents and warrants to the Issuer that:           (a) the Collateral Manager (i) has been duly organized, is validly existing and is in good standing under the laws of the State of Delaware, (ii) has full power and authority to own the Collateral Manager’s assets and to transact the business in which it is currently engaged, and (iii) is duly qualified and in good standing under the laws of each jurisdiction where the Collateral Manager’s ownership or lease of property or the conduct of the Collateral Manager’s business requires, or the performance of this Agreement and the Indenture would require, such qualification, except for failures to be so qualified that would not in the aggregate have a material adverse effect on the business, operations, assets or financial condition of the Collateral Manager or the ability of the Collateral Manager to perform its obligations under, or on the validity or enforceability of, this Agreement and the provisions of the Indenture applicable to the Collateral Manager; the Collateral Manager has full power and authority to execute, deliver and perform this Agreement and the Collateral Manager’s obligations hereunder and the provisions of the Indenture applicable to the Collateral Manager; this Agreement has been duly authorized, executed and delivered by the Collateral Manager and constitutes a legal, valid and binding agreement of the Collateral Manager, enforceable against it in accordance with the terms hereof, except that the enforceability hereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law);           (b) the Collateral Manager is not in violation of any Federal or state securities law or regulation promulgated thereunder that would have a material adverse effect upon the ability of the Collateral Manager to perform its duties under this Agreement or the Indenture, and there is no charge, investigation, action, suit or proceeding before or by any court or regulatory agency pending or, to the best knowledge of the Collateral Manager, threatened against the Collateral Manager which could reasonably be expected to have a material adverse effect upon the ability of the Collateral Manager to perform its duties under this Agreement or the Indenture;           (c) neither the execution and delivery of this Agreement nor the performance by the Collateral Manager of its duties hereunder or under the Indenture conflicts with or will violate or result in a breach or violation of any of the terms or provisions of, or constitutes a - 8 - --------------------------------------------------------------------------------   default under: (i) the certificate of formation or the limited liability company agreement of the Collateral Manager, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement or other evidence of indebtedness or other agreement, obligation, condition, covenant or instrument to which the Collateral Manager is a party or by which the Collateral Manager is bound, (iii) any law, decree, order, rule or regulation applicable to the Collateral Manager of any court or regulatory, administrative or governmental agency, body or authority or arbitrator having jurisdiction over the Collateral Manager or its properties, and which would have, in the case of any of (i), (ii) or (iii) of this subsection (c), either individually or in the aggregate, a material adverse effect on the business, operations, assets or financial condition of the Collateral Manager or the ability of the Collateral Manager to perform its obligations under this Agreement or the Indenture;           (d) no consent, approval, authorization or order of or declaration or filing with any government, governmental instrumentality or court or other Person is required for the performance by the Collateral Manager of its duties hereunder and under the Indenture, except such as have been duly made or obtained;           (e) the Section entitled “THE COLLATERAL MANAGER” in the Offering Memorandum, as of the date thereof (including as of the date of any supplement thereto) and as of the Closing Date does not contain any untrue statement of a material fact and does not omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and           (f) the Collateral Manager is not required to register as an investment adviser under the Advisers Act.           6. Expenses. Both parties hereto acknowledge and agree that a portion of the gross proceeds received from the issuance and sale of the Securities will be used to pay certain organizational and structuring fees and expenses of the Issuer, including the legal fees and expenses of counsel to the Collateral Manager. The Collateral Manager shall pay all expenses and costs incurred by it in the course of performing its obligations under this Agreement; provided, however, that the Collateral Manager shall not be liable for, and (subject to the Priority of Payments set forth in the Indenture and to the extent funds are available therefor) the Issuer shall be responsible for the payment of, reasonable expenses and costs (including, without limitation, reasonable travel expenses) of (i) independent accountants, consultants and other advisers retained by the Issuer or by the Collateral Manager on behalf of the Issuer in connection with the services provided by the Collateral Manager hereunder, (ii) legal advisers retained by the Issuer or by the Collateral Manager on behalf of the Issuer in connection with the services provided by the Collateral Manager hereunder and (iii) the Collateral Manager to the extent of reasonable expenses (A) incurred in effecting or directing purchases of Collateral Obligations and sales of Collateral Obligations and Eligible Investments, (B) incurred in negotiating with issuers of Collateral Obligations as to proposed modifications or waivers, (C) incurred in taking action or advising the Trustee with respect to the Issuer’s exercise of any rights or remedies in connection with the Collateral Obligations and Eligible Investments, including in connection with an Offer or a default, (D) incurred in participating in committees or other groups formed by creditors of an issuer of Collateral Obligations, (E) incurred in consulting with and providing any Rating Agency with any information in connection with its maintenance of the ratings of the - 9 - --------------------------------------------------------------------------------   Notes, (F) relating to the Special Amortization of the Notes (other than the Class K Notes), (G) relating to the provision of information in order to render the Notes eligible for resale pursuant to Rule 144A of the Securities Act, (H) disbursed or allocated in valuing the Assets, (I) in connection with disbursed or allocated software and technology expenditures relating to the monitoring and administration of the Assets, (J) for an allocable share of the cost of certain credit databases used by the Collateral Manager in providing services to the Issuer under this Agreement and (K) incurred by the Collateral Manager in connection with matters arising in the performance of its duties under this Agreement.           7. Fees. As compensation for the performance of its obligations as Collateral Manager hereunder and under the Indenture, the Collateral Manager will be entitled to receive (i) a fee, payable quarterly in arrears on each Payment Date in accordance with the Priority of Payments, equal to 0.15% per annum of the Net Outstanding Portfolio Balance and the Aggregate Class A-1R Undrawn Amount (without duplication) for such Payment Date (the “Senior Collateral Management Fee”) and (ii) an additional fee, payable quarterly in arrears on each Payment Date in accordance with the Priority of Payments, equal to 0.25% per annum of the Net Outstanding Portfolio Balance and the Aggregate Class A-1R Undrawn Amount (without duplication) for such Payment Date (the “Subordinate Collateral Management Fee” and, together with the Senior Collateral Management Fee, the “Collateral Management Fee”). Each Collateral Management Fee will be calculated for each Interest Accrual Period assuming a 360-day year with the actual number of days elapsed in such Interest Accrual Period. The Collateral Management Fee will be calculated based on the Net Outstanding Portfolio Balance and the Aggregate Class A-1R Undrawn Amount (without duplication) as of the first day of the applicable Interest Accrual Period. If on any Payment Date there are insufficient funds to pay such fees (and/or any other amounts due and payable to the Collateral Manager) in full, in accordance with the Priority of Payments, the amount not so paid shall be deferred and such amounts shall be payable on such later Payment Date on which funds are available therefor as provided in the Priority of Payments set forth in the Indenture. Any accrued and unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments shall accrue interest at LIBOR in effect for the applicable Interest Accrual Period computed on an actual 360-day basis. Any accrued and unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments shall accrue interest at LIBOR in effect for the applicable Interest Accrual Period on an actual 360-day basis. Notwithstanding any other provision hereof, the aggregate amount of all accrued but unpaid Subordinate Collateral Management Fee payable on the final Payment Date or, if earlier, following the winding up of the Issuer shall be equal to the lesser of (a) the nominal amount thereof and (b) the amount available for payment under the Priority of Payments. The Collateral Manager hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the nonpayment to the Collateral Manager of any amounts due it hereunder except in accordance with Section 18 hereof and, subject to the provisions of Section 12, to continue to serve as Collateral Manager. If this Agreement is terminated pursuant to Section 12 hereof or otherwise, the accrued fees payable to the Collateral Manager shall be prorated for any partial periods between the Payment Dates during which this Agreement was in effect and shall be due and payable on the first Payment Date following the date of such termination, together with all expenses payable to the Collateral Manager in accordance with Section 6 hereof, and subject to the provisions of the Indenture and the Priority of Payments. Notwithstanding anything to the contrary herein, the Collateral - 10 - --------------------------------------------------------------------------------   Manager may at any time, in its discretion, waive any portion of the Collateral Management Fees.           8. Non-Exclusivity. Nothing herein shall prevent the Collateral Manager or any of its Affiliates or any of their members, managers, officers, agents, employees, stockholders, interest holders, partners or directors from engaging in any other businesses or providing investment management, advisory or any other types of services to any other portfolios or Persons or entities, including the Issuer, the Trustee and the Noteholders, to the fullest extent permitted by applicable law; provided, however, that the Collateral Manager may not take any of the foregoing actions which the Collateral Manager knows or reasonably should know (A) would require the Issuer or the pool of Assets to register as an “investment company” under the Investment Company Act or (B) would cause the Issuer or, with respect to the Issuer or the Assets, the Collateral Manager to be in material violation of any law, rule or regulation applicable to the Issuer or the Assets.           9. Conflicts of Interest.           (a) After (but excluding) the Closing Date and the sales by Affiliates of the Collateral Manager of Collateral Obligations to the Issuer on the Closing Date, the Collateral Manager will not cause the Issuer to enter into any transaction to acquire Collateral Obligations with the Collateral Manager or any of its Affiliates as principal unless the applicable terms and conditions set forth in Section 3(b) are complied with.           (b) The Collateral Manager shall perform its obligations hereunder in accordance with any applicable requirements of the Advisers Act and the Indenture. The Issuer acknowledges that (i) the Trust Depositor, an affiliate of the Collateral Manager, will acquire on the Closing Date 100% of each of the Class J Notes, the Class K Notes and the Certificate, (ii) the Seller (or an Affiliate of the Collateral Manager) and/or its Affiliates (including the Trust Depositor) will sell Collateral Obligations to the Issuer on the Closing Date, and (iii) the Collateral Manager, its Affiliates and funds or accounts for which the Collateral Manager or its Affiliates acts as investment adviser may at times own Notes of one or more additional Classes. After the Closing Date, the Collateral Manager agrees to provide to the Trustee written notice upon the acquisition or transfer (after, but excluding, the Closing Date) of any Securities held by the Trust Depositor, the Collateral Manager, any of their respective Affiliates or any fund managed or controlled by the Collateral Manager or any Affiliate thereof, which written notice may, but need not be, in the form of a subsequent Collateral Obligations Purchase Agreement among the Trust Depositor and the Issuer.           (c) Nothing herein shall prevent the Collateral Manager or any of its Affiliates or any of their members, managers, officers, agents, employees, stockholders, interest holders, partners or directors from engaging in other businesses (including financing, purchasing, owning, holding, originating or disposing of any assets or investments), or from rendering services of any kind to the Issuer and its Affiliates, the Trustee, the Holders or any other Person or entity, whether or not any of the foregoing may be competitive with the business of the Issuer. Without prejudice to the generality of the foregoing, directors, officers, members, partners, employees and agents of the Collateral Manager, Affiliates of the Collateral Manager, and the Collateral Manager may, among other things: - 11 - --------------------------------------------------------------------------------        (i) serve as directors (whether supervisory or managing), officers, employees, partners, members, managers, agents, nominees or signatories for the Issuer or any Affiliate thereof, or for any obligor in respect of any of the Collateral Obligations or Eligible Investments, or any of their respective Affiliates, except to the extent prohibited by their respective Underlying Instruments, as from time to time amended; provided that (x) in the reasonable judgment of the Collateral Manager, such activity will not have a material adverse effect on the ability of the Issuer or the Trustee to enforce its respective rights with respect to any Assets and (y) nothing in this paragraph shall be deemed to limit the duties of the Collateral Manager set forth in Section 1 hereof;      (ii) perform, and receive fees for the performance of, services of whatever nature rendered to an obligor in respect of any of the Collateral Obligations or Eligible Investments, including acting as master servicer, sub-servicer or special servicer with respect to any CMBS Securities or with respect to any commercial mortgage loan constituting or underlying any Collateral Obligation; provided that, in the reasonable judgment of the Collateral Manager, such activity will not have a material adverse effect on the ability of the Issuer or the Trustee to enforce its respective rights with respect to any of the Assets; provided, further, with respect to such services, the Collateral Manager is not acting as an agent for the Issuer;      (iii) be retained to provide services unrelated to this Agreement to the Issuer or its Affiliates and be paid therefor;      (iv) be a secured or unsecured creditor of, or hold an equity interest in, the Issuer, its Affiliates or any obligor of any Collateral Obligation or Eligible Investment; provided, however, that the Collateral Manager may not be such a creditor or hold any of such interests if, in the opinion of counsel to the Issuer, the existence of such interest would require registration of the Issuer or the Assts as an “investment company” under the Investment Company Act or violate any provisions of Federal or applicable state law or any law, rule or regulation of any governmental body or agency having jurisdiction over the Issuer;      (v) make, hold or sell an investment in an issuer’s securities that may be pari passu, senior or junior in ranking to a Collateral Obligation;      (vi) except as otherwise provided in this Section 9, sell any Collateral Obligation or Eligible Investment to, or purchase any Collateral Obligation from, the Issuer while acting in the capacity of principal or agent; and      (vii) subject to its obligations in Section 1 hereof to protect the Holders, serve as a member of any “creditors’ board” with respect to any Defaulted Security, Eligible Investment or with respect to any commercial mortgage loan underlying or constituting any Collateral Obligation or the respective borrower for any such commercial mortgage loan.           It is understood that the Collateral Manager and its Affiliates may engage in any other business, whether or not any of the foregoing may be competitive with the business of the - 12 - --------------------------------------------------------------------------------   Issuer (including financing, purchasing, owning, holding, servicing, originating or disposing of any assets or investments), and furnish investment management and advisory services to others, including Persons that may have investment policies similar to those followed by the Collateral Manager with respect to the Assets and that may own instruments of the same class, or of the same type, as the Collateral Obligations or other instruments of the issuers of Collateral Obligations and may manage portfolios similar to the Assets. The Collateral Manager and its Affiliates shall be free, in their sole discretion, to make recommendations to others, or effect transactions on behalf of themselves or for others, which may be the same as or different from those the Collateral Manager causes the Issuer to effect with respect to the Assets.           The Collateral Manager and its Affiliates may, and may cause or advise their respective clients to, invest in assets, investments or instruments that would be appropriate for the Issuer or as security for the Notes and shall have no duty or obligation to offer any such asset, investment or instrument to the Issuer. Such investments may be different from those made to or on behalf of the Issuer. The Collateral Manager, its Affiliates and their respective clients may have ongoing relationships with Persons whose instruments are pledged to secure the Notes and may own instruments issued by, or loans to, issuers of the Collateral Obligations or to any borrower or Affiliate of any borrower on any commercial mortgage loans underlying or constituting the Collateral Obligations or the Eligible Investments. The Collateral Manager and its Affiliates may cause or advise their respective clients to invest in instruments that are senior to, or have interests different from or adverse to, the instruments that are pledged to secure the Notes.           Nothing contained in this Agreement shall prevent the Collateral Manager or any of its Affiliates from themselves buying or selling, or from recommending to or directing any other account to buy or sell, at any time, securities or other Assets of the same kind or class, or securities or other Assets of a different kind or class of the same issuer, as those directed by the Collateral Manager to be purchased or sold hereunder. It is understood that, to the extent permitted by applicable law, the Collateral Manager, its Affiliates, and any member, manager, officer, director, stockholder or employee of the Collateral Manager or any such Affiliate or any member of their families or a Person advised by the Collateral Manager may have an interest in a particular transaction or in securities or other Assets of the same kind or class, or securities or other Assets of a different kind or class of the same issuer, as those purchased or sold by the Collateral Manager hereunder. When the Collateral Manager is considering purchases or sales for the Issuer and one or more of such other accounts at the same time, the Collateral Manager shall allocate available investments or opportunities for sales in its discretion and make investment recommendations and decisions that may be the same as or different from those made with respect to the Issuer’s investments, in accordance with applicable law and the Collateral Manager Servicing Standard, to the extent applicable.           Subject to the Indenture and the provisions of this Agreement, the Collateral Manager shall not be obligated to pursue any specific investment strategy or opportunity that may arise with respect to the Assets.           The Issuer further acknowledges that the Collateral Manager and its Affiliates are and intend to continue to be in the business of originating and acquiring commercial loans, selling such loans to affiliated issuers in connection with securitization, warehouse and other - 13 - --------------------------------------------------------------------------------   financing facilities, servicing such loans in connection with the foregoing and servicing or managing loans on behalf of certain of its Affiliates, including the Seller. In connection with originating or acquiring such loans, the Collateral Manager or its Affiliates will often be appointed in various agency capacities under such loans or, in instances when the Seller is appointed to such agency roles with respect to loans it originates or acquires, the Seller may contract with the Collateral Manager to perform such agency functions. With respect to some of these loans a portion may be owned by the Issuer and a portion may be owned by the Collateral Manager and/or one or more other Affiliates. The Issuer further acknowledges that various other aspects of the Collateral Manager’s or its Affiliates’ business and existing or potential conflicts related thereto are set forth in the Offering Memorandum. The Issuer expressly consents to the Collateral Manager or its Affiliates serving in these various capacities and, subject to the terms of this Agreement, waives any conflict of interest that may arise therefrom. Nothing in this paragraph shall in any way limit the generality of the other provisions of this Section 9.           The Issuer hereby acknowledges and consents to the various potential and actual conflicts of interests that may exist with respect to the Collateral Manager as described above; provided, however, that nothing contained in this Section 9 shall be construed as altering the duties of the Collateral Manager set forth in this Agreement or in the Indenture.           10. Records; Confidentiality. The Collateral Manager shall maintain appropriate books of account and records relating to services performed hereunder, and such books of account and records shall be accessible for inspection by an authorized representative of the Issuer, the Trustee and the Independent accountants appointed by the Issuer pursuant to the Indenture at a mutually agreed-upon time during normal business hours and upon reasonable prior notice; provided that the Collateral Manager shall not be obligated to provide access to any non-public information if the Collateral Manager in good faith determines that the disclosure of such information would violate any applicable law, regulation or contractual arrangement. The Collateral Manager shall follow its customary procedures to keep confidential all information obtained in connection with the services rendered hereunder and shall not disclose any such information except (i) with the prior written consent of the Issuer (which consent shall not be unreasonably withheld), (ii) such information as the Rating Agencies shall reasonably request in connection with their rating or evaluation of the Notes and/or the Collateral Manager, as applicable, (iii) as required by law, regulation, court order or the rules, regulations, or request of any regulatory or self-regulating organization, body or official (including any securities exchange on which the Notes may be listed from time to time) having jurisdiction over the Collateral Manager or its Affiliates or as otherwise required by law or judicial process, (iv) such information as shall have been publicly disclosed other than in violation of this Agreement, (v) to its members, officers, directors, and employees, and to its attorneys, accountants and other professional advisers in conjunction with the transactions described herein, (vi) such information as may be necessary or desirable in order for the Collateral Manager to prepare, publish and distribute to any Person any information relating to the investment performance of the Assets, (vii) in connection with the enforcement of the Collateral Manager’s rights hereunder or in any dispute or proceeding related hereto, (viii) to the Trustee, (ix) to the extent required pursuant to any Hedge Agreement of the Issuer, (x) to Holders and potential purchasers of any of the Securities, (xi) in connection with establishing trading or investment accounts or otherwise in connection with effecting transactions on behalf of the Issuer and (xii) such information as may - 14 - --------------------------------------------------------------------------------   be obtained by the Collateral Manager other than in connection with the services rendered hereunder.           Subject to compliance with the requirements of any law, rule or regulation applicable to the Collateral Manager, nothing contained herein shall prevent the Collateral Manager from discussing its activities hereunder in a general way in the normal course of its business, including, without limitation, general discussions with other Persons regarding its ability to act as a collateral manager and its past performance in such capacity. In addition, subject to compliance with the requirements of any law, rule or regulation applicable to the Collateral Manager, with respect to information that the Collateral Manager obtains or develops regarding the Collateral Obligations or Eligible Investments (including, without limitation, information regarding ratings, yield, creditworthiness, financial condition and prospects of any issuer thereof) in connection with the performance of its services hereunder, nothing in this Section 10 shall prevent the Collateral Manager or its Affiliates, in the conduct of their respective businesses, from using such information or disclosing such information to others so long as such other use does not, in its reasonable judgment, disadvantage the Issuer. Notwithstanding anything to the contrary contained in this Agreement, all persons may disclose to any and all persons, without limitation of any kind, the U.S. Federal, state and local tax treatment of the Securities and the Issuer, any fact that may be relevant to understanding the U.S. Federal, state and local tax treatment of the Securities and the Issuers, and all materials of any kind (including opinions or other tax analyses) relating to such U.S. Federal, state and local tax treatment and that may be relevant to understanding such tax treatment.           11. Term. This Agreement shall become effective on the Closing Date and shall continue in full force and effect until the first to occur of the following: (a) the payment in full of the Notes and the termination of the Indenture in accordance with its terms, (b) the liquidation of the Assets and the final distribution of the proceeds of such liquidation to the Holders and the Issuer, or (c) the termination of this Agreement pursuant to Section 12 hereof.           12. Termination. (a) The Collateral Manager may be removed without cause upon at least thirty (30) days’ prior written notice if (A) Holders of at least 75% by Aggregate Outstanding Amount of each Class of Notes (voting as a separate Class) and (B) the Certificateholder gives written notice to the Collateral Manager, the Issuer, each Hedge Counterparty and the Trustee of such removal (including in any such calculation any Collateral Manager Securities); provided that if the Collateral Manager is removed pursuant to this clause (a), any successor Collateral Manager will not be permitted to be a Holder of, or an Affiliate of any Holder of, Securities. Notice of any such removal shall be delivered by the Trustee on behalf of the Issuer to the Holders of each Class of Notes, the Certificateholder, each Rating Agency and each Hedge Counterparty.           (b) This Agreement may be terminated, and the Collateral Manager may be removed, by the Issuer or the Trustee for cause, upon thirty (30) days’ prior written notice by the Issuer, at the direction of Holders of at least a majority by Aggregate Outstanding Amount of each Class of Notes (excluding any Collateral Manager Securities), each voting as a separate Class); provided, however, upon the occurrence of an event described in clause (iii) of this Section 12(b), termination of the Collateral Manager will be automatic and without advance notice required from the Issuer, the Trustee or any other Person. Notice of any such removal for - 15 - --------------------------------------------------------------------------------   cause shall be delivered by or on behalf of the Issuer to each Rating Agency, each Hedge Counterparty and the Noteholders and the Certificateholder. In no event will the Trustee be required to determine whether or not cause exists for the removal of the Collateral Manager. As used in this Section 12, “cause” means any of the following events:      (i) the Collateral Manager (A) willfully breaches, or takes any action that it knows violates, any provision of this Agreement or any term of the Indenture applicable to the Collateral Manager (not including a willful breach or knowing violation that results from a good faith dispute regarding alternative courses of action or interpretation of instructions or a failure to meet any Coverage Test or Collateral Quality Test);      (ii) the Collateral Manager breaches any provision of this Agreement or any terms of the Indenture applicable to the Collateral Manager, which breach has a material adverse effect on the Noteholders, and fails to cure such breach within 90 days after the first to occur of (A) notice of such failure being given to the Collateral Manager or (B) the Collateral Manager having actual knowledge of such breach;      (iii) the Collateral Manager (A) ceases to be able to, or admits in writing the Collateral Manager’s inability to, pay the Collateral Manager’s debts when and as they become due, (B) files, or consents by answer or otherwise to the filing against the Collateral Manager of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or takes advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (C) makes an assignment for the benefit of the Collateral Manager’s creditors, (D) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Collateral Manager or with respect to any substantial part of the Collateral Manager’s property, or (E) is adjudicated as insolvent or to be liquidated;      (iv) the occurrence of an act by the Collateral Manager or its Affiliates that constitutes fraud or criminal activity in the performance of its obligations under this Agreement or the indictment of the Collateral Manager or any of its officers or directors for a felony offense materially related to advisory services similar to those provided pursuant to this Agreement or employees (acting in such capacity) engaged in the provision of services under this Agreement and such activities or indictment are directly related to the performance or provision of such or similar services;      (v) the failure of any representation, warranty, certificate or statement of the Collateral Manager in or pursuant to this Agreement or the Indenture to be correct in all material respects and (x) such failure has (or could reasonably be expected to have) a material adverse effect on the Noteholders or the Issuer and (y) if such failure can be cured, no cure is made for 45 days after the Collateral Manager becomes aware of such failure or receives notice thereof in writing from the Trustee;      (vi) the occurrence and continuation of any of the Events of Default described in Sections 5.1(a) or 5.1(b) of the Indenture; or - 16 - --------------------------------------------------------------------------------        (vii) the Collateral Manager consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another Person and either (A) at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee Person fails to or cannot assume all the obligations of the Collateral Manager under this Agreement, or (B) the resulting, surviving or transferee Person lacks the legal capacity to perform the obligations of the Collateral Manager hereunder and under the Indenture. The Collateral Manager shall notify the Trustee, the Rating Agencies and the Issuer in writing promptly upon becoming aware of any event that constitutes cause under this Section 12(b).           (c) The Collateral Manager may resign, upon ninety (90) days’ prior written notice to the Issuer, the Trustee, each Rating Agency, the Certificateholder and each Hedge Counterparty. Notwithstanding the notice required above, the Collateral Manager shall have the right to resign without prior notice if, due to a change in any applicable law or regulation or interpretation thereof, the performance by the Collateral Manager of its duties under this Agreement would adversely affect (A) CapitalSource Inc.’s (or any of its Affiliates, as the case may be) status as a REIT or (B) subject the Issuer or any of its Affiliates (other than a taxable REIT Subsidiary) to any U.S. federal, state or local income, profit or similar tax on a net income basis or (ii) constitute a violation of any applicable law or regulation.           (d) No removal, termination or resignation (other than a resignation predicated on a violation of law as noted above) of the Collateral Manager, except upon a change in law as noted above, or termination of this Agreement shall be effective unless (x) a successor Collateral Manager (a “Replacement Manager”) has been appointed by the Issuer and has agreed in writing to assume all of the Collateral Manager’s duties and obligations pursuant to this Agreement and (y) written notification shall have been provided in accordance with Sections 12(a), (b) or (c), as applicable. The appointment of any Replacement Manager shall be subject to satisfaction of the Rating Agency Condition and each such Replacement Manager (i) shall have demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Collateral Manager, (ii) is legally qualified and has the capacity to act as collateral manager, (iii) by its appointment will not cause the Issuer or the pool of Assets to, or result in the Issuer or the pool of Assets becoming, an “investment company” under the Investment Company Act, (iv) has accepted its appointment in writing and (v) by its appointment will not cause the Issuer or the pool of Assets to become subject to income or withholding tax that would not have been imposed but for such appointment.      (e) Upon any resignation or removal of the Collateral Manager while any of the Notes are Outstanding, the Certificateholder shall have the right to instruct the Issuer to appoint an institution identified by such Certificateholder as Replacement Manager; provided that in the event that 100% of aggregate outstanding notional amount of the Certificate is held by any one or more of Collateral Manager, its Affiliates and funds managed or controlled by the Collateral Manager or any Affiliate thereof and the proposed Replacement Manager is an Affiliate of the Collateral Manager, the holders of at least a majority of the Aggregate Outstanding Amount of the most junior Class of Notes not 100% owned by the Collateral Manager or an Affiliate of the Collateral Manager (excluding any Notes held by the Collateral Manager or an Affiliate of the Collateral Manager to the extent the Replacement Manager is an - 17 - --------------------------------------------------------------------------------   Affiliate of the Collateral Manager or the Collateral Manager has been removed for Cause) may appoint an institution as Replacement Manager; provided, further, that (i) the Issuer provides to the Noteholders and the Certificateholder notice of such appointment and a majority by Aggregate Outstanding Amount of the Controlling Class (excluding any Notes owned by the Collateral Manager or any of its Affiliates or any fund managed or controlled by the Collateral Manager or any Affiliate thereof, each voting as a separate Class) does not object to such appointment within fifteen (15) days, (ii) the Rating Agency Condition has been satisfied with respect to such appointment and (iii) the requirements set forth in Section 12(d)(i) through (v) above have been satisfied.           (f) In the event that the Collateral Manager resigns pursuant to Section 12(c) or is terminated pursuant to Sections 12(a) or (b) hereof and the Issuer has not appointed a successor prior to the day following the termination (or resignation) date specified in such notice, the Collateral Manager will be entitled to propose a successor and will so appoint such proposed entity as successor sixty (60) days thereafter, unless a majority of any Class of Notes objects to such appointment within fifteen (15) days of notice of such appointment period in which case the Controlling Class of Notes (excluding any Notes owned by the Collateral Manager or any of its Affiliates or any fund managed or controlled by the Collateral Manager or any Affiliate thereof, each voting as a separate Class) will be entitled to propose a successor and will appoint such proposed entity as successor thirty (30) days thereafter unless a majority by Aggregate Outstanding Amount of any other Class of Notes (excluding any Notes owned by the Collateral Manager or any of its Affiliates or any fund managed or controlled by the Collateral Manager or any Affiliate thereof, each voting as a separate Class) objects to such appointment within such thirty (30) day period, in each case subject to the requirements set forth in Section 12(d) above. In the event a proposed successor Collateral Manager is not appointed pursuant to the foregoing procedures, the resigning or removed Collateral Manager may petition any court of competent jurisdiction for the appointment of a successor Collateral Manager, which appointment will not require the consent of, or be subject to the disapproval of, the Issuer, any Noteholder or the Certificateholder.           Notwithstanding any provision contained in this Agreement, the Indenture or otherwise, so long as the Collateral Manager continues to perform its obligations hereunder, the Collateral Management Fee shall continue to accrue for the benefit of the Collateral Manager until termination of this Agreement under this Section 12 shall become effective as set forth herein. In addition, the Collateral Manager shall, subject to Section 6, be entitled to reimbursement of out-of-pocket expenses incurred in cooperating with the Replacement Manager, including in connection with the delivery of any documents or property. In the event that the Collateral Manager is removed or resigns and a Replacement Manager is appointed, such former Collateral Manager nonetheless shall be entitled to receive payment of all unpaid Collateral Management Fees, including the Senior Collateral Management Fee and the Subordinated Collateral Management Fee, accrued through the effective date of the removal or resignation, to the extent that funds are available for that purpose in accordance with the Priority of Payments, and such payments shall rank in the Priority of Payments pari passu with the Collateral Management Fees due to the Replacement Manager. In addition, following the removal or resignation of the Collateral Manager hereunder, the removed or resigning Collateral Manager shall be granted access to the books of account and records of the Issuer and the Trustee to the extent such removed or resigning Collateral Manager deems necessary to confirm - 18 - --------------------------------------------------------------------------------   the proper payment of any amounts owing to such removed or resigning Collateral Manager hereunder.           (g) Upon the effective date of termination of this Agreement, the Collateral Manager shall as soon as practicable:      (i) deliver to the Issuer all property and documents of the Trustee or the Issuer or otherwise relating to the Assets then in the custody of the Collateral Manager (although the Collateral Manager may keep copies of such documents for its records); and      (ii) deliver to the Trustee an accounting with respect to the books and records delivered to the Issuer or the Replacement Manager appointed pursuant to this Section 12 hereof.           The Collateral Manager shall reasonably assist and cooperate with the Trustee and the Issuer (as reasonably requested by the Trustee or the Issuer) in the assumption of the Collateral Manager’s duties by any Replacement Manager as provided for in this Agreement, as applicable. Notwithstanding such termination, the Collateral Manager shall remain liable to the extent set forth herein (but subject to Section 13 hereof) for the Collateral Manager’s acts or omissions hereunder arising prior to its termination as Collateral Manager hereunder and for any expenses, losses, damages, liabilities, demands, charges and claims (including reasonable attorneys’ fees) in respect of or arising out of a breach of the representations and warranties made by it in Section 5 hereof or from any failure of the Collateral Manager to comply with the provisions of this Section 12(g).           (h) The Collateral Manager agrees that, notwithstanding any termination, the Collateral Manager shall reasonably cooperate in any Proceeding arising in connection with this Agreement, the Indenture or any of the Assets (excluding any such Proceeding in which claims are asserted against the Collateral Manager or any Affiliate of the Collateral Manager) so long as the Collateral Manager shall have been offered (in its good faith judgment) reasonable security, indemnity or other provision against the cost, expenses and liabilities that might be incurred in connection therewith, but, in any event, shall not be required to make any admission or to take any action against the Collateral Manager’s own interests or the interests of other funds and accounts advised by the Collateral Manager.           (i) If this Agreement is terminated pursuant to Sections 12(a), (b) or (c) hereof, such termination shall be without any further liability or obligation of the Issuer or the Collateral Manager to the other, except as provided in Sections 6, 7, 12 and 13 and the last sentence of Section 10 hereof.           (j) Upon expiration of the applicable notice period with respect to termination specified in Section 12(d) hereof, all authority and power of the Collateral Manager under this Agreement and the Indenture, whether with respect to the Assets or otherwise, shall automatically and without further action by any person or entity pass to and be vested in the Replacement Manager. - 19 - --------------------------------------------------------------------------------             13. Liability of Collateral Manager. (a) The Collateral Manager assumes no responsibility under this Agreement other than to render the services called for from the Collateral Manager hereunder and under the Indenture in the manner prescribed herein and therein. The Collateral Manager, its members, managers, directors, officers, stockholders, partners, agents and employees and any Affiliate of the Collateral Manager and its directors, officers, stockholders, partners, members, managers, agents and employees (collectively, the “Collateral Manager Indemnified Parties”) shall have no liability to the Noteholders, the Trustee, the Issuer, any Hedge Counterparty, the Initial Purchaser, or any of their respective Affiliates, partners, shareholders, officers, directors, employees, agents, accountants and attorneys, or any other Person, for any error of judgment, mistake of law, or for any claim, loss, liability, damage, settlement, costs, or other expenses (including reasonable attorneys’ fees and court costs and reasonable accountant’s fees and expenses) of any nature whatsoever (collectively “Liabilities”) that arise out of or in connection with any representation, warranty, covenant, or act or omissions of the Collateral Manager or such other person in the performance of its duties under this Agreement or the Indenture or for any decrease in the value of the Collateral Obligations or Eligible Investments, except by reason of acts or omissions constituting bad faith, willful misconduct or gross negligence in the performance of, or reckless disregard of, the duties of the Collateral Manager hereunder and under the terms of the Indenture. The Issuer agrees that the Collateral Manager Indemnified Parties shall not be liable for any consequential, special, exemplary or punitive damages hereunder and that, as set forth more specifically in Section 18, any liability of the Collateral Manager hereunder is solely a limited liability company obligation of the Collateral Manager and not an obligation of any other Collateral Manager Indemnified Party. The acts, failure to act or breaches described in this clause (a) for which the Collateral Manager would have liability are collectively referred to for purposes of this Section 13 as “Collateral Manager Breaches.”           (b) The Collateral Manager shall indemnify, defend and hold harmless the Issuer and each of its partners, shareholders, members, managers, officers, directors, employees, agents, accountants and attorneys (each, an “Issuer Indemnified Party”) from and against any claims that may be made against an Issuer Indemnified Party by third parties and any damages, losses, claims, liabilities, costs or expenses (including all reasonable legal and other expenses) which are incurred as a direct consequence of the Collateral Manager Breaches, except for liability to which such Issuer Indemnified Party would be subject by reason of willful misconduct, bad faith, gross negligence in the performance of, or reckless disregard of the obligations of the Issuer hereunder and under the terms of the Indenture.           (c) The Issuer shall reimburse, indemnify and hold harmless the Collateral Manager Indemnified Parties from any and all Liabilities, as are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation (whether or not such Collateral Manager Indemnified Party is a party) caused by, or arising out of or in connection with this Agreement, the Indenture and the transactions contemplated hereby and thereby, including the issuance of the Notes, or any acts or omissions of any Collateral Manager Indemnified Parties except those that are the direct result of Collateral Manager Breaches. Any amounts payable by the Issuer under this Section 13(c) shall be payable only subject to the Priority of Payments set forth in the Indenture and to the extent Assets are available therefor. - 20 - --------------------------------------------------------------------------------             (d) With respect to any claim made or threatened against an Issuer Indemnified Party or a Collateral Manager Indemnified Party (each an “Indemnified Party”), or compulsory process or request or other notice of any loss, claim, damage or liability served upon an Indemnified Party, for which such Indemnified Party is or may be entitled to indemnification under this Section 13, such Indemnified Party shall (or, with respect to Indemnified Parties that are directors, managers, officers, stockholders, members, managers, agents or employees of the Issuer or the Collateral Manager, the Issuer or the Collateral Manager, as the case may be, shall cause such Indemnified Party to):      (i) give written notice to the indemnifying party of such claim within ten (10) Business Days after such Indemnified Party’s receipt of actual notice that such claim is made or threatened, which notice to the indemnifying party shall specify in reasonable detail the nature of the claim and the amount (or an estimate of the amount) of the claim; provided, however, that the failure of any Indemnified Party to provide such notice to the indemnifying party shall not relieve the indemnifying party of its obligations under this Section 13 unless the rights or defenses available to the Indemnified Party are materially prejudiced or otherwise forfeited by reason of such failure;      (ii) at the indemnifying party’s expense, provide the indemnifying party such information and cooperation with respect to such claim as the indemnifying party may reasonably require, including making appropriate personnel available to the indemnifying party at such reasonable times as the indemnifying party may request;      (iii) at the indemnifying party’s expense, cooperate and take all such steps as the indemnifying party may reasonably request to preserve and protect any defense to such claim;      (iv) in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the indemnifying party the right, which the indemnifying party may exercise in its sole discretion and at its expense, to participate in the investigation, defense and settlement of such claim;      (v) neither incur any material expense to defend against nor release or settle any such claim or make any admission with respect thereto (other than routine or incontestable admissions or factual admissions the failure to make of which would expose such Indemnified Party to unindemnified liability) nor permit a default or consent to the entry of any judgment in respect thereof, in each case without the prior written consent of the indemnifying party; and      (vi) upon reasonable prior notice, afford to the indemnifying party the right, in such party’s sole discretion and at such party’s sole expense, to assume the defense of such claim, including the right to designate counsel reasonably acceptable to the Indemnified Party and to control all negotiations, litigation, arbitration, settlements, compromises and appeals of such claim; provided that, if the indemnifying party assumes the defense of such claim, it shall not be liable for any fees and expenses of counsel for any Indemnified Party incurred thereafter in connection with such claim except that, if such Indemnified Party reasonably determines that counsel designated by the - 21 - --------------------------------------------------------------------------------   indemnifying party has a conflict of interest, such indemnifying party shall pay the reasonable fees and disbursements of one counsel (in addition to any local counsel) separate from such indemnifying party’s own counsel for all Indemnified Parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances; and provided, further, that the indemnifying party shall not have the right, without the Indemnified Party’s written consent, to settle any such claim if, in a case where the Issuer is the indemnifying party, the Issuer does not make available (in accordance with the Priority of Payments), in a segregated account available only for this purpose, the full amount required to pay any amounts due from the Indemnified Party under such settlement or, in any case, such settlement (A) arises from or is part of any criminal action, suit or proceeding, (B) contains a stipulation to, confession of judgment with respect to, or admission or acknowledgement of, any liability or wrongdoing on the part of the Indemnified Party, (C) relates to any Federal, state or local tax matters or (D) provides for injunctive relief, or other relief other than damages, which is binding on the Indemnified Party.           (e) In the event that any Indemnified Party waives its right to indemnification hereunder, the indemnifying party shall not be entitled to appoint counsel to represent such Indemnified Party nor shall the indemnifying party reimburse such Indemnified Party for any costs of counsel to such Indemnified Party.           (f) Nothing herein shall in any way constitute a waiver or limitation of any rights that the Issuer or the Collateral Manager may have under any United States Federal or state securities laws.           14. Obligations of Collateral Manager. (a) The Collateral Manager to the extent required under the Indenture, and on behalf of the Issuer, shall: (i) engage the services of an Independent certified accountant to prepare any United States Federal, state or local income tax or information returns and any non United States income tax or information returns that the Issuer may from time to time be required to file under applicable law (each a “Tax Return”), (ii) deliver, at least 30 days before any applicable due date upon which penalties and interest would accrue, each Tax Return, properly completed, to the Company Administrator for signature by an Authorized Officer of the Issuer and (iii) file or deliver such Tax Return on behalf of the Issuer within any applicable time limit with any authority or Person as required under applicable law.           (b) Unless otherwise required by any provision of the Indenture or this Agreement or by applicable law, the Collateral Manager shall not take any action which it knows would , or acting without gross negligence would know, (a) materially adversely affect the Issuer for purposes of United States federal or state law or any other law known to the Collateral Manager to be applicable to the Issuer, (b) not be permitted under the Issuer’s Certificate of Trust and Trust Agreement, (c) require registration of the Issuer or the Assets as an “investment company” under the Investment Company Act or (d) cause the Issuer to violate the terms of the Indenture, it being understood that in connection with the foregoing the Collateral Manager will not be required to make any independent investigation of any facts or laws not otherwise known to it in connection with its obligations under this Agreement and the Indenture or the conduct of its business generally. The Collateral Manager will perform its duties under this Agreement and - 22 - --------------------------------------------------------------------------------   the Indenture in a manner reasonably intended not to subject the Issuer to U.S. federal or state income taxation. The Collateral Manager shall use all commercially reasonable efforts to ensure that no action is taken by it, and shall not intentionally or with reckless disregard take any action, which the Collateral Manager knows or reasonably should know would have a materially adverse United States federal or state income tax effect on the Issuer.           (c) Notwithstanding anything to the contrary herein, the Collateral Manager or any of its Affiliates may take any action that is not specifically prohibited by the Indenture, this Agreement or applicable law that the Collateral Manager or any Affiliate of the Collateral Managers deems to be in its (or in its portfolio’s) best interest regardless of its impact on the Collateral Obligations; provided that when taking such action it is not acting in any capacity for the Issuer and provided that the Collateral Manager or such Affiliate is not taking any action to prevent or impede the Collateral Manager from performing its duties hereunder or under the Indenture, including, without limitation, acting in accordance with the Collateral Manager Servicing Standard.           15. No Partnership or Joint Venture. The Issuer and the Collateral Manager are not partners or joint venturers with each other, and nothing herein shall be construed to make them such partners or joint venturers or impose any liability as such on either of them. The Collateral Manager’s relation to the Issuer shall be that of an independent contractor and not a general agent. Except as expressly provided in this Agreement, the Servicing Agreement and in the Indenture, the Collateral Manager shall not have authority to act for or represent the Issuer in any way and shall not otherwise be deemed to be the Issuer’s agent.           16. Notices. Any notice from a party under this Agreement shall be in writing and sent by answer-back facsimile or addressed and delivered or sent by certified mail, postage prepaid, return receipt requested or sent by overnight courier service guaranteeing next day delivery to the other party at such address as such other party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of the Issuer for this purpose shall be: CapitalSource Real Estate Loan Trust 2006-A c/o Wilmington Trust Company 1100 North Market Street, Wilmington, Delaware 19890 Attention: Corporate Trust Administration Fax No.: (302) 636-4140, with two copies to the Collateral Manager (as addressed below). the address of the Collateral Manager for this purpose shall be: CapitalSource Finance LLC 4445 Willard Avenue, 12th Floor Chevy Chase, Maryland 20815 Attention: Securitization Department Fax No.: (301) 841-2380 - 23 - --------------------------------------------------------------------------------             17. Succession; Assignment. This Agreement shall inure to the benefit of, and be binding upon the successors to, the parties hereto. Any assignment of this Agreement by operation of law or otherwise to any Person, in whole or in part, by the Collateral Manager shall be deemed null and void unless: (i) such assignment is consented to in writing by the Issuer and by the holders of more than 66-2/3% of the outstanding principal amount of the Controlling Class (or, in the case of the Certificate, outstanding notional amount) (excluding in any such calculation any Securities held by the Collateral Manager, any of its Affiliates or any fund managed or controlled by the Collateral Manager or any Affiliate thereof) and (ii) the Rating Agency Condition is satisfied; provided, however, that the Collateral Manager may assign all of its rights and responsibilities and/or delegate its obligations under this Agreement to an Affiliate without the consent of the Issuer, the Trustee or any Noteholder and without satisfaction of the Rating Agency Condition so long as (a) the Collateral Manager gives notice to each Rating Agency that such assignment and/or delegation has been made, (b) such Affiliate satisfies the conditions required for a Replacement Manager hereunder and (c) such assignment is not effected by the transfer of control of a majority of voting interests in the Collateral Manager to a person that is not an Affiliate of CapitalSource Inc.; and (iii) the assignee has agreed in writing to assume all of the Collateral Manager’s duties and obligations pursuant to this Agreement. Notwithstanding any such assignment, the Collateral Manager’s obligations arising under Section 13 of this Agreement prior to such assignment and the Collateral Manager’s obligations under the last sentence of Section 10 and Sections 7 and 12 hereof shall survive any such assignment.           18. No Bankruptcy Petition/Limited Recourse. The Collateral Manager covenants and agrees that, prior to the date that is one year and one day (or, if longer, the applicable preference period then in effect) after the payment in full of all Notes issued by the Issuer under the Indenture, the Collateral Manager will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any bankruptcy, insolvency, reorganization or similar law; provided, however, that nothing in this Section 18 shall preclude, or be deemed to stop, the Collateral Manager from taking any action prior to the expiration of the aforementioned one year and one day period (or, if longer, the applicable preference period then in effect) in (x) any case or proceeding voluntarily filed or commenced by the Issuer, as the case may be, or (y) any involuntary insolvency proceeding filed or commenced against the Issuer, as the case may be, by a Person other than the Collateral Manager. The Collateral Manager hereby acknowledges and agrees that the Issuer’s obligations hereunder will be solely the corporate obligations of the Issuer, and the Collateral Manager will not have recourse to any of the directors, officers, employees, shareholders or affiliates of the Issuer or the Owner Trustee on behalf of the Issuer with respect to any claims, losses, damages, liabilities, indemnities or other obligations in connection with any transaction contemplated hereby. Notwithstanding any provision hereof, all obligations of the Issuer and any claims arising from this Agreement or any transactions contemplated by this Agreement shall be limited solely to the Collateral Obligations and the other Assets and payable in accordance with the Priority of Payments. If payments on any such claims from the Assets are insufficient, no other assets shall be available for payment of the deficiency and, following liquidation of all the Assets, any claims of the Collateral Manager arising from this Agreement and the obligations of the Issuer to pay such deficiencies shall be extinguished. The Issuer hereby acknowledges and agrees that the Collateral Manager’s obligations hereunder shall be solely the limited liability company obligations of the Collateral - 24 - --------------------------------------------------------------------------------   Manager, and the Issuer shall not have any recourse to any of the members, managers, directors, officers, employees, shareholders or Affiliates of the Collateral Manager with respect to any claims, losses, damages, liabilities, indemnities or other obligations in connection with any transactions contemplated hereby. The provisions of this Section 18 shall survive the termination of this Agreement for any reason.           19. Miscellaneous. (a) this Agreement shall be construed in accordance with and governed by the laws of state of New York applicable to agreements made and to be performed therein without regard to conflict of laws principles. With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably (i) submits to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and (ii) waives any objection that such party may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction, nor shall the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. The Collateral Manager hereby irrevocably consents to service of any and all process which may be served in any Proceeding to its address as set forth in Section 16 and agrees that service of process upon it in accordance herewith shall be deemed in every respect effective service of process upon it in any such suit, action or Proceeding and shall be taken and held to be valid personal service upon it. The Issuer hereby irrevocably consents to the service of any and all process which may be served in any Proceeding to its as address set forth in Section 16 and agrees that service of process upon it in accordance herewith shall be deemed in every respect effective service of process upon it in any such suit, action or Proceeding and shall be taken and held to be valid personal service upon it. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.           EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.           (b) The captions in this Agreement are included for convenience only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.           (c) In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.           (d) This Agreement may not be amended or modified or any provision thereof waived (i) except by an instrument in writing signed by both of the parties hereto or, in the case of a waiver, by the party waiving compliance and (ii) in each case, in compliance with the Indenture, including with respect to satisfaction of the Rating Agency Condition. This - 25 - --------------------------------------------------------------------------------   Agreement may be modified without the prior written consent of the Trustee, any Hedge Counterparty or the holders of Notes to correct any inconsistency or cure any ambiguity or mistake. Any other amendment of this Agreement shall require the prior written consent of the Trustee, each Hedge Counterparty and the holders of 66-2/3% of the outstanding principal amount of the Controlling Class, which consent shall not be unreasonably withheld and is subject to the satisfaction of the Rating Agency Condition.           (e) This Agreement constitutes the entire understanding and agreement between the parties hereto and supersedes all other prior and contemporaneous understandings and agreements, whether written or oral, between the parties hereto concerning this subject matter (other than the Indenture).           (f) The Collateral Manager hereby agrees and consents to the terms of Section 15.1(f) of the Indenture applicable to the Collateral Manager and shall perform any provisions of the Indenture made applicable to the Collateral Manager by the Indenture as required by Section 15.1(f) of the Indenture.           (g) This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.           (h) The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “but not limited to.”           (i) Subject to the last sentence of the penultimate paragraph of Section 1 hereof, in the event of a conflict between the terms of this Agreement and the Indenture, including with respect to the obligations of the Collateral Manager hereunder and thereunder, the terms of this Agreement shall be controlling.           (j) No failure or delay on the part of any party hereto to exercise any right or remedy under this Agreement shall operate as a waiver thereof, and no waiver shall be effective unless it is in writing and signed by the party granting such waiver.           (k) This Agreement is made solely for the benefit of the Issuer, the Collateral Manager and the Trustee, on behalf of the Noteholders, the Certificateholder and each Hedge Counterparty, their successors and assigns, and no other person shall have any right, benefit or interest under or because of this Agreement.           (l) The Collateral Manager hereby irrevocably waives any rights it may have to set off against the Assets with respect to any obligations that are or may be due and owing to the Collateral Manager by the Issuer.           20. Regarding Notices Between Collateral Manager and CLO Servicer. Notwithstanding anything to the contrary contained herein, to the extent the Collateral Manager and the CLO Servicer utilize common information, information systems and/or personnel in connection with their respective obligations hereunder then either such party’s obligation to provide any notice, deliverable or communication to such other party hereunder shall be deemed to be satisfied as long as (i) the party obligated to provide such notice, deliverable or - 26 - --------------------------------------------------------------------------------   communication shall have notified the party entitled to receive it of the availability of the information or materials which are the subject matter thereof and (ii) the other such party has access to the information or materials that would be the subject of such notice, delivery or communication, and if the notice described in clause (i) has been delivered, to the extent otherwise required to be done as among such parties, either such party’s failure to provide separate copies, make physical or electronic delivery or give specific notice in respect of any such materials shall not be a default hereunder. Nothing contained in the foregoing shall alter or diminish the Collateral Manager’s and the CLO Servicer’s obligations to provide delivery of materials, notice or other information to any of the other parties to this Agreement. - 27 - --------------------------------------------------------------------------------   EXECUTION COPY           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed (as a deed in the case of the Issuer) by their respective authorized representatives as of the day and year first above written.                                         CAPITALSOURCE REAL ESTATE LOAN             TRUST 2006-A                           By:   Wilmington Trust Company, not in its             individual capacity, but solely as Owner             Trustee                               By:   /s/ J. CHRISTOPHER MURPHY                                   Name: J. Christopher Murphy                 Title: Financial Services Officer       --------------------------------------------------------------------------------   EXECUTION COPY           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed (as a deed in the case of the Issuer) by their respective authorized representatives as of the day and year first above written.                                 CAPITALSOURCE FINANCE LLC, as             Collateral Manager                       By:   /s/ NAV SWAMY                           Name: Nav Swamy             Title: Director of Securitizations      

Exhibit 10.3   2006 INCENTIVE COMPENSATION PLAN PERFORMANCE TARGETS   Officers and Executives:   Intent:  To align compensation with business objectives and performance and enable the company to attract, retain and reward executive officers whose contributions are critical to long-term success.   Short-term Incentive Component   Measurement Criteria:  Award based on achieving operating income budgeted plans of MarkWest Hydrocarbon Inc. (“MarkWest Hydrocarbon”) and MarkWest Energy Partners, L.P. (“MarkWest Energy”), and on department/individual goals and performance, with each criterion weighted based on individual and department responsibilities to align performance and goals.   Threshold:  The payout of incentive awards is contingent upon EBITDA (earnings before interest, taxes, depreciation, depletion and amortization) being a minimum of 85% of target for both MarkWest Energy and MarkWest Hydrocarbon.   Incentive Award Range:  The incentive award range is set from 30% to 50% of base salary depending on level and performance achievement, with opportunity for stretch incentive awards in the range of 30% to 50% if stretch performance is achieved.   Payout:  Cash.   --------------------------------------------------------------------------------

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. OPTION TO PURCHASE COMMON STOCK OF GEM SOLUTIONS, INC. Void after December 7, 2016 This certifies that, for value received, Mark G. Sampson (“Holder”) is entitled, subject to the terms set forth below, to purchase from GeM Solutions, Inc., a Delaware corporation (the “Company”), shares of the common stock, $.001 par value per share, of the Company (“Common Stock”), as constituted on the date hereof, with the Notice of Exercise attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States or as otherwise provided in Section 3 hereof, at the Exercise Price then in effect. The number, character and Exercise Price of the shares of Common Stock issuable upon exercise hereof are subject to adjustment as provided herein. 1. Term of Option. Subject to compliance with the vesting provisions identified at Section 2.3 hereof, this Option shall be exercisable, in whole or in part, during the term commencing on the date hereof and ending at 5:00 p.m. EST on December , 2016 (the “Option Expiration Date”) and shall be void thereafter. 2. Number of Shares, Exercise Price and Vesting Provisions. 2.1 Number of Shares. The number of shares of Common Stock which may be purchased pursuant to this Option shall be 4,000,000 shares (the “Shares”), subject, however, to adjustment pursuant to Section 11 hereof. 2.2 Exercise Price. The Exercise Price at which this Option, or portion thereof, may be exercised shall be $0.25 per Share, subject, however, to adjustment pursuant to Section 11 hereof. 2.3 Vesting. Subject to Sections 11 and 3.3(a) hereof, this Option shall vest in accordance with the following schedule: (i) Options to purchase 1,333,333 shares shall vest and become exercisable on June 8, 2007; --------------------------------------------------------------------------------   (ii) Options to purchase 1,333,333 shares shall vest and become exercisable on December 8, 2007; and (iii) Options to purchase 1,333,334 shares shall vest and become exercisable on June 8, 2008. 3. Exercise of Option. 3.1 Payment of Exercise Price. Subject to the terms hereof, the purchase rights represented by this Option are exercisable by the Holder in whole or in part, at any time, or from time to time, by the surrender of this Option and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) accompanied by payment of the Exercise Price in full (i) in cash or by bank or certified check for the Shares with respect to which this Option is exercised; (ii) by delivery to the Company of shares of the Company’s Common Stock having a Fair Market Value (as defined below) equal to the aggregate Exercise Price of the Shares being purchased which Holder is the record and beneficial owner of and which have been held by the Holder for at least six (6) months; provided, however, that such method of payment is then permitted under applicable law; (iii) if the sale of the Shares is covered by an effective registration statement, by delivering to the Company a Notice of Exercise together with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to sell a sufficient portion of the Shares and deliver the sales proceeds directly to the Company to pay the Exercise Price; (iv) by set off against any amounts owed to the Holder by the Company; (v) by reducing the number of shares of Common Stock otherwise issuable under the Option to the Holder upon the exercise of the Option by a number of shares of Common Stock having a Fair Market Value (as defined below) equal to the aggregated exercise price; provided, however, that such method of payment is then permitted under applicable law; (vi) to the extent permitted by applicable law, by: (A) delivery of a promissory note of the Holder to the Company on terms determined by the Board of Directors (the “Board”), or (B) payment of such other lawful consideration as the Board may determine; or (vii) by any combination of the procedures set forth in subsections (i), (ii), (iii), (iv), (v), and (vi) of this Section 3.1. 3.2 Fair Market Value. If previously owned shares of Common Stock are tendered as payment of the Exercise Price, the value of such shares shall be the “Fair Market Value” of such shares on the trading date immediately preceding the date of exercise. For the purpose of this Agreement, the “Fair Market Value” shall be: (a) If the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), the Fair Market Value on any given date shall be the average of the highest bid and lowest asked prices of the Common Stock as reported for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported; 2 --------------------------------------------------------------------------------   (b) If the Common Stock is admitted to trading on a United States securities exchange or the NASDAQ National Market System, the Fair Market Value on any date shall be the closing price reported for the Common Stock on such exchange or system for such date or, if no sales were reported for such date, for the last day preceding such date for which a sale was reported; (c) If the Common Stock is traded in the over-the-counter market and not on any national securities exchange nor in the NASDAQ Reporting System, the Fair Market Value shall be the average of the mean between the last bid and ask prices per share, as reported by the National Quotation Bureau, Inc., or an equivalent generally accepted reporting service, or if not so reported, the average of the closing bid and asked prices for a share as furnished to the Company by any member of the National Association of Securities Dealers, Inc., selected by the Company for that purpose; or (d) If the Fair Market Value of the Common Stock cannot be determined on the basis previously set forth in this definition on the date that the Fair Market Value is to be determined, the Board of Directors of the Company shall in good faith determine the Fair Market Value of the Common Stock on such date. If the tender of previously owned shares would result in an issuance of a whole number of Shares and a fractional Share of Common Stock, the value of such fractional share shall be paid to the Company in cash or by check by the Holder. 3.3 Termination of Employment or Service; Death. (a) If Holder shall cease to be employed by or provide management services to the Company as a result of Holder resigning or otherwise voluntarily leaving the employ of the Company or ceasing to provide services to the Company, all Options to which Holder is then entitled to exercise may be exercised only within ninety (90) days after the termination of employment or cessation of service and prior to the Option Termination Date. In the event that any termination of employment or cessation of service shall be for Cause (as defined below), then this Option shall forthwith terminate. In the event that the Company shall terminate Holder’s employment with Company or service relationship with the Company for any reason other than for Cause (as defined below), all Options shall become immediately vested and exercisable in full and may be exercised at any time within two (2) years after such termination of employment or service relationship and prior to the Option Termination Date. For purposes of this Option, the term “Cause” shall mean (a) if Holder is a party to a written agreement with the Company, or provides services to the Company pursuant to a services agreement between the Company and a third party, which contains a definition of “cause” or “for cause” or words of similar import for purposes of termination of employment or service thereunder by the Company, “cause” or “for cause” as defined in such agreement; (b) in all other cases (i) the Holder’s intentional, persistent failure, dereliction, or refusal to perform such duties as are reasonably assigned to him or her by the officers or directors of the Company; (ii) the Holder’s fraud, dishonesty or other deliberate injury to the Company in the performance of his or her duties on behalf of, or for, the Company; (iii) the Holder’s conviction of a crime which constitutes a felony involving moral turpitude, fraud or deceit in the jurisdiction in which the Holder is employed, regardless of whether such crime involves the Company; (iv) the willful commission by the Holder of a criminal or other act that causes substantial economic damage to the Company or substantial injury to the business reputation of the Company; or (v) the Holder’s material breach of his or her employment agreement, or the material breach of a services agreement by and between the Company and a third party pursuant to which the Holder provides services to the Company, if any. For purposes of this Option, no act, or failure to act, on the part of any person shall be considered “willful” unless done or omitted to be done by the person other than in good faith and without reasonable belief that the person’s action or omission was in the best interest of the Company. 3 --------------------------------------------------------------------------------   (b) If Holder shall die while employed by or providing services to the Company and prior to the Option Termination Date, any Options then exercisable may be exercised only within one (1) year after Holder’s death, prior to the Option Termination Date, and only by the Holder’s personal representative or persons entitled thereto under the Holder’s will or the laws of descent and distribution. (c) This Option may not be exercised for more Shares (subject to adjustment as provided in Section 11 hereof) after the termination of the Holder’s employment, cessation of services to the Company, or death, as the case may be, than the Holder was entitled to purchase thereunder at the time of the termination of the Holder’s employment, the cessation of services to the Company, or death. 3.4 Exercise Date; Delivery of Certificates. This Option shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and Holder shall be treated for all purposes as the holder of record of such Shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the Holder a certificate or certificates for the number of Shares issuable upon such exercise. In the event that this Option is exercised in part, the Company at its expense will execute and deliver a new Option of like tenor exercisable for the number of shares for which this Option may then be exercised. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Option. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 5. Replacement of Option. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Option and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense shall execute and deliver, in lieu of this Option, a new Option of like tenor and amount. 4 --------------------------------------------------------------------------------   6. Rights of Stockholder. Except as otherwise contemplated herein, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Option shall have been exercised as provided herein. 7. Transfer of Option. 7.1. Non-Transferability. This Option shall not be assigned, transferred, pledged or hypothecated in any way, nor subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. Any attempted assignment, transfer, pledge, hypothecation or other disposition of this Option contrary to the provisions hereof, and the levy of an execution, attachment, or similar process upon the Option, shall be null and void and without effect. 7.2. Compliance with Securities Laws; Restrictions on Transfers. In addition to restrictions on transfer of this Option and Shares set forth in Section 7.1 above. (a) The Holder of this Option, by acceptance hereof, acknowledges that this Option and the Shares to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment (unless such shares are subject to resale pursuant to an effective prospectus), and that the Holder will not offer, sell or otherwise dispose of any Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of this Option, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Shares of Common Stock so purchased are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment (unless such shares are subject to resale pursuant to an effective prospectus), and not with a view toward distribution or resale. (b) Neither this Option nor any share of Common Stock issued upon exercise of this Option may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the 1933 Act, unless (i) such security has been registered for sale under the 1933 Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities; or (ii) exemptions from the registration requirements of the 1933 Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the 1933 Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company. The Holder of this Option, by acceptance hereof, acknowledges that the Company has no obligation to file a registration statement with the Securities and Exchange Commission or any state securities commission to register the issuance of the Shares upon exercise hereof or the sale or transfer of the Shares after issuance. 5 --------------------------------------------------------------------------------   (c) All Shares issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws). THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION THEREFROM. (d) Holder recognizes that investing in the Option and the Shares involves a high degree of risk, and Holder is in a financial position to hold the Option and the Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Option and the Shares. The Holder is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and has had the opportunity to inspect the Company’s operation. Holder has had the opportunity to ask questions of, and receive answers from the management of the Company (and any person acting on its behalf) concerning the Option and the Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Holder may have requested in making its investment decision. (e) Holder acknowledges and represents: (i) that he has been afforded the opportunity to review and is familiar with the business prospects and finances of the Company and has based his decision to invest solely on the information contained therein and has not been furnished with any other literature, prospectus or other information except as included in such reports; (ii) Holder is acquiring the Options and Shares for investment purposes only and not with a view toward distribution; (iii) he understands that no federal or state agency has approved or disapproved the Option or Shares or made any finding or determination as to the fairness of the Option and Common Stock for investment; and (iv) that the Company has made no representations, warranties, or assurances as to (A) the future trading value of the Common Stock, (B) whether there will be a public market for the resale of the Common Stock or (C) the filing of a registration statement with the Securities and Exchange Commission or any state securities commission to register the issuance of the Shares upon exercise hereof or the sale or transfer of the Shares after issuance. 6 --------------------------------------------------------------------------------   8. Reservation and Issuance of Stock; Payment of Taxes. (a) The Company covenants that during the term that this Option is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Shares upon the exercise of this Option, and from time to time will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon the exercise of the Option. (b) The Company further covenants that all shares of Common Stock issuable upon the due exercise of this Option will be free and clear from all taxes or liens, charges and security interests created by the Company with respect to the issuance thereof, however, the Company shall not be obligated or liable for the payment of any taxes, liens or charges of Holder, or any other party contemplated by Section 7, incurred in connection with the issuance of this Option or the Common Stock upon the due exercise of this Option. The Company agrees that its issuance of this Option shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Common Stock upon the exercise of this Option. The Common Stock issuable upon the due exercise of this Option, will, upon issuance in accordance with the terms hereof, be duly authorized, validly issued, fully paid and non-assessable. (c) Upon exercise of the Option, the Company shall have the right to require the Holder to remit to the Company an amount sufficient to satisfy federal, state and local tax withholding requirements prior to the delivery of any certificate for Shares of Common Stock purchased pursuant to the Option, if in the opinion of counsel to the Company such withholding is required under applicable tax laws. (d) If Holder is obligated to pay the Company an amount required to be withheld under applicable tax withholding requirements, Holder may pay such amount (i) in cash; (ii) in the discretion of the Board of Directors of the Company, through the delivery to the Company of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the tax obligation provided that the previously owned shares delivered in satisfaction of the withholding obligations must have been held by the Holder for at least six (6) months; (iii) in the discretion of the Board of Directors of the Company, through the withholding of Shares of Common Stock otherwise issuable to the Holder in connection with the Option exercise; or (iv) in the discretion of the Board of Directors of the Company, through a combination of the procedures set forth in subsections (i), (ii) and (iii) of this Section 8(d). 9. Notices. (a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Option. 7 --------------------------------------------------------------------------------   (b) All notices, advices and communications under this Option shall be deemed to have been given, (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing, addressed as follows: If to the Company: GeM Solutions, Inc. 7935 Airport Pulling Road Suite 201 Naples, FL 34109 With a copy to: Fox Rothschild LLP P.O. Box 5231 Princeton, NJ 08543-5231 Attn.: Vincent A. Vietti, Esquire and to the Holder: at the address set forth in the records of the Company. Either of the Company or the Holder may from time to time change the address to which notices to it are to be mailed hereunder by notice in accordance with the provisions of this Paragraph 9. 10. Amendments. (a) The Company may amend, modify or terminate this Option, including but not limited to, substituting therefor another Option of the same or a different type and changing the date of exercise or realization, provided that the Holder’s consent to such action shall be required unless the Company determines that the action, taking into account any related action, would not materially and adversely affect the Holder. (b) No waivers of, or exceptions to, any term, condition or provision of this Option, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 8 --------------------------------------------------------------------------------   11. Adjustments. The number of Shares of Common Stock purchasable hereunder and the Exercise Price is subject to adjustment from time to time upon the occurrence of certain events, as follows: 11.1. Split, Subdivision, Combination of Shares, Reclassification or Recapitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, applicable to securities as to which purchase rights under this Option exist or any distribution to holders of the securities as to which purchase rights under this Option exist other than an ordinary cash dividend, the Exercise Price and the number and kind of securities issuable upon exercise of this Option shall be proportionately adjusted. Any adjustment under this Section 11.1 shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend. If this Section 11.1 applies and Section 11.3 also applies to any event, Section 11.3 shall be applicable to such event, and this Section 11.1 shall not be applicable. 11.2 Liquidation or Dissolution. In the event the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, this Option will: (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation, dissolution, sale or disposition, and (ii) terminate effective upon such liquidation, dissolution, sale or disposition, except to the extent exercised before such effective date 11.3 Reorganization and Change in Control Events. (1) Definitions. (a) A “Reorganization Event” shall mean: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the outstanding shares of Common Stock are converted into or exchanged for the right to receive cash, securities or other property; or (ii) any exchange of all of the outstanding shares of Common Stock for cash, securities or other property pursuant to a share exchange transaction. (b) A “Change in Control Event” shall mean: (i) the acquisition by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (each, a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 30% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan or related trust sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined in Section 11.3(1)(b)(iii) below) that complies with clauses (x) and (y) of subsection (iii) of this definition; 9 --------------------------------------------------------------------------------   (ii) an event that results in the Continuing Directors (as defined below) not constituting a majority of the Board (or, if applicable, the board of directors of a successor corporation to the Company). “Continuing Director” means, at any date, a member of the Board: (x) who was a member of the Board on the date of the initial issuance of this Option, or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred 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 Board; or (iii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination, which shall include, without limitation, a corporation that 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 (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Common Stock and Outstanding Voting Securities, respectively, immediately prior to such Business Combination, and (y) no Person (excluding the Acquiring Corporation or any employee benefit plan or related trust maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 30% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination). 10 --------------------------------------------------------------------------------   (2) Effect on Option. (a) Reorganization Event. Upon the occurrence of a Reorganization Event (regardless of whether such event also constitutes a Change in Control Event), or the execution by the Company of any agreement with respect to a Reorganization Event (regardless of whether such event will result in a Change in Control Event), this Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); provided, however, that if such Reorganization Event also constitutes a Change in Control Event, such assumed or substituted options shall be immediately exercisable in full upon the occurrence of such Reorganization Event. For purposes hereof, this Option shall be considered to be assumed if, following consummation of the Reorganization Event, this Option confers the right to purchase, for each share of Common Stock subject to this Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation (or an affiliate thereof), provide for the consideration to be received upon the exercise of this Option to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, this, then the this Options shall become exercisable in full as of a date at least thirty (30) days prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by Holder before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the “Acquisition Price”), then this Option shall terminate upon consummation of such Reorganization Event and Holder shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which: (A) the Acquisition Price multiplied by the number of shares of Common Stock issuable upon exercise of this Option (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. (b) Change in Control Event that is not a Reorganization Event. Upon the occurrence of a Change in Control Event that does not also constitute a Reorganization Event, this Option shall automatically become immediately exercisable in full. 12. Intentionally Omitted. 11 --------------------------------------------------------------------------------   13. Severability. Whenever possible, each provision of this Option shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Option 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 shall not affect the validity, legality or enforceability of any other provision of this Option in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Option shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 14. Governing Law. The corporate law of the State of Delaware shall govern all issues and questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, interpretation and enforceability of this Option and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Florida, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. 15. Jurisdiction. The Holder and the Company agree to submit to personal jurisdiction and to waive any objection as to venue in the federal or state courts of Florida. Service of process on the Company or the Holder in any action arising out of or relating to this Option shall be effective if mailed to such party at the address listed in Section 9 hereof. 16. Arbitration. If a dispute arises as to interpretation of this Option, it shall be decided finally by three arbitrators in an arbitration proceeding conforming to the Rules of the American Arbitration Association applicable to commercial arbitration. The arbitrators shall be appointed as follows: one by the Company, one by the Holder and the third by the said two arbitrators, or, if they cannot agree, then the third arbitrator shall be appointed by the American Arbitration Association. The third arbitrator shall be chairman of the panel and shall be impartial. The arbitration shall take place in the county in which the Company’s corporate headquarters is located. The decision of a majority of the arbitrators shall be conclusively binding upon the parties and final, and such decision shall be enforceable as a judgment in any court of competent jurisdiction. Each party shall pay the fees and expenses of the arbitrator appointed by it, its counsel and its witnesses. The parties shall share equally the fees and expenses of the impartial arbitrator. 17. Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by the Company of this Option: (i) are within the Company’s corporate power; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of the Company’s articles of incorporation or bylaws; (iv) will not violate in any material respect, any law or regulation, including any and all Federal and state securities laws, or any order or decree of any court or governmental instrumentality; and (v) will not, in any material respect, conflict with or result in the breach or termination of, or constitute a default under any agreement or other material instrument to which the Company is a party or by which the Company is bound. 12 -------------------------------------------------------------------------------- 18. Successors and Assigns. This Option shall inure to the benefit of and be binding on the respective successors, assigns and legal representatives of the Holder and the Company. IN WITNESS WHEREOF, the Company and Holder have caused this Option to be executed this 8th day of December, 2006.       GeM Solutions, Inc.   By:  /s/ John E. Baker       --------------------------------------------------------------------------------       John E. Baker, Chief Financial Officer   AGREED AND ACCEPTED:     Mark G. Sampson     /s/ Mark G. Sampson     --------------------------------------------------------------------------------     Signature         13 -------------------------------------------------------------------------------- NOTICE OF EXERCISE TO: Chief Executive Officer GeM Solutions, Inc. 7935 Airport Pulling Road Suite 201 Naples, FL 34109 (1) The undersigned hereby elects to purchase _______________ shares of Common Stock of GeM Solutions, Inc. pursuant to the terms of the attached Option, and tenders herewith payment of the purchase price for such shares in full in the following manner (please check one of the following choices):   [emptybox.gif] In Cash   [emptybox.gif] Cashless exercise through a broker;   [emptybox.gif] Delivery of previously owned shares;   [emptybox.gif] Cashless exercise by reducing the number of shares of Common Stock otherwise issuable under the Option; or   [emptybox.gif] Set off against amounts owed to the undersigned. (2) In exercising this Option, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon conversion thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment (unless such shares are subject to resale pursuant to an effective prospectus), and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned.             --------------------------------------------------------------------------------               --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Date)     (Signature)   14 --------------------------------------------------------------------------------

Exhibit 10.1 EXECUTION COPY TIME WARNER TELECOM INC. CLASS A COMMON STOCK UNDERWRITING AGREEMENT September 20, 2006 -------------------------------------------------------------------------------- September 20, 2006 Deutsche Bank Securities Inc. Lehman Brothers Inc. J.P. Morgan Securities Inc. and the several other underwriters named in Schedule II hereto c/o Deutsche Bank Securities Inc.       60 Wall Street       New York, NY 10005 c/o Lehman Brothers Inc.       745 Seventh Avenue       New York, NY 10019 Ladies and Gentlemen: Certain stockholders of Time Warner Telecom Inc., a Delaware corporation (the “Company”) named in Schedule III hereto (the “Selling Stockholders”) severally propose to sell to Deutsche Bank Securities Inc. (“Deutsche Bank”), Lehman Brothers Inc. (“Lehman Brothers”), J.P. Morgan Securities Inc. and the several other underwriters named in Schedule II hereto (the “Underwriters”) an aggregate of 39,660,598 shares (the “Firm Shares”) of the Class A Common Stock, par value $.01 per share, of the Company (the “Class A Common Stock”), each Selling Stockholder selling the amount set forth opposite such Selling Stockholder’s name in Schedule III hereto. The Selling Stockholders also propose to sell to the several Underwriters not more than an additional aggregate of 3,966,060 shares of the Class A Common Stock (the “Additional Shares”) if and to the extent that Deutsche Bank and Lehman Brothers shall have determined to exercise, on behalf of the Underwriters, the right to purchase such Additional Shares (or any portion thereof) granted in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement, including a prospectus (the file number of which is set forth in Schedule I hereto) on Form S-3, relating to securities (the “Shelf Securities”), including the Shares, for registration under the Securities Act of 1933, as amended (the “Securities Act”), of such Shelf Securities and the offering thereof from time to time in accordance with Rule 415. The registration statement as amended to the date of this Agreement, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A or Rule 430B under the Securities Act, is hereinafter referred to as the “Registration Statement,” and the related -------------------------------------------------------------------------------- prospectus covering the Shelf Securities dated March 17, 2006 in the form first used to confirm sales of the Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “Basic Prospectus.” The Basic Prospectus, as supplemented by the prospectus supplement specifically relating to the Shares in the form first used to confirm sales of the Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act), is hereinafter referred to as the “Prospectus,” and the term “preliminary prospectus” means the Basic Prospectus as supplemented by the preliminary prospectus supplement dated September 14, 2006. For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act and “Time of Sale Prospectus” means the preliminary prospectus together with the free writing prospectuses, if any, each identified in Schedule I hereto. As used herein, the terms “Registration Statement,” “Basic Prospectus,” “preliminary prospectus,” “Time of Sale Prospectus” and Prospectus shall include the documents, if any, incorporated by reference therein. The terms “supplement,” “amendment,” and “amend” as used herein with respect to the Registration Statement, the Basic Prospectus, the Time of Sale Prospectus, any preliminary prospectus or free writing prospectus shall include all documents subsequently filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are deemed to be incorporated by reference therein. 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission. If the Registration Statement is an automatic shelf registration statement as defined in Rule 405 under the Securities Act, the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) eligible to use the Registration Statement as an automatic shelf registration statement and the Company has not received notice that the Commission objects to the use of the Registration Statement as an automatic shelf registration statement. (b) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Time of Sale Prospectus or the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) each part of the Registration Statement, when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will 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 not misleading, (iii) the   2 -------------------------------------------------------------------------------- Registration Statement as of the date hereof does 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 not misleading, (iv) the Registration Statement and the Prospectus comply, and as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (v) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (vi) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein. (c) The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act in connection with the offering has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, in connection with the offering pursuant to Rule 433(d) under the Securities Act or that was prepared by or behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule I hereto, and electronic road shows, if any, each furnished to the Underwriters before first use, the Company has not prepared, used or referred to, and will not, without the prior consent of Deutsche Bank and Lehman Brothers, prepare, use or refer to, any free writing prospectus in connection with the offering. (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business   3 -------------------------------------------------------------------------------- or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. For the purposes of this Agreement, the term “subsidiary” refers to all direct and indirect subsidiaries of the Company. (e) Each subsidiary of the Company has been duly incorporated or, in the case of partnerships or limited liability companies, duly organized, is validly existing as a corporation, a partnership or a limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or organization, has the corporate power or power as a partnership or limited liability company, as applicable, and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company that is a corporation have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim (collectively, “Liens”) except for any Liens securing indebtedness of the Company or its subsidiaries for borrowed money (including pursuant to its credit agreement or indentures) or as described in the Time of Sale Prospectus or Registration Statement, and all of the partnership interests or limited liability company membership interest in each of the Company’s subsidiaries that is a partnership or a limited liability company, as the case may be, are owned directly or indirectly by the Company, free and clear of all Liens except for any Liens securing indebtedness of the Company or its subsidiaries for borrowed money (including pursuant to its credit agreement or indentures) or as described in the Time of Sale Prospectus or Registration Statement. (f) This Agreement has been duly authorized, executed and delivered by the Company. (g) The authorized capital stock of the Company conforms as to legal matters in all material respects to the description thereof contained in the Prospectus. (h) The outstanding shares of capital stock of the Company (including the shares of Class B Common Stock held by the Selling Stockholders) have been duly authorized and are validly issued, fully paid and non-assessable. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the Shares and will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any of its subsidiaries or any agreement or other instrument binding upon the Company or any of its subsidiaries that is   4 -------------------------------------------------------------------------------- material to the Company and its subsidiaries, taken as a whole (including, without limitation, all agreements and indentures listed as Exhibits to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005 and the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006), or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any of its subsidiaries, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement and the Shares, except such as have been obtained under the Securities Act and the Exchange Act and as set forth in the Time of Sale Prospectus or such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus. (k) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject (i) other than proceedings accurately described in all material respects in the Time of Sale Prospectus and proceedings that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by the Prospectus or (ii) that are required to be described in the Registration Statement or the Prospectus and are not so described; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (l) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended. (m) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required   5 -------------------------------------------------------------------------------- permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (n) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any of the securities of the Company (except as otherwise disclosed in the Registration Statement) or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (p) Subsequent to the date as of which information is given in the Time of Sale Prospectus, (i) the Company has not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction, in each case, not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, taken as a whole, except in each case as described in the Time of Sale Prospectus or the Registration Statement. (q) 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, free and clear of all Liens except for any Liens securing indebtedness of the Company or its subsidiaries for borrowed money (including pursuant to its credit agreement or indentures) or Liens permitted under its credit agreement or indentures or for such as are described in the Time of Sale Prospectus or the Registration Statement or such 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 it under valid, subsisting and enforceable leases with such exceptions as do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries or such as do not, singly or in the aggregate, have or could not result in a material adverse effect on the Company and its subsidiaries, taken as a whole, except in each case as described in or contemplated by the Time of Sale Prospectus.   6 -------------------------------------------------------------------------------- (r) Except as described in the Time of Sale Prospectus, the Company and its subsidiaries own or possess, or can acquire on reasonable terms, all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names, currently employed by them in connection with the business now operated by them, except where the failure to own or possess or to have the right to acquire any of the foregoing, singly or in the aggregate, does not have a material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole. (s) Except as described in the Time of Sale Prospectus, no material labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, except for disputes that do not or would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; and the Company is not aware, but without any independent investigation or inquiry, of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could have a material adverse effect on the Company and its subsidiaries, taken as a whole. (t) The Company and its subsidiaries are insured by insurers that the Company reasonably believes to be of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which it is engaged; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Time of Sale Prospectus. (u) (i) The Company and its subsidiaries possess all permits, licenses, rights of way, approvals, consents and other authorizations (collectively issued by the appropriate federal, state or local regulatory agencies or bodies, (including the Federal Communications Commission (the “FCC”), the public utilities commission, or any equivalent body, of each state in which the Company and its subsidiaries do business and any other relevant state or local governmental department, commission, board, bureau, agency, court or other authority thereof (the “Local Authorities”)) required for the conduct of the telecommunications business now operated by the Company and its subsidiaries (collectively, the “Governmental Licenses”), except where the failure to possess any such Governmental Licenses would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental   7 -------------------------------------------------------------------------------- Licenses, except where the failure so to comply would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the Governmental Licenses are valid and in full force, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; there is no outstanding adverse judgment, decree or order that has been issued by the FCC or any of the Local Authorities against the Company or any of its subsidiaries and which, singly or in the aggregate, would have a material adverse effect of the Company and its subsidiaries, taken as a whole; and neither the Company nor any of its subsidiaries has received any notice of or is aware of proceedings relating to the revocation or modification of any such Governmental Licenses or, except as set forth in the Time of Sale Prospectus, that would otherwise affect the operations of the Company or its subsidiaries and which, singly or in the aggregate, would have a material adverse effect on the Company and its subsidiaries, taken as a whole. (v) There is, and has been, no failure on the part of the Company or its subsidiaries, or any of their directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith including, without limitation, Section 402 related to loans and Sections 302 and 906 related to certifications. (w) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations in all material respects, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability and (iii) access to assets is permitted only in accordance with management’s general or specific authorization in all material respects, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (x) Ernst & Young LLP, who reported on the annual consolidated financial statements of the Company incorporated by reference in the Registration Statement and the Prospectus, are independent accountants as required by the Securities Act. 2. Representations and Warranties of the Selling Stockholders. Each Selling Stockholder represents and warrants to, solely as to itself and not as to any other Selling Stockholder, and agrees with each of the Underwriters and the Company that: (a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder.   8 -------------------------------------------------------------------------------- (b) The execution and delivery by such Selling Stockholder of, and the performance by such Selling Stockholder of its obligations under, this Agreement, will not contravene any provision of applicable law, or the certificate of incorporation or by-laws of such Selling Stockholder, or any agreement or other instrument binding upon such Selling Stockholder that is material to such Selling Stockholder or any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Stockholder, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such Selling Stockholder of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. (c) Such Selling Stockholder has, and on the Closing Date will have, valid title to, or a valid “security entitlement” within the meaning of Section 8-501 of the New York Uniform Commercial Code in respect of, the Shares to be sold by such Selling Stockholder free and clear of all security interests, claims, liens, equities or other encumbrances and the legal right and power, and all authorization and approval required by law, to enter into this Agreement and to sell, transfer and deliver the Shares to be sold by such Selling Stockholder or a security entitlement in respect of such Shares. (d) Upon payment for the Shares to be sold by such Selling Stockholder pursuant to this Agreement, delivery of such Shares, as directed by the Underwriters, to Cede & Co. (“Cede”) or such other nominee as may be designated by the Depository Trust Company (“DTC”), registration of such Shares in the name of Cede or such other nominee and the crediting of such Shares on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within the meaning of Section 8-105 of the New York Uniform Commercial Code (the “UCC”)) to such Shares), (A) DTC shall be a “protected purchaser” of such Shares within the meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in respect of such Shares and (C) no action based on any “adverse claim”, within the meaning of Section 8-102 of the UCC, to such Shares may be asserted against the Underwriters with respect to such security entitlement; for purposes of this representation, such Selling Stockholder may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC. (e) (i) The Registration Statement, when it became effective, did not contain, and, as amended or supplemented, if applicable, will not, as of the Closing Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated   9 -------------------------------------------------------------------------------- therein or necessary to make the statements therein not misleading, (ii) the Time of Sale Prospectus and the Prospectus do not contain and, as amended or supplemented, if applicable, will not contain, as of the Closing Date, any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph are limited to statements or omissions based upon information relating to such Selling Stockholder furnished to the Company in writing by such Selling Stockholder expressly for use in the Registration Statement, the Time of Sale Prospectus and the Prospectus or any amendments or supplements thereto (such information, the “Selling Stockholder Information”). 3. Agreements to Sell and Purchase. Each Selling Stockholder, severally and not jointly, hereby agrees to sell to the several Underwriters the number of Firm Shares set forth opposite its name on Schedule III hereto and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Selling Stockholders the respective number of Firm Shares set forth in Schedule II hereto opposite its name at a purchase price of $16.8437 per share (the “Purchase Price”). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, each Selling Stockholder, severally and not jointly, agrees to sell to the Underwriters the number of Additional Shares set forth opposite its name on Schedule III hereto, and the Underwriters shall have the right to purchase, severally and not jointly, up to an aggregate of 3,966,060 Additional Shares. Deutsche Bank and Lehman Brothers may exercise these rights on behalf of the Underwriters in whole or from time to time in part by giving written notice of each election to exercise the option not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such securities are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the Closing Date for the Firm Shares nor later than ten business days after the date of such notice. On each day, if any, that Additional Shares are to be purchased (each, an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional securities as the Underwriters may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of Firm Shares. To the extent the Underwriters elect to purchase less than the full number of Additional Shares, such shares shall be sold pro rata, subject to rounding, based on the ratio that the number of Additional Shares set forth opposite the name of such Selling Stockholder bears to 3,966,060.   10 -------------------------------------------------------------------------------- The Company and each Selling Stockholder hereby agrees that, without the written consent of Deutsche Bank and Lehman Brothers on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Class A Common Stock or any securities convertible into or exercisable or exchangeable for Class A Common Stock, (ii) file any registration statement with the Commission relating to the offering of any shares of Class A Common Stock or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A Common Stock, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of Class A Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (i) the Shares to be sold hereunder, (ii) the issuance by the Company of shares of Class A Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and as described in the Prospectus (or filing a registration statement with the Commission related to the issuance or resale of such Class A Common Stock), (iii) the issuance by the Company of shares of Class A Common Stock in connection with the acquisition of Xspedius Communications, LLC as described in the Prospectus (or the filing of amendments to the Registration Statement on Form S-4 filed with the Commission on September 1, 2006 relating to this acquisition) (iv) the issuance by the Company of any shares of Class A Common Stock, options or other securities to or for the benefit of employees of the Company on or after the date hereof pursuant to the Company’s employee stock ownership plan or equity incentive plans as described in the Time of Sale Prospectus or the Registration Statement and the issuance by the Company of shares of Class A Common Stock upon the exercise of any such options (or filing a registration statement with the Commission related to the issuance or resale of such Class A Common Stock), (v) direct or indirect transfers or disposals by any of the Selling Stockholders of shares of Class A Common Stock or any security convertible into or exercisable or exchangeable for Class A Common Stock, provided that each transferee shall enter into a written agreement accepting the restrictions set forth in the preceding paragraph and this paragraph as if it were a Selling Stockholder, (vi) the tender by any of the Selling Stockholders of shares of Class A Common Stock into a tender offer for all of the shares of Class A Common Stock or the indirect transfer or disposal of shares of Class A Common Stock or any security convertible into or exercisable or exchangeable for the Class A Common Stock as part of a business combination transaction involving the Class A Common Stock, and (vii) transactions by the Selling Stockholders relating to shares of Class A Common Stock or other securities acquired in open market transactions after the completion of the Offering.   11 -------------------------------------------------------------------------------- In addition, each Selling Stockholder, agrees that, without the prior written consent of Deutsche Bank and Lehman Brothers on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, make any demand for, or exercise any right with respect to, the registration of any shares of Class A Common Stock or any security convertible into or exercisable or exchangeable for Class A Common Stock. Each Selling Stockholder consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of any Shares held by such Selling Stockholder except in compliance with the foregoing restrictions. 4. Public Offering. The Selling Stockholders and the Company are advised by the Underwriters that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after this Agreement has become effective as in their judgment is advisable. The Selling Stockholders and the Company are further advised by the Underwriters that the Shares are to be offered to the public upon the terms set forth in the Prospectus. 5. Payment and Delivery. Payment for the Firm Shares shall be made to each Selling Stockholder in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters on the date and time set forth in Schedule I hereto, or at such other time on the same or such other date, not later than the fifth business day thereafter, as may be designated by Deutsche Bank and Lehman Brothers in writing. The time and date of such payment are hereinafter referred to as the “Closing Date.” Payment for any Additional Shares shall be made to the Selling Stockholders in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such other date, in any event not later than October 30, 2006, as shall be designated in writing by Deutsche Bank and Lehman Brothers. The time and date of such payment are hereinafter referred to as the “Option Closing Date.” The Firm Shares and Additional Shares shall be registered in such names and in such denominations as Deutsche Bank and Lehman Brothers shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to Deutsche Bank on the Closing Date or the Option Closing Date, as the case may be, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor.   12 -------------------------------------------------------------------------------- 6. Conditions to the Underwriters’ Obligations. The several obligations of the Underwriters are subject to the following conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded the Company or any of the securities of the Company or any of its subsidiaries or in the rating outlook for the Company by any “nationally recognized statistical rating organization,” as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the financial condition or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in the judgment of Deutsche Bank and Lehman Brothers, is material and adverse and that makes it, in the judgment of Deutsche Bank and Lehman Brothers, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 6(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct in all material respects as of the Closing Date and that the Company has complied in all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of each Selling Stockholder, to the effect that the representations and warranties of such Selling Stockholder contained in this Agreement are true and correct in all material respects as of the Closing Date and that such Selling Stockholder has complied in all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.   13 -------------------------------------------------------------------------------- (d) The Underwriters shall have received on the Closing Date an opinion of Faegre & Benson LLP, outside counsel for the Company, dated the Closing Date, to the effect that: (i) to such counsel’s knowledge, (A) there are not any pending or threatened governmental proceedings before any court or governmental agency or authority or any arbitrator to which the Company is a party or to which any of the properties of the Company is subject of a character required to be disclosed in the Time of Sale Prospectus which are not disclosed as required, and (B) there is no contract, indenture, mortgage, loan agreement, note, lease or other document of a character required to be described in the Time of Sale Prospectus which is not described as required; (ii) the outstanding shares of capital stock of the Company (including the Shares to be sold by the Selling Stockholders) have been duly authorized and are validly issued and fully paid and non-assessable; (iii) the Shares conform in all material respects to the description thereof contained in the Time of Sale Prospectus; (iv) this Agreement has been duly authorized, executed and delivered by the Company; (v) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to such counsel’s knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to such counsel’s knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares and as for such as may be required by the FCC or Local Authorities, as to which such counsel expresses no opinion; (vi) the statements relating to legal matters, documents or proceedings included in (A) the Time of Sale Prospectus and the Prospectus under the captions “Description of Capital Stock,” insofar as relevant to the offering of the Shares, “Underwriters” (except relating to price, stabilization, short positions and passive market making activities, as to which such counsel need not express an opinion) “Description of the Debt Securities,” and “Description of Capital Stock” and (B) the   14 -------------------------------------------------------------------------------- Registration Statement in Item 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein fairly summarize in all material respects such matters, documents or proceedings; (vii) such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required, except for such statutes, regulations, contracts or other documents relating to telecommunications law, the FCC or Local Authorities, as to which such counsel expresses no opinion; (viii) the Company is not, and after giving effect to the offering and sale of the Shares as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended; (ix) (A) in the opinion of such counsel (1) each document filed pursuant to the Exchange Act prior to the Closing Date and incorporated by reference in the Registration Statement and the Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) appeared on its face to be appropriately responsive as of its filing date in all material respects to the requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder, and (2) the Registration Statement and the Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) appear on their face to be appropriately responsive in all material respects to the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder, and (B) nothing has come to the attention of such counsel that causes such counsel to believe that (1) any part of the Registration Statement, when such part became effective (except for the financial statements and financial schedules and other financial and statistical data included therein as to which such counsel need not express any belief), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (2) the Registration Statement or the Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any belief) on the date of this Agreement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or   15 -------------------------------------------------------------------------------- necessary to make the statements therein not misleading, (C) the Time of Sale Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any belief) as of the date of this Agreement or as amended or supplemented, if applicable, as of the Closing Date contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made not misleading or (D) the Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any belief) as amended or supplemented, if applicable, as of the Closing Date contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made not misleading; and (e) The Underwriters shall have received on the Closing Date an opinion of Paul B. Jones, Esq., Senior Vice President and General Counsel of the Company, dated the Closing Date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) each subsidiary of the Company has been duly incorporated, or, in the case of partnerships or limited liability companies, duly organized, is validly existing as a corporation, a partnership or a limited liability company, as the case may be, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) except as otherwise disclosed in the Time of Sale Prospectus, all of the issued shares of capital stock of each subsidiary of the Company that is a corporation have been validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company free and clear of all Liens except for any Liens securing indebtedness of the Company or its   16 -------------------------------------------------------------------------------- subsidiaries for borrowed money (including pursuant to its credit agreement or indentures) or as described in the Time of Sale Prospectus or Registration Statement; and all of the partnership interests and membership interests in each of the subsidiaries of the Company that is a partnership or a limited liability company, are owned directly by the Company free and clear of all Liens except for any Liens securing indebtedness of the Company or its subsidiaries for borrowed money (including pursuant to its credit agreement or indentures) or as described in the Time of Sale Prospectus or Registration Statement; (iv) the authorized capital stock of the Company conforms as to legal matters in all material respects to the description thereof contained in the Time of Sale Prospectus; (v) the statements contained in the Time of Sale Prospectus under the captions “Risk Factors – Several customers account for a significant portion of our revenue, and some of our customers’ purchases may not continue due to customer consolidations, financial difficulties or other factors,” “Risk Factors – We have experienced reductions in switched access and reciprocal compensation revenue as a result of regulatory rate reform, and we may experience further such reductions in the future,” “Risk Factors – Risks Relating to Our Business – We may be adversely affected by changes in the regulation of special access services,” “Risk Factors – Risks Relating to Our Business – We must obtain access to rights-of-way and pole attachments on reasonable terms and conditions,” “Risk Factors – Risks Relating to Our Business – Our revolving credit facility and term loan B and the indentures relating to each outstanding series of our senior notes contain, and our proposed bank financing will contain, restrictive covenants that may limit our flexibility, and breach of those covenants may cause us to be in default under those agreements,” “Risk Factors – Risks Relating to Our Ownership Structure – We are controlled by the Class B Stockholders,” “Risk Factors – Risks Relating to Our Ownership Structure – Time Warner Inc. can sell control of us at any time, and sales by the Class B stockholders could adversely affect us,” “Risk Factors – Risks Relating to Our Ownership Structure – Each of the Class B stockholders has veto rights over certain actions”; and, except as updated in the Prospectus or in any later document incorporated by reference into the Prospectus, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 under the captions “Item 1. Business—Services— Limitation on Residential and Content Services,” “Item 1. Business—Competition,” “Item 1. Business—Government Regulation,” “Item 1A. Risk Factors—Risks Relating to Our Business—Several customers account for a significant proportion of our revenue, and some of our customers’ purchases may not continue due to customer consolidations, financial difficulties or other factors,” “Item 1A. Risk Factors—Risks Relating to Our Business—We must obtain access to rights-of-way and pole attachments on reasonable terms and conditions,” “Item 1A. Risk Factors—Risks   17 -------------------------------------------------------------------------------- Relating to Our Business—We have experienced reductions in switched access and reciprocal compensation revenue as a result of regulatory rate reform, and we may experience further such reductions in the future,” “Item 1A. Risk Factors—Risks Relating to Our Business—We may be adversely affected by changes in the regulation of special access services,” “Item 1A. Risk Factors—Risks Relating to Our Business—We may be adversely affected by changes to the Communications Act,” “Item 1A. Risk Factors—Risks Relating to Our Ownership Structure—We are controlled by the Class B Stockholders,” “Item 1A. Risk Factors—Risks Relating to Our Ownership Structure—Each of the Class B Stockholders has veto rights over certain actions,” “Item 1A. Risk Factors—Risks Relating to Our Ownership Structure—Time Warner Inc. can sell control of us at any time, and sales by the Class B Stockholders could adversely affect us,” “Item 3. Legal Proceedings” and “Item 13. Certain Relationships and Related Transactions” and except as updated in the Time of Sale Prospectus or in any later document incorporated by reference in the Time of Sale Prospectus, in the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders held on June 7, 2006 as filed with the Commission under the caption “Certain Relationships and Related Transactions,” in each case insofar as such statements constitute a summary of the legal or regulatory matters or legal or regulatory proceedings referred to therein, are correct in all material respects and do not omit a material fact necessary to make the statements contained therein not misleading; (vi) to such counsel’s knowledge, the Company possesses the governmental licenses required by federal or state telecommunications regulatory bodies necessary for the Company’s existing services (the “Communications Licenses”) and the Company is in compliance with the terms and conditions of all such Communications Licenses, except where the failure to so comply would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole, and such Communications Licenses are valid and in full force and effect, except where the invalidity of such Communications Licenses to be in full force and effect would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (vii) there is no outstanding adverse judgment, decree or order that has been issued by the FCC or any state telecommunications regulatory body against the Company and its subsidiaries which, singly or in the aggregate, would have a material adverse effect on the Company and its subsidiaries, taken as a whole; and, to such counsel’s knowledge, neither the Company nor any of its subsidiaries is the subject of, or threatened by, any proceedings relating to the revocation or modification of any such Communications Licenses or, except as set forth in the Time of Sale Prospectus, that would otherwise adversely affect the operation of the Company and its subsidiaries, taken as a whole, which singly or in the aggregate, would have a material adverse effect on the Company and its subsidiaries, taken as a whole;   18 -------------------------------------------------------------------------------- (viii) the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated herein, the issuance and sale of the Shares, and the use of proceeds from the sale of the Shares to the extent expressly described in the Time of Sale Prospectus under the caption “Use of Proceeds,” and compliance by the Company with its obligations under this Agreement and the Shares do not and will not, whether with or without the giving of notice or lapse of time or both, result in any violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to such counsel, of any federal or state telecommunications regulatory body having jurisdiction over the Company, except for such violations that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ix) to such counsel’s knowledge, there are no telecommunications statutes or regulations that are required to be described in the Time of Sale Prospectus that are not described as required; and (x) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the Shares will not contravene any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company (including, without limitation, all agreements and indentures listed as Exhibits to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005 and the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006). (f) The Underwriters shall have received on the Closing Date an opinion of Cravath, Swaine & Moore LLP, counsel for Time Warner Companies, Inc., TW/TAE, Inc. and Warner Communications Inc. (collectively, the “Time Warner Selling Stockholders”) to the effect that: (i) this Agreement has been duly authorized, executed and delivered by or on behalf of such Time Warner Selling Stockholder; (ii) upon payment for the Shares to be sold by such Time Warner Selling Stockholder pursuant to this Agreement, delivery of such Shares, as directed by the Underwriters, to Cede or such other nominee as may be designated by DTC, registration of such Shares in the name of Cede or such other nominee and the crediting of such Shares on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim within the meaning of Section 8-105 of the UCC to such Shares), (A) DTC shall be a “protected purchaser” of such Shares within the   19 -------------------------------------------------------------------------------- meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in respect of such Shares and (C) no action based on any “adverse claim” (within the meaning of Section 8-102 of the UCC) to such Shares may be asserted against the Underwriters with respect to such security entitlement; in giving this opinion, counsel for such Time Warner Selling Stockholder may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC; and (iii) the execution and delivery by each Time Warner Selling Stockholder of, and the performance by each Time Warner Selling Stockholder of its obligations under this Agreement will not conflict with, or constitute a default under, the laws of the state of New York. (g) The Underwriters shall have received on the Closing Date an opinion of Brenda Karickhoff, Esq., Senior Vice President and Deputy General Counsel of Time Warner Inc., to the effect that: (i) the execution and delivery by each Time Warner Selling Stockholder of, and the performance by each Time Warner Selling Stockholder of its obligations under this Agreement will not conflict with, or constitute a default under, (a) any provision of the certificate of incorporation or by-laws of such Time Warner Selling Stockholder, (b) to such counsel’s knowledge, any of the terms or provisions of any agreement or other instrument binding upon such Time Warner Selling Stockholder that is material to such Time Warner Selling Stockholder, (c) to such counsel’s knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Time Warner Selling Stockholder or (d) the corporate laws of the State of Delaware or federal law or regulation (other than federal and state securities or Blue Sky laws or the rules and regulations of the FCC); (ii) no consent, approval, authorization or order of, or qualification with, any federal, New York or Delaware governmental body or agency is required for the performance by any Time Warner Selling Stockholder of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with offer and sale of the Shares; and   20 -------------------------------------------------------------------------------- (iii) each Time Warner Selling Stockholder has valid title to, or a valid security entitlement in respect of, the Shares to be sold by such Time Warner Selling Stockholder free and clear of all security interests, claims, liens, equities and other encumbrances, and such Time Warner Selling Stockholder has the legal right and power, and all authorization and approval required by law, to enter into this Agreement and to sell, transfer and deliver the Shares to be sold by such Time Warner Selling Stockholder or a security entitlement in respect of such Shares. (h) The Underwriters shall have received on the Closing Date an opinion of Sabin, Bermant & Gould LLP, counsel for Advance Telecom Holdings Corp. and Newhouse Telecom Holdings Corp. (together, the “A/N Selling Stockholders”), each to the effect that: (i) this Agreement has been duly authorized, executed and delivered by or on behalf of each of the A/N Selling Stockholders; (ii) the execution and delivery by each A/N Selling Stockholder of, and the performance by such A/N Selling Stockholder of its obligations under, this Agreement will not contravene any provision of applicable law, or the certificate of incorporation or by-laws of such A/N Selling Stockholder, or, to the best of such counsel’s knowledge, any agreement or other instrument binding upon such A/N Selling Stockholder or, to the best of such counsel’s knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over such A/N Selling Stockholder, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such A/N Selling Stockholder of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with offer and sale of the Shares; (iii) each of the A/N Selling Stockholders has valid title to, or a valid security entitlement in respect of, the Shares to be sold by such A/N Selling Stockholder free and clear of all security interests, claims, liens, equities and other encumbrances, and each of the A/N Selling Stockholders has the legal right and power, and all authorization and approval required by law, to enter into this Agreement and to sell, transfer and deliver the Shares to be sold by such A/N Selling Stockholder or a security entitlement in respect of such Shares; and (iv) upon payment for the Shares to be sold by the A/N Selling Stockholders pursuant to this Agreement, delivery of such Shares, as directed by the Underwriters, to Cede or such other nominee as may be designated by DTC, registration of such Securities in the name of Cede or such other nominee and the crediting of such Shares on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim within the meaning of Section 8-105 of the UCC to such Shares), (A) DTC shall be a “protected purchaser” of such Securities within the   21 -------------------------------------------------------------------------------- meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in respect of such Securities and (C) no action based on any “adverse claim” (within the meaning of Section 8-102 of the UCC) to such Shares may be asserted against the Underwriters with respect to such security entitlement; in giving this opinion, counsel for the A/N Selling Stockholders may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC. (i) The Underwriters shall have received on the Closing Date an opinion of Shearman & Sterling LLP, counsel for the Underwriters, dated the Closing Date, in the form and substance reasonably satisfactory to them. (j) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Ernst & Young LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof. (k) The “lock-up” agreements, each substantially in the form of Exhibit A hereto, between the Underwriters and the executive officers and directors of the Company listed on Schedule V hereto, relating to sales and certain other dispositions of shares of Class A Common Stock or certain other securities, delivered to the Underwriters on or before the date hereof, shall be in full force and effect on the Closing Date. Such “lock-up” agreements shall be terminated and shall not be binding on the Company’s directors and executive officers if this Agreement is terminated for any reason. (l) The Underwriters shall have received on the Closing Date such documents as they may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Shares, the sale of the Shares and other matters related to the issuance or sale of the Shares. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to the Underwriters on the applicable Option Closing Date of each of the documents referred to above (other than any lock-up agreement   22 -------------------------------------------------------------------------------- referenced in Section 6(k)) dated as of the Option Closing Date (except that insofar as any documents relate to Shares, they may be limited to covering only Additional Shares). 7. Covenants of the Company. The Company covenants with each Underwriter as follows: (a) To furnish to the Underwriters, without charge, a signed copy of the Registration Statement (including exhibits thereto and documents incorporated by reference) and to deliver to each of the Underwriters during the period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of Sale Prospectus, the Prospectus, any documents incorporated therein by reference therein and any supplements and amendments thereto or to the Registration Statement as the Underwriters may reasonably request. (b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to each Underwriter a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Underwriters reasonably object. (c) To furnish to each Underwriter a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which the Underwriters reasonably object. (d) Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder. (e) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.   23 -------------------------------------------------------------------------------- (f) If, during such period after the first date of the public offering of the Shares as in the reasonable opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, not misleading, or if, in the reasonable opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses Deutsche Bank and Lehman Brothers will furnish to the Company) to which Shares may have been sold by Deutsche Bank, Lehman Brothers and J.P. Morgan Securities Inc. on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law. (g) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Underwriters shall reasonably request. (h) To make generally available to the Company’s security holders and to each Underwriter as soon as practicable an earning statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement, which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (i) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company’s counsel, the Company’s accountants and one counsel for the Selling Stockholders (the fees, disbursement and expenses of any additional counsel for the Selling Stockholders must be paid for by the Selling Stockholders) in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to   24 -------------------------------------------------------------------------------- any of the foregoing, including the filing fees payable to the Commission relating to the Shares (within the time required by Rule 456 (b)(1), if applicable), all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (j) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (k) the cost of printing or producing any Blue Sky or legal investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 7(g) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or legal investment memorandum, (l) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (m) any fees charged by the rating agencies for the rating of the Shares, (n) the cost of the preparation, issuance and delivery of the Shares, (o) the costs and charges of any trustee, transfer agent, registrar or depositary, and (p) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section or Section 8 below. It is understood, however, that except as provided in this Section, Section 9 entitled “Indemnity and Contribution,” and the last paragraph of Section 11 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. The provisions of this Section shall not supersede or otherwise affect any agreement that the Company and the Selling Stockholders may otherwise have for the allocation of such expenses among themselves. (q) If the third anniversary of the initial effective date of the Registration Statement occurs before all the Shares have been sold by the Underwriters, prior to the third anniversary to file a new shelf registration statement and to take any other action necessary to permit the public offering of the Shares to continue without interruption; references herein to the Registration Statement shall include the new registration statement declared effective by the Commission; (r) During the period beginning on the date hereof and continuing to and including the Closing Date, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company or warrants to purchase or otherwise acquire debt securities of the Company (other than (i) commercial paper issued in the ordinary course of business or (ii) securities or warrants permitted with the prior written consent of Deutsche Bank and Lehman Brothers).   25 -------------------------------------------------------------------------------- 8. Covenants of the Underwriters. Each Underwriter severally covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter. The Underwriters further covenant with the Company to pay or cause to be paid the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the Shares. 9. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, the preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any electronic roadshow or the Prospectus or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through Deutsche Bank and Lehman Brothers expressly for use therein. (b) The Company agrees to indemnify and hold harmless each Selling Stockholder, each person, if any, who controls any Selling Stockholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Selling Stockholder within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, the preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any electronic road show or the Prospectus (if used within the period set forth in paragraph (f) of Section 7 hereof and as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the   26 -------------------------------------------------------------------------------- circumstances in which they were made, except for losses, claims, damages or liabilities with respect to Selling Stockholder Information provided by such Selling Stockholder. (c) Each Selling Stockholder agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, the preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, or the Prospectus (if used within the period set forth in paragraph (f) of Section 7 hereof and as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made but only with respect to the Selling Stockholder Information provided by such Selling Stockholder. The liability of each Selling Stockholder under the indemnity agreement contained in this paragraph shall be limited to an amount equal to the net proceeds received by such Selling Stockholder from the sale of Shares by it under this Agreement. (d) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each Selling Stockholder, the directors and officers of the Company and each Selling Stockholder who sign the Registration Statement and each person, if any, who controls the Company or any Selling Stockholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, the preliminary prospectus, the Time of Sale Prospectus, any other free writing prospectus that the Company has filed or is required to file pursuant to Rule 433(d) of the Securities Act or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, but only with reference to information relating to such Underwriter furnished to the Company in writing by Deutsche Bank and Lehman Brothers on behalf of such Underwriter expressly for use in the Registration Statement, the preliminary prospectus, the Time of Sale   27 -------------------------------------------------------------------------------- Prospectus, any other free writing prospectus that the Company has filed or is required to file pursuant to Rule 433(d) of the Securities Act or the Prospectus or any amendment or supplement thereto. (e) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 9(a), 9(b), 9(c) or 9(d), such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under the Securities Act, (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (iii) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Selling Stockholders and all persons, if any, who control any Selling Stockholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons and affiliates of any Underwriters, such firm shall be designated in writing by the Underwriters authorized to appoint counsel under this Section set forth in Schedule IV hereto. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Stockholders and such control persons of the Selling Stockholders, such firm shall be designated in writing by the Time Warner Selling Stockholders. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No   28 -------------------------------------------------------------------------------- indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (f) To the extent the indemnification provided for in Section 9(a), 9(b), 9(c) or 9(d) is unavailable to an indemnified party in respect of any losses, claims, damages or liabilities referred to under such paragraph, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) if the indemnifying party is the Company (other than as set forth in clause 9(f)(iii) below) or the Selling Stockholders, in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares, (ii) if the indemnifying person is an Underwriter, in such proportion as is appropriate to reflect the relative fault of such Underwriter on the one hand and the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (iii) if the indemnifying person is the Company and the indemnified party is any Selling Stockholder, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and such Selling Stockholder on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, or (iv) if the allocation provided by clause 9(f)(i), 9(f)(ii) or 9(f)(iii) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 9(f)(i) above or the relative fault referred to in clause 9(f)(ii) and 9(f)(iii) but also the relative fault (in cases covered by clause 9(f)(i)) or such relative benefits (in cases covered by clause 9(f)(ii) and 9(f)(iii)) of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company or the Selling Stockholders on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Selling Stockholders and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate public offering price of the Shares. The relative fault of the Company or the Selling Stockholders on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Stockholders or by the Underwriters and the parties’ relative intent, knowledge, access to information   29 -------------------------------------------------------------------------------- and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 9 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. The liability of any Selling Stockholder under the contribution agreement contained in this paragraph shall be limited to an amount equal to the net proceeds received by such Selling Stockholder from the sale of Shares by it under this Agreement. (g) The Company, the Selling Stockholders and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 9(f). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 9(f) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (h) The indemnity and contribution provisions contained in this Section 9 and the representations, warranties and other statements of the Company and the Selling Stockholders contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, by or on behalf of any Selling Stockholder, the officers or directors of any Selling Stockholder or any person controlling any Selling Stockholder, or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 10. Termination. The Underwriters may terminate this Agreement by notice given by Deutsche Bank and Lehman Brothers to the Company and the Selling Stockholders, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange or the Nasdaq Stock Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States   30 -------------------------------------------------------------------------------- shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the judgment of Deutsche Bank and Lehman Brothers, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the judgment of Deutsche Bank and Lehman Brothers, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus. 11. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase Firm Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Firm Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Firm Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule II bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as Deutsche Bank and Lehman Brothers may specify, to purchase the Firm Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Firm Shares that any Underwriter has agreed to purchase on such date pursuant to this Agreement be increased pursuant to this Section 11 by an amount in excess of one-ninth of such number of Firm Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased, and arrangements satisfactory to Deutsche Bank and Lehman Brothers, the Company and the Selling Stockholders for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholders. In any such case either Deutsche Bank and Lehman Brothers or the Selling Stockholders shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on   31 -------------------------------------------------------------------------------- such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any one of them, because of any failure or refusal on the part of the Company or the Selling Stockholders to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company or the Selling Stockholders shall be unable to perform their obligations under this Agreement, the Company or the Selling Stockholders as the case may be will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 12. Entire Agreement. (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire agreement between the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other, with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the Shares. (b) The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arms length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement and prior written agreements (to the extent not superseded by this Agreement), if any, and (iii) the Underwriters may have interests that differ from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares. 13. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 15. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.   32 -------------------------------------------------------------------------------- 16. Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to Deutsche Bank and Lehman Brothers at the addresses set forth in Schedule IV hereto; if to the Company shall be delivered, mailed or sent to the address set forth in Schedule IV hereto; and if to the Selling Stockholders shall be delivered, mailed or sent to the addresses set forth in Schedule IV hereto.   33 -------------------------------------------------------------------------------- Very truly yours, TIME WARNER TELECOM INC. By:   /s/ Paul B. Jones   Name:   Paul B. Jones   Title:   Senior Vice President, General Counsel & Regulatory Policy Signature Page — Underwriting Agreement -------------------------------------------------------------------------------- TIME WARNER COMPANIES, INC. By:   /s/ Michael Del Nin   Name:   Michael Del Nin   Title:   Senior Vice President   IV-2 -------------------------------------------------------------------------------- TW/TAE, INC. By:   /s/ Michael Del Nin   Name:   Michael Del Nin   Title:   Senior Vice President WARNER COMMUNICATIONS INC. By:   /s/ Michael Del Nin   Name:   Michael Del Nin   Title:   Senior Vice President   IV-3 -------------------------------------------------------------------------------- ADVANCE TELECOM HOLDINGS CORP. By:   /s/ Robert Miron   Name:   Robert Miron   Title:   President NEWHOUSE TELECOM HOLDINGS CORP. By:   /s/ Robert Miron   Name:   Robert Miron   Title:   Vice President   IV-4 -------------------------------------------------------------------------------- DEUTSCHE BANK SECURITIES INC. LEHMAN BROTHERS INC. J.P. MORGAN SECURITIES INC. Acting severally on behalf of themselves and the several Underwriters named in Schedule II hereto By:   Deutsche Bank Securities Inc. By:   /s/ David Pearson   Name:   David Pearson   Title:   Managing Director By:   /s/ Malcolm Morris   Name:   Malcolm Morris   Title:   Managing Director By:   Lehman Brothers Inc. By:   /s/ John Sowinski   Name:   John Sowinski   Title:   Vice President By:   J.P. Morgan Securities Inc. By:   /s/ Michael Millman   Name:   Michael Millman   Title:   Managing Director   IV-5 -------------------------------------------------------------------------------- SCHEDULE I   Issuer Free Writing Prospectus and Final Term Sheet To prospectus dated March 17, 2006, preliminary prospectus supplement dated September 14, 2006   Registration Statement No. 333-132504 Dated March 17, 2006 Rule 433 Time Warner Telecom Inc. 39,660,598 Shares Class A Common Stock In the event of an inconsistency between this Term Sheet and the preliminary Prospectus Supplement dated September 14, 2006, you should rely on the information in this Term Sheet.   Issuer    Time Warner Telecom Inc. (the “Company”) Common stock symbol    TWTC Title of securities    Class A Common Stock Class A Common Stock offered by the Selling Stockholders    39,660,598 shares, which represents an increase of 12,160,598 shares from the number of shares indicated on the cover page of the preliminary Prospectus Supplement Over-allotment option    3,966,060 shares Price to public    $17.50 per share Proceeds to the Selling Stockholders after discounts but before expenses    $16.84 per share Total proceeds to the Selling Stockholders after discounts but before expenses    $668,031,215; $734,834,339 if the over-allotment option is exercised in full Aggregate underwriting compensation    $26,029,250; $28,632,176 if the over-allotment option is exercised in full Class A Common Stock outstanding after the offering*    118,229,537 shares Selling Stockholders    Time Warner Companies, Inc. TW/TAE, Inc. Warner Communications Inc. Advance Telecom Holdings Corp. and Newhouse Telecom Holdings Corp. (collectively, “Advance/Newhouse”)   The shares to be sold by the Selling Stockholders represent 90.9% of the shares of the Company held by the Selling Stockholders and registered on their behalf, and represent 100% of the shares of the Company held by them and registered on their behalf if the over-allotment option is exercised in full. Board representation    Under the terms of the stockholders’ agreement dated May 10, 1999, as amended, among the Selling Stockholders, certain of their affiliates and the Company, as a result of the offering, Time Warner Inc. and Advance/Newhouse will no longer be entitled to board representation. Lock-up    As disclosed in the preliminary Prospectus Supplement, the Company is subject to a “lock up” agreement. In addition to the other exceptions discussed in the preliminary Prospectus Supplement, the lock up agreement does not apply to shares of Class A Common Stock that will be issued by the Company in connection with its pending acquisition of Xspedius Communications, LLC, which is described in the preliminary Prospectus Supplement.   I-1 -------------------------------------------------------------------------------- Trade date    September 21, 2006 Settlement date    September 26, 2006   * Based on the number of shares of Class A Common Stock outstanding as of August 31, 2006. Does not include the shares subject to the over-allotment option and the shares of Class A Common Stock that will be issued by the Company in connection with its pending acquisition of Xspedius Communications, LLC as described in the preliminary Prospectus Supplement. The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the preliminary prospectus supplement dated September 14, 2006 and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send to you the prospectus if you request it by calling toll-free 1-800-503-4611. ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW OR ELSEWHERE WITHIN THE EMAIL ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.   I-2 -------------------------------------------------------------------------------- SCHEDULE II   Underwriter    Number of Shares To Be Purchased Deutsche Bank Securities Inc.    15,864,240 Lehman Brothers Inc.    9,915,150 J.P. Morgan Securities Inc.    5,949,090 Raymond James & Associates, Inc.    3,172,848 Blaylock & Company, Inc.    951,854 Janco Partners, Inc.    951,854 Kaufman Bros., L.P.    951,854 Samuel Ramirez & Company    951,854 Utendahl Capital Group, LLC    951,854      Total    39,660,598        II-1 -------------------------------------------------------------------------------- SCHEDULE III   Selling Stockholder    Number of Firm Shares To Be Sold    Number of Additional Shares To Be Sold Time Warner Companies, Inc.    3,367,609    0 TW/TAE, Inc.    1,796,200    0 Warner Communications Inc.    25,129,750    3,029,356 Advance Telecom Holdings Corp.    3,343,363    334,336 Newhouse Telecom Holdings Corp.    6,023,676    602,368           Total:    39,660,598    3,966,060             III-1 -------------------------------------------------------------------------------- SCHEDULE IV   Underwriters authorized to appoint counsel under Section 9(e):    Deutsche Bank Securities Inc. Address for Notices to Underwriters:    Deutsche Bank Securities Inc. 60 Wall Street New York, New York 10005 Attn: Syndicate Department   Lehman Brothers Inc. 745 Seventh Avenue New York, NY 10019 Attn: Syndicate Department Address for Notices to the Company:    Time Warner Telecom Inc. Attn: General Counsel 10475 Park Meadows Drive Littleton, Colorado 80124   with copies to:   Faegre & Benson LLP 3200 Wells Fargo Center Denver, CO 80203 Attn: Douglas R. Wright, Esq. Address for Notices to Time Warner Companies, Inc., TW/TAE, Inc. and Warner Communications Inc.:    c/o Time Warner Inc. One Time Warner Center New York, New York 10019 Attn: General Counsel   with copies to:   Ray Murphy Senior Vice President and Treasurer Time Warner Inc. One Time Warner Center New York, New York 10019   and   Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Attn: Faiza J. Saeed, Esq.   IV-1 -------------------------------------------------------------------------------- Address for Notices to Advance Telecom Holdings Corp. and Newhouse Telecom Holdings Corp. :    Advance Telecom Holdings Corp. 5000 Campuswood Drive East Syracuse, New York 13057   Newhouse Telecom Holdings Corp. Four Time Square New York, New York 10036   IV-2 -------------------------------------------------------------------------------- SCHEDULE V PARTIES TO LOCK-UP AGREEMENTS Larissa L. Herda Olaf Olafsson Richard J. Davies Spencer B. Hays Robert D. Marcus George S. Sacerdote Roscoe C. Young, II Kevin W. Mooney Gregory J. Attorri Mark A. Peters Paul B. Jones John T. Blount Catherine A. Hemmer Michael A. Rouleau Julie A. Rich Robert W. Gaskins Jill R. Stuart Mark D. Hernandez   V-1 -------------------------------------------------------------------------------- EXHIBIT A Deutsche Bank Securities Inc. Lehman Brothers Inc. J.P. Morgan Securities Inc. c/o Deutsche Bank Securities Inc.       60 Wall Street       New York, NY 10005 c/o Lehman Brothers       745 Seventh Avenue       New York, NY 10019 Dear Sirs and Mesdames: The undersigned understands that Deutsche Bank Securities Inc., Lehman Brothers Inc. and J.P. Morgan Securities Inc. (the “Underwriters”) severally propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Time Warner Telecom Inc., a Delaware corporation (the “Company”), and certain selling stockholders of the Company (the “Selling Stockholders”) providing for the public offering by the Underwriters of some of the Selling Stockholders’ shares of Class A common stock, par value $.01 per share of the Company (the “Securities”) (such offering referred to as the “Offering”). To induce the Underwriters that may participate in the Offering to continue their efforts in connection with the Offering, the undersigned hereby agrees that, without the prior written consent of Deutsche Bank Securities Inc. and Lehman Brothers Inc. on behalf of the Underwriters, he or she will not, during the period commencing on the date hereof and ending 90 days after the date of the final prospectus supplement relating to the Offering (the “Prospectus”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock of the Company or any securities convertible into or exercisable or exchangeable for common stock, or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (i) sales of shares of Class A Common Stock through existing Rule 10b5-1 plans as in effect on September 14, 2006, (ii) the transfer by a bona fide gift of Class A Common Stock, provided that (a) the transferee shall enter into a written agreement accepting the restrictions set forth in the preceding sentence and (b) no filing of a registration statement with the Commission or other filing with the Commission, including under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be   A-1 -------------------------------------------------------------------------------- required or shall be voluntarily made in respect of the transfer during the 90-day restricted period, and (iii) transactions relating to shares of Class A Common Stock or other securities of the Company acquired in open market transactions after the completion of the Offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the 90-day restricted period in connection with subsequent sales of Class A Common Stock or other securities of the Company acquired in such open market transactions. In addition, the undersigned agrees that, without the prior written consent of Deutsche Bank Securities Inc. and Lehman Brothers Inc. on behalf of the Underwriters, he or she will not, during the period commencing on the date hereof and ending 90 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Class A Common Stock or any security convertible into or exercisable or exchangeable for Class A Common Stock. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Class A Common Stock except in compliance with the foregoing restrictions. The undersigned understands that the Company, the Selling Stockholders and the Underwriters are relying upon this Lock-Up Agreement in proceeding toward consummation of the Offering. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns. The undersigned understands that whether or not the Offering actually occurs depends on a number of factors, including market conditions. The Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.   Very truly yours,     (Name)     (Address)   A-2

  WALGREEN CO. 2006 EXECUTIVE DEFERRED COMPENSATION/ CAPITAL ACCUMULATION PLAN Walgreen Co. (the "Company") hereby establishes a nonqualified deferred compensation program for certain of its employees as described herein. The following shall constitute the terms and conditions of the Walgreen Co. 2006 Executive Deferred Compensation/Capital Accumulation Plan (the "Plan"), effective January 1, 2006: 1. Purpose; Effective Date. The purpose of the Plan is to permit a select group of management or highly compensated employees of the Company and its participating subsidiaries (collectively referred to herein as the "Employer") to defer the receipt of income which would otherwise become payable to them and to provide additional benefits through crediting of interest. It is intended that this Plan, by providing this deferral opportunity, will assist the Company in retaining and attracting key individuals by providing them with these benefits. 2. Administration. Full power and authority to construe, interpret, and administer the Plan shall be vested in the Compensation Committee of the Board of Directors of the Company (the "Committee"), as follows: Powers of the Committee. The Committee shall have all powers necessary to administer the Plan, including, without limitation, the power to interpret the provisions of the Plan, to decide all questions of eligibility, to establish rules and forms for the administration of the Plan, and to appoint individuals to assist in the administration of the Plan and any other agents it deems advisable. Actions of the Committee. All determinations, interpretations, rules, and decisions of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having or claiming to have any interest or right under the Plan. Delegation. The Committee shall have the power to delegate specific duties and responsibilities to officers or other employees of the Company or to other individuals or entities. The Committee may rescind any delegation at any time. Except as otherwise required by law, each person or entity to whom a duty or responsibility has been delegated shall be responsible for the exercise of such duty or responsibility and shall not be responsible for any act or failure to act of any other person or entity. The Committee hereby delegates responsibility for the day-to-day administration of the Plan to the Company's Vice President of Human Resources, who shall have the authority to assign administrative duties to other Company employees. Indemnification. The Company shall indemnify the members of the Committee, the members of the Board and all Company officers and other employees responsible for administering the Plan against any and all liabilities arising by reason of any act or failure to act made in good faith in accordance with the provisions of the Plan. For this purpose, liabilities include expenses reasonably incurred in the defense of any claim relating to the Plan. Reports and Records. The Committee and those to whom the Committee has delegated duties under the Plan shall keep records of all their proceedings and actions and shall maintain books of account, records, and other data as shall be necessary for the proper administration of the Plan and for compliance with applicable law. 3. Eligibility and Participation. Only those persons who are employed in Salary Grades 12 through 33 or their equivalent as of January 1, 2006, shall be eligible to become a participant in the Plan. An eligible employee shall become a participant upon the execution of an irrevocable election under the Plan and the acceptance of the election by the Company. Notwithstanding the foregoing, a person who is not employed in an eligible grade level as of January 1, 2006, but who is subsequently hired in or promoted to an eligible position during 2006 or thereafter, may be offered the opportunity to defer the receipt of 12 months worth of compensation under the Plan. The terms and conditions of such deferral opportunities will be designed to mirror the terms and conditions set forth in the remainder of this Plan, with appropriate adjustments to account for the different deferral periods. The timing of the deferral election and the designated deferral period with respect to any such deferral opportunity will be structured to comply with the applicable requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder (the "Code"). 4. Deferred Compensation Account. A. Each participant shall make an irrevocable election in writing (or via electronic means to be established by the Company) of the amount of compensation to be deferred under the Plan (the "deferral amount"). Such amount shall not be in excess of 10% of the participant's base salary as of January 1, 2006, and shall be in increments of no less than $1,000. The election shall be made prior to January 1, 2006 and shall be for the period January 1, 2006 through December 31, 2006. The deferral shall be reduced in substantially equal amounts from the base salary otherwise periodically payable to the participant over the 2006 calendar year (or over a portion of such calendar year as deemed administratively practicable), and attributable to service by the participant for the Employer after the date of participant's election. B. The Employer shall establish and maintain a bookkeeping account in the name of each participant, which shall be known as his or her "Deferred Account," and which shall be credited with the amount of compensation deferred, and which shall reflect the accumulated value of the deferral amount. The accumulated value of the deferral amount shall equal the amount arrived at by increasing the deferral account balance by assumed simple interest compounded annually but credited as of the last day of each calendar month, calculated from January 1, 2006. Amounts paid to or on behalf of the participant or his or her beneficiary pursuant to this Plan, shall be deducted from the Deferred Account as of the first day of the month in which such payment is made. The rate to be used in determining the accumulated value of the deferral amount shall be that rate specified in the Plan paragraph under which payment is to be made. C. The participant's Deferred Account shall at all times be reflected on the Employer's books in accordance with generally accepted accounting practices as a general unsecured and unfunded obligation of the Employer. The Plan shall not give any person any right or security interest in any asset of the Employer nor shall it imply any trust or segregation of assets by the Employer. The participant's Deferred Account shall be distributed from the general assets of the Employer. 5. Time and Manner of Payment. The participant's Deferred Account shall be distributed as follows: A. Installment Payments Following Retirement or Termination Upon Disability 1. A participant who has not attained age 50 as of January 1, 2006 shall receive 15 equal annual installment payments commencing at the January 1 of the year following his or her attainment of age 65, or as soon as practicable thereafter, if the participant's continuous employment with the employer ends by reason of Retirement or Disability. For purposes of this Plan: a. Retirement is defined as leaving the active employ of the Employer after attaining at least age 65, or after at least 10 years of service and after attaining at least age 55; and b. Disability shall mean that the participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as determined in the sole discretion of the Committee. 2. A participant who has attained age 50 but not age 65 as of January 1, 2006, shall elect, at the time of making the deferral election pursuant to Paragraph 4A, to receive installment payments in one of the following manners following termination of employment by reason of Retirement or Disability: a. Fifteen (15) equal annual installments as described in subparagraph (1) above; or b. Ten (10) equal annual installments commencing at the January 1 of the year following his or her attainment of age 70, or as soon as practicable thereafter. 3. A participant who attained age 65 but not age 70 as of January 1, 2006, shall receive 10 equal annual installments commencing at the January 1 following his or her attainment of age 70, or as soon as practicable thereafter. 4. A participant who has attained age 70 as of January 1, 2006, shall receive equal annual installments commencing at the January 1 following the end of the deferral period and ending on January 1 following his or her 79th birthday. >   > Installment payments shall be calculated to amortize fully the accumulated > value of the deferral amount over the payment period. For purposes of this > Subparagraph A, the interest rate to be credited in the calculation of the > accumulated value of the deferral amount shall be 10.5%. B. Interim Payments > Participants who have not yet attained age 45 as of January 1, 2006 shall > receive, in addition to the applicable payments described in the remainder of > this Paragraph 5, an interim lump-sum payment on January 1, 2013, or as soon > as practicable thereafter, provided that one of the following conditions is > met: > > > 1. The participant remains in the continuous employ of the Employer during > the period beginning January 1, 2006 and ending December 31, 2012; or > > > > 2. The participant terminates employment due to Disability after a period of > continuous employment from January 1, 2006. > > This interim lump-sum payment, if any, shall be an amount equal to the > deferral amount under Paragraph 4A of this Plan. Payments under Subparagraphs > B(1) and B(2) shall be debited from the participant's Deferral Account as of > the first day of the month in which payment is made. Payment Upon Termination 1. Subject to Subparagraph C(4) below, a participant who voluntarily terminates his or her employment with the Employer prior to Retirement or whose employment with the Employer is involuntarily terminated prior to Retirement for any reason other than Cause (as defined below), shall receive, as soon as practicable after such termination, a lump-sum payment in the amount of the accumulated value of the deferral amount. For purposes of this Subparagraph C(1), the rate to be credited in the calculation of the accumulated value of the deferral amount shall be 7.5%. C. Subject to Subparagraph C(3) below, and notwithstanding any other provision of this Plan, if participant's employment with the Employer is terminated at any time for "Cause," the sole amount payable to or on behalf of participant hereunder shall be a lump-sum payment of the accumulated value of the participant's deferral amount, payable as soon as practicable after such termination of employment. For purposes of this Subparagraph C(2), the rate to be credited in the calculation of the accumulated value of the deferral amount shall be 0%. For purposes of this Subparagraph C(2), termination of employment for Cause shall be determined by the Committee or its delegates and shall mean a termination of employment for: (a) an act or acts of dishonesty committed by a Participant; (b) a violation of any of the anti-harassment or anti-discrimination policies or procedures of the Company; or (c) a violation of any of the other policies or procedures of the Company applicable to the Participant's employment or job category which is either: (i) grossly negligent; or (ii) willful and deliberate. D. Notwithstanding the remainder of this Subparagraph 5C, a lump-sum payment to any participant who is a "Key Employee," as such term is defined in Section 409A of the Code, shall, to the extent necessary to comply with Section 409A of the Code, be paid no earlier than six months following such participant's termination of employment with the Employer. D. Payment Upon Death of the Participant 1. If a participant dies after leaving the active employ of the Employer for Retirement as provided in Subparagraph 5A above, or while actively employed but after becoming eligible for Retirement (based on age and service), and prior to receiving any or all annual installment payments due the participant pursuant to Subparagraph 5A above, the Employer shall pay any such unpaid annual payments to the participant's beneficiary, commencing with the next annual payment due following the date of participant's death. 2. If a participant dies while actively employed by the Employer and prior to becoming eligible for Retirement (based on age and service), no interim payments or annual installments pursuant to Subparagraphs 5A and B shall be paid by the Employer after the date of the participant's death, but the Employer shall as soon as practicable after the participant's death, pay to the participant's beneficiary, in a lump sum, the accumulated value of the deferral amount. For purposes of this Subparagraph 5D, the rate to be credited in the calculation of the accumulated value of the deferral amount shall be 10.5%. 3. If participant dies while actively employed by the Employer after commencement of annual installment payments at either age 65 or 70, the Employer shall pay any such unpaid annual installment payments to the participant's beneficiary commencing with the next annual payment due following the date of the participant's death. 6. Noncompetition. Notwithstanding any other provision of this Plan, if the Committee at any time determines that a participant, without having obtained the prior written consent of the Committee or its designee, has engaged in Competition with the Employer, the sole amount payable to the participant hereunder shall be a lump-sum payment of the accumulated value of the deferral amount, payable as soon as practicable after such determination. For purposes of this Paragraph 6, the simple rate of interest applied to determine the accumulated value of the deferral amount shall be 2%. "Competition with the Employer" shall mean engaging, within any geographical area or market served by the Employer and without the Employer's written consent, in the provision of goods or services, or in any other business activity of a type offered or engaged in by the employer, on the participant's own behalf or on behalf of another business enterprise, while employed by the Employer or during the 24-month period following the participant's termination of employment with the Employer. Notwithstanding the foregoing, if this Paragraph 6 applies to a participant who is receiving or has otherwise become eligible to receive installment payments pursuant to Paragraph 5A, then, to the extent required to comply with Section 409A of the Code, such participant will receive installment payments as scheduled, but such payments will be reduced such that rate of interest applied to determine the accumulated value of the entire deferral amount shall be 2%. 7. Beneficiary Designation. A Participant may, from time to time, designate any legal or natural person, persons or entity (who may be designated contingently or successively) to whom or to which payments are to be made if the participant dies before receiving payment of all amounts due hereunder, by signing a form approved by the Committee. A beneficiary designation form shall be effective only after the signed form is filed with the Employer while the participant is alive. Such forms may be submitted electronically pursuant to reasonable procedures established by the Company for such purpose. A properly filed designation shall cancel all beneficiary designation forms signed and filed earlier. If the participant fails to designate a beneficiary as provided above, or if all designated beneficiaries of the participant die before the participant or before complete payment of all amounts due hereunder, the Employer, in its discretion, may pay the unpaid amounts to one or more of such participant's relatives by blood, adoption, or marriage in any manner permitted by law which the Committee considers to be appropriate, including, but not limited to, payment to the legal representative or representatives of the estate of the last to die of the participant and the participant's designated beneficiaries. The Committee may also permit beneficiaries to designate their own beneficiaries following the participant's death. 8. Facility of Payment. If the Employer has, for any reason, doubt as to the proper person to whom to make payment, the Employer may withhold payment until instructed by a final order of a court of competent jurisdiction. Any payment hereunder made by the Employer in good faith shall fully discharge the Employer from its obligation with respect to such payment. 9. Insurance. The Employer may, in its sole discretion, purchase a policy or policies of insurance on the life of any participant or disability insurance with respect to a participant, the cash value, if any, and proceeds of which may, but need not, be used by the Employer to satisfy part or all of its obligations hereunder. The Employer will be the owner of any such policies and neither a participant nor any other person or entity claiming through the participant shall have any ownership rights in such policies or any proceeds thereof. Each participant, as a condition of receiving any benefits hereunder, on behalf of himself/herself or any person or entity claiming through him or her, shall cooperate with the Employer in obtaining any such insurance that the Employer desires to purchase by submitting to such physical examinations, completing such forms, and making such records available as may be required by the Employer from time to time. 10. Effect on Other Benefits. The deferral amount shall be included in the participant's compensation for the year of deferral for the purpose of calculating the participant's bonuses and awards under any incentive or similar compensation plan or program of the Employer, insurance, and other employee benefits, except that in accordance with the terms of any plan qualified under Section 401(a) of the Code maintained by the Employer, the amount deferred under Paragraph 4 shall not be included as compensation in the year of deferral for purposes of calculating the benefits or contributions by or on behalf of the participant under such plan or plans. Payments shall be excluded from compensation in years paid for purposes of calculating the participant's bonuses and awards under any incentive or similar compensation plan or program of the Employer, insurance, and other employee benefits, except that in accordance with the terms of any plan qualified under Section 401(a) of the Code maintained by the Employer, payments to active employees shall be included as compensation in the year paid. 11. Nonalienation. Neither a participant nor anyone claiming through him or her shall have any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto hereby are expressly declared to be nonassignable and nontransferable, nor shall any such right to receive payments hereunder be subject to the claims of creditors of a participant or anyone claiming through him or her to any legal, equitable, or other proceeding or process for the enforcement of such claims. 12. Tax Withholding. Notwithstanding the provisions of Paragraph 11, the Employer may withhold from any Plan benefit or payment such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Code or the Social Security Act or any state income tax act or for purposes of paying any estate, inheritance or other tax attributable to any benefit or payment hereunder. 13. Nonsecured Promise. The rights under this Plan of each participant and any person or entity claiming through him or her shall be solely those of an unsecured, general creditor of the Employer. Any insurance policy or other asset acquired or held by the Employer shall not be deemed to be held by the Employer for or on behalf of any participant, or any other person, or to be security for the performance of any obligations hereunder of the Employer, but shall, with respect to this Plan, be and remain a general, unpledged, unrestricted asset of the Employer. 14. Independence of Plan. Except as otherwise expressly provided herein, this Plan shall be independent of, and in addition to, any other employment agreement or employment benefit agreement or plan or rights that may exist from time to time between the parties hereto. This Plan shall not be deemed to constitute a contract of employment between the parties hereto, nor shall any provision hereof restrict the right of the Employer to discharge any participant, or restrict the right of any participant to terminate his or her employment with the Employer. 15. Amendment. The Company may in its sole discretion amend the Plan from time to time by action of the Board of Directors of the Company (the "Board") or the Committee. No such amendment shall alter a participant's right to receive a payment due under the terms of the Plan at the date of amendment. Notwithstanding any other provision of the Plan, from and after a Change of Control, the Company may not amend the Plan to reduce the rate to be credited in calculating the accumulated value of participant's deferral amount below the rate that would have been utilized had his or her employment been terminated or the Plan terminated as of the date of the adoption of the amendment or, if more favorable, below the highest rate provided at any time during the 90-day period prior to the Change of Control. Neither the terms of this Paragraph 15 nor those of Paragraph 16 may be amended so as to diminish the rights of a participant under such provision from or after a Change of Control or in anticipation of a Change of Control, and any such purported amendment shall be null and void. For this purpose, a "Change of Control" shall mean: The acquisition, other than from the Company, 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")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by the Company or any of its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of the Company immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, as the case may be; or Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or C. Approval by the shareholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which all or substantially all the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Company immediately prior to such reorganization, merger, or consolidation do not, following such reorganization, merger, or consolidation, 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 reorganization, merger, or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. 16. Successors; Change of Control. The terms and conditions of this Plan and deferral election shall inure to the benefit of and bind the Company, the Employer, and the participant, including his or her successors, assigns, and personal representatives. If substantially all of the assets of the Company are acquired by another corporation or entity or if the Company is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder shall be obligations of the successor corporations or entity. Further, if the employment of a participant were to be involuntarily terminated during a period of five years following a Change of Control (as defined in Paragraph 15 above) for reasons other than Cause (as defined in Subparagraph 5C(3)), such termination shall be treated as Retirement by the participant for all purposes of this Plan, except to the extent that such treatment would result in any payment made under this Plan being nondeductible by the Employer for federal income tax purposes by reason of Section 280G of the Code. A payment shall only be deemed to be nondeductible for purposes of this Paragraph 16 if the Employer provides the participant with an opinion of counsel reasonably acceptable to the participant to that effect. 17. Termination of the Plan; Termination of Plan Participation. Notwithstanding any other provision of this Plan, if the Committee determines that participation by one or more participants shall cause the Plan to be subject to Part 2, 3 or 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the entire interest of such participant or participants under the Plan may be paid immediately to such participant or participants, to the extent the Committee determines such immediate payment is consistent with Code Section 409A, or shall otherwise be segregated from the Plan in the discretion of the Committee, and such participant or participants shall cease to have any interest under the Plan. The Company may terminate this Plan by action of the Board or the Committee if the Committee, in its sole and absolute discretion, determines that any change in federal or state law, or judicial or administrative interpretation thereof, has materially affected the cost of providing the benefits otherwise payable under this Plan, or for any other reason whatsoever. Upon such termination, to the extent the Committee determines that immediate payment is consistent with Code Section 409A, the entire interest of each participant under the Plan may be paid in one lump sum, as soon as practicable after such termination of the Plan. For purposes of this Paragraph 17, all lump-sum payments shall equal the accumulated value of the deferral amount, and the rate to be credited in the calculation of the accumulated value of the deferral amount shall be 10.5% 18. Claims and Appeals Procedures. The following claims and appeals procedures shall apply under the Plan pursuant to the requirements of ERISA and the Department of Labor regulations issued thereunder: A. Presentation of Claim. Any participant or beneficiary of a deceased participant (such participant or beneficiary being referred to below as a "Claimant") may deliver to the Company's Director of Compensation and Benefits (or such other employee or group of employees designated by the Committee to consider written claims under the Plan) (the "Administrator") a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. B. Notification of Decision. The Administrator shall consider a Claimant's claim within 90 days after its receipt (180 days if the Administrator determines additional time is required for administrative reasons), and shall notify the Claimant in writing or electronically: 1. that the Claimant's requested determination has been made, and that theclaim has been allowed in full; or 2. that the Administrator has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: a. the specific reason(s) for the denial of the claim, or any part of it; b. specific reference(s) to pertinent provisions of the Plan upon which such denial was based; c. a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and d. an explanation of the claim review procedure set forth in Subparagraph C below, and of the Claimant's right to bring suit under ERISA if the claim is denied on review. C. Review of a Denied Claim. Within 60 days after receiving a notice from the Administrator that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): 1. may review pertinent documents; 2. may submit written comments or other documents; and/or 3. may request a hearing, which the Committee, in its sole discretion, may grant. D. Decision on Review. The Claimant's request for review shall be considered by the Committee (or by such other individual or individuals designated by the Committee to consider written appeals under the Plan). The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain specific reasons for the decision, specific reference(s) to the pertinent Plan provisions upon which the decision was based, and such other matters as the Committee deems relevant. E. Legal Action. A Claimant's compliance with the foregoing provisions of this Paragraph 18 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. Any such legal action must commence within six months of receipt of the Committee's decision on review. 19. Trust Fund. The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Company may establish one or more trusts, with such trustees as the Committee may approve, for the purpose of assisting in the payment of such benefits. Although such a trust may be irrevocable, its assets shall be held for payment of all of the Employer's general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, the Employer shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Employer. 20. Responsibility for Legal Effect. Neither party hereto makes any representations or warranties, express or implied, or assumes any responsibility concerning the legal, tax, or other implications or effects of this Plan. 21. Severability. If any provision of the Plan shall be found to be invalid or unenforceable by a court of competent jurisdiction, the validity or enforceability of the remaining provisions of the Plan shall remain in full force and effect. 22. Paragraph Headings. The Paragraph headings used in this Plan are for convenience of reference only and shall not be considered in construing this Plan. 23. Controlling Law. The Plan shall be construed in accordance with the laws of the state of Illinois.

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT WHEREAS, United National Insurance Company (the “Company”), a Pennsylvania corporation, is party to an amended and restated executive employment agreement dated as of January 1, 2005 (the “Agreement”) with Richard S. March (the “Executive”); WHEREAS, Section 13 of the Agreement provides that the Agreement may be amended pursuant to a written instrument signed by the Company and the Executive; and WHEREAS, the Company and the Executive desire that, in connection with the amendment of the agreements pursuant to which the Executive purchased shares and was granted options in Vigilant International, Ltd. (now United America Indemnity, Ltd.), the Agreement be amended so that it is consistent with such share and option agreements; and WHEREAS, the actions contemplated herein on behalf of the Company have been duly and validly authorized by all necessary action and no other proceedings on the part of the Company are necessary to consummate the actions contemplated herein. NOW THEREFORE, the Agreement is hereby amended in the following respects: 1. The second sentence of Section 4.3(c) is hereby deleted in its entirety. 2. Annex A of the Agreement is hereby restated in its entirety to read as follows: “Forfeiture of Options and Restricted, Common and Preferred Shares and Gains Realized upon Prior Option Exercises or Sale of Shares. The options granted pursuant to the Time Vesting Option Agreement between UAI and the Executive dated as of September 5, 2003, as amended, the Performance Vesting Option Agreement between UAI and the Executive dated as of September 5, 2003, as amended, and the Share Option Agreement between UAI and the Executive dated as of September 5, 2003, as amended, and the shares purchased pursuant to the Restricted Share Purchase Agreement between UAI and the Executive dated as of September 5, 2003, as amended (all four agreements collectively, the “Share/Option Agreements”) shall be subject to the cancellation and forfeiture provisions of each such Share/Option Agreement to which the Executive, by accepting and/or having accepted such options or shares, hereby agrees. In the event of the Executive’s breach or failure to comply with such provisions of the Share/Option Agreements (whether or not employed by the Company at such breach or failure to comply) (a “Forfeiture Event”), any repurchase of shares by the Company from the Executive and any recovery by the Company of “Award Gain” (as defined below) shall be subject to the following:   (i)   Company Repurchase of Shares. Payment with respect to any repurchase of shares by the Company from the Executive shall take the form of a three-year note from the Company or its designee, accruing interest at the lowest then applicable rate mandated by federal law, with the principal and interest due on the fifth anniversary of the date of purchase (or such later date as may be necessary to permit the Company or its designee to comply with any applicable borrowing covenants affecting its payment obligations), and shall be reduced to reflect any outstanding liabilities of the Executive to the Company or its Affiliates. The Executive promptly shall take all appropriate and necessary action to facilitate the buy back of such equity, including the prompt delivery to the Company (or its designee) of all share certificates or other documents that the Company may request.   (ii)   Recovery of Award Gain.   (a)   For purposes of this Annex A, the term “Award Gain” shall mean (I) in respect of a given options exercise, the product of (X) the fair market value per share at the date of such exercise (without regard to any subsequent change in the market price of such share) minus the exercise price times (Y) the number of shares as to which the options were exercised at that date, and (II), in respect of any sale of shares, the value of any cash or the fair market value of the shares or property paid or payable to the Executive less any cash or the fair market value of any shares or property (other than shares or options which would have itself been forfeitable hereunder and excluding any payment of tax withholding) paid by the Executive to the Company (or its designee) as a condition or in connection with the acquisition of such shares or amount otherwise included in subclause (i) above. (b) The Executive will be obligated to repay to the Company (or its designee), in cash, within ten (10) business days after demand is made therefor, by the Company (or its designee), the total amount of Award Gain realized by the Executive (I) upon each exercise of the Options that occurred on or after (A) the date that is six (6) months prior to the Forfeiture Event, if the Forfeiture Event occurred while the Executive was employed by the Company or a subsidiary or affiliate, or (B) the date that is six (6) months prior to the date that the Executive’s employment by the Company or a subsidiary or affiliate terminated, if the Forfeiture Event occurred after the Executive ceased to be so employed, or (II) upon any sale, transfer or other disposition of the Class A Common Shares of UAI.” INTENDED TO BE LEGALLY BOUND, the signatories hereto have been have caused this amendment to be executed as of the 1st day of January, 2006.       UNITED NATIONAL INSURANCE COMPANY By: /s/ Troy W. Thacker   EXECUTIVE By: /s/ Richard S. March       Name: Troy W. Thacker Title: Director   Name: Richard S. March      

Exhibit 10.7   REGISTRATION RIGHTS AGREEMENT   This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May 6, 2006, is by and among Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd., Continental Casualty Company, Maranello Holdings LLC, Scoggin IV LLC, Mr. Jeffrey Benjamin and Mr. Norman Brownstein (each, a “Holder,” together, the “Holders”) and SkyTerra Communications, Inc., a Delaware corporation (“SkyTerra”). Certain capitalized terms used herein are defined in Section 7 below.   RECITALS:   WHEREAS, pursuant to the agreements listed on Schedule A hereto (the “Merger/Purchase Agreements”), SkyTerra will issue an aggregate of 4,125,183 shares of its Common Stock (the “Acquired Shares”) to the Holders;   WHEREAS, in order to induce the Holders to consummate the transactions under the Merger/Purchase Agreements, SkyTerra has agreed to provide certain registration rights to the Holders on the terms and subject to the conditions set forth herein.   NOW, THEREFORE, the parties hereto hereby agree as follows:   SECTION 1.         REGISTRATION UNDER THE SECURITIES ACT.   1.1       REGISTRATION.   (A)           EACH OF THE PARTIES TO THIS AGREEMENT SHALL COOPERATE, AND SKYTERRA SHALL FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) AS SOON AS PRACTICABLE FOLLOWING THE DATE HEREOF, A REGISTRATION STATEMENT ON THE APPROPRIATE FORM FOR THE PURPOSE OF REGISTERING THE ACQUIRED SHARES UNDER THE SECURITIES ACT FOR RESALE BY HOLDERS OF THE ACQUIRED SHARES (THE “RESALE REGISTRATION STATEMENT”). SKYTERRA WILL CAUSE THE RESALE REGISTRATION STATEMENT TO COMPLY AS TO FORM IN ALL MATERIAL RESPECTS WITH THE APPLICABLE PROVISIONS OF THE SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER. SKYTERRA SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS, AND EACH OF THE HOLDERS WILL COOPERATE WITH SKYTERRA, TO HAVE THE RESALE REGISTRATION STATEMENT DECLARED EFFECTIVE BY THE SEC AS PROMPTLY AS PRACTICABLE.   (B)           SKYTERRA SHALL KEEP THE RESALE REGISTRATION STATEMENT EFFECTIVE (INCLUDING THROUGH THE FILING OF ANY REQUIRED POST-EFFECTIVE AMENDMENTS) UNTIL THE EARLIER TO OCCUR OF (I) SUCH TIME AS THE HOLDERS HAVE SOLD ALL OF THE ACQUIRED SHARES REGISTERED THEREUNDER OR (II) ONE YEAR FROM THE INITIAL CLOSING (AS DEFINED IN THE EXCHANGE AGREEMENT BY AND AMONG MOTIENT CORPORATION, MOTIENT VENTURES HOLDING INC., AND SKYTERRA COMMUNICATIONS, INC. DATED AS OF MAY 6, 2006); PROVIDED, THAT SUCH DATE SHALL BE EXTENDED BY THE AMOUNT OF TIME OF ANY PERIOD DURING WHICH THE HOLDERS MAY NOT USE THE RESALE REGISTRATION STATEMENT AS THE RESULT OF THE OCCURRENCE OF AN EVENT DESCRIBED IN SECTION 1.2(E) (II), (III) OR (IV) BELOW. THEREAFTER, SKYTERRA SHALL BE ENTITLED TO WITHDRAW THE RESALE REGISTRATION STATEMENT AND, UPON SUCH WITHDRAWAL, THE HOLDERS SHALL HAVE NO FURTHER RIGHT TO SELL ANY OF THE ACQUIRED SHARES PURSUANT TO THE RESALE REGISTRATION STATEMENT (OR ANY PROSPECTUS FORMING A PART THEREOF).   --------------------------------------------------------------------------------   1.2          REGISTRATION PROCEDURES. SUBJECT TO THE TERMS AND CONDITIONS HEREOF, SKYTERRA SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO EFFECT THE REGISTRATION AND THE DISPOSITION OF THE ACQUIRED SHARES IN ACCORDANCE WITH THE INTENDED METHOD OF DISPOSITION THEREOF, AND PURSUANT THERETO SKYTERRA SHALL AS EXPEDITIOUSLY AS PRACTICABLE:   (A)           PROMPTLY PREPARE AND FILE WITH THE SEC THE RESALE REGISTRATION STATEMENT WITH RESPECT TO THE ACQUIRED SHARES (AND ANY AMENDMENTS, INCLUDING ANY POST-EFFECTIVE AMENDMENTS OR SUPPLEMENTS TO THE RESALE REGISTRATION STATEMENT SKYTERRA DEEMS TO BE NECESSARY) AND USE ITS COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE RESALE REGISTRATION STATEMENT TO BECOME EFFECTIVE AND TO COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT APPLICABLE TO IT; PROVIDED, THAT BEFORE FILING THE RESALE REGISTRATION STATEMENT OR PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO, SKYTERRA SHALL FURNISH TO COUNSEL FOR THE HOLDERS COPIES OF ALL SUCH DOCUMENTS PROPOSED TO BE FILED, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT AND, IF REQUESTED BY THE HOLDERS, THE EXHIBITS INCORPORATED BY REFERENCE SO AS TO PROVIDE THE HOLDERS AND THEIR COUNSEL A REASONABLE OPPORTUNITY TO REVIEW AND COMMENT ON SUCH DOCUMENTS, AND SKYTERRA (I) WILL MAKE SUCH CHANGES AND ADDITIONS THERETO AS REASONABLY REQUESTED BY COUNSEL TO THE HOLDERS PRIOR TO FILING THE RESALE REGISTRATION STATEMENT OR AMENDMENT THERETO OR ANY PROSPECTUS OR ANY SUPPLEMENT THERETO AND (II) IF ANY OF THE HOLDERS ARE UNDERWRITERS OR CONTROLLING PERSONS OF SKYTERRA, WILL INCLUDE THEREIN MATERIAL RELATING TO THE HOLDERS OR THE PLAN OF DISTRIBUTION FOR THE ACQUIRED SHARES REGISTERED THEREUNDER, FURNISHED TO SKYTERRA IN WRITING, WHICH, IN THE REASONABLE JUDGMENT OF THE HOLDERS, SHOULD BE INCLUDED;   (B)           FURNISH TO THE HOLDERS SUCH NUMBER OF COPIES OF THE RESALE REGISTRATION STATEMENT, EACH AMENDMENT AND SUPPLEMENT THERETO, THE PROSPECTUS INCLUDED IN THE RESALE REGISTRATION STATEMENT AND SUCH OTHER DOCUMENTS AS THE HOLDERS MAY REASONABLY REQUEST IN ORDER TO FACILITATE THE DISPOSITION OF THE ACQUIRED SHARES REGISTERED THEREUNDER; PROVIDED, HOWEVER, THAT SKYTERRA SHALL HAVE NO OBLIGATION TO FURNISH COPIES OF A FINAL PROSPECTUS IF THE CONDITIONS OF RULE 172(C) UNDER THE SECURITIES ACT ARE SATISFIED BY SKYTERRA;   (C)           PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS AND SUPPLEMENTS TO THE RESALE REGISTRATION STATEMENT AND THE PROSPECTUS USED IN CONNECTION THEREWITH AS MAY BE NECESSARY TO KEEP THE RESALE REGISTRATION STATEMENT EFFECTIVE FOR THE TIME PERIOD AS SPECIFIED IN SECTION 1.1 IN ORDER TO COMPLETE THE DISPOSITION OF THE ACQUIRED SHARES COVERED BY THE RESALE REGISTRATION STATEMENT AND COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT WITH RESPECT TO THE DISPOSITION OF ALL ACQUIRED SHARES COVERED BY THE RESALE REGISTRATION STATEMENT DURING SUCH PERIOD IN ACCORDANCE WITH THE INTENDED METHODS OF DISPOSITION THEREOF AS SET FORTH IN THE RESALE REGISTRATION STATEMENT;   (D)           USE ITS COMMERCIALLY REASONABLE EFFORTS TO REGISTER OR QUALIFY THE ACQUIRED SHARES UNDER SUCH OTHER SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTIONS AS THE HOLDERS REASONABLY REQUEST AND DO ANY AND ALL OTHER ACTS AND THINGS WHICH MAY BE REASONABLY NECESSARY OR ADVISABLE TO ENABLE THE HOLDERS TO CONSUMMATE THE DISPOSITION OF THE ACQUIRED SHARES IN SUCH JURISDICTIONS OF (PROVIDED THAT SKYTERRA SHALL NOT BE REQUIRED TO (I) QUALIFY GENERALLY TO DO BUSINESS IN ANY JURISDICTION WHERE   2 --------------------------------------------------------------------------------   IT WOULD NOT OTHERWISE BE REQUIRED TO QUALIFY BUT FOR THIS SUBSECTION, (II) SUBJECT ITSELF TO TAXATION IN ANY SUCH JURISDICTION OR (III) CONSENT TO GENERAL SERVICE OF PROCESS IN ANY SUCH JURISDICTION);   (E)           NOTIFY THE HOLDERS, AT ANY TIME WHEN A PROSPECTUS RELATING THERETO IS REQUIRED TO BE DELIVERED UNDER THE SECURITIES ACT, (I) WHEN THE RESALE REGISTRATION STATEMENT OR ANY POST-EFFECTIVE AMENDMENT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, (II) OF ANY WRITTEN REQUEST BY THE SEC FOR AMENDMENTS OR SUPPLEMENTS TO THE RESALE REGISTRATION STATEMENT OR PROSPECTUS, (III) OF THE HAPPENING OF ANY EVENT AS A RESULT OF WHICH THE PROSPECTUS INCLUDED IN THE RESALE REGISTRATION STATEMENT CONTAINS AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS ANY FACT NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING (WHEREUPON THE HOLDERS SHALL IMMEDIATELY CEASE ANY OFFERS, SALES OR OTHER DISTRIBUTION OF ACQUIRED SHARES REGISTERED THEREUNDER), AND, SUBJECT TO 1.3(C), SKYTERRA SHALL PROMPTLY PREPARE A SUPPLEMENT OR AMENDMENT TO SUCH PROSPECTUS SO THAT, AS THEREAFTER USED BY THE HOLDERS FOR THE RESALE OF THE ACQUIRED SHARES, SUCH PROSPECTUS SHALL NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY FACT NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, AND (IV) OF THE ISSUANCE OF ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE RESALE REGISTRATION STATEMENT, OR OF ANY ORDER SUSPENDING OR PREVENTING THE USE OF ANY RELATED PROSPECTUS OR SUSPENDING THE QUALIFICATION OF ANY OF THE ACQUIRED SHARES INCLUDED IN THE RESALE REGISTRATION STATEMENT FOR SALE OR DISTRIBUTION IN ANY JURISDICTION;   (F)            IN THE EVENT OF THE ISSUANCE OF ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE RESALE REGISTRATION STATEMENT, OR OF ANY ORDER SUSPENDING OR PREVENTING THE USE OF ANY RELATED PROSPECTUS OR SUSPENDING THE QUALIFICATION OF ANY ACQUIRED SHARES INCLUDED IN THE RESALE REGISTRATION STATEMENT FOR SALE OR DISTRIBUTION IN ANY JURISDICTION, SKYTERRA SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS PROMPTLY TO OBTAIN THE WITHDRAWAL OF SUCH ORDER AND SHALL PREPARE AND FILE AN AMENDED OR SUPPLEMENTED PROSPECTUS, IF REQUIRED; AND   (G)           PROVIDE A TRANSFER AGENT AND REGISTRAR FOR ALL THE ACQUIRED SHARES NOT LATER THAN THE EFFECTIVE DATE OF THE RESALE REGISTRATION STATEMENT;   (H)           USE ITS COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE ACQUIRED SHARES COVERED BY THE RESALE REGISTRATION STATEMENT TO BE REGISTERED WITH OR APPROVED BY SUCH OTHER GOVERNMENTAL AGENCIES OR AUTHORITIES AS MAY BE NECESSARY TO ENABLE THE HOLDERS TO COMPLETE THE DISPOSITION OF THE ACQUIRED SHARES COVERED BY THE REGISTRATION STATEMENT AND COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT WITH RESPECT TO THE DISPOSITION OF ALL ACQUIRED SHARES COVERED BY THE RESALE REGISTRATION STATEMENT DURING SUCH PERIOD IN ACCORDANCE WITH THE INTENDED METHODS OF DISPOSITION BY THE HOLDERS THEREOF SET FORTH IN THE RESALE REGISTRATION STATEMENT;   (I)            MAKE AVAILABLE FOR INSPECTION BY THE HOLDERS, ANY UNDERWRITER PARTICIPATING IN ANY DISPOSITION PURSUANT TO THE RESALE REGISTRATION STATEMENT ON BEHALF OF THE HOLDERS, AND ANY ATTORNEY, ACCOUNTANT OR OTHER AGENT RETAINED BY THE HOLDERS OR THE   3 --------------------------------------------------------------------------------   UNDERWRITER, ALL FINANCIAL AND OTHER RECORDS, PERTINENT CORPORATE DOCUMENTS AND PROPERTIES OF SKYTERRA, AND CAUSE SKYTERRA’S OFFICERS, MANAGERS, EMPLOYEES AND INDEPENDENT ACCOUNTANTS TO SUPPLY ALL INFORMATION REASONABLY REQUESTED BY THE HOLDERS AND SUCH UNDERWRITERS, ATTORNEYS, ACCOUNTANTS OR AGENTS IN CONNECTION WITH THE RESALE REGISTRATION STATEMENT; AND   (J)            MAKE GENERALLY AVAILABLE TO ITS STOCKHOLDERS A CONSOLIDATED EARNINGS STATEMENT (WHICH NEED NOT BE AUDITED) FOR THE 12 MONTHS BEGINNING AFTER THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT AS SOON AS REASONABLY PRACTICABLE AFTER THE END OF SUCH PERIOD, WHICH EARNINGS STATEMENT SHALL SATISFY THE REQUIREMENTS OF AN EARNING STATEMENT UNDER SECTION 11(A) OF THE SECURITIES ACT.   1.3          OTHER PROCEDURAL MATTERS.   (A)           SEC CORRESPONDENCE. SKYTERRA SHALL MAKE AVAILABLE TO THE HOLDERS PROMPTLY AFTER THE SAME IS PREPARED AND PUBLICLY DISTRIBUTED, FILED WITH THE SEC, OR RECEIVED BY SKYTERRA, ONE COPY OF THE RESALE REGISTRATION STATEMENT AND ANY AMENDMENT THERETO, EACH PRELIMINARY PROSPECTUS AND EACH AMENDMENT OR SUPPLEMENT THERETO, EACH LETTER WRITTEN BY OR ON BEHALF OF SKYTERRA TO THE SEC OR THE STAFF OF THE SEC (OR OTHER GOVERNMENTAL AGENCY OR SELF-REGULATORY BODY OR OTHER BODY HAVING JURISDICTION, INCLUDING ANY DOMESTIC OR FOREIGN SECURITIES EXCHANGE), IN EACH CASE RELATING TO THE RESALE REGISTRATION STATEMENT. SKYTERRA WILL PROMPTLY RESPOND TO ANY AND ALL COMMENTS RECEIVED FROM THE SEC, WITH A VIEW TOWARDS CAUSING THE RESALE REGISTRATION STATEMENT OR ANY AMENDMENT THERETO TO BE DECLARED EFFECTIVE BY THE SEC AS SOON AS PRACTICABLE AND SHALL FILE AN ACCELERATION REQUEST AS SOON AS PRACTICABLE FOLLOWING THE RESOLUTION OR CLEARANCE OF ALL SEC COMMENTS OR, IF APPLICABLE, FOLLOWING NOTIFICATION BY THE SEC THAT THE RESALE REGISTRATION STATEMENT OR ANY AMENDMENT THERETO WILL NOT BE SUBJECT TO REVIEW.   (B)           SKYTERRA MAY REQUIRE THE HOLDERS TO FURNISH TO SKYTERRA ANY OTHER INFORMATION REGARDING THE HOLDERS AND THE DISPOSITION OF THE ACQUIRED SHARES, INCLUDING WITHOUT LIMITATION THE PLAN OF DISTRIBUTION OF THE ACQUIRED SHARES, AS SKYTERRA REASONABLY DETERMINES, IS REQUIRED TO BE INCLUDED IN THE RESALE REGISTRATION STATEMENT.   (C)           EACH OF THE HOLDERS AGREES THAT, UPON NOTICE FROM SKYTERRA OF THE HAPPENING OF ANY EVENT AS A RESULT OF WHICH THE PROSPECTUS INCLUDED IN THE RESALE REGISTRATION STATEMENT CONTAINS AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING (A “SUSPENSION NOTICE”), SUCH HOLDER WILL FORTHWITH DISCONTINUE DISPOSITION OF ACQUIRED SHARES PURSUANT TO THE RESALE REGISTRATION STATEMENT UNTIL THE HOLDERS ARE ADVISED IN WRITING BY SKYTERRA THAT THE USE OF THE PROSPECTUS MAY BE RESUMED AND ARE FURNISHED WITH A SUPPLEMENTED OR AMENDED PROSPECTUS AS CONTEMPLATED BY SECTION 1.2 HEREOF; PROVIDED, HOWEVER, THAT SUCH POSTPONEMENT OF SALES OF ACQUIRED SHARES BY THE HOLDERS SHALL NOT IN ANY EVENT EXCEED (I) TWENTY (20) CONSECUTIVE DAYS OR (II) FORTY-FIVE (45) DAYS IN THE AGGREGATE IN ANY 12 MONTH PERIOD. IF SKYTERRA SHALL GIVE THE HOLDERS ANY SUSPENSION NOTICE, SKYTERRA SHALL EXTEND THE PERIOD OF TIME DURING WHICH SKYTERRA IS REQUIRED TO MAINTAIN THE RESALE REGISTRATION STATEMENT EFFECTIVE   4 --------------------------------------------------------------------------------   PURSUANT TO THIS AGREEMENT BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH SUSPENSION NOTICE TO AND INCLUDING THE DATE THE HOLDERS EITHER ARE ADVISED BY SKYTERRA THAT THE USE OF THE PROSPECTUS MAY BE RESUMED. IN ANY EVENT, SKYTERRA SHALL NOT BE ENTITLED TO DELIVER MORE THAN A TOTAL OF THREE (3) SUSPENSION NOTICES IN ANY 12 MONTH PERIOD.   (D)           NEITHER SKYTERRA NOR THE HOLDERS SHALL PERMIT ANY OFFICER, MANAGER, UNDERWRITER, BROKER OR ANY OTHER PERSON ACTING ON BEHALF OF SKYTERRA TO USE ANY FREE WRITING PROSPECTUS (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) IN CONNECTION WITH THE RESALE REGISTRATION STATEMENT FILED PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF SKYTERRA, THE HOLDERS AND ANY UNDERWRITER.   1.4          EXPENSES.   (A)           REGISTRATION EXPENSES. ALL REGISTRATION EXPENSES SHALL BE BORNE BY SKYTERRA.   (B)           SELLING EXPENSES. ALL EXPENSES INCIDENT TO THE HOLDERS’ PERFORMANCE OF OR COMPLIANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ALL FEES AND EXPENSES OF COUNSEL FOR THE HOLDERS, FEES AND EXPENSES OF THE HOLDERS’ TRANSFER AGENT, AND ANY BROKER OR DEALER DISCOUNTS OR COMMISSIONS ATTRIBUTABLE TO THE DISPOSITION OF ACQUIRED SHARES SHALL BE BORNE SOLELY BY THE HOLDERS, AS INCURRED BY EACH OR ON A PRO RATA BASIS FOR SHARED EXPENSES, AS APPLICABLE.   SECTION 2.         LOCKUP AGREEMENT.   2.1          EACH OF THE HOLDERS HEREBY AGREES TO NOT EFFECT ANY PUBLIC SALE OR DISTRIBUTION (INCLUDING ANY SALES PURSUANT TO RULE 144) OF EQUITY SECURITIES OF SKYTERRA, OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR SUCH SECURITIES, DURING THE SEVEN DAYS PRIOR TO AND THE 90-DAY PERIOD BEGINNING ON THE EFFECTIVE DATE OF ANY UNDERWRITTEN REGISTERED PUBLIC OFFERING OF EQUITY SECURITIES OF SKYTERRA OR SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO OR EXERCISABLE FOR EQUITY SECURITIES OF SKYTERRA (EXCEPT AS PART OF SUCH UNDERWRITTEN REGISTRATION), UNLESS THE UNDERWRITERS MANAGING THE REGISTERED PUBLIC OFFERING OTHERWISE CONSENT IN WRITING, AND EACH OF THE HOLDERS WILL DELIVER AN UNDERTAKING TO THE MANAGING UNDERWRITERS (IF REQUESTED) CONSISTENT WITH THIS COVENANT. THE HOLDERS SHALL NOT BE OBLIGATED TO COMPLY WITH THE PROVISIONS OF THIS SECTION 2.1 MORE THAN TWO TIMES IN ANY 12-MONTH PERIOD.   SECTION 3.         INDEMNIFICATION.   3.1          INDEMNIFICATION BY SKYTERRA. SKYTERRA AGREES TO INDEMNIFY, TO THE EXTENT PERMITTED BY LAW, EACH OF THE HOLDERS, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AFFILIATES AND EACH PERSON WHO CONTROLS THE HOLDERS (WITHIN THE MEANING OF THE SECURITIES ACT) AGAINST ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, AND EXPENSES CAUSED BY ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF MATERIAL FACT CONTAINED IN THE RESALE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART OF THE RESALE REGISTRATION STATEMENT OR ANY “ISSUER FREE WRITING PROSPECTUS” (AS DEFINED IN SECURITIES ACT RULE 433), OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO OR ANY OMISSION OR ALLEGED OMISSION OF 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 ANY VIOLATION OR ALLEGED VIOLATION BY SKYTERRA OF THE SECURITIES ACT, THE EXCHANGE ACT OR APPLICABLE “BLUE SKY” LAWS,   5 --------------------------------------------------------------------------------   EXCEPT INSOFAR AS THE SAME ARE MADE IN RELIANCE AND IN CONFORMITY WITH ANY INFORMATION FURNISHED IN WRITING TO SKYTERRA BY THE HOLDERS EXPRESSLY FOR USE THEREIN OR BY THE FAILURE OF THE HOLDERS TO DELIVER A COPY OF SUCH REGISTRATION STATEMENT OR PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO AS REQUIRED BY LAW AFTER SKYTERRA HAS FURNISHED THE HOLDERS WITH A SUFFICIENT NUMBER OF COPIES OF THE SAME.   3.2          INDEMNIFICATION BY THE HOLDERS. IN CONNECTION WITH THE RESALE REGISTRATION STATEMENT IN WHICH ANY HOLDER IS PARTICIPATING, EACH SUCH HOLDER SHALL FURNISH TO SKYTERRA IN WRITING SUCH INFORMATION AS SKYTERRA REASONABLY REQUESTS FOR USE IN CONNECTION WITH ANY SUCH REGISTRATION STATEMENT OR PROSPECTUS AND, TO THE EXTENT PERMITTED BY LAW, EACH HOLDER SHALL INDEMNIFY SKYTERRA, ITS DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES, AND EACH PERSON WHO CONTROLS SKYTERRA (WITHIN THE MEANING OF THE SECURITIES ACT), AGAINST ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES, AND EXPENSES RESULTING FROM ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF MATERIAL FACT CONTAINED IN THE RESALE REGISTRATION STATEMENT, THE PROSPECTUS OR PRELIMINARY PROSPECTUS FORMING A PART OF THE RESALE REGISTRATION STATEMENT OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO OR ANY OMISSION OR ALLEGED OMISSION OF 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, BUT ONLY TO THE EXTENT THAT ANY INFORMATION SO FURNISHED IN WRITING BY SUCH HOLDER CONTAINS SUCH UNTRUE STATEMENT OR OMITS A MATERIAL FACT REQUIRED TO BE STATED THEREIN NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING; PROVIDED, HOWEVER, THAT THE OBLIGATION OF ANY HOLDER TO INDEMNIFY SKYTERRA HEREUNDER SHALL BE LIMITED TO THE NET PROCEEDS TO SUCH HOLDER FROM THE SALE OF SUCH HOLDER’S ACQUIRED SHARES PURSUANT TO THE RESALE REGISTRATION STATEMENT.   3.3          INDEMNIFICATION PROCEDURES. ANY PERSON ENTITLED TO INDEMNIFICATION HEREUNDER SHALL (I) GIVE PROMPT WRITTEN NOTICE TO THE INDEMNIFYING PARTY OF ANY CLAIM WITH RESPECT TO WHICH IT SEEKS INDEMNIFICATION (PROVIDED THAT THE FAILURE TO GIVE PROMPT NOTICE SHALL NOT IMPAIR ANY PERSON’S RIGHT TO INDEMNIFICATION HEREUNDER TO THE EXTENT SUCH FAILURE HAS NOT PREJUDICED THE INDEMNIFYING PARTY) AND (II) UNLESS IN SUCH INDEMNIFIED PARTY’S REASONABLE JUDGMENT A CONFLICT OF INTEREST BETWEEN SUCH INDEMNIFIED AND INDEMNIFYING PARTIES MAY EXIST WITH RESPECT TO SUCH CLAIM, PERMIT SUCH INDEMNIFYING PARTY TO ASSUME THE DEFENSE OF SUCH CLAIM WITH COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY. IF SUCH DEFENSE IS ASSUMED, THE INDEMNIFYING PARTY SHALL NOT BE SUBJECT TO ANY LIABILITY FOR ANY SETTLEMENT MADE BY THE INDEMNIFIED PARTY WITHOUT ITS CONSENT (BUT SUCH CONSENT SHALL NOT BE UNREASONABLY WITHHELD). AN INDEMNIFYING PARTY WHO IS NOT ENTITLED TO, OR ELECTS NOT TO, ASSUME THE DEFENSE OF A CLAIM SHALL NOT BE OBLIGATED TO PAY THE FEES AND EXPENSES OF MORE THAN ONE COUNSEL (IN ADDITION TO LOCAL COUNSEL) FOR ALL PARTIES INDEMNIFIED BY SUCH INDEMNIFYING PARTY WITH RESPECT TO SUCH CLAIM, UNLESS IN THE REASONABLE JUDGMENT OF ANY INDEMNIFIED PARTY THERE MAY BE ONE OR MORE LEGAL OR EQUITABLE DEFENSES AVAILABLE TO SUCH INDEMNIFIED PARTY THAT ARE IN ADDITION TO OR MAY CONFLICT WITH THOSE AVAILABLE TO ANOTHER INDEMNIFIED PARTY WITH RESPECT TO SUCH CLAIM. FAILURE TO GIVE PROMPT WRITTEN NOTICE SHALL NOT RELEASE THE INDEMNIFYING PARTY FROM ITS OBLIGATIONS HEREUNDER.   3.4          INVESTIGATION; CONTRIBUTION. THE INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF THE INDEMNIFIED PARTY OR ANY OFFICER, DIRECTOR, OR CONTROLLING PERSON OF SUCH INDEMNIFIED PARTY AND SHALL SURVIVE THE TRANSFER OF SECURITIES. IF THE INDEMNIFICATION PROVIDED UNDER SECTION 3.1 OR SECTION 3.2 OF THIS AGREEMENT IS HELD BY A COURT TO BE UNAVAILABLE OR UNENFORCEABLE IN RESPECT OF ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES REFERRED TO HEREIN, THEN EACH APPLICABLE   6 --------------------------------------------------------------------------------   INDEMNIFYING PARTY, IN LIEU OF INDEMNIFYING SUCH INDEMNIFIED PARTY, SHALL CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PERSON AS A RESULT OF SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE FAULT OF THE INDEMNIFYING PARTY ON THE ONE HAND AND OF THE INDEMNIFIED PARTY ON THE OTHER IN CONNECTION WITH THE STATEMENTS OR OMISSIONS THAT RESULT IN SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. THE RELATIVE FAULT OF THE INDEMNIFYING PARTY ON THE ONE HAND AND OF THE INDEMNIFIED PERSON ON THE OTHER SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER THE UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT OR THE OMISSION OR ALLEGED OMISSION TO STATE A MATERIAL FACT RELATES TO INFORMATION SUPPLIED BY THE INDEMNIFYING PARTY OR BY THE INDEMNIFIED PARTY, AND BY SUCH PARTY’S RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO CORRECT OR PREVENT SUCH STATEMENT OR OMISSION. IN NO EVENT SHALL THE LIABILITY OF THE HOLDERS FOR CONTRIBUTION PURSUANT TO THIS SECTION 3.4 BE GREATER THAN THE AMOUNT FOR WHICH THE HOLDERS WOULD HAVE BEEN LIABLE PURSUANT TO SECTION 3.2 HAD INDEMNIFICATION BEEN AVAILABLE AND ENFORCEABLE.   SECTION 4.         RULE 144 TRANSACTIONS.   4.1          UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144 TRANSACTIONS. FOR AS LONG AS THE HOLDERS CONTINUE TO HOLD ANY ACQUIRED SHARES, SKYTERRA SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO FILE WITH THE SEC, ON A TIMELY BASIS, ALL ANNUAL, QUARTERLY AND OTHER PERIODIC REPORTS REQUIRED TO BE FILED BY IT UNDER SECTIONS 13 AND 15(D) OF THE EXCHANGE ACT, AND THE RULES AND REGULATIONS THEREUNDER; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE CONSTRUED TO REQUIRE SKYTERRA TO PREPARE AND FILE PERIODIC REPORTS IF IT IS NOT REQUIRED TO DO SO UNDER THE EXCHANGE ACT. IN THE EVENT OF ANY PROPOSED SALE BY THE HOLDERS OF ACQUIRED SHARES PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR OTHERWISE AS PROVIDED HEREIN, WHICH SALE IS TO BE MADE IN ACCORDANCE WITH THE TERMS OF SECTION 5.1(B) HEREOF, SKYTERRA SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO COOPERATE WITH THE HOLDERS SO AS TO ENABLE SUCH SALES TO BE MADE IN ACCORDANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS, THE REQUIREMENTS OF THE TRANSFER AGENT OF SKYTERRA, AND THE REASONABLE REQUIREMENTS OF THE BROKER THROUGH WHICH THE SALES ARE PROPOSED TO BE EXECUTED, AND SHALL, UPON WRITTEN REQUEST, FURNISH UNLEGENDED CERTIFICATES REPRESENTING OWNERSHIP OF ACQUIRED SHARES SOLD THEREBY, SUCH CERTIFICATES TO BE FURNISHED IN SUCH NUMBERS AND DENOMINATIONS AS THE HOLDERS MAY REASONABLY REQUEST.   SECTION 5.         RESTRICTIONS ON TRANSFER.   5.1          PERMITTED TRANSFERS. EACH OF THE HOLDERS HEREBY AGREES THAT, UNTIL IT AND ANY PERMITTED TRANSFEREES UNDER PARAGRAPH (E) OR (F) HEREUNDER HAVE DISPOSED OF ALL OF THE ACQUIRED SHARES, IT WILL NOT, DIRECTLY OR INDIRECTLY, WITHOUT THE PRIOR WRITTEN CONSENT OF SKYTERRA, SELL, DISTRIBUTE, TRANSFER OR OTHERWISE DISPOSE (IN EACH CASE, A “DISPOSITION”) OF ANY ACQUIRED SHARES EXCEPT:   (A)           SALES OF ACQUIRED SHARES PURSUANT TO THE RESALE REGISTRATION STATEMENT; OR   (B)           SALES OF ACQUIRED SHARES PURSUANT TO RULE 144 (BUT NOT PARAGRAPH (K) THEREOF) UNDER THE SECURITIES ACT; OR   7 --------------------------------------------------------------------------------   (C)           SALES OR TRANSFERS OF ACQUIRED SHARES TO ANY PERSON OR GROUP OF RELATED PERSONS WHO WOULD IMMEDIATELY THEREAFTER NOT OWN OR HAVE THE RIGHT TO ACQUIRE OR VOTE WITH RESPECT TO ACQUIRED SHARES CONSISTING OF, IN THE AGGREGATE, MORE THAN FIVE PERCENT (5%) OF THE TOTAL COMBINED VOTING POWER OF ALL ACQUIRED SHARES THEN OUTSTANDING; PROVIDED, HOWEVER, THAT IN EACH SUCH CASE, THE TRANSFEREE SHALL RECEIVE AND HOLD SUCH ACQUIRED SHARES SUBJECT TO, AND THE TRANSFEREE AND ALL OF THE TRANSFEREES’ AFFILIATES SHALL AGREE TO BE BOUND BY, ALL THE TERMS OF THIS AGREEMENT, WHICH TERMS SHALL ALSO INURE TO THE BENEFIT OF SUCH TRANSFEREES, AND THERE SHALL BE NO FURTHER TRANSFER OF SUCH ACQUIRED SHARES, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 5.1; OR   (D)           A BONA FIDE PLEDGE OF OR THE GRANTING OF A SECURITY INTEREST IN THE ACQUIRED SHARES TO AN INSTITUTIONAL LENDER FOR MONEY BORROWED, PROVIDED THAT SUCH LENDER ACKNOWLEDGES IN WRITING THAT IT HAS RECEIVED A COPY OF THIS AGREEMENT AND AGREES, UPON ITS BECOMING THE OWNER OF, OR OBTAINING DISPOSITIVE AUTHORITY WITH RESPECT TO OR IN CONNECTION WITH ANY DISPOSITION OF, ANY SUCH ACQUIRED SHARES, TO BE BOUND BY THE PROVISIONS OF THIS AGREEMENT IN CONNECTION WITH ANY RIGHT IT MAY HAVE TO DISPOSE OF ANY SUCH ACQUIRED SHARES (AND, UPON AGREEING SO TO BE BOUND, THE PROVISIONS OF THIS AGREEMENT SHALL INURE TO THE BENEFIT OF SUCH PARTY); OR   (E)           SALES OR TRANSFERS OF ACQUIRED SHARES PURSUANT TO A TENDER OR EXCHANGE OFFER WHICH THE BOARD OF DIRECTORS OF SKYTERRA DOES NOT OPPOSE WITHIN 10 BUSINESS DAYS AFTER THE DATE OF COMMENCEMENT (AS SUCH TERM IS DEFINED IN RULE 14D-2(A) OF THE GENERAL RULES AND REGULATIONS UNDER THE EXCHANGE ACT) OF SUCH OFFER; OR   (F)            DISPOSITIONS OF ACQUIRED SHARES BY ANY HOLDER TO ANY WHOLLY OWNED SUBSIDIARY OF SUCH HOLDER OR TO A SUCCESSOR CORPORATION OF SUCH HOLDER; PROVIDED, HOWEVER, THAT IN EACH SUCH CASE, THE TRANSFEREE SHALL RECEIVE AND HOLD SUCH ACQUIRED SHARES SUBJECT TO, AND THE TRANSFEREE AND ALL OF THE TRANSFEREES’ AFFILIATES SHALL AGREE TO BE BOUND BY, ALL THE TERMS OF THIS AGREEMENT, WHICH TERMS SHALL ALSO INURE TO THE BENEFIT OF SUCH TRANSFEREES, AND THERE SHALL BE NO FURTHER TRANSFER OF SUCH ACQUIRED SHARES, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 5.1; OR   (G)           DISPOSITIONS PURSUANT TO ANY MERGER, CONSOLIDATION, REORGANIZATION OR RECAPITALIZATION TO WHICH SKYTERRA IS A PARTY OR IN CONNECTION WITH ANY RECLASSIFICATION OF ACQUIRED SHARES.   provided, that in the event that any Seller seeks to effect a Disposition of any Acquired Shares pursuant to clauses (b), (c) or (f) of this Section 5.1, (i) such Disposition is made in compliance with applicable securities laws, and (ii) prior to such Disposition, such Seller shall have delivered to SkyTerra an opinion of counsel stating that such Disposition (A) is permitted by this Agreement and the applicable Merger / Purchase Agreement on Schedule A hereto, (B) does not require registration under the Securities Act, and (C) does not cause the applicable Merger / Purchase Agreement to be required to have been registered under the Securities Act and that this Agreement is enforceable against the transferee of such Acquired Shares.   8 --------------------------------------------------------------------------------   SECTION 6.         INTENTIONALLY OMITTED   SECTION 7.         DEFINITIONS.   “Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly or through one or more intermediaries, controls, is controlled by or is under common control with such specified Person.   “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any successor statute.   “Person” means any individual, firm, partnership, corporation, trust, joint venture, limited liability company, association, joint stock company, unincorporated organization, or any other entity or organization, including a governmental entity or any department, agency, or political subdivision thereof.   “Registration Expenses” means all expenses incident to SkyTerra’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, fees with respect to filings required to be made with the NASD, printing expenses, messenger and delivery and mailing expenses, fees and disbursements of custodians, and fees and disbursements of counsel for SkyTerra and all independent certified public accountants retained by SkyTerra and other Persons retained by SkyTerra.   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any successor statute.   SECTION 8.         MISCELLANEOUS.   8.1          LEGENDS AND STOP TRANSFER ORDERS.   (A)           EACH OF THE HOLDERS HEREBY AGREES THAT ALL CERTIFICATES REPRESENTING ACQUIRED SHARES SHALL HAVE THE FOLLOWING LEGEND (OR OTHER LEGEND TO THE SAME EFFECT): “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS PURSUANT TO THE PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT, DATED MAY 6, 2006, BY AND AMONG THE HOLDERS (AS DEFINED THEREIN) AND SKYTERRA COMMUNICATIONS, INC., A COPY OF WHICH IS ON FILE WITH EACH HOLDER OR THE OFFICE OF THE CORPORATE SECRETARY THEREOF.”   (B)           EACH OF THE HOLDERS HEREBY AGREES TO THE ENTRY OF STOP TRANSFER ORDERS WITH THE TRANSFER AGENT AND REGISTRAR OF THE ACQUIRED SHARES AGAINST THE TRANSFER (OTHER THAN IN COMPLIANCE WITH THIS AGREEMENT) OF LEGENDED SECURITIES HELD BY THE HOLDERS (OR THEIR PERMITTED TRANSFEREES UNDER SECTION 5.1(F) OR (G) HEREOF).   (C)           SKYTERRA AGREES TO REMOVE ANY STOP TRANSFER ORDERS PROVIDED IN PARAGRAPH (B) ABOVE IN SUFFICIENT TIME TO PERMIT ANY PARTY TO MAKE ANY TRANSFER PERMITTED BY THE TERMS OF THIS AGREEMENT.   9 --------------------------------------------------------------------------------   8.2          CONSOLIDATION OR MERGER OF SKYTERRA.   For as long as the Holders continue to hold any Acquired Shares, if any of the following events (collectively, a “SkyTerra Change of Control”) occurs, namely:   (A)           ANY RECLASSIFICATION OR EXCHANGE OF THE OUTSTANDING ACQUIRED SHARES (OTHER THAN A CHANGE IN PAR VALUE, OR FROM PAR VALUE TO NO PAR VALUE, OR FROM NO PAR VALUE TO PAR VALUE, OR AS A RESULT OF A SUBDIVISION OR COMBINATION);   (B)           ANY MERGER, CONSOLIDATION, STATUTORY SHARE EXCHANGE OR COMBINATION OF SKYTERRA WITH ANOTHER CORPORATION AS A RESULT OF WHICH HOLDERS OF ACQUIRED SHARES SHALL BE ENTITLED TO RECEIVE STOCK OR OTHER SECURITIES WITH RESPECT TO OR IN EXCHANGE FOR SUCH ACQUIRED SHARES; OR   (C)           ANY SALE OR CONVEYANCE OF THE PROPERTIES AND ASSETS OF SKYTERRA AS, OR SUBSTANTIALLY AS, AN ENTIRETY TO ANY OTHER CORPORATION AS A RESULT OF WHICH HOLDERS OF ACQUIRED SHARES SHALL BE ENTITLED TO RECEIVE STOCK OR OTHER SECURITIES WITH RESPECT TO OR IN EXCHANGE FOR SUCH ACQUIRED SHARES;   SkyTerra shall enter into, or SkyTerra shall cause the successor or purchasing corporation to enter into, as the case may be, an agreement with the Holders that provides the Holders with substantially similar rights as provided in this Agreement with respect to the stock or other securities to be issued in the SkyTerra Change of Control transaction with respect to or in exchange for the Acquired Shares.   8.3          SPECIFIC PERFORMANCE. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTIES WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES. IT IS ACCORDINGLY AGREED THAT THE PARTIES HERETO SHALL AND DO HEREBY WAIVE THE DEFENSE IN ANY ACTION FOR SPECIFIC PERFORMANCE THAT A REMEDY AT LAW WOULD BE ADEQUATE AND THAT THE PARTIES HERETO, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, SHALL BE ENTITLED TO COMPEL SPECIFIC PERFORMANCE OF THIS AGREEMENT IN ANY ACTION INSTITUTED HEREUNDER.   8.4          AMENDMENTS AND WAIVERS. THE FAILURE OF ANY PARTY TO ENFORCE ANY OF THE PROVISIONS OF THIS AGREEMENT SHALL IN NO WAY BE CONSTRUED AS A WAIVER OF SUCH PROVISIONS AND SHALL NOT AFFECT THE RIGHT OF SUCH PARTY THEREAFTER TO ENFORCE EACH AND EVERY PROVISION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS. NO MODIFICATION, AMENDMENT, OR WAIVER OF ANY PROVISION OF THIS AGREEMENT SHALL BE EFFECTIVE AGAINST THE HOLDERS OR SKYTERRA EXCEPT BY A WRITTEN AGREEMENT SIGNED BY EACH OF THE HOLDERS AND SKYTERRA.   8.5          SUCCESSORS AND ASSIGNS. ALL COVENANTS AND AGREEMENTS IN THIS AGREEMENT BY OR ON BEHALF OF ANY OF THE PARTIES HERETO SHALL BIND AND INURE TO THE BENEFIT OF THE RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS OF THE PARTIES HERETO WHETHER SO EXPRESSED OR NOT INCLUDING, WITHOUT LIMITATION, ANY PERSON WHICH IS THE SUCCESSOR TO ANY OF THE HOLDERS OR SKYTERRA.   8.6          SEVERABILITY. IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF THIS AGREEMENT, OR ANY PART THEREOF, IS HELD BY A COURT OF COMPETENT JURISDICTION OR ANY FOREIGN FEDERAL, STATE, COUNTY, OR LOCAL GOVERNMENT OR ANY OTHER GOVERNMENTAL, REGULATORY, OR ADMINISTRATIVE AGENCY OR AUTHORITY TO BE INVALID, VOID, UNENFORCEABLE, OR AGAINST PUBLIC POLICY FOR ANY REASON, THE REMAINDER OF THE TERMS,   10 --------------------------------------------------------------------------------   PROVISIONS, COVENANTS, AND RESTRICTIONS OF THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL IN NO WAY BE AFFECTED, IMPAIRED, OR INVALIDATED.   8.7          ENTIRE AGREEMENT. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THIS DOCUMENT EMBODIES THE COMPLETE AGREEMENT AND UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES AND PREEMPTS ANY PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG THE PARTIES, WRITTEN OR ORAL, WHICH MAY HAVE RELATED TO THE SUBJECT MATTER HEREOF IN ANY WAY.   8.8          COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT, AND IT SHALL NOT BE NECESSARY IN MAKING PROOF OF THIS AGREEMENT TO PRODUCE OR ACCOUNT FOR MORE THAN ONE SUCH COUNTERPART.   8.9          HEADINGS. THE HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT LIMIT OR OTHERWISE AFFECT THE MEANING OF TERMS CONTAINED HEREIN.   8.10        GOVERNING LAW; CONSENT OF EXCLUSIVE JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. THE PARTIES HERETO HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY OR INDIRECTLY FROM OR IN CONNECTION WITH THIS AGREEMENT SHALL BE LITIGATED ONLY IN THE STATE OR FEDERAL COURTS LOCATED IN MANHATTAN IN THE STATE OF NEW YORK. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE FOREGOING COURTS AND CONSENT THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO EITHER OF SAID COURTS OR A JUDGE THEREOF MAY BE SERVED INSIDE OR OUTSIDE THE STATE OF NEW YORK BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH IN THIS AGREEMENT (AND SERVICE SO MADE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID) OR BY PERSONAL SERVICE OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.   8.11        NOTICES. ANY NOTICES, REPORTS OR OTHER CORRESPONDENCE (HEREINAFTER COLLECTIVELY REFERRED TO AS “CORRESPONDENCE”) REQUIRED OR PERMITTED TO BE GIVEN HEREUNDER SHALL BE GIVEN IN WRITING AND SHALL BE DEEMED GIVEN THREE BUSINESS DAYS AFTER THE DATE SENT BY CERTIFIED OR REGISTERED MAIL (RETURN RECEIPT REQUESTED), ONE BUSINESS DAY AFTER THE DATE SENT BY OVERNIGHT COURIER OR ON THE DATE GIVEN BY TELECOPY (WITH CONFIRMATION OF RECEIPT) OR DELIVERED BY HAND, TO THE PARTY TO WHOM SUCH CORRESPONDENCE IS REQUIRED OR PERMITTED TO BE GIVEN HEREUNDER.   11 --------------------------------------------------------------------------------   To : Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and/or Bay Harbour Master Ltd.   Bay Harbour Management   Len Chazen c/o Covington & Burling 1330 Avenue of the Americas New York, NY 10019 Facsimile: (212) 841-1010   To : Continental Casualty Company   Continental Casualty Company CNA Center Chicago, IL 60685 Facsimile: (312) 822-4175 Attention: Securities Handling, 23S, Corporate Actions   To : Maranello Holdings LLC   Maranello Holdings LLC   Len Chazen c/o Covington & Burling 1330 Avenue of the Americas New York, NY 10019 Facsimile: (212) 841-1010     12 --------------------------------------------------------------------------------   To : Scoggin IV LLC   Scoggin Capital 660 Madison Ave., 20th Floor New York, NY 10021 Facsimile: (212) 355-7480 Attention: Doug Rothschild, Renee Koevary and Bill Wrankel   To : Mr. Jeffrey Benjamin   Mr. Jeffrey Benjamin 133 East 64th St. New York, NY 10021 Facsimile: (212) 515-3267   To : Mr. Norman Brownstein   Brownstein Hyatt Farber 410 Seventeenth Street Twenty-Second Floor Denver, CO 80202-4437 Facsimile: (303) 223-1111 Attention: Mr. Norman Brownstein   To SkyTerra Communications, Inc.:   SkyTerra Communications, Inc. 19 West 44th Street, Suite 507 New York, New York 10036 Facsimile: (212) 730-7523 Attn:Robert C. Lewis   with a copy (which shall not constitute notice) to:   Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Facsimile: (917) 777-2918 Attn:  Gregory A. Fernicola, Esq   13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the day and year first above written.     SKYTERRA COMMUNICATIONS, INC.           By: /s/ Jeffrey A. Leddy       Name: Jeffrey A. Leddy     Title: Chief Executive Officer           TROPHY HUNTER INVESTMENTS, LTD.           By: /s/ Steven Van Dyke       Name: Steven Van Dyke     Title: Managing Principal           BAY HARBOUR 90-1, LTD.           By: /s/ Steven Van Dyke       Name: Steven Van Dyke     Title: Managing Principal           BAY HARBOUR MASTER LTD.           By: /s/ Steven Van Dyke       Name: Steven Van Dyke     Title: Managing Principal           CONTINENTAL CASUALTY COMPANY           By: /s/ Marilou R. McGirr       Name: Marilou R. McGirr     Title: Vice President and Assistant Treasurer       14 --------------------------------------------------------------------------------     MARANELLO HOLDINGS LLC           By: /s/ Peter Wainman       Name: Peter Wainman     Title: Managing Member           SCOGGIN IV LLC           By: /s/ Craig Effron       Name: Craig Effron     Title:           MR. JEFFREY BENJAMIN           By: /s/ Jeffrey Benjamin       Name: Jeffrey Benjamin           MR. NORMAN BROWNSTEIN           By: /s/ Norman Brownstein       Name: Norman Brownstein   15 --------------------------------------------------------------------------------   Schedule A   Merger / Purchase Agreements   Agreement and Plan of Merger dated as of May 6, 2006 between SkyTerra, Bay Harbour and MSV Investors Holdings, Inc.   Asset Purchase Agreement dated as of May 6, 2006 among Continental Casualty Company, MSV Investors Holdings, Inc., and SkyTerra Communications, Inc.   Asset Purchase Agreement dated as of May 6, 2006 among Maranello Holdings LLC, MSV Investors Holdings, Inc., and SkyTerra Communications, Inc.   Asset Purchase Agreement dated as of May 6, 2006 among Scoggin IV LLC, MSV Investors Holdings, Inc., and SkyTerra Communications, Inc.   Asset Purchase Agreement dated as of May 6, 2006 among Mr. Jeffrey Benjamin, MSV Investors Holdings, Inc., and SkyTerra Communications, Inc.   Asset Purchase Agreement dated as of May 6, 2006 among Mr. Norman Brownstein, MSV Investors Holdings, Inc., and SkyTerra Communications, Inc.   --------------------------------------------------------------------------------

Exhibit 10.1 NANOMETRICS INCORPORATED JOHN D. HEATON EMPLOYMENT AGREEMENT This Agreement is entered into as of October 4, 2006 by and between Nanometrics Incorporated (the “Company”) and John D. Heaton (“Executive”), effective as of the date hereof (the “Effective Date”). 1. Duties and Scope of Employment. (a) Positions and Duties. Executive will serve as President and Chief Executive Officer, reporting to the Company’s Board of Directors (the “Board”). Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Board. The period Executive is employed by the Company under this Agreement is referred to herein as the “Employment Term”. (b) Board Membership. Executive will continue to serve as a member of the Board as of the Effective Date. Thereafter, at each annual meeting of the Company’s stockholders during the Employment Term, the Company will nominate Executive to serve as a member of the Board. Executive’s service as a member of the Board will be subject to any required stockholder approval. Upon the termination of Executive’s employment for any reason, unless otherwise requested by the Board, Executive will be deemed to have resigned from the Board (and all other positions held at the Company and its affiliates, including, without limitation, any boards of subsidiaries) voluntarily, without any further required action by the Executive, as of the end of the Executive’s employment and Executive, at the Board’s request, will execute any documents necessary to reflect his resignation. (c) Obligations. During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company and will use good faith efforts to discharge Executive’s obligations under this Agreement to the best of Executive’s ability and in accordance with each of the Company’s corporate guidance and ethics guidelines, conflict of interests policies and code of conduct. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation, or consulting activity for any direct or indirect remuneration without the prior approval of the Board (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the Board, serve in any capacity with any civic, educational, or charitable organization, provided such services do not interfere with Executive’s obligations to Company. (i) Executive hereby represents and warrants to the Company that Executive is not party to any contract, understanding, agreement or policy, written or otherwise, that would be breached by Executive’s entering into, or performing services under, this Agreement. -------------------------------------------------------------------------------- Executive further represents that he has disclosed to the Company in writing all threatened, pending, or actual claims that are unresolved and still outstanding as of the Effective Date, in each case, against Executive of which he is aware, if any, as a result of his employment with his current employer (or any other previous employer) or his membership on any boards of directors. (d) Other Entities. Executive agrees to serve, without additional compensation, as an officer and director for each of the Company’s subsidiaries, partnerships, joint ventures, limited liability companies and other affiliates, including entities in which the Company has a significant investment as determined by the Company. As used in this Agreement, the term “affiliates” will include any entity controlled by, controlling, or under common control of the Company. 2. At-Will Employment. Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment. Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive. However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of Executive’s termination of employment. 3. Term of Agreement. This Agreement will have an initial term of two (2) years commencing on the Effective Date. On the second anniversary of the Effective Date, and on each annual anniversary of the Effective Date thereafter, this Agreement automatically will renew for an additional one (1) year term unless either party provides the other party with written notice of non-renewal at least 3 months prior to the date of automatic renewal. 4. Compensation. (a) Base Salary. As of the Effective Date, the Company will pay Executive an annual salary of $404,250 as compensation for his services (such annual salary, as is then effective, to be referred to herein as “Base Salary”). The Base Salary will be paid periodically in accordance with the Company’s normal payroll practices and be subject to the usual, required withholdings. (b) Annual Incentive. Executive will be eligible to receive annual cash incentives and other bonuses payable in accordance with the terms of the Company’s profit sharing policy (the “Profit Sharing Program”) or any other bonus program then in effect. 5. Employee Benefits. During the Employment Term, Executive will be eligible to participate in all Company employee benefit plans, policies and arrangements that are applicable to other executive officers and employees of the Company, as such plans, policies and arrangements may exist from time to time and in accordance with their terms. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time. 6. Paid Time Off (PTO). Executive will be entitled to receive paid time off or PTO in accordance with Company policy for other senior executive officers. 7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in the furtherance of the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.   -2- -------------------------------------------------------------------------------- 8. Termination of Employment. In the event Executive’s employment with the Company terminates for any reason, Executive will be entitled to any (a) unpaid Base Salary accrued up to the effective date of termination, (b) unpaid, but earned and accrued annual incentive for any completed fiscal year as of his termination of employment, (c) pay for accrued but unused vacation that the Company is legally obligated to pay Executive, (d) benefits or compensation as provided under the terms of any employee benefit and compensation agreements or plans applicable to Executive, (e) unreimbursed business expenses required to be reimbursed to Executive, and (f) rights to indemnification Executive may have under the Company’s Articles of Incorporation, Bylaws, the Agreement, or separate indemnification agreement, as applicable. In addition, if the termination is by the Company without Cause or the Executive resigns for Good Reason, Executive will be entitled to the amounts and benefits specified in Section 9. 9. Severance. (a) Termination Without Cause or Resignation for Good Reason other than in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or if Executive resigns for Good Reason, and such termination is not in Connection with a Change of Control, then, subject to Section 10, Executive will receive: (i) Continued payment of Base Salary for twelve (12) months; (ii) Continued payment for twelve (12) months in an aggregate amount equal to 100% of the amount paid to Executive under the Profit Sharing Program in the fiscal year prior to the year in which the termination occurs; (iii) Effective immediately prior to such termination or resignation, twelve (12) months accelerated vesting with respect to Executive’s then outstanding, unvested equity awards. (iv) Reimbursement for premiums paid for continued medical benefits for Executive (and any eligible dependents) under the Company’s benefit plans until the earlier of (i) twelve (12) months, payable when such premiums are due (provided Executive validly elects to continue coverage under applicable law), or (ii) the date upon which Executive and Executive’s eligible dependents become covered under similar plans. Continued payments under this Section shall be made in accordance with the Company’s normal payroll practices. (b) Termination Without Cause or Resignation for Good Reason in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and the termination is in Connection with a Change of Control, then, subject to Section 10, Executive will receive: (i) Continued payment of Base Salary for twenty-four (24) months; (ii) Continued payment for twenty-four (24) months in an aggregate amount equal to 200% of the amount paid to Executive under the Profit Sharing Program in the fiscal year prior to the year in which the termination occurs;   -3- -------------------------------------------------------------------------------- (iii) Effective immediately prior to such termination, full accelerated vesting with respect to Executive’s then outstanding unvested equity awards; and (iv) Reimbursement for premiums paid for continued medical benefits for Executive (and any eligible dependents) under the Company’s benefit plans until the earlier of (i) twenty-four (24) months, payable when such premiums are due (provided Executive validly elects to continue coverage under applicable law), or (ii) the date upon which Executive and Executive’s eligible dependents become covered under similar plans. Continued payments under this Section shall be made in accordance with the Company’s normal payroll practices. (c) Non-Renewal Termination. If the Company provides Executive with written notice of the Company’s non-renewal of the Agreement in accordance with Section 3 and Executive’s employment is terminated effective on an annual anniversary of the Effective Date (or such earlier or later date agreed to in writing by the Company and Executive) as a result of such non-renewal, then, subject to Section 10, Executive will receive severance payments and benefits pursuant to Section 9(a). (d) Voluntary Termination Without Good Reason or Termination for Cause. If Executive’s employment is terminated voluntarily, including due to death or Disability, without Good Reason or is terminated for Cause by the Company, then, except as provided in Section 8 and 9(c), (i) all further vesting of Executive’s outstanding equity awards will terminate immediately; (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, and (iii) Executive will be eligible for severance benefits only in accordance with the Company’s then established plans, programs and practices. 10. Conditions to Receipt of Severance; No Duty to Mitigate. (a) Separation Agreement and Release of Claims. The receipt of any severance or other benefits pursuant to Section 9 will be subject to Executive signing and not revoking a separation agreement and release of claims in a form satisfactory to the Company. No severance or other benefits will be paid or provided until the separation agreement and release agreement becomes effective. (b) Nondisparagement. Beginning with the date of this Agreement and continuing thereafter, Executive will not knowingly disparage, criticize, or otherwise make any derogatory statements regarding the Company, its directors, or its officers. Notwithstanding the foregoing, nothing contained in this agreement will be deemed to restrict Executive, the Company or any of the Company’s current or former officers and/or directors from providing information to any governmental or regulatory agency (or in any way limit the content of any such information) to the extent they are requested or required to provide such information pursuant to applicable law or regulation. (c) Other Requirements. Executive’s receipt of continued severance payments will be subject to Executive continuing to comply with the terms of the Confidential Information Agreement, including the terms of a non-competition and non-solicitation agreement, and the provisions of this Section, and signing and not revoking a separation agreement and release of claims in a form satisfactory to the Company.   -4- -------------------------------------------------------------------------------- (d) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment. 11. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 9 will be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section will be made in writing by the independent public accountants who are primarily used by the Company immediately prior to Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company will bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. 12. Definitions. (a) Cause. For purposes of this Agreement, “Cause” will mean: (i) Executive’s willful and continued failure to perform the duties and responsibilities of his position after there has been delivered to Executive a written demand for performance from the Board which describes the basis for the Board’s belief that Executive has not substantially performed his duties and provides Executive with thirty (30) days to take corrective action; (ii) Any act of personal dishonesty taken by Executive in connection with his responsibilities as an employee of the Company with the intention or reasonable expectation that such action may result in the substantial personal enrichment of Executive;   -5- -------------------------------------------------------------------------------- (iii) Executive’s conviction of, or plea of nolo contendere to, a felony that the Board reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business; (iv) A breach of any fiduciary duty owed to the Company by Executive that has a material detrimental effect on the Company’s reputation or business; (v) Executive being found liable in any Securities and Exchange Commission or other civil or criminal securities law action or entering any cease and desist order with respect to such action (regardless of whether or not Executive admits or denies liability); (vi) Executive (A) obstructing or impeding; (B) endeavoring to influence, obstruct or impede, or (C) failing to materially cooperate with, any investigation authorized by the Board or any governmental or self-regulatory entity (an “Investigation”). However, Executive’s failure to waive attorney-client privilege relating to communications with Executive’s own attorney in connection with an Investigation will not constitute “Cause”; or (vii) Executive’s disqualification or bar by any governmental or self-regulatory authority from serving in the capacity contemplated by this Agreement or Executive’s loss of any governmental or self-regulatory license that is reasonably necessary for Executive to perform his responsibilities to the Company under this Agreement, if (A) the disqualification, bar or loss continues for more than thirty (30) days, and (B) during that period the Company uses its good faith efforts to cause the disqualification or bar to be lifted or the license replaced. While any disqualification, bar or loss continues during Executive’s employment, Executive will serve in the capacity contemplated by this Agreement to whatever extent legally permissible and, if Executive’s employment is not permissible, Executive will be placed on leave (which will be paid to the extent legally permissible). (b) Change in Control. For purposes of this Agreement, “Change in Control” will mean the occurrence of any of the following events occurring following the Effective Date: (i) The consummation by 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) at least 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) The approval by the stockholders of the Company, or if stockholder approval is not required, approval by the Board, 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; (iii) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, 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 combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or   -6- -------------------------------------------------------------------------------- (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” will 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 whose election or nomination was not in connection with any transactions 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) Disability. For purposes of this Agreement, “Disability” will mean Executive’s absence from his responsibilities with the Company on a full-time basis for 120 calendar days in any consecutive twelve (12) months period as a result of Executive’s mental or physical illness or injury. The Board will determine whether a Disability exists based on evidence provided by one or more physicians selected by the Board. (d) Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following, without Executive’s express written consent: (i) A significant reduction of Executive’s duties, position, or responsibilities, relative to Executive’s duties, position, or responsibilities in effect immediately prior to such reduction; (ii) A substantial reduction by the Company of the facilities and perquisites (including office space and location) available to Executive immediately prior to such reduction; (iii) A material reduction in the kind or level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that Executive’s overall benefits package is significantly reduced other than pursuant to a reduction that also is applied to substantially all other executive officers of the Company and that reduces the level of employee benefits by a percentage reduction that is no greater than 15%; (iv) A reduction in Executive’s Base Salary or annual cash incentive as in effect immediately prior to such reduction other than pursuant to a reduction that also is applied to substantially all other executive officers of the Company and which reduction reduces the Base Salary and/or annual cash incentive by a percentage reduction that is no greater than 15%; (v) The relocation of Executive to a facility or location more than fifty (50) miles from his current place of employment; or (vi) The failure of the Company to obtain the assumption of the employment agreement by a successor and an agreement that Executive will retain the same role and responsibilities in the merged or surviving parent company as he had prior to the merger under Section 1 of this Agreement.   -7- -------------------------------------------------------------------------------- The failure of the Company’s stockholders to elect or reelect Executive to the Board will not constitute Good Reason for purposes of this Agreement. (e) In Connection with a Change of Control. For purposes of this Agreement, a termination of Executive’s employment with the Company is “in Connection with a Change of Control” if Executive’s employment is terminated within twelve (12) months following a Change of Control. 13. Indemnification. The Indemnification Agreement entered into between Executive and the Company, and incorporated herein by reference, will remain in full force and effect in accordance with its terms. 14. Section 409A. Notwithstanding anything to the contrary in this Agreement, any severance payments or benefits due to Executive pursuant to this Agreement or otherwise will not be paid during the six-month period following Executive’s termination of employment if the Company determines, in its good faith judgment, that paying such severance or other benefits at the time or times indicated above would cause Executive to incur an additional tax under Section 409A of the Code and any temporary or final Treasury Regulations and Internal Revenue Service guidance thereunder (“Section 409A”). If the payment of any severance or other benefits are delayed as a result of the previous sentence, any cash severance payments due to Executive pursuant to this Agreement or otherwise during the first six (6) months after Executive’s termination will accrue during such six-month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of the Executive’s termination. Thereafter, payments will resume in accordance with the applicable schedule set forth in this Agreement. 15. Confidential Information. Executive will continue to abide by the confidential information, intellectual property, non-competition and non-solicitation agreement, previously executive by Executive, and incorporated herein by reference (the “Confidential Information Agreement”). 16. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death, and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of Executive’s right to compensation or other benefits will be null and void. 17. Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent overnight by a well established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:   -8- -------------------------------------------------------------------------------- If to the Company: Attn: Chairman of the Compensation Committee c/o Corporate Secretary Nanometrics Incorporated 1550 Buckeye Drive Milpitas, CA 95035 If to Executive: at the last residential address known by the Company. 18. Severability. If any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provision. 19. Arbitration. The Parties agree that any and all disputes arising out of the terms of this Agreement, Executive’s employment by the Company, Executive’s service as an officer or director of the Company, or Executive’s compensation and benefits, their interpretation and any of the matters herein released, will be subject to binding arbitration. In the event of a dispute, the parties (or their legal representatives) will promptly confer to select a Single Arbitrator mutually acceptable to both parties. The Arbitrator must be a licensed attorney, primarily engaged as a practicing lawyer in the field of employment law and related litigation for at least ten (10) years, or primarily engaged in the practice of arbitrating executive employment law disputes for at least ten (10) years. If the parties cannot agree on an Arbitrator, then the moving party may file a Demand for Arbitration with the American Arbitration Association (“AAA”) in Santa Clara, California, who will be selected and appointed consistent with the AAA-Employment Dispute Resolution Rules, except that such Arbitrator must have the qualifications set forth in this paragraph. Any arbitration will be conducted in a manner consistent with AAA National Rules for the Resolution of Employment Disputes, supplemented by the California Rules of Civil Procedure. The Parties further agree that the prevailing party in any arbitration will be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award. Should the Arbitrator determine that Executive has substantially prevailed in any such action, then all reasonable legal and professional expenses incurred by him in connection with such action will be reimbursed to him by the Company. The Parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury. This paragraph will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Executive’s obligations under this Agreement and the Confidential Information Agreement. 20. Legal and Tax Expenses. The Company will reimburse Executive up to $10,000 for reasonable legal advice expenses incurred by him in connection with the negotiation, preparation and execution of this Agreement. 21. Integration. This Agreement, together with the Confidential Information Agreement, the Indemnification Agreement and the standard forms of equity award grant that describe Executive’s outstanding equity awards and other agreements referenced and incorporated by   -9- -------------------------------------------------------------------------------- reference into this Agreement, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in a writing and signed by duly authorized representatives of the parties hereto. Executive agrees to work in good faith with the Company to consider amendments to this Agreement which are necessary or appropriate to avoid imposition of any additional tax or income recognition under Section 409A prior to the actual payment to Executive of payments or benefits under this Agreement. Notwithstanding the foregoing, this Agreement will be deemed amended, without any consent required from Executive, to the extent necessary to avoid imposition of any additional tax or income recognition pursuant to Section 409A prior to actual payments under this Agreement to Executive. The parties agree to cooperate with each other and to take reasonably necessary steps in this regard. In entering into this Agreement, no party has relied on or made any representation, warranty, inducement, promise, or understanding that is not in this Agreement. To the extent that any provisions of this Agreement conflict with those of any other agreement, including the standard Restrictive Covenant Agreement to be signed upon Executive’s hire, the terms in this Agreement will prevail. 22. Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement. 23. Survival. The Confidential Information Agreement and the Company’s and Executive’s responsibilities under Section 10 will survive the termination of this Agreement. 24. Headings. All captions and Section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement. 25. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes. 26. Governing Law. This Agreement will be governed by the laws of the State of California without regard to its conflict of laws provisions. 27. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement. 28. Conditions. This offer is conditioned upon Executive providing to Company references relating to Executive’s employment in a form acceptable to the Company, and Company’s satisfactory review of such references. 29. Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.   -10- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by a duly authorized officer, as of the day and year written below.   COMPANY:      NANOMETRICS INCORPORATED      /s/ Edmond R. Ward      Date: October 4, 2006 Edmond R Ward      Chairman of the Compensation/Stock Option Committee      EXECUTIVE:      /s/ John D. Heaton      Date: October 4, 2006 John D. Heaton      [SIGNATURE PAGE TO HEATON EMPLOYMENT AGREEMENT]   -11-

Exhibit 10.29 AGREEMENT This Employment Agreement (“Agreement”) is made and entered into as of the 15th day of July, 2006 by and between Avatech Solutions, Inc. (the “Company”) and Christopher Olander (“Olander”) and supersedes the Employment Agreement between the parties dated June 18th, 2004, except that Olander’s obligations and the Company’s rights under Section 6 of the Employment Agreement will continue. Explanatory Statement A. Olander is currently employed by the Company as Executive Vice President and General Counsel pursuant to an employment agreement (the “Employment Agreement”). B. Although Olander’s full time employment by the Company as its Executive Vice President and General Counsel will terminate on July 15, 2006 prior to the end of the term of the Employment Agreement dated June 18, 2004, the Company desires to maintain a business relationship with Olander to, among other things, more effectively explore certain business opportunities. C. The Company desires to retain Olander, and Olander desires to be retained by the Company, as a part-time employee, on an as-needed basis, commencing on the date of this Agreement and ending on December 15, 2006. NOW, THEREFORE, in consideration of the Explanatory Statement, which is incorporated herein by reference, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Employment. The Company hereby retains Olander, and Olander accepts such retainer, as a part-time employee of the Company to assist the Company in creating and completing certain advantageous business opportunities. When the Company identifies a possible business opportunity, it may, at its sole discretion, request that Olander perform certain services on the Company’s behalf in connection therewith, and Olander agrees to make himself reasonably available to assist the Company in pursuing such opportunity. 2. Compensation; Benefits. Through December 15, 2006, the Company shall compensate Olander hereunder at the same rate of Base Salary, paid at the same times, as currently is the case under the Employment Agreement dated June 18, 2004 so long as Olander shall not be employed full-time by another company. Olander shall continue to be eligible for coverage by the Company’s medical, dental, life, disability and 401(k) Plans until December 15, 2006, to the extent permitted by the applicable benefit plans and by the companies issuing group insurance policies with respect to such benefits. He shall not accrue any additional vacation, sick or any other paid time off after July 15, 2006 and will not be eligible for any incentive payments or any other additional compensation after July 15, 2006. Should Olander accept full-time employment with another company, he will no longer be eligible for dental, life, disability or 401(k) participation. Olander may elect to participate in the Company’s medical plan from December 16, 2006 until June 18, 2007 provided that he remits a check to the Company, in advance, for the then employee’s share of the monthly health insurance premium. Olander’s check for this coverage must be received by the Company by the 1st day of the month for which he intends to continue coverage. If the check has not been received, the Company may terminate coverage for Olander and return any monies received after that date. For purposes of COBRA, the continuation period will be deemed to have begun on July 1, 2006. 3. Options. All unexercised, vested options to purchase the Company’s common stock previously granted to Olander shall not terminate upon his termination of employment with the Company on December 15, 2006, but shall continue to remain in effect as nonqualified stock options under the Company’s 2002 Incentive Stock Option Plan, and shall terminate instead on July 15, 2007. -------------------------------------------------------------------------------- 4. No Disparagement or Adverse Action. On or after July 13, 2006, Olander has not made and will not make any disparaging or derogatory statements, whether oral or written, regarding the Company, or its directors, officers, employees or agents. Olander has not taken and will not take any action adverse to the Company, or its directors, officers, employees, or agents. Olander will not make any statement or take any action which could encourage or result in the resignation of any employee of the Company. For purposes of this Section and Section 5, the term “Company” includes any parent, subsidiary, or entity under common control with the Company (“affiliated entity”). Donald Walsh, CEO, W. Scott Harris, President and COO, and Lawrence Rychlak, CFO, have agreed that on and after July 13, 2006, they have not made and will not make any disparaging or derogatory statements, whether oral or written, regarding Olander, except for statements which an officer believes he should make in the course of his duties on behalf of the Company. 5. Release. Olander releases and discharges the Company, and its officers, directors, employees and agents from all claims, rights, charges and/or causes of action (hereinafter referred to as “claims”) which he had, now has or hereafter may have arising out of or related to his employment with the Company, the termination of his employment, and/or any other matter through the date this Agreement is signed, including, but not limited to, claims under the Age Discrimination in Employment Act of 1967, as amended, (“ADEA”), claims under all other employment discrimination laws, tort claims, contract claims, and claims under all federal, state and local laws. Olander confirms that the consideration provided under this Agreement is in addition to that to which he was already entitled. Olander voluntarily agrees to accept the consideration set forth in this Agreement in full accord and satisfaction of all claims. This Release is agreed to without reliance upon any statement or representation. Olander will not file or maintain any suit (or accept any compensation, benefit, or other personal remedy of any kind in any non-judicial forum) arising out of or related to the matters released. The Company releases Olander from all claims which it had, now has or hereafter may have arising out of or related to his employment with the Company and/or any other matter through the date this Agreement is signed, except for a claim arising out of or related to Olander’s breach of Section 6 of the Employment Agreement dated June 18, 2004 or for conduct which constitutes “Cause” as defined in Section 5.1 of such Agreement. 6. Remedies for Breach. In the event Olander breaches any commitment made in this Agreement other than a commitment which is related to a claim under the ADEA, then, in addition to any other rights the Company may have: (a) Olander agrees that no further payments under this Agreement shall be due and the Company shall have the right to recover an amount equal to the Base Salary paid to Olander after June 15, 2006 and (b) Olander shall pay the Company’s attorney’s fees and other costs incurred by the Company in connection with the breach or a threatened breach, including, but not limited to, seeking to recover such payments and/or to obtain injunctive relief with respect to the breach or any subsequent breach. In the event Olander breaches any commitment made in this Agreement which is related to a claim under the ADEA, then to the extent permitted by the ADEA, Olander agrees that the Company shall have the rights set forth in (a) and (b) of the preceding paragraph of this Section 6. 7. Miscellaneous. The parties have made no representations except as expressly set forth herein. This Agreement may not be assigned by either party without the written consent of the other party. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. The parties hereby waive trail by jury in any action arising under this Agreement. Any action arising under this Agreement shall be brought in and shall be subject to the exclusive jurisdiction and venue of the federal courts located in Maryland or the Circuit Court for Baltimore County. 8. Revocation Period. OLANDER SHALL HAVE THE RIGHT TO UNI-LATERALLY REVOKE THIS AGREEMENT BY DELIVERING HIS WRITTEN REVOCATION TO DONALD R. WALSH AT THE COMPANY’S MAIN OFFICE DURING THE SEVEN (7) DAY PERIOD FOLLOWING THE DATE HE SIGNS IT. This Agreement shall become effective and enforceable after the expiration of the revocation period. The Company is not obligated to make any payments or provide any benefits under this Agreement until the Agreement becomes effective and enforceable. -------------------------------------------------------------------------------- OLANDER ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT COMPLETELY; THAT HE CAN TAKE UP TO 21 DAYS FROM THE DATE HE RECEIVED THIS AGREEMENT TO DECIDE WHETHER TO SIGN IT; THAT HE HAS BEEN ADVISED IN WRITING, VIA THIS AGREEMENT, TO CONSULT WITH AN ATTORNEY REGARDING IT; AND THAT HE UNDERSTANDS EACH AND EVERY PROVISION OF IT. IN WITNESS WHEREOF, the parties have placed their hands and seals as of the date first above written.   /s/ Christopher Olander   7/14/06 Christopher Olander   Date Avatech Solutions, Inc.   /s/ Donald R. Walsh   7/14/06 Donald R. (Scotty) Walsh   Date Chief Executive Officer  

Exhibit 10.6   AMENDED & RESTATED EMPLOYMENT AGREEMENT   AGREEMENT by and between Beazer Homes USA, Inc., a Delaware corporation (the “Company”) and CORY J. BOYDSTON (the “Executive”), dated as of the 3rd day of February, 2006.   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. 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 and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon 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.   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 1(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 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 in 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.   (b)           The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the second anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.   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 25% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 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”); 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 Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any   1 --------------------------------------------------------------------------------   corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or   (b)           Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent 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 Board; or   (c)           Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (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 Company Common Stock and Outstanding Company 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 (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 Business Combination of the Outstanding Company Common Stock and Outstanding Company 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 the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% 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 Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or   (d)           Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.   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 (including status, offices, titles and reporting requirements), authority, 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   2 --------------------------------------------------------------------------------   preceding the Effective Date or any office or location less than 35 miles from such location.   (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 the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully 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 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 twelve month period immediately preceding the month in which the Effective Date occurs. Annual Base Salary shall be payable in accordance with the Company’s normal payroll practices (but not less frequently than monthly). During the Employment Period, the Annual Base Salary shall be reviewed (for purposes of increase only) 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 Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the arithmetic average of the Executive’s bonuses (whether paid or deferred) under the Company’s or its predecessor’s annual incentive plans during the last three full fiscal years prior to the Effective Date or for such lesser period as the Executive has been employed by the Company or its predecessor (annualized in the event that the Executive was not employed by the Company for the whole of any such fiscal year), (the “Average Annual Bonus”). Each such Annual Bonus 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 Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. Without limiting the generality of the foregoing definition, the “Average Annual Bonus” shall include the following components, if any, pursuant to the Company’s Amended and Restated VCIP Rules (or any successor incentive plan, for so long as any of same shall exist):   3 --------------------------------------------------------------------------------   (a)   Cash payouts from VC and IVC awards and the “Bank” payout, subject to the Payout Cap, all at full face value;   (b)   Any excess in the Bank discounted at 75% of face value (which shall, for purposes hereof, be deemed to be fully vested);   (c)   10% of the Bank contributed to the Deferred Compensation Plan, at full face value (which shall, for purposes hereof, be deemed to be fully vested); and   (d)  Any deferred bonus under the VCIP which is invested in stock under the Company’s Corporate Management Stock Purchase Program, at full face value of said bonus (which shall, for purposes hereof, be deemed to be fully vested).   (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, in each case, 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 family, 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.   4 --------------------------------------------------------------------------------   (vi)          Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, 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 and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120 day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to 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 Disability of the Executive occurs during the Employment Period (pursuant to the definition of Disability set forth below), the Company may give to the Executive written notice in accordance with Section 12(c) 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 for Cause. For purposes of this Agreement, “Cause” shall mean:   (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 resulting from incapacity due to physical or mental illness), for more than 15 days after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or   5 --------------------------------------------------------------------------------   (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 upon the instructions of the President and Chief Executive Officer of the Company 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 respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 15 days 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 not occurring in bad faith and which is remedied by the Company within 15 days after receipt of notice thereof given by the Executive;   (iii)          the Company’s requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date, which is not remedied by the Company within 15 days after receipt of notice thereof given by the Executive;   (iv)          any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or   (v)           any failure by the Company to comply with and satisfy Section 11(c) of this Agreement, which is not remedied by the Company within 15 days after receipt of notice thereof given by the Executive.   (d)           Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(c) 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   6 --------------------------------------------------------------------------------   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 thirty 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, subject to applicable cure periods, 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 the date of death of the Executive or the Disability Effective Date, as the case may be.   6.             Obligations of the Company upon Termination.   (a)           Good Reason; Other Than for Cause. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause 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)  any accrued but unpaid Annual Bonus respecting any completed fiscal year ending prior to the Date of Termination, (3) the product of (x) the Average Annual Bonus 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 (4) 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 theretofore paid (the sum of the amounts described in clauses (1), (2), (3) and (4) shall be hereinafter referred to as the “Accrued Obligations”). Anything contained herein to the contrary notwithstanding, the timing of payment by the Company of any deferred compensation shall remain subject to the terms and conditions of the applicable deferred compensation plan and any payment election previously made by the Executive; provided, however, that, if at the time of Termination, Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code, as amended, then payments shall not be made before the date which is six (6) months after the date of separation from service with the Company (or, if earlier, the date of the Executive’s death); and   B.            the amount equal to the product of (1) one and one-half (1.50), and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Highest Annual Bonus (as hereinafter defined); and   (ii)           for eighteen (18) months 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 family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies   7 --------------------------------------------------------------------------------   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 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. 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 eighteen (18) months after the Date of Termination and to have retired on the last day of such period;   (iii)          the Company shall, at its sole expense as incurred, provide the Executive with outplacement services in accordance with the Company’s policies with regard to outplacement then in effect; and   (iv)          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”).   For purposes hereof, the term “Highest Annual Bonus” shall mean the highest of the Executive’s bonuses (whether paid or deferred) under the Company’s or its predecessor’s annual incentive plans during the last three full fiscal years prior to the Effective Date or for such lesser period as the Executive has been employed by the Company or its predecessor (annualized in the event that the Executive was not employed by the Company for the whole of any such fiscal year).   (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 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 peer executives 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 or the Executive’s legal representative 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   8 --------------------------------------------------------------------------------   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 family, 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) his 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.             Non-exclusivity 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 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. EACH AND EVERY PAYMENT MADE HEREUNDER BY THE COMPANY SHALL BE FINAL, AND THE COMPANY SHALL NOT SEEK TO RECOVER ALL OR ANY PART OF SUCH PAYMENT FROM THE EXECUTIVE OR FROM WHOMSOEVER MAY BE ENTITLED THERETO, FOR ANY REASONS WHATSOEVER. 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. THE COMPANY AGREES TO PAY AS INCURRED, TO THE FULL EXTENT PERMITTED BY LAW, ALL LEGAL FEES AND EXPENSES WHICH THE EXECUTIVE MAY REASONABLY INCUR AS A RESULT OF ANY CONTEST BY (I) THE COMPANY, PROVIDED THAT THE EXECUTIVE PREVAILS IN AT LEAST ONE MATERIAL ISSUE, (II) THE EXECUTIVE OR (III) OTHERS, OF THE VALIDITY OR ENFORCEABILITY OF, OR LIABILITY UNDER, ANY PROVISION OF THIS AGREEMENT OR ANY GUARANTEE OF PERFORMANCE THEREOF (INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY CONTEST BY THE EXECUTIVE ABOUT THE AMOUNT OF ANY PAYMENT PURSUANT TO THIS AGREEMENT), PLUS IN EACH CASE INTEREST ON ANY DELAYED PAYMENT AT THE APPLICABLE FEDERAL RATE PROVIDED FOR IN SECTION 7872(F) (2) (A) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).   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   9 --------------------------------------------------------------------------------   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. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the “Reduced Amount”) that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount.   (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 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)           The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such 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, the Executive shall:   (i)            give the Company any information reasonably requested by the Company relating to such claim,   (ii)           take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,   (iii)          cooperate with the Company in good faith in order effectively to contest such claim, and   10 --------------------------------------------------------------------------------   (iv)          permit the Company to participate in any proceedings relating to such claim;   provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.   (d)           If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.   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 --------------------------------------------------------------------------------   11.           Successors.   (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 (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets 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)           This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. Any legal action, suit or proceeding arising out of or relating to this Agreement shall be instituted in the state or federal courts in the State of Delaware and the parties agree not to assert, in any action, suit or proceeding by way of motion, as a defense or otherwise, any claim that either party is not personally subject to the jurisdiction of such court, or that such action, suit or proceeding is brought in an inconvenient forum, or that the venue is improper or that the subject matter hereof cannot be enforced in such court. The parties hereby irrevocably submit to the jurisdiction of any such court in any such action, suit or proceeding.   (b)           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.   (c)           All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by FedEx or other commercial overnight courier or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:   If to the Executive:   1835 REDBOURNE DRIVE, ATLANTA, GEORGIA 30350   If to the Company:   1000 Abernathy Road Suite 1200 Atlanta, Georgia 30328 Attention: Company Secretary   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.   (d)           The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.   12 --------------------------------------------------------------------------------   (e)           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.   (f)            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) through (v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.   (g)           Except as may otherwise be provided under any other written agreement between the Executive and the Company, the Executive and the Company acknowledge that the employment of the Executive by the Company is “at will” and, subject to Section 1 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 supersede any other agreement between the parties with respect to the subject matter hereof and, upon the Effective Date, any such other agreement shall be null, void and of no further force or effect. Furthermore, from and after the date of this Agreement, this Agreement shall amend, restate and supersede that certain Employment Agreement dated as of September 1, 2004 between the Company and the Executive, which Employment Agreement shall be null, void and of no further force or effect.   IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.       /s/ Cory J. Boydston     CORY J. BOYDSTON       BEAZER HOMES USA, INC.           By /s/ Ian J. McCarthy       Ian J. McCarthy     President and Chief Executive Officer   13 --------------------------------------------------------------------------------

  EXHIBIT 10.1 SECURITIES PURCHASE AGREEMENT      This Securities Purchase Agreement (this “Agreement”) is dated as of June 13, 2006, among MicroMed Cardiovascular, Inc., a Delaware corporation (the “Company”), on the one hand, and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”) on the other hand;      WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company in the aggregate, up to $20,000,000 of shares of Common Stock and Warrants to purchase Common Stock on the Closing Date.      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agrees as follows: ARTICLE I DEFINITIONS      1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:           “Action” shall have the meaning ascribed to such term in Section 3.1(i).           “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 144. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.           “Anti-Dilution Shares” means any Shares issued further to Section 4.9 hereof or further to Section 4.9 of either the November 2005 Securities Purchase Agreement or the August 2005 Purchase Agreement.           “August 2005 Purchase Agreement” means that Securities Purchase Agreement dated as of August 9, 2005 by and among the Company and certain purchasers named therein.           “Closing” means the closing of the purchase and sale of the Shares and the Placement Agent Warrants pursuant to Section 2.1.           “Closing Date” means the date when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Shares have been satisfied or waived.           “Commission” means the Securities and Exchange Commission.   --------------------------------------------------------------------------------             “Common Stock” means the common stock of the Company, par value $0.001 per share, and any securities into which such common stock may hereafter be reclassified.           “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.           “Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.           “Effective Date” means the date that the Registration Statement is first declared effective by the Commission.           “Exchange Act” means the Securities Exchange Act of 1934, as amended.           “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise of or conversion of any securities issued hereunder, or convertible securities, options or warrants issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities, (c) securities issued pursuant to strategic transactions with an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds or pursuant to acquisitions, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; and (d) securities issued to consultants for services rendered to the Company in non-capital raising transactions in an amount per individual issuance not to exceed 30,000 shares for particular services rendered.           “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).           “Hunter” means Hunter World Markets, Inc.           “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(k).           “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).           “Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.           “Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b). 2 --------------------------------------------------------------------------------             “Material Permits” shall have the meaning ascribed to such term in Section 3.1(i).           “November 2005 Purchase Agreement” means that Securities Purchase Agreement dated as of November 29, 2005 by and among the Company and certain purchasers named herein.           “Per Share Purchase Price” equals $1.55, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.           “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.           “Placement Agent Agreement” means that certain Placement Agent Agreement dated as of May 26, 2006 between the Company and Hunter.           “Placement Agent Warrants” means those warrants to be issued to Hunter further to the Placement Agent Agreement.           “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.           “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and each Purchaser, providing for the registration of the Shares and the shares of Common Stock underlying the Warrants and the Placement Agent Warrants in the form of Exhibit A attached hereto.           “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares.           “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).           “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.           “Securities Act” means the Securities Act of 1933, as amended.           “Shares” means the shares of the Company’s Common Stock issued or issuable to each Purchaser pursuant to this Agreement.           “Subscription Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature page hereto, in United States dollars and in immediately available funds. 3 --------------------------------------------------------------------------------             “Subsidiary” shall mean the subsidiaries of the Company, if any, set forth on Schedule 3.1(a).           “Trading Day” means a day on which the Common Stock is traded on a Trading Market.           “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or the OTC Bulletin Board.           “Transaction Documents” means this Agreement, the Registration Rights Agreement, the Warrants, the Placement Agent Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder.           “Warrants” means those three-year warrants issauble further to the provisions of this Agreement. ARTICLE II PURCHASE AND SALE      2.1 Closing. On the Closing Date, each Purchaser shall purchase from the Company, severally and not jointly with the other Purchasers, and the Company shall issue and sell to each Purchaser, a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price plus Warrants to purchase 33% of the shares sold to such Purchaser. Upon satisfaction of the conditions set forth in Section 2.3, the Closing shall occur at the offices of Troy & Gould, located at 1801 Century Park East, 16th Floor, Los Angeles, California 90067, or such other location as the parties shall mutually agree. The aggregate Subscription Amounts for the Shares sold hereunder shall be up to $20,000,000. Notwithstanding the foregoing, the payment of the aggregate Subscription Amounts and disbursement of funds shall be through an escrow with Wells Fargo Bank, Los Angeles, California or such other escrow agent as Hunter approves (the “Escrow Agent”).      2.2 Deliveries.           (a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser or Hunter, as the case may be the following:                (i) this Agreement duly executed by the Company;                (ii) a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver, on an expedited basis, a certificate evidencing a number of Common Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;                (iii) Warrants to purchase 33% of the Shares sold to such Purchaser;                (iv) the Placement Agent Warrants; and 4 --------------------------------------------------------------------------------                  (v) the Registration Rights Agreement duly executed by the Company.           (b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:                (i) this Agreement duly executed by such Purchaser;                (ii) such Purchaser’s Subscription Amount by wire transfer of same day funds to the account as specified in writing by the Escrow Agent; and                (iii) the Registration Rights Agreement duly executed by such Purchaser.      2.3 Closing Conditions.           (a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:                (i) a minimum of $10.0 million of Shares and Warrants shall be sold hereunder;                (ii) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein;                (iii) all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed; and                (iv) the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement.           (b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:                (i) a minimum of $10.0 million of Shares and Warrants shall be sold hereunder;                (ii) the accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained herein;                (iii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;                (iv) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;                (v) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and                (vi) The Purchasers shall have received an opinion of counsel to the Company in form and substance reasonably satisfactory to the Purchasers. 5 --------------------------------------------------------------------------------   ARTICLE III REPRESENTATIONS AND WARRANTIES      3.1 Representations and Warranties of the Company. Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to each Purchaser:           (a) Subsidiaries. All of the direct and indirect subsidiaries of the Company, if any, are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, then references in the Transaction Documents to the Subsidiaries will be disregarded.           (b) Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Documents, (ii) a material adverse effect on the results of operations, assets, business, prospects or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.           (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to 6 --------------------------------------------------------------------------------   the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.           (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Shares and the Warrants and the consummation by the Company of the other transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.           (e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Registration Statement, (iii) application(s) to each applicable Trading Market for the listing of the Common Shares for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).           (f) Issuance of the Securities. The Shares, the Warrants and shares of common stock underlying the Warrants (the “Warrant Shares”) are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement. Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, $.001 par value per share, and 50,000,000 shares of preferred stock, $.001 par value per share. As of the date hereof, there were 28,787,550 shares of common stock outstanding, 36,978 shares held as Treasury Stock and 1,500,000 shares held in escrow and no shares of preferred stock outstanding. In addition, there were outstanding options and warrants to purchase 4,204,657 shares of common stock. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance 7 --------------------------------------------------------------------------------   with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares, the Warrants and the Warrant Shares. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.           (g) Material Changes. Since December 31, 2005, (i) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Financial Statements (as defined below) pursuant to GAAP, (ii) the Company has not altered its method of accounting, and (iii) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock.           (h) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares, the Warrants and the Warrant Shares or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any current director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current director or officer of the Company.           (i) Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.           (j) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights necessary or material for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights of others. 8 --------------------------------------------------------------------------------             (k) Certain Fees. Except for placement agent fees to Hunter, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.           (l) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Shares and Warrants by the Company to the Purchasers as contemplated hereby. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares or Warrants by any form of general solicitation or general advertising. The Company has offered the Shares and Warrants for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.           (m) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares and Warrants, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.           (n) Registration Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.           (o) Financial Statements. The Company has made available to the Purchasers its (a) audited balance sheets as at December 31, 2004 and 2005 and related statements of operations, changes in stockholders equity and cash flows for the years ended December 31, 2004 and 2005, and (b) unaudited balance sheets as at March 31, 2005 and the related statement of operations, changes in stockholders equity and cash flows for the three months ended March 31, 2005 (collectively, the “Financial Statements”). The Financial Statements (i) were in accordance with the books and records of the Company, (ii) are correct and complete, (iii) fairly present the financial position and results of operations of the Company as of the dates indicated, and (iv) are prepared in accordance with U.S. GAAP (except that unaudited financial statements may not be in accordance with GAAP because of the absence of footnotes normally contained therein.      3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:           (a) Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each of the Transaction Documents to 9 --------------------------------------------------------------------------------   which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.           (b) Investment Intent. Such Purchaser understands that the Shares, the Warrant Shares, and the Warrants, are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring such securities as principal for its own account and not with a view to or for distributing or reselling such securities or any part thereof, has no present intention of distributing any of such securities and has no arrangement or understanding with any other persons regarding the distribution of such securities (this representation and warranty not limiting such Purchaser’s right to sell such securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the securities hereunder in the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the securities hereunder.           (c) Purchaser Status. At the time such Purchaser was offered the Shares and Warrants, it was, and at the date hereof it is, (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.           (d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares and Warrants, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Shares and Warrants and, at the present time, is able to afford a complete loss of such investment.           (e) General Solicitation. Such Purchaser is not purchasing the Shares and Warrants as a result of any advertisement, article, notice or other communication regarding the Shares and Warrants published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. ARTICLE IV OTHER AGREEMENTS OF THE PARTIES      4.1 Transfer Restrictions.           (a) The Shares, the Warrant Shares and the Warrants, may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of these securities other than pursuant to an effective registration statement or Rule 144, to the Company 10 --------------------------------------------------------------------------------   or to an affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement.           (b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a legend on any of the securities sold hereunder in the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.      The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the aforementioned securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of securities may reasonably request in connection with a pledge or transfer of the securities, including, if the securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other 11 --------------------------------------------------------------------------------   applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.           (c) Certificates evidencing the shares and Warrant Shares issued upon exercise of the Warrants shall not contain any legend (including the legend set forth in Section 4.1(b)), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act provided that at the time a Purchaser requests a removal of the legend on any certificate evidencing all or any portion of any of such securities, such Purchaser (or a broker acting on such Purchaser’s behalf) provides to the Company (or to the transfer agent on the Company’s behalf), a representation that any of such securities, sold or to be sold by such Purchaser have been, or will be, sold in accordance with the plan of distribution set forth in the Prospectus and in compliance with the prospectus delivery requirements under the Securities Act, or (ii) following any sale of such securities pursuant to Rule 144, or (iii) if such Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission). The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing securities issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such securities that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.           (d) Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing such securities as set forth in this Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any such securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.      4.2 Furnishing of Information. As long as any Purchaser owns Shares, the Company will use best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Shares, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Shares may reasonably request, all to the extent required from time to time to enable such Person to sell such Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.      4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares and Warrants in a manner that would require the registration under the Securities Act of the sale of the Shares and Warrants to the Purchasers or that would be integrated with the offer or sale of the Shares and Warrants for purposes of the rules and regulations of any Trading Market such that it would require 12 --------------------------------------------------------------------------------   shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.      4.4 Publicity. The Company, and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company, nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, neither the Company shall publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (i) as required by federal securities law and (ii) to the extent such disclosure is required by law or Trading Market regulations.      4.5 Reservation of Common Stock. As of the date hereof, each of the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue the shares of Common Stock pursuant to this Agreement.      4.6 Equal Treatment of Purchasers. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended to treat for the Company the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Shares or otherwise.      4.7 Subsequent Equity Sales. Except for Exempt Issuances, from the date hereof until the Effective Date, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents.      4.8 Delivery of Shares After Closing. The Company shall deliver, or cause to be delivered, the respective Shares and Warrants purchased by each Purchaser to such Purchaser within three Trading Days of the Closing Date.      4.9 Most Favored Nations. If, at any time and from time to time during the period commencing on the Closing Date and ending on the Company issues additional shares of Common Stock or Common Stock Equivalents, excluding any Anti-Dilution Shares (the “Additional Shares”) at a price or exercise price per share of Common Stock (the “Effective Price”) less than Per Share Purchase Price (as adjusted hereunder to such date), then the Company shall provide notice thereof to the Purchasers, and, within twenty business days from receipt of such notice, the Purchasers or any of them shall have the right to purchase additional shares of Common Stock (the “Purchase Shares”) at a purchase price equal to the par value thereof (the “Purchase Share Price”) in accordance with the following: (a) There shall be calculated a per share price (the “Adjusted Price”) determined by a fraction, the numerator of 13 --------------------------------------------------------------------------------   which shall be [Actual Outstanding] PLUS the product of the number of Additional Shares multiplied by the Effective Price PLUS any prior products of previously issued Additional Shares multiplied by the applicable Effective Price(s) with respect to such issuances, and the denominator of which shall be [Fully diluted outstanding] PLUS the number of Additional Shares PLUS any previously issued Additional Shares. (b) Each Purchaser shall be entitled to purchase that number of Purchase Shares at the Purchase Price equal to the difference between the product of the total dollars paid by Purchaser for shares of common stock hereunder (the “Purchaser Amount”) divided by the Adjusted Price LESS the product of the Purchaser Amount divided by the Per Share Purchase Price. Notwithstanding the foregoing, no adjustment will be made in respect of Exempt Issuances.      4.10 Board Nominee. At each of the next two annual meetings of stockholders where directors are elected, the Company agrees to place Hunter’s designee on the slate of directors for nomination to the Board at each such meeting. Todd Ficeto to the Board. ARTICLE V MISCELLANEOUS      5.1 Termination. This Agreement may be terminated by any Purchaser, by written notice to the other parties, if the Closing has not been consummated on or before July 31, 2006; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties).      5.2 Fees and Expenses. The Company shall deliver, prior to the Closing, a completed and executed copy of the Closing Statement, attached hereto as Annex A. Except as otherwise set forth in this Agreement or in the Placement Agent Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other similar transfer taxes and duties levied in connection with the sale of the Shares and Warrants.      5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.      5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. 14 --------------------------------------------------------------------------------        5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers holding at least 66% of the Shares at such time or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.      5.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.      5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser. Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Shares and Warrants, provided such transferee agrees in writing to be bound, with respect to the transferred Shares and Warrants, by the provisions hereof that apply to the “Purchasers”.      5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.      5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of Los Angeles. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Los Angeles, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in 15 --------------------------------------------------------------------------------   such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.      5.10 Survival. The representations and warranties herein shall survive the Closing and delivery of the Shares for two years from the date hereof.      5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.      5.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.      5.13 Replacement of Shares. If any certificate evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares.      5.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. (Signature Pages Follows) 16 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                   MICROMED CARDIOVASCULAR, INC.                       By:   /s/ Travis E. Baugh                       Name:   Travis E. Baugh         Title:   President and Chief Executive Officer                       Address for Notice                       8965 Interchange Drive         Houston TX 77054     with a copy to (which shall not constitute notice): Thomas J. Poletti, Esq. Kirkpatrick & Lockhart Nicholson Graham LLP 10100 Santa Monica Boulevard Seventh Floor Los Angeles, CA 90067 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOR PURCHASERS FOLLOW] 17 --------------------------------------------------------------------------------   [PURCHASER SIGNATURE PAGES TO MICROMED CARDIOVASCULAR, INC. SECURITIES PURCHASE AGREEMENT PURCHASE AGREEMENT]      IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                       INVESTING ENTITY                           ABSOLUTE RETURN EUROPE FUND                                 By:       /s/ FLORIAN HOMM                           Name:   FLORIAN HOMM             Title:   Chief Investment Officer                               Address for Notice of Investing Party:             c/o Hunter World Markets, Inc.                    9300 Wilshire Blvd.                    Penthouse Suite                   Beverly Hills, CA 90212     With a copy to (which shall not constitute notice): David L. Ficksman Troy & Gould 1801 Century Park East, 16th Floor Los Angeles, California 90067 Address for Delivery of Securities for Investing Entity (if not same as above):       Subscription Amount:    $6,200,000 Securities:                                               shares of Common Stock and                                             Warrants EIN Number:                                                                                    [SIGNATURE PAGES CONTINUE] 18 --------------------------------------------------------------------------------   [PURCHASER SIGNATURE PAGES TO MICROMED CARDIOVASCULAR, INC. SECURITIES PURCHASE AGREEMENT PURCHASE AGREEMENT]      IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                       INVESTING ENTITY                           ABSOLUTE EAST WEST FUND                           By:       /s/ FLORIAN HOMM                           Name:   FLORIAN HOMM             Title:   Chief Investment Officer                               Address for Notice of Investing Party:             c/o Hunter World Markets, Inc.                    9300 Wilshire Blvd.                   Penthouse Suite                    Beverly Hills, CA 90212     With a copy to (which shall not constitute notice): David L. Ficksman Troy & Gould 1801 Century Park East, 16th Floor Los Angeles, California 90067 Address for Delivery of Securities for Investing Entity (if not same as above):       Subscription Amount:    $3,875,000.00 Securities:                                                                    shares of Common Stock and                                          Warrants EIN Number:                                                                                    [SIGNATURE PAGES CONTINUE] 19 --------------------------------------------------------------------------------   [PURCHASER SIGNATURE PAGES TO MICROMED CARDIOVASCULAR, INC. SECURITIES PURCHASE AGREEMENT PURCHASE AGREEMENT]      IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                       INVESTING ENTITY                           ABSOLUTE OCTANE FUND                           By:       /s/ FLORIAN HOMM                           Name:   FLORIAN HOMM             Title:   Chief Investment Officer                               Address for Notice of Investing Party:             c/o Hunter World Markets, Inc.                    9300 Wilshire Blvd.                    Penthouse Suite                    Beverly Hills, CA 90212     With a copy to (which shall not constitute notice): David L. Ficksman Troy & Gould 1801 Century Park East, 16th Floor Los Angeles, California 90067 Address for Delivery of Securities for Investing Entity (if not same as above):       Subscription Amount:    $3,875,000.00 Securities:                                                                 shares of Common Stock and                                          Warrants EIN Number:                                                                [SIGNATURE PAGES CONTINUE] 20 --------------------------------------------------------------------------------   [PURCHASER SIGNATURE PAGES TO MICROMED CARDIOVASCULAR, INC. SECURITIES PURCHASE AGREEMENT PURCHASE AGREEMENT]      IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                       INVESTING ENTITY                           ABSOLUTE LARGE CAP FUND                           By:       /s/ FLORIAN HOMM                           Name:   FLORIAN HOMM             Title:   Chief Investment Officer                               Address for Notice of Investing Party:             c/o Hunter World Markets, Inc.                    9300 Wilshire Blvd.                    Penthouse Suite                    Beverly Hills, CA 90212     With a copy to (which shall not constitute notice): David L. Ficksman Troy & Gould 1801 Century Park East, 16th Floor Los Angeles, California 90067 Address for Delivery of Securities for Investing Entity (if not same as above):       Subscription Amount:    $1,475,000.00 Securities:                                                                shares of Common Stock and                                          Warrants EIN Number:                                                                21 --------------------------------------------------------------------------------   ANNEX A CLOSING STATEMENT      Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers shall purchase up to $15,425,000 of Shares and Warrants from MicroMed Cardiovascular, Inc., a Delaware corporation (the “Company”). All funds will be wired into an escrow account. All funds will be disbursed in accordance with this Closing Statement. Disbursement Date: June 13, 2006               I. PURCHASE PRICE                           Gross Proceeds to be Received in Trust:   $ 15,425,000                 II. DISBURSEMENTS                       Payee:   MicroMed Cardiovascular, Inc.   $ 13,862,500       8965 Interchange Drive             Houston, TX 77054             ABA # 121140399             Acct # 3300362576                       Payee:   Hunter World Markets, Inc.   $ 1,562,500       Union Bank of California             Century City, CA 90067             ABA # 122000496             Acct # 20601 66768                           Total Amount Disbursed:   $ 15,425,000   22 --------------------------------------------------------------------------------   Schedule of Purchasers                                             Purchaser’s Name   Share Amount     Warrant Amount     Purchase Amount   Absolute Return Europe Fund     4,000,000       1,333,333     $ 6,200,000     Absolute East West Fund     2,500,000       833,333     $ 3,875,000     Absolute Octane Fund     2,500,000       833,333     $ 3,875,000     Absolute Large Cap Fund     951,613       317,204     $ 1,475,000                         TOTAL:     9,951,613       3,317,204     $ 15,425,000                       23

Exhibit 10.5 SECOND LEASE EXTENSION AGREEMENT Building #6 1360 O’Brien Drive Menlo Park, California 94025 THIS SECOND LEASE EXTENSION AGREEMENT (this “Agreement”) is made and entered into on June 23, 2006 by and between MENLO BUSINESS PARK, LLC, a California limited liability company (“Lessor”), and DEPOMED, INC., a California corporation (“Lessee”). RECITALS A.            Lessor and Lessee entered into a Lease dated February 4, 2000 of the premises referred to as Building #6 located at 1360 O’Brien Drive, Menlo Park, California 94025, more particularly described on Exhibit “A” attached to the Lease and incorporated by reference herein (the “Premises”).  The Premises contain approximately 20,624 rentable square feet of space.  Lessor and Lessee entered into a Lease Extension Agreement on April 30, 2003 (the “First Lease Extension Agreement”) extending the expiration date of the initial term of the Lease from March 14, 2005 to April 30, 2008.  The Lease dated February 4, 2000, as amended by the First Lease Extension Agreement, is hereafter referred to collectively as the “Lease.” B.            Lessor and Lessee wish to extend further the expiration date of the initial term as previously extended by the First Lease Extension Agreement, subject to the terms and conditions set forth herein. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1.             Defined Terms.  Terms defined in the Lease and used in this Agreement shall have the meaning ascribed to them in the Lease. 2.             Extension of Initial Term. (a)           The initial term of the Lease is hereby extended for a period of fourteen (14) calendar months commencing on May 1, 2008 and ending on June 30, 2009 (the “Second Extension Term”).  The Second Extension Term shall be upon all of the same terms and conditions of the Lease, except that the Monthly Base Rent payable by -------------------------------------------------------------------------------- Lessee to Lessor during the Second Extension Term shall be as set forth in Paragraph 3 hereof. (b)           The option to extend provided for in Paragraph 3 of the Lease shall be for a term of sixty (60) calendar months immediately following the expiration of the Second Extension Term and shall otherwise be upon the same terms and conditions as set forth in Paragraph 3 of the Lease. 3.             Monthly Base Rent.  Lessee shall pay to Lessor Monthly Base Rent during the Second Extension Term, in monthly installments in advance on a triple net basis in lawful money of the United States, as follows: (a)           Commencing on May 1, 2008 and continuing through April 30, 2009, the sum of Fifty-four Thousand Six Hundred Fifty-three and Sixty Hundredths Dollars ($54,653.60) per month ($2.65/square foot/NNN). (b)           Commencing on May 1, 2009 (the “Rental Adjustment Date”), the Monthly Base Rent shall be adjusted to reflect any increase in the cost of living.  The adjustment shall be calculated upon the basis of the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index, all items,  for all Urban Consumers - San Francisco-Oakland-San Jose (1982-84=100), hereafter referred to as the “Index.”  The Index for said subgroup published most recently as of the end of the calendar month immediately preceding the month in which the commencement date of the Second Extension Term occurs shall be considered the “base Index.” (c)           The Monthly Base Rent shall be adjusted as of the Rental Adjustment Date to an amount equal to the product obtained by multiplying Fifty-four Thousand Six Hundred Fifty-three and Sixty Hundredths Dollars ($54,653.60) (the Monthly Base Rent for the Premises commencing on May 1, 2008 referred to in Paragraph 3(a) above), by a fraction, the numerator of which is the Index most recently published as of the end of the calendar  month immediately preceding the Rental Adjustment Date and the denominator of which is the base Index; provided that in no event shall the Monthly Base Rent be increased on the Rental Adjustment Date to an amount less than three percent (3%) per annum or more than six percent (6%) per annum of the Monthly Base Rent payable immediately before the Rental Adjustment Date.  The Monthly Base Rent as so adjusted shall continue through June 30, 2009, the expiration date of the Second Extension Term. (d)           When the new Monthly Base Rent is determined for the Rental Adjustment Date, Lessor shall give Lessee written notice of the amount of the new Monthly Base Rent and how the new Monthly Base Rent figure was computed in accordance with subparagraphs 3(b) and 3(c) above.  Lessee shall pay to Lessor retroactively any unpaid increase in Monthly Base Rent due from and after the Rental 2 -------------------------------------------------------------------------------- Adjustment Date.  If the Index does not exist on the Rental Adjustment Date in the same format as referred to in subparagraph 3(b) above, Lessor shall substitute in lieu thereof an index reasonably comparable to the Index referred to above which is acceptable to Lessee and which is then published by the Bureau of Labor Statistics, or successor or similar governmental agency, or if no governmental agency then publishes an index, Lessor shall substitute therefor any index commonly accepted which is published by a reputable private organization. (e)           Monthly Base Rent for any partial month shall be prorated on the basis of the number of calendar days in such month. 4.             Additional Rent; Operating Expenses and Taxes.  In addition to the Monthly Base Rent payable by Lessee pursuant to Paragraph 3 above, Lessee shall pay to Lessor during the Second Extension Term, as Additional Rent, Operating Expenses and Taxes pursuant to Paragraph 5 of the Lease. 5.             Condition of the Premises.  Lessee is currently in possession of the Premises and is conducting business thereon pursuant to the Lease.  Lessee agrees to accept the Premises in its “as is” condition at the commencement of the Second Extension Term, subject to the performance by Lessor of Lessor’s obligations under Paragraph 14(a) of the Lease. 6.             Security Deposit.  Lessor acknowledges that Lessor has received from Lessee and is currently holding the sum of One Hundred Forty-five Thousand Four Hundred and Forty Hundredths Dollars ($145,400.40) in cash (the “Security Deposit”), as security for Lessee’s faithful performance of Lessee’s obligations under the Lease.  Lessor shall continue to hold the Security Deposit during the remainder of the initial term and during the Second Extension Term pursuant to Paragraph 7 of the Lease. Subject to the satisfaction of the conditions set forth in Paragraph 6(b) of the First Lease Extension Agreement, Lessor shall refund to Lessee Forty-eight Thousand Four Hundred Sixty-six Dollars ($48,466.00) of the Security Deposit on March 15, 2007. 7.             Real Estate Brokers.  Lessor shall pay a leasing commission to Tarlton Properties, Inc., who has acted as exclusive leasing agent for Lessor in connection with this Agreement, pursuant to a separate agreement between Lessor and said broker.  Lessor shall also pay leasing commissions to NAI BT Commercial and Technology Commercial, Inc., who have acted as leasing agents for Lessee in connection with this Agreement, pursuant to an agreement between Lessor and said brokers.  Each party represents and warrants to the other party that it has not had any dealings with any real estate broker, finder, or other person with respect to this Agreement other than the above named brokers.  Each party shall hold harmless the other party from all damages, expenses, and 3 -------------------------------------------------------------------------------- liabilities resulting from any claims that may be asserted against the other party by any broker, finder, or other person with whom the other party has or purportedly has dealt, other than the above named brokers. 8.             Notices.  Paragraph 24, Notices, of the Lease is amended to read as follows: “24.         Notices.  All notices, statements, demands, requests, or consents given hereunder by either party to the other shall be in writing and shall be personally delivered or sent by United States mail, registered or certified, return receipt requested, postage prepaid, and addressed to the parties as follows: Lessor: Menlo Business Park, LLC   c/o Tarlton Properties, Inc.   955 Alma Street   Palo Alto, California 94301       Attention: John C. Tarlton   Telephone: (650) 330-3600     Lessee: DepoMed, Inc.   1330 O’Brien Drive   Menlo Park, California 94025       Attention:   Telephone:   All such notices or other communications given hereunder shall be addressed to the parties to such other address as either party may have furnished to the other as a place for the service of notice.  Notices shall be deemed given upon receipt or attempted delivery where delivery is not accepted.” 9.             Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4 -------------------------------------------------------------------------------- 10.           Continuing Effect.  The parties acknowledge that the Lease remains in full force and effect as amended hereby, and with the initial term further extended as provided herein. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. “Lessor”       MENLO BUSINESS PARK, LLC   a California limited liability company           By: /s/ J. O. Oltmans, II     J. O. Oltmans, II, Manager           By: /s/ James R. Swartz     James R. Swartz, Manager           “Lessee”       DEPOMED, INC.,   a California corporation           By: /s/ John F. Hamilton     John F. Hamilton, Vice President and Chief Financial Officer           By: /s/ Matthew M. Gosling     Matthew M. Gosling, Vice President and General Counsel   5 --------------------------------------------------------------------------------

EXHIBIT 10.19 Note: Portions of this exhibit indicated by [*] are subject to a confidential treatment request, and have been omitted from this exhibit. Complete, unredacted copies of this exhibit have been filed with the Securities and Exchange Commission as part of the Company’s confidential treatment request.  AMENDMENT OF 1st AND 2nd PURCHASE CONTRACTS (YZN/ACL-S22) THIS AMENDMENT OF 1st AND 2nd PURCHASE CONTRACTS (hereinafter called, “This Amendment”) is made this 6th day of October, 2005, by and between YOZAN INCORPORATED of the city of Tokyo, Japan, (hereinafter called, “YZN”) and AIRSPAN COMMUNICATIONS LIMITED of the city of Uxbridge, Middlesex, U.K., (hereinafter called, “ACL”), to amend PURCHASE CONTRACT (YZN/ACL-A14) dated 14th April, 2005, and SUPPLEMENT TO PURCHASE CONTRACT (YZN/ACL-A14S1) dated 15th August, 2005, (hereinafter collectively called, “1st P/C”) and 2nd PURCHASE CONTRACT (YZN/ACL-S13) dated 13th September, 2005, (hereinafter called, “2nd P/C”). The amendment of 1st P/C and 2nd P/C agreed hereunder by the both parties is as follows : 1. Regarding 2nd P/C : a) ARTICLE 4.-Clause (1)-Item 9. is amended to “WiFi-AP For ProST [*] Units US$[*].-”, because 1,000Units of WiFi-AP For ProST is removed from 2nd P/C and covered under 1st P/C for integration with ProSTs to be delivered under 1st P/C as the below-mentioned. b) The bottom line in parenthesis of ARTICLE 4.-Clause (1) is amended to “Grand Total before volume discount : US$[*].-”, as the result of the above amendment. c) Notwithstanding the above a) and b), ARTICLE 4.-Clause (2) and the other part of 2nd P/C remains unchanged. Therefore, The Total Contract Price of 2nd P/C after the volume discount is U.S.$15,000,000.-. 2. Regarding 1st P/C : a) The Optional Purchase of 1,000Units WiFi-AP For ProST mentioned in Item 7 of SUPPLEMENT TO PURCHASE CONTRACT (YZN/ACL-A14S1) dated 15th day of August, 2005, (hereinafter called, “Supplement A14S1”) and 1,000Units Outdoor PSU mentioned in Item 13 of Supplement A14S1 is made by YZN with the additional contract price of U.S.$[*].-, which is calculated from the unit price of Outdoor PSU (U.S. [*].-) and [*]Units quantity after the mutually agreed discount (The said [*]Units WiFi-AP is not charged under 1st P/C.) . b) As the result of the optional purchase by YZN mentioned in the above a), the quantity of ProST-WiFi purchased by YZN under 1st P/C, which is mentioned in Item 6. of Supplement A14S1, is [*] Units instead of [*] Units. c) As the result of the above a) and b), the additional Down Payment of U.S.$16,500.- shall be paid by YZN to ACL within two weeks of This Amendment in addition to Item 15 of Supplement A14S1. Now, this is calculated as follows : The total Contract Price of 1st P/C U.S.$16,667,940.- The Contract Price added by This Amendment U.S.$55,000.- The total Contract Price of the date U.S.$16,722,940.- The Down Payment Amount of the above U.S.$5,016,882.- Less The Down Payment already paid U.S.$5,000,382.- The Down Payment to be paid by This Amendment U.S.$16,500.-     -------------------------------------------------------------------------------- d) Considering the changes made by Supplement A14S1 and the foregoing clauses of This Amendment, ARTICLE 11. of 1st P/C shall be read as follows :    “The Bank Guarantee for 10% of the total Contract Price issued by a prime bank in U.K., which shall amount U.S.$1,672,294.- and be effective till 6 months after the acceptance of all the Products, shall be deposited by ACL at YZN. This Bank Guarantee will be raised in two Guarantees: (1)The first one amounts U.S.$320,795.-, which is hypothetically regarded as equivalent to 10% of Contract Price of Lot-1 to Lot-7, to be raised by the end of September, 2005; (2)The 2nd one amounts U.S.$1,345,999.-, which is hypothetically regarded as equivalent to 10% of Contract Price of Lot-8 to Lot-10 to be raised by the end of December, 2005. The respective Bank Guarantee shall be effective six months after acceptance of all the Lots covered by the corresponding Bank Guarantee being made by YZN. YZN shall return these Bank Guarantees to ACL immediately after its expiry.” In witness whereof, each party of the parties hereto has caused This Amendment to be Executed, in duplicate, each duplicate of which shall be considered as original, by its duly authorized officers or representatives.   YOZAN INC.    AIRSPAN COMMUNICATIONS LTD.     (signed)   (signed)           By Sunao Takatori,   By Henrik Smith-Petersen,   President and CEO   President Asia Pacific            

  Exhibit 10.4 This Electronotes® Selling Agent Agreement has been filed to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Tennessee Valley Authority. The representations and warranties of the parties in this Electronotes® Selling Agent Agreement were made to, and solely for the benefit of, the other parties to this Electronotes® Selling Agent Agreement. The assertions embodied in the representations and warranties may be qualified by information included in schedules, exhibits or other materials exchanged by the parties that may modify or create exceptions to the representations and warranties. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.   --------------------------------------------------------------------------------   $3,000,000,000 MAXIMUM AGGREGATE PRINCIPAL AMOUNT OUTSTANDING electronotes® TENNESSEE VALLEY AUTHORITY POWER BONDS WITH MATURITIES OF ONE YEAR TO THIRTY YEARS FROM DATE OF ISSUE SELLING AGENT AGREEMENT As of June 1, 2006 LaSalle Financial Services, Inc. 327 Plaza Real, Suite 225 Boca Raton, Florida 33432 A.G. Edwards & Sons, Inc. One North Jefferson St. Louis, Missouri 63103 Citigroup Global Markets Inc. 388 Greenwich Street New York, New York 10013 Edward D. Jones & Co., L.P. 12555 Manchester Road St. Louis, Missouri 63131 First Tennessee Bank National Association 845 Crossover Lane, Suite 150 Memphis, Tennessee 38117 J.J.B. Hilliard, W.L. Lyons, Inc. Hilliard Lyons Center, 5th Floor P.O. Box 32760 Louisville, Kentucky 40232 Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, Floor 15 New York, New York 10080   --------------------------------------------------------------------------------   Morgan Stanley & Co. Incorporated Second Floor 1585 Broadway New York, New York 10036 Wachovia Securities, LLC 301 South College Street One Wachovia Center Charlotte, North Carolina 28288 Dear Sirs:      Tennessee Valley Authority, a wholly owned corporate agency and instrumentality of the United States of America (“TVA” or the “Company”), has established a program to issue and sell its Tennessee Valley Authority Power Bonds with Maturities of One Year to Thirty Years from Date of Issue (the “electronotes®”) in an aggregate principal amount of up to $3,000,000,000 outstanding at any one time pursuant to the Tennessee Valley Authority Act of 1933, as amended (the “TVA Act”), and under the Basic Tennessee Valley Authority Power Bond Resolution adopted by the Board of Directors of TVA (the “Board”) on October 6, 1960, and amended on September 28, 1976, October 17, 1989, and March 25, 1992 (as so amended, the “Basic Resolution”), and a Supplemental Resolution adopted by the Board as of February 23, 2001, as amended on July 23, 2002, and on March 14, 2006, authorizing the issuance and sale of the electronotes® and designating and delegating authority to certain officers to specify and determine the terms and conditions of the electronotes® (the “Supplemental Resolution” and together with the Basic Resolution, the “Resolutions”).      As of June 1, 2006, there are $1,058,053,000 of electronotes® outstanding. The electronotes® hereinafter issued (herein referred to as the “Bonds”) may be issued from time to time in one or more installments. The terms and conditions of each installment of Bonds shall be established in accordance with Section 2.2 of the Supplemental Resolution by the Company’s Chief Financial Officer or Vice President and Treasurer (the “Designated Officers”) or the duly authorized representative of either such officer in an Officer’s Certificate executed prior to the issuance of each installment of Bonds (a “Designated Officer’s Certificate”). If the Bonds are to be issued in multiple installments, the title of the Bonds and the general terms thereof shall be set forth in the initial Designated Officer’s Certificate. Prior to the issuance of any installment of Bonds, the specific terms of said installment of Bonds shall be set forth in a subsequent Designated Officer’s Certificate or a supplement to the initial Designated Officer’s Certificate. The Bonds shall have the maturity ranges, interest rates, and other terms set forth in the Offering Circular referred to below as it may be amended or supplemented from time to time. The Bonds will be issued, and the terms thereof established, from time to time by the Company in accordance with the Resolutions.      The Company has prepared an Information Statement dated November 18, 2005 (the “Information Statement”), and the Power Bonds Offering Circular dated June 1, 2006, relating to the Bonds (the “Power Bonds Offering Circular”) for the purpose of supplying information in 2 --------------------------------------------------------------------------------   respect of the offering of the Bonds. The Power Bonds Offering Circular, as most recently amended, supplemented, or revised, together with the Information Statement which is attached thereto and made a part thereof, as most recently amended, supplemented, or revised, and together with the applicable Pricing Supplement or Permitted Free Writing, in either case, as most recently amended, supplemented, or revised, is referred to herein as the “Offering Circular.” The term “Permitted Free Writing” as used herein means the documents, if any, prepared by the Company that (i) contain the final terms of the offering and (ii) are attached to the applicable Terms Agreement for a tranche of Bonds. The term “Pricing Supplement” refers to the applicable supplement to the Offering Circular that (i) sets forth only the terms of a particular installment of Bonds and (ii) is prepared or approved by the Company.      The “Pricing Disclosure Material” as used herein shall mean either (i) a Permitted Free Writing with the final terms of the offering and the Offering Circular or (ii) the Pricing Supplement prepared or approved by the Company and the Offering Circular, in either case, in the last form conveyed to a purchaser prior to or simultaneously with the confirmation of sale.      This Selling Agent Agreement amends and restates in its entirety (i) the Selling Agent Agreement dated as of February 13, 2004, between TVA and the agents referred to therein and (ii) the letter agreement between TVA and A.G. Edwards & Sons, Inc. dated as of January 5, 2005, under which TVA appointed A.G. Edwards & Sons, Inc. as an agent under the Selling Agent Agreement referred to in clause (i) of this paragraph. I. Appointment of Agents      Subject to the terms and conditions contained in this Selling Agent Agreement (the “Agreement”), the Company hereby appoints or confirms the appointment, as the case may be, of each of you as an agent of the Company (individually, an “Agent” and collectively, the “Agents”) for the purpose of soliciting and receiving offers to purchase Bonds from the Company; and you hereby agree to use your reasonable best efforts to solicit and receive offers to purchase Bonds upon terms acceptable to the Company at such times and in such amounts as the Company shall from time to time specify and in accordance with the terms hereof. The Company reserves the right, after consultation with LaSalle Financial Services, Inc. (the “Purchasing Agent”), to enter into agreements substantially identical hereto with other agents.      Whenever the Company determines to sell Bonds pursuant to this Agreement, such Bonds shall be sold pursuant to a Terms Agreement (as defined in Section IV(b) below) relating to such sale in accordance with the provisions of Section IV(b) hereof between the Company and the Purchasing Agent with the Purchasing Agent purchasing such Bonds as principal for resale to others.      This Agreement shall not be construed to create either an obligation on the part of the Company to sell any Bonds or an obligation of any of the Agents to purchase Bonds. Each Terms Agreement shall create an obligation on the part of the Company to sell, and an obligation on the part of the Purchasing Agent to purchase, the Bonds identified in such Terms Agreement. 3 --------------------------------------------------------------------------------   II. Conditions of the Obligations of the Agents      Your obligations hereunder are subject at all times to the accuracy of the representations and warranties of the Company herein and the performance and observance by the Company of all covenants and agreements herein contained to be performed and observed by the Company and to the additional conditions set forth in this Section II, which additional conditions shall be satisfied prior to June 15, 2006 or such later date agreed to by the Company and the Purchasing Agent (the date the last of such conditions are satisfied is hereinafter referred to as the “Commencement Date”).      (a) (i) No litigation or proceeding shall be threatened or pending to restrain or enjoin the issuance or delivery of the Bonds, or which in any way questions or affects the validity of the Bonds, and (ii) there shall have been no material adverse change in the financial condition or the results of operations of the Company or in its business prospects from that set forth in the Offering Circular; and you shall have received a certificate of the Company dated as of or prior to the Commencement Date and signed by a Designated Officer of the Company or a duly authorized representative of a Designated Officer to the foregoing effect. The Designated Officer or the representative of such Designated Officer making such certificate may rely upon the best of his or her knowledge as to proceedings threatened.      (b) You shall have received a favorable opinion of Maureen H. Dunn, Esq., Executive Vice President and General Counsel for the Company, or Michael L. Wills, Assistant General Counsel, Finance, for the Company, dated as of or prior to the Commencement Date, to the effect that:      (i) The Company is an instrumentality and agency of the United States of America duly created and validly existing under the provisions of the TVA Act and under the Constitution of the United States, with full power and authority to hold properties and conduct its business as described in the Offering Circular.      (ii) The Company has the right and power under the TVA Act and under the Constitution of the United States to issue the Bonds and to adopt the Resolutions, the Resolutions have been duly and lawfully adopted by the Company in accordance with the provisions of the TVA Act and are, except as provided in the last paragraph of this Section II(b), in full force and effect, and no other authorization for the adoption of the Resolutions is required.      (iii) The Secretary of the Treasury has approved the time of issuance and maximum rate of interest of the Bonds in compliance with Section 15d of the TVA Act, and such approval remains in full force and effect; the Bonds have been duly authorized and executed, and when the terms of a particular Bond and of the issuance and sale thereof have been established in accordance with the Resolutions and delivered against payment as contemplated by this Agreement, such Bond will have been duly issued and delivered, in each case, in accordance with the provisions of the TVA Act and the Resolutions, and will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to fraudulent transfer, moratorium, and other laws of general applicability relating to or affecting creditors’ 4 --------------------------------------------------------------------------------   rights and to general equity principles, payable, however, solely from the Net Power Proceeds of the Company, as defined and set forth in the Basic Resolution; and when so issued, such Bond will, except as provided in the last paragraph of this Section II(b), be entitled to the benefits provided by the Resolutions.      (iv) When issued, the Bonds will be subject to Federal income taxation, but under the TVA Act the Bonds will be exempt as to principal and interest from all taxation now or hereafter imposed by any state of the United States or local taxing authority of any such state, except estate, inheritance, and gift taxes. The exemption from state and local taxation may not apply to franchise or other nonproperty taxes in lieu thereof imposed on corporations or to gain or loss on the sale or exchange of a Bond.      (v) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required (except any that may be required to be obtained by any Agent or any purchaser of the Bonds) for the consummation of this Agreement or the transactions contemplated by this Agreement in connection with the issuance or sale of the Bonds by the Company, except such as have been obtained and made under the TVA Act and such as may be required under state securities laws in connection with qualification of the Bonds pursuant to Section III (d) of this Agreement.      (vi) This Agreement has been duly authorized, executed, and delivered by the Company and is enforceable, subject, as to enforcement, (1) to fraudulent transfer, moratorium, and other laws of general applicability relating to or affecting creditors’ rights, (2) to general equity principles, and (3) to rights to indemnification and contributions which may be limited by applicable law or equitable principles.      (vii) The execution, delivery, and performance of this Agreement and the issuance and sale of the Bonds and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, the TVA Act, any statute, any rule, regulation, or order of any governmental agency or body or any court having jurisdiction over the Company or any properties held by the Company, or any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the properties held by the Company is subject, or the regulations of the Company, and the Company has full power and authority to authorize, issue, and sell the Bonds as contemplated by this Agreement.      (viii) When issued, the Bonds will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will be exempted securities within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than for the purposes of Section 17A thereof).      (ix) The priority granted to the United States by 31 U.S.C. § 3713 in the case of the insolvency of certain persons indebted to the United States does not establish a priority in favor of the United States with respect to Evidences of Indebtedness (as defined in the Offering Circular) to the United States over other Evidences of Indebtedness of the Company, including the Bonds. 5 --------------------------------------------------------------------------------        (x) Such counsel has no reason to believe that the Offering Circular, as of its date and the date of such opinion, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; the descriptions in the Offering Circular of the Bonds, the TVA Act, the Resolutions, statutes, legal and governmental proceedings, and contracts and other documents are accurate and fairly present the information set forth therein, it being understood that such counsel need express no opinion as to (a) the financial statements, schedules, or other financial or statistical data contained in the Offering Circular and (b) the information set forth in the Offering Circular under the heading “Tax Matters.”      (xi) In addition, such counsel may also state in such opinion that its opinions in paragraphs (ii) and (iii) regarding the force and effect of the Resolutions and the Bonds’ entitlement to the benefits thereof, respectively, are qualified to the extent that the Resolutions may be affected by the paragraph captioned “TENNESSEE VALLEY AUTHORITY” in Title IV of the Energy and Water Development Appropriations Act, 1998, Pub. L. No. 105-62, 111 Stat. 1320, 1338 (1997) (such paragraph being hereinafter referred to as the “Appropriations Act paragraph”) and TVA’s actions taken pursuant thereto, relating to, among other things, the use of revenues from TVA’s Power Program, as defined in the Basic Resolution, for “essential stewardship activities,” as such term is used in the Appropriations Act paragraph. Furthermore, such counsel may state in such opinion that its opinions are based on facts and laws in existence on the date of such opinion.      (c) You shall have received a letter dated as of or prior to the Commencement Date from PricewaterhouseCoopers LLP, independent auditors, or another independent auditor reasonably satisfactory to the Purchasing Agent, to the effect that:      (i) they have inquired of Company officials who have responsibility for financial and accounting matters regarding whether:      (A) at the date of the latest available balance sheet, there was any decrease in the total proprietary capital in excess of $100,000,000 or any increase in short-term indebtedness (excluding issuances of Discount Notes (as defined in the Offering Circular)) in excess of $100,000,000 or any increase in the principal amount of long-term debt of (excluding issuances of electronotes® and adjustments to the principal of inflation-indexed bonds) or any increase (not including any increase resulting from the issuance of Discount Notes (as defined in the Offering Circular) or adjustments to the principal of inflation-indexed bonds) in net current liabilities (current liabilities less current assets) in excess of $150,000,000 or any decrease in net assets in excess of $100,000,000, as compared with amounts shown on the balance sheet included in the Offering Circular; or      (B) at a subsequent specified date not more than five business days prior to the date of such letter, there was any decrease in the total proprietary capital in excess of $200,000,000 or any increase in short-term indebtedness 6 --------------------------------------------------------------------------------   (excluding issuances of Discount Notes (as defined in the Offering Circular)) in excess of $100,000,000 or any increase in the principal amount of long-term debt of the Company (excluding issuances of electronotes® and adjustments to the principal of inflation indexed bonds), as compared with amounts shown on the balance sheet included in the Offering Circular; or (C) for the period from the closing date of the income statement included in the Offering Circular to the closing date of the latest available income statement there were any decreases, as compared with the corresponding period of the previous year, in (1) operating revenues in an amount greater than $75 million, or (2) operating income in an amount greater than $75 million, or (3) net income in an amount greater than $75 million; and those Company officials have advised them that there were no such decreases or increases (to the extent quantifiable), except, in all cases set forth in clauses (A), (B) and (C) above, for changes, increases, or decreases which the Offering Circular discloses have occurred or may occur or which are described in such letter; and      (ii) they have compared the dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Circular (in each case to the extent that such dollar amounts, percentages, and other financial information are derived from the general accounting records of the Company subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages, and other financial information to be in agreement in all material aspects with such results, except for material items as otherwise specified in such letter. For purposes of this provision, no item will be deemed material unless it exceeds 3 percent of the financial statement classification.      (d) You shall have received a favorable opinion of Orrick, Herrington & Sutcliffe LLP, counsel for the Agents, dated as of or prior to the Commencement Date, to the effect that:      (i) The Company is an instrumentality and agency of the United States of America duly created and validly existing under the provisions of the TVA Act and under the Constitution of the United States.      (ii) The Company has the right and power under the TVA Act and under the Constitution of the United States to issue the Bonds and to adopt the Resolutions, the Resolutions have been duly and lawfully adopted by the Company in accordance with the provisions of the TVA Act and are, except as provided in the second to last paragraph of this Section II(d), in full force and effect and no other authorization for the adoption of the Resolutions is required.      (iii) The Secretary of the Treasury has approved the time of issuance and maximum rate of interest of the Bonds in compliance with Section 15d of the TVA 7 --------------------------------------------------------------------------------   Act; the Bonds have been duly authorized and executed and when the terms of a particular Bond and of the issuance and sale thereof have been established in accordance with the Resolutions and delivered against payment as contemplated by this Agreement, such Bond will have been duly issued and delivered, in each case, in accordance with the provisions of the TVA Act and the Resolutions, and will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject, as to enforcement, to fraudulent transfer, moratorium, and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, payable, however, solely from the Net Power Proceeds of the Company, as defined and set forth in the Basic Resolution; and, except as provided in the second to last paragraph of this Section II(d), such Bond will, when issued, be entitled to the benefits provided by the Resolutions.      (iv) When issued, the Bonds will be subject to Federal income taxation, but under the TVA Act the Bonds will be exempt both as to principal and interest from all taxation now or hereafter imposed by any state of the United States or local taxing authority of any such state, except estate, inheritance, and gift taxes. The exemption from state and local taxation may not apply to franchise or other nonproperty taxes in lieu thereof imposed on corporations or to gain or loss on the sale or exchange of a Bond.      (v) This Agreement has been duly authorized, executed, and delivered by the Company.      (vi) When issued, the Bonds will be exempt from the registration requirements of the Securities Act of 1933, as amended, and will be exempted securities within the meaning of the Securities Exchange Act of 1934, as amended, and no indenture need be qualified with respect to the Bonds under the Trust Indenture Act of 1939, as amended.      (vii) Such counsel shall state that they have examined the statements with respect to the Bonds and the Resolutions contained in the Offering Circular and, in the opinion of such counsel, such statements, insofar as they relate to the provisions of statutes or documents therein described, are true and correct in all material respects.      In addition, such counsel shall state in such opinion that during the course of the preparation of the Offering Circular, they reviewed the Offering Circular and participated in conferences with representatives of the Company and its counsel, at which the contents of the Offering Circular and related matters were discussed. Although such counsel may state that they are not passing upon or assuming any responsibility for the accuracy, completeness, or fairness of any of the statements made in the Offering Circular, on the basis of the information which they gained in the course of the services referred to above, nothing which has come to their attention in the course of such review has caused them to believe that the Offering Circular, as of its date and the date of such opinion, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, such counsel may state that they are not expressing any opinion or belief as to the financial statements, schedules, or other financial data contained in the Offering Circular. 8 --------------------------------------------------------------------------------        In addition, such counsel may also state in such opinion that its opinions in paragraphs (ii) and (iii) regarding the force and the effect of the Resolutions and the Bonds’ entitlement to the benefits thereof, respectively, are qualified to the extent that the Resolutions may be affected by the Appropriations Act paragraph and the Company’s actions taken pursuant thereto, relating to, among other things, the use of revenues from the Company’s Power Program, as defined in the Basic Resolution, for “essential stewardship activities,” as such term is used in the Appropriations Act paragraph.      Furthermore, such counsel may state in such opinion that its opinions are based on facts and laws in existence on the date of such opinion.      (e) You shall have received a favorable opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel for the Company, dated as of or prior to the Commencement Date, confirming their tax opinion as described in the Offering Circular.      (f) You shall have received a certificate of the Secretary or an Assistant Secretary of the Company, dated as of or prior to the Commencement Date, as to the Resolutions authorizing the issuance and sale of the Bonds and certain related matters.      The obligation of the Purchasing Agent to purchase Bonds under any Terms Agreement is subject to the conditions that (i) no litigation or proceeding shall be threatened or pending to restrain or enjoin the issuance or delivery of the Bonds, or which in any way questions or affects the validity of the Bonds, and (ii) there shall have been no material adverse change in the financial condition or results from operations of the Company or in its business prospects from that set forth in the Offering Circular, each of which conditions shall be met on the corresponding Settlement Date (as defined in Section IV(b) hereof). Further, if specifically called for by any Terms Agreement, the Purchasing Agent’s obligations with respect to such Bonds under such Terms Agreement shall be subject to the satisfaction on the corresponding Settlement Date of the conditions set forth above in clause (a) as it relates to the officer’s certificate of a Designated Officer or representative thereof, clause (b) as it relates to the opinion of the Executive Vice President and General Counsel to the Company or the Assistant General Counsel, Finance, for the Company, clause (c) as it relates to the letter of the independent auditor, clause (d) as it relates to the opinion of counsel to the Agents, clause (e) as it relates to the tax opinion of special counsel to the Company, and clause (f) as it relates to the certificate of the Secretary or an Assistant Secretary of the Company; provided, however, that each shall be dated as of the Settlement Date, and to the extent appropriate such opinions, letters, and certificates may reconfirm matters set forth in prior opinions, letters, and certificates, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company; provided, further, that to the extent opinions of counsel referred to in clauses (b) and (d) are required to be delivered, references in such clauses to the Offering Circular shall be deemed to refer to the Offering Circular and the Pricing Disclosure Material. 9 --------------------------------------------------------------------------------   III. Covenants of the Company      In further consideration of your agreements herein contained, the Company covenants as follows:      (a) To furnish to you, without charge, a copy of (i) the resolutions of the Board of Directors of the Company authorizing the issuance and sale of the Bonds, certified by the Secretary or an Assistant Secretary of the Company as having been duly adopted and (ii) as many copies of the Offering Circular and the Pricing Disclosure Material as you may reasonably request.      (b) Before amending or supplementing the Offering Circular (other than by means of a Pricing Supplement), to furnish you a copy of each such proposed amendment or supplement, and to afford you a reasonable opportunity to comment on any such proposed amendment or supplement.      (c) To furnish you copies of each amendment to the Offering Circular and the Pricing Disclosure Material in such quantities as you may from time to time reasonably request; and if at any time when an Offering Circular or Pricing Disclosure Material is being used in connection with the initial offering of any of the Bonds, any event shall have occurred as a result of which the Offering Circular or the Pricing Disclosure Material would either include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Company will (A) notify you to suspend the solicitation of offers to purchase Bonds and if notified by the Company, you shall forthwith suspend such solicitation and cease using the Offering Circular or the Pricing Disclosure Material, as applicable, as then amended or supplemented, and (B) if the Company notifies you that it would like you to resume the solicitation of offers to purchase, promptly prepare an amendment or supplement to the Offering Circular or the Pricing Disclosure Material which will correct such statement or omission, and furnish you copies of any such amendment or supplement in such quantities as you may reasonably request.      (d) To furnish the necessary information, execute all proper applications and other requisite forms, and otherwise cooperate in qualifying the Bonds under the securities or Blue Sky laws of such states as may be designated by the Purchasing Agent and in determining their eligibility for investment; provided, however, the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in connection with any such qualifications. The Company shall cooperate in continuing such qualifications in effect so long as required for the distribution of the Bonds.      (e) Prior to the termination of this Agreement pursuant to Article VII hereof, to furnish to the Agents, as soon as practicable after the end of each fiscal year, a copy of its annual financial statements for such year, and to furnish to the Purchasing Agent, from time to time, such other information concerning the Company as the Purchasing Agent may reasonably request.      (f) (i) If the Company and the Purchasing Agent agree to list Bonds on any stock exchange (a “Stock Exchange”), to use its reasonable efforts, in cooperation with the Purchasing 10 --------------------------------------------------------------------------------   Agent, to cause such Bonds to be accepted for listing on any such Stock Exchange, in each case as the Company and the Purchasing Agent shall deem to be appropriate. In connection with any such agreement to list Bonds on a Stock Exchange, the Company shall use its reasonable efforts to obtain such listing promptly and shall furnish any and all documents, instruments, information, and undertakings that may be reasonably necessary or advisable in order to obtain and maintain the listing.      (ii) So long as any Bond remains outstanding and listed on a Stock Exchange, if the Offering Circular or the Pricing Disclosure Material, in each case as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact relating to any matter described in the Offering Circular or the Pricing Disclosure Material the inclusion of which was required by the listing rules and regulations of such Stock Exchange on which any Bonds are listed (the “Listing Rules”) or by such Stock Exchange, to provide to the Purchasing Agent information about the change or matter and to amend or supplement the Offering Circular or the Pricing Disclosure Material in order to comply with the Listing Rules or as otherwise requested by the Stock Exchange.      (iii) To use reasonable efforts to comply with any undertakings given by it from time to time to any Stock Exchange on which any Bonds are listed.      (g) To notify the Purchasing Agent promptly in writing in the event that the Company does not have a security listed on the New York Stock Exchange.      (h) To notify the Agents immediately, and confirm such notice in writing, of any change in the rating assigned by any nationally recognized statistical rating organization, as such term is defined in Rule 436(g)(2) under the Securities Act, to the program under which the Bonds are issued (the “Program”) or any debt securities (including the Bonds) of the Company, or the public announcement by any nationally recognized statistical rating organization that it has under surveillance or review, with possible negative implications, its rating of the Program or any such debt securities, or the withdrawal by any nationally recognized statistical rating organization of its rating of the Program or any such debt securities.      (i) Semiannually as soon as practicable after March 31 and September 30 of each year that this Agreement remains in effect (each, a “Bring Down Date”), to deliver, or cause to be delivered, to each of the Agents (i) a certificate of the Company, dated as of the applicable Bring Down Date, to the effect that the representations and warranties of the Company in this Agreement are true and correct, (ii) the opinion of the General Counsel or Assistant General Counsel, Finance, of the Company, dated as of the applicable Bring Down Date, to the effect set forth in Section II(b), and (iii) the letter of the independent accountant, dated as of the applicable Bring Down Date, to the effect set forth in Section II(c), provided, however, that (a) the obligation to deliver the letter of the independent accountant is contingent upon each Agent’s providing the Company with a representation letter that is satisfactory to the independent accountant and (b) to the extent appropriate, such opinion, letters, and certificates may reconfirm matters set forth in prior opinions, letters, and certificates, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company. 11 --------------------------------------------------------------------------------   IV. Offering by Agents      (a) Solicitations as Agent. You hereby agree, as Agents hereunder, to use your reasonable best efforts to solicit and receive offers to purchase Bonds upon the terms and conditions set forth herein and in the Offering Circular and the Pricing Disclosure Material. For the purpose of such solicitation you will use the Offering Circular which has been most recently distributed to you by the Company or any entity acting on behalf of the Company and the Pricing Disclosure Material, and you will solicit offers to purchase only as permitted or contemplated thereby and herein and only as permitted by the applicable securities laws or regulations of any jurisdiction. The Company reserves the right, in its sole discretion, to suspend solicitation of offers to purchase Bonds commencing at any time for any period of time or permanently. Upon receipt of instructions (which may be given orally) from the Company, you will as soon as practicable, but in any event no later than one business day after receipt of such instructions, suspend solicitation of offers to purchase until such time as the Company has advised you that such solicitation may be resumed.      You are authorized to solicit orders for the Bonds only in denominations of $1,000 or more (in multiples of $1,000). You are not authorized to appoint subagents or to engage the service of any other broker or dealer in connection with the offer or sale of the Bonds without the consent of the Company; provided, however, the Purchasing Agent may engage the service of any other broker or dealer without the consent of the Company. The Purchasing Agent will, however, on a periodic basis, provide the Company with a listing of those brokers or dealers so engaged. In addition, unless otherwise instructed by the Company, the Purchasing Agent shall communicate to the Company, orally or in writing, each offer to purchase Bonds. The Company shall have the sole right to accept offers to purchase Bonds offered through the Purchasing Agent and may reject any proposed purchase of Bonds as a whole or in part. Moreover, the Company may not accept orders to purchase Bonds (or any payment for Bonds) which (i) bear interest at a rate above the maximum rate of interest approved by the Secretary of the Treasury or permitted in the applicable authorizing resolutions or (ii) exceed the principal amount of Bonds permitted to be issued during any period under the applicable authorizing resolutions. You shall have the right, in your discretion reasonably exercised, to reject any offer to purchase Bonds, as a whole or in part, and any such rejection shall not be deemed a breach of your agreements contained herein.      (b) Purchases as Principal. Each sale of Bonds to the Purchasing Agent as principal for resale to others shall be made in accordance with the terms of this Agreement and a separate agreement, substantially in the form of Exhibit C hereto (or such other form as the Purchasing Agent and the Company shall agree to), which will provide for the sale of such Bonds to, and the purchase and reoffering thereof by, the Purchasing Agent. Each such separate agreement (which may be an oral agreement and confirmed in writing as described below between the Purchasing Agent and the Company) is herein referred to as a “Terms Agreement.” A Terms Agreement may also specify certain provisions relating to the reoffering of such Bonds by the Purchasing Agent. The Terms Agreement shall not be effective, and the Agents agree that no confirmation of a sale of Bonds shall be delivered to a prospective purchaser, until the Company has made the Pricing Disclosure Material available to the Agents. The Purchasing Agent’s agreement to purchase Bonds pursuant to any Terms Agreement shall be deemed to have been made on the 12 --------------------------------------------------------------------------------   basis of the representations, warranties, and agreements of the Company herein contained and shall be subject to the terms and conditions herein set forth. Except pursuant to a Terms Agreement, under no circumstances shall the Purchasing Agent be obligated to purchase any Bonds for its own account. Each Terms Agreement, whether oral (and confirmed in writing which may be by facsimile transmission) or in writing, shall describe the Bonds to be purchased pursuant thereto by the Purchasing Agent, and may specify, among other things, the principal amount of Bonds to be purchased, the interest rate or formula and maturity date or dates of such Bonds, the interest payment dates, if any, the price to be paid to the Company for such Bonds, the initial public offering price at which the Bonds are proposed to be reoffered, and the time and place of delivery of and payment for such Bonds (the “Settlement Date”), whether the Bonds provide for a survivor’s option or for optional redemption by the Company and on what terms and conditions, and any other relevant terms.      In connection with the resale of the Bonds purchased by the Purchasing Agent on behalf of the Agents, without the consent of the Company, you are not authorized to appoint subagents or to engage the service of any other broker or dealer; provided, however, the Purchasing Agent may engage the service of any other broker or dealer without the consent of the Company. The Purchasing Agent will, however, on a periodic basis, provide the Company with a listing of those brokers or dealers so engaged. Unless authorized by the Purchasing Agent in each instance, each Agent agrees not to purchase and sell Bonds during the initial public offering for which an order from a client has not been received.      The Company agrees to pay the Purchasing Agent, as consideration for soliciting offers to purchase Bonds, a concession in the form of a discount equal to the percentages of initial offering price of each Bond sold as set forth in Exhibit A hereto or such other discount agreed to by the Company and the Purchasing Agent (the “Concession”). The Purchasing Agent and the other Agents will share the Concession in such proportions as they may agree.      (c) Public Offering Price. Unless otherwise authorized by the Company, all Bonds shall be sold to the public at a purchase price not to exceed 100 percent of the principal amount thereof, plus accrued interest, if any, with the exception of Bonds that bear a zero interest rate and are issued at a substantial discount from the principal amount payable at the Maturity Date (a “Zero-Coupon Bond”). Zero-Coupon Bonds shall be sold to the public at a purchase price no greater than an amount, expressed as a percentage of the principal face amount of such Bonds, equal to (i) the net proceeds to the Company on the sale of such Bonds, plus (ii) the Concession, plus (iii) accrued interest, if any. Such purchase price shall be set forth in the confirmation statement of the Selling Group (as defined in Exhibit B) member responsible for such sale, and delivered to the purchaser along with a copy of the Offering Circular (if not previously delivered).      (d) Procedures. Procedural details relating to the issue and delivery of, and the solicitation of offers to purchase and purchase of and payment for, the Bonds, pursuant to Section IV(a) and IV(b) of this Agreement, are set forth in the Administrative Procedures attached hereto as Exhibit B, as amended from time to time (the “Procedures”). The provisions of the Procedures shall apply to all transactions contemplated hereunder. You and the Company each agree to perform the respective duties and obligations specifically provided to be performed 13 --------------------------------------------------------------------------------   in the Procedures. The Procedures may only be amended by written agreement of the Company and the Purchasing Agent, and a copy of any such amendment shall be provided promptly to JPMorgan Chase Bank, N.A., or any successor paying agent.      (e) Offering Circular Delivery. You shall furnish to each person to whom you sell or deliver Bonds a copy of the Offering Circular and the Pricing Disclosure Material. You are not authorized to give any information or to make any representation not contained in the Offering Circular, the Pricing Disclosure Material, or the documents incorporated by reference or specifically referred to in either thereof in connection with the offer and sale of the Bonds. You will not use any additional marketing materials in connection with any offer or sale of the Bonds other than the brochure prepared by the Company and previously furnished to the Purchasing Agent.      (f) Compliance With Laws. The Agents are aware that no action has been or will be taken by the Company that would permit a public offering of the Bonds or possession or distribution of the Offering Circular, the Pricing Disclosure Material or any other material relating to the Bonds in any country or jurisdiction where action for that purpose is required (other than states of the United States in connection with securities or Blue Sky laws of such states). Accordingly, the Agents agree that they will observe all applicable laws and regulations in each jurisdiction in or from which it may directly or indirectly acquire, offer, sell, or deliver Bonds or have in their possession or distribute the Offering Circular, the Pricing Disclosure Material or any other offering material relating to the Bonds, and the Agents will obtain any consent, approval or permission required for the purchase, offer, or sale by them of Bonds under the laws and regulations in force in any such jurisdiction to which they are subject or in which they make such purchase, offer, or sale; provided, however, that the obligations of the Agents pursuant to this Section IV(f) does not apply to any website of the Company with respect to the Bonds. V. Representations and Warranties of the Company      The Company represents and warrants to and agrees with the Agents that as of the date hereof, as of each date on which the Company accepts an offer to purchase Bonds pursuant to a Terms Agreement, as of each Settlement Date, and as of each date the Offering Circular is amended or supplemented:      (a) The Offering Circular does not and the Pricing Disclosure Material will not include any untrue statement of a material fact, and the Offering Circular does not and the Pricing Disclosure Material will not omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in the Offering Circular or the Pricing Disclosure Material based upon written information furnished to the Company by the Purchasing Agent or by any Agent through the Purchasing Agent specifically for use therein.      (b) The Board has duly adopted the Resolutions, copies of which have been or will be provided to the Agents, providing for the issuance and sale of the Bonds thereunder. 14 --------------------------------------------------------------------------------        (c) The Secretary of the Treasury has approved the time of issuance of and the maximum rate of interest to be borne by the Bonds, in compliance with Section 15d of the TVA Act, the rate of interest on the Bonds will not exceed the maximum rate of interest approved by the Secretary of the Treasury, and no other approval, authorization, consent, or order of or filing with any public board or body (other than in connection with qualifying the Bonds for offering and sale under the securities or Blue Sky laws of any jurisdiction) is required for or in connection with the issuance and sale of the Bonds as contemplated hereby.      (d) The Bonds have been duly authorized and, when issued and delivered pursuant to the Resolutions and this Agreement, will be duly issued and delivered and will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject, as to enforcement, to fraudulent transfer, moratorium, and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, payable, however, solely from the Net Power Proceeds of the Company, as defined and set forth in the Basic Resolution.      (e) When issued and delivered pursuant to the Resolutions and this Agreement, the Bonds will conform, in all material respects, to the descriptions thereof contained in the Offering Circular and the Pricing Disclosure Material.      (f) The Company is not, in any material respect, in violation of the TVA Act or in default in the performance or observance of any obligation, agreement, covenant, or condition contained in any material contract or lease to which the Company is a party or by which it is bound, and the execution and delivery of this Agreement and the issuance and delivery of the Bonds, the incurrence of the obligations herein set forth and the consummation of the transactions herein contemplated will not conflict with, or constitute a breach of or default under, the TVA Act and the regulations of the Company thereunder, any material contract or lease to which the Company is a party or by which it is bound, or any law, administrative regulation, or court decree to which it is subject.      (g) Except as may be described in the Offering Circular or the Pricing Disclosure Material, since November 18, 2005, there has not been any material adverse change in the financial condition or the results of operations of the Company or in its business prospects.      (h) Except as disclosed in the Offering Circular or the Pricing Disclosure Material, there are no actions, suits, or proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its property, at law or in equity or before or by any Federal or state commission, regulatory body, or administrative agency or other governmental body, in which a decision might have a material adverse effect on the business or property of the Company or which would in any way interfere with the issuance and delivery of the Bonds or the performance by the Company of its obligations thereunder or under the Resolutions.      (i) This Agreement has been duly authorized, executed, and delivered by the Company.      (j) The program under which the electronotes® are issued as well as the Bonds are rated “Aaa” by Moody’s Investor Services, Inc. and “AAA” by Standard & Poor’s Rating Services or such other rating as to which the Company shall have most recently notified the Agents pursuant to Section III(h) hereof. 15 --------------------------------------------------------------------------------        (k) The Company has not distributed and will not distribute any offering material in connection with the offering and sale of the Bonds other than the Offering Circular, the Pricing Disclosure Material, if any, the Pricing Supplement, if any, the Permitted Free Writing, if any, and any amendment or supplement to any thereof. VI. Indemnification and Contribution      (a) The Company will indemnify and hold harmless each Agent against any losses, claims, damages, or liabilities, joint or several, to which the Agent may become subject, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, the Permitted Free Writing or any amendment or supplement to any thereof or (ii) arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and will reimburse the Agent for any legal or other expenses reasonably incurred by the Agent in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the foregoing indemnity agreement with respect to the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, the Permitted Free Writing and any amendment or supplement to any thereof shall not inure to the benefit of any Agent from whom the person asserting any such losses, claims, damages, or liabilities purchased Bonds, or any person controlling such Agent, if (i) TVA or another entity acting on TVA’s behalf furnished a copy of the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, or the Permitted Free Writing (each as then amended and supplemented) to such Agent prior to the mailing or delivery by such Agent of written confirmation of the sale of the Bonds, (ii) a copy of such Offering Circular, Pricing Disclosure Material, Pricing Supplement, or Permitted Free Writing was not sent or given by or on behalf of such Agent to such person at or prior to delivery of the written confirmation of the sale of the Bonds to such person, and (iii) the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, or the Permitted Free Writing would have cured the defect giving rise to such losses, claims, damages, or liabilities; and provided, further, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, or the Permitted Free Writing (or any amendment or supplements to any thereof) included or omitted in reliance upon and in conformity with written information furnished to the Company by any Agent relating to such Agent specifically for use therein and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred.      (b) Each Agent will indemnify and hold harmless the Company against any losses, claims, damages, or liabilities to which the Company may become subject, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement or the Permitted Free Writing or any amendment or supplement to any thereof or the omission or the alleged omission to state 16 --------------------------------------------------------------------------------   therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Agent relating to such Agent specifically for use therein.      (c) Promptly after receipt by an indemnified party under this Section VI of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under Section VI(a) or Section VI(b) above, notify the indemnifying party of the commencement thereof. Failure of an indemnified party to provide such notice within a reasonable time shall not relieve the indemnifying party from any liability under Section VI(a) or Section VI(b) above to the extent it is not materially prejudiced as a result thereof, and in any event, the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under Section VI(a) or Section VI(b) above. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section VI(a) or Section VI(b) above and such person timely notifies the indemnifying party of the institution thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party notified, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain or provide its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties, including all indemnified Agents, and that all such fees and expenses shall be reimbursed as they are incurred.      (d) If the indemnification provided for in this Section VI is unavailable in whole or in part (other than for failure to provide timely notice) to hold harmless an indemnified party under Section VI(a) or Section VI(b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, or liabilities referred to in Section VI(a) or Section VI(b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Agent on the other from the particular installment or installments of Bonds associated with such indemnification or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the particular installment or installments 17 --------------------------------------------------------------------------------   of Bonds associated with such indemnification (before deducting expenses) received by the Company bear to the total commissions or discounts received by the Agent in respect thereof. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Agent and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages, or liabilities referred to in the first sentence of this Section VI(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section VI(d). Notwithstanding the provisions of this Section VI(d), no Agent shall be required to contribute any amount in excess of the amount by which the total price at which such installment or installments of Bonds sold by it were offered to the public exceeds the amount of any damages which such Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission or other conduct described in Section VI(b) above. No person guilty of fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Agent’s obligation in this Section VI(d) to contribute is several in proportion to its respective purchase obligation and not joint. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.      (e) The obligations of any indemnifying party under this Section VI shall be in addition to any liability which such party may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, which controls such indemnified party within the meaning of the Securities Act of 1933, as amended, and to each employee, officer, and director of the indemnified party. VII. Termination; Survival of Certain Representations and Obligations      This Agreement may be terminated at any time by the Company or the Purchasing Agent upon the giving of five business days’ written notice of such termination to the nonterminating party. In the event of any such termination, no party shall have any liability to any other party hereto, except for obligations hereunder which expressly survive the termination of this Agreement and except that, if the time of termination is subsequent to the execution of a Terms Agreement, but prior to the Settlement Date specified therein, the Company shall have the obligation to deliver such Bond or Bonds subject to such Terms Agreement.      Subsequent to the execution of a Terms Agreement, (i) the Purchasing Agent may terminate such Terms Agreement, and (ii), if the Purchasing Agent does not elect to terminate such Terms Agreement pursuant to clause (i) of this sentence, upon the request of an Agent with respect to Bonds to be purchased through the Purchasing Agent by such Agent, the Purchasing Agent shall terminate such Terms Agreement to the extent of the Bonds that were to be purchased through the Purchasing Agent by such requesting Agent, in each case immediately 18 --------------------------------------------------------------------------------   upon notice to the Company, at any time prior to the Settlement Date relating thereto, if there shall have occurred any:      (A) change, or any development involving a prospective change, which, in the judgment of the Purchasing Agent or such requesting Agent, materially impairs the investment quality of the Bonds, including, but, not limited to, any change in or affecting particularly the business or properties of the Company; or      (B) suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company in the Federal Reserve book-entry system; or      (C) banking moratorium declared by Federal or New York authorities; or      (D) outbreak or escalation of hostilities in which the United States is involved, any declaration of war by Congress, or any other substantial national or international calamity or emergency if, in the judgment of the Purchasing Agent or such requesting Agent, the effect of any such outbreak, escalation, declaration, calamity, or emergency makes it impractical to proceed with completion of the sale of and payment for the Bonds.      If this Agreement is terminated, the last sentence of the second paragraph of Section IV(a), Section III(c) and (d), Section VI, and the first item of Section XII shall survive; provided, that, if the time of termination is subsequent to the execution of a Terms Agreement but prior to the Settlement Date specified therein, the provisions of Section III(a) and (b), and Section IV(b), (d), (e), and (f) shall also survive until such Settlement Date. VIII. Notices      Except as otherwise specifically provided herein, all statements, requests, notices, advices, and other communications hereunder shall be in writing, or by telephone if promptly confirmed in writing, and if to you shall be sufficient in all respects if mailed, delivered, or sent by facsimile transmission (confirmed in writing) to you at your address or facsimile number set forth below by your signature and if to the Company shall be sufficient in all respects if mailed, delivered, or sent by facsimile transmission (confirmed in writing) to the Company at 400 West Summit Hill Drive, Knoxville, Tennessee 37902, Attention: Senior Vice President, Treasurer/Investor Relations, facsimile number (865) 632-6673. All such notices shall be effective on receipt. Notwithstanding the foregoing, the Company may furnish copies of proposed amendments or supplements to the Offering Circular as required by Section III(b) of this Agreement by sending such amendments or supplements to you at the e-mail address set forth below your signature. 19 --------------------------------------------------------------------------------   IX. Binding Effect of Agreement      This Agreement shall be binding upon you and the Company, and inure solely to the benefit of you and the Company and any other person expressly entitled to indemnification hereunder and the respective personal representatives, successors, and assigns of each, and no other person shall acquire or have any rights under or by virtue of this Agreement. X. Governing Law      This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York. XI. Power of Attorney      If this Agreement is executed by or on behalf of any party, such person hereby states that at the time of the execution of this Agreement he has no notice of revocation of the power of attorney by which he has executed this Agreement as such attorney. XII. Expenses      The Company will pay the expenses incident to the performance of its obligations under this Agreement, including: (i) the preparation and filing of the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, and any Permitted Free Writing and any amendment or supplement to any thereof; (ii) the preparation, issuance, and delivery of the Bonds; (iii) the fees and disbursements of the Company’s counsel and auditors and of any paying or other agents appointed by the Company; (iv) the printing and delivery to you in quantities as hereinabove stated of copies of the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, and any Permitted Free Writing and any amendment or supplement to any thereof; (v) the reasonable fees and disbursements of Orrick, Herrington & Sutcliffe LLP, counsel for the Agents (including “Blue Sky” fees and disbursements, if any); (vi) if the Company lists Bonds on a securities exchange, the costs and fees of such listing; and (vii) any fees charged by rating agencies for the rating of the electronotes® program or the Bonds. XIII. Counterparts      This Agreement may be executed by each of the parties hereto in any number of counterparts, and by each of the parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. XIV. Additional Definition      As used herein, “business day” means any day other than a Saturday, Sunday, or any day on which banking institutions are authorized or required by law or executive order to be closed in the City of New York. 20 --------------------------------------------------------------------------------   XV. Officials Not to Benefit      No member of or delegate to Congress or Resident Commissioner and no officer, employee, special Government employee, or agent of the Company shall be admitted to any share or part of this Agreement or to any benefit that may arise therefrom, but this provision shall not be construed to extend to a corporation contracting for its general benefit; nor shall any of the Agents offer or give, directly or indirectly, to any officer, employee, special Government employee, or agent of the Company, any gift, gratuity, favor, entertainment, loan, or any other thing of some monetary value, except as provided in 5 C.F.R. part 2635. XVI. Miscellaneous      You agree to comply, to the extent applicable to you, with the equal opportunity clause set forth in Executive Order No. 11246 and with 41 C.F.R. part 60-1. All applicable clauses referred to in the foregoing order and regulations are incorporated herein by reference as if fully set forth. XVII. No Fiduciary Duty      The Company and each Selling Agent acknowledge and agree that, except to the extent expressly set forth herein, each Selling Agent is acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of the Bonds contemplated by this Selling Agent Agreement (including in connection with determining the terms of the offerings) and not as a fiduciary to the Company or any other person. Additionally, each Selling Agent is not advising the Company or any other person as to any legal, tax, investment, accounting, or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Selling Agents shall have no responsibility or liability to the Company with respect thereto. Any review by any Selling Agent of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of such Selling Agent and shall not be on behalf of the Company or any other person. 21 --------------------------------------------------------------------------------        If the foregoing is in accordance with your understanding, please sign and return to us a counterpart hereof, and upon acceptance hereof by you, this letter and such acceptance hereof shall constitute a binding agreement between the Company and you.                       Very truly yours,                           TENNESSEE VALLEY AUTHORITY                           By:   /s/ John M. Hoskins             Name:   John M. Hoskins             Title:   Senior Vice President, Treasurer/Investor Relations       --------------------------------------------------------------------------------   Confirmed and accepted as of the date first above written: A.G. EDWARDS & SONS, INC.             By:   /s/ Joyce Opinsky     Name: Joyce Opinsky     Title:   Vice President One North Jefferson St. Louis, Missouri 63103 Attention: Joyce Opinsky Facsimile: 314-955-7341 E-Mail: [email protected]   --------------------------------------------------------------------------------   CITIGROUP GLOBAL MARKETS INC.       By:   /s/ Jack D. McSpadden, Jr.     Name: Jack D. McSpadden, Jr.     Title:   Managing Director 388 Greenwich Street New York, New York 10013 Facsimile: 646-291-5209 E-Mail: [email protected]   --------------------------------------------------------------------------------   EDWARD D. JONES & CO., L.P.       By:   /s/ David G. Otto     Name: David G. Otto     Title:   Principal, Government & Mortgage-backed Securities 12555 Manchester Road St. Louis, Missouri 63131 Attention: David G. Otto Facsimile: 314-515-5214 E-Mail: [email protected]   --------------------------------------------------------------------------------   FIRST TENNESSEE BANK NATIONAL ASSOCIATION       By:   /s/ Joel Ross     Name: Joel Ross     Title:   SVP 845 Crossover Lane, Suite 150 Memphis, Tennessee 38117 Attention: Stephen Valadie Facsimile: 901-435-8990 E-Mail: [email protected].   --------------------------------------------------------------------------------   J.J.B. HILLIARD, W.L. LYONS, INC.       By:   /s/ Donald Merrifield     Name: Donald Merrifield     Title:   Senior Vice President Hilliard Lyons Center 5th Floor P.O. Box 32760 Louisville, Kentucky 40232 Attention: Don Merrifield Facsimile: 502-588-1215 E-Mail: [email protected]   --------------------------------------------------------------------------------   LASALLE FINANCIAL SERVICES, INC.       By:   /s/ Melissa Toth     Name: Melissa Toth 327 Plaza Real, Suite 225 Boca Raton, Florida 33432 Facsimile: 561-361-1243 -2- --------------------------------------------------------------------------------   MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED       By:   /s/ Brant Meleski     Name: Brant Meleski     Title:   Director 4 World Financial Center, Floor 26 New York, New York 10080 Attention: Brant Meleski Facsimile: 212-449-7938 E-Mail: [email protected]   --------------------------------------------------------------------------------   MORGAN STANLEY & CO. INCORPORATED By: /s/ Michael Fusco Second Floor 1585 Broadway New York, New York 10036 Attention: Debt Syndicate Department Facsimile: 212-507-2404   --------------------------------------------------------------------------------   WACHOVIA SECURITIES, LLC       By:   /s/ George Curci     Name: George Curci     Title:   Senior Vice President Wachovia Securities, LLC 901 East Byrd Street 3rd Floor Richmond, VA 23219 Attention: George Curci Facsimile: 804-868-2298 E-Mail: [email protected]   --------------------------------------------------------------------------------   EXHIBIT A Power Bonds TENNESSEE VALLEY AUTHORITY DEALER AGENT PROGRAM Unless agreed to otherwise by the Company and the Purchasing Agent the following Concessions are payable as a percentage of the initial offering price to public of each Bond sold to or through the Purchasing Agent.           1 year     0.200 % 2 years     0.400 % 3 years     0.625 % 4 years     1.000 % 5 years     1.000 % 7 years     1.250 % 10 years     1.500 % 13 years     2.000 % 15 years     2.000 % more than 15 years     2.000 % EXHIBIT A-1 --------------------------------------------------------------------------------   EXHIBIT B TENNESSEE VALLEY AUTHORITY electronotes® $3,000,000,000 MAXIMUM AGGREGATE PRINCIPAL AMOUNT OUTSTANDING TENNESSEE VALLEY AUTHORITY POWER BONDS WITH MATURITIES OF ONE YEAR TO THIRTY YEARS FROM DATE OF ISSUE ADMINISTRATIVE PROCEDURES      Power Bonds With Maturities of One Year to Thirty Years from Date of Issue (the “Bonds”) are offered from time to time by the Tennessee Valley Authority (the “Company”). The Bonds will be offered by LaSalle Financial Services, Inc. (the “Purchasing Agent”), and A.G. Edwards & Sons, Inc., Citigroup Global Markets Inc., Edward D. Jones & Co., L.P., First Tennessee Bank National Association, J.J.B. Hilliard, W.L. Lyons, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, and Wachovia Securities, LLC (collectively, the “Agents”) pursuant to a Selling Agent Agreement among the Company and the Agents dated as of June 1, 2006 (as may be amended from time to time, the “Selling Agent Agreement”), and if the Bonds are to be purchased by the Purchasing Agent as principal for resale to others, one or more terms agreements substantially in the form attached to the Selling Agent Agreement as Exhibit C (each a “Terms Agreement”). Pursuant to the Selling Agent Agreement, the Agents have agreed to use their reasonable best efforts to solicit offers to purchase Bonds. Any Bonds purchased by the Purchasing Agent pursuant to a Terms Agreement will be resold by the Purchasing Agent (and by any Agent that purchases them from the Purchasing Agent) to (i) customers of the Agents or (ii) selected broker-dealers (the “Selling Group”) for distribution to their customers pursuant to a Master Selected Dealers Agreement (a “Dealers Agreement”) attached hereto as Exhibit E. The Bonds have not been, and will not be, registered with the Securities and Exchange Commission (the “Commission”). JPMorgan Chase Bank, N.A., will act as paying agent (the “Paying Agent”) under an Issuing and Paying Agency Agreement, dated as of April 12, 2001, as amended on November 14, 2002, and as of June 1, 2006, between the Company and the Paying Agent (as hereafter amended or supplemented from time to time, the “Paying Agency Agreement”) covering the Bonds.      The Bonds will be issued in book-entry form (each, a “Book-Entry Note”) and represented by a fully registered master global note certificate without coupons (a “Master Note”) held by the Paying Agent, as agent for The Depository Trust Company (“DTC”) and EXHIBIT B-1 --------------------------------------------------------------------------------   recorded in the book-entry system maintained by DTC1. Each Book-Entry Note will have the annual interest rate (which will not exceed the maximum rate of interest approved by the Secretary of the Treasury (the “Maximum Rate of Interest”)), maturity, and other terms set forth in the relevant Pricing Supplement or Permitted Free Writing (each as defined in the Selling Agent Agreement). Owners of beneficial interests in a Book-Entry Note will be entitled to physical delivery of Bonds issued in certificated form equal in principal amount to their respective beneficial interests only upon certain limited circumstances described in the Offering Circular. Administrative procedures and specific terms of the offering are explained below. Administrative responsibilities, accountable document control, and record keeping responsibilities will be handled by the Company or by an agent of the Company.      Book-Entry Notes will be issued in accordance with the administrative procedures set forth herein. To the extent the procedures set forth below conflict with or omit certain of the provisions of the Bonds, the Resolutions, the Selling Agent Agreement, or the Offering Circular, the relevant provisions of the Bonds, the Resolutions, the Selling Agent Agreement, and the Offering Circular shall control. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Selling Agent Agreement. Administrative Procedures for Bonds      In connection with the qualification of Bonds for eligibility in the book-entry system maintained by DTC, the Paying Agent will perform the custodial, document control, and administrative functions described below, in accordance with its obligations under a Letter of Representations from the Company and the Paying Agent to DTC, dated April 12, 2001, and a Medium-Term Note Certificate Agreement between the Paying Agent and DTC (the “Certificate Agreement”), dated December 2, 1988, and its obligations as a participant in DTC, including DTC’s Same-Day Funds Settlement System (“SDFS”). The procedures set forth below apply only to Bonds that are held in the book-entry system maintained by DTC and may be modified in compliance with DTC’s then applicable procedures and upon agreement by the Company and the Purchasing Agent. The Paying Agent will be promptly notified of any modifications to the procedures set forth below.       Maturities:   Each Book-Entry Note will mature on a date (the “Maturity Date”) one year to thirty years from the date of issuance by the Company of such Book-Entry Note. Book-Entry Notes may be issued with any maturity selected by the Company. “Maturity” when used with respect to any Book-Entry Note means the date on which the outstanding principal amount of such Book-Entry   1   The original master note was executed and authenticated by TVA as of April 12, 2001, a second master note was executed and authenticated by TVA as of November 14, 2002, and a third master note was executed and authenticated by TVA as of June 1, 2006. Upon repayment in full of all amounts due on the electronotes® issued prior to the date hereof and evidenced by the original master note or the second master note, such master note will be cancelled and returned to the Company or disposed of in accordance with the Paying Agent’s customary procedures. All electronotes® hereinafter issued will be represented by the third master note. Notwithstanding anything herein to the contrary, the principal amount of electronotes® outstanding under the third master note, together with the principal amounts then outstanding under the original master note and the second master note, may not at any time exceed $3,000,000,000. EXHIBIT B-2 --------------------------------------------------------------------------------             Note becomes due and payable in full in accordance with its terms, whether at its Maturity Date or by redemption, repayment or otherwise.       Issuance:   The Book-Entry Notes will be represented by a Master Note. Each Master Note will be dated and issued as of the date of its countersignature by the Paying Agent.       Identification Numbers:   The Company has received from the CUSIP Service Bureau (the “CUSIP Service Bureau”) of Standard & Poor’s Corporation (“Standard & Poor’s”) one series of CUSIP numbers consisting of approximately 900 CUSIP numbers for future assignment to Book-Entry Notes. The Company will provide DTC and the Paying Agent with a list of such CUSIP numbers. The Company will assign CUSIP numbers as described below under Settlement Procedure “B.” DTC will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the Company has assigned to Book-Entry Notes. The Company will reserve additional CUSIP numbers when necessary for assignment to Book-Entry Notes and will provide the Paying Agent and DTC with the list of additional CUSIP numbers so obtained.       Registration:   Unless otherwise specified by DTC, each Master Note will be issued only in fully registered form without coupons. Each Master Note will be registered in the name of Cede & Co., as nominee for DTC, on the bond register maintained under the Paying Agency Agreement by the Paying Agent. The beneficial owner of a Book-Entry Note (or one or more indirect participants in DTC designated by such owner) will designate one or more participants in DTC (with respect to such Book-Entry Note, the “Participants”) to act as agent or agents for such owner in connection with the book-entry system maintained by DTC, and DTC will record in book-entry form, in accordance with instructions provided by such Participants, a credit balance with respect to such Book-Entry Note in the account of such Participants. The ownership interest of such beneficial owner in such Book-Entry Note will be recorded through the records of such Participants or through the separate records of such Participants and one or more indirect participants in DTC. So long as Cede & Co. is the registered owner of a Master Note, DTC will be considered the sole owner and holder of the Book-Entry Notes represented by the Master Note for all purposes under the Resolutions.       Transfers:   Transfers of interests in a Book-Entry Note will be accomplished by book entries made by DTC and, in turn, by Participants (and in EXHIBIT B-3 --------------------------------------------------------------------------------             certain cases, one or more indirect participants in DTC) acting on behalf of beneficial transferors and transferees of such interests.       Denominations:   Book-Entry Notes will be issued in denominations of $1,000 or more (in multiples of $1,000).       Issue Price:   Unless otherwise specified in an applicable Pricing Supplement or Permitted Free Writing, each Book-Entry Note will be issued at the percentage of principal amount specified in the Offering Circular relating to such Book-Entry Note.       Interest:   Each Book-Entry Note will bear interest at a fixed rate, which may be zero during all or any part of the term in the case of certain Book-Entry Notes issued at a price representing a substantial discount from the principal amount payable at Maturity. The rate of interest on any Book-Entry Note may not exceed the Maximum Rate of Interest which on the date of the Selling Agency Agreement is 9%. Interest on each Book-Entry Note will accrue from the Issue Date of such Book-Entry Note for the first interest period and from the most recent Interest Payment Date to which interest has been paid for all subsequent interest periods. Except as set forth hereafter, each payment of interest on a Book-Entry Note will include interest accrued to but excluding, as the case may be, the Interest Payment Date or the date of Maturity (other than a Maturity Date of a Book-Entry Note occurring on the 31st day of a month in which case such payment of interest will include interest accrued to but excluding the 30th day of such month). Any payment of principal, premium, or interest required to be made on a day that is not a Business Day (as defined below) may be made on the next succeeding Business Day and no interest shall accrue as a result of any such delayed payment.           Each Book-Entry Note will bear interest from and including its Issue Date at the rate per annum set forth in the applicable Pricing Supplement or Permitted Free Writing until the principal amount thereof is paid, or made available for payment, in full. Unless otherwise specified in the applicable Pricing Supplement or Permitted Free Writing, interest on each Book-Entry Note (other than a Zero-Coupon Bond) will be payable either monthly, quarterly, semiannually, or annually on each Interest Payment Date and at Maturity (or on the date of redemption or repayment if a Book-Entry Note is repurchased by the Company prior to maturity pursuant to mandatory or optional redemption provisions or the Survivor’s Option). Interest will be payable to the person in whose name a Book-Entry Note is registered at the close of EXHIBIT B-4 --------------------------------------------------------------------------------             business on the Regular Record Date next preceding each Interest Payment Date; provided, however, that interest payable at Maturity will be payable to the person to whom principal shall be payable. The Regular Record Date with respect to any Interest Payment Date shall be the date fifteen calendar days prior to such Interest Payment Date, whether or not such date shall be a Business Day; provided, however, that interest payable at Maturity will be payable to the person to whom principal shall be payable.           Any payment of principal, and premium, if any, or interest required to be made on a Book-Entry Note on a day which is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day, and no additional interest shall accrue as a result of such delayed payment. Unless otherwise specified in the applicable Pricing Supplement or Permitted Free Writing, any interest on the Book-Entry Notes will be computed on the basis of a 360-day year of twelve 30-day months. The interest rates the Company will agree to pay on newly issued Book-Entry Notes are subject to change without notice by the Company from time to time, but no such change will affect any Book-Entry Notes already issued or as to which an offer to purchase has been accepted by the Company.           The Interest Payment Dates for a Book-Entry Note that provides for monthly interest payments shall be the fifteenth day of each calendar month, commencing in the calendar month that next succeeds the month in which the Book-Entry Note is issued. In the case of a Book-Entry Note that provides for quarterly interest payments, the Interest Payment Dates shall be the fifteenth day of each third month, commencing in the third succeeding calendar month following the month in which the Book-Entry Note is issued. In the case of a Book-Entry Note that provides for semiannual interest payments, the Interest Payment dates shall be the fifteenth day of each sixth month, commencing in the sixth succeeding calendar month following the month in which the Book-Entry Note is issued. In the case of a Book-Entry Note that provides for annual interest payments, the Interest Payment Date shall be the fifteenth day of every twelfth month, commencing in the twelfth succeeding calendar month following the month in which the Book-Entry Note is issued.           Each payment of interest on a Book-Entry Note shall include accrued interest from and including the Issue Date or from and including the last day in respect of which interest has been paid EXHIBIT B-5 --------------------------------------------------------------------------------             (or duly provided for), as the case may be, to, but excluding, the Interest Payment Date or Maturity Date, as the case may be.       Calculation of Interest:   Unless otherwise specified in the applicable Pricing Supplement or Permitted Free Writing, interest on the Book-Entry Notes (including interest for partial periods) will be calculated on the basis of a 360-day year of twelve 30-day months.       Business Day:   “Business Day” means, unless otherwise specified in the applicable Pricing Supplement or Permitted Free Writing, any day, other than a Saturday or Sunday, that meets the following applicable requirement: such day is not a day on which banking institutions are authorized or required by law or executive order to be closed in the City of New York.       Payments of Principal and Interest:   Promptly after each Regular Record Date, the Paying Agent will deliver to the Company and DTC a written notice specifying by CUSIP number the amount of interest, if any, to be paid on each Book-Entry Note on the following Interest Payment Date (other than an Interest Payment Date coinciding with a Maturity Date) and the total of such amounts. DTC will confirm the amount payable on each Book-Entry Note on such Interest Payment Date by reference to the daily bond reports published by Standard & Poor’s. On such Interest Payment Date, the Company will pay to the Paying Agent, and the Paying Agent in turn will pay to DTC, such total amount of interest due (other than on the Maturity Date), at the times and in the manner set forth below under “Manner of Payment.” If any Interest Payment Date for any Book-Entry Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Interest Payment Date.       Payments on the Maturity Date:   On or about the first Business Day of each month, the Paying Agent will deliver to the Company and DTC a written list of principal, premium, if any, and interest to be paid on any Book-Entry Note maturing or subject to redemption (pursuant to a sinking fund or otherwise) or repayment (“Maturity”) in the following month. The Paying Agent, the Company, and DTC will confirm the amounts of such principal, premium, if any, and interest payments with respect to such Book-Entry Note on or about the fifth Business Day preceding the Maturity Date of such Book-Entry Note. On the Maturity Date, the Company will pay to the Paying Agent, and the Paying Agent in turn will pay to DTC, the principal amount of such Book-Entry Note, together with interest and premium, if any, due on such Maturity Date, at EXHIBIT B-6 --------------------------------------------------------------------------------             the times and in the manner set forth below under “Manner of Payment.” If the Maturity Date of any Book-Entry Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Maturity Date.       Manner of Payment:   The total amount of any principal, premium, if any, and interest due on Book-Entry Notes on any Interest Payment Date or at Maturity shall be paid by the Company to the Paying Agent in immediately available funds on such date. The Company will make such payment on such Book-Entry Notes by instructing the Paying Agent to withdraw funds from an account maintained by the Company by wire transfer as agreed with the Paying Agent. The Company will confirm such instructions in writing to the Paying Agent. Prior to 11:00 a.m., New York City time, on the Maturity Date or as soon as possible thereafter, the Paying Agent will make payment to DTC in accordance with existing arrangements between DTC and the Paying Agent, in funds available for immediate use by DTC, each payment of interest, principal, and premium, if any, due on a Book-Entry Note on such date. On each Interest Payment Date (other than on the Maturity Date) the Paying Agent will pay DTC such interest payments in same-day funds in accordance with existing arrangements between the Paying Agent and DTC. Thereafter, on each such date, DTC will pay, in accordance with its SDFS operating procedures then in effect, such amounts in funds available for immediate use to the respective Participants with payments in amounts proportionate to their respective holdings in principal amount of beneficial interest in such Book-Entry Note as are recorded in the book-entry system maintained by DTC. Neither the Company nor the Paying Agent shall have any direct responsibility or liability for the payment by DTC of the principal of, or premium, if any, or interest on, the Book-Entry Notes to such Participants.       Withholding Taxes:   The amount of any taxes required under applicable law to be withheld from any interest payment on a Book-Entry Note will be determined and withheld by the Participant, indirect participant in DTC, or other person responsible for forwarding payments and materials directly to the beneficial owner of such Book-Entry Note.       Procedure for Rate Setting and Posting:   The Company and the Agents will discuss, from time to time, the aggregate principal amounts of, the Maturities, the Issue Price and the interest rates (which will not exceed the Maximum Rate of Interest) to be borne by Book-Entry Notes that may be sold as a EXHIBIT B-7 --------------------------------------------------------------------------------             result of the solicitation of orders by the Agents. If the Company decides to set interest rates borne by any Book-Entry Notes in respect of which the Agents are to solicit orders (the setting of such interest rates to be referred to herein as “Posting” and the day on which such interest rates are set to be referred to herein as the “Posting Day”), or if the Company decides to change interest rates previously posted by it, it will promptly advise the Agents of the prices and interest rates to be posted.           The Company will assign a separate CUSIP number for each tranche of Book-Entry Notes to be posted, and will so advise and notify the Paying Agent and Purchasing Agent of said assignment by telephone and/or by telecopier or other form of electronic transmission. The Purchasing Agent will, in turn, include the assigned CUSIP number on all Posting notices communicated to the Agents and Selling Group members.       Offering of Book-Entry Notes:   In the event that there is a Posting, the Purchasing Agent will communicate to each of the Agents and Selling Group members the aggregate principal amount and Maturities of, along with the interest rates to be borne by, each Book-Entry Note that is the subject of the Posting. Thereafter, the Purchasing Agent, along with the other Agents and the Selling Group, will solicit offers to purchase the Book-Entry Notes accordingly.       Purchase of Book-Entry Notes by the Purchasing Agent:   The Purchasing Agent will, no later than 4:00 p.m. (New York City time) on the seventh day subsequent to the day on which such Posting occurs, or if such seventh day is not a Business Day, on the preceding Business Day, or on such other Business Day and time as shall be mutually agreed upon by the Company and the Purchasing Agent (any such day, a “Trade Day”), (i) complete, execute, and deliver to the Company a Terms Agreement that sets forth, among other things, the amount of each Book-Entry Note that the Purchasing Agent is offering to purchase or (ii) inform the Company that none of the Book-Entry Notes will be purchased by the Purchasing Agent.       Acceptance and Rejection of Orders:   Unless otherwise agreed by the Company and the Purchasing Agent, the Company has the sole right to accept orders to purchase Book-Entry Notes and may reject any such order in whole or in part; provided that the Company may not accept orders to purchase Book-Entry Notes which bear interest at a rate above the Maximum Rate of Interest. Unless otherwise instructed by the Company, the Purchasing Agent will promptly advise the Company by telephone of all offers to purchase Book-Entry Notes received by it, other than those rejected by it in whole or in EXHIBIT B-8 --------------------------------------------------------------------------------             part in the reasonable exercise of its discretion. No order for less than $1,000 principal amount of Book-Entry Notes will be accepted. Upon receipt of a completed and executed Terms Agreement from the Purchasing Agent (substantially in the form attached to the Selling Agent Agreement as Exhibit C), the Company will (i) promptly execute and return such Terms Agreement to the Purchasing Agent or (ii) inform the Purchasing Agent that its offer to purchase the Book-Entry Notes has been rejected, in whole or in part. The Purchasing Agent will thereafter promptly inform the other Agents and participating Selling Group members of the action taken by the Company.       Preparation of Pricing Supplement or Permitted Free Writing:   The Company will provide a Pricing Supplement (substantially in the form attached to the Selling Agent Agreement as Exhibit D) or a Permitted Free Writing (in the form to be attached to the Terms Agreement), in either case reflecting the terms of such Book-Entry Note, and will supply a copy thereof (or additional copies if requested) to the Purchasing Agent, on or as soon as reasonably practicable after the Posting Day but in no event later than 12:00 p.m. on the Trade Day, and one copy to the Paying Agent. The Purchasing Agent will cause an Offering Circular (together with the Pricing Supplement or Permitted Free Writing) to be delivered to each of the other Agents and Selling Group members that purchased such Book-Entry Notes, and each of these, in turn, will, pursuant to the terms of the Selling Agent Agreement and the Master Selected Dealer Agreement, cause to be delivered a copy of the Offering Circular (together with the Pricing Supplement or Permitted Free Writing) to each purchaser of Book-Entry Notes from such Agent or Selling Group member. The Agents and the Selling Group members will not deliver a confirmation for sale to any prospective purchaser until it has delivered the Offering Circular (together with the Pricing Supplement or Permitted Free Writing) as required by the immediately preceding sentence.           In each instance that a Pricing Supplement or Permitted Free Writing is prepared, the Agents or Selling Group members will affix the Pricing Supplement or Permitted Free Writing to the Offering Circular prior to their use if the Pricing Supplement or Permitted Free Writing is not already affixed thereto.       Delivery of Confirmation and Offering Circular:   Subject to “Suspension of Solicitation; Amendment or Supplement” below, the Agents and Selling Group members will deliver an Offering Circular (together with the Pricing EXHIBIT B-9 --------------------------------------------------------------------------------             Supplement or Permitted Free Writing) as herein described with respect to each Book-Entry Note sold by it.           For each Book-Entry Note sold by an Agent or Selling Group member, the Agent or Selling Group member who sold such Book-Entry Note will issue a confirmation to the purchaser, setting forth the terms of such Book-Entry Note and other applicable details described above and delivery and payment instructions. In addition, the Agent or Selling Group member who sold such Book-Entry Note will deliver to such purchaser the Offering Circular (together with the Pricing Supplement or Permitted Free Writing) in relation to such Book-Entry Note as soon as reasonably practicable after the Company provides a copy of such Offering Circular (together with the Pricing Supplement or Permitted Free Writing) to the Purchasing Agent but in no event later than the delivery of the confirmation of sale.       Settlement:   The receipt of immediately available funds by the Company in payment for Book-Entry Notes and the issuance of the Book-Entry Notes shall constitute “Settlement” with respect to such Book-Entry Notes. All orders accepted by the Company will be settled within one to three Business Days pursuant to the timetable for Settlement set forth below, unless the Company and the Purchasing Agent agree to Settlement on a later date, and shall be specified upon acceptance of such offer; provided, however, that in all cases the Company will notify the Paying Agent on the date issuance instructions are given.       Settlement Procedures:   In the event of a purchase of a Book-Entry Note by the Purchasing Agent, as principal, appropriate Settlement details, if different from those set forth below, will be set forth in the applicable Terms Agreement to be entered into between the Purchasing Agent and the Company pursuant to the Selling Agent Agreement. Settlement Procedures with regard to each Book-Entry Note purchased by the Purchasing Agent, as principal, shall be as follows:   A.   The Purchasing Agent will communicate the following details of the terms of the offer with respect to each Book-Entry Note to be issued (the “Bond Sale Information”) to the Company by telephone confirmed in writing or by facsimile transmission or other acceptable written means:   1.   Principal amount of the offer;     2.   Interest Rate; EXHIBIT B-10 --------------------------------------------------------------------------------     3.   Interest Payment Dates;     4.   Settlement Date;     5.   Maturity Date;     6.   Purchase Price;     7.   Purchasing Agent’s commission determined pursuant to Section IV(a) of the Selling Agent Agreement;     8.   Net proceeds to the Company;     9.   Trade Date;     10.   If a Book-Entry Note is redeemable by the Company, such of the following as are applicable:   (i)   The date on and after which such Book-Entry Note may be redeemed (the “Redemption Commencement Date”),     (ii)   Initial redemption price (% of par), and     (iii)   Amount (% of par) that the initial redemption price shall decline (but not below par) on each anniversary of the Redemption Commencement Date;   11.   Whether the Book-Entry Note has the Survivor’s Option and the terms of any other repayment provision;     12.   If a discount bond, the total amount of original issue discount, the yield to maturity, and the initial accrual period of original issue discount;     13.   DTC Participant Number of the institution through which the customer will hold the beneficial interest in the Global Security.   B.   The Company will confirm the previously assigned CUSIP number to the Book-Entry Note and then advise the Paying Agent and the Purchasing Agent by telephone (confirmed in writing at any time on the same date) or by telecopier or other form of electronic transmission of the information received in accordance with Settlement EXHIBIT B-11 --------------------------------------------------------------------------------         Procedure “A” above and the assigned CUSIP number. Each such communication by the Company will be deemed to constitute a representation and warranty by the Company to the Paying Agent and the Agents that (i) such Book-Entry Note is then, and at the time of issuance and sale thereof will be, duly authorized for issuance and sale by the Company; (ii) such Book-Entry Note, and the Master Note representing such Book-Entry Note, will conform with the terms of the Resolutions; and (iii) upon delivery of the Book-Entry Note, the aggregate principal amount of all Bonds issued under the Resolutions will not exceed the aggregate principal amount of Bonds authorized for issuance at such time by the Company.     C.   The Paying Agent will communicate to DTC and the Purchasing Agent through DTC’s Participant Terminal System a pending deposit message specifying the following Settlement information:   1.   The information received in accordance with Settlement Procedure “A.”     2.   The numbers of the participant accounts maintained by DTC on behalf of the Paying Agent and the Purchasing Agent.     3.   The initial Interest Payment Date for such Book-Entry Note and, if then calculated, the amount of interest payable on such Initial Interest Payment Date (which amount shall have been confirmed by the Paying Agent).     4.   The CUSIP number of such Book-Entry Note.     5.   The frequency of interest.   D.   DTC will credit such Book-Entry Note to the participant account of the Paying Agent maintained by DTC.     E.   The Paying Agent will enter an SDFS deliver order through DTC’s Participant Terminal System instructing DTC to (i) debit such Book-Entry Note to the Paying Agent’s participant account and credit such Book-Entry Note to the participant account of the Purchasing Agent maintained by DTC and (ii) debit the settlement account of the Purchasing Agent and credit the settlement account of the Paying Agent maintained by DTC, in an amount EXHIBIT B-12 --------------------------------------------------------------------------------         equal to the price of such Book-Entry Note less the Purchasing Agent’s commission. The entry of such a deliver order shall be deemed to constitute a representation and warranty by the Paying Agent to DTC that (a) the Master Note representing such Book-Entry Note has been issued and authenticated, and (b) the Paying Agent is holding the Master Note representing such Book-Entry Note pursuant to the Certificate Agreement.     F.   The Purchasing Agent will enter an SDFS deliver order through DTC’s Participant Terminal System instructing DTC to (i) debit such Book-Entry Note to the Purchasing Agent’s participant account and credit such Book-Entry Note to the participant accounts of the Participants to whom such Book-Entry Note is to be credited maintained by DTC and (ii) debit the settlement accounts of such Participants and credit the settlement account of the Purchasing Agent maintained by DTC, in an amount equal to the price of the Book-Entry Note so credited to their accounts.     G.   Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures “E” and “F” will be settled in accordance with SDFS operating procedures in effect on the Settlement Date.     H.   The Paying Agent, upon confirming receipt of such funds, will credit to an account of the Company funds available for immediate use in an amount equal to the amount credited to the Paying Agent’s DTC participant account in accordance with Settlement Procedure “E.”     I.   The Purchasing Agent will confirm the purchase of each Book-Entry Note to the purchaser thereof either by transmitting to the Participant to whose account such Book-Entry Note has been credited a confirmation order through DTC’s Participant Terminal System or by mailing a written confirmation to such purchaser. In all cases, the Offering Circular (together with the Pricing Supplement or Permitted Free Writing) must be delivered as soon as reasonably practicable after the Company provides a copy of such Offering Circular (together with the Pricing Supplement or Permitted Free Writing) to the Purchasing Agent but in no event later than the delivery of such confirmation. EXHIBIT B-13 --------------------------------------------------------------------------------     J.   Upon request, the Paying Agent will as soon as practicable send to the Company a statement setting forth the principal amount of Book-Entry Notes outstanding as of the date of such request under the Resolutions and setting forth the CUSIP number(s) assigned to, and a brief description of, any orders of which the Company has advised the Paying Agent but which have not yet been settled.           Settlement Procedures   For Book-Entry Notes solicited by the Purchasing Agent or Agent and accepted by the Company, Settlement Procedures “A” through “J” shall be completed as soon as possible but not later than the respective times (New York City time) set forth below:           Timetable:   Settlement Procedure   Time               A   4:00 p.m. on the Trade Day.     B   5:00 p.m. on the Trade Day.     C   2:00 p.m. on the Business Day before the Settlement Date.     D   11:00 a.m. on the Settlement Date.     E-F   2:00 p.m. on the Settlement Date.     G   2:45 p.m. on the Settlement Date.     H   3:00 p.m. on the Settlement Date.     I   5:00 p.m. on the Settlement Date.     J   At the request of the Company.               In the event of a purchase of Book-Entry Notes by the Purchasing Agent, as principal, appropriate Settlement details, if different from those set forth above, will be set forth in the applicable Terms Agreement to be entered into between the Purchasing Agent and the Company pursuant to the Selling Agent Agreement.               NOTE: The Offering Circular (together with the Pricing Supplement or Permitted Free Writing) must be delivered as soon as reasonably practicable after the Company provides a copy of such Offering Circular (together with the Pricing Supplement or Permitted Free Writing) to the Purchasing Agent but in no event later than the delivery of the written confirmation given to the customer (Settlement Procedure “I”). Settlement Procedure “G” is subject to extension in accordance with any extension of Fedwire closing deadlines and in the other events specified in the SDFS operating procedures in effect on the Settlement Date.               If Settlement of a Book-Entry Note is rescheduled or cancelled, EXHIBIT B-14 --------------------------------------------------------------------------------                 the Paying Agent will deliver to DTC, through DTC’s Participant Terminal System, a cancellation message to such effect by no later than 2:00 p.m., New York City time, on the Business Day immediately preceding the scheduled Settlement Date.           Failure to Settle:   If the Paying Agent fails to enter an SDFS deliver order with respect to a Book-Entry Note pursuant to Settlement Procedure “E,” the Paying Agent may deliver to DTC, through DTC’s Participant Terminal System, as soon as practicable a withdrawal message instructing DTC to debit such Book-Entry Note to the participant account of the Paying Agent maintained at DTC. DTC will process the withdrawal message; provided, that, such participant account contains Book-Entry Notes having the same terms and having a principal amount that is at least equal to the principal amount of such Book-Entry Notes to be debited. If withdrawal messages are processed with respect to all the Book-Entry Notes identified by a single CUSIP number, the CUSIP number assigned to such Book-Entry Notes shall, in accordance with CUSIP Service Bureau procedures, be cancelled and not immediately reassigned.               If the purchase price for any Book-Entry Note is not timely paid to the Participants with respect to such Book-Entry Note by the beneficial purchaser thereof (or a person, including an indirect participant in DTC, acting on behalf of such purchaser), such Participants may enter a SDFS deliver order through DTC’s participant Terminal System reversing the orders entered pursuant to Settlement Procedure “F.”               Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Note, DTC may take any actions in accordance with its SDFS operating procedures then in effect.           Procedure for Rate Changes:   Each time a decision has been reached to change rates, the Company will promptly advise the Agents of the new rates, who will forthwith suspend solicitation of purchases of Book-Entry Notes at the prior rates. The Agents may telephone the Company with recommendations as to the changed interest rates.           Suspension of Solicitation; Amendment or Supplement:   Subject to the Company’s representations, warranties, and covenants contained in the Selling Agent Agreement, the Company may instruct the Agents to suspend at any time for any period of time or permanently, the solicitation of orders to purchase Book-Entry Notes. Upon receipt of such instructions (which may be given orally), each Agent will forthwith suspend solicitation until such time as the Company has advised it that EXHIBIT B-15 --------------------------------------------------------------------------------                 solicitation of offers to purchase may be resumed.               In the event that at the time the Company suspends solicitation of offers to purchase there shall be any orders outstanding for settlement, the Company will promptly advise the Agents and the Paying Agent whether such orders may be settled and whether copies of the Offering Circular (together with the Pricing Supplement or Permitted Free Writing) as in effect at the time of the suspension may be delivered in connection with the settlement of such orders. The Company will have the sole responsibility for such decision and for any arrangements which may be made in the event that the Company determines that such orders may not be settled or that copies of such Offering Circular (together with the Pricing Supplement or Permitted Free Writing) may not be so delivered.               If the Company decides to amend or supplement the Offering Circular (or any Pricing Supplement or Permitted Free Writing), it will promptly advise the Agents and furnish the Agents and the Paying Agent with the proposed amendment or supplement and with such certificates and opinions as are required, all to the extent required by and in accordance with the terms of the Selling Agent Agreement. The Company will provide the Agents and the Paying Agent with copies of any such supplement.           Paying Agent Not to Risk Funds:   Nothing herein shall be deemed to require the Paying Agent to risk or expend its own funds in connection with any payment to the Company, or the Agents or the purchasers, it being understood by all parties that payments made by the Paying Agent to either the Company or the Agents shall be made only to the extent that funds are provided to the Paying Agent for such purpose.           Advertising Costs:   The Company shall have the sole right to approve the form and substance of any advertising an Agent may initiate in connection with such Agent’s solicitation to purchase the Book-Entry Notes. The expense of such advertising will be solely the responsibility of such Agent, unless otherwise agreed to by the Company. EXHIBIT B-16 --------------------------------------------------------------------------------   EXHIBIT C TENNESSEE VALLEY AUTHORITY electronotes® TERMS AGREEMENT                      ___, 200_ Tennessee Valley Authority 400 West Summit Hill Drive Knoxville, Tennessee 37902 The undersigned agrees to purchase the following aggregate principal amount of Book-Entry Notes:           $                   The terms of such Book-Entry Notes shall be as follows:               CUSIP Number:             Interest Rate:       %        Maturity Date:             Price to Public:             Agent’s Concession:       %     Settlement Date, Time, and Place:             Survivor’s Option:             Interest Payment Dates:             Optional Redemption, if any:             Initial Redemption Date:             Redemption Price:     Initially                     % of Principal Amount and declining                     % of the Principal Amount on each anniversary of the Initial Redemption Date until the Redemption Price is 100% of the Principal Amount. EXHIBIT C-1 --------------------------------------------------------------------------------   [Any other terms and conditions agreed to by the Purchasing Agent and the Company]                   LASALLE FINANCIAL SERVICES, INC.                       By:                   Name:             Title:     ACCEPTED: TENNESSEE VALLEY AUTHORITY           By:               Name:         Title:     EXHIBIT C-2 --------------------------------------------------------------------------------   EXHIBIT D [Form of Pricing Supplement] Tennessee Valley Authority electronotes® Tennessee Valley Authority Power Bonds With Maturities of 12 Months or More from Date of Issue                                                                                                               Pricing Supplement No.               Trade Date:                                                       To Offering Circular Supplement dated                    , 200_               Issue Date:                                                       and Offering Circular dated June 1, 2006                                                                             Stated       Maturity       Price to       Discounts &                           Survivor’s                           Proceeds       CUSIP     Interest Rate1       Date       Public2       Commissions       Interest Payment       Option                 Subject to Redemption or Repayment       TVA                                                               First                                                                                         Frequency       Payment                 Yes/No       Date and terms of redemption or repayment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Original Issue Discount Note:     Total Amount of OID:                                                                                Yes          No                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         1   The interest rates on the TVA electronotes® may be changed by TVA from time to time, but any such change will not affect the interest rate on any TVA electronotes ® offered prior to the effective date of the change.   2   Expressed as a percentage of aggregate principal amount. Actual Price to Public may be less and will be determined by prevailing market prices at the time of purchase as set forth in the confirmation sheet. EXHIBIT D-1   --------------------------------------------------------------------------------   EXHIBIT E Form of Master Selected Dealer Agreement         Name of Broker-Dealer           Address:                             Dear Selected Dealer:           In connection with public offerings of securities after the date hereof for which we are acting as manager of an underwriting syndicate or are otherwise responsible for the distribution of securities to the public by means of an offering of securities for sale to selected dealers, you may be offered the right as such a selected dealer to purchase as principal a portion of such securities. This will confirm our mutual agreement as to the general terms and conditions applicable to your participation in any such selected dealer group organized by us as follows.           1. Applicability of this Agreement. The terms and conditions of this Agreement shall be applicable to any public offering of securities (“Securities”) pursuant to a registration statement filed under the Securities Act of 1933 (the “Securities Act”), or exempt from registration thereunder (other than a public offering of Securities effected wholly outside the United States of America), wherein LaSalle Financial Services, Inc. (“LFS”) (acting for its own account or for the account of any underwriting or similar group or syndicate) is responsible for managing or otherwise implementing the sale of the Securities to selected broker-dealers (“Selected Dealers”) and has expressly informed you that such terms and conditions shall be applicable. Any such offering of Securities to you as a Selected Dealer is hereinafter called an “Offering”. In the case of any Offering where we are acting for the account of any underwriting or similar group or syndicate (“Underwriters”), the terms and conditions of this Agreement shall be for the benefit of, and binding upon, such Underwriters, including, in the case of any Offering where we are acting with others as representatives of Underwriters, such other representatives.           2. Conditions of Offering; Acceptance and Purchases. Any Offering will be subject to delivery of the Securities and their acceptance by us and any other Underwriters, may be EXHIBIT E-1   --------------------------------------------------------------------------------   subject to the approval of all legal matters by counsel and the satisfaction of other conditions, and may be made on the basis of reservation of Securities or an allotment against subscription. We will advise you by telegram, telex or other form of written communication (“Written Communication”) of the particular method and supplementary terms and conditions (including, without limitation, the information as to prices and offering date referred to in Section 3(c) hereof) of any Offering in which you are invited to participate. “Written Communication” may include, in the case of any Offering described in Section 3(a) hereof, Time of Sale Information (as defined below) and, in the case of an Offering described in Section 3(b) hereof, an offering circular. To the extent such supplementary terms and conditions are inconsistent with any provision herein, such terms and conditions shall supersede any such provision. Unless otherwise indicated in any such Written Communication, acceptances and other communications by you with respect to an Offering should be sent to LaSalle Financial Services, Inc., 327 Plaza Real, Suite 225, Boca Raton, Florida 33432 (Telecopy: (561) 416-6180). We reserve the right to reject any acceptance in whole or in part. Unless notified otherwise by us, Securities purchased by you shall be paid for on such date as we shall determine, on one business day’s prior notice to you, by certified or official bank check, in an amount equal to the Public Offering Prices (as hereinafter defined) or, if we shall so advise you, at such Public Offering Price less the Concession (as hereinafter defined), payable in immediately available funds to the order of LaSalle Financial Services, Inc., against delivery of the Securities. If Securities are purchased and paid for at such Public Offering Price, such Concession will be paid after the termination of the provisions of Section 3(c) hereof with respect to such Securities. Notwithstanding the foregoing, unless notified otherwise by us, payment for and delivery of Securities purchased by you shall be made through the facilities of The Depository Trust Company, if you are a member, unless you have otherwise notified us prior to the date specified in a Written Communication to you from us or, if you are not a member, settlement may be made through a correspondent who is a member pursuant to instructions which you will send to us prior to such specified date.           3. Representations, Warranties and Agreements.           (a) Registered Offerings. In the case of any Offering of Securities that are registered under the Securities Act (“Registered Offering”), the following terms should have the following meaning. The term “Preliminary Prospectus” means any preliminary prospectus relating to the Offering or any preliminary prospectus supplement together with a prospectus relating to the Offering. The term “Prospectus” means the prospectus, together with the final prospectus supplement, if any, relating to the Offering filed or to be filed under Rule 424 of the Securities Act. The term “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act and the term “Permitted Free Writing Prospectus” means (i) a free writing prospectus authorized for use by the issuer in connection with the Offering of the Securities that has been filed with the Securities & Exchange Commission (the “Commission”) in accordance with Rule 433(d) of the Securities Act or (ii) a free writing prospectus containing solely a description of terms of the Securities that (a) does not reflect the final terms, (b) is exempt from the filing requirement pursuant to Rule 433(d)(5)(i) and (c) is furnished to you by LFS. “Time of Sale Information ” means the Preliminary Prospectus together with each Permitted Free Writing Prospectus, if any, relating to the Offering of Securities. In connection with any Registered Offering, we shall provide you with, or otherwise make available (electronically or by other means), such number of copies of the Time of Sale Information and of the Prospectus (other than in each case information incorporated by reference therein) as you may reasonably request for the purposes contemplated by the Securities EXHIBIT E-2   --------------------------------------------------------------------------------   Act and the Securities Exchange Act of 1934 (the “Exchange Act”) and the applicable rules and regulations of the Commission thereunder. You represent and warrant that you are familiar with Rule 173 under the Securities Act and agree that you will comply therewith. You agree that you will not use, authorize use of, refer to, or participate in the planning for use of any written communication (as defined in Rule 405 under the Securities Act) concerning the Offering, any issuer of the Securities, (including without limitation any free writing prospectus and any information furnished by any issuer of the Securities but not incorporated by reference into the Preliminary Prospectus or Prospectus) other than: (a) any Preliminary Prospectus or Prospectus; (b) any Permitted Free Writing Prospectus; or (c) any communications that comply with Rule 134 or Rule 135 of the Securities Act. You represent that the Time of Sale Information has been conveyed to each person to whom you sell or deliver Securities prior to entering into a contract of sale with such person. You agree to make a record of your distribution of the Time of Sale Information related to each Offering. When furnished with copies of any revised Preliminary Prospectus or Permitted Free Writing Prospectus or a new Permitted Free Writing Prospectus revising or supplementing the terms of the Preliminary Prospectus or a previous Permitted Free Writing Prospectus, you will, upon our request, promptly forward copies thereof to each person to whom you have theretofore distributed a Preliminary Prospectus or Permitted Free Writing Prospectus prior to entering into any contract of sale with such person. You will not be authorized by the issuer or other seller of Securities offered pursuant to a prospectus or by any Underwriter to give any information or to make any representation not contained in the Time of Sale Information in connection with the sale of such Securities.           (b) Offerings Pursuant to Offering Circular. In the case of any Offering of Securities, other than a Registered Offering, which is made pursuant to an offering circular or other document comparable to a prospectus in a Registered Offering, including, without limitation, an Offering of “exempted securities” as defined in Section 3(a)(12) of the Exchange Act (an “Exempted Securities Offering”), we shall provide you with such number of copies of each preliminary offering circular and of the final offering circular relating thereto as you may reasonably request. You agree that you will comply with the applicable Federal and state laws, and the applicable rules and regulations of any regulatory body promulgated thereunder, governing the use and distribution of offering circulars by brokers or dealers. You agree that in purchasing Securities pursuant to an offering circular you will rely upon no statements whatsoever, written or oral, other than the statements in the final offering circular delivered to you by us. You will not be authorized by the issuer or other seller of Securities offered pursuant to an offering circular or by any Underwriter to give any information or to make any representation not contained in the offering circular in connection with the sale of such Securities.           (c) Offer and Sale to the Public. With respect to any Offering of Securities, we will inform you by a Written Communication of the public offering price, the selling concession, the reallowance (if any) to broker-dealers and the time when you may commence selling Securities to the public. After such public offering has commenced, we may change the public offering price, the selling concession and the reallowance (if any) to broker-dealers. The offering price, selling concession and reallowance (if any) to broker-dealers at any time in effect with respect to an Offering are hereinafter referred to, respectively, as the “Public Offering Price”, the “Concession” and the “Reallowance”. With respect to each Offering of Securities, until the provisions of this Section 3(c) shall be terminated pursuant to Section 5 hereof, you agree to offer Securities to the public at no more than the Public Offering Price. If notified by us, you may sell securities to the EXHIBIT E-3   --------------------------------------------------------------------------------   public at a lesser negotiated price than the Public Offering Price, but in an amount not to exceed the Concession. If a Reallowance is in effect, a reallowance from the Public Offering Price not in excess of such Reallowance may be allowed as consideration for services rendered in distribution to broker-dealers (i) who are actually engaged in the investment banking or securities business, (ii) who execute the written agreement prescribed by Rule 2740(c) of the Conduct Rules of the National Association of Securities Dealers, Inc. (the “NASD”) and (iii) who, if they are foreign banks, broker-dealers or institutions not eligible for membership in the NASD, represent to you that they will promptly reoffer such Securities at the Public Offering Price and will abide by the conditions with respect to foreign banks, broker-dealers and institutions set forth in Section 3(e) hereof.           (d) Over-allotment; Stabilization; Unsold Allotments. We may, with respect to any Offering, be authorized to over-allot in arranging sales to Selected Dealers, to purchase and sell Securities for long or short account and to stabilize or maintain the market price of the Securities. You agree not to purchase and sell Securities for which an order from a client has not been received without our consent in each instance. You further agree that, upon our request at any time and from time to time prior to the termination of the provisions of Section 3 (c) hereof with respect to any Offering, you will report to us the amount of Securities purchased by you pursuant to such Offering which then remain unsold by you and will, upon our request at any such time, sell to us for our account or the account of one or more Underwriters such amount of such unsold Securities as we may designate at the Public Offering Price less an amount to be determined by us not in excess of the Concession. If, prior to the later of (i) the termination of the provisions of Section 3(c) hereof with respect to any Offering or (ii) the covering by us of any short position created by us in connection with such Offering for our account or the account of one or more Underwriters, we purchase or contract to purchase for our account or the account of one or more Underwriters in the open market or otherwise any Securities purchased by you under this Agreement as part of such Offering, you agree to pay us on demand an amount equal to the Concession with respect to such Securities (unless you shall have purchased such Securities pursuant to Section 2 hereof at the Public Offering Price in which case we shall not be obligated to pay such Concession to you pursuant to Section 2) plus transfer taxes and broker’s commissions or dealer’s mark-up, if any, paid in connection with such purchase or contract to purchase.           (e) NASD. You represent and warrant that you are actually engaged in the investment banking or securities business. In addition, you further represent and warrant that you are either (i) a member in good standing of the NASD, (ii) a foreign bank, broker-dealer or institution not eligible for membership in the NASD which agrees not to make any sales within the United States, its territories or its possessions or to persons who are citizens thereof or residents therein, and in making any other sales to comply with the NASD’s interpretation with respect to free riding and withholding, or (iii), solely in connection with an Exempted Securities Offering, a bank, as defined in Section 3(a)(6) of the Exchange Act, that does not otherwise fall within provision (i) or (ii) of this sentence (a “Bank”). You further represent, by your participation in an Offering, that you have provided to us all documents and other information required to be filed with respect to you, any related person or any person associated with you or any such related person pursuant to the supplementary requirements of the NASD’s interpretation with respect to review of corporate financing as such requirements relate to such Offering.           You agree that, in connection with any purchase or sale of the Securities wherein a selling Concession, discount or other allowance is received or granted, (1) you will comply EXHIBIT E-4   --------------------------------------------------------------------------------   with the provisions of Rule 2740 of the Conduct Rules of the NASD, (2 ) if you are a non-NASD member broker or dealer in a foreign country, you will also comply (a), as though you were an NASD member, with the provision of Rules 2730, 2740 and 2750 of the Conduct Rules and (b) with Rule 2420 of the Conduct Rules as that Rule applies to a non-NASD member broker or dealer in a foreign country and (3), in connection with an Exempted Securities Offering, if you are a Bank, you will also comply, as though you were an NASD member, with the provision of Rules 2730, 2740 and 2750 of the Conduct Rules.           You further agree that, in connection with any purchase of securities from us that is not otherwise covered by the terms of this Agreement (whether we are acting as manager, as a member of an underwriting syndicate or a selling group or otherwise), if a selling Concession, discount or other allowance is granted to you, clauses (1), (2) and (3) of the preceding paragraph will be applicable.           (f) Relationship among Underwriters and Selected Dealers. We may buy Securities from or sell Securities to any Underwriter or Selected Dealer and the Underwriters (if any) and the Selected Dealers may purchase Securities from and sell Securities to each other at the Public Offering Price less all or any part of the Reallowance. You are not authorized to act as agent for us, any Underwriter or the issuer or other seller of any Securities in offering Securities to the public or otherwise. Neither we nor any Underwriter shall be under any obligation to you except for obligations assumed hereby or in any Written Communication from us in connection with any Offering. Nothing contained herein or in any Written Communication from us shall constitute the Selected Dealers an association or partners with us or any Underwriter or with one another. If the Selected Dealers, among themselves or with the Underwriters, should be deemed to constitute a partnership for Federal income tax purposes, then you elect to be excluded from the application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and agree not to take any position inconsistent with that election. You authorize us, in our discretion, to execute and file on your behalf such evidence of that election as may be required by the Internal Revenue Service. In connection with any Offering, you shall be liable for your proportionate amount of any tax, claim, demand or liability that may be asserted against you alone or against one or more Selected Dealers participating in such Offering, or against us or the Underwriters, based upon the claim that the Selected Dealers (including you), or any of them, constitute an association, an unincorporated business or other entity, including, in each case, your proportionate amount of any expense incurred in defending against any such tax, claim, demand or liability.           (g) Blue Sky Laws. Upon application to us, we shall inform you as to any advice we have received from counsel concerning the jurisdictions in which Securities have been qualified for sale or are exempt under the securities or blue sky laws of such jurisdictions, but we do not assume any obligation or responsibility as to your right to sell Securities in any such jurisdiction.           (h) Compliance with Law. You agree that in selling Securities pursuant to any Offering (which agreement shall also be for the benefit of the issuer or other seller of such Securities) you will comply with all applicable laws, rules and regulations, including the applicable provisions of the Securities Act and the Exchange Act, the applicable rules and regulations of the Securities and Exchange Commission thereunder, the applicable rules and regulations of the NASD, the applicable rules and regulations of any securities exchange having jurisdiction over the Offering, including but not limited to NASD Rule 2310, New York Stock Exchange Rule 405, NASD Notice EXHIBIT E-5   --------------------------------------------------------------------------------   – to- Members 03-71 and any other laws, rules or regulations regarding suitability or diligence of accounts. You represent and warrant, on behalf of yourself and any subsidiary, affiliate, or agent to be used by you in the context of this Agreement, that you and they have not relied upon advice from us, any issuer of the Securities, the Underwriters or other sellers of the Securities or any of our or their respective affiliates regarding the suitability of the Securities for any investor.           (i) Registration of the Securities. You are aware that no action has been or will be taken by the issuer of the Securities that would permit the offer or sale of the Securities or possession or distribution of the Prospectus or any other offering material relating to the Securities in any jurisdiction where action for that purpose is required, other than registering the Securities under the Securities Act in the case of a Registered Offering. Accordingly, you agree that you will observe all applicable laws and regulations in each jurisdiction in or from which you may directly or indirectly acquire, offer, sell, or deliver Securities or have in your possession or distribute the Prospectus or any other offering material relating to the Securities, and you will obtain any consent, approval or permission required by you for the purchase, offer, or sale by you of the Securities under the laws and regulations in force in any such jurisdiction to which you are subject or in which you make such purchase, offer, or sale. Neither the issuer of the Securities nor LFS or any Selected Dealers or Underwriters shall have any responsibility for determining what compliance is necessary by you or for your obtaining such consents, approvals, or permissions. You further agree that you will take no action that will impose any obligations on the issuer of the Securities, LFS, or any Selected Dealers or Underwriters. Subject as provided above, you shall, unless prohibited by applicable law, furnish to each person to whom you offer, sell or deliver Securities a copy of the Prospectus (as then amended or supplemented) or (unless delivery of the Prospectus is required by applicable law) inform each such person that a copy thereof (as then amended or supplemented) will be made available upon request. You are not authorized to give any information or to make any representation not contained in the Prospectus or the documents incorporated by reference or specifically referred to therein in connection with the offer and sale of the Securities. In the case of an Exempted Securities Offering, all references to “Prospectus” in this section shall be interpreted to mean “offering circular.”           (j) Electronic Media. You agree that you are familiar with the Commission’s guidance on the use of electronic media to deliver documents under the Federal Securities laws (including, but not limited to, Release 33-7856 (May 4, 2000) and Release 33-7233 (October 6, 1995)) and the NASD Notice-to-Members 98-3 (January 1998) concerning delivery of documents by broker dealers through electronic media. You agree that you will comply therewith in connection with the delivery of the Time of Sale Information to investors in connection with a Registered Offering.           (k) Structured Products. You agree that you are familiar with NASD Notice-to-Members 05-59 concerning NASD members’ obligations when selling structured products and, to the extent it is applicable to you, you agree to comply with the requirements therein. EXHIBIT E-6   --------------------------------------------------------------------------------             (l) New Products You agree to comply with NASD Notice-to-Members 05-26 recommending best practices for reviewing new products (which agreement shall also be for the benefit of any issuer of the Securities).           (m) U. S. Patriot Act/Office of Foreign Asset Control (OFAC). You represent and warrant, on behalf of yourself and any subsidiary, affiliate, or agent to be used by you in the context of this Agreement, that you and they comply and will comply with all applicable rules and regulations of the Office of Foreign Assets Control of the U.S. Department of the Treasury and all applicable requirements of the U.S. Bank Secrecy Act and the USA PATRIOT Act and the rules and regulations promulgated thereunder.           (n) Cease and Desist Proceedings. You represent and warrant that you are not the subject of a pending proceeding under Section 8A of the Securities Act in connection with the Offering.           4. Indemnification. You agree to indemnify and hold harmless LFS, the issuer of the Securities and any Underwriter and each person, if any, who controls (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) LFS or the issuer of the Securities, and their respective directors, officers and employees from and against any and all losses, liabilities, costs or claims (or actions in respect thereof) (collectively, “Losses”) to which any of them may become subject (including all reasonable costs of investigating, disputing or defending any such claim or action), insofar as such Losses arise out of or are in connection with the breach of any representation, warranty or agreement made by you herein.           If any claim, demand, action or proceeding (including any governmental investigation) shall be brought or alleged against an indemnified party in respect of which indemnity is to be sought against an indemnifying party, the indemnified party shall promptly notify the indemnifying party in writing, and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnified party may designate in such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to such indemnified party or (iii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to local counsel where necessary) for all such indemnified parties. Such firm shall be designated in writing by the indemnified party. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying EXHIBIT E-7   --------------------------------------------------------------------------------   party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.           The indemnity agreements contained in this Section and the representations and warranties by you in this Agreement shall remain operative and in full force and effect regardless of: (i) any termination of this Agreement; (ii) any investigation made by an indemnified party or on such party’s behalf its officers or directors or any person controlling an indemnified party or by or on behalf of the indemnifying party, its directors or officers or any person controlling the indemnifying party; and (iii) acceptance of and payment for any Securities.           5. Termination, Supplements and Amendments. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and supercedes all prior oral or written agreements between the parties hereto or their predecessors with regard to the subject matter hereof. This Agreement may be terminated by Written Communication from you to LFS or from LFS to you. Until so terminated, this Agreement shall continue in full force and effect. This Agreement may be supplemented or amended by us by written notice thereof to you, and any such supplement or amendment to this Agreement shall be effective with respect to any Offering to which this Agreement applies after the date you received such supplement or amendment. Each reference to “this Agreement” herein shall, as appropriate, be to this Agreement as so amended and supplemented. The terms and conditions set forth in Section 3(c) hereof with regard to any Offering will terminate at the close of business on the 30th day after the commencement of the public offering of the Securities to which such Offering relates, but in our discretion may be extended by us for a further period not exceeding 30 days and in our discretion, whether or not extended, may be terminated at any earlier time.           6. Successors and Assigns. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and other persons specified in Section 1 hereof, and the respective successors and assigns of each of them.           7. Governing Law. This Agreement and the terms and conditions set forth herein with respect to any Offering together with such supplementary terms and conditions with respect to such Offering as may be contained in any Written Communication from us to you in connection therewith shall be governed by, and construed in accordance with, the laws of the State of New York.           8. Headings and References. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.           Please confirm by signing and returning to us the enclosed copy of this Agreement that your subscription to, or your acceptance of any reservation of, any Securities pursuant to an Offering shall constitute (i) acceptance of and agreement to the terms and EXHIBIT E-8   --------------------------------------------------------------------------------   conditions of this Agreement (as supplemented and amended pursuant to Section 5 hereof) together with and subject to any supplementary terms and conditions contained in any Written Communication from us in connection with such Offering, all of which shall constitute a binding agreement between you and us, individually or as representative of any Underwriters, (ii) confirmation that your representations and warranties set forth in Section 3 hereof are true and correct at that time, (iii) confirmation that your agreements set forth in Sections 2 and 3 hereof have been and will be fully performed by you to the extent and at the times required thereby and (iv) acknowledgment that you have requested and received from us sufficient copies of the Time of Sale Information and prospectus or final offering circular, as the case may be, with respect to such Offering in order to comply with your undertakings in Section 3(a) or 3(b) hereof.                   Very truly yours,                       LaSalle Financial Services, Inc.                       By:   /s/ Melissa Toth               Name: Melissa Toth             Title: First Vice President                             CONFIRMED:                     ,     20__                     (NAME OF BROKER-DEALER)               By:               Name:         Title:     EXHIBIT E-9  

Exhibit 10.1   CONTRACT NO. 149238   XBOX 360 PUBLISHER LICENSE AGREEMENT   This Xbox 360 Publisher License Agreement (“Agreement”) is entered into and effective as of the later of the two signature dates below (the “Effective Date”) by and between Microsoft Licensing, GP, a Nevada general partnership (“Microsoft”), and THQ Inc., a Delaware corporation (“Publisher”).   RECITALS     A.            Microsoft and its affiliated companies develop and license a computer game system known as the Xbox 360 game system and a proprietary online service accessible via the Xbox 360 game system known as Xbox Live. B.            Publisher wishes to develop and/or publish one or more software products running on the Xbox 360 game system, which software products may also be made available to subscribers of Xbox Live, and to license proprietary materials from Microsoft on the terms and conditions set forth herein. Accordingly, for and in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which each party hereby acknowledges, Microsoft and Publisher agree as follows: 1.             EXHIBITS The following exhibits are hereby incorporated to this Agreement (some require completion and/or execution by one or both parties):  Exhibit 1:   Payments Exhibit 2:   Xbox 360 Royalty Tier Selection Form Exhibit 3:   Xbox 360 Publisher Enrollment Form Exhibit 4:   Authorized Subsidiaries Exhibit 5:   Non-Disclosure Agreement Exhibit 6:   Japan/Asian Royalty Incentive Program Exhibit 7:   Xbox Live Incentive Program 2.             DEFINITIONS As further described in this Agreement and the Xbox 360 Publisher Guide (defined below), the following terms have the following respective meanings: 2.1           “ASIAN MANUFACTURING REGION” MEANS THE REGION FOR MANUFACTURING COMPRISING TAIWAN, HONG KONG, SINGAPORE, KOREA, JAPAN AND ANY OTHER COUNTRIES THAT ARE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. 2.2           “ASIAN SALES TERRITORY” MEANS THE TERRITORY FOR SALES DISTRIBUTION COMPRISING TAIWAN, HONG KONG, SINGAPORE, KOREA, AND ANY OTHER COUNTRIES THAT ARE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE.  THE ASIAN SALES TERRITORY DOES NOT INCLUDE JAPAN. 2.3           “AUTHORIZED REPLICATOR” MEANS A SOFTWARE REPLICATOR CERTIFIED AND APPROVED BY MICROSOFT FOR REPLICATION OF FPUS (DEFINED BELOW) THAT RUN ON THE XBOX 360. 2.4           “BRANDING SPECIFICATIONS” MEANS THE SPECIFICATIONS AS PROVIDED BY MICROSOFT FROM TIME TO TIME FOR USING THE LICENSED TRADEMARKS IN CONNECTION WITH A SOFTWARE TITLE AND/OR ONLINE CONTENT AND ON MARKETING MATERIALS AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. 2.5           “BTS” MEANS A MICROSOFT DESIGNED BREAK-THE-SEAL STICKER THAT WILL BE ISSUED TO THE AUTHORIZED REPLICATOR FOR PLACEMENT ON THE PACKAGING MATERIALS (DEFINED BELOW) AS SPECIFIED IN THE XBOX 360 PUBLISHER GUIDE. 2.6           “CERTIFICATION” MEANS THE FINAL STAGE OF THE APPROVAL PROCESS BY WHICH MICROSOFT APPROVES OR DISAPPROVES OF A SOFTWARE TITLE OR ONLINE CONTENT FOR MANUFACTURE AND/OR DISTRIBUTION.  CERTIFICATION IS FURTHER DEFINED IN THIS AGREEMENT AND THE XBOX 360 PUBLISHER GUIDE.   Microsoft Confidential   1 --------------------------------------------------------------------------------   2.7           “COMMERCIAL RELEASE” WITH RESPECT TO A SOFTWARE TITLE MEANS THE FIRST COMMERCIAL DISTRIBUTION OF AN FPU THAT IS NOT DESIGNATED AS A DEMO VERSION.  WITH RESPECT TO ONLINE CONTENT, COMMERCIAL RELEASE MEANS ITS FIRST AVAILABILITY VIA XBOX LIVE TO XBOX LIVE USERS. 2.8           “CONCEPT” MEANS THE DETAILED DESCRIPTION OF PUBLISHER’S PROPOSED SOFTWARE TITLE AND/OR ONLINE CONTENT IN EACH CASE INCLUDING SUCH INFORMATION AS MAY BE REQUESTED BY MICROSOFT. 2.9           “DEMO VERSIONS” MEANS A SMALL PORTION OF AN APPLICABLE SOFTWARE TITLE THAT IS PROVIDED TO END USERS TO ADVERTISE OR PROMOTE A SOFTWARE TITLE. 2.10         “EUROPEAN SALES TERRITORY” MEANS THE TERRITORY FOR SALES DISTRIBUTION COMPRISING THE UNITED KINGDOM, FRANCE, GERMANY, SPAIN, ITALY, NETHERLANDS, BELGIUM, SWEDEN, DENMARK, NORWAY, FINLAND, AUSTRIA, SWITZERLAND, IRELAND, PORTUGAL, GREECE, AUSTRALIA, NEW ZEALAND AND ANY OTHER COUNTRIES THAT ARE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE 2.11         “EUROPEAN MANUFACTURING REGION” MEANS THE REGION FOR MANUFACTURING COMPRISING THE UNITED KINGDOM, FRANCE, GERMANY, SPAIN, ITALY, NETHERLANDS, BELGIUM, SWEDEN, DENMARK, NORWAY, FINLAND, AUSTRIA, SWITZERLAND, IRELAND, PORTUGAL, GREECE, AUSTRALIA, NEW ZEALAND AND ANY OTHER COUNTRIES THAT ARE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. 2.12         “FPU” OR “FINISHED PRODUCT UNIT” MEANS A COPY OF A SOFTWARE TITLE IN OBJECT CODE FORM THAT HAS PASSED CERTIFICATION, HAS BEEN AFFIXED TO A DVD DISK AND APPROVED BY MICROSOFT FOR RELEASE AND MANUFACTURING.  ONCE THE PACKAGING MATERIALS HAVE BEEN ADDED, AND THE BTS HAS BEEN ASSIGNED OR AFFIXED TO THE FPU OR ITS PACKAGING, THE FPU ALSO INCLUDES ITS ACCOMPANYING BTS AND PACKAGING MATERIALS. 2.13         “JAPAN SALES TERRITORY” MEANS THE TERRITORY FOR SALES DISTRIBUTION COMPRISING THE COUNTRY OF JAPAN. 2.14         “LICENSED TRADEMARKS” MEANS THE MICROSOFT TRADEMARKS IDENTIFIED IN THE XBOX 360 PUBLISHER GUIDE. 2.15         “MARKETING MATERIALS” COLLECTIVELY MEANS THE PACKAGING MATERIALS AND ALL PRESS RELEASES, MARKETING, ADVERTISING OR PROMOTIONAL MATERIALS RELATED TO THE SOFTWARE TITLE, FPUS AND/OR ONLINE CONTENT (INCLUDING WITHOUT LIMITATION WEB ADVERTISING AND PUBLISHER’S WEB PAGES TO THE EXTENT THEY REFER TO THE SOFTWARE TITLE(S), FPU(S) AND/OR ONLINE CONTENT) THAT WILL BE USED AND DISTRIBUTED BY PUBLISHER IN THE MARKETING OF THE SOFTWARE TITLE(S), FPU(S) AND/OR ONLINE CONTENT. 2.16         “MANUFACTURING REGION” MEANS THE ASIAN MANUFACTURING REGION, EUROPEAN MANUFACTURING REGION, AND/OR NORTH AMERICAN MANUFACTURING REGION. 2.17         “NORTH AMERICAN SALES TERRITORY” MEANS THE TERRITORY FOR SALES DISTRIBUTION COMPRISING THE UNITED STATES, CANADA, MEXICO, COLOMBIA AND ANY OTHER COUNTRIES THAT MAY BE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. 2.18         “NORTH AMERICAN MANUFACTURING REGION” MEANS THE REGION FOR MANUFACTURING COMPRISING THE UNITED STATES, CANADA, MEXICO, COLOMBIA AND ANY OTHER COUNTRIES THAT MAY BE INCLUDED BY MICROSOFT FROM TIME TO TIME AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. 2.19         “ONLINE CONTENT” MEANS ANY CONTENT, FEATURE, OR ACCESS TO SOFTWARE OR ONLINE SERVICE THAT IS DISTRIBUTED BY MICROSOFT PURSUANT TO THIS AGREEMENT.  ONLINE CONTENT INCLUDES, BUT IS NOT LIMITED TO, ONLINE GAME FEATURES, TITLE UPDATES, DEMO VERSIONS, TRAILERS, “THEMES,” “GAMER PICTURES” OR ANY OTHER CATEGORY OF ONLINE CONTENT OR SERVICE APPROVED BY MICROSOFT FROM TIME TO TIME.  TRAILERS, “THEMES,” “GAMER PICTURES” AND ANY OTHER APPROVED ONLINE CONTENT WILL BE FURTHER DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE. 2.20         “ONLINE GAME FEATURES” MEANS A SOFTWARE TITLE’S CONTENT, FEATURES AND/OR SERVICES THAT ARE AVAILABLE TO XBOX LIVE USERS VIA XBOX LIVE, WHETHER INCLUDED IN THE SOFTWARE TITLE’S FPU OR OTHERWISE DISTRIBUTED VIA XBOX LIVE. 2.21         “PACKAGING MATERIALS” MEANS ART AND MECHANICAL FORMATS FOR A SOFTWARE TITLE INCLUDING THE RETAIL PACKAGING, END USER INSTRUCTION MANUAL WITH END USER LICENSE AGREEMENT AND WARRANTIES, END USER WARNINGS, FPU MEDIA LABEL, AND ANY PROMOTIONAL INSERTS AND OTHER MATERIALS THAT ARE TO BE INCLUDED IN THE RETAIL PACKAGING.   2 -------------------------------------------------------------------------------- 2.22         “PRE-CERTIFICATION” MEANS THE FIRST STAGE OF THE APPROVAL PROCESS WHEREIN MICROSOFT TESTS TO PROVIDE FEEDBACK AND/OR IDENTIFY ANY ISSUES THAT MAY PREVENT THE SOFTWARE TITLE FROM BEING APPROVED DURING THE CERTIFICATION PHASE.  PRE-CERTIFICATION IS FURTHER DESCRIBED IN THIS AGREEMENT AND THE XBOX 360 PUBLISHER GUIDE. 2.23         “SALES TERRITORY” MEANS THE ASIAN SALES TERRITORY, EUROPEAN SALES TERRITORY, JAPAN SALES TERRITORY, AND/OR NORTH AMERICAN SALES TERRITORY. 2.24         “SOFTWARE TITLE” MEANS THE SINGLE SOFTWARE PRODUCT AS APPROVED BY MICROSOFT FOR USE ON XBOX 360, INCLUDING ANY TITLE UPDATES THERETO (IF AND TO THE EXTENT APPROVED BY MICROSOFT) AND ALL ONLINE GAME FEATURES FOR SUCH SOFTWARE TITLE.  IF MICROSOFT APPROVES ONE OR MORE ADDITIONAL SINGLE SOFTWARE PRODUCT(S) PROPOSED BY PUBLISHER TO RUN ON XBOX 360, THIS AGREEMENT, AND THE TERM “SOFTWARE TITLE,” WILL BE BROADENED AUTOMATICALLY TO COVER THE RESPECTIVE NEW SOFTWARE PRODUCT(S) AS ADDITIONAL SOFTWARE TITLE(S) UNDER THIS AGREEMENT. 2.25         “SUBSCRIBER” MEANS AN XBOX LIVE USER THAT ESTABLISHES AN ACCOUNT WITH XBOX LIVE. 2.26         “SUB-PUBLISHER” MEANS AN ENTITY THAT HAS A VALID XBOX 360 PUBLISHER LICENSE AGREEMENT WITH MICROSOFT OR A MICROSOFT AFFILIATE AND WITH WHOM PUBLISHER HAS ENTERED AN AGREEMENT TO ALLOW SUCH ENTITY TO PUBLISH A SOFTWARE TITLE OR ONLINE CONTENT IN SPECIFIC SALES TERRITORIES. 2.27         “SUGGESTED RETAIL PRICE” MEANS THE HIGHEST PER UNIT PRICE THAT PUBLISHER OR ITS AGENT RECOMMENDS THE FPU BE MADE COMMERCIALLY AVAILABLE TO END-USERS IN A PARTICULAR SALES TERRITORY.  IF THE SUGGESTED RETAIL PRICE OF A PARTICULAR SOFTWARE TITLE VARIES AMONG THE COUNTRIES IN A SINGLE SALES TERRITORY, THEN THE HIGHEST SUGGESTED RETAIL PRICE ESTABLISHED FOR ANY OF THE COUNTRIES WILL BE USED TO DETERMINE THE APPROPRIATE ROYALTY FEES FOR THE ENTIRE SALES TERRITORY. 2.28         “TITLE UPDATE” MEANS AN UPDATE, UPGRADE, OR TECHNICAL FIX TO A SOFTWARE TITLE THAT XBOX LIVE USERS CAN AUTOMATICALLY DOWNLOAD TO THE XBOX LIVE USER’S XBOX 360. 2.29         “WHOLESALE PRICE” MEANS THE HIGHEST PER UNIT PRICE THAT PUBLISHER CHARGES RETAILERS AND/OR DISTRIBUTORS IN BONA FIDE THIRD PARTY TRANSACTIONS FOR THE RIGHT TO DISTRIBUTE AND SELL  THE SOFTWARE TITLE WITHIN A SALES TERRITORY, IT BEING AGREED THAT (I) ANY TRANSACTIONS INVOLVING AFFILIATES OF PUBLISHER (ENTITIES CONTROLLING, CONTROLLED BY OR UNDER COMMON CONTROL OF, PUBLISHER) ARE NOT TO BE CONSIDERED IN DETERMINING THE WHOLESALE PRICE; (II) IF PUBLISHER ENTERS INTO AN AGREEMENT WITH A THIRD PARTY (SUCH AS  A SUB-PUBLISHER) PROVIDING THE THIRD PARTY WITH THE EXCLUSIVE RIGHT TO DISTRIBUTE THE SOFTWARE TITLE IN A SALES TERRITORY, THE WHOLESALE PRICE IS GOVERNED BY THE PRICE CHARGED BY THE THIRD PARTY RATHER THAN THE TERMS OF THE EXCLUSIVE DISTRIBUTION AGREEMENT BETWEEN PUBLISHER AND SUCH THIRD PARTY; AND (III) IF THE WHOLESALE PRICE VARIES AMONG COUNTRIES IN A SINGLE SALES TERRITORY, THE HIGHEST WHOLESALE PRICE USED IN THE SALES TERRITORY WILL BE USED TO DETERMINE THE APPROPRIATE ROYALTY FEES FOR THE ENTIRE SALES TERRITORY. 2.30         “XBOX 360” MEANS THE SECOND VERSION OF MICROSOFT’S PROPRIETARY GAME SYSTEM, SUCCESSOR TO THE XBOX GAME SYSTEM, INCLUDING OPERATING SYSTEM SOFTWARE AND HARDWARE DESIGN SPECIFICATIONS. 2.31         “XBOX 360 PUBLISHER GUIDE” MEANS A DOCUMENT (IN PHYSICAL, ELECTRONIC OR WEB SITE FORM) CREATED BY MICROSOFT THAT SUPPLEMENTS THIS AGREEMENT AND PROVIDES DETAILED REQUIREMENTS REGARDING THE PRE-CERTIFICATION AND CERTIFICATION APPROVAL PROCESS, BRANDING SPECIFICATIONS, REPLICATION REQUIREMENTS, ROYALTY PAYMENT PROCESS, MARKETING GUIDELINES, TECHNICAL SPECIFICATIONS AND CERTIFICATION REQUIREMENTS, DEMO VERSION REQUIREMENTS, PACKAGING REQUIREMENTS AND OTHER OPERATIONAL ASPECTS OF THE XBOX 360 AND XBOX LIVE.  MICROSOFT MAY SUPPLEMENT, REVISE OR UPDATE THE XBOX 360 PUBLISHER GUIDE FROM TIME TO TIME IN ITS REASONABLE DISCRETION AS SET FORTH IN THIS AGREEMENT. 2.32         “XBOX LIVE” MEANS THE PROPRIETARY ONLINE SERVICE OFFERED BY MICROSOFT TO XBOX LIVE USERS. 2.33         “XBOX LIVE USER” MEANS ANY INDIVIDUAL THAT ACCESSES AND USES XBOX LIVE. 2.34         OTHER TERMS.  ALL OTHER CAPITALIZED TERMS HAVE THE DEFINITIONS SET FORTH WITH THE FIRST USE OF SUCH TERM AS DESCRIBED IN THIS AGREEMENT. 3.             XBOX 360 DEVELOPMENT KIT LICENSE Publisher shall enter into one or more development kit license(s) for the applicable territory(ies) to which Xbox 360 game development kits will be shipped for use by Publisher (each an “XDK License”) pursuant to which Microsoft or its affiliate may license to Publisher software development tools and hardware to assist Publisher in the development and testing of 3 -------------------------------------------------------------------------------- Software Titles, including redistributable code that Publisher must incorporate into Software Titles pursuant to the terms and conditions contained in the XDK License. 4.             APPROVAL PROCESS 4.1           STANDARD APPROVAL PROCESS.  THE STANDARD APPROVAL PROCESS FOR A SOFTWARE TITLE IS DIVIDED INTO FOUR PHASES COMPRISED OF CONCEPT APPROVAL, PRE-CERTIFICATION, CERTIFICATION, AND MARKETING MATERIALS APPROVAL.  UNLESS PUBLISHER ELECTS THE EU APPROVAL OPTION FOR A EUROPEAN FPU (DESCRIBED BELOW), PUBLISHER IS REQUIRED TO SUBMIT ITS SOFTWARE TITLE TO MICROSOFT FOR EVALUATION AT ALL FOUR PHASES.  EACH PHASE IS IDENTIFIED BELOW AND FURTHER DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE.  ADDITIONAL OR ALTERNATE APPROVAL PROCESSES FOR ONLINE CONTENT MAY BE FURTHER DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE.  WITH RESPECT TO ANY AND ALL APPROVALS REQUIRED BY MICROSOFT HEREUNDER, MICROSOFT SHALL EXERCISE REASONABLE DISCRETION AND SHALL ACT IN GOOD FAITH. 4.1.1        CONCEPT.  FOR EACH SOFTWARE TITLE, PUBLISHER SHALL DELIVER TO MICROSOFT A COMPLETED CONCEPT SUBMISSION FORM (IN THE FORM PROVIDED BY MICROSOFT TO PUBLISHER) THAT DESCRIBES THE SOFTWARE TITLE.  IN THE EVENT THAT PUBLISHER DESIRES TO HOST OR HAVE A THIRD PARTY HOST OR PROVIDE TO XBOX LIVE USERS ANY OF PUBLISHER’S ONLINE GAME FEATURES, PUBLISHER SHALL SO INDICATE ON THE CONCEPT SUBMISSION FORM AND MUST EXECUTE AN ADDENDUM TO THIS AGREEMENT, WHICH ADDENDUM IS AVAILABLE UPON REQUEST AND WILL BE INCORPORATED INTO THIS AGREEMENT UPON EXECUTION.  FOLLOWING EVALUATION OF PUBLISHER’S CONCEPT SUBMISSION, MICROSOFT WILL NOTIFY PUBLISHER IN WRITING OF WHETHER THE CONCEPT IS APPROVED OR REJECTED.  IF APPROVED, THE CONCEPT SUBMISSION FORM, IN THE FORM SUBMITTED AND APPROVED BY MICROSOFT, IS INCORPORATED HEREIN BY REFERENCE AND ADHERENCE TO ITS TERMS IS A REQUIREMENT FOR CERTIFICATION.  PUBLISHER MAY PROPOSE ONLINE CONTENT AT ANY TIME AFTER A CONCEPT HAS BEEN APPROVED, IN WHICH CASE PUBLISHER SHALL DELIVER TO MICROSOFT A SEPARATE CONCEPT SUBMISSION FOR EACH PROPOSED PIECE OF ONLINE CONTENT. 4.1.2        PRE-CERTIFICATION.  IF THE CONCEPT IS APPROVED, PUBLISHER SHALL DELIVER TO MICROSOFT A CODE-COMPLETE VERSION OF THE SOFTWARE TITLE OR ONLINE CONTENT THAT INCLUDES ALL CURRENT FEATURES OF THE SOFTWARE TITLE AND SUCH OTHER CONTENT AS MAY BE REQUIRED UNDER THE XBOX 360 PUBLISHER GUIDE.  UPON RECEIPT, MICROSOFT SHALL CONDUCT TECHNICAL SCREEN AND/OR OTHER TESTING OF THE SOFTWARE TITLE OR ONLINE CONTENT CONSISTENT WITH THE XBOX 360 PUBLISHER GUIDE AND WILL SUBSEQUENTLY PROVIDE PUBLISHER WITH WRITTEN ADVISORY FEEDBACK REGARDING SUCH TESTING. 4.1.3        CERTIFICATION.  FOLLOWING PRE-CERTIFICATION, PUBLISHER SHALL DELIVER TO MICROSOFT THE PROPOSED FINAL RELEASE VERSION OF THE APPLICABLE SOFTWARE TITLE THAT IS COMPLETE, READY FOR ACCESS VIA XBOX LIVE (IF APPLICABLE), RELEASE, MANUFACTURE, AND COMMERCIAL DISTRIBUTION.  SUCH VERSION MUST INCLUDE THE FINAL CONTENT RATING CERTIFICATION REQUIRED BY SECTION 4.4, HAVE IDENTIFIED PROGRAM ERRORS CORRECTED, AND HAVE ANY AND ALL CHANGES PREVIOUSLY REQUIRED BY MICROSOFT IMPLEMENTED.  MICROSOFT SHALL CONDUCT COMPLIANCE, COMPATIBILITY, FUNCTIONAL AND OTHER TESTING CONSISTENT WITH THE XBOX 360 PUBLISHER GUIDE (“CERTIFICATION TESTING”) AND SHALL SUBSEQUENTLY PROVIDE PUBLISHER WITH THE RESULTS OF SUCH TESTING, INCLUDING ANY REQUIRED FIXES REQUIRED PRIOR TO ACHIEVING CERTIFICATION, IN WRITING.  RELEASE FROM CERTIFICATION FOR A SOFTWARE TITLE (AND FOR ONLINE CONTENT AS APPLICABLE) IS BASED ON (1) PASSING THE CERTIFICATION TESTING; (2) CONFORMANCE WITH THE APPROVED CONCEPT AND ANY REQUIRED SUBMISSION MATERIALS AS STATED IN THE XBOX 360 PUBLISHER GUIDE; (3) PACKAGING MATERIALS APPROVAL; (4) CONSISTENCY WITH THE GOALS AND OBJECTIVES OF THE XBOX 360 CONSOLE PLATFORM AND XBOX LIVE; AND (5) CONTINUING AND ONGOING COMPLIANCE WITH ALL CERTIFICATION REQUIREMENTS AND OTHER REQUIREMENTS AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE AND THIS AGREEMENT. 4.1.4        MARKETING MATERIALS APPROVAL.  PUBLISHER SHALL SUBMIT ALL MARKETING MATERIALS TO MICROSOFT AND SHALL NOT DISTRIBUTE SUCH MARKETING MATERIALS UNLESS AND UNTIL MICROSOFT HAS APPROVED THEM IN WRITING.  PRIOR TO USE OR PUBLICATION OF ANY MARKETING MATERIALS, PUBLISHER AGREES TO INCORPORATE ALL CHANGES RELATING TO USE OF THE LICENSED TRADEMARKS THAT MICROSOFT MAY REQUEST IN WRITING AND WILL USE ITS COMMERCIALLY REASONABLE EFFORTS TO INCORPORATE OTHER CHANGES REASONABLY SUGGESTED BY MICROSOFT (PROVIDED, HOWEVER, THAT IN ANY EVENT PUBLISHER SHALL AT ALL TIMES COMPLY WITH THE BRANDING SPECIFICATIONS). 4.2           EU APPROVAL OPTION.  FOR A SOFTWARE TITLE THAT PUBLISHER INTENDS TO DISTRIBUTE SOLELY IN THE EUROPEAN SALES TERRITORY (A “EUROPEAN FPU”), PUBLISHER MAY CHOOSE TO FOREGO CONCEPT APPROVAL (SECTION 4.1.1), PRE-CERTIFICATION (SECTION 4.1.2) AND/OR MARKETING MATERIALS APPROVAL (SECTION 4.1.4) AND SUBMIT SUCH SOFTWARE TITLE TO MICROSOFT ONLY FOR CERTIFICATION APPROVAL.  THIS OPTION IS REFERRED TO HEREIN AS THE “EU APPROVAL OPTION.”  THE EU APPROVAL OPTION APPLIES SOLELY TO DISTRIBUTION OF EUROPEAN FPUS, AND IS NOT AVAILABLE FOR ONLINE CONTENT INTENDED TO BE AVAILABLE IN THE EUROPEAN SALES TERRITORY.   IF PUBLISHER CHOOSES THE EU APPROVAL OPTION, PUBLISHER SHALL NOT USE THE LICENSED TRADEMARKS ON THE EUROPEAN FPU AND THE LICENSE GRANT SET FORTH IN SECTION 12.1 IS WITHDRAWN AS TO SUCH EUROPEAN FPU.  IN ADDITION, PUBLISHER SHALL MAKE NO STATEMENTS IN ADVERTISING, MARKETING MATERIALS, PACKAGING, WEB SITES OR OTHERWISE THAT THE EUROPEAN FPU IS APPROVED OR OTHERWISE SANCTIONED BY MICROSOFT OR IS AN OFFICIAL XBOX 360 SOFTWARE TITLE.  THE EUROPEAN FPU MAY NOT BE   4 -------------------------------------------------------------------------------- DISTRIBUTED OUTSIDE THE EUROPEAN SALES TERRITORY WITHOUT COMPLYING WITH ALL TERMS OF THIS AGREEMENT CONCERNING APPROVALS AND THE RELEASE OF THE FPU AS DEEMED RELEVANT BY MICROSOFT.  MICROSOFT MAY PROVIDE ADDITIONAL INFORMATION IN THE XBOX 360 PUBLISHER GUIDE REGARDING THE EUROPEAN APPROVAL OPTION.  NOTWITHSTANDING PUBLISHER’S CHOICE OF THE EU APPROVAL OPTION, ALL OTHER PORTIONS OF THIS AGREEMENT OTHER THAN THOSE SPECIFICALLY IDENTIFIED ABOVE SHALL REMAIN IN EFFECT. 4.3           RESUBMISSIONS AND ADDITIONAL REVIEW.  IF A SOFTWARE TITLE OR ONLINE CONTENT FAILS CERTIFICATION, AND IF PUBLISHER HAS MADE GOOD FAITH EFFORTS TO ADDRESS ANY ISSUES RAISED BY MICROSOFT, MICROSOFT WILL GIVE PUBLISHER THE OPPORTUNITY TO RESUBMIT SUCH SOFTWARE TITLE OR ONLINE CONTENT FOR CERTIFICATION.  MICROSOFT MAY CHARGE PUBLISHER A REASONABLE FEE DESIGNED TO OFFSET THE COSTS ASSOCIATED WITH TESTING UPON RESUBMISSION.  PUBLISHER MAY REQUEST THE ABILITY TO SUBMIT VERSIONS OF THE SOFTWARE TITLE OR ONLINE CONTENT AT STAGES OF DEVELOPMENT OTHER THAN AS IDENTIFIED ABOVE FOR REVIEW AND FEEDBACK BY MICROSOFT.  SUCH REVIEW IS WITHIN THE DISCRETION OF MICROSOFT AND MAY REQUIRE THE PAYMENT OF REASONABLE FEES BY PUBLISHER TO OFFSET THE COSTS ASSOCIATED WITH THE REVIEW OF SUCH SOFTWARE TITLES OR ONLINE CONTENT. 4.4           CONTENT RATING.  FOR THOSE SALES TERRITORIES THAT UTILIZE A CONTENT RATING SYSTEM, MICROSOFT WILL NOT ACCEPT SUBMISSION OF A SOFTWARE TITLE FOR CERTIFICATION APPROVAL UNLESS AND UNTIL PUBLISHER HAS OBTAINED, AT PUBLISHER’S SOLE COST, A RATING NOT HIGHER THAN “MATURE (17+)” OR ITS EQUIVALENT FROM THE APPROPRIATE RATING BODIES AND/OR ANY AND ALL OTHER INDEPENDENT CONTENT RATING AUTHORITY/AUTHORITIES FOR THE APPLICABLE SALES TERRITORY(IES) REASONABLY DESIGNATED BY MICROSOFT (SUCH AS ESRB, ELSPA, CERO, ETC.).  PUBLISHER SHALL INCLUDE THE APPLICABLE RATING(S) PROMINENTLY ON FPUS AND MARKETING MATERIALS, IN ACCORDANCE WITH THE APPLICABLE RATING BODY GUIDELINES, AND SHALL INCLUDE THE APPLICABLE RATING IN A HEADER FILE OF THE SOFTWARE TITLE AND IN ONLINE CONTENT, AS DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE.  FOR THOSE SALES TERRITORIES THAT DO NOT UTILIZE A CONTENT RATING SYSTEM, MICROSOFT WILL NOT APPROVE ANY SOFTWARE TITLE OR ONLINE CONTENT THAT, IN ITS OPINION, CONTAINS EXCESSIVE SEXUAL CONTENT OR VIOLENCE, INAPPROPRIATE LANGUAGE OR OTHER ELEMENTS DEEMED UNSUITABLE FOR THE XBOX 360. MICROSOFT WILL PROVIDE THQ ADVANCED NOTICE VIA THE XBOX 360 PUBLISHER GUIDE WHENEVER ANY NEW COUNTRIES THAT DO NOT HAVE A CONTENT RATING SYSTEM ARE ADDED TO SALES TERRITORIES AND WHAT, IF ANY, CONTENT GUIDELINES IT PROPOSES FOR SUCH COUNTRY.  IF, AFTER COMMERCIAL RELEASE, A SOFTWARE TITLE IS DETERMINED AS SUITABLE FOR ADULTS ONLY OR OTHERWISE AS INDECENT, OBSCENE OR OTHERWISE PROHIBITED BY LAW, THE PUBLISHER SHALL AT ITS OWN COSTS RECALL ALL FPUS.  PUBLISHER HEREBY REPRESENTS AND WARRANTS THAT ANY ONLINE GAME FEATURES AND OTHER GAME-RELATED ONLINE CONTENT NOT INCLUDED IN THE INITIAL SOFTWARE TITLE FPU WILL NOT BE INCONSISTENT WITH THE CONTENT RATING (OR, IN THOSE COUNTRIES THAT DO NOT UTILIZE A CONTENT RATING SYSTEM, WITH THE OVERALL NATURE OF THE CONTENT) OF THE UNDERLYING SOFTWARE TITLE.  CONTENT RATING INFORMATION AND REQUIREMENTS MAY BE FURTHER DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE. 4.5           PUBLISHER TESTING.  PUBLISHER SHALL PERFORM ITS OWN TESTING OF THE SOFTWARE TITLE AND FPUS AND SHALL KEEP WRITTEN OR ELECTRONIC RECORDS OF SUCH TESTING DURING THE TERM OF THIS AGREEMENT AND FOR NO LESS THAN **** THEREAFTER (“TEST RECORDS”)   UPON MICROSOFT’S REASONABLE ADVANCE WRITTEN REQUEST, PUBLISHER SHALL PROVIDE MICROSOFT WITH COPIES OF, OR REASONABLE ACCESS TO INSPECT, THE TEST RECORDS, FPUS AND SOFTWARE TITLE (EITHER IN PRE-COMMERCIAL RELEASE OR COMMERCIAL RELEASE VERSIONS, AS MICROSOFT MAY REQUEST IN WRITING). 4.6           MUTUAL APPROVAL REQUIRED.  PUBLISHER SHALL NOT DISTRIBUTE THE SOFTWARE TITLE, NOR MANUFACTURE ANY FPU INTENDED FOR DISTRIBUTION, UNLESS AND UNTIL MICROSOFT HAS GIVEN ITS FINAL APPROVAL AND RELEASE FROM CERTIFICATION VERSION OF THE SOFTWARE TITLE AND BOTH PARTIES HAVE APPROVED THE FPU IN WRITING. 4.7           TITLE UPDATES 4.7.1        ALL TITLE UPDATES FOR SOFTWARE TITLES ARE SUBJECT TO APPROVAL BY MICROSOFT.  PUBLISHER MAY RELEASE ONE TITLE UPDATE PER SOFTWARE TITLE FREE OF CHARGE.  ANY ADDITIONAL TITLE UPDATES PROPOSED BY PUBLISHER MAY BE SUBJECT TO A REASONABLE CHARGE. 4.7.2        MICROSOFT MAY REQUIRE PUBLISHER TO DEVELOP AND PROVIDE A TITLE UPDATE IF (A) A SOFTWARE TITLE OR ONLINE CONTENT ADVERSELY AFFECTS XBOX LIVE, (B) IF A CHANGE TO THE XBOX 360 PUBLISHER GUIDE REQUIRES A TITLE UPDATE, (C) IF CERTIFICATION IS REVOKED FOR ONLINE CONTENT, OR (D) FOR ANY OTHER REASON AT MICROSOFT’S REASONABLE DISCRETION.  MICROSOFT WILL NOT CHARGE PUBLISHER FOR THE CERTIFICATION, HOSTING, AND DISTRIBUTION OF TITLE UPDATES TO XBOX LIVE USERS FOR THE FIRST TITLE UPDATE (IF ANY) PER SOFTWARE TITLE OR ONLINE CONTENT REQUIRED BY A SPECIFIC CHANGE IN THE XBOX 360 PUBLISHER GUIDE OR FOR ANY OTHER REASON AT MICROSOFT’S REASONABLE DISCRETION.  MICROSOFT RESERVES THE RIGHT TO CHARGE PUBLISHER A REASONABLE FEE TO OFFSET THE COSTS ASSOCIATED WITH THE CERTIFICATION, HOSTING, AND DISTRIBUTION OF TITLE UPDATES TO XBOX LIVE USERS THAT ARE REQUIRED BECAUSE OF REVOCATION OF CERTIFICATION OR A SOFTWARE TITLE OR ONLINE CONTENT ADVERSELY AFFECTING XBOX LIVE.   * Confidential portion omitted and filed separately with the Securities and Exchange Commission. 5 -------------------------------------------------------------------------------- 5.             XBOX 360 PUBLISHER GUIDE Publisher acknowledges that the Xbox 360 Publisher Guide is an evolving document and subject to change during the term of this Agreement.  Publisher agrees to be bound by all provisions contained in the then-applicable version of the Xbox 360 Publisher Guide. Publisher agrees that upon Publisher’s receipt of notice of availability of the applicable supplement, revision, or updated version of the Xbox 360 Publisher Guide (which may be via a publisher newsletter or other electronic notification), Publisher shall be bound by all provisions of the Xbox 360 Publisher Guide as supplemented, revised, or updated.  Publisher’s continued distribution of FPUs after a notice of supplement, revision or update that is included in the Xbox 360 Publisher Guide or made available to Publisher constitutes Publisher’s agreement to the then-current Xbox 360 Publisher Guide as supplemented, revised or updated.  Microsoft will specify in each such supplement, revision or update a reasonable effective date of each change if such change is not required to be effective immediately.  Only with respect to a Software Title that has passed Pre-Certification prior to the applicable revision or update, Publisher will not be obligated to comply with any changes made to the technical or content requirements for Software Titles in the Xbox 360 Publisher Guide, except in circumstances where such change is deemed by Microsoft to be vitally important to the success of the Xbox 360 platform (e.g. changes due to piracy, technical failure) or will not add significant expense to the Software Title’s development.  In addition, changes made in Branding Specifications or other Marketing Materials requirements will be effective as to a Software Title that has passed Certification only on a “going forward” basis (i.e., only to such Marketing Materials and/or FPUs as are manufactured after Microsoft notifies Publisher of the change).  Notwithstanding the foregoing, Publisher shall comply with such changes to the Xbox 360 Publisher Guide related to Branding Specifications or other Marketing Materials requirements retroactively if Microsoft agrees to pay for Publisher’s direct, out-of-pocket expenses necessarily incurred as a result of its retrospective compliance with the change. 6.             POST-RELEASE COMPLIANCE 6.1           CORRECTION OF BUGS OR ERRORS.   NOTWITHSTANDING MICROSOFT’S CERTIFICATION, ALL SOFTWARE TITLES MUST REMAIN IN COMPLIANCE WITH ALL CERTIFICATION REQUIREMENTS AND REQUIREMENTS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE ON A CONTINUING AND ONGOING BASIS.  PUBLISHER MUST MAKE COMMERCIALLY REASONABLE EFFORTS TO CORRECT ANY MATERIAL PROGRAM BUGS OR ERRORS IN CONFORMANCE WITH THE XBOX 360 PUBLISHER GUIDE WHENEVER DISCOVERED AND PUBLISHER AGREES TO CORRECT SUCH MATERIAL BUGS AND ERRORS AS SOON AS POSSIBLE AFTER DISCOVERY.  WITH RESPECT TO BUGS OR ERRORS DISCOVERED AFTER COMMERCIAL RELEASE OF THE APPLICABLE SOFTWARE TITLE, PUBLISHER WILL, AT MICROSOFT’S WRITTEN REQUEST OR ALLOWANCE, CORRECT THE BUG OR ERROR IN ALL FPUS MANUFACTURED AFTER DISCOVERY AND MICROSOFT MAY CHARGE A REASONABLE AMOUNT TO COVER THE COSTS OF CERTIFYING THE SOFTWARE TITLE AGAIN. 6.2           ONLINE CONTENT; MINIMUM COMMITMENT 6.2.1        PUBLISHER AGREES THAT EACH ONLINE GAME FEATURE OF A SOFTWARE TITLE WILL BE MADE AVAILABLE VIA XBOX LIVE FOR AT LEAST **** FOLLOWING THE RESPECTIVE COMMERCIAL RELEASE OF THE FPUS OF THE SOFTWARE TITLE IN EACH SALES TERRITORY IN WHICH XBOX LIVE IS AVAILABLE (THE “MINIMUM COMMITMENT”).  PUBLISHER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO PROVIDE ALL NECESSARY SUPPORT FOR SUCH ONLINE GAME FEATURE DURING ITS AVAILABILITY AND FOR **** AFTER DISCONTINUATION IN ACCORDANCE WITH PUBLISHER’S STANDARD SUPPORT SERVICES.  FOLLOWING THE MINIMUM COMMITMENT PERIOD, PUBLISHER MAY TERMINATE MICROSOFT’S LICENSE ASSOCIATED WITH SUCH ONLINE GAME FEATURE UPON **** PRIOR WRITTEN NOTICE TO MICROSOFT; AND/OR MICROSOFT MAY DISCONTINUE THE AVAILABILITY OF ANY OR ALL SUCH ONLINE GAME FEATURE VIA XBOX LIVE UPON **** PRIOR WRITTEN NOTICE TO PUBLISHER.  PUBLISHER IS RESPONSIBLE FOR COMMUNICATING THE DURATION OF ONLINE GAME FEATURE AVAILABILITY TO XBOX LIVE USERS, AND FOR PROVIDING REASONABLE ADVANCE NOTICE TO XBOX LIVE USERS OF ANY DISCONTINUATION OF SUCH ONLINE GAME FEATURE. 6.2.2        SUBJECT TO SECTION 10.3, PUBLISHER AGREES THAT MICROSOFT HAS THE RIGHT TO MAKE ONLINE CONTENT OTHER THAN ONLINE GAMES FEATURES SUBMITTED BY PUBLISHER AVAILABLE TO XBOX LIVE USERS FOR THE TERM OF THIS AGREEMENT.  PUBLISHER AGREES TO PROVIDE ALL NECESSARY SUPPORT FOR SUCH ONLINE CONTENT AS LONG AS SUCH ONLINE CONTENT IS MADE AVAILABLE TO XBOX LIVE USERS AND FOR **** THEREAFTER IN ACCORDANCE WITH PUBLISHER’S STANDARD SUPPORT SERVICES. 6.2.3        ARCHIVE COPIES.  PUBLISHER AGREES TO MAINTAIN, AND TO POSSESS THE ABILITY TO SUPPORT, COPIES IN OBJECT CODE, SOURCE CODE AND SYMBOL FORMAT, OF ALL ONLINE CONTENT AVAILABLE TO XBOX LIVE USERS DURING THE TERM OF THIS AGREEMENT AND FOR NO LESS THAN **** THEREAFTER.     * Confidential portion omitted and filed separately with the Securities and Exchange Commission. 6 -------------------------------------------------------------------------------- 7.             MANUFACTURING 7.1           AUTHORIZED REPLICATORS.  PUBLISHER WILL USE ONLY AN AUTHORIZED REPLICATOR TO PRODUCE FPUS.  PRIOR TO PLACING AN ORDER WITH A REPLICATOR FOR FPUS, PUBLISHER SHALL CONFIRM WITH MICROSOFT THAT SUCH ENTITY IS AN AUTHORIZED REPLICATOR.  MICROSOFT WILL ENDEAVOR TO KEEP AN UP-TO-DATE LIST OF AUTHORIZED REPLICATORS IN THE XBOX 360 PUBLISHER GUIDE.  PUBLISHER WILL NOTIFY MICROSOFT IN WRITING OF THE IDENTITY OF THE APPLICABLE AUTHORIZED REPLICATOR AND THE AGREEMENT FOR SUCH REPLICATION SERVICES SHALL BE AS NEGOTIATED BY PUBLISHER AND THE APPLICABLE AUTHORIZED REPLICATOR, SUBJECT TO THE REQUIREMENTS IN THIS AGREEMENT.  PUBLISHER ACKNOWLEDGES THAT MICROSOFT MAY CHARGE THE AUTHORIZED REPLICATOR FEES FOR RIGHTS, SERVICES OR PRODUCTS ASSOCIATED WITH THE MANUFACTURE OF FPUS AND THAT THE AGREEMENT WITH THE AUTHORIZED REPLICATOR GRANTS MICROSOFT THE RIGHT TO INSTRUCT THE AUTHORIZED REPLICATOR TO CEASE THE MANUFACTURE OR FPU AND/OR PROHIBIT THE RELEASE OF FPU TO PUBLISHER OR ITS AGENTS IN THE EVENT PUBLISHER IS IN BREACH OF THIS AGREEMENT OR ANY CREDIT ARRANGEMENT ENTERED INTO BY MICROSOFT AND PUBLISHER OR PUBLISHER.  MICROSOFT DOES NOT GUARANTEE ANY LEVEL OF PERFORMANCE BY THE AUTHORIZED REPLICATORS, AND MICROSOFT WILL HAVE NO LIABILITY TO PUBLISHER FOR ANY AUTHORIZED REPLICATOR’S FAILURE TO PERFORM ITS OBLIGATIONS UNDER ANY APPLICABLE AGREEMENT BETWEEN MICROSOFT AND SUCH AUTHORIZED REPLICATOR AND/OR BETWEEN PUBLISHER AND SUCH AUTHORIZED REPLICATOR.  MICROSOFT HAS NO RESPONSIBILITY FOR ENSURING THAT FPUS ARE FREE OF ALL DEFECTS. 7.2           SUBMISSIONS TO THE AUTHORIZED REPLICATOR.  MICROSOFT, AND NOT PUBLISHER, WILL PROVIDE TO THE APPLICABLE AUTHORIZED REPLICATOR THE FINAL RELEASE VERSION OF THE SOFTWARE TITLE AND ALL SPECIFICATIONS REQUIRED BY MICROSOFT FOR THE MANUFACTURE OF THE FPUS INCLUDING, WITHOUT LIMITATION, THE SECURITY TECHNOLOGY (AS DEFINED IN SECTION 7.9 BELOW).  PUBLISHER IS RESPONSIBLE FOR PREPARING AND DELIVERING TO THE AUTHORIZED REPLICATOR ALL OTHER ITEMS REQUIRED FOR MANUFACTURING FPUS INCLUDING APPROVED PACKAGING MATERIALS ASSOCIATED WITH THE FPUS.  SUBJECT TO THE APPROVAL OF PUBLISHER (WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD), MICROSOFT HAS THE RIGHT TO HAVE INCLUDED IN THE PACKAGING OF FPUS SUCH PROMOTIONAL MATERIALS FOR XBOX, XBOX 360, XBOX LIVE, AND/OR OTHER XBOX OR XBOX 360 PRODUCTS OR SERVICES AS MICROSOFT MAY DETERMINE IN ITS REASONABLE DISCRETION.  MICROSOFT WILL BE RESPONSIBLE FOR DELIVERING TO THE AUTHORIZED REPLICATOR ALL SUCH PROMOTIONAL MATERIALS AS IT DESIRES TO INCLUDE WITH FPUS, AND, UNLESS OTHERWISE AGREED BY THE PARTIES, ANY INCREMENTAL INSERTION COSTS RELATING TO SUCH MARKETING MATERIALS WILL BE BORNE BY MICROSOFT. 7.3           VERIFICATION VERSIONS.  PUBLISHER SHALL CAUSE THE AUTHORIZED REPLICATOR TO CREATE SEVERAL TEST VERSIONS OF EACH FPU (“VERIFICATION VERSION(S)”) THAT WILL BE PROVIDED TO BOTH MICROSOFT AND PUBLISHER FOR EVALUATION.  PRIOR TO FULL MANUFACTURE OF A FPU BY THE AUTHORIZED REPLICATOR, BOTH PUBLISHER AND MICROSOFT MUST APPROVE THE APPLICABLE VERIFICATION VERSION.  THROUGHOUT THE MANUFACTURING PROCESS AND UPON THE REASONABLE WRITTEN REQUEST OF MICROSOFT, PUBLISHER SHALL CAUSE THE AUTHORIZED REPLICATOR TO PROVIDE ADDITIONAL VERIFICATION VERSIONS OF THE FPU FOR EVALUATION BY MICROSOFT.  MICROSOFT’S APPROVAL IS A CONDITION PRECEDENT TO MANUFACTURE, HOWEVER PUBLISHER SHALL GRANT THE FINAL APPROVAL AND SHALL WORK DIRECTLY WITH THE AUTHORIZED REPLICATOR REGARDING THE PRODUCTION RUN.  PUBLISHER AGREES THAT ALL FPUS MUST BE REPLICATED IN CONFORMITY WITH ALL OF THE QUALITY STANDARDS AND MANUFACTURING SPECIFICATIONS, POLICIES AND PROCEDURES THAT MICROSOFT REQUIRES OF ITS AUTHORIZED REPLICATORS, AND THAT ALL PACKAGING MATERIALS MUST BE APPROVED BY MICROSOFT PRIOR TO PACKAGING.  PUBLISHER SHALL CAUSE THE AUTHORIZED REPLICATOR TO INCLUDE THE BTS ON EACH FPU. 7.4           SAMPLES.  FOR EACH SOFTWARE TITLE SKU, AT PUBLISHER’S COST, PUBLISHER SHALL PROVIDE MICROSOFT WITH **** FPUS AND ACCOMPANYING MARKETING MATERIALS PER SALES TERRITORY IN WHICH THE FPU WILL BE RELEASED.  SUCH UNITS MAY BE USED IN MARKETING, AS PRODUCT SAMPLES, FOR CUSTOMER SUPPORT, TESTING AND FOR ARCHIVAL PURPOSES ONLY AND NOT FOR RESALE.  PUBLISHER WILL NOT HAVE TO PAY A ROYALTY FEE FOR SUCH SAMPLES NOR WILL SUCH SAMPLES COUNT TOWARDS THE UNIT DISCOUNTS UNDER EXHIBIT 1. 7.5          MINIMUM ORDER QUANTITIES 7.5.1        WITHIN **** AFTER THE DATE ON WHICH BOTH MICROSOFT AND PUBLISHER HAVE AUTHORIZED THE AUTHORIZED REPLICATOR TO BEGIN REPLICATION OF FPUS FOR DISTRIBUTION TO A SPECIFIED SALES TERRITORY, (RECEIPT OF BOTH APPROVALS IS REFERRED TO AS “RELEASE TO MANUFACTURE”), PUBLISHER MUST PLACE ORDERS TO MANUFACTURE THE MINIMUM ORDER QUANTITIES (“MOQS”) AS DESCRIBED IN THE XBOX 360 PUBLISHER GUIDE.  MICROSOFT MAY UPDATE AND REVISE THE MOQS **** WHICH WILL BE EFFECTIVE STARTING THE FOLLOWING ****.  CURRENTLY, THE MOQS ARE AS FOLLOWS:     ****   **** ****   ****   **** ****   ****   **** ****   ****   **** ****   ****   ****   * Confidential portion omitted and filed separately with the Securities and Exchange Commission. 7 -------------------------------------------------------------------------------- 7.5.2        FOR THE PURPOSES OF THIS SECTION, A “DISC” SHALL MEAN AN FPU THAT IS SIGNED FOR USE ON A CERTAIN DEFINED RANGE OF XBOX 360 HARDWARE, REGARDLESS OF THE NUMBER OF LANGUAGES OR PRODUCT SKUS CONTAINED THEREON.  THE MOQS PER SOFTWARE TITLE ARE CUMULATIVE PER SALES TERRITORY.  FOR EXAMPLE, IF AN FPU IS RELEASED IN BOTH THE NORTH AMERICAN SALES TERRITORY AND THE EUROPEAN SALES TERRITORY, THE CUMULATIVE MOQ PER SOFTWARE TITLE WOULD BE ****.  THE MOQ PER SOFTWARE TITLE AND THE MOQ PER DISC, HOWEVER, ARE NOT CUMULATIVE.  FOR EXAMPLE, A SINGLE DISC FPU RELEASED ONLY IN THE NORTH AMERICA SALES TERRITORY WILL HAVE A TOTAL MINIMUM ORDER QUANTITY OF ****, WHICH WOULD COVER THE **** MOQ PER SOFTWARE TITLE AND THE **** MOQ PER DISC (RATHER THAN **** WHICH WOULD HAVE BEEN THE TOTAL MINIMUM ORDER QUANTITY IF THE MOQ PER SOFTWARE TITLE AND THE MOQ PER DISC HAD BEEN CUMULATIVE). 7.5.3        IF PUBLISHER FAILS TO PLACE ORDERS TO MEET ANY APPLICABLE MINIMUM ORDER QUANTITY WITHIN **** OF RELEASE TO MANUFACTURE, PUBLISHER SHALL IMMEDIATELY PAY MICROSOFT THE APPLICABLE ROYALTY FEE FOR THE NUMBER OF FPUS REPRESENTED BY THE DIFFERENCE BETWEEN THE APPLICABLE MOQ AND THE NUMBER OF FPUS OF THE SOFTWARE TITLE ACTUALLY ORDERED BY PUBLISHER. 7.6           MANUFACTURING REPORTS.   FOR PURPOSES OF ASSISTING IN THE SCHEDULING OF MANUFACTURING RESOURCES, ON A **** BASIS, OR AS OTHERWISE REQUESTED BY MICROSOFT IN WRITING IN ITS REASONABLE DISCRETION,  PUBLISHER SHALL PROVIDE MICROSOFT WITH FORECASTS SHOWING MANUFACTURING PROJECTIONS BY SALES TERRITORY **** OUT FOR EACH SOFTWARE TITLE.  SUCH FORECASTS SHALL NOT BE BINDING.  PUBLISHER WILL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE AUTHORIZED REPLICATOR TO DELIVER TO MICROSOFT TRUE AND ACCURATE **** STATEMENTS OF FPUS MANUFACTURED IN EACH ****, ON A SOFTWARE TITLE-BY-SOFTWARE TITLE BASIS AND IN SUFFICIENT DETAIL TO SATISFY MICROSOFT, WITHIN ****.  MICROSOFT WILL HAVE REASONABLE AUDIT RIGHTS TO EXAMINE THE RECORDS OF THE AUTHORIZED REPLICATOR REGARDING THE NUMBER OF FPUS MANUFACTURED UPON TEN (10) DAYS ADVANCE WRITTEN NOTICE TO PUBLISHER; PROVIDED, THAT ANY REPRESENTATIVE(S) OF MICROSOFT CONDUCTING SUCH EXAMINATION SHALL BE REQUIRED TO PRESERVE SUCH RECORDS AS STRICTLY CONFIDENTIAL AND MAY BE REQUIRED TO EXECUTE A NONDISCLOSURE AGREEMENT IN A FORM REASONABLY SUITABLE TO PUBLISHER AND MICROSOFT. 7.7           NEW AUTHORIZED REPLICATOR.  IF PUBLISHER REQUESTS THAT MICROSOFT CERTIFY AND APPROVE A THIRD PARTY REPLICATOR THAT IS NOT THEN AN AUTHORIZED REPLICATOR, MICROSOFT WILL CONSIDER SUCH REQUEST IN GOOD FAITH.  PUBLISHER ACKNOWLEDGES AND AGREES THAT MICROSOFT MAY CONDITION CERTIFICATION AND APPROVAL OF SUCH THIRD PARTY ON THE EXECUTION OF AN AGREEMENT IN A FORM SATISFACTORY TO MICROSOFT PURSUANT TO WHICH SUCH THIRD PARTY AGREES TO STRICT QUALITY STANDARDS, NON-DISCLOSURE REQUIREMENTS, LICENSE FEES FOR USE OF MICROSOFT INTELLECTUAL PROPERTY AND TRADE SECRETS, AND PROCEDURES TO PROTECT MICROSOFT’S INTELLECTUAL PROPERTY AND TRADE SECRETS.  NOTWITHSTANDING ANYTHING CONTAINED HEREIN, PUBLISHER ACKNOWLEDGES THAT MICROSOFT IS NOT REQUIRED TO CERTIFY, MAINTAIN THE CERTIFICATION OR APPROVE ANY PARTICULAR THIRD PARTY AS AN AUTHORIZED REPLICATOR, AND THAT THE CERTIFICATION AND APPROVAL PROCESS MAY BE TIME-CONSUMING. 7.8           ALTERNATE MANUFACTURING IN EUROPE.  PUBLISHER MAY, SOLELY WITH RESPECT TO FPUS MANUFACTURED FOR DISTRIBUTION IN THE EUROPEAN SALES TERRITORY, UTILIZE A DIFFERENT PROCESS OR COMPANY FOR THE COMBINATION OF A FPU WITH PACKAGING MATERIALS PROVIDED THAT SUCH PACKAGING PROCESS INCORPORATES THE BTS AND OTHERWISE COMPLIES WITH THE XBOX 360 PUBLISHER GUIDE.   PUBLISHER SHALL NOTIFY MICROSOFT REGARDING ITS USE OF SUCH PROCESS OR COMPANY SO THAT THE PARTIES MAY PROPERLY COORDINATE THEIR ACTIVITIES AND APPROVALS.  TO THE EXTENT THAT MICROSOFT IS UNABLE TO ACCOMMODATE SUCH PROCESSES OR COMPANY, PUBLISHER SHALL MODIFY ITS OPERATIONS TO COMPLY WITH MICROSOFT’S REQUIREMENTS. 7.9           SECURITY.  MICROSOFT HAS THE RIGHT TO ADD TO THE FINAL RELEASE VERSION OF THE SOFTWARE TITLE DELIVERED BY PUBLISHER TO MICROSOFT, AND TO ALL FPUS, SUCH DIGITAL SIGNATURE TECHNOLOGY AND OTHER SECURITY TECHNOLOGY AND COPYRIGHT MANAGEMENT INFORMATION (COLLECTIVELY, “SECURITY TECHNOLOGY”) AS MICROSOFT MAY DETERMINE TO BE NECESSARY, AND/OR MICROSOFT MAY MODIFY THE SIGNATURE INCLUDED IN ANY SECURITY TECHNOLOGY INCLUDED IN THE SOFTWARE TITLE BY PUBLISHER AT MICROSOFT’S DISCRETION.  ADDITIONALLY, MICROSOFT MAY ADD SECURITY TECHNOLOGY THAT PROHIBITS THE PLAY OF SOFTWARE TITLES ON XBOX 360 UNITS MANUFACTURED IN A REGION OR COUNTRY DIFFERENT FROM THE LOCATION OF MANUFACTURE OF THE RESPECTIVE FPUS OR THAT HAVE BEEN MODIFIED IN ANY MANNER NOT AUTHORIZED BY MICROSOFT. 7.10         DEMO VERSIONS.  IF PUBLISHER WISHES TO DISTRIBUTE A DEMO VERSION IN FPU FORMAT, PUBLISHER MUST OBTAIN MICROSOFT’S PRIOR WRITTEN APPROVAL AND MICROSOFT MAY CHARGE A REASONABLE FEE TO OFFSET COSTS OF THE CERTIFICATION.  SUBJECT TO THE TERMS OF THE XBOX 360 PUBLISHER GUIDE, SUCH DEMO VERSION(S) MAY BE PLACED ON A SINGLE DISC, EITHER AS A STAND-ALONE OR WITH OTHER DEMO VERSIONS AND THE PRICE OF SUCH UNITS MUST BE **** OR ITS EQUIVALENT IN LOCAL CURRENCY.  UNLESS SEPARATELY ADDRESSED IN THE XBOX 360 PUBLISHER GUIDE, ALL RIGHTS, OBLIGATIONS AND APPROVALS SET FORTH IN THIS AGREEMENT AS APPLYING TO SOFTWARE TITLES SHALL SEPARATELY APPLY TO ANY DEMO VERSION.  ****.  IF PUBLISHERS WISHES TO DISTRIBUTE A DEMO VERSIONS IN AN   * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   8 --------------------------------------------------------------------------------   ONLINE DOWNLOADABLE FORMAT, SUCH DOWNLOADABLE DEMO VERSION SHALL BE DISTRIBUTED VIA BY MICROSOFT XBOX LIVE IN ACCORDANCE WITH SECTION 10.3, AND SUCH DOWNLOADABLE DEMO VERSION WILL BE SUBJECT TO ALL OTHER TERMS AND POLICIES APPLICABLE TO ONLINE CONTENT SET FORTH HEREIN AND IN THE XBOX 360 PUBLISHER GUIDE. 8.             PAYMENTS The Parties shall make payments to each other under the terms of Exhibit 1. Microsoft hereby acknowledges and agrees that Publisher makes no representation or warranty regarding the amount of sales of the Software Title(s) and/or Online Content or the amount of royalties to be received in connection therewith. 9.             MARKETING, SALES AND SUPPORT 9.1           PUBLISHER RESPONSIBLE.  AS BETWEEN MICROSOFT AND PUBLISHER, PUBLISHER IS SOLELY RESPONSIBLE FOR THE MARKETING AND SALES OF THE SOFTWARE TITLE.  PUBLISHER IS ALSO SOLELY RESPONSIBLE FOR PROVIDING TECHNICAL AND ALL OTHER SUPPORT RELATING TO THE FPUS (INCLUDING FOR XBOX LIVE USERS OF ONLINE CONTENT).  PUBLISHER SHALL PROVIDE ALL APPROPRIATE CONTACT INFORMATION (INCLUDING WITHOUT LIMITATION PUBLISHER’S ADDRESS AND TELEPHONE NUMBER, AND THE APPLICABLE INDIVIDUAL/GROUP RESPONSIBLE FOR CUSTOMER SUPPORT), AND SHALL ALSO PROVIDE ALL SUCH INFORMATION TO MICROSOFT FOR POSTING ON HTTP://WWW.XBOX.COM, OR SUCH SUCCESSOR OR RELATED WEB SITE IDENTIFIED BY MICROSOFT OR IN XBOX LIVE.  CUSTOMER SUPPORT SHALL AT ALL TIMES CONFORM TO THE CUSTOMER SERVICE REQUIREMENTS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE AND INDUSTRY STANDARDS IN THE CONSOLE GAME INDUSTRY. 9.2           WARRANTY.  PUBLISHER SHALL PROVIDE THE ORIGINAL END USER OF ANY FPU A MINIMUM WARRANTY IN ACCORDANCE WITH LOCAL LAWS AND INDUSTRY PRACTICES.  FOR EXAMPLE, IN THE UNITED STATES, PUBLISHER SHALL, AS OF THE EFFECTIVE DATE, PROVIDE A MINIMUM **** LIMITED WARRANTY THAT THE FPU WILL NOT BE DEFECTIVE OR PUBLISHER WILL REFUND THE PURCHASE PRICE OR PROVIDE A REPLACEMENT FPU AT NO CHARGE.  PUBLISHER MAY OFFER ADDITIONAL WARRANTY COVERAGE CONSISTENT WITH THE TRADITIONS AND PRACTICES OF VIDEO GAME CONSOLE GAME PUBLISHERS WITHIN THE APPLICABLE SALES TERRITORY OR AS OTHERWISE REQUIRED BY LOCAL LAW. 9.3           RECALL.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IF THERE IS A MATERIAL DEFECT IN A SOFTWARE TITLE AND/OR ANY FPUS, WHICH DEFECT IN THE REASONABLE JUDGMENT OF MICROSOFT WOULD SIGNIFICANTLY IMPAIR THE ABILITY OF AN END USER TO PLAY SUCH SOFTWARE TITLE OR FPU OR WOULD ADVERSELY AFFECT THE GAMEPLAY OF THE XBOX 360 OR XBOX LIVE, MICROSOFT SHALL PROVIDE PUBLISHER WITH WRITTEN NOTICE THEREOF AND THE PARTIES SHALL WORK IN GOOD FAITH TO RESOLVE ANY ISSUES WITHOUT RESORTING TO A RECALL. HOWEVER, IF SUCH ISSUES CANNOT BE RESOLVED BY THE PARTIES, ACTING IN GOOD FAITH, WITHIN A COMMERCIALLY REASONABLE TIME PERIOD UNDER THE CIRCUMSTANCES, MICROSOFT MAY REQUIRE PUBLISHER TO RECALL FPUS AND UNDERTAKE PROMPT REPAIR OR REPLACEMENT OF SUCH SOFTWARE TITLE AND/OR FPUS. 9.4           NO BUNDLING WITH UNAPPROVED PERIPHERALS, PRODUCTS OR SOFTWARE.  EXCEPT AS EXPRESSLY STATED IN THIS SECTION, PUBLISHER SHALL NOT MARKET OR DISTRIBUTE A FPU BUNDLED WITH ANY OTHER PRODUCT OR SERVICE, NOR SHALL PUBLISHER KNOWINGLY PERMIT OR ASSIST ANY THIRD PARTY IN SUCH BUNDLING, WITHOUT MICROSOFT’S PRIOR WRITTEN CONSENT.  PUBLISHER MAY MARKET OR DISTRIBUTE (I) FPU BUNDLED WITH A SOFTWARE TITLE(S) THAT HAS BEEN PREVIOUSLY CERTIFIED AND RELEASED BY MICROSOFT FOR MANUFACTURING; OR (II) FPU BUNDLED WITH A PERIPHERAL PRODUCT (E.G. GAME PADS) THAT HAS BEEN PREVIOUSLY LICENSED AS AN “XBOX 360 LICENSED PERIPHERAL” BY MICROSOFT, WITHOUT OBTAINING THE WRITTEN PERMISSION OF MICROSOFT.  PUBLISHER SHALL CONTACT MICROSOFT IN ADVANCE TO CONFIRM THAT THE PERIPHERAL OR SOFTWARE TITLE TO BE BUNDLED HAS PREVIOUSLY BEEN APPROVED BY MICROSOFT PURSUANT TO A VALID LICENSE, SUCH CONFIRMATION NOT TO BE UNREASONABLY WITHHELD OR DELAYED BY MICROSOFT. 9.5           SOFTWARE TITLE LICENSE.  PUBLISHER GRANTS MICROSOFT A FULLY-PAID, ROYALTY-FREE, WORLDWIDE, NON-EXCLUSIVE LICENSE (I) TO PUBLICLY PERFORM THE SOFTWARE TITLES AT CONVENTIONS, EVENTS, TRADE SHOWS, PRESS BRIEFINGS, PUBLIC INTERACTIVE DISPLAYS AND THE LIKE; (II) TO USE THE TITLE OF THE SOFTWARE TITLE, AND SCREEN SHOTS FROM THE SOFTWARE TITLE, IN ADVERTISING AND PROMOTIONAL MATERIAL RELATING TO XBOX 360 AND RELATED MICROSOFT PRODUCTS AND SERVICES, AS MICROSOFT MAY REASONABLY DEEM APPROPRIATE, SUBJECT TO PUBLISHER’S PRIOR WRITTEN APPROVAL; (III) DISTRIBUTE DEMO VERSIONS WITH THE OFFICIAL XBOX MAGAZINE, AS A STANDALONE PRODUCT WITH OTHER DEMO SOFTWARE, SUBJECT TO PUBLISHER’S PRIOR WRITTEN APPROVAL; AND (IV) DISTRIBUTE SOFTWARE TITLE TRAILERS VIA XBOX.COM, SUBJECT TO PUBLISHER’S PRIOR WRITTEN APPROVAL.    PUBLISHER MAY ALSO SELECT ONLINE CONTENT FOR INCLUSION IN PUBLIC INTERACTIVE DISPLAYS AND/OR COMPILATION DEMO DISCS PUBLISHED BY MICROSOFT, IN WHICH CASE PUBLISHER GRANTS MICROSOFT A FULLY-PAID, ROYALTY-FREE, WORLDWIDE, TRANSFERABLE AND SUBLICENSEABLE ONLY TO MICROSOFT AFFILIATES, NON-EXCLUSIVE LICENSE TO BROADCAST, TRANSMIT, DISTRIBUTE, HOST, PUBLICLY DISPLAY, REPRODUCE AND  MANUFACTURE SUCH SELECTED ONLINE CONTENT AS PART OF PUBLIC INTERACTIVE DISPLAYS AND COMPILATION DEMO DISCS, AND TO DISTRIBUTE AND PERMIT END USERS TO DOWNLOAD AND STORE (AND, AT PUBLISHER’S DISCRETION, TO MAKE FURTHER COPIES) SUCH ONLINE CONTENT VIA PUBLIC INTERACTIVE DISPLAYS, SUBJECT TO   * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   9 -------------------------------------------------------------------------------- PUBLISHER’S PRIOR WRITTEN APPROVAL.  THE RIGHTS GRANTED IN THE PRECEDING SENTENCE ARE IN ADDITION TO ANY RIGHTS THAT MICROSOFT MAY HAVE FOR USES OF PUBLISHER SOFTWARE TITLES UNDER THE APPLICABLE LAW, SUCH AS USES THAT ARE “REFERENTIAL,” “FAIR USE” OR “REASONABLE USE.” 10.          GRANT OF DISTRIBUTION LICENSE, LIMITATIONS 10.1         DISTRIBUTION LICENSE.   UPON CERTIFICATION OF THE SOFTWARE TITLE, APPROVAL OF THE MARKETING MATERIALS AND THE FPU TEST VERSION OF THE SOFTWARE TITLE BY MICROSOFT, AND SUBJECT TO THE TERMS AND CONDITIONS CONTAINED WITHIN THIS AGREEMENT, MICROSOFT GRANTS PUBLISHER (AND PUBLISHER’S AUTHORIZED AFFILIATES, AS SET FORTH IN SECTION 10.8) A NON-EXCLUSIVE, NON-TRANSFERABLE (EXCEPT TO PUBLISHER’S AUTHORIZED AFFILIATES), LICENSE TO DISTRIBUTE FPUS CONTAINING  REDISTRIBUTABLE AND SAMPLE CODE (AS DEFINED IN THE XDK LICENSE) AND SECURITY TECHNOLOGY (AS DEFINED ABOVE) WITHIN THE SALES TERRITORIES APPROVED IN THE SOFTWARE TITLE’S CONCEPT IN FPU FORM TO THIRD PARTIES FOR DISTRIBUTION TO END USERS AND/OR DIRECTLY TO END USERS.  THE LICENSE TO DISTRIBUTE THE FPUS IS PERSONAL TO PUBLISHER AND EXCEPT FOR TRANSFERS OF FPU THROUGH NORMAL CHANNELS OF DISTRIBUTION (E.G. WHOLESALERS, RETAILERS), ABSENT THE WRITTEN APPROVAL OF MICROSOFT (NOT TO BE UNREASONABLY WITHHELD OR DELAYED), PUBLISHER MAY NOT SUBLICENSE OR ASSIGN ITS RIGHTS UNDER THIS LICENSE TO OTHER PARTIES.  FOR THE AVOIDANCE OF DOUBT, WITHOUT THE WRITTEN APPROVAL OF MICROSOFT, PUBLISHER MAY NOT SUBLICENSE, TRANSFER OR ASSIGN ITS RIGHT TO DISTRIBUTE SOFTWARE TITLES OR FPU TO ANOTHER ENTITY, EXCEPT FOR PUBLISHER AFFILIATES, THAT WILL BRAND, CO-BRAND OR OTHERWISE ASSUME CONTROL OVER SUCH PRODUCTS AS A “PUBLISHER” AS THAT CONCEPT IS TYPICALLY UNDERSTOOD IN THE CONSOLE GAME INDUSTRY.  PUBLISHER MAY ONLY GRANT END USERS THE RIGHT TO MAKE PERSONAL, NON-COMMERCIAL USE OF SOFTWARE TITLES AND MAY NOT GRANT END USERS ANY OF THE OTHER RIGHTS RESERVED TO A COPYRIGHT HOLDER UNDER US COPYRIGHT LAW, JAPANESE COPYRIGHT LAW, OR ITS INTERNATIONAL EQUIVALENT.  PUBLISHER’S LICENSE RIGHTS DO NOT INCLUDE ANY LICENSE, RIGHT, POWER OR AUTHORITY TO SUBJECT MICROSOFT’S SOFTWARE OR DERIVATIVE WORKS THEREOF OR INTELLECTUAL PROPERTY ASSOCIATED THEREWITH IN WHOLE OR IN PART TO ANY OF THE TERMS OF AN EXCLUDED LICENSE.  “EXCLUDED LICENSE” MEANS ANY LICENSE THAT REQUIRES AS A CONDITION OF USE, MODIFICATION AND/OR DISTRIBUTION OF SOFTWARE SUBJECT TO THE EXCLUDED LICENSE, THAT SUCH SOFTWARE OR OTHER SOFTWARE COMBINED AND/OR DISTRIBUTED WITH SUCH SOFTWARE BE (A) DISCLOSED OR DISTRIBUTED IN SOURCE CODE FORM; (B) LICENSED FOR THE PURPOSE OF MAKING DERIVATIVE WORKS; OR (C) REDISTRIBUTABLE AT NO CHARGE. 10.2         NO DISTRIBUTION OUTSIDE THE SALES TERRITORY.  PUBLISHER SHALL DISTRIBUTE FPUS ONLY IN SALES TERRITORIES FOR WHICH THE SOFTWARE TITLE HAS BEEN APPROVED BY MICROSOFT.  PUBLISHER SHALL NOT DIRECTLY OR INDIRECTLY EXPORT ANY FPUS FROM AN AUTHORIZED SALES TERRITORY TO AN UNAUTHORIZED TERRITORY NOR SHALL PUBLISHER KNOWINGLY PERMIT OR ASSIST ANY THIRD PARTY IN DOING SO, NOR SHALL PUBLISHER DISTRIBUTE FPUS TO ANY PERSON OR ENTITY THAT IT HAS REASON TO BELIEVE MAY RE-DISTRIBUTE OR SELL SUCH FPUS OUTSIDE AUTHORIZED SALES TERRITORIES. 10.3         ONLINE FEATURES.  IN CONSIDERATION OF THE ROYALTY PAYMENTS AS DESCRIBED IN EXHIBIT 1, PUBLISHER GRANTS TO MICROSOFT (I) A WORLDWIDE, TRANSFERABLE AND/OR SUBLICENSABLE ONLY TO MICROSOFT AFFILIATES LICENSE TO BROADCAST, TRANSMIT, DISTRIBUTE, HOST, PUBLICLY DISPLAY, REPRODUCE, AND LICENSE ONLINE CONTENT FOR USE ON XBOX 360S, AND (II) A WORLDWIDE. TRANSFERABLE TO MICROSOFT AFFILIATES LICENSE SOLELY TO DISTRIBUTE TO END USERS AND PERMIT END USERS TO DOWNLOAD AND STORE ONLINE CONTENT (AND, AT PUBLISHER’S DISCRETION, TO MAKE FURTHER COPIES).  PUBLISHER AGREES THAT THE LICENSE GRANTS SET FORTH IN THIS SECTION APPLICABLE TO ONLINE CONTENT ARE EXCLUSIVE, MEANING THAT EXCEPT AS EXPRESSLY PERMITTED UNDER THIS AGREEMENT, THE XBOX 360 PUBLISHER GUIDE AND/OR AS AGREED BY THE PARTIES, PUBLISHER SHALL NOT DIRECTLY OR INDIRECTLY PERMIT OR ENABLE ACCESS TO ONLINE CONTENT BY ANY MEANS, METHODS, PLATFORMS OR SERVICES OTHER THAN THROUGH XBOX LIVE, OR AS OTHERWISE SET FORTH IN THIS AGREEMENT.  NOTWITHSTANDING THE FOREGOING, THIS SECTION 10.3 DOES NOT PREVENT PUBLISHER FROM MAKING OTHER PLATFORM VERSIONS OF ITS SOFTWARE TITLES OR ONLINE CONTENT AVAILABLE VIA OTHER PLATFORM-SPECIFIC ONLINE SERVICES.  THIS SECTION 10.3 SHALL SURVIVE EXPIRATION OR TERMINATION OF THIS AGREEMENT SOLELY TO THE EXTENT AND FOR THE DURATION NECESSARY TO EFFECTUATE SECTION 17.3 BELOW. 10.4         NO REVERSE ENGINEERING.  PUBLISHER MAY UTILIZE AND STUDY THE DESIGN, PERFORMANCE AND OPERATION OF XBOX 360 OR XBOX LIVE SOLELY FOR THE PURPOSES OF DEVELOPING THE SOFTWARE TITLE OR ONLINE CONTENT.  NOTWITHSTANDING THE FOREGOING, PUBLISHER SHALL NOT, DIRECTLY OR INDIRECTLY, REVERSE ENGINEER OR AID OR ASSIST IN THE REVERSE ENGINEERING OF ALL OR ANY PART OF XBOX 360 OR XBOX LIVE EXCEPT AND ONLY TO THE EXTENT THAT SUCH ACTIVITY IS EXPRESSLY PERMITTED BY APPLICABLE LAW OR IN WRITING BY MICROSOFT NOTWITHSTANDING THIS LIMITATION.  IN THE EVENT APPLICABLE LAW GRANTS PUBLISHER THE RIGHT TO REVERSE ENGINEER THE XBOX 360 OR XBOX LIVE NOTWITHSTANDING THIS LIMITATION, PUBLISHER SHALL PROVIDE MICROSOFT WITH WRITTEN NOTICE PRIOR TO SUCH REVERSE ENGINEERING ACTIVITY, INFORMATION REGARDING PUBLISHER’S INTENDED METHOD OF REVERSE ENGINEERING, ITS PURPOSE AND THE LEGAL AUTHORITY FOR SUCH ACTIVITY AND SHALL AFFORD MICROSOFT A REASONABLE PERIOD OF TIME BEFORE INITIATING SUCH ACTIVITY IN ORDER TO EVALUATE THE ACTIVITY AND/OR CHALLENGE THE REVERSE ENGINEERING ACTIVITY WITH THE APPROPRIATE LEGAL AUTHORITIES.  PUBLISHER SHALL REFRAIN FROM SUCH REVERSE ENGINEERING ACTIVITY UNTIL SUCH TIME AS ANY LEGAL CHALLENGE IS RESOLVED IN PUBLISHER’S FAVOR.  REVERSE ENGINEERING INCLUDES, WITHOUT LIMITATION, DECOMPILING, DISASSEMBLY, SNIFFING, PEELING SEMICONDUCTOR COMPONENTS, OR OTHERWISE DERIVING SOURCE CODE.  IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES THAT MICROSOFT MAY HAVE UNDER THE CIRCUMSTANCES, PUBLISHER SHALL BE REQUIRED IN ALL CASES TO PAY ROYALTIES TO MICROSOFT IN ACCORDANCE WITH 10 -------------------------------------------------------------------------------- EXHIBIT 1 WITH RESPECT TO ANY GAMES OR OTHER PRODUCTS THAT ARE DEVELOPED, MARKETED OR DISTRIBUTED BY PUBLISHER, AND DERIVED IN WHOLE OR IN PART FROM THE REVERSE ENGINEERING OF XBOX 360, XBOX LIVE OR ANY MICROSOFT DATA, CODE OR OTHER MATERIAL. 10.5         RESERVATION OF RIGHTS.  MICROSOFT RESERVES ALL RIGHTS NOT EXPLICITLY GRANTED HEREIN. 10.6         OWNERSHIP OF THE SOFTWARE TITLES.  EXCEPT FOR THE INTELLECTUAL PROPERTY SUPPLIED BY MICROSOFT TO PUBLISHER (INCLUDING WITHOUT LIMITATION THE LICENSED TRADEMARKS HEREUNDER AND THE LICENSES IN CERTAIN SOFTWARE AND HARDWARE GRANTED BY AN XDK LICENSE), OWNERSHIP OF WHICH IS RETAINED BY MICROSOFT, INSOFAR AS MICROSOFT IS CONCERNED, PUBLISHER WILL OWN ALL RIGHTS IN AND TO THE SOFTWARE TITLES AND ONLINE CONTENT. 10.7         CONTENT.  NOTHING CONTAINED IN THIS AGREEMENT SHALL BE DEEMED TO PREVENT PUBLISHER FROM DEVELOPING A GAME OR GAMES FOR OTHER VIDEO GAME PLATFORMS, WHERE SUCH GAME OR GAMES HAVE A SIMILAR AUDIOVISUAL DISPLAY, LOOK, FEEL, OR GAME ELEMENTS AS FOUND IN THE SOFTWARE TITLE DEVELOPED BY PUBLISHER UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT PUBLISHER MAY NOT USE ANY OF MICROSOFT’S INTELLECTUAL PROPERTY AND/OR CONFIDENTIAL INFORMATION IN SUCH OTHER GAME OR GAMES WITHOUT THE PRIOR WRITTEN CONSENT OF MICROSOFT. 10.8         SUB-PUBLISHING.  NOTWITHSTANDING SECTION 10.1, PUBLISHER MAY ENTER INTO INDEPENDENT AGREEMENTS WITH OTHER PUBLISHERS TO DISTRIBUTE SOFTWARE TITLES IN MULTIPLE APPROVED SALES TERRITORIES (A “SUB-PUBLISHING RELATIONSHIP”), SO LONG AS: 10.8.1      PUBLISHER PROVIDES WRITTEN NOTICE TO MICROSOFT, AT LEAST **** PRIOR TO AUTHORIZING A SUB-PUBLISHER TO MANUFACTURE ANY SOFTWARE TITLE(S), OF THE SUB-PUBLISHING RELATIONSHIP, ALONG WITH (I) A SUMMARY OF THE SCOPE AND NATURE OF THE SUB-PUBLISHING RELATIONSHIP INCLUDING, WITHOUT LIMITATION, AS BETWEEN PUBLISHER AND SUB-PUBLISHER, (II) WHICH PARTY WILL BE RESPONSIBLE FOR CERTIFICATION OF THE SOFTWARE TITLE(S) AND/OR ANY ONLINE CONTENT, (III) A LIST OF THE SOFTWARE TITLE(S) FOR WHICH SUB-PUBLISHER HAS ACQUIRED PUBLISHING RIGHTS, (IV) THE GEOGRAPHIC TERRITORY(IES) FOR WHICH SUCH RIGHTS WERE GRANTED, AND (V) THE TERM OF PUBLISHER’S AGREEMENT WITH SUB-PUBLISHER; AND 10.8.2      THE SUB-PUBLISHER HAS SIGNED AN XBOX 360 PUBLISHER LICENSE AGREEMENT (“XBOX 360 PLA”) AND BOTH PUBLISHER AND SUB-PUBLISHER ARE AND REMAIN AT ALL TIMES IN GOOD STANDING UNDER EACH OF THEIR RESPECTIVE XBOX 360 PLAS.  PUBLISHER IS RESPONSIBLE FOR MAKING APPLICABLE ROYALTY PAYMENTS FOR THE FPUS FOR WHICH IT PLACES MANUFACTURING ORDERS, AND SUB-PUBLISHER IS RESPONSIBLE FOR MAKING ROYALTY PAYMENTS FOR THE FPUS FOR WHICH IT PLACES MANUFACTURING ORDERS; PROVIDED, THAT PUBLISHER SHALL NOT BE LIABLE FOR ANY FAILURE BY SUB-PUBLISHER TO MAKE ANY SUCH PAYMENT. 10.9         AUTHORIZED AFFILIATES.  IF PUBLISHER AND AN AFFILIATE EXECUTE THE “PUBLISHER AFFILIATE AGREEMENT” PROVIDED IN EXHIBIT 4, THEN PUBLISHER’S AUTHORIZED AFFILIATE MAY EXERCISE THE RIGHTS GRANTED TO PUBLISHER UNDER THIS AGREEMENT.   THE FOREGOING SHALL NOT APPLY TO ANY PUBLISHER AFFILIATE WHICH PAYS OR INTENDS TO PAY ROYALTIES FROM A EUROPEAN BILLING ADDRESS.  ANY SUCH EUROPEAN AFFILIATE SHALL INSTEAD EXECUTE AN XBOX 360 PUBLISHER ENROLLMENT WITH MIOL, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT 3. 11.          USAGE DATA Publisher acknowledges that the operation of the Xbox Live service requires that Microsoft collect and store Xbox Live User usage data, including, without limitation, Xbox Live User statistics, scores, ratings, and rankings (collectively, “Xbox Live User Data”), as well as personally-identifiable Xbox Live User data (e.g., name, email address) (“Personal Data”).  Microsoft reserves the right, in its discretion, to use such Xbox Live User Data for any purpose, including without limitation, posting the Xbox Live User Data on Xbox.com or other Microsoft Web sites.  Microsoft agrees to use commercially reasonable efforts to periodically make certain Xbox Live User Data and Personal Data available to Publisher; provided that Publisher’s use of such data is in accordance with the then-current Xbox Live Privacy Statement and such other reasonable restrictions as Microsoft may require.  Without limiting the foregoing, Publisher agrees that any disclosure of Personal Data to Publisher is only used by Publisher and may not be shared with any other third parties, and any permitted email communications with Xbox Live Users includes instructions for opting out of receiving any further communications from Publisher. 12.          TRADEMARK RIGHTS AND RESTRICTIONS 12.1         LICENSED TRADEMARKS LICENSE.  IN EACH SOFTWARE TITLE, FPU, ONLINE CONTENT AND ON ALL MARKETING MATERIALS, PUBLISHER SHALL INCORPORATE THE LICENSED TRADEMARKS AND INCLUDE CREDIT AND ACKNOWLEDGEMENT TO MICROSOFT AS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE.  MICROSOFT GRANTS TO PUBLISHER A NON-EXCLUSIVE, NON-TRANSFERABLE, PERSONAL LICENSE TO * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   11 -------------------------------------------------------------------------------- USE THE LICENSED TRADEMARKS IN CONNECTION WITH SOFTWARE TITLES, FPUS, ONLINE CONTENT AND MARKETING MATERIALS ACCORDING TO THE XBOX 360 PUBLISHER GUIDE AND OTHER CONDITIONS HEREIN, AND SOLELY IN CONNECTION WITH MARKETING, SALE, MANUFACTURING AND DISTRIBUTION IN THE APPROVED SALES TERRITORIES OR VIA XBOX LIVE. 12.2         LIMITATIONS.  PUBLISHER IS GRANTED NO RIGHT, AND SHALL NOT PURPORT, TO PERMIT ANY THIRD PARTY TO USE THE LICENSED TRADEMARKS IN ANY MANNER WITHOUT MICROSOFT’S PRIOR WRITTEN CONSENT.  PUBLISHER’S LICENSE TO USE LICENSED TRADEMARKS IN CONNECTION WITH THE SOFTWARE TITLE, FPUS AND/OR ONLINE CONTENT DOES NOT EXTEND TO THE MERCHANDISING OR SALE OF RELATED OR PROMOTIONAL PRODUCTS. 12.3         BRANDING SPECIFICATIONS.  PUBLISHER’S USE OF THE LICENSED TRADEMARKS (INCLUDING WITHOUT LIMITATION IN FPUS, ONLINE CONTENT AND MARKETING MATERIALS) MUST COMPLY WITH THE BRANDING SPECIFICATIONS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE.  PUBLISHER SHALL NOT USE LICENSED TRADEMARKS IN ASSOCIATION WITH ANY THIRD PARTY TRADEMARKS IN A MANNER THAT MIGHT SUGGEST CO-BRANDING OR OTHERWISE CREATE POTENTIAL CONFUSION AS TO SOURCE OR SPONSORSHIP OF THE SOFTWARE TITLE, ONLINE CONTENT OR FPUS OR OWNERSHIP OF THE LICENSED TRADEMARKS, UNLESS MICROSOFT HAS OTHERWISE APPROVED SUCH USE IN WRITING.  UPON NOTICE OR OTHER DISCOVERY OF ANY NON-CONFORMANCE WITH THE REQUIREMENTS OR PROHIBITIONS OF THIS SECTION, PUBLISHER SHALL PROMPTLY REMEDY SUCH NON-CONFORMANCE AND NOTIFY MICROSOFT OF THE NON-CONFORMANCE AND REMEDIAL STEPS TAKEN. 12.4         PROTECTION OF LICENSED TRADEMARKS.  PUBLISHER SHALL ASSIST MICROSOFT IN PROTECTING AND MAINTAINING MICROSOFT’S RIGHTS IN THE LICENSED TRADEMARKS, AT MICROSOFT’S SOLE EXPENSE, INCLUDING PREPARATION AND EXECUTION OF DOCUMENTS NECESSARY TO REGISTER THE LICENSED TRADEMARKS OR RECORD THIS AGREEMENT, AND GIVING IMMEDIATE NOTICE TO MICROSOFT OF POTENTIAL INFRINGEMENT OF THE LICENSED TRADEMARKS.  MICROSOFT SHALL HAVE THE SOLE RIGHT TO AND IN ITS SOLE DISCRETION AND EXPENSE MAY, COMMENCE, PROSECUTE OR DEFEND, AND CONTROL ANY ACTION CONCERNING THE LICENSED TRADEMARKS, EITHER IN ITS OWN NAME OR BY JOINING PUBLISHER AS A PARTY THERETO (SUBJECT TO PUBLISHER’S PRIOR WRITTEN CONSENT).  PUBLISHER SHALL NOT DURING THE TERM OF THIS AGREEMENT CONTEST THE VALIDITY OF, BY ACT OR OMISSION JEOPARDIZE, OR TAKE ANY ACTION INCONSISTENT WITH, MICROSOFT’S RIGHTS OR GOODWILL IN THE LICENSED TRADEMARKS IN ANY COUNTRY, INCLUDING ATTEMPTED REGISTRATION OF ANY LICENSED TRADEMARK, OR USE OR ATTEMPTED REGISTRATION OF ANY MARK CONFUSINGLY SIMILAR THERETO. 12.5         OWNERSHIP AND GOODWILL.  PUBLISHER ACKNOWLEDGES MICROSOFT’S OWNERSHIP OF ALL LICENSED TRADEMARKS, AND ALL GOODWILL ASSOCIATED WITH THE LICENSED TRADEMARKS.  USE OF THE LICENSED TRADEMARKS SHALL NOT CREATE ANY RIGHT, TITLE OR INTEREST THEREIN IN PUBLISHER’S FAVOR.  PUBLISHER’S USE OF THE LICENSED TRADEMARKS SHALL INURE SOLELY TO THE BENEFIT OF MICROSOFT. 13.          NON-DISCLOSURE; ANNOUNCEMENTS 13.1         NON-DISCLOSURE AGREEMENT.  THE INFORMATION, MATERIALS AND SOFTWARE EXCHANGED BY THE PARTIES HEREUNDER OR UNDER AN XDK LICENSE, INCLUDING THE TERMS AND CONDITIONS HEREOF AND OF THE XDK LICENSE, ARE SUBJECT TO THE NON-DISCLOSURE AGREEMENT BETWEEN THE PARTIES ATTACHED HERETO AS EXHIBIT 5 (THE “NON-DISCLOSURE AGREEMENT”), WHICH IS INCORPORATED HEREIN BY REFERENCE; PROVIDED, HOWEVER, THAT FOR PURPOSES OF THE FOREGOING, SECTION 2(A)(I) OF THE NON-DISCLOSURE AGREEMENT SHALL HEREINAFTER READ, “THE RECEIVING PARTY SHALL: (I)] REFRAIN FROM DISCLOSING CONFIDENTIAL INFORMATION OF THE DISCLOSING PARTY TO ANY THIRD PARTIES FOR AS LONG AS SUCH REMAINS UNDISCLOSED UNDER 1(B) ABOVE EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 2(B) AND 2(C) OF THIS [NON-DISCLOSURE] AGREEMENT.”  IN THIS WAY, ALL CONFIDENTIAL INFORMATION PROVIDED HEREUNDER OR BY WAY OF THE XDK LICENSE IN WHATEVER FORM (E.G. INFORMATION, MATERIALS, TOOLS AND/OR SOFTWARE EXCHANGED BY THE PARTIES HEREUNDER OR UNDER AN XDK LICENSE), INCLUDING THE TERMS AND CONDITIONS HEREOF AND OF THE XDK LICENSE, UNLESS OTHERWISE SPECIFICALLY STATED, WILL BE PROTECTED FROM DISCLOSURE FOR AS LONG AS IT REMAINS CONFIDENTIAL. 13.2         PUBLIC ANNOUNCEMENTS.  NEITHER PARTY SHALL ISSUE ANY SUCH PRESS RELEASE OR MAKE ANY SUCH PUBLIC ANNOUNCEMENT(S) RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY XDK LICENSE WITHOUT THE EXPRESS PRIOR CONSENT OF THE OTHER PARTY, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED.    NOTHING CONTAINED IN THIS SECTION 13.2 WILL RELIEVE PUBLISHER OF ANY OTHER OBLIGATIONS IT MAY HAVE UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ITS OBLIGATIONS TO SEEK AND OBTAIN MICROSOFT APPROVAL OF MARKETING MATERIALS. 13.3         REQUIRED PUBLIC FILINGS.  NOTWITHSTANDING SECTIONS 13.1 AND 13.2, THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT, OR PORTIONS THEREOF, MAY BE REQUIRED UNDER APPLICABLE LAW TO BE DISCLOSED, AS PART OF OR AN EXHIBIT TO A PARTY’S REQUIRED PUBLIC DISCLOSURE DOCUMENTS.  IF EITHER PARTY IS ADVISED BY ITS LEGAL COUNSEL THAT SUCH DISCLOSURE IS REQUIRED, IT WILL NOTIFY THE OTHER IN WRITING AND THE PARTIES WILL JOINTLY SEEK CONFIDENTIAL TREATMENT OF THIS AGREEMENT TO THE MAXIMUM EXTENT REASONABLY POSSIBLE, IN DOCUMENTS APPROVED BY BOTH PARTIES AND FILED WITH THE APPLICABLE GOVERNMENTAL OR REGULATORY AUTHORITIES, AND/OR MICROSOFT WILL PREPARE A REDACTED VERSION OF THIS AGREEMENT FOR FILING. 12 -------------------------------------------------------------------------------- 14.          PROTECTION OF PROPRIETARY RIGHTS 14.1         MICROSOFT INTELLECTUAL PROPERTY.  IF PUBLISHER LEARNS OF ANY INFRINGEMENT OR IMITATION OF THE LICENSED TRADEMARKS, A SOFTWARE TITLE, ONLINE CONTENT OR FPU, OR THE PROPRIETARY RIGHTS IN OR RELATED TO ANY OF THEM, IT WILL PROMPTLY NOTIFY MICROSOFT THEREOF.  MICROSOFT MAY TAKE SUCH ACTION AS IT DEEMS ADVISABLE FOR THE PROTECTION OF ITS RIGHTS IN AND TO SUCH PROPRIETARY RIGHTS, AND PUBLISHER SHALL, IF REASONABLY REQUESTED BY MICROSOFT IN WRITING, COOPERATE IN ALL REASONABLE RESPECTS THEREIN AT MICROSOFT’S EXPENSE.  IN NO EVENT, HOWEVER, SHALL MICROSOFT BE REQUIRED TO TAKE ANY ACTION IF IT DEEMS IT INADVISABLE TO DO SO.  MICROSOFT WILL HAVE THE RIGHT TO RETAIN ALL PROCEEDS IT MAY DERIVE FROM ANY RECOVERY IN CONNECTION WITH SUCH ACTIONS. 14.2         PUBLISHER INTELLECTUAL PROPERTY.  IF MICROSOFT LEARNS OF ANY INFRINGEMENT OR IMITATION OF A SOFTWARE TITLE, ONLINE CONTENT OR FPU, OR THE PROPRIETARY RIGHTS IN OR RELATED TO ANY OF THEM, IT WILL PROMPTLY NOTIFY PUBLISHER THEREOF IN WRITING. PUBLISHER, WITHOUT THE EXPRESS WRITTEN PERMISSION OF MICROSOFT, MAY BRING ANY ACTION OR PROCEEDING RELATING TO INFRINGEMENT OR POTENTIAL INFRINGEMENT OF A SOFTWARE TITLE, ONLINE CONTENT OR FPU, TO THE EXTENT SUCH INFRINGEMENT INVOLVES ANY PROPRIETARY RIGHTS OF PUBLISHER (PROVIDED THAT PUBLISHER WILL NOT HAVE THE RIGHT TO BRING ANY SUCH ACTION OR PROCEEDING INVOLVING MICROSOFT’S INTELLECTUAL PROPERTY), AND MICROSOFT SHALL, IF REQUESTED BY PUBLISHER IN WRITING, COOPERATE IN ALL REASONABLE RESPECTS THEREIN.  PUBLISHER SHALL MAKE REASONABLE EFFORTS TO INFORM MICROSOFT REGARDING SUCH ACTIONS IN A TIMELY MANNER.  PUBLISHER WILL HAVE THE RIGHT TO RETAIN ALL PROCEEDS IT MAY DERIVE FROM ANY RECOVERY IN CONNECTION WITH SUCH ACTIONS.  PUBLISHER AGREES TO USE ALL COMMERCIALLY REASONABLE EFFORTS TO PROTECT AND ENFORCE ITS PROPRIETARY RIGHTS IN THE SOFTWARE TITLE OR ONLINE CONTENT. 14.3         JOINT ACTIONS.  PUBLISHER AND MICROSOFT MAY AGREE TO JOINTLY PURSUE CASES OF INFRINGEMENT INVOLVING THE SOFTWARE TITLES OR ONLINE CONTENT (SINCE SUCH PRODUCTS WILL CONTAIN INTELLECTUAL PROPERTY OWNED BY EACH OF THEM).  UNLESS THE PARTIES OTHERWISE AGREE, OR UNLESS THE RECOVERY IS EXPRESSLY ALLOCATED BETWEEN THEM BY THE COURT (IN WHICH CASE THE TERMS OF SECTIONS 14.1 AND 14.2 WILL APPLY), IN THE EVENT PUBLISHER AND MICROSOFT JOINTLY PROSECUTE AN INFRINGEMENT LAWSUIT UNDER THIS PROVISION, ANY RECOVERY WILL BE USED FIRST TO REIMBURSE PUBLISHER AND MICROSOFT FOR THEIR RESPECTIVE REASONABLE ATTORNEYS’ FEES AND EXPENSES, PRO RATA, AND ANY REMAINING RECOVERY SHALL ALSO BE GIVEN TO PUBLISHER AND MICROSOFT PRO RATA BASED UPON THE FEES AND EXPENSES INCURRED IN BRINGING SUCH ACTION. 15.          WARRANTIES 15.1         PUBLISHER.  PUBLISHER WARRANTS AND REPRESENTS THAT: 15.1.1      IT HAS THE FULL POWER TO ENTER INTO THIS AGREEMENT; 15.1.2      IT HAS OBTAINED AND WILL MAINTAIN ALL NECESSARY RIGHTS AND PERMISSIONS FOR ITS AND MICROSOFT’S USE OF THE SOFTWARE TITLE, FPUS, MARKETING MATERIALS, ONLINE CONTENT, ALL INFORMATION, DATA, LOGOS, AND SOFTWARE OR OTHER MATERIALS PROVIDED TO MICROSOFT AND/OR MADE AVAILABLE TO XBOX LIVE USERS VIA XBOX LIVE (EXCLUDING THOSE PORTIONS THAT CONSIST OF THE LICENSED TRADEMARKS, SECURITY TECHNOLOGY AND REDISTRIBUTABLE COMPONENTS OF THE SO-CALLED “XDK” IN THE FORM AS DELIVERED TO PUBLISHER BY MICROSOFT PURSUANT TO AN XDK LICENSE) (COLLECTIVELY, THE “PUBLISHER CONTENT”), AND THAT ALL PUBLISHER CONTENT COMPLIES WITH ALL LAWS AND REGULATIONS, AND DOES NOT AND WILL NOT INFRINGE UPON OR MISAPPROPRIATE ANY THIRD PARTY TRADE SECRETS, COPYRIGHTS, TRADEMARKS, PATENTS, PUBLICITY, PRIVACY OR OTHER PROPRIETARY RIGHTS. 15.1.3      IT SHALL COMPLY WITH ALL LAWS, REGULATIONS, INDUSTRY CONTENT RATING REQUIREMENTS AND ADMINISTRATIVE ORDERS AND REQUIREMENTS WITHIN ANY APPLICABLE SALES TERRITORY RELATING TO THE DISTRIBUTION, SALE AND MARKETING OF THE SOFTWARE TITLE, AND SHALL KEEP IN FORCE ALL NECESSARY LICENSES, PERMITS, REGISTRATIONS, APPROVALS AND/OR EXEMPTIONS THROUGHOUT THE TERM OF THIS AGREEMENT AND FOR SO LONG AS IT IS DISTRIBUTING, SELLING OR MARKETING THE SOFTWARE TITLE IN ANY APPLICABLE SALES TERRITORY. 15.1.4      THE SOFTWARE TITLE, ONLINE CONTENT AND/OR INFORMATION, DATA, LOGOS AND SOFTWARE OR OTHER MATERIALS PROVIDED TO MICROSOFT AND /OR MADE AVAILABLE TO XBOX LIVE USERS VIA XBOX LIVE, DO NOT AND SHALL NOT CONTAIN ANY MESSAGES, DATA, IMAGES OR PROGRAMS THAT ARE, BY LAW, DEFAMATORY, OBSCENE OR PORNOGRAPHIC, OR IN ANY WAY VIOLATE ANY APPLICABLE LAWS OR INDUSTRY CONTENT RATING REQUIREMENTS (INCLUDING WITHOUT LIMITATION LAWS OF PRIVACY) OF THE APPLICABLE SALES TERRITORY(IES) WHERE THE SOFTWARE TITLE IS MARKETED AND/OR DISTRIBUTED. 15.1.5      THE ONLINE CONTENT SHALL NOT HARVEST OR OTHERWISE COLLECT INFORMATION ABOUT XBOX LIVE USERS, INCLUDING E-MAIL ADDRESSES, WITHOUT THE XBOX LIVE USERS’ EXPRESS CONSENT; AND THE ONLINE CONTENT SHALL NOT LINK TO ANY UNSOLICITED COMMUNICATION SENT TO ANY THIRD PARTY. 15.2         MICROSOFT.  MICROSOFT WARRANTS AND REPRESENTS THAT:   13 -------------------------------------------------------------------------------- 15.2.1      IT HAS THE FULL POWER TO ENTER INTO THIS AGREEMENT AND IT HAS NOT PREVIOUSLY AND WILL NOT GRANT ANY RIGHTS TO ANY THIRD PARTY THAT ARE INCONSISTENT WITH THE RIGHTS GRANTED TO PUBLISHER HEREIN; 15.3        DISCLAIMER.  EXCEPT AS EXPRESSLY STATED IN THIS SECTION 15, MICROSOFT PROVIDES ALL MATERIALS (INCLUDING WITHOUT LIMITATION THE SECURITY TECHNOLOGY) AND SERVICES HEREUNDER ON AN “AS IS” BASIS, AND MICROSOFT DISCLAIMS ALL OTHER WARRANTIES UNDER THE APPLICABLE LAWS OF ANY COUNTRY, EXPRESS OR IMPLIED, REGARDING THE MATERIALS AND SERVICES IT PROVIDES HEREUNDER, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OF FREEDOM FROM COMPUTER VIRUSES.  WITHOUT LIMITATION, MICROSOFT PROVIDES NO WARRANTY OF NON-INFRINGEMENT. 15.4        EXCLUSION OF INCIDENTAL, CONSEQUENTIAL AND CERTAIN OTHER DAMAGES.  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL MICROSOFT, ITS AFFILIATES, LICENSORS OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER, RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR LOST GOODWILL AND WHETHER BASED ON BREACH OF ANY EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR STRICT LIABILITY, REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE COULD HAVE BEEN REASONABLY FORESEEN. 15.5        LIMITATION OF LIABILITY. THE MAXIMUM LIABILITY OF MICROSOFT TO PUBLISHER OR TO ANY THIRD PARTY ARISING OUT OF THIS AGREEMENT WILL BE ****.  FURTHERMORE, UNDER NO CIRCUMSTANCES SHALL MICROSOFT BE LIABLE TO PUBLISHER FOR ANY DAMAGES WHATSOEVER WITH RESPECT TO ANY CLAIMS RELATING TO THE SECURITY TECHNOLOGY AND/OR ITS EFFECT ON ANY SOFTWARE TITLE OR FOR ANY STATEMENTS OR CLAIMS MADE BY PUBLISHER, WHETHER IN PUBLISHER’S MARKETING MATERIALS OR OTHERWISE, REGARDING THE AVAILABILITY OR OPERATION OF ANY ONLINE FEATURES. 16.           INDEMNITY; INSURANCE.  A CLAIM FOR WHICH INDEMNITY MAY BE SOUGHT HEREUNDER IS REFERRED TO AS A “CLAIM.” 16.1         MUTUAL INDEMNIFICATION.  EACH PARTY HEREBY AGREES TO INDEMNIFY, DEFEND, AND HOLD THE OTHER PARTY HARMLESS FROM ANY AND ALL THIRD PARTY CLAIMS, DEMANDS, COSTS, LIABILITIES, LOSSES, EXPENSES AND DAMAGES (INCLUDING REASONABLE ATTORNEYS’ FEES, COSTS, AND EXPERT WITNESSES’ FEES) ARISING OUT OF OR IN CONNECTION WITH ANY CLAIM THAT, TAKING THE CLAIMANT’S ALLEGATIONS TO BE TRUE, WOULD RESULT IN A BREACH BY THE INDEMNIFYING PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR COVENANTS SET FORTH IN SECTION 15. 16.2         ADDITIONAL PUBLISHER INDEMNIFICATION OBLIGATION.  PUBLISHER FURTHER AGREES TO INDEMNIFY, DEFEND, AND HOLD MICROSOFT HARMLESS FROM ANY AND ALL THIRD PARTY CLAIMS, DEMANDS, COSTS, LIABILITIES, LOSSES, EXPENSES AND DAMAGES (INCLUDING REASONABLE ATTORNEYS’ FEES, COSTS, AND EXPERT WITNESSES’ FEES) ARISING OUT OF OR IN CONNECTION WITH ANY CLAIM REGARDING ANY SOFTWARE TITLE OR FPU INCLUDING WITHOUT LIMITATION ANY CLAIM RELATING TO QUALITY, PERFORMANCE, SAFETY THEREOF, OR ARISING OUT OF PUBLISHER’S USE OF THE LICENSED TRADEMARKS IN BREACH OF THIS AGREEMENT. 16.3         NOTICE AND ASSISTANCE.  THE INDEMNIFIED PARTY SHALL:  (I) PROVIDE THE INDEMNIFYING PARTY REASONABLY PROMPT NOTICE IN WRITING OF ANY CLAIM AND PERMIT THE INDEMNIFYING PARTY TO ANSWER AND DEFEND SUCH CLAIM THROUGH COUNSEL CHOSEN AND PAID BY THE INDEMNIFYING PARTY; AND (II) PROVIDE INFORMATION, ASSISTANCE AND AUTHORITY TO HELP THE INDEMNIFYING PARTY DEFEND SUCH CLAIM.  THE INDEMNIFIED PARTY MAY PARTICIPATE IN THE DEFENSE OF ANY CLAIM AT ITS OWN EXPENSE.  THE INDEMNIFYING PARTY WILL NOT BE RESPONSIBLE FOR ANY SETTLEMENT MADE BY THE INDEMNIFIED PARTY WITHOUT THE INDEMNIFYING PARTY’S WRITTEN PERMISSION, WHICH WILL NOT BE UNREASONABLY WITHHELD OR DELAYED.  IN THE EVENT THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY AGREE TO SETTLE A CLAIM, THE INDEMNIFIED PARTY AGREES NOT TO PUBLICIZE THE SETTLEMENT WITHOUT FIRST OBTAINING THE INDEMNIFYING PARTY’S WRITTEN PERMISSION. 16.4         INSURANCE.   PUBLISHER SHALL MAINTAIN SUFFICIENT AND APPROPRIATE INSURANCE COVERAGE TO ENABLE IT TO MEET ITS OBLIGATIONS UNDER THIS AGREEMENT AND BY LAW (WHETHER PRODUCTS LIABILITY, GENERAL LIABILITY OR SOME OTHER TYPE OF INSURANCE).  FOR FPUS DISTRIBUTED IN THE JAPAN SALES TERRITORY, PUBLISHER’S COVERAGE WILL HAVE MINIMUM LIMITS OF THE JAPANESE YEN EQUIVALENT OF **** PER OCCURRENCE, WITH A DEDUCTIBLE OF NOT MORE THAN THE JAPANESE YEN EQUIVALENT OF ****.  FOR FPUS * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   14 -------------------------------------------------------------------------------- DISTRIBUTED IN THE ASIAN SALES TERRITORY, PUBLISHER’S COVERAGE WILL HAVE MINIMUM LIMITS OF **** PER OCCURRENCE (OR ITS EQUIVALENT VALUE IN LOCAL CURRENCY AS OF THE DATE OF ISSUANCE), WITH A DEDUCTIBLE OF NOT MORE THAN **** (OR ITS EQUIVALENT VALUE IN LOCAL CURRENCY AS OF THE DATE OF ISSUANCE).  FOR FPUS DISTRIBUTED OUTSIDE OF JAPAN AND THE ASIAN SALES TERRITORIES, PUBLISHER SHALL MAINTAIN PROFESSIONAL LIABILITY AND ERRORS & OMISSIONS LIABILITY INSURANCE (E&O) WITH POLICY LIMITS OF NOT LESS THAN **** PER OCCURRENCE (OR ITS EQUIVALENT VALUE IN LOCAL CURRENCY AS OF THE DATE OF ISSUANCE), EACH CLAIM WITH A DEDUCTIBLE OF NOT MORE THAN **** (OR ITS EQUIVALENT VALUE IN LOCAL CURRENCY AS OF THE DATE OF ISSUANCE).  SUCH INSURANCE SHALL INCLUDE COVERAGE FOR INFRINGEMENT OF ANY PROPRIETARY RIGHT OF ANY THIRD PARTY, INCLUDING WITHOUT LIMITATION COPYRIGHT AND TRADEMARK INFRINGEMENT AS RELATED TO PUBLISHER’S PERFORMANCE UNDER THIS AGREEMENT.  THE E&O INSURANCE RETROACTIVE COVERAGE DATE WILL BE NO LATER THAN ****.  PUBLISHER SHALL MAINTAIN AN ACTIVE POLICY, OR PURCHASE AN EXTENDED REPORTING PERIOD PROVIDING COVERAGE FOR CLAIMS FIRST MADE AND REPORTED TO THE INSURANCE COMPANY WITHIN **** AFTER ****.  UPON REQUEST, PUBLISHER SHALL DELIVER TO MICROSOFT PROOF OF SUCH COVERAGE.  IN THE EVENT THAT PUBLISHER’S PROOF EVIDENCES COVERAGE THAT MICROSOFT REASONABLY DETERMINES TO BE LESS THAN THAT REQUIRED TO MEET PUBLISHER’S OBLIGATIONS CREATED BY THIS AGREEMENT, THEN PUBLISHER AGREES THAT IT SHALL PROMPTLY ACQUIRE SUCH COVERAGE AND NOTIFY MICROSOFT IN WRITING THEREOF. 17.          TERM AND TERMINATION 17.1         TERM.  THE TERM OF THIS AGREEMENT SHALL COMMENCE ON THE EFFECTIVE DATE AND SHALL CONTINUE UNTIL ****.  UNLESS ONE PARTY GIVES THE OTHER NOTICE OF NON-RENEWAL WITHIN **** OF THE END OF THE THEN-CURRENT TERM, THIS AGREEMENT SHALL AUTOMATICALLY RENEW FOR SUCCESSIVE **** TERMS. 17.2         TERMINATION FOR BREACH.  IF EITHER PARTY MATERIALLY FAILS TO PERFORM OR COMPLY WITH THIS AGREEMENT OR ANY PROVISION THEREOF, AND FAILS TO REMEDY THE DEFAULT WITHIN **** AFTER THE RECEIPT OF WRITTEN NOTICE TO THAT EFFECT, THEN THE OTHER PARTY HAS THE RIGHT, AT ITS SOLE OPTION AND UPON WRITTEN NOTICE TO THE DEFAULTING PARTY, TO TERMINATE THIS AGREEMENT UPON WRITTEN NOTICE; PROVIDED THAT IF PUBLISHER IS THE PARTY THAT HAS MATERIALLY FAILED TO PERFORM OR COMPLY WITH THIS AGREEMENT, THEN MICROSOFT HAS THE RIGHT, BUT NOT THE OBLIGATION, TO SUSPEND AVAILABILITY OF THE ONLINE CONTENT DURING SUCH **** PERIOD.  ANY NOTICE OF DEFAULT HEREUNDER MUST BE PROMINENTLY LABELED “NOTICE OF DEFAULT”; PROVIDED, HOWEVER, THAT IF THE DEFAULT IS OF SECTIONS 10, 12 OR SECTIONS 1 OR 2 OF EXHIBIT 1, THE NON-DISCLOSURE AGREEMENT, OR AN XDK LICENSE, THEN THE NON-DEFAULTING PARTY MAY TERMINATE THIS AGREEMENT IMMEDIATELY UPON WRITTEN NOTICE, WITHOUT BEING OBLIGATED TO PROVIDE A **** CURE PERIOD.  THE RIGHTS AND REMEDIES PROVIDED IN THIS SECTION ARE NOT EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR THIS AGREEMENT.  IF THE UNCURED DEFAULT IS RELATED TO A PARTICULAR SOFTWARE TITLE OR PARTICULAR ONLINE CONTENT, THEN THE PARTY NOT IN DEFAULT HAS THE RIGHT, IN ITS DISCRETION, TO TERMINATE THIS AGREEMENT ITS ENTIRETY OR WITH RESPECT TO THE APPLICABLE SOFTWARE TITLE OR THE PARTICULAR ONLINE CONTENT.  IF MICROSOFT DETERMINES, AT ANY TIME PRIOR TO THE COMMERCIAL RELEASE OF A SOFTWARE TITLE OR ONLINE CONTENT, THAT SUCH SOFTWARE TITLE OR ONLINE CONTENT DOES NOT MATERIALLY COMPLY WITH THE REQUIREMENTS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE OR TO ANY APPLICABLE LAWS, THEN MICROSOFT HAS THE RIGHT, IN MICROSOFT’S SOLE DISCRETION AND NOTWITHSTANDING ANY PRIOR APPROVALS GIVEN BY MICROSOFT, TO TERMINATE THIS AGREEMENT WITHOUT COST OR PENALTY, AS A WHOLE OR ON A SOFTWARE TITLE BY SOFTWARE TITLE, OR SALES TERRITORY BY SALES TERRITORY BASIS UPON WRITTEN NOTICE TO PUBLISHER WITH RESPECT TO SUCH SOFTWARE TITLE OR SALES TERRITORY. 17.3        EFFECT OF TERMINATION; SELL-OFF RIGHTS.  UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT, PUBLISHER HAS NO FURTHER RIGHT TO EXERCISE THE RIGHTS LICENSED HEREUNDER OR WITHIN THE XDK LICENSE AND SHALL PROMPTLY CEASE ALL MANUFACTURING OF FPU THROUGH ITS AUTHORIZED REPLICATORS AND, OTHER THAN AS PROVIDED BELOW, CEASE USE OF THE LICENSED TRADEMARKS.  PUBLISHER SHALL HAVE A PERIOD OF ****, TO SELL-OFF ITS INVENTORY OF FPUS EXISTING AS OF THE DATE OF TERMINATION OR EXPIRATION, AFTER WHICH SELL-OFF PERIOD PUBLISHER SHALL IMMEDIATELY RETURN ALL FPUS TO AN AUTHORIZED REPLICATOR FOR DESTRUCTION.  PUBLISHER SHALL CAUSE THE AUTHORIZED REPLICATOR TO DESTROY ALL FPUS AND ISSUE TO MICROSOFT WRITTEN CERTIFICATION BY AN AUTHORIZED REPRESENTATIVE OF THE AUTHORIZED REPLICATOR CONFIRMING THE DESTRUCTION OF FPUS REQUIRED HEREUNDER.  ALL OF PUBLISHER’S OBLIGATIONS UNDER THIS AGREEMENT SHALL CONTINUE TO APPLY DURING SUCH **** SELL-OFF PERIOD.  IF THIS AGREEMENT IS TERMINATED DUE TO PUBLISHER’S BREACH, AT MICROSOFT’S OPTION, MICROSOFT MAY REQUIRE PUBLISHER TO IMMEDIATELY DESTROY ALL FPUS NOT YET DISTRIBUTED TO PUBLISHER’S DISTRIBUTORS, DEALERS AND/OR END USERS AND SHALL REQUIRE ALL THOSE DISTRIBUTING THE FPU OVER WHICH IT HAS CONTROL TO CEASE DISTRIBUTION.  UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT, PUBLISHER SHALL CONTINUE TO SUPPORT EXISTING ONLINE GAME FEATURES FOR FPUS THAT HAVE ALREADY BEEN SOLD UNTIL THE END OF THE MINIMUM COMMITMENT TERM. 17.4         CROSS-DEFAULT.  IF MICROSOFT HAS THE RIGHT TO TERMINATE THIS AGREEMENT, THEN MICROSOFT MAY, AT ITS SOLE DISCRETION ALSO TERMINATE THE XDK LICENSE.  IF MICROSOFT TERMINATES THE XDK LICENSE DUE TO A BREACH BY PUBLISHER, THEN MICROSOFT MAY, AT ITS SOLE DISCRETION ALSO TERMINATE THIS AGREEMENT. * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   15 -------------------------------------------------------------------------------- 17.5         SURVIVAL.  THE FOLLOWING PROVISIONS SHALL SURVIVE EXPIRATION OR TERMINATION OF THIS AGREEMENT: SECTIONS 2, 6.2.2 (AS TO THE MINIMUM COMMITMENT), 6.2.3, 8 AND SECTIONS 1, 2 AND 5 OF EXHIBIT 1, 9.1-9.3, 10.3, 10.4, 11, 13.1, 14, 15, 16, 17.3, 17.5 AND 18. 18.          GENERAL 18.1         GOVERNING LAW; VENUE; ATTORNEYS FEES.  THIS AGREEMENT IS TO BE CONSTRUED AND CONTROLLED BY THE LAWS OF THE STATE OF WASHINGTON, U.S.A., AND PUBLISHER CONSENTS TO EXCLUSIVE JURISDICTION AND VENUE IN THE FEDERAL COURTS SITTING IN KING COUNTY, WASHINGTON, U.S.A., UNLESS NO FEDERAL JURISDICTION EXISTS, IN WHICH CASE PUBLISHER CONSENTS TO EXCLUSIVE JURISDICTION AND VENUE IN THE SUPERIOR COURT OF KING COUNTY, WASHINGTON, U.S.A.  PUBLISHER WAIVES ALL DEFENSES OF LACK OF PERSONAL JURISDICTION AND FORUM NON CONVENIENS.  PROCESS MAY BE SERVED ON EITHER PARTY IN THE MANNER AUTHORIZED BY APPLICABLE LAW OR COURT RULE.  THE ENGLISH VERSION OF THIS AGREEMENT IS DETERMINATIVE OVER ANY TRANSLATIONS THEREOF.  IF EITHER PARTY EMPLOYS ATTORNEYS TO ENFORCE ANY RIGHTS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PREVAILING PARTY IS ENTITLED TO RECOVER ITS REASONABLE ATTORNEYS’ FEES, COSTS AND OTHER EXPENSES.  THIS CHOICE OF JURISDICTION PROVISION DOES NOT PREVENT MICROSOFT FROM SEEKING INJUNCTIVE RELIEF WITH RESPECT TO A VIOLATION OF INTELLECTUAL PROPERTY RIGHTS OR CONFIDENTIALITY OBLIGATIONS IN ANY APPROPRIATE JURISDICTION. 18.2         NOTICES; REQUESTS.  ALL NOTICES AND REQUESTS IN CONNECTION WITH THIS AGREEMENT ARE DEEMED GIVEN ON THE **** AFTER THEY ARE DEPOSITED IN THE APPLICABLE COUNTRY’S MAIL SYSTEM (****), POSTAGE PREPAID, CERTIFIED OR REGISTERED, RETURN RECEIPT REQUESTED; OR **** SENT BY OVERNIGHT COURIER, CHARGES PREPAID, WITH A CONFIRMING FAX; AND ADDRESSED AS FOLLOWS:   Publisher: THQ Inc.   Microsoft: MICROSOFT LICENSING, GP   29903 Agoura Road     6100 Neil Road, Suite 100   Agoura Hills, CA 91301     Reno, NV 89511-1137         Attention: President & CEO               Fax: 818.871-4700   Attention: Xbox Accounting Services Phone: 818-871-5000       Email: [email protected]   with a cc to: MICROSOFT CORPORATION       One Microsoft Way       Redmond, WA 98052-6399         With a cc to: Executive VP, Business & Legal Affairs (same address)           Fax: 818.871-7593   Attention: Law & Corporate Affairs Department Phone: 818.871-5080     Assoc. General Counsel, Consumer Legal Email: [email protected]     Group (H&ED)       Fax: (425) 936-7329                           or to such other address as the party to receive the notice or request so designates by written notice to the other. 18.3         NO DELAY OR WAIVER.  NO DELAY OR FAILURE OF EITHER PARTY AT ANY TIME TO EXERCISE OR ENFORCE ANY RIGHT OR REMEDY AVAILABLE TO IT UNDER THIS AGREEMENT, AND NO COURSE OF DEALING OR PERFORMANCE WITH RESPECT THERETO, WILL CONSTITUTE A WAIVER OF ANY SUCH RIGHT OR REMEDY WITH RESPECT TO ANY OTHER BREACH OR FAILURE BY THE OTHER PARTY.  THE EXPRESS WAIVER BY A PARTY OF ANY RIGHT OR REMEDY IN A PARTICULAR INSTANCE WILL NOT CONSTITUTE A WAIVER OF ANY SUCH RIGHT OR REMEDY IN ANY OTHER INSTANCE.  ALL RIGHTS AND REMEDIES WILL BE CUMULATIVE AND NOT EXCLUSIVE OF ANY OTHER RIGHTS OR REMEDIES. 18.4         ASSIGNMENT.  PUBLISHER MAY NOT ASSIGN THIS AGREEMENT OR ANY PORTION THEREOF, TO ANY THIRD PARTY UNLESS MICROSOFT EXPRESSLY CONSENTS TO SUCH ASSIGNMENT IN WRITING.  MICROSOFT WILL HAVE THE RIGHT TO ASSIGN THIS AGREEMENT AND/OR ANY PORTION THEREOF AS MICROSOFT MAY DEEM APPROPRIATE AND/OR AUTHORIZE ITS AFFILIATES OR PARTNERS TO PERFORM THIS AGREEMENT IN WHOLE OR PART ON ITS BEHALF.  FOR THE PURPOSES OF THIS AGREEMENT, A MERGER, CONSOLIDATION, OR OTHER CORPORATE REORGANIZATION, OR A TRANSFER OR SALE OF A CONTROLLING INTEREST IN A PARTY’S STOCK, OR OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS IS TO BE DEEMED TO BE AN ASSIGNMENT.  THIS AGREEMENT WILL INURE TO THE BENEFIT OF AND BE BINDING UPON THE PARTIES, THEIR SUCCESSORS, ADMINISTRATORS, HEIRS, AND PERMITTED ASSIGNS. 18.5         NO PARTNERSHIP.  MICROSOFT AND PUBLISHER ARE ENTERING INTO A LICENSE PURSUANT TO THIS AGREEMENT AND NOTHING IN THIS AGREEMENT IS TO BE CONSTRUED AS CREATING AN EMPLOYER-EMPLOYEE RELATIONSHIP, A PARTNERSHIP, A FRANCHISE, OR A JOINT VENTURE BETWEEN THE PARTIES. 18.6         SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS FOUND INVALID OR UNENFORCEABLE PURSUANT TO JUDICIAL DECREE OR DECISION, THE REMAINDER OF THIS AGREEMENT SHALL REMAIN VALID AND ENFORCEABLE ACCORDING TO ITS TERMS.  THE PARTIES INTEND THAT THE PROVISIONS OF THIS AGREEMENT BE ENFORCED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW.  ACCORDINGLY, THE PARTIES   * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   16 -------------------------------------------------------------------------------- AGREE THAT IF ANY PROVISIONS ARE DEEMED NOT ENFORCEABLE, THEY ARE TO BE DEEMED MODIFIED TO THE EXTENT NECESSARY TO MAKE THEM ENFORCEABLE. 18.7         INJUNCTIVE RELIEF.  THE PARTIES AGREE THAT PUBLISHER’S THREATENED OR ACTUAL UNAUTHORIZED USE OF THE LICENSED TRADEMARKS OR OTHER MICROSOFT PROPRIETARY RIGHTS WHETHER IN WHOLE OR IN PART, MAY RESULT IN IMMEDIATE AND IRREPARABLE DAMAGE TO MICROSOFT FOR WHICH THERE MAY BE NO ADEQUATE REMEDY AT LAW.  EITHER PARTY’S THREATENED OR ACTUAL BREACH OF THE CONFIDENTIALITY PROVISIONS MAY CAUSE DAMAGE TO THE NON-BREACHING PARTY, AND IN SUCH EVENT THE NON-BREACHING PARTY IS ENTITLED TO SEEK APPROPRIATE INJUNCTIVE RELIEF FROM ANY COURT OF COMPETENT JURISDICTION WITHOUT THE NECESSITY OF POSTING BOND OR OTHER SECURITY. 18.8         ENTIRE AGREEMENT; MODIFICATION; NO OFFER.  THIS AGREEMENT (INCLUDING THE CONCEPT, THE NON-DISCLOSURE AGREEMENT, THE XBOX 360 PUBLISHER GUIDE, WRITTEN AMENDMENTS THERETO, AND OTHER INCORPORATED DOCUMENTS) AND THE XDK LICENSE CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MERGES ALL PRIOR AND CONTEMPORANEOUS COMMUNICATIONS.  THIS AGREEMENT SHALL NOT BE MODIFIED EXCEPT BY A WRITTEN AGREEMENT DATED SUBSEQUENT HERETO SIGNED ON BEHALF OF PUBLISHER AND MICROSOFT BY THEIR DULY AUTHORIZED REPRESENTATIVES.  NEITHER THIS AGREEMENT NOR ANY WRITTEN OR ORAL STATEMENTS RELATED HERETO CONSTITUTE AN OFFER, AND THIS AGREEMENT IS NOT LEGALLY BINDING UNTIL EXECUTED BY BOTH PARTIES HERETO.   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date on the dates indicated below.   MICROSOFT LICENSING, GP   THQ Inc.                 By (sign)   By (sign)                 Name (Print)   Name (Print)                 Title   Title                 Date   Date     17 -------------------------------------------------------------------------------- EXHIBIT 1   PAYMENTS 1.                      PLATFORM ROYALTY A.             FOR EACH FPU MANUFACTURED DURING THE TERM OF THIS AGREEMENT, PUBLISHER SHALL PAY MICROSOFT NONREFUNDABLE ROYALTIES IN ACCORDANCE WITH THE ROYALTY TABLES SET FORTH BELOW (TABLES 1 AND 2) AND THE “UNIT DISCOUNT” TABLE SET FORTH IN SECTION 1.D OF THIS EXHIBIT 1 (TABLE 3). B.             THE ROYALTY FEE IS DETERMINED BY THE “THRESHOLD PRICE” (WHICH IS THE WHOLESALE PRICE (WSP) OR SUGGESTED RETAIL PRICE (SRP) AT WHICH PUBLISHER INTENDS TO SELL THE SOFTWARE TITLE IN THE APPLICABLE SALES TERRITORY).  TO DETERMINE THE APPLICABLE ROYALTY RATE FOR A PARTICULAR SOFTWARE TITLE IN A PARTICULAR SALES TERRITORY, THE APPLICABLE THRESHOLD PRICE FROM TABLE 1 BELOW WILL DETERMINE THE CORRECT ROYALTY “TIER.”  THE ROYALTY FEE IS THEN AS SET FORTH IN TABLE 2 BASED ON THE MANUFACTURING REGION IN WHICH THE FPUS WILL BE MANUFACTURED.  FOR EXAMPLE, ASSUME THE WHOLESALE PRICE OF A SOFTWARE TITLE TO BE SOLD IN THE EUROPEAN SALES TERRITORY IS ****.  ACCORDING TO TABLE 1, **** ROYALTY RATES WILL APPLY TO THAT SOFTWARE TITLE AND THE ROYALTY RATE IS DETERMINED IN TABLE 2 BY THE MANUFACTURING REGION.  IF THE SOFTWARE TITLE WERE MANUFACTURED IN THE EUROPEAN MANUFACTURING REGION, THE ROYALTY FEE WOULD BE **** PER FPU.  IF THE SOFTWARE TITLE WERE MANUFACTURED IN ASIAN MANUFACTURING REGION, THE ROYALTY FEE WOULD BE **** PER FPU.   ****     ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   **** * **** ****     ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   ****   C.             SETTING THE ROYALTY.  PUBLISHER SHALL SUBMIT TO MICROSOFT, AT LEAST **** FOR A SOFTWARE TITLE, A COMPLETED AND SIGNED “ROYALTY TIER SELECTION FORM” IN THE FORM ATTACHED TO THIS AGREEMENT AS EXHIBIT 2 FOR EACH SALES TERRITORY.  THE SELECTION INDICATED IN THE ROYALTY TIER SELECTION FORM WILL ONLY BE EFFECTIVE ONCE THE ROYALTY TIER SELECTION FORM HAS BEEN ACCEPTED BY MICROSOFT.  IF PUBLISHER DOES NOT SUBMIT A ROYALTY TIER SELECTION FORM AS REQUIRED HEREUNDER, THE ROYALTY FEE FOR SUCH SOFTWARE TITLE WILL DEFAULT TO ****, REGARDLESS OF THE ACTUAL THRESHOLD PRICE.  THE SELECTION OF A ROYALTY TIER FOR A SOFTWARE TITLE IN A SALES TERRITORY IS BINDING FOR THE LIFE OF THAT SOFTWARE TITLE EVEN IF THE THRESHOLD PRICE IS REDUCED FOLLOWING THE SOFTWARE TITLE’S COMMERCIAL RELEASE. D.             UNIT DISCOUNTS.   PUBLISHER IS ELIGIBLE FOR A DISCOUNT TO FPUS MANUFACTURED FOR A PARTICULAR SALES TERRITORY (A “UNIT DISCOUNT”) BASED ON THE NUMBER OF FPUS THAT HAVE BEEN MANUFACTURED FOR SALE IN THAT SALES TERRITORY AS DESCRIBED IN TABLE 3 BELOW.   EXCEPT AS PROVIDED IN SECTION 4 BELOW, UNITS MANUFACTURED FOR SALE IN A SALES TERRITORY ARE AGGREGATED ONLY TOWARDS A DISCOUNT ON FPUS MANUFACTURED FOR THAT SALES TERRITORY; THERE IS NO WORLDWIDE OR CROSS-TERRITORIAL AGGREGATION OF UNITS FOR A PARTICULAR SOFTWARE TITLE.  THE DISCOUNT WILL BE ROUNDED UP TO THE NEAREST CENT, YEN OR HUNDREDTH OF A EURO.     * Confidential portion omitted and filed separately with the Securities and Exchange Commission.     1 --------------------------------------------------------------------------------   Table 3: Unit Discounts ****   ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   **** ****   ****   ****   ****   ****   ****   i.              For North American Sales Territory: **** **** **** ii.             For Japan Sales Territory: **** 2.                      PAYMENT PROCESS A.             PUBLISHER SHALL NOT AUTHORIZE ITS AUTHORIZED REPLICATORS TO BEGIN PRODUCTION UNTIL SUCH TIME AS ****.  DEPENDING UPON PUBLISHER’S CREDIT WORTHINESS, MICROSOFT MAY, BUT IS NOT OBLIGATED TO, OFFER PUBLISHER CREDIT TERMS FOR THE PAYMENT OF ROYALTIES DUE UNDER THIS AGREEMENT WITHIN **** OF RECEIPT OF INVOICE.   ALL PAYMENTS WILL BE MADE BY WIRE TRANSFER ONLY, IN ACCORDANCE WITH THE PAYMENT INSTRUCTIONS SET FORTH IN THE XBOX 360 PUBLISHER GUIDE. B.             PUBLISHER WILL PAY ROYALTIES FOR FPUS MANUFACTURED IN THE NORTH AMERICAN MANUFACTURING REGION IN US DOLLARS, FOR FPUS MANUFACTURED IN THE ASIAN MANUFACTURING REGION IN JAPANESE YEN AND FOR FPUS MANUFACTURED IN THE EUROPEAN MANUFACTURING REGION IN EUROS. 3.                      BILLING ADDRESS A.             PUBLISHER MAY HAVE ONLY TWO “BILL TO” ADDRESSES FOR THE PAYMENT OF ROYALTIES UNDER THIS AGREEMENT, ONE FOR THE NORTH AMERICAN MANUFACTURING REGION AND ONE FOR THE ASIAN MANUFACTURING REGION.  IF PUBLISHER DESIRES TO HAVE A “BILL-TO” ADDRESS IN A EUROPEAN COUNTRY, PUBLISHER (OR A PUBLISHER AFFILIATE) MUST EXECUTE AN MIOL ENROLLMENT FORM IN THE FORM ATTACHED TO THIS AGREEMENT AS EXHIBIT 3. Publisher’s billing address(es) is as follows: North America Manufacturing Region: Asian Manufacturing Region (if different):                 Name: THQ Inc. Name:   Address:                29003 Agoura Road Address:     Agoura Hills, CA 91391                             Attention:     Attention:   Email address:     Email address:   Fax: 818-871-7400 Fax:   Phone: 818-871-5000 Phone:   4.                      ASIA SIMSHIP PROGRAM The purpose of this program is to encourage Publisher to release Japanese FPUs or North American FPUs, that have been multi-region signed to run on NTSC-J boxes (hereinafter collectively referred to as “Simship Titles”), in Hong Kong, Singapore and Taiwan (referred to as “Simship Territory”) at the same time as Publisher releases the Software Title in the Japan and/or North American Sales Territories.  In order for a Software Title to qualify as a Simship Title, Publisher must   * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   2 -------------------------------------------------------------------------------- release the Software Title in the Simship Territory on the same date as the Commercial Release date of such Software Title in the Japan and/or North American Sales Territories, wherever the Software Title was first Commercially Released (referred to as “Original Territory”).  To the extent that a Software Title qualifies as a Simship Title, the applicable royalty tier (under Section 1.b of this Exhibit 1 above) and Unit Discount (under Section 1.d of this Exhibit 1 above) is determined as if all FPUs of such Software Title manufactured for distribution in both the Original Territory and the Simship Territory were manufactured for distribution in the Original Territory.  For example, if a Publisher initially manufactures **** FPUs of a Software Title for the Japan Sales Territory and simships **** of those units to the Simship Territory, the royalty fee for all of the FPUs is determined by ****.  In this example, Publisher would also receive a **** Unit Discount on **** units for having exceeded the Unit Discount level specified in Section 1. d of this Exhibit 1 above applicable to the Japan Sales Territory.  Publisher must provide Microsoft with written notice of its intention to participate in the Asian Simship Program with respect to a particular Software Title at least **** prior to manufacturing any FPUs it intends to qualify for the program.  In its notice, Publisher shall provide all relevant information, including total number of FPUs to be manufactured, number of FPUs to be simshipped into the Simship Territory, date of simship, etc.  Publisher remains responsible for complying with all relevant import, distribution and packaging requirements as well as any other applicable requirements set forth in the Xbox 360 Publisher Guide. 5.                      ONLINE CONTENT a.             For the purpose of this Section 5, the following capitalized terms have the following meanings: **** **** B.             PUBLISHER MAY, FROM TIME TO TIME, SUBMIT ONLINE CONTENT TO MICROSOFT FOR MICROSOFT TO DISTRIBUTE VIA XBOX LIVE.  **** C.             **** D.             **** E.             WITHIN **** AFTER THE END OF **** WITH RESPECT TO WHICH MICROSOFT OWES PUBLISHER ANY ROYALTY FEES, MICROSOFT SHALL FURNISH PUBLISHER WITH A WRITTEN STATEMENT, TOGETHER WITH PAYMENT FOR ANY AMOUNT SHOWN THEREBY TO BE DUE TO PUBLISHER.  THE STATEMENT WILL CONTAIN INFORMATION SUFFICIENT TO DISCERN HOW THE ROYALTY FEES WERE COMPUTED. 6.                      XBOX LIVE BILLING AND COLLECTION MICROSOFT IS RESPONSIBLE FOR BILLING AND COLLECTING ALL FEES ASSOCIATED WITH XBOX LIVE, INCLUDING FEES FOR SUBSCRIPTIONS AND/OR ANY ONLINE CONTENT FOR WHICH A XBOX LIVE USER MAY BE CHARGED.  **** 7.             TAXES A.             THE AMOUNTS TO BE PAID BY EITHER PARTY TO THE OTHER DO NOT INCLUDE ANY FOREIGN, U.S. FEDERAL, STATE, LOCAL, MUNICIPAL OR OTHER GOVERNMENTAL TAXES, DUTIES, LEVIES, FEES, EXCISES OR TARIFFS, ARISING AS A RESULT OF OR IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, (I) ANY STATE OR LOCAL SALES OR USE TAXES OR ANY VALUE ADDED TAX OR BUSINESS TRANSFER TAX NOW OR HEREAFTER IMPOSED ON THE PROVISION OF ANY SERVICES TO THE OTHER  PARTY UNDER THIS AGREEMENT, (II) TAXES IMPOSED OR BASED ON OR WITH RESPECT TO OR MEASURED BY ANY NET OR GROSS INCOME OR RECEIPTS OF EITHER PARTY, (III) ANY FRANCHISE TAXES, TAXES ON DOING BUSINESS, GROSS RECEIPTS TAXES OR CAPITAL STOCK TAXES (INCLUDING ANY MINIMUM TAXES AND TAXES MEASURED BY ANY ITEM OF TAX PREFERENCE), (IV) ANY TAXES IMPOSED OR ASSESSED AFTER THE DATE UPON WHICH THIS AGREEMENT IS TERMINATED, (V) TAXES BASED UPON OR IMPOSED WITH REFERENCE TO EITHER PARTIES’ REAL AND/OR PERSONAL PROPERTY OWNERSHIP AND (VI) ANY TAXES SIMILAR TO OR IN THE NATURE OF THOSE TAXES DESCRIBED IN (I), (II), (III), (IV) OR (V) ABOVE, NOW OR HEREAFTER IMPOSED ON EITHER PARTY (OR ANY THIRD PARTIES WITH WHICH EITHER PARTY IS PERMITTED TO ENTER INTO AGREEMENTS RELATING TO ITS UNDERTAKINGS HEREUNDER) (ALL SUCH AMOUNTS, TOGETHER WITH ANY PENALTIES, INTEREST OR ANY ADDITIONS THERETO, COLLECTIVELY “TAXES”).   NEITHER PARTY IS LIABLE FOR ANY OF THE OTHER PARTY’S TAXES INCURRED IN CONNECTION WITH OR RELATED TO THE SALE OF GOODS AND SERVICES UNDER THIS AGREEMENT, AND ALL SUCH TAXES ARE THE FINANCIAL RESPONSIBILITY OF THE PARTY OBLIGATED TO PAY SUCH TAXES AS DETERMINED BY THE APPLICABLE LAW, PROVIDED THAT BOTH PARTIES SHALL PAY TO THE OTHER THE APPROPRIATE COLLECTED TAXES IN ACCORDANCE WITH SUBSECTION 6.B BELOW. EACH PARTY AGREES TO INDEMNIFY, DEFEND AND HOLD THE OTHER PARTY HARMLESS FROM ANY   * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   3 -------------------------------------------------------------------------------- TAXES (OTHER THAN COLLECTED TAXES, DEFINED BELOW) OR CLAIMS, CAUSES OF ACTION, COSTS (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) AND ANY OTHER LIABILITIES OF ANY NATURE WHATSOEVER RELATED TO SUCH TAXES TO THE EXTENT SUCH TAXES RELATE TO AMOUNTS PAID UNDER THIS AMENDMENT. B.             ANY SALES OR USE  TAXES DESCRIBED IN 6.A ABOVE THAT (I) ARE OWED BY EITHER PARTY SOLELY AS A RESULT OF ENTERING INTO THIS AGREEMENT AND THE PAYMENT OF THE FEES HEREUNDER, (II) ARE REQUIRED TO BE COLLECTED FROM THAT PARTY UNDER APPLICABLE LAW, AND (III) ARE BASED SOLELY UPON THE AMOUNTS PAYABLE UNDER THIS AGREEMENT (SUCH TAXES THE “COLLECTED TAXES”), WILL BE STATED SEPARATELY AS APPLICABLE ON PAYEE’S INVOICES AND WILL BE REMITTED BY THE OTHER PARTY TO THE PAYEE, UPON REQUEST PAYEE SHALL REMIT TO THE OTHER PARTY OFFICIAL TAX RECEIPTS INDICATING THAT SUCH COLLECTED TAXES HAVE BEEN COLLECTED AND PAID BY THE PAYEE.  EITHER PARTY MAY PROVIDE THE OTHER PARTY AN EXEMPTION CERTIFICATE ACCEPTABLE TO THE RELEVANT TAXING AUTHORITY (INCLUDING WITHOUT LIMITATION A RESALE CERTIFICATE) IN WHICH CASE PAYEE SHALL NOT COLLECT THE TAXES COVERED BY SUCH CERTIFICATE.  EACH PARTY AGREES TO TAKE SUCH COMMERCIALLY REASONABLE STEPS AS ARE REQUESTED BY THE OTHER PARTY TO MINIMIZE SUCH COLLECTED TAXES IN ACCORDANCE WITH ALL RELEVANT LAWS AND TO COOPERATE WITH AND ASSIST THE OTHER PARTY, IN CHALLENGING THE VALIDITY OF ANY COLLECTED TAXES OR TAXES OTHERWISE PAID BY THE PAYOR PARTY.  EACH PARTY SHALL INDEMNIFY AND HOLD THE OTHER PARTY HARMLESS FROM ANY COLLECTED TAXES, PENALTIES, INTEREST, OR ADDITIONS TO TAX ARISING FROM AMOUNTS PAID BY ONE PARTY TO THE OTHER UNDER THIS AGREEMENT, THAT ARE ASSERTED OR ASSESSED AGAINST ONE PARTY TO THE EXTENT SUCH AMOUNTS RELATE TO AMOUNTS THAT ARE PAID TO OR COLLECTED BY ONE PARTY FROM THE OTHER UNDER THIS SECTION. IF ANY TAXING AUTHORITY REFUNDS ANY TAX TO A PARTY THAT THE OTHER PARTY ORIGINALLY PAID, OR A PARTY OTHERWISE BECOMES AWARE THAT ANY TAX WAS INCORRECTLY AND/OR ERRONEOUSLY COLLECTED FROM THE OTHER PARTY, THEN THAT PARTY SHALL PROMPTLY REMIT TO THE OTHER PARTY AN AMOUNT EQUAL TO SUCH REFUND, OR INCORRECT COLLECTION AS THE CASE MAY BE PLUS ANY INTEREST THEREON. C.             IF TAXES ARE REQUIRED TO BE WITHHELD ON ANY AMOUNTS OTHERWISE TO BE PAID BY ONE PARTY TO THE OTHER, THE PAYING PARTY SHALL DEDUCT SUCH TAXES FROM THE AMOUNT OTHERWISE OWED AND PAY THEM TO THE APPROPRIATE TAXING AUTHORITY.  AT A PARTY’S WRITTEN REQUEST AND EXPENSE, THE PARTIES SHALL USE REASONABLE EFFORTS TO COOPERATE WITH AND ASSIST EACH OTHER IN OBTAINING TAX CERTIFICATES OR OTHER APPROPRIATE DOCUMENTATION EVIDENCING SUCH PAYMENT, PROVIDED, HOWEVER, THAT THE RESPONSIBILITY FOR SUCH DOCUMENTATION SHALL REMAIN WITH THE PAYEE PARTY.  IF ONE PARTY IS REQUIRED BY ANY NON-U.S.A. GOVERNMENT TO WITHHOLD INCOME TAXES ON PAYMENTS TO THE OTHER PARTY, THEN SUCH PARTY MAY DEDUCT SUCH TAXES FROM THE AMOUNT OWED TO THE OTHER PARTY AND SHALL PAY THEM TO THE APPROPRIATE TAX AUTHORITY, PROVIDED THAT WITHIN **** OF SUCH PAYMENT, SUCH PARTY DELIVERS TO THE OTHER PARTY AN OFFICIAL RECEIPT FOR ANY SUCH TAXES WITHHELD OR OTHER DOCUMENTS NECESSARY TO ENABLE THE OTHER PARTY TO CLAIM A U.S.A. FOREIGN TAX CREDIT. D.             THIS SECTION 7 SHALL GOVERN THE TREATMENT OF ALL TAXES ARISING AS A RESULT OF OR IN CONNECTION WITH THIS AGREEMENT NOTWITHSTANDING ANY OTHER SECTION OF THIS AGREEMENT. 8.             AUDIT During the term of this Agreement and for **** each party shall keep all usual and proper records related to its performance under this Agreement, including but not limited to audited financial statements and support for all transactions related to the ordering, production, inventory, distribution and billing/invoicing information.  Such records, books of account, and entries will be kept in accordance with generally accepted accounting principles.  Either party (the “Auditing Party”) may audit and/or inspect the other party’s (the “Audited Party”) records no more than **** in any **** period  in order to verify  compliance with the terms of this Agreement.  The Auditing Party may, upon reasonable advance written notice, audit the Audited Party’s records and consult with the Audited Party’s accountants for the purpose of verifying the Audited Party’s compliance with the terms of this Agreement and for a period of ****.  Any such audit will be conducted during regular business hours at the Audited Party’s offices.  Any such audit will be paid for by Auditing Party unless Material discrepancies are disclosed.  As used in this section, “Material” means ****.  If Material discrepancies are disclosed, the Audited Party agrees to pay the Auditing Party for ****.               * Confidential portion omitted and filed separately with the Securities and Exchange Commission.     4 --------------------------------------------------------------------------------   EXHIBIT 2   XBOX 360 ROYALTY TIER SELECTION FORM   PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.   NOTES: 1.         THIS FORM MUST BE SUBMITTED AT LEAST ****.  IF THIS FORM IS NOT SUBMITTED ON TIME, THE ROYALTY RATE WILL DEFAULT TO **** FOR THE APPLICABLE SALES TERRITORY. 2.         A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY.     1.               Publisher Name:_____________________________________________________________________   2.               Xbox 360 Software Title Name: ___________________________________________________________   3. XeMID Number: 4. Manufacturing Region (check one):                 North American         European         Asian                 5. Sales Territory (check one): 6. Final Certification Date:                 North American Sales Territory           Japan Sales Territory           European Sales Territory           Asian Sales Territory                 7. Select Royalty Tier: (check one):    ****                   The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.                                     By (sign)                                                                 Name, Title (Print)                                                                 E-Mail Address (for confirmation of receipt)                                                               Date (Print mm/dd/yy)                           * Confidential portion omitted and filed separately with the Securities and Exchange Commission.       1 --------------------------------------------------------------------------------   EXHIBIT 3   XBOX 360 PUBLISHER ENROLLMENT FORM   PLEASE COMPLETE THIS FORM, SIGN IT, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF YOUR ACCOUNT MANAGER.   NOTE:  PUBLISHER MUST COMPLETE, SIGN AND SUBMIT THIS ENROLLMENT FORM ****.   This Xbox 360 Publisher License Enrollment (“Enrollment”) is entered into between Microsoft Ireland Operations Ltd. (“MIOL”) and __________________ (“Publisher”), and is effective as of the latter of the two signatures identified below.   The terms of that certain Xbox 360 Publisher License Agreement signed by Microsoft Licensing GP and __________________  dated on or about  _________________  (the “Xbox 360 PLA”) are incorporated herein by reference.   1.             Term.  This Enrollment will expire on the date on which the Xbox 360 PLA expires, unless it is terminated earlier as provided for in that agreement.   2.             Representations and Warranties.  By signing this Enrollment, the parties agree to be bound by the terms of this Enrollment and Publisher represents and warrants that: (i) it has read and understood the Xbox 360 PLA, including any amendments thereto, and agree to be bound by those; (ii) it is either the entity that signed the Xbox 360 PLA or its affiliate; and (iii) the information that provided herein is accurate.   3.             Notices; Requests.  All notices and requests in connection with this Enrollment are deemed given on (i) the **** after they are deposited in the applicable country’s mail system (**** if sent internationally), postage prepaid, certified or registered, return receipt requested; or (ii) **** after they are sent by overnight courier, charges prepaid, with a confirming fax; and addressed as follows:   Publisher: THQ (UK) Limited Microsoft: MICROSOFT IRELAND OPERATIONS LTD.       Microsoft European Operations Centre, Address: Ground Floor, Block A, Dukes Court,   Atrium Building Block B,   Duke Street, Woking, Surrey,   Carmenhall Road,   GU21 5BH, UK   Sandyford Industrial Estate       Dublin 18 Attention: Sharron Traversari   Ireland         Fax: +44 1483 770 727           Fax: 353 1 706 4110 Phone: +44 1483 227 261         Attention: MIOL Xbox Accounting Services Email: [email protected]         with a cc to: MICROSOFT CORPORATION       One Microsoft Way       Redmond, WA  98052-6399             Attention: Law & Corporate Affairs Department Consumer       Legal Group, H&ED (Xbox)       Fax:  +1 (425) 706-7329           or to such other address as the party to receive the notice or request so designates by written notice to the other.     [remainder of page intentionally left blank]           * Confidential portion omitted and filed separately with the Securities and Exchange Commission.     2 --------------------------------------------------------------------------------   4.             Billing Address.     For purposes of the Xbox 360 PLA, Exhibit 1, Section 3, Publisher’s billing address for the European Manufacturing Region is as follows:   Name: THQ (UK) LIMITED     Address: Ground Floor, Block A, Dukes Court   Duke Street, Woking, , Surrey, GU21 5BH, UK     VAT number: GB765342225     Attention: Sharron Traversari     Email address: [email protected]     Fax: +44 1483 770 727     Phone: +44 1483 227 261         MICROSOFT IRELAND OPERATIONS LTD.                             PUBLISHER: THQ (UK) LIMITED             By (sign)     By (sign)                 Name (Print)     Name (Print)                 Title     Title                 Date (Print mm/dd/yy)     Date (Print mm/dd/yy)     3 --------------------------------------------------------------------------------   EXHIBIT 4   AUTHORIZED AFFILIATES Publisher affiliates authorized to perform the rights and obligations under this Agreement are:   I.   Name:     II. Name:       Address:       Address:                                                                                       Telephone:       Telephone:       Fax:       Fax:                                                                                                     Publisher will provide Microsoft at least **** written notice of the name and address of each additional Publisher affiliate that Publisher wishes to add to this Exhibit 4.  Any additional Publisher affiliate may not perform any rights or obligations under this Agreement until it has signed and submitted a Publisher Affiliate Agreement (attached below) to Microsoft   PUBLISHER AFFILIATE AGREEMENT   For good and valuable consideration, ______________________, a corporation of ______________________ (“Publisher  Affiliate “) hereby covenants and agrees with Microsoft Licensing, GP, a Nevada general partnership that Publisher  Affiliate will comply with all obligations of _________________________(“Publisher”) pursuant to that certain Xbox 360 Publisher License Agreement between Microsoft and Publisher dated ______________, 200___ (the “Xbox 360 PLA”) and to be bound by the terms and conditions of this Publisher Affiliate Agreement.  Capitalized terms used herein and not otherwise defined will have the same meaning as in the Agreement. Publisher Affiliate acknowledges that its agreement herein is a condition for Publisher Affiliate to exercise the rights and perform the obligations established by the terms of the Xbox 360 PLA.  Publisher Affiliate and Publisher will be jointly and severally liable to Microsoft for all obligations related to Publisher Affiliate’s exercise of the rights, performance of obligations, or receipt of Confidential Information under the Xbox 360 PLA.  This Publisher Affiliate Agreement may be terminated in the manner set forth in the Xbox 360 PLA.  Termination of this Publisher Affiliate Agreement does not terminate the Xbox 360 PLA with respect to Publisher or any other Publisher Affiliates. IN WITNESS WHEREOF, Publisher Affiliate has executed this agreement as of the date set forth below.  All signed copies of this Publisher Affiliate Agreement will be deemed originals.   ___________________________ Signature   ___________________________ Title   ___________________________ Name (Print)   ___________________________ Date                 * Confidential portion omitted and filed separately with the Securities and Exchange Commission.   1 --------------------------------------------------------------------------------   EXHIBIT 5   NON-DISCLOSURE AGREEMENT     [Attached]       1 --------------------------------------------------------------------------------   EXHIBIT 6   JAPAN AND ASIA ROYALTY INCENTIVE PROGRAM 1.                      OVERVIEW To encourage Publisher to release localized Software Titles in the Japan and Asian Sales Territories during ****, Publisher may qualify for a special incentive payment equal to **** according to the terms of this Exhibit 6 (the “Royalty Incentive Program”). 2.                      QUALIFIED FPUS In order to qualify for the Royalty Incentive Program, the following requirements must be met.                 A.             APPROVED CONCEPT SUBMISSION FORM.  PUBLISHER MUST SEND MICROSOFT A COMPLETED CONCEPT SUBMISSION FORM (IN A FORMAT TO BE PROVIDED BY MICROSOFT) FOR ANY SOFTWARE TITLES PUBLISHER INTENDS TO QUALIFY FOR THE ROYALTY INCENTIVE PROGRAM NO LATER THAN ****.   IN ORDER FOR FPUS TO QUALIFY FOR THE ROYALTY INCENTIVE PROGRAM, PUBLISHER’S CONCEPT FOR THE SOFTWARE TITLE MUST BE RECEIVED ON TIME AND APPROVED BY MICROSOFT, SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD.                 B.             J-SIGNED.  ONLY FPUS THAT ARE “J-SIGNED” (AS DEFINED IN THE XBOX 360 PUBLISHER GUIDE) TO TECHNICALLY RESTRICT THEIR OPERATION TO XBOX CONSOLES MADE FOR THE JAPAN AND ASIAN SALES TERRITORIES WILL QUALIFY FOR THE ROYALTY INCENTIVE PROGRAM.                 C.             ****                 D.             **** E.             PUBLIC RELATIONS.  IN ORDER TO QUALIFY FOR THE ROYALTY INCENTIVE PROGRAM, PUBLISHER MUST ALLOW MICROSOFT TO PUBLICLY DISCLOSE THAT THE SOFTWARE TITLE WILL BE RELEASED ON XBOX 360 IN THE JAPAN OR ASIAN SALES TERRITORIES; PROVIDED, THAT THE FORM AND CONTENT OF SUCH PUBLIC DISCLOSURE IS SUBJECT TO PUBLISHER’S PRIOR WRITTEN APPROVAL.                 F.              TIMELY PAYMENT.  PUBLISHER MUST PAY ROYALTY FEES ON TIME IN ACCORDANCE WITH THIS AGREEMENT OR ITS CREDIT ARRANGEMENT WITH MICROSOFT IN ORDER TO QUALIFY FOR THE ROYALTY INCENTIVE PROGRAM. 3.                      PAYMENT A.             MANUFACTURING PERIODS.  THE ROYALTY INCENTIVE PROGRAM WILL ONLY APPLY TO QUALIFIED FPUS MANUFACTURED **** (AS APPLICABLE FOR THE FPU). B.             INCENTIVE PAYMENTS.  MICROSOFT WILL MAKE ROYALTY INCENTIVE PAYMENTS WITHIN **** IN WHICH QUALIFIED FPUS WERE MANUFACTURED. C.             LIMIT.   SUBJECT TO THE TERMS OF THIS EXHIBIT 6, PUBLISHER’S ROYALTY INCENTIVE PAYMENT WILL EQUAL ****.   PUBLISHER ACKNOWLEDGES THAT THE ROYALTY INCENTIVE PAYMENT WILL ONLY APPLY TO ****                     * Confidential portion omitted and filed separately with the Securities and Exchange Commission.     2 --------------------------------------------------------------------------------   EXHIBIT 7   XBOX 360 LIVE INCENTIVE PROGRAM     1.                      XBOX 360 LIVE INCENTIVE PROGRAM To encourage Publisher to support functionality for Xbox Live in its Xbox 360 Software Titles and to drive increased usage of Xbox Live via Xbox 360, Publisher may qualify for certain payments based on the amount of Xbox Live Market Share (defined in Section 2.a. of this Exhibit 7 below) created by Publisher’s Multiplayer Software Titles (defined in Section 2.c. of this Exhibit 7 below).  Each Accounting Period (defined in Section 3.c. of this exhibit below), Microsoft will calculate Publisher’s Xbox Live Market Share.  If it is above ****, then Microsoft will pay Publisher an amount ****.   The basic equation for calculating the Publisher’s payment under this program is: **** The following sections define the elements of this basic equation. Notwithstanding anything herein to the contrary, use of or revenue derived from online games for which an end user pays a subscription separate from any account established for basic use of Xbox Live, are excluded from this Xbox 360 Live Incentive Program. 2.                      XBOX LIVE MARKET SHARE A.             “XBOX LIVE MARKET SHARE” = ****. B.             “**** UNIQUE USER MARKET SHARE” MEANS ****. C.             “MULTIPLAYER SOFTWARE TITLES” MEANS A SOFTWARE TITLE FOR XBOX 360 THAT SUPPORTS REAL-TIME MULTIPLAYER GAME PLAY. D.             “**** UNIQUE USERS” MEANS ****. E.             “PAYING SUBSCRIBER” MEANS ****. F.              “**** UNIQUE USER MARKET SHARE” MEANS ****. G.             “**** UNIQUE USERS” MEANS THE ****. H.             “NEW SUBSCRIBER MARKET SHARE” MEANS ****. I.              “NEW SUBSCRIBER” MEANS A PAYING SUBSCRIBER WHO PAYS FOR AN XBOX LIVE ACCOUNT FOR THE FIRST TIME.  A NEW SUBSCRIBER IS ATTRIBUTED TO THE FIRST MULTIPLAYER SOFTWARE TITLE HE OR SHE PLAYS, EVEN IF SUCH PLAY WAS DURING A FREE-TRIAL PERIOD WHICH WAS LATER CONVERTED INTO A PAYING SUBSCRIPTION.  EACH PAYING SUBSCRIBER CAN ONLY BE COUNTED AS A NEW SUBSCRIBER ONCE. 3.                      PARTICIPATION POOL A.             “PARTICIPATION POOL” MEANS ****. B.             “SUBSCRIPTION REVENUE” MEANS ****. C.             “ACCOUNTING PERIOD” MEANS A ****, WITHIN THE TERM (DEFINED BELOW); PROVIDED THAT IF THE EFFECTIVE DATE OF THIS AGREEMENT OR THE EXPIRATION DATE OF THIS PROGRAM FALLS WITHIN SUCH ****, THEN THE APPLICABLE PAYMENT CALCULATION SET FORTH BELOW SHALL BE MADE FOR A PARTIAL ACCOUNTING PERIOD, AS APPROPRIATE. * Confidential portion omitted and filed separately with the Securities and Exchange Commission. 3 -------------------------------------------------------------------------------- 4.                      EXAMPLE **** 5.              TERM This Xbox 360 Live Incentive Program will be available for ****.    Microsoft reserves the right to change the weights for averaging set forth in Section 2.a. of this exhibit upon written notice to Publisher, but no more frequently than ****. 6.                      PAYMENTS In the event Publisher qualifies for a payment under this program during an Accounting Period, Microsoft shall furnish Publisher with a statement, together with payment for any amount shown thereby to be due to Publisher within ****.                 * Confidential portion omitted and filed separately with the Securities and Exchange Commission.     4 --------------------------------------------------------------------------------

EXHIBIT 10.49 CUSIP Number:                        -------------------------------------------------------------------------------- AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 29, 2006 among ENERGY TRANSFER PARTNERS, L.P., as the Borrower, WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent, LC Issuer and Swingline Lender, BANK OF AMERICA, N.A. and CITIBANK, N.A., as Co-Syndication Agents, BNP PARIBAS and THE ROYAL BANK OF SCOTLAND plc, as Co-Documentation Agents, DEUTSCHE BANK SECURITIES INC., CREDIT SUISSE, CAYMAN ISLANDS BRANCH, UBS SECURITIES LLC, JPMORGAN CHASE BANK, N.A. and SUNTRUST BANK, as Senior Managing Agents, and The Other Lenders Party Hereto WACHOVIA CAPITAL MARKETS, LLC, as Sole Lead Arranger and Sole Book Manager $1,300,000,000 Five Year Revolving Credit Facility   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS   Section         Page ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS    1 1.01    Defined Terms    1 1.02    Other Interpretive Provisions    26 1.03    Accounting Terms    26 1.04    Rounding    27 1.05    Times of Day    27 1.06    Letter of Credit Amounts    27 ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS    27 2.01    Revolving Credit Loans    27 2.02    Swingline Loans    28 2.03    Requests for New Loans    29 2.04    Continuations and Conversions of Existing Loans    30 2.05    Use of Proceeds    31 2.06    Prepayments of Loans    31 2.07    Letters of Credit    32 2.08    Requesting Letters of Credit    32 2.09    Reimbursement and Participations    33 2.10    No Duty to Inquire    35 2.11    LC Collateral    36 2.12    Interest Rates and Fees    37 2.13    Evidence of Debt    38 2.14    Payments Generally; Administrative Agent’s Clawback    39 2.15    Sharing of Payments by Lenders    40 2.16    Reductions in Commitment    41 2.17    Increase in Aggregate Commitments    41 2.18    Extension of Maturity Date; Removal of Lenders    42 ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY    45 3.01    Taxes    45 3.02    Illegality    47 3.03    Inability to Determine Rates    47 3.04    Increased Costs; Reserves on Eurodollar Loans    48 3.05    Compensation for Losses    49 3.06    Mitigation Obligations; Replacement of Lenders    50 3.07    Survival    50 ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS    50 4.01    Conditions of Initial Credit Extension    50 4.02    Conditions to all Credit Extensions    52 ARTICLE V. REPRESENTATIONS AND WARRANTIES    53 5.01    No Default    53   i -------------------------------------------------------------------------------- 5.02    Organization and Good Standing    53 5.03    Authorization    53 5.04    No Conflicts or Consents    53 5.05    Enforceable Obligations    54 5.06    Initial Financial Statements; No Material Adverse Change    54 5.07    Taxes, Obligations and Restrictions    54 5.08    Full Disclosure    55 5.09    Litigation    55 5.10    ERISA    55 5.11    Compliance with Laws    55 5.12    Environmental Laws    56 5.13    Borrower’s Subsidiaries    57 5.14    Title to Properties; Licenses    57 5.15    Government Regulation    57 5.16    Solvency    58 ARTICLE VI. AFFIRMATIVE COVENANTS    58 6.01    Payment and Performance    58 6.02    Books, Financial Statements and Reports    59 6.03    Other Information and Inspections    61 6.04    Notice of Material Events    61 6.05    Maintenance of Properties    62 6.06    Maintenance of Existence and Qualifications    62 6.07    Payment of Trade Liabilities, Taxes, etc.    62 6.08    Insurance    63 6.09    Compliance with Agreements and Law    63 6.10    Environmental Matters    63 6.11    Guaranties of Subsidiaries    64 6.12    Compliance with Agreements    65 6.13    Maintenance of Separateness    65 ARTICLE VII. NEGATIVE COVENANTS    66 7.01    Indebtedness    66 7.02    Limitation on Liens    67 7.03    Limitation on Mergers, Issuances of Subsidiary Securities    68 7.04    Limitation on Sales of Property and Sale-Leaseback Transactions    69 7.05    Limitation on Restricted Payment    70 7.06    Limitation on Investments, Loans and Advances    70 7.07    Change in Nature of Businesses    71 7.08    Transactions with Affiliates    71 7.09    Restrictive and Negative Pledge Agreements    71 7.10    Hedging Arrangements and Open Positions    71 7.11    Commingling of Deposit Accounts and Accounts    71 7.12    Leverage Ratio    72 ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES    72 8.01    Events of Default    72 8.02    Remedies Upon Event of Default    75 8.03    Application of Funds    75 ARTICLE IX. ADMINISTRATIVE AGENT    76 9.01    Appointment and Authority    76 9.02    Rights as a Lender    76   ii -------------------------------------------------------------------------------- 9.03    Exculpatory Provisions    77 9.04    Reliance by Administrative Agent    77 9.05    Delegation of Duties    78 9.06    Resignation of Administrative Agent    78 9.07    Non-Reliance on Administrative Agent and Other Lenders    79 9.08    No Other Duties, Etc.    79 9.09    Administrative Agent May File Proofs of Claim    79 9.10    Guaranty Matters    80 ARTICLE X. MISCELLANEOUS    80 10.01    Amendments, Etc.    80 10.02    Notices; Effectiveness; Electronic Communication    81 10.03    No Waiver; Cumulative Remedies    83 10.04    Expenses; Indemnity; Damage Waiver    83 10.05    Payments Set Aside    85 10.06    Successors and Assigns    85 10.07    Treatment of Certain Information; Confidentiality    88 10.08    Right of Setoff    89 10.09    Interest Rate Limitation    90 10.10    Counterparts; Integration; Effectiveness    90 10.11    Survival of Representations and Warranties    90 10.12    Severability    90 10.13    Replacement of Lenders    91 10.14    Governing Law; Jurisdiction; Etc.    91 10.15    Waiver of Jury Trial    92 10.16    USA PATRIOT Act Notice    92 10.17    Time of the Essence    93 10.18    No Recourse    93 10.19    Existing Credit Agreement    93 SIGNATURES    S-1   iii -------------------------------------------------------------------------------- Exhibit 10.49 AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of June 29, 2006, among ENERGY TRANSFER PARTNERS, L.P., a Delaware limited partnership (the “Borrower”), WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent, LC Issuer and Swingline Lender, BANK OF AMERICA, N.A. and CITIBANK, N.A., as Co-Syndication Agents, BNP PARIBAS and THE ROYAL BANK OF SCOTLAND plc, as Co-Documentation Agents, DEUTSCHE BANK SECURITIES INC., CREDIT SUISSE, CAYMAN ISLANDS BRANCH, UBS SECURITIES LLC, JPMORGAN CHASE BANK, N.A. and SUNTRUST BANK, as Senior Managing Agents, and each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”). In consideration of the mutual covenants and agreements contained herein and in consideration of the loans which may hereafter be made by Lenders to, and the Letters of Credit that may hereafter be issued by the LC Issuer for the account of, the Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: “Administrative Agent” means Wachovia Bank, National Association, in its capacity as administrative agent for the Lenders hereunder. “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent. “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Aggregate Commitments” means the Commitments of all the Lenders. The initial amount of the Aggregate Commitments is $1,300,000,000, subject to optional reductions pursuant to Section 2.16 and subject to increases as provided in Section 2.17. “Agreement” means this Amended and Restated Credit Agreement, as amended or supplemented from time to time in accordance with the terms hereof. -------------------------------------------------------------------------------- “Applicable Percentage” means with respect to any Lender, the percentage of the Aggregate Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. “Applicable Rate” means, on any day, with respect to any Eurodollar Loan or commitment fees hereunder, respectively, the percent per annum set forth below under the caption “Eurodollar Margin,” or “Commitment Fee Rate,” respectively, based upon the Level corresponding to the Ratings by the Rating Agencies applicable on such date:   Ratings: (Fitch/Moody’s/S&P)    Eurodollar Margin     Commitment Fee Rate   Level 1 >BBB+/Baa1/BBB+    0.300 %   0.070 % Level 2 BBB/Baa2/BBB    0.400 %   0.090 % Level 3 BBB-/Baa3/BBB-    0.550 %   0.110 % Level 4 BB+/Ba1/BB+    0.700 %   0.125 % Level 5 <BB/Ba2/BB    0.850 %   0.175 % For purposes of the foregoing, (a) if only one Rating is determined, the Level corresponding to that Rating shall apply; (b) if there are only two Ratings, then (i) if there is a one Level difference between the two Ratings, then the Level corresponding to the higher Rating shall be used, and (ii) if there is a greater than one Level difference between the Ratings, then the Level that is one Level below the higher Rating will be used; (c) if there are three Ratings, then (i) if all three are at different Levels, the middle Level shall apply and (ii) if two Ratings correspond to the same Level and the third is different, the Level corresponding to the two same Levels shall apply; (d) if the Ratings established or deemed to have been established by the Rating Agencies shall be changed (other than as a result of a change in the rating system of such Rating Agency), such change shall be effective as of the date on which it is first announced by the applicable Rating Agency and (e) if no Rating is determined, Level 5 shall apply. Changes in the Applicable Rate will occur automatically without prior notice as changes in the applicable Ratings occur, and each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. In addition to the increases, if any, in the Applicable Rate pursuant to the immediately preceding paragraph, on each day that the Facility Usage exceeds 50% of the Aggregate Commitments, the then effective Applicable Rate set forth above under “Eurodollar Margin”   2 -------------------------------------------------------------------------------- shall be increased by 0.05 % per annum for Level 1 and Level 2 and shall be increased by 0.10% per annum for Level 3, Level 4 and Level 5. The Applicable Rate for Base Rate Loans at all times is zero percent (0.0%). “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b), and accepted by the Administrative Agent, in substantially the form of Exhibit A or any other form approved by the Administrative Agent. “Attributable Debt” means, with respect to any Sale and Lease-Back Transaction not involving a Capital Lease Obligation, as of any date of determination, the total obligation (discounted to present value at the rate of interest implicit in the lease included in such transaction) of the lessee for rental payments (other than accounts required to be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute payments for property rights) during the remaining portion of the term (including extensions which are at the sole option of the lessor) of the lease included in such transaction (in the case of any lease which is terminable by the lessee upon the payment of a penalty, such rental obligation shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated). “Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Rate in effect on such day plus  1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. “Base Rate Loan” means a Loan or portion of a Loan that bears interest based on the Base Rate. “Borrower” means Energy Transfer Partners, L.P., a Delaware limited partnership. “Borrowing” means Loans of the same Type, made, Converted or Continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.   3 -------------------------------------------------------------------------------- “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. “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the LC Issuer and the Lenders, as collateral for the LC Obligations, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the LC Issuer. Derivatives of such term have corresponding meanings. “Cash Equivalents” means Investments in: (a) marketable obligations, maturing within 12 months after acquisition thereof, issued or unconditionally guaranteed by the United States or an instrumentality or agency thereof and entitled to the full faith and credit of the United States; (b) demand deposits and time deposits (including certificates of deposit) maturing within 12 months from the date of deposit thereof, (i) with any office of any Lender or (ii) with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long-term certificates of deposit are rated BBB+ or Baa1 or better, respectively, by either Rating Agency; (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in subsection (a) above entered into with (i) any Lender or (ii) any other commercial bank meeting the specifications of subsection (b) above; (d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S&P; and (e) money market or other mutual funds substantially all of whose assets comprise securities of the types described in subsections (a) through (d) above. “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. “Change of Control” means the existence of any of the following: (a) any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than an Exempt Person, shall be the legal or beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the combined voting power of the then total Equity Interests of the General Partner; or (b) General Partner shall not be the sole legal and beneficial owner of the 2% general   4 -------------------------------------------------------------------------------- partner interest in the Borrower and the right to serve as the sole general partner of the Borrower; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the General Partner by Persons who were neither (i) nominated, approved or appointed by the board of directors of the General Partner nor (ii) appointed by directors so nominated, approved or appointed. As used herein “Exempt Person” means (i) Energy Transfer Equity, L.P., and any successor by merger, consolidation or reincorporation (the “GP Owner”), so long as no person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than an Exempt Person under the foregoing clause (i), shall be the legal or beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the combined voting power of the then total Equity Interests (A) of a general partner of the GP Owner if the GP Owner is a partnership or (b) of the GP Owner if such GP Owner is a corporation or other entity other than a partnership and (ii) any of (A) Ray C. Davis, Kelcy L. Warren, H. Michael Krimbill, the heirs at law of such individuals, entities or trusts owned by or established for the benefit of such individuals or their respective heirs at law (such as entities or trusts established for estate planning purposes), (B) Natural Gas Partners VI, L.P., or (C) entities owned solely by existing and former management employees of the General Partner. “Clean Down Period” means a period of 30 consecutive days during each Fiscal Year that (i) is specified by the Borrower as the Clean Down Period by the delivery within 15 days following the end of such period of a certificate in form satisfactory to the Administrative Agent stating that the Borrower was in compliance with Section 7.12(a) during such period and indicating the highest Leverage Ratio applicable to such period or (ii) is deemed to occur as provided in the definition of Excluded Inventory Indebtedness. “Closing Date” means the first date all the conditions precedent in Section 4.01 and Section 4.02 are satisfied or waived in accordance with Section 10.01. “Code” means the Internal Revenue Code of 1986, together with all rules and regulations promulgated with respect thereto. “Commission” means the United States Securities and Exchange Commission. “Commitment” means, as to each Lender, its obligation (a) to make Revolving Credit Loans to the Borrower pursuant to Section 2.01, and (b) to purchase participations in LC Obligations and Swingline Loans, in an aggregate principal amount at any one time outstanding not to exceed the Commitment amount set forth opposite such Lender’s name on Schedule 1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. “Commitment Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.16, and (c) the date of termination of the Commitment of each Lender to make Loans and of the obligation of the LC Issuer to make LC Credit Extensions pursuant to Section 8.02.   5 -------------------------------------------------------------------------------- “Compliance Certificate” means a certificate substantially in the form of Exhibit B. “Consolidated” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial condition, results of operations, cash flows, assets, liabilities, etc. refer to the consolidated financial statements, financial condition, results of operations, cash flows, assets, liabilities, etc. of such Person and its properly consolidated subsidiaries. Notwithstanding the foregoing, when used in reference to the Borrower and its Restricted Subsidiaries, “Consolidated” shall exclude the effect on the consolidated financial statements, financial condition, results of operations, cash flows, assets, liabilities, etc. of the Borrower and its Restricted Subsidiaries of all Unrestricted Subsidiaries, determined as if Restricted Persons held no Equity Interest in Unrestricted Subsidiaries, and, without limiting the foregoing, excluding all Equity Interests in Unrestricted Subsidiaries and dividends and distributions received from Unrestricted Subsidiaries. “Consolidated EBITDA” means, for any period, the Consolidated Net Income of the Borrower and its Restricted Subsidiaries for such period, plus (a) each of the following to the extent deducted in determining such Consolidated Net Income (i) all Consolidated Interest Expense, (ii) all income taxes (including any franchise taxes to the extent based upon net income), (iii) all depreciation and amortization (including amortization of good will and debt issue costs), (iv) any other non-cash charges or losses, and (v) so long as any of the HOLP Companies are Unrestricted Subsidiaries, general and administrative expense of the Borrower (on an unconsolidated basis) to the extent allocated to the HOLP Companies not to exceed $5,000,000 for any period of four Fiscal Quarters, minus (b) each of the following (i) all non-cash items of income or gain which were included in determining such Consolidated Net Income, and (ii) any cash payments made during such period in respect of items described in clause (a)(iv) above subsequent to the Fiscal Quarter in which the relevant non-cash charges or losses were reflected as a charge in the statement of Consolidated Net Income. Consolidated EBITDA shall be subject to the adjustments set forth in the following clauses (1) and (2) for all purposes under this Agreement other than for purposes of Section 7.12(b): (1) If, since the beginning of the four Fiscal Quarter period ending on the date for which Consolidated EBITDA is determined, any Restricted Person shall have made any disposition or acquisition of operating assets, shall have consolidated or merged with or into Person (other than another Restricted Person), or shall have made any disposition of a Restricted Person or an acquisition of a Person that becomes a Restricted Person, Consolidated EBITDA shall be calculated giving pro forma effect thereto as if the disposition, acquisition, consolidation or merger had occurred on the first day of such period. Such pro forma effect shall be determined (A) in good faith by the chief financial officer, principal accounting officer or treasurer of the Borrower and acceptable to the Administrative Agent, (B) giving effect to any anticipated or proposed cost savings related to such disposition, acquisition, consolidation or merger, to the extent approved by Administrative Agent, such approval not to be unreasonably withheld, and (C) without giving effect to any anticipated or proposed change in operations, revenues, expenses or other items included in the computation of Consolidated EBITDA.   6 -------------------------------------------------------------------------------- (2) Consolidated EBITDA shall be increased by the amount of any applicable Material Project EBITDA Adjustments. “Consolidated Funded Indebtedness” means as of any date, the sum of the following (without duplication): (a) all Indebtedness which is classified as “long-term indebtedness” on a Consolidated balance sheet of the Borrower and its Restricted Subsidiaries prepared as of such date in accordance with GAAP and any current maturities and other principal amount in respect of such Indebtedness due within one year but which was classified as “long-term indebtedness” at the creation thereof, (b) Indebtedness for borrowed money of the Borrower and its Restricted Subsidiaries outstanding under a revolving credit or similar agreement, notwithstanding the fact that any such borrowing is made within one year of the expiration of such agreement, (c) Capital Leases Obligations of the Borrower and its Restricted Subsidiaries, and (d) all Indebtedness in respect of any Guarantee by the Borrower or any of its Restricted Subsidiaries of Indebtedness of any Person other than the Borrower or any of its Restricted Subsidiaries, but excluding (i) Attributable Debt of the Borrower and its Restricted Subsidiaries, (ii) Performance Guaranties and (iii) obligations of the Borrower or any Restricted Subsidiaries under Hybrid Securities; provided, however, on each day, other than during each Clean Down Period, Consolidated Funded Indebtedness shall exclude the amount of Excluded Inventory Indebtedness. “Consolidated Interest Expense” means, for any period, all interest paid or accrued (that has resulted in a cash payment in the period or will result in a cash payment in future quarter(s)) during such period on, and all fees and related charges in respect of, Indebtedness which was deducted in determining Consolidated Net Income during such period. “Consolidated Net Income” means, for any period, the Borrower’s and its Restricted Subsidiaries’ gross revenues for such period, minus the Borrower’s and its Restricted Subsidiaries’ expenses and other proper charges against income (including taxes on income to the extent imposed), determined on a Consolidated basis after eliminating earnings or losses attributable to outstanding minority interests and excluding the net earnings or losses of any Person, other than a Restricted Subsidiary, in which the Borrower or any of its Restricted Subsidiaries has an ownership interest. Consolidated Net Income shall not include (a) any gain or loss from the sale of assets other than in the ordinary course of business, (b) any extraordinary gains or losses, or (c) any non-cash gains or losses resulting from mark to market activity as a result of SFAS 133. Consolidated Net Income for any period shall (i) include any cash dividends and distributions actually received during such period from any Person, other than a Restricted Subsidiary, in which the Borrower or any of its Restricted Subsidiaries has an ownership interest and (ii) specifically exclude dividends and distributions from HOLP and its Subsidiaries at any time prior to their designation as Restricted Subsidiaries pursuant to Section 6.11. “Consolidated Net Tangible Assets” means, at any date of determination, the total amount of Consolidated assets of the Borrower and its Restricted Subsidiaries after deducting therefrom: (a) all current liabilities (excluding (i) any current liabilities that by their terms are extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed, and (ii) current maturities of long-term debt); and (b) the value (net of any applicable reserves and accumulated amortization) of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth, or on   7 -------------------------------------------------------------------------------- a pro forma basis would be set forth, on the Consolidated balance sheet of the Borrower and its Restricted Subsidiaries for the most recently completed Fiscal Quarter, prepared in accordance with GAAP. “Continue,” “Continuation,” and “Continued” shall refer to the continuation pursuant to Section 2.04 of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period. “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. “Convert,” “Conversion,” and “Converted” shall refer to a conversion pursuant to Section 2.04 or Article III of one Type of Loan into another Type of Loan. “Credit Extension” means each of the following: (a) a Borrowing and (b) an LC Credit Extension. “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default. “Default Rate” means, at the time in question, (a) for any Eurodollar Loan (up to the end of the applicable Interest Period), two percent (2%) per annum plus the Applicable Rate for Eurodollar Loans plus the Eurodollar Rate then in effect, (b) for each Base Rate Loan, Swingline Loan or LC Obligation, two percent (2%) per annum plus the Applicable Rate for Base Rate Loans plus the Base Rate or (c) for each Letter of Credit, two percent (2%) per annum plus the Applicable Rate for Eurodollar Loans; provided, however, the Default Rate shall never exceed the Maximum Rate. “Default Rate Period” means (i) any period during which any Event of Default specified in Section 8.01(a), (b) or (j) is continuing and (ii) upon the request of the Majority Lenders, any period during which any other Event of Default is continuing. “Disclosure Schedule” means Schedule 3 hereto. “Dollar” and “$” mean lawful money of the United States. “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and the LC Issuer, and (ii) unless an Event of Default has occurred and is continuing, the   8 -------------------------------------------------------------------------------- Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries. “Environmental Laws” means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination. “ERISA” means the Employee Retirement Income Security Act of 1974, together with all rules and regulations promulgated with respect thereto. “ERISA Affiliate” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are treated as a single employer under Section 414 of the Code. “ERISA Plan” means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability. “Eurodollar Loan” means a Loan or portion of a Loan that bears interest at a rate based on the Eurodollar Rate. “Eurodollar Rate” means, with respect to any Eurodollar Loan for any Interest Period, (a) the rate per annum appearing on Page 3750 of the Bridge Telerate Service (formerly Dow Jones Market Service) (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period; (b) if for any reason the rate specified in clause (a) of this definition does not so appear on Page 3750 of the Bridge Telerate Service (or any successor or   9 -------------------------------------------------------------------------------- substitute page or any such successor to or substitute for such Service), the rate per annum appearing on Reuters Screen LIBO page (or any successor or substitute page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period for a maturity comparable to such Interest Period; and (c) if the rate specified in clause (a) of this definition does not so appear on Page 3750 of the Bridge Telerate Service (or any successor or substitute page or any such successor to or substitute for such Service) and if no rate specified in clause (b) of this definition so appears on Reuters Screen LIBO page (or any successor or substitute page), the average of the interest rates per annum at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London offices of Wachovia Bank, National Association in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. “Event of Default” has the meaning given to such term in Section 8.01. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Excluded Inventory Indebtedness” means Indebtedness of Restricted Persons (whether under this Agreement or other Indebtedness permitted to be incurred under the terms of this Agreement) incurred to finance the purchase or holding by one or more Restricted Persons of inventories of gas held in storage at the Bammel reservoir for sale and delivery in the ordinary course of business, that is designated by the Borrower as Excluded Inventory Indebtedness, subject to the following conditions: (i) the Borrower will designate the amount of Indebtedness that is Excluded Inventory Indebtedness in connection with each determination of Consolidated Funded Indebtedness, (ii) the aggregate amount of Excluded Inventory Indebtedness on any day shall not exceed the value of inventory then owned by a Restricted Person on such day which is held in storage at the Bammel reservoir for sale and delivery in the ordinary course of business and with respect to which the price has been hedged to substantially eliminate price risk and in compliance with the Risk Management Policy, the value of such inventory determined based on the price as so hedged and any margin calls relating to such hedges, (iii) the aggregate amount of Excluded Inventory Indebtedness on any day shall not exceed (A) $450,000,000 prior to April 1, 2007 and (B) $300,000,000 on or after April 1, 2007, and (iv) no Indebtedness shall be designated as Excluded Inventory Indebtedness in the last 30 days of a Fiscal Year if the Borrower shall not otherwise have declared a Clean Down Period during such Fiscal Year. “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the LC Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or   10 -------------------------------------------------------------------------------- is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a). “Existing Credit Agreement” means that certain Credit Agreement dated as of December 12, 2005, among Borrower, Wachovia Bank, National Association, as Administrative Agent, LC Issuer and Swingline Lender, Bank of America, N.A. and Citibank, N.A., as co-syndication agents, BNP Paribas and The Royal Bank of Scotland plc, as co-documentation agents, and a syndicate of lenders party thereto. “Existing Letters of Credit” means the Letters of Credit (as defined in the Existing Credit Agreement) issued and outstanding under the Existing Credit Agreement and which shall remain issued and outstanding for purposes of this Agreement. “Facility Usage” means, at the time in question, the aggregate amount of outstanding Loans and LC Obligations at such time. “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. “Fee Letter” means the letter agreement, dated June 12, 2006, among the Borrower, the Administrative Agent and Wachovia Capital Markets, LLC. “Fiscal Quarter” means a three-month period ending on the last day of November, February, May and August. “Fiscal Year” means a twelve month period ending on August 31. “Fitch” means Fitch, Inc., or its successor. “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.   11 -------------------------------------------------------------------------------- “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. “GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of the Borrower and its Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to the Borrower or with respect to the Borrower and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Lender, and the Borrower and Majority Lenders agree to such change insofar as it affects the accounting of the Borrower or of the Borrower and its Consolidated Subsidiaries. “General Partner” means Energy Transfer Partners GP, L.P., a Delaware limited partnership, or the corporate, partnership or limited liability successor thereto, in either case, which is the sole general partner of the Borrower. “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank). “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The term “Guarantee” shall exclude endorsements in the ordinary course of business of negotiable   12 -------------------------------------------------------------------------------- instruments in the course of collection. The amount of any Guarantee shall be deemed to be an amount equal to the lesser of (i) the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made, or (ii) if not stated or determinable or if such Guarantee by its terms is limited to less than the full amount of such primary obligation, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith or the amount to which such Guarantee is limited. The term “Guarantee” as a verb has a corresponding meaning. “Guarantors” means any Subsidiary of the Borrower that now or hereafter executes and delivers a Guaranty to the Administrative Agent pursuant to Section 6.11. “Guaranty” means, collectively, one or more Guarantees of the Obligations made by the Guarantors in favor of the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit C, including any supplements to an existing Guaranty in substantially the form that is a part of Exhibit C. “Hazardous Materials” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise. “Hedging Contract” means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement. “Hedging Termination Value” means, in respect of any one or more Hedging Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Contracts, (a) for any date on or after the date such Hedging Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Contracts (which may include a Lender or any Affiliate of a Lender). “Heritage Note Purchase Agreements” means collectively, (a) the Note Purchase Agreement dated as of June 25, 1996, among HOLP and the purchasers named therein, as amended and supplemented; (b) the Note Purchase Agreement dated as of November 19, 1997, among HOLP and the purchasers named therein, as amended and supplemented; and (c) the Note Purchase Agreement dated as of August 10, 2000 among HOLP and the purchasers named therein, as amended and supplemented. “HHI” means Heritage Holdings, Inc., a Delaware corporation, or the corporate, partnership or limited liability successor thereto.   13 -------------------------------------------------------------------------------- “HOLP” means Heritage Operating, L.P., a Delaware limited partnership, or the corporate, partnership or limited liability successor thereto. “HOLP Companies” means HOLP and each Wholly-Owned Subsidiary of HOLP, whether now existing or hereafter formed or acquired. “Hybrid Securities” means any hybrid securities consisting of trust preferred securities or deferrable interest subordinated debt securities with maturities of at least 20 years issued by wholly owned special purpose entities that are Restricted Subsidiaries. “Indebtedness” means, with respect to any Person, without duplication: (a) indebtedness for borrowed money, all obligations upon which interest charges are customarily paid and all obligations evidenced by any bond, note, debenture or other similar instrument which such Person has directly or indirectly created, incurred or assumed; (b) obligations of others secured by any Lien in respect of property owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness; provided that the amount of such Indebtedness, if such Person has not assumed the same or become liable therefor, shall in no event be deemed to be greater than the fair market value from time to time of the property subject to such Lien; (c) indebtedness, whether or not for borrowed money (excluding trade payables and accrued expenses arising in the ordinary course of business and payable in the ordinary course of business), with respect to which such Person has become directly or indirectly liable and which represents the deferred purchase price (or a portion thereof) or has been incurred to finance the purchase price (or a portion thereof) of any property or service or business acquired by such Person, whether by purchase, consolidation, merger or otherwise; (d) the principal component of Capital Lease Obligations to the extent such obligations would, in accordance with GAAP, appear on a balance sheet of such Person; (e) Attributable Debt of such Person in respect of Sale and Lease-Back Transactions not involving a Capital Lease Obligation; (f) obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends or distribution; (g) obligations, contingent or fixed, of such person as an account party in respect of letters of credit (other than letters of credit incurred in the ordinary course of business and consistent with past practice or letters of credit outstanding on the effective date of this Agreement);   14 -------------------------------------------------------------------------------- (h) liabilities of such Person in respect of unfunded vested benefits under pension plans (determined on a net basis for all such plans) and all asserted withdrawal liabilities of such Person or a commonly controlled entity to a multiemployer plan; (i) obligations of such Person in respect of bankers’ acceptances (other than in respect of accounts payable to suppliers incurred in the ordinary course of business consistent with past practice); and (j) Guarantees by such Person in respect of obligations of the character referred to in clause (a), (b), (c), (d), (e), (f), (g), (h) or (i) of this definition of any other Person; (k) obligations of the character referred to in clause (a), (b), (c), (d), (e), (f), (g), (h), (i) or (j) of this definition deemed to be extinguished under GAAP but for which such Person remains legally liable; and (l) amendment, supplement, modification, deferral, renewal, extension or refunding of any obligation or liability of the types referred to in clauses (a) through (k) above. “Indemnified Taxes” means Taxes other than Excluded Taxes. “Indemnitees” has the meaning given to such term in Section 10.04(b). “Indenture” mean that certain Indenture, dated as of January 18, 2005, among the Borrower, the guarantors named therein and Wachovia Bank, National Association, as Trustee, as amended by the First Supplemental Indenture, the Second Supplemental Indenture and the Third Supplemental Indenture, and as further amended or supplemented from time to time thereafter. “Initial Borrower Financial Statements” means (i) the audited Consolidated annual financial statements of the Borrower as of August 31, 2005 and (ii) the unaudited interim Consolidated quarterly financial statements of the Borrower as of February 28, 2006. “Initial Financial Statements” means (a) the Initial Borrower Financial Statements, and (b) the Initial La Grange Financial Statements. “Initial La Grange Financial Statements” means (i) the audited Consolidated annual financial statements of La Grange as of August 31, 2005 and (ii) the unaudited interim Consolidated quarterly financial statements of La Grange as of February 28, 2006. “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each Fiscal Quarter and the Maturity Date.   15 -------------------------------------------------------------------------------- “Interest Period” means, as to each Eurodollar Loan, the period commencing on the date such Eurodollar Loan is disbursed or converted to or continued as a Eurodollar Loan and ending on the date one, two, three or six months thereafter (or nine or twelve months thereafter if consented to by all the Lenders), as selected by the Borrower in its Loan Notice; provided that: (a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period shall extend beyond the Maturity Date. “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees obligations of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of determining the outstanding amount of an Investment, the amount of any Investment shall be the amount actually invested (without adjustment for subsequent increases or decreases in the value of such Investment) reduced by the cash proceeds received upon the sale, liquidation, repayment or disposition of such Investment (less all costs thereof) or other cash distributions or proceeds received from such Investment, whether as earnings or as a return of capital, in an aggregate amount up to but not in excess of the amount of such Investment. “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the LC Issuer and the Borrower (or any Restricted Subsidiary) or in favor the LC Issuer and relating to any such Letter of Credit. “Joint Venture Interest” means an acquisition of or Investment in Equity Interests in any Person incorporated or otherwise formed pursuant to the laws of the United States or Canada or any state or province thereof or the District of Columbia, held directly or indirectly by the Borrower, that will not be a Subsidiary after giving effect to such acquisition or Investment. “La Grange” means La Grange Acquisition, L.P., a Texas limited partnership. “Laws” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign country or any department, state, province or other political subdivision thereof.   16 -------------------------------------------------------------------------------- “LC Collateral” means cash or deposit account balances pledged and deposited with or delivered to the Administrative Agent, for the benefit of the LC Issuer and the Lenders, as collateral for the LC Obligations. “LC Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof. “LC Issuer” means Wachovia Bank, National Association in its capacity as issuer of Letters of Credit hereunder (other than the Existing Letters of Credit) or any successor issuer of Letters of Credit hereunder and Bank of America, in its capacity as issuer of the Existing Letters of Credit. “LC Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Matured LC Obligations. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the “International Standby Practices 1998” (published by the Institute of International Banking Law & Practice or such later version thereof as may be in effect at the time of issuance), such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. “Lender” has the meaning given to such term in the introductory paragraph hereto. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender. “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent. “Letter of Credit” means any standby letter of credit issued hereunder and shall include the Existing Letters of Credit. “Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the LC Issuer. “Leverage Ratio” means the ratio of (a) Consolidated Funded Indebtedness outstanding on the specified date to (b) the Consolidated EBITDA for the specified four Fiscal Quarter period. “Liabilities” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered liabilities pursuant to GAAP. “LIBOR Reference Rate” means a rate of interest for Swingline Loans determined by reference to the Eurodollar Rate for a one (1) month interest period that would be applicable for   17 -------------------------------------------------------------------------------- a Revolving Credit Loan, as that rate may fluctuate in accordance with changes in the Eurodollar Rate as determined on a day-to-day basis. “Lien” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. “Lien” also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists. “Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement, including the Revolving Credit Loans and the Swingline Loans. “Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, each Guaranty, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters). “Loan Notice” means a notice of (a) a Borrowing, (b) a Conversion of Loans from one Type to the other, pursuant to Section 2.04, or (c) a Continuation of Eurodollar Loans, pursuant to Section 2.04, which, if in writing, shall be substantially in the form of Exhibit D. “Majority Lenders” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the Commitment of each Lender to make Loans and the obligation of the LC Issuer to make LC Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Facility Usage (with the aggregate amount of each Lender’s risk participation and funded participation in LC Obligations being deemed “held” by such Lender for purposes of this definition). “Material Adverse Effect” means a material adverse effect on (i) the financial condition, operations, properties or prospects of the Borrower and its Restricted Subsidiaries, taken as a whole, or (ii) the ability of the Borrower to perform its obligations under this Agreement and the Notes or the ability of the Restricted Subsidiaries, taken as a whole, to perform their respective obligations under the Guaranty, or (iii) the validity or enforceability of this Agreement, the Guaranty or the Notes.   18 -------------------------------------------------------------------------------- “Material Project” means the construction or expansion of any capital project of the Borrower or any of its Restricted Subsidiaries with multi-year customer contracts, the aggregate capital cost of which exceeds $30,000,000. “Material Project EBITDA Adjustments” shall mean, with respect to each Material Project: (A) prior to completion of the Material Project (and including the Fiscal Quarter in which completion occurs), a percentage (based on the then-current completion percentage of the Material Project) of an amount to be approved by the Administrative Agent, in its reasonable judgment, as the projected Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Material Project (such amount to be determined based on the multi-year customer contracts relating to such Material Project, the creditworthiness of the other parties to any such contracts, and projected revenues from such contracts, capital costs and expenses, scheduled completion, oil and gas reserve and production estimates, commodity price assumptions and other factors deemed reasonably appropriate by Administrative Agent), which shall be added to actual Consolidated EBITDA for the Borrower and its Restricted Subsidiaries for the Fiscal Quarter in which construction of such Material Project commences and for each Fiscal Quarter thereafter until completion of the Material Project (and including the Fiscal Quarter in which completion occurs, but net of any actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Material Project following its completion); provided that if construction of the Material Project is not completed by the scheduled completion date, then the foregoing amount shall be reduced, for quarters ending after the scheduled completion date to (but excluding) the first full quarter after completion, by the following percentage amounts depending on the period of delay for completion (based on the period of actual delay or then-estimated delay, whichever is longer): (i) 90 days or less, 0%, (ii) longer than 90 days, but not more than 180 days, 25%, (iii) longer than 180 days but not more than 270 days, 50%, and (iv) longer than 270 days, 100%; and (B) for the first full Fiscal Quarter following completion of the Material Project, for the first two full Fiscal Quarters following such completion, and for the first three full Fiscal Quarters following such completion, an amount equal to the lesser of (x) actual Consolidated EBITDA of the Borrower and its Subsidiaries attributable to the Material Project for such first full Fiscal Quarter times four, such first two full Fiscal Quarters times two, and such first three full Fiscal Quarters times four/thirds, respectively, and (y) actual Consolidated EBITDA of the Borrower and its Subsidiaries attributable to the Material Project for such first full Fiscal Quarter, such first two full Fiscal Quarters, and such first three full Fiscal Quarters, respectively, plus projected Consolidated EBITDA of Borrower and its Restricted Subsidiaries attributable to such Material Project (determined in the same manner as set forth in clause (A) above) for the balance of the four full Fiscal Quarter period following such completion.   19 -------------------------------------------------------------------------------- Notwithstanding the foregoing: (i) no such additions shall be allowed with respect to any Material Project unless: (a) not later than 30 days prior to the delivery of any certificate required by the terms and provisions of Section 6.02(b) to the extent Material Project EBITDA Adjustments will be made to Consolidated EBITDA in determining compliance with Section 7.12 under clause (i) thereof and not later than 10 days prior to any determination of compliance with Section 7.12 under any other clause thereof, the Borrower shall have delivered to the Administrative Agent written pro forma projections of Consolidated EBITDA of the Borrower and its Restricted Subsidiaries attributable to such Material Project, and (b) prior to the date such certificate is required to be delivered, the Administrative Agent shall have approved (such approval not to be unreasonably withheld) such projections and shall have received such other information and documentation as the Administrative Agent may reasonably request, all in form and substance satisfactory to the Administrative Agent, and (ii) the aggregate amount of all Material Project EBITDA Adjustments during any period shall be limited to 20% of the total actual Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for such period (which total actual Consolidated EBITDA shall be determined without including any Material Project EBITDA Adjustments or any adjustments in respect of any acquisition, consolidation or merger as provided in clause (1) of the definition of Consolidated EBITDA). “Matured LC Obligations” means all amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be under any Letter of Credit and all other amounts due and owing to LC Issuer under any Letter of Credit Application, to the extent the same have not been repaid to LC Issuer (with the proceeds of Loans or otherwise). “Maturity Date” means June 29, 2011, as may be extended pursuant to Section 2.18. “Maximum Rate” has the meaning given to such term in Section 10.09. “Moody’s” means Moody’s Investors Service, Inc., or its successor. “Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit E. “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Restricted Person, arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Restricted Person or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. “Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.   20 -------------------------------------------------------------------------------- “Participant” has the meaning given to such term in Section 10.06(d). “Partnership Agreement” means the Agreement of Limited Partnership of the Borrower as in effect on the date of this Agreement. “Performance Guaranties” means, collectively, guaranties by the Borrower of obligations of any Unrestricted Subsidiary (but not of Indebtedness of any Unrestricted Subsidiary) not to exceed in the aggregate amount outstanding of $85,000,000 at any time. “Permitted Acquisitions” means (A) the acquisition of all of the Equity Interests in a Person (exclusive of director qualifying shares and other Equity Interests required to be held by an Affiliate to comply with a requirement of Law) or (B) any other acquisition of all or a substantial portion of the business, assets or operations of a Person (whether in a single transaction or a series of related transactions) or (C) a merger or consolidation of any Person with or into a Restricted Person so long as the survivor is or becomes a Restricted Person upon consummation thereof (and Borrower is the survivor, if it is a party); provided, that (i) prior to and after giving effect to such acquisition no Default or Event of Default shall have occurred and be continuing; and (ii) all representations and warranties contained in the Loan Documents shall be true and correct in all material respects as if restated immediately following the consummation of such acquisition; and (iii) the Borrower has provided to the Administrative Agent an officer’s certificate, in form satisfactory to the Administrative Agent, certifying that each of the foregoing conditions has been satisfied. “Permitted Investments” means: (a) Cash Equivalents, (b) Investment in South Texas Gas Gathering’s Dorado joint venture, Mid-Texas Pipeline Company and Ranger Pipeline, L.P., (c) Investments in any Restricted Subsidiary, (d) Investments in Unrestricted Subsidiaries as of the Closing Date, (e) the Subscription Agreement, dated as of January 20, 2004, between HHI and Oasis Pipe Line Company, as such Subscription Agreement exists on the date of this Agreement and purchases of shares of HHI required to be made pursuant thereto, (f) Guarantees of Indebtedness to the extent permitted by Section 7.01, (g) Performance Guaranties, (h) Investments in Joint Venture Interests, provided that, both before and after giving effect to any such Investment (i) all representations and warranties contained herein shall be true and correct in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date, (ii) the Person issuing such Joint Venture Interests is engaged in   21 -------------------------------------------------------------------------------- the Permitted Line of Business and (iii) no Default or Event of Default shall have occurred and be continuing or will result therefrom, (i) Investments (in addition to those permitted by clauses (a) through (h) of this definition) in any Person incorporated or otherwise formed pursuant to the laws of the United States or Canada or any state or province thereof or the District of Columbia including Investments in any Unrestricted Subsidiary (but additional Investments in respect of Performance Guarantees shall only be permitted pursuant to subsection (g) and shall not be permitted under this subsection (i) and additional Investments in HOLP and its Subsidiaries shall only be permitted under subsection (j) and shall not be permitted under this subsection (i)); provided that immediately prior to and after giving effect to such Investment (i) the aggregate outstanding amount of all such Investments made by the Restricted Persons under this clause (i) shall not exceed 10% of the Consolidated Net Tangible Assets, (ii) all representations and warranties shall be true and correct in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date, and (iii) no Default or Event of Default shall have occurred and be continuing or will result therefrom, and (j) Contributions to Unrestricted Subsidiaries sourced from funds derived from equity offerings of the Borrower not to exceed $100,000,000 per year. “Permitted Lien” has the meaning given to such term in Section 7.02. “Permitted Line of Business” means, with respect to the specified Person, lines of business engaged in by such Person and its Subsidiaries such that such Person and its Subsidiaries, taken as a whole, are substantially engaged in businesses that are (i) qualified business of master limited partnerships and (ii) energy-related. “Permitted Priority Debt” means (i) Indebtedness of a Restricted Subsidiary, whether or not secured, other than Indebtedness permitted under Section 7.01(a) through (f) and (ii) Indebtedness of the Borrower or any Restricted Subsidiary secured by Liens on property of the Borrower or any Restricted Subsidiary, other than Liens permitted under subsections (a) through (n) of Section 7.02, not to exceed at any one time outstanding in the aggregate under clause (i) and (ii), but without duplication, an aggregate principal amount equal to 15% of Consolidated Net Tangible Assets. “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. “Prime Rate” means the rate of interest per annum publicly announced from time to time by Wachovia Bank, National Association as its prime rate in effect at its principal office in Charlotte, North Carolina. Each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. “Quarterly Testing Date” means the last day of each Fiscal Quarter.   22 -------------------------------------------------------------------------------- “Rating” means, as to each Rating Agency and on any day, the rating maintained by such Rating Agency on such day for senior, unsecured, non-credit enhanced (except for any Guarantee by Restricted Subsidiaries) long-term debt of the Borrower. “Rating Agency” means Fitch, S&P or Moody’s. “Register” has the meaning given to such term in Section 10.06(c). “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates. “Request for Credit Extension” means (a) with respect to a Borrowing, Conversion or Continuation of Loans, a Loan Notice, and (b) with respect to an LC Credit Extension, a Letter of Credit Application. “Responsible Officer” means the chief executive officer, president, chief financial officer, or treasurer of a Restricted Person. Any document delivered hereunder that is signed by a Responsible Officer of a Restricted Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Restricted Person and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Restricted Person. “Restricted Payment” means any dividends on, or other distribution in respect of, any Equity Interests in any Restricted Person, or any purchase, redemption, acquisition, or retirement of any Equity Interests in any Restricted Person (whether such interests are now or hereafter issued, outstanding or created), or any reduction or retirement of the Equity Interest of any Restricted Person, except, in each case, distributions, dividends or any other of the above actions payable solely in shares of capital stock of (or other ownership or profit interests in) such Restricted Person, or warrants, options or other rights for the purchase or acquisition from such Restricted Person of shares of capital stock of (or other ownership or profit interests in) such Restricted Person. “Restricted Person” means any of the Borrower and each Restricted Subsidiary. “Restricted Subsidiary” means any Subsidiary of the Borrower other than the Unrestricted Subsidiaries. “Revolving Credit Loan” means a Loan made pursuant to Section 2.01. “Risk Management Policy” means the Risk Management Policy of the Borrower in effect on the date of this Agreement as amended from time to time. “S&P” means Standard & Poor’s Ratings Services (a division of McGraw Hill, Inc.) or its successor.   23 -------------------------------------------------------------------------------- “Sale and Lease-Back Transaction” means, with respect to any Person (a “Transferor”), any arrangement (other than between the Borrower and a Wholly Owned Subsidiary of the Borrower that is a Restricted Person or between Wholly Owned Subsidiaries of the Borrower that are each Restricted Persons) whereby (a) property (the “Subject Property”) has been or is to be disposed of by such Transferor to any other Person with the intention on the part of such Transferor of taking back a lease of such Subject Property pursuant to which the rental payments are calculated to amortize the purchase price of such Subject Property substantially over the useful life of such Subject Property, and (b) such Subject Property is in fact so leased by such Transferor or an Affiliate of such Transferor. “Specified Acquisition” means an acquisition of assets or entities or operating lines or divisions by a Restricted Person for a purchase price of not less than $50,000,000. “Specified Acquisition Period” means a period elected by the Borrower that commences on the date elected by the Borrower, by notice to the Administrative Agent, following the occurrence of a Specified Acquisition and ending on the earliest of (a) the third Quarterly Testing Date occurring after the consummation of such Specified Acquisition, (b) the date of a Specified Equity Offering and (c) if the Leverage Ratio is less than or equal to 4.50 to 1.00 on such date, the date of the Borrower’s delivery of a notice to the Administrative Agent terminating such Specified Acquisition Period accompanied by a certificate reflecting compliance with such Leverage Ratio; provided, in the event the Leverage Ratio exceeds 4.75 to 1.00 as of the end of any Fiscal Quarter in which a Specified Acquisition has occurred, the Borrower shall be deemed to have so elected a Specified Acquisition Period with respect thereto on such last day of such Fiscal Quarter; provided, further, following the election (or deemed election) of a Specified Acquisition Period, the Borrower may not elect (or be deemed to have elected) a subsequent Specified Acquisition Period unless, at the time of such subsequent election, the Leverage Ratio does not exceed 4.75 to 1.00. Only one Specified Acquisition Period may be elected (or deemed elected) with respect to any particular Specified Acquisition. “Specified Equity Offering” means the date (or the last such date if more than one issuances are aggregated) that the proceeds are received by the Borrower of one or more issuances of equity by the Borrower for aggregate net cash proceeds of not less than twenty five percent (25%) of the aggregate purchase price of the Specified Acquisition. For purposes of clarification, the Borrower, the Administrative Agent and the Lenders agree that nothing in this Agreement, including this definition, shall obligate the Borrower at any time to issue equity for the purpose of financing all or any portion of the purchase price associated with a Specified Acquisition. “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.   24 -------------------------------------------------------------------------------- “Swingline Commitment” means the commitment of the Swingline Lender to make Swingline Loans, as such amount may be adjusted from time to time in accordance with this Agreement by the Borrower and the Swingline Lender. The Swingline Commitment is $75,000,000. “Swingline Lender” means Wachovia Bank, National Association. “Swingline Loan” means a Loan made pursuant to Section 2.02. “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. “Termination Event” means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30 day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan. “Tribunal” means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States or any state, province, commonwealth, nation, territory, possession, county, parish, town, township, village or municipality, whether now or hereafter constituted or existing. “Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Loan. “UCC” means the Uniform Commercial Code as in effect in the State of New York from time to time. “Unrestricted Subsidiaries” means each of the following, unless designated as a Restricted Subsidiary pursuant to Section 6.11: (i) the HOLP Companies, (ii) HHI and (iii) any other Subsidiary of the Borrower which is designated as an Unrestricted Subsidiary pursuant to Section 6.11. “United States” and “U.S.” mean the United States of America. “Wholly Owned Subsidiary” means, with respect to a Person, any Subsidiary of such Person, all of the issued and outstanding stock, limited liability company membership interests, or partnership interests of which (including all rights or options to acquire such stock or   25 -------------------------------------------------------------------------------- interests) are directly or indirectly (through one or more Subsidiaries) owned by such Person, excluding any general partner interests owned, directly or indirectly, by General Partner in any such Subsidiary that is a partnership, in each case such general partner interests not to exceed two percent (2%) of the aggregate ownership interests of any such partnership and directors’ qualifying shares if applicable. 1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.” (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 1.03 Accounting Terms. (a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a   26 -------------------------------------------------------------------------------- manner consistent with that used in preparing the Initial Financial Statements, except as otherwise specifically prescribed herein. (b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Majority Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Majority Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable). 1.06 Letter of Credit Amounts. Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time. ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Revolving Credit Loans. Subject to the terms and conditions hereof, each Lender agrees to make Revolving Credit Loans (“Revolving Credit Loans”) to the Borrower upon the Borrower’s request from time to time during the Commitment Period, provided that (a) subject to Sections 3.03, 3.04 and 3.06, all Lenders are requested to make Revolving Credit Loans of the same Type in accordance with their respective Applicable Percentages and as part of the same Borrowing, and (b) after giving effect to such Revolving Credit Loans, the Facility Usage does not exceed the Aggregate Commitments, and the Loans of any Lender plus such Lender’s Applicable Percentage of all LC Obligations does not exceed such Lender’s Commitment. The aggregate amount of all Revolving Credit Loans that are Base Rate Loans in any Borrowing must be equal to $5,000,000 or any higher integral multiple of $1,000,000. The aggregate amount of all Eurodollar Loans in any Borrowing must be equal to $5,000,000 or any   27 -------------------------------------------------------------------------------- higher integral multiple of $1,000,000. The Borrower may have no more than twelve (12) Borrowings of Eurodollar Loans outstanding at any time. Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay, and reborrow under this Section 2.01. 2.02 Swingline Loans. (a) Subject to the terms and conditions of this Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Commitment Period; provided, that the aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount requested), shall not exceed the lesser of (i) the Aggregate Commitments less the sum of all outstanding Revolving Credit Loans and the LC Obligations and (ii) the Swingline Commitment; provided further that the Swingline Lender will not make a Swingline Loan from and after the date which is one (1) day after it has received written notice from the Borrower or any Lender that one or more of the applicable conditions to Credit Extensions specified in Section 4.02 is not then satisfied until such conditions are satisfied or waived in accordance with the provisions of this Agreement (and the Swingline Lender shall be entitled to conclusively rely on any such notice and shall have no obligation to independently investigate the accuracy of such notice and shall have no liability to the Borrower in respect thereof if such notice proves to be inaccurate). The aggregate amount of Swingline Loans in any Borrowing shall not be subject to a minimum amount or increment. (b) Swingline Loans shall be refunded by the Lenders on demand by the Swingline Lender. Such refundings shall be made by each Lender in accordance with its Applicable Percentage and shall thereafter be reflected as Loans of the Lenders on the books and records of the Administrative Agent. Each Lender shall fund its Applicable Percentage of Revolving Credit Loans as required to repay Swingline Loans outstanding to the Swingline Lender upon demand by the Swingline Lender but in no event later than 1:00 p.m. on the next succeeding Business Day after such demand is made. No Lender’s obligation to fund its Applicable Percentage of a Swingline Loan shall be affected by any other Lender’s failure to fund its Applicable Percentage of a Swingline Loan, nor shall any Lender’s Applicable Percentage be increased as a result of any such failure of any other Lender to fund its Applicable Percentage of a Swingline Loan. (c) The Borrower shall pay to the Swingline Lender the amount of each Swingline Loan (unless such Swingline Loan is fully refunded by the Lenders pursuant to Section 2.02(b)): on demand and in no event later than the Maturity Date. In addition, the Borrower hereby authorizes the Administrative Agent to charge any account maintained by the Borrower with the Swingline Lender (up to the amount available therein) in order to immediately pay the Swingline Lender the amount of such Swingline Loans. If any portion of any such amount paid to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be ratably shared among all the Lenders in accordance with their Applicable Percentages (unless the amounts so recovered by or on behalf of the Borrower pertain to a Swingline Loan extended after the occurrence and during the continuance of an Event of Default of which the Administrative Agent has received notice in the manner required pursuant to Section 10.02 and which such Event of Default has not been waived by the Majority Lenders or the Lenders, as applicable).   28 -------------------------------------------------------------------------------- (d) Each Lender acknowledges and agrees that its obligation to refund Swingline Loans in accordance with the terms of this Section 2.02 is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Article IV. Further, each Lender agrees and acknowledges that if prior to the refunding of any outstanding Swingline Loans pursuant to this Section 2.02, one of the events described in subsections (j)(i), (j)(ii) or (j)(iii) of Section 8.01 shall have occurred, each Lender will, on the date the applicable Revolving Credit Loan would have been made, purchase an undivided, irrevocable and unconditional participating interest in the Swingline Loans to be refunded in an amount equal to its Applicable Percentage of the aggregate amount of such Swingline Loans. Each Lender will immediately transfer to the Swingline Lender, in immediately available funds, the amount of its participation, and upon receipt thereof, the Swingline Lender will deliver to such Lender a certificate evidencing such participation dated the date of receipt of such funds and for such amount. Whenever, at any time after the Swingline Lender has received from any Lender such Lender’s participating interest in a Swingline Loan, the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded). Notwithstanding the foregoing provisions of this Section 2.02(d), a Lender shall have no obligation to refund a Swingline Loan pursuant to Section 2.02(b) if (i) a Default shall exist at the time such refunding is requested by the Swingline Lender, (ii) such Default had occurred and was continuing at the time such Swingline Loan was made by the Swingline Lender and (ii) such Lender notified the Swingline Lender in writing, not less than one Business Day prior to the making by the Swingline Lender of such Swingline Loan, that such Default has occurred and is continuing and that such Lender will not refund Swingline Loans made while such Default is continuing. 2.03 Requests for New Loans. The Borrower must give to the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of Loans to be funded by Lenders, except in the case of Swingline Loans under a cash management arrangement as provided below. Each such notice constitutes a “Loan Notice” hereunder and must: (a) specify (i) the aggregate amount of any such Borrowing of Base Rate Loans and the date on which such Base Rate Loans are to be advanced, (ii) the aggregate amount of any such Borrowing of Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period, or (iii) the aggregate amount of any such Borrowing of Swingline Loans and the date on which such Swingline Loans are to be advanced; and (b) be received by the Administrative Agent not later than 11:00 a.m. on (i) the day on which any such Base Rate Loans or Swingline Loans are to be made, or (ii) the third Business Day preceding the day on which any such Eurodollar Loans are to be made. Each such written request or confirmation must be made in the form and substance of the Loan Notice, duly completed. Each such telephonic request shall be deemed a representation,   29 -------------------------------------------------------------------------------- warranty, acknowledgment and agreement by the Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Loan Notice requesting Revolving Credit Loans, the Administrative Agent shall give each Lender prompt notice of the terms thereof. Upon receipt of any such Loan Notice requesting Swingline Loans, the Administrative Agent shall give the Swingline Lender prompt notice of the terms thereof. In the case of Revolving Credit Loans, if all conditions precedent to such new Loans have been met, each Lender will on the date requested promptly remit to the Administrative Agent at the Administrative Agent’s Office the amount of such Lender’s Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, the Administrative Agent shall promptly make such Loans available to the Borrower. In the case of Swingline Loans, if all conditions precedent to such new Loans have been met, the Swingline Lender will on the date requested promptly remit to the Administrative Agent at the Administrative Agent’s Office the amount of such Swingline Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Swingline Loan have been neither met nor waived as provided herein, the Administrative Agent shall promptly make such Loans available to the Borrower. Revolving Credit Loans to be made for the purpose of refunding Swingline Loans shall be made by the Lenders as provided in Section 2.02(b). The Borrower may maintain with the Swingline Lender operating accounts with a cash management arrangement for the automatic funding and repayment of Swingline Loans according to cash needs or excess cash existing in the operating accounts at the end of each Business Day. No request to the Administrative Agent by the Borrower is required for the funding or repayment of Swingline Loans in connection with such arrangement; provided, however, the Borrower must notify the Swingline Lender and the Administrative Agent immediately on any Business Day if one or more of the applicable conditions specified in Article IV is not then satisfied and instruct the Swingline Lender not to fund Swingline Loans under such arrangement until the Borrower has notified the Swingline Lender and the Administrative Agent that all applicable conditions specified in Article IV are satisfied. 2.04 Continuations and Conversions of Existing Loans. The Borrower may make the following elections with respect to Revolving Credit Loans already outstanding: to Convert, in whole or in part, Base Rate Loans to Eurodollar Loans, to Convert, in whole or in part, Eurodollar Loans to Base Rate Loans on the last day of the Interest Period applicable thereto, and to Continue, in whole or in part, Eurodollar Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. In making such elections, the Borrower may combine existing Revolving Credit Loans made pursuant to separate Borrowings into one new Borrowing or divide existing Revolving Credit Loans made pursuant to one Borrowing into separate new Borrowings, provided, that (i) the Borrower may have no more than twelve (12) Borrowings of Eurodollar Loans outstanding at any time, (ii) the aggregate amount of all Base Rate Loans in any Borrowing must be equal to $1,000,000 or any higher integral multiple of $500,000, and (iii) the aggregate amount of all Eurodollar Loans in any Borrowing must be equal to $5,000,000 or any higher integral multiple of $1,000,000. To make any such election, the Borrower must give to the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Borrowing. Each such notice must: (a) specify the existing Loans which are to be Continued or Converted;   30 -------------------------------------------------------------------------------- (b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans into which such existing Loans are to be Continued or Converted and the date on which such Continuation or Conversion is to occur, or (ii) the aggregate amount of any Borrowing of Eurodollar Loans into which such existing Loans are to be Continued or Converted, the date on which such Continuation or Conversion is to occur (which shall be the first day of the Interest Period which is to apply to such Eurodollar Loans), and the length of the applicable Interest Period; and (c) be received by the Administrative Agent not later than 11:00 a.m. on (i) the day on which any such Conversion to Base Rate Loans is to occur, or (ii) the third Business Day preceding the day on which any such Continuation or Conversion to Eurodollar Loans is to occur. Each such written request or confirmation must be made in the form and substance of the Loan Notice, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by the Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Loan Notice, the Administrative Agent shall give each Lender prompt notice of the terms thereof. Each Loan Notice shall be irrevocable and binding on the Borrower. During the continuance of any Default, the Borrower may not make any election to Convert existing Loans into Eurodollar Loans or Continue existing Loans as Eurodollar Loans beyond the expiration of their respective and corresponding Interest Period then in effect. If (due to the existence of a Default or for any other reason) the Borrower fails to timely and properly give any Loan Notice with respect to a Borrowing of existing Eurodollar Loans at least three days prior to the end of the Interest Period applicable thereto, such Eurodollar Loans, to the extent not prepaid at the end of such Interest Period, shall automatically be Converted into Base Rate Loans at the end of such Interest Period. No new funds shall be repaid by the Borrower or advanced by any Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new advance of funds for any purpose; such Continuations and Conversions merely constitute a change in the interest rate, Interest Period or Type applicable to already outstanding Loans. 2.05 Use of Proceeds. The Borrower shall use the proceeds of all Loans (a) for working capital purposes, (b) purchases of common Equity Interests of the Borrower, (c) acquisitions of assets or Equity Interests otherwise permitted under the terms of this Agreement, and (d) for general business purposes. The Letters of Credit shall be used for general business purposes of the Borrower and its Restricted Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board of Governors of the Federal Reserve System, including Regulations T, U and X. The Borrower represents and warrants that the Borrower is not engaged principally, or as one of the Borrower’s important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock. 2.06 Prepayments of Loans. The Borrower may, upon three Business Days’ notice to the Administrative Agent (which notice shall be irrevocable, and the Administrative Agent   31 -------------------------------------------------------------------------------- will promptly give notice to the other Lenders), from time to time and without premium or penalty (other than Eurodollar Loan breakage costs, if any, pursuant to Section 3.05) prepay the Loans, in whole or in part, so long as the aggregate amounts of all partial prepayments of principal on the Loans equals $5,000,000 or any higher integral multiple of $1,000,000. Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment. 2.07 Letters of Credit. Subject to the terms and conditions hereof, during the Commitment Period the Borrower may request LC Issuer to issue, amend, or extend the expiration date of, one or more Letters of Credit for the account of the Borrower or any or its Restricted Subsidiaries, provided that: (a) after taking such Letter of Credit into account the Facility Usage does not exceed the Aggregate Commitments at such time; (b) the expiration date of such Letter of Credit is prior to the earlier of (i) 365 days after the issuance thereof, provided that such Letter of Credit may provide for automatic extensions of such expiration date (such Letter of Credit an “Auto-Extension Letter of Credit”) for additional periods of 365 days thereafter, and (ii) five Business Days prior to the end of the Commitment Period; (c) the issuance of such Letter of Credit will be in compliance with all applicable governmental restrictions, policies, and guidelines and will not subject LC Issuer to any cost which is not reimbursable under Article III; (d) such Letter of Credit is in form and upon terms as shall be acceptable to LC Issuer in its sole and absolute discretion; and (e) all other conditions in this Agreement to the issuance of such Letter of Credit have been satisfied. LC Issuer will honor any such request if the foregoing conditions (a) through (e) (in the following Section 2.08 called the “LC Conditions”) have been met as of the date of issuance, amendment, or extension of such Letter of Credit. 2.08 Requesting Letters of Credit. The Borrower must make written application for any Letter of Credit at least three Business Days (or such shorter period as may be agreed upon by the LC Issuer) before the date on which the Borrower desires for LC Issuer to issue such Letter of Credit. By making any such written application, unless otherwise expressly stated therein, the Borrower shall be deemed to have represented and warranted that the LC Conditions described in Section 2.07 will be met as of the date of issuance of such Letter of Credit. Each such written application for a Letter of Credit must be made in the form of the Letter of Credit Application. If all LC Conditions for a Letter of Credit have been met as described in Section 2.07 on any Business Day before 11:00 a.m., LC Issuer will issue such Letter of Credit   32 -------------------------------------------------------------------------------- on the same Business Day at LC Issuer’s Lending Office. If the LC Conditions are met as described in Section 2.07 on any Business Day on or after 11:00 a.m., LC Issuer will issue such Letter of Credit on the next succeeding Business Day at LC Issuer’s Lending Office. If any provisions of any LC Application conflict with any provisions of this Agreement, the provisions of this Agreement shall govern and control. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any extension of an Auto-Extension Letter of Credit. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than five Business Days prior to the end of the Commitment Period; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof, or (B) it has received notice (which may be by telephone or in writing) from the Administrative Agent, any Lender or the Borrower on or before the day that is five Business Days before the last day in which notice of non-extension for such Letter of Credit may be given that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and directing the L/C Issuer not to permit such extension. 2.09 Reimbursement and Participations. (a) Reimbursement. Each Matured LC Obligation shall constitute a loan by LC Issuer to the Borrower. The Borrower promises to pay to LC Issuer, or to LC Issuer’s order, on demand, the full amount of each Matured LC Obligation together with interest thereon (i) at the Base Rate plus the Applicable Margin for Base Rate Loans to and including the second Business Day after the Matured LC Obligation is incurred, subject to Section 2.09(b), and (ii) at the Default Rate applicable to Base Rate Loans on each day thereafter. (b) Letter of Credit Advances. If the beneficiary of any Letter of Credit makes a draft or other demand for payment thereunder, then the Borrower shall be deemed to have requested the Lenders make Loans to the Borrower in the amount of such draft or demand, which Loans shall be made concurrently with LC Issuer’s payment of such draft or demand and shall be immediately used by LC Issuer to repay the amount of the resulting Matured LC Obligation. Such deemed request by the Borrower shall be made in compliance with all of the provisions hereof, provided that for the purposes of the first sentence of Section 2.01, the amount of such Loans shall be considered, but the amount of the Matured LC Obligation to be concurrently paid by such Loans shall not be considered. (c) Participation by Lenders. LC Issuer irrevocably agrees to grant and hereby grants to each Lender, and – to induce LC Issuer to issue Letters of Credit hereunder – each Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from LC Issuer, on the terms and conditions hereinafter stated and for such Lender’s own account and risk an undivided interest equal to such Lender’s Applicable Percentage of LC Issuer’s obligations and rights under each Letter of Credit issued hereunder and the amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit for which LC Issuer is not reimbursed in full by the Borrower in accordance with the terms of this Agreement   33 -------------------------------------------------------------------------------- and the related LC Application (including any reimbursement by means of concurrent Loans or by the application of LC Collateral), such Lender shall (in all circumstances and without set-off or counterclaim) pay to LC Issuer on demand, in immediately available funds at LC Issuer’s Lending Office, such Lender’s Applicable Percentage of such Matured LC Obligation (or any portion thereof which has not been reimbursed by the Borrower). Each Lender’s obligation to pay LC Issuer pursuant to the terms of this subsection is irrevocable and unconditional. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is paid by such Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Lender, on demand, interest thereon calculated from such due date at the Federal Funds Rate. If any amount required to be paid by any Lender to LC Issuer pursuant to this subsection is not paid by such Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Lender, on demand, interest thereon calculated from such due date at the Base Rate plus the Base Rate Margin. (d) Distributions to Participants. Whenever LC Issuer has in accordance with this Section received from any Lender payment of such Lender’s Applicable Percentage of any Matured LC Obligation, if LC Issuer thereafter receives any payment of such Matured LC Obligation or any payment of interest thereon (whether directly from the Borrower or by application of LC Collateral or otherwise, and excluding only interest for any period prior to LC Issuer’s demand that such Lender make such payment of its Applicable Percentage), LC Issuer will distribute to such Lender its Applicable Percentage of the amounts so received by LC Issuer; provided, however, that if any such payment received by LC Issuer must thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the portion thereof which LC Issuer has previously distributed to it. (e) Calculations. A written advice setting forth in reasonable detail the amounts owing under this Section, submitted by LC Issuer to the Borrower or any Lender from time to time, shall be conclusive, absent manifest error, as to the amounts thereof. (f) Obligations Absolute. The Borrower’s obligation to reimburse Matured LC Obligations shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the LC Issuer, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other   34 -------------------------------------------------------------------------------- communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the LC Issuer; provided that the foregoing shall not be construed to excuse the LC Issuer from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the LC Issuer’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the LC Issuer (as finally determined by a court of competent jurisdiction), the LC Issuer shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the LC Issuer may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. 2.10 No Duty to Inquire. (a) Drafts and Demands. LC Issuer is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. LC Issuer is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. The Borrower releases LC Issuer and each Lender from, and agrees to hold LC Issuer and each Lender harmless and indemnified against, any liability or claim in connection with or arising out of the subject matter of this section, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any LC Issuer or Lender, provided only that no LC Issuer or Lender shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. (b) Extension of Maturity. If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of the Borrower, or if the amount of any Letter of Credit is increased or decreased at the request of the Borrower, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased, decreased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by LC Issuer, LC Issuer’s correspondents, or any Lender in accordance with such extension, increase, decrease or other modification.   35 -------------------------------------------------------------------------------- (c) Transferees of Letters of Credit. If any Letter of Credit provides that it is transferable, LC Issuer shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, nor shall LC Issuer be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by LC Issuer to any purported transferee or transferees as determined by LC Issuer is hereby authorized and approved, and the Borrower releases LC Issuer and each Lender from, and agrees to hold LC Issuer and each Lender harmless and indemnified against, any liability or claim in connection with or arising out of the foregoing, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any LC Issuer or Lender, provided only that neither LC Issuer nor any Lender shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. 2.11 LC Collateral. (a) Acceleration of LC Obligations. If the Obligations or any part thereof become immediately due and payable pursuant to Section 8.02 then, unless the Administrative Agent, acting on the instruction of Majority Lenders, shall otherwise specifically elect to the contrary (which election may thereafter be retracted by the Administrative Agent, acting on the instruction of Majority Lenders, at any time), the Borrower shall be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC Obligations which are then outstanding to be held as LC Collateral. Nothing in this subsection shall, however, limit or impair any rights which LC Issuer may have under any other document or agreement relating to any Letter of Credit, LC Collateral or LC Obligation, including any LC Application, or any rights which LC Issuer or any Lender may have to otherwise apply any payments by the Borrower and any LC Collateral under Section 2.14. (b) Investment of LC Collateral. Pending application thereof, all LC Collateral shall be invested by LC Issuer in such Cash Equivalents as LC Issuer may choose in its sole discretion. All interest on (and other proceeds of) such Investments shall be reinvested or applied to Matured LC Obligations or other Obligations which are due and payable. When all Obligations have been satisfied in full, including all LC Obligations, all Letters of Credit have expired or been terminated, and all of the Borrower’s reimbursement obligations in connection therewith have been satisfied in full, LC Issuer shall release to the Borrower any remaining LC Collateral. The Borrower hereby assigns and grants to LC Issuer for the benefit of Lenders a continuing security interest in all LC Collateral paid by it to LC Issuer, all Investments purchased with such LC Collateral, and all proceeds thereof to secure its Matured LC Obligations and its Obligations under this Agreement, each Note, and the other Loan Documents. The Borrower further agrees that LC Issuer shall have all of the rights and remedies of a secured party under the UCC with respect to such security interest and that an Event of Default under this Agreement shall constitute a default for purposes of such security interest. (c) Payment of LC Collateral. If the Borrower is required to provide LC Collateral for any reason but fails to do so as required, LC Issuer or the Administrative Agent may without prior notice to the Borrower or any other Restricted Person provide such LC Collateral (whether   36 -------------------------------------------------------------------------------- by transfers from other accounts maintained with LC Issuer, or otherwise) using any available funds of the Borrower or any other Person also liable to make such payments, and LC Issuer or the Administrative Agent will give notice thereof to the Borrower promptly after such application or transfer. Any such amounts which are required to be provided as LC Collateral and which are not provided on the date required shall be considered past due Obligations owing hereunder. 2.12 Interest Rates and Fees. (a) Interest Rates. Unless the Default Rate shall apply, (i) each Base Rate Loan shall bear interest on each day outstanding at the Base Rate plus the Applicable Rate for Base Rate Loans in effect on such day, (ii) each Eurodollar Loan shall bear interest on each day during the related Interest Period at the related Eurodollar Rate plus the Applicable Rate for Eurodollar Loans in effect on such day, and (iii) each Swingline Loan shall bear interest on each day outstanding at the LIBOR Reference Rate plus the Applicable Rate for Eurodollar Loans in effect on such day. During a Default Rate Period, all Loans and other Obligations shall bear interest on each day outstanding at the applicable Default Rate. The interest rate shall change whenever the applicable Base Rate, the Eurodollar Rate, the LIBOR Reference Rate or the Applicable Rate for Eurodollar Loans changes. In no event shall the interest rate on any Loan exceed the Maximum Rate. (b) Commitment Fees. In consideration of each Lender’s commitment to make Loans, the Borrower will pay to the Administrative Agent for the account of each Lender a commitment fee determined on a daily basis equal to the Applicable Rate for commitment fees in effect on such day times such Lender’s Applicable Percentage of the unused portion of the Aggregate Commitments on each day during the Commitment Period, determined for each such day by deducting from the amount of the Aggregate Commitments at the end of such day the Facility Usage. For the purposes of calculating the commitment fee pursuant to this subsection (b), the aggregate amount of outstanding Swingline Loans shall not be included in the term Facility Usage. This commitment fee shall be due and payable in arrears on the last day of each Fiscal Quarter and at the end of the Commitment Period. (c) Letter of Credit Fees. In consideration of LC Issuer’s issuance of any Letter of Credit, the Borrower agrees to pay to the Administrative Agent, for the account of all Lenders in accordance with their respective Applicable Percentages, a letter of credit fee equal to the Applicable Rate for Eurodollar Loans then in effect (or the Default Rate during the Default Rate Period) applicable each day times the face amount of such Letter of Credit. Such fee will be calculated on the face amount of each Letter of Credit outstanding on each day at the above applicable rates and will be payable in arrears on the last day of each Fiscal Quarter. In addition, the Borrower will pay a minimum administrative issuance fee equal to the greater of $150 or one-eighth percent (0.125%) per annum of the face amount of each Letter of Credit and such other fees and charges customarily charged by the LC Issuer in respect of any issuance, amendment or negotiation of any Letter of Credit in accordance with the LC Issuer’s published schedule of such charges effective as of the date of such amendment or negotiation; such fees will be payable in arrears on the last day of each Fiscal Quarter.   37 -------------------------------------------------------------------------------- (d) Administrative Agent’s Fees. In addition to all other amounts due to the Administrative Agent under the Loan Documents, the Borrower will pay fees to the Administrative Agent as described in the Fee Letter. (e) Calculations and Determinations. All calculations of interest chargeable with respect to the Eurodollar Rate and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. All calculations under the Loan Documents of interest chargeable with respect to the Base Rate shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 365 or 366 days, as appropriate. (f) Past Due Obligations. The Borrower hereby promises to each Lender to pay interest at the Default Rate on all Obligations (including Obligations to pay fees or to reimburse or indemnify any Lender) which the Borrower has in this Agreement promised to pay to such Lender and which are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid. 2.13 Evidence of Debt. (a) Credit Extensions. The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto. (b) Letters of Credit. In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.   38 -------------------------------------------------------------------------------- 2.14 Payments Generally; Administrative Agent’s Clawback. (a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made (i) with respect to Revolving Credit Loans, to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, and (ii) with respect to Swingline Loans, to the Administrative Agent, for the account of the Swingline Lender. Each such payment shall be made at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 3:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of each such payment with respect to Revolving Credit Loans in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 3:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.03 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the LC Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such   39 -------------------------------------------------------------------------------- date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the LC Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the LC Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the LC Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error. (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest. (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans, to fund participations in Letters of Credit and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 10.04(c). (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.15 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it, or the participations in LC Obligations held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and subparticipations in LC Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that: (a) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and   40 -------------------------------------------------------------------------------- (b) the provisions of this Section shall not be construed to apply to (i) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (ii) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or subparticipations in LC Obligations to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply). Each Restricted Person consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Restricted Person rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Restricted Person in the amount of such participation. 2.16 Reductions in Commitment. The Borrower shall have the right from time to time to permanently reduce the Aggregate Commitments, provided that (i) notice of such reduction is given not less than two Business Days prior to such reduction, (ii) the resulting Aggregate Commitments are not less than the Facility Usage, and (iii) each partial reduction shall be in an amount at least equal to $5,000,000 and in multiples of $1,000,000 in excess thereof. 2.17 Increase in Aggregate Commitments. (a) The Borrower shall have the option, without the consent of the Lenders, from time to time to cause one or more increases in the Aggregate Commitments by adding, subject to the prior approval of the Administrative Agent (such approval not to be unreasonably withheld), to this Agreement one or more financial institutions as Lenders (collectively, the “New Lenders”) or by allowing one or more Lenders to increase their respective Commitments; provided however that: (i) prior to and after giving effect to the increase, no Default or Event of Default shall have occurred hereunder and be continuing, (ii) no such increase shall cause the Aggregate Commitments to exceed $1,500,000,000, (iii) no Lender’s Commitment shall be increased without such Lender’s consent, and (iv) such increase shall be evidenced by a commitment increase agreement in form and substance acceptable to the Administrative Agent and executed by the Borrower, the Administrative Agent, New Lenders, if any, and Lenders increasing their Commitments, if any, and which shall indicate the amount and allocation of such increase in the Aggregate Commitments and the effective date of such increase (the “Increase Effective Date”). Each financial institution that becomes a New Lender pursuant to this Section by the execution and delivery to the Administrative Agent of the applicable commitment increase agreement shall be a “Lender” for all purposes under this Agreement on the applicable Increase Effective Date. The Borrower shall borrow and prepay Loans on each Increase Effective Date (and pay any additional amounts required pursuant to Section 3.06) to the extent necessary to keep the outstanding Loans of each Lender ratable with such Lender’s revised   41 -------------------------------------------------------------------------------- Applicable Percentage after giving effect to any nonratable increase in the Aggregate Commitments under this Section. (b) As a condition precedent to each increase pursuant to subsection (a) above, the Borrower shall deliver to the Administrative Agent, to the extent requested by the Administrative Agent, the following in form and substance satisfactory to the Administrative Agent: (i) a certificate dated as of the Increase Effective Date, signed by a Responsible Officer of the Borrower certifying that each of the conditions to such increase set forth in this Section shall have occurred and been complied with and that, before and after giving effect to such increase, (A) the representations and warranties contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date after giving effect to such increase, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date, and (B) no Default or Event of Default exists; (ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of the Borrower and each Guarantor as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with such increase agreement and any Guarantors’ consent to such increase agreement, and such documents and certifications as the Administrative Agent may require to evidence that the Borrower and each Guarantor is validly existing and in good standing in its jurisdiction of organization; and (iii) a favorable opinion of Winston & Strawn LLP, counsel to the Restricted Persons, and a favorable opinion of Vinson & Elkins L.L.P., local counsel to the Restricted Persons for the State of Texas, relating to such increase agreement and any Guarantors’ consent to such increase agreement, each addressed to the Administrative Agent and each Lender. 2.18 Extension of Maturity Date; Removal of Lenders. (a) Subject to the remaining terms and provisions of this Section 2.18, the Borrower shall have two successive options to extend the Maturity Date for a period of 364 days each (the first of which extension options shall be referred to herein as the “First Extension Option” and the second of which extension options shall be referred to herein as the “Second Extension Option”). In connection with the First Extension Option, the Borrower may, by written notice to the Administrative Agent (a “Notice of Extension”) given not earlier than 60 days prior to the first anniversary of the Effective Date nor later than 45 days prior to the then effective Maturity Date, advise the Lenders that it requests an extension of the then effective Maturity Date (such then effective Maturity Date being the “Existing Maturity Date”) by 364 calendar days, effective on the Existing Maturity Date. In the event the First Extension Option is exercised and the Existing Maturity Date is extended pursuant to the terms of this Section 2.18, the Borrower may, by Notice of Extension given not earlier than 364 calendar days following the date of delivery of   42 -------------------------------------------------------------------------------- the Notice of Extension provided in connection with the First Extension Option nor later than 45 days prior to the Existing Maturity Date, advise the Lenders that it has elected to exercise the Second Extension Option and request to extend the Existing Maturity Date by 364 calendar days, effective on said Existing Maturity Date. The Administrative Agent will promptly, and in any event within five Business Days of the receipt of any such Notice of Extension, notify the Lenders of the contents of each such Notice of Extension. (b) Each Notice of Extension shall (i) be irrevocable and (ii) constitute a representation by the Borrower that (A) no Event of Default or Default has occurred and is continuing and no event or circumstance has occurred that has had a Material Adverse Effect, and (B) the representations and warranties contained in Article V are correct on and as of the date Borrower provides any Notice of Extension, as though made on and as of such date (unless any representation and warranty expressly relates to an earlier date, in which case such representation and warranty shall be correct as of such earlier date). (c) In the event a Notice of Extension is given to the Administrative Agent as provided in Section 2.18(a) and the Administrative Agent notifies a Lender of the contents thereof, such Lender shall, on or before the day that is 20 days following the date of Administrative Agent’s receipt of said Notice of Extension, advise the Administrative Agent in writing whether or not such Lender consents to the extension requested thereby and if any Lender fails so to advise the Administrative Agent, such Lender shall be deemed to have not consented to such extension. If the Required Lenders so consent (the “Consenting Lenders”) to such extension, which consent may be withheld in their sole and absolute discretion, and any and all Lenders who have not consented (the “Non-Consenting Lenders”) are replaced pursuant to paragraph (d) or (e) of this Section 2.18 or repaid pursuant to paragraph (f) of this Section 2.18, the Maturity Date, and the Commitments of the Consenting Lenders and the Nominees (as defined below) shall be automatically extended 364 calendar days from the Existing Maturity Date, effective on the Existing Maturity Date. The Administrative Agent shall promptly notify the Borrower and all of the Lenders of each written notice of consent given pursuant to this Section 2.18(c). (d) In the event the Consenting Lenders hold less than 100% of the sum of the aggregate Facility Usage and unused Commitments, the Consenting Lenders, or any of them, shall have the right (but not the obligation) to assume all or any portion of the Non-Consenting Lenders’ Commitments by giving written notice to the Borrower and the Administrative Agent of their election to do so on or before the day that is 25 days following the date of Administrative Agent’s receipt of the Notice of Extension, which notice shall be irrevocable and shall constitute an undertaking to (i) assume, as of 5:00 p.m. on the Existing Maturity Date, all or such portion of the Commitments of the Non-Consenting Lenders, as the case may be, as may be specified in such written notice, and (ii) purchase (without recourse) from the Non-Consenting Lenders, at 5:00 p.m. on the Existing Maturity Date, the Facility Usage outstanding on the Existing Maturity Date that corresponds to the portion of the Commitments to be so assumed at a price equal to the sum of (x) the unpaid principal amount of all Loans so purchased, plus (y) the aggregate amount, if any, previously funded by the transferor or any participations so purchased, plus (z) all accrued and unpaid interest thereon and accrued unpaid commitment fees in respect of such Commitments. Such Commitments and Facility Usage, or portion thereof, to be assumed and   43 -------------------------------------------------------------------------------- purchased by Consenting Lenders shall be allocated by the Administrative Agent among those Consenting Lenders who have so elected to assume the same, such allocation to be on a pro rata basis in accordance with the respective Commitments of such Consenting Lenders as of the Existing Maturity Date (provided, however, in no event shall a Consenting Lender be required to assume and purchase an amount or portion of the Commitments of and Obligation owing to the Non-Consenting Lenders in excess of the amount which such Consenting Lender agreed to assume and purchase pursuant to the immediately preceding sentence) or on such other basis as such Consenting Lender shall agree. The Administrative Agent shall promptly notify the Borrower and the other Consenting Lenders in the event it receives any notice from a Consenting Lender pursuant to this Section 2.18(d). (e) Conditions to Effectiveness of Extensions. In the event that the Consenting Lenders shall not elect as provided in Section 2.18(d) to assume and purchase all of the Non-Consenting Lenders’ Commitments and Facility Usage, the Borrower may designate, by written notice to the Administrative Agent and the Consenting Lenders given on or before the day that is 30 days following the date of Administrative Agent’s receipt of the Notice of Extension, one or more assignees not a party to this Agreement (individually, a “Nominee” and collectively, the “Nominees”) to assume all or any portion of the Non-Consenting Lenders’ Commitments not to be assumed by the Consenting Lenders and to purchase (without recourse) from the Non-Consenting Lenders all Facility Usage outstanding at 5:00 p.m. on the Existing Maturity Date that corresponds to the portion of the Commitments so to be assumed at the price specified in Section 2.18(d). Each assumption and purchase under this Section 2.18(e) shall be effective as of 5:00 p.m. on the Existing Maturity Date when each of the following conditions has been satisfied in a manner satisfactory to the Administrative Agent: (i) each Nominee and the Non-Consenting Lenders have executed an Assignment and Assumption pursuant to which such Nominee shall (A) assume in writing its share of the obligations of the Non-Consenting Lenders hereunder, including its share of the Commitments of the Non-Consenting Lenders and (B) agree to be bound as a Lender by the terms of this Agreement; (ii) each Nominee shall have completed and delivered to the Administrative Agent an Administrative Questionnaire; and (iii) the assignment shall otherwise comply with Section 10.06. (f) If all of the Commitments of the Non-Consenting Lenders are not replaced on or before the Existing Maturity Date, then, at the Borrower’s option, either (i) all Commitments shall terminate on the Existing Maturity Date or (ii) the Borrower shall give prompt notice of termination on the Existing Maturity Date of the Commitments of each Non-Consenting Lender not so replaced to the Administrative Agent, and shall fully repay on the Existing Maturity Date the Loans (including, without limitation, all accrued and unpaid interest and unpaid fees), if any, of such Non-Consenting Lenders, which shall reduce the aggregate Commitments accordingly (to the extent not assumed), and the Existing Maturity Date shall be extended in accordance with this Section 2.18 for the remaining Commitments of the Consenting Lenders; provided, however, that the Required Lenders have consented to such extension pursuant to Section 2.18(c).   44 -------------------------------------------------------------------------------- Following the Existing Maturity Date, the Non-Consenting Lenders shall have no further obligations under this Agreement, including, without limitation, that such Non-Consenting Lenders shall have no obligation to purchase participations in Letters of Credit. ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or LC Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the LC Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the LC Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (provided that the Borrower shall not indemnify the Administrative Agent, any Lender or the LC Issuer for any such penalties, interest and reasonable expenses arising solely from such party’s failure to notify the Borrower of such Indemnified Taxes or Other Taxes within a reasonable period of time after such party has actual knowledge of such Indemnified Taxes or Other Taxes), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the LC Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the LC Issuer, shall be conclusive absent manifest error. (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.   45 -------------------------------------------------------------------------------- (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, (ii) duly completed copies of Internal Revenue Service Form W-8ECI, (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made. (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the LC Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the LC   46 -------------------------------------------------------------------------------- Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the LC Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the LC Issuer in the event the Administrative Agent, such Lender or the LC Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the LC Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person. 3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans to Eurodollar Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. 3.03 Inability to Determine Rates. If the Majority Lenders determine that for any reason in connection with any request for a Eurodollar Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Loans shall be suspended until the Administrative Agent (upon the instruction of the Majority Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.   47 -------------------------------------------------------------------------------- 3.04 Increased Costs; Reserves on Eurodollar Loans. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the LC Issuer; (ii) subject any Lender or the LC Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender or the LC Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the LC Issuer); or (iii) impose on any Lender or the LC Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the LC Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the LC Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the LC Issuer, the Borrower will pay to such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer, as the case may be, for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender or the LC Issuer determines that any Change in Law affecting such Lender or the LC Issuer or any Lending Office of such Lender or such Lender’s or the LC Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the LC Issuer’s capital or on the capital of such Lender’s or the LC Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the LC Issuer, to a level below that which such Lender or the LC Issuer or such Lender’s or the LC Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the LC Issuer’s policies and the policies of such Lender’s or the LC Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer or such Lender’s or the LC Issuer’s holding company for any such reduction suffered. (c) Certificates for Reimbursement. A certificate of a Lender or the LC Issuer setting forth the amount or amounts necessary to compensate such Lender or the LC Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or   48 -------------------------------------------------------------------------------- the LC Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender or the LC Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the LC Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the LC Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the LC Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the LC Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof). (e) Reserves on Eurodollar Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice. 3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or (c) any assignment of a Eurodollar Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13; including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained (but excluding any loss of anticipated profits). The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.   49 -------------------------------------------------------------------------------- For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Loan was in fact so funded. 3.06 Mitigation Obligations; Replacement of Lenders. (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13. 3.07 Survival. All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder. ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 Conditions of Initial Credit Extension. The obligation of the LC Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent: (a) The Administrative Agent shall have received all of the following, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent: (i) counterparts of this Agreement executed by the Borrower and each Lender, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower and a Guaranty executed by each Guarantor required to execute and deliver such Guaranty pursuant to Section 6.11 of this Agreement, sufficient in number for distribution to the Administrative Agent, the Borrower and their respective counsel;   50 -------------------------------------------------------------------------------- (ii) a Note executed by the Borrower in favor of each Lender requesting a Note; (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Restricted Person as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Restricted Person is a party; (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Restricted Person is duly organized or formed, and that each of the Borrower and each Guarantor is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (v) a favorable opinion of Winston & Strawn LLP, counsel to the Restricted Persons, substantially in the form of Exhibit F, and a favorable opinion of Vinson & Elkins L.L.P., local counsel to the Restricted Persons for the State of Texas, in form and substance satisfactory to Administrative Agent, each addressed to the Administrative Agent and each Lender; (vi) a certificate of a Responsible Officer of each Restricted Person either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Restricted Person and the validity against such Restricted Person of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required; (vii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no event or circumstance since the date of the Initial Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect; (viii) a duly completed Compliance Certificate as of the last day of the Fiscal Quarter of the Borrower most recently ended prior to the Closing Date for which financial statements are available to the Borrower, signed by a Responsible Officer of the Borrower; (ix) evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect; (x) evidence satisfactory to it that (A) all Loans (as defined in the Existing Credit Agreement) of the Lenders (as defined in the Existing Credit Agreement) shall   51 -------------------------------------------------------------------------------- have been or shall concurrently be repaid in full, together with any accrued interest thereon and any accrued fees payable to such Lenders under the Existing Credit Agreement to the Closing Date, (B) the commitments under the Existing Credit Agreement of such Lenders shall have been or shall concurrently be terminated and (C) all Liens securing obligations (including Hedging Contracts) in connection with the Existing Credit Agreement are being concurrently released; (xi) the Initial Financial Statements; and (xii) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the LC Issuer or the Majority Lenders reasonably may require. (b) The Borrower shall have a Rating from at least one Rating Agency of BBB- or better. (c) Any fees required to be paid on or before the Closing Date shall have been paid. (d) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent). Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has executed and delivered this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto. 4.02 Conditions to all Credit Extensions. No Lender has any obligation to make any Loan (including its first), and LC Issuer has no obligation to issue any Letter of Credit (including its first), unless the following conditions precedent have been satisfied: (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable (but with respect to any amendment, renewal or extension, only in the event that the face amount of such Letter of Credit is actually increased), both before and after giving effect to such Borrowing or other Credit Extension, provided, however, for purposes of this Section 4.02, (i) to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct as of such earlier date, (ii) the representations and warranties contained in Section 5.06(a) shall be deemed to refer to the most recent financial statements furnished pursuant to   52 -------------------------------------------------------------------------------- Section 6.02, and (iii) the representation and warranty contained in Section 5.06(b) shall not need to be true and correct on any date after the date of the initial Credit Extension; and (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V. REPRESENTATIONS AND WARRANTIES To confirm each Lender’s understanding concerning Restricted Persons and Restricted Persons’ businesses, properties and obligations and to induce each Lender to enter into this Agreement and to extend credit hereunder, the Borrower represents and warrants to each Lender that: 5.01 No Default. No Restricted Person is in default in the performance of any of the covenants and agreements contained in any Loan Document. No event has occurred and is continuing which constitutes a Default. 5.02 Organization and Good Standing. Each Restricted Person is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where the failure to so qualify has not had, and could not reasonably be expected to have, a Material Adverse Effect. 5.03 Authorization. Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder. The Borrower is duly authorized to borrow funds and obtain Letters of Credit hereunder. 5.04 No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Loan Documents to which each is a party, the performance by each of its obligations under such Loan Documents, and the consummation of the transactions contemplated by the various Loan Documents, do not and will not (i) conflict with any provision of (1) any Law, (2) the organizational documents of any Restricted Person or the General Partner, or (3) any material agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person or the General Partner, (ii) result in the acceleration of any Indebtedness owed by the Borrower, any of its Subsidiaries or the General Partner, or (iii) result in or require the   53 -------------------------------------------------------------------------------- creation of any Lien upon any assets or properties of any Restricted Person or the General Partner. Except as expressly contemplated in the Loan Documents or disclosed in the Disclosure Schedule, no permit, consent, approval, authorization or order of, and no notice to or filing, registration or qualification with, any Tribunal or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents. No Restricted Person is in breach of or in default under any instrument, license or other agreement applicable to or binding upon such Restricted Person, which breach or default has had, or could reasonably be expected to have, a Material Adverse Effect. 5.05 Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights. 5.06 Initial Financial Statements; No Material Adverse Change. (a) The Borrower has heretofore delivered to the Lenders true, correct and complete copies of the Initial Financial Statements. All Initial Financial Statements were prepared in accordance with GAAP. The Initial Borrower Financial Statements fairly present the Borrower’s Consolidated financial position at the date thereof, the Consolidated results of the Borrower’s operations for the periods thereof and the Borrower’s Consolidated cash flows for the period thereof. The Initial La Grange Financial Statements fairly present La Grange’s Consolidated financial position at the date thereof, the Consolidated results of La Grange’s operations for the period thereof and La Grange’s Consolidated cash flows for the period thereof. (b) Since the date of the Initial Financial Statements, no event or circumstance has occurred that has had a Material Adverse Effect. 5.07 Taxes, Obligations and Restrictions. No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long term commitments) that exceed $10,000,000 in the aggregate and not shown in the Initial Financial Statements, disclosed in the Disclosure Schedule or otherwise permitted under Section 7.01. Each Restricted Person has timely filed all tax returns and reports required to have been filed and has paid all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property, except to the extent that any of the foregoing is not yet due or is being in good faith contested as permitted by Section 6.07. No Unrestricted Subsidiary is party to or subject to any agreement, relating to any Indebtedness or extension of credit (or commitment for any extension of credit) that restrict any action of any Restricted Person or that obligates any Unrestricted Subsidiary to cause any Restricted Person to take any action, other than (i) limitations or restrictions on affiliate transactions between any Unrestricted Subsidiary or any Restricted Person, and (ii) provisions substantially in the form contained in the Heritage Note Purchase Agreements as in effect on the date of this Agreement.   54 -------------------------------------------------------------------------------- 5.08 Full Disclosure. No written certificate, statement or other information, taken as a whole, delivered herewith or heretofore by any Restricted Person to any Lender in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading as of the date made or deemed made. All written information, taken as a whole, furnished after the date hereof by or on behalf of any Restricted Person to the Administrative Agent, LC Issuer or any Lender in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect in light of the circumstances in which made, or based on reasonable estimates on the date as of which such information is stated or certified. There is no fact known to any Restricted Person that has not been disclosed to each Lender in writing which has had, or could reasonably be expected to have, a Material Adverse Effect. 5.09 Litigation. Except as disclosed in the Initial Financial Statements or in the Disclosure Schedule and except for matters that could not, in the aggregate, reasonably be expected to have a Material Adverse Effect (i) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending or, to the knowledge of the Borrower, threatened, by or before any Tribunal against any Restricted Person or affecting any property of any Restricted Person, and (ii) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any Restricted Person or any Restricted Person’s stockholders, partners, directors or officers or affecting any property of any Restricted Person. Since the date of this Agreement, there has been no change in the status of any matters disclosed in the Initial Financial Statements or in the Disclosure Schedule that, individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect. 5.10 ERISA. All currently existing ERISA Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial Financial Statements or in the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA. Except as set forth in the Disclosure Schedule: (i) no “accumulated funding deficiency” (as defined in Section 412(a) of the Code exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (ii) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than $5,000,000. 5.11 Compliance with Laws. Except as set forth in the Disclosure Schedule, each Restricted Person has all permits, licenses and authorizations required in connection with the conduct of its businesses, except to the extent failure to have any such permit, license or authorization has not had, and could not reasonably be expected to have, a Material Adverse Effect. Each Restricted Person is in compliance with the terms and conditions of all such permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Law or in any regulation, code, plan, order, decree, judgment,   55 -------------------------------------------------------------------------------- injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply has not had, and could not reasonably be expected to have, a Material Adverse Effect. Without limiting the foregoing, each Restricted Person (i) has filed and maintained all tariffs applicable to its business with each applicable agency, (ii) and all such tariffs are in compliance with all Laws administered or promulgated by each applicable agency and (iii) has imposed charges on its customers in compliance with such tariffs, all contracts applicable to its business and all applicable Laws except to the extent such failure to file or impose has not had, and could not reasonably be expected to have, a Material Adverse Effect. As used herein, “agency” includes the Federal Energy Regulatory Commission and each other United States federal, state, or local governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over any Restricted Person or its properties. 5.12 Environmental Laws. Without limiting the provisions of Section 5.11 and except as disclosed in the Form 10-K for the year ended August 31, 2004 filed by the Borrower with the Commission or as has not had, and could not reasonably be expected to have, a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions has not had and could not reasonably be expected to have, a Material Adverse Effect): (a) Neither any property of the Borrower nor any Restricted Subsidiary nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws; (b) Without limitation of clause (a) above, no property of the Borrower or any Restricted Subsidiary nor the operations currently conducted thereon or, to the best knowledge of the Borrower, by any prior owner or operator of such property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws; (c) All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all property of the Borrower and each Restricted Subsidiary, including without limitation past or present treatment, storage, disposal or release of a hazardous substance, hazardous waste or solid waste into the environment, have been duly obtained or filed, and each of the Borrower and the Restricted Subsidiaries are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (d) All hazardous substances, hazardous waste, solid waste, and oil and gas exploration and production wastes, if any, generated at any and all property of the Borrower or any Restricted Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an endangerment to public health or welfare or the environment, and, to the best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or   56 -------------------------------------------------------------------------------- threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws; (e) The Borrower and the Restricted Subsidiaries have taken all steps reasonably necessary to determine and have determined that no hazardous substances, hazardous waste, solid waste, or oil and gas exploration and production wastes, have been disposed of or otherwise released and there has been no threatened release of any hazardous substances on or to any property of the Borrower or any Restricted Subsidiary; (f) To the extent applicable, all property of the Borrower and each Restricted Subsidiary currently satisfies all design, operation, and equipment requirements imposed by the Environmental Laws or scheduled as of the date hereof to be imposed by the Environmental Laws during the term of this Agreement, and the Borrower does not have any reason to believe that such property, to the extent subject to the Environmental Laws, will not be able to maintain compliance with the Environmental Laws requirements during the term of this Agreement; and (g) None of the Borrower, any Guarantor or any Restricted Subsidiary has any known contingent liability in connection with any release or threatened release of any oil, hazardous substance, hazardous waste or solid waste into the environment. 5.13 Borrower’s Subsidiaries. The Borrower does not have any Subsidiary or own any stock in any other corporation or association except those listed in the Disclosure Schedule or disclosed to the Administrative Agent in writing. Neither the Borrower nor any of its Subsidiaries is a member of any general or limited partnership, limited liability company, joint venture or association of any type whatsoever except those listed in the Disclosure Schedule or disclosed to the Administrative Agent in writing. The Borrower owns, directly or indirectly, the equity membership or partnership interest in each of its Subsidiaries which is indicated in the Disclosure Schedule or as disclosed to the Administrative Agent in writing. 5.14 Title to Properties; Licenses. Each Restricted Person has good and defensible title to or valid leasehold interests in all of its material properties and assets, free and clear of all Liens other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person’s business. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property unless, in each case, such failure to possess or violation has not had, and could not reasonably be expected to have, a Material Adverse Effect. 5.15 Government Regulation. Neither the Borrower nor any other Restricted Person owing Obligations is subject to regulation under the Public Utility Holding Company Act of 1935 (so long as it is in effect), the Federal Power Act, the Investment Company Act of 1940 (as any of the preceding acts have been amended) or any other Law which regulates the incurring by such Person of Indebtedness. Neither the Borrower nor any of its Restricted Subsidiaries, nor   57 -------------------------------------------------------------------------------- any Person having “control” (as that term is defined in 12 U.S.C. § 375b(9) or in regulations promulgated pursuant thereto) of the Borrower or any of its Restricted Subsidiaries, is a “director” or an “executive officer” or “principal shareholder” (as those terms are defined in 12 U.S.C. § 375b(8) or (9) or in regulations promulgated pursuant thereto) of any Lender, of a bank holding company of which any Lender is a Subsidiary or of any Subsidiary of a bank holding company of which any Lender is a Subsidiary. Neither the Borrower nor any Subsidiary or Affiliate of the Borrower is (i) named on the list of Specially Designated Nationals or Blocked Persons maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control available at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or (ii) (A) an agency of the government of a country, (B) an organization controlled by a country, or (C) a person resident in a country that is subject to a sanctions program identified on the list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise published from time to time, as such program may be applicable to such agency, organization or person, and the proceeds from the loan will not be used to fund any operations in, finance any investments or activities in, or make any payments to, any such country, agency, organization or person. 5.16 Solvency. The Borrower and each of its Subsidiaries is solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws), and the sum of the Borrower’s and each of its Subsidiaries’ absolute and contingent liabilities, including the Obligations or guarantees thereof, shall not exceed the fair market value of such Person’s assets, and the Borrower’s and each of its Subsidiaries’ capital should be adequate for the businesses in which such Person is engaged and intends to be engaged. Neither the Borrower nor any of its Subsidiaries has incurred (whether under the Loan Documents or otherwise), nor does any such Person intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. ARTICLE VI. AFFIRMATIVE COVENANTS To conform with the terms and conditions under which each Lender is willing to have credit outstanding to the Borrower, and to induce each Lender to enter into this Agreement and extend credit hereunder, the Borrower covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Majority Lenders, or all Lenders as required under Section 10.01, have previously agreed otherwise: 6.01 Payment and Performance. Each Restricted Person will pay all amounts due under the Loan Documents, to which it is a party, in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition expressed in the Loan Documents to which it is a party.   58 -------------------------------------------------------------------------------- 6.02 Books, Financial Statements and Reports. The Borrower will maintain and will cause its Subsidiaries to maintain a standard system of accounting and proper books of record and account in accordance with GAAP, will maintain its Fiscal Year, and will furnish the following statements and reports to each Lender at the Borrower’s expense: (a) As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, (i) complete Consolidated financial statements of the Borrower together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion relating to such financial statements, based on an audit using generally accepted auditing standards, by Grant Thornton LLP, or other independent certified public accountants selected by the General Partner and acceptable to the Administrative Agent, stating that such Consolidated financial statements have been so prepared; provided, however, that at any time when the Borrower shall be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, delivery within the time period specified above of copies of the Annual Report on Form 10-K of the Borrower for such Fiscal Year prepared in compliance with the requirements therefor and filed with the Commission shall be deemed to satisfy the requirements of this clause (a)(i), and (ii) a consolidating balance sheet and a consolidating statement of operations reflecting the consolidating information for the Borrower, the Unrestricted Subsidiaries (individually or with one or more on a combined basis) and the Restricted Subsidiaries (individually or with one or more on a combined basis) for such Fiscal Year, setting forth, in each case, in comparative form, figures for the preceding Fiscal Year, certified by an authorized financial officer of the Borrower as presenting fairly, in all material respects, the information contained therein, on a basis consistent with the Consolidated financial statements, which consolidating statement of operations may be in summary form in detail satisfactory to the Administrative Agent. Such financial statements shall contain a Consolidated balance sheet as of the end of such Fiscal Year and Consolidated statements of earnings for such Fiscal Year. Such financial statements shall set forth in comparative form the corresponding figures for the preceding Fiscal Year. Such financial statements shall set forth in comparative form the corresponding figures for the preceding fiscal year. (b) As soon as available, and in any event within fifty (50) days after the end of each Fiscal Quarter (i) the Borrower’s Consolidated balance sheet as of the end of such Fiscal Quarter and the Borrower’s Consolidated statements of income, partners’ capital and cash flows for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments; provided, however, that at any time when the Borrower shall be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, delivery within the time period specified above of copies of the Quarterly Report on Form 10-Q of the Borrower for such Fiscal Quarter prepared in accordance with the requirements therefor and filed with the Commission shall be deemed to satisfy the requirements of this clause (b)(i) for any of the first three Fiscal Quarters of a Fiscal Year and (ii) a consolidating balance sheet and a consolidating statement of operations reflecting the consolidating information for the Borrower, the Unrestricted Subsidiaries (individually or with one or more on a combined basis) and the Restricted Subsidiaries (individually or with one or more on a combined basis) for such Fiscal Quarter, setting forth, in each case, in comparative form, figures for same period of the preceding Fiscal Year, certified by an authorized financial officer of the Borrower as presenting fairly, in all material respects, the information contained therein, on a basis consistent with the Consolidated financial statements, which consolidating statement of operations may be in summary form in detail satisfactory to the Administrative Agent. Such financial statements shall set forth in comparative form the corresponding figures for the same period of the preceding Fiscal Year. In addition the Borrower will, together with   59 -------------------------------------------------------------------------------- each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a Compliance Certificate, signed on behalf of the Borrower by the chief financial officer, principal accounting officer or treasurer of the General Partner, setting forth that such financial statements are accurate and complete in all material respects (subject, in the case of Fiscal Quarter-end statements, to normal year-end adjustments), stating that he has reviewed the Loan Documents, containing calculations showing compliance (or non-compliance) at the end of such Fiscal Quarter with the requirements of Section 7.12, and stating that no Default exists at the end of such Fiscal Quarter or at the time of such certificate or specifying the nature and period of existence of any such Default. (c) So long as any of the HOLP Companies are Unrestricted Subsidiaries, as soon as available, and in any event within one hundred (100) days after the end of each Fiscal Year, complete Consolidated financial statements of La Grange together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by Grant Thornton LLP relating to such financial statements, or other independent certified public accountants selected by the General Partner and acceptable to the Administrative Agent, stating that such Consolidated financial statements have been so prepared. Such financial statements shall contain a Consolidated balance sheet as of the end of such Fiscal Year and Consolidated statements of earnings for such Fiscal Year. Such financial statements shall set forth in comparative form the corresponding figures for the preceding Fiscal Year. (d) So long as any of the HOLP Companies are Unrestricted Subsidiaries, as soon as available, and in any event within fifty (50) days after the end of each fiscal quarter, the Consolidated balance sheet of La Grange as of the end of such Fiscal Quarter, the Consolidated balance sheet of La Grange as of the end of such Fiscal Quarter and the Consolidated statements of La Grange of income, partners’ capital and cash flows for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments. Such financial statements shall set forth in comparative form the corresponding figures for the same period of the preceding Fiscal Year. In addition La Grange will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a certificate signed on behalf of La Grange by the chief financial officer, principal accounting officer or treasurer of General Partner, stating that such financial statements are accurate and complete in all material respects (subject, in the case of Fiscal Quarter-end statements, to normal year-end adjustments). (e) Promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Borrower or any of its Subsidiaries to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such Lender), and each prospectus and all amendments thereto filed by the Borrower or any of its Subsidiaries with the Commission and of all press releases and other statements made available generally by the Borrower or any of its Subsidiaries to the public concerning material developments; provided that the Borrower shall be deemed to have furnished the information specified in this clause (e) above on the date that such   60 -------------------------------------------------------------------------------- information is posted at the Borrower’s website on the Internet or at such other website as notified to the Lenders. 6.03 Other Information and Inspections. Each Restricted Person will furnish to each Lender any information which the Administrative Agent or any Lender may from time to time reasonably request concerning any representation, warranty, covenant, provision or condition of the Loan Documents or any matter in connection with Restricted Persons’ businesses and operations. Each Restricted Person will permit representatives appointed by the Administrative Agent (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect during normal business hours (which right to visit and inspect shall be limited to once during any Fiscal Year unless a Default has occurred and is continuing) any of such Restricted Person’s property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit the Administrative Agent or its representatives to investigate and verify the accuracy of the information furnished to the Administrative Agent or any Lender in connection with the Loan Documents and to discuss all such matters with its officers, employees and, upon prior notice to the Borrower, its representatives. 6.04 Notice of Material Events. The Borrower will notify the Administrative Agent, LC Issuer and each Lender promptly, and not later than five (5) Business Days in the case of subsection (b) below and not later than thirty (30) days in the case of any other subsection below, after any executive officer of the Borrower has knowledge thereof, stating that such notice is being given pursuant to this Agreement, of: (a) the occurrence of any event or circumstance that has had, or could reasonably be expected to have, a Material Adverse Effect, (b) the occurrence of any Default, (c) the acceleration of the maturity of any Indebtedness owed by the Borrower or any of its Subsidiaries or of any default by the Borrower or any of its Subsidiaries under any indenture, mortgage, agreement, contract or other instrument to which it is a party or by which it or any of its properties is bound, if such acceleration or default has had or could have a Material Adverse Effect, (d) the occurrence of any Termination Event, (e) Under any Environmental Law, any claim of $50,000,000 or more, any notice of potential liability which might reasonably be expected to exceed such amount, or any other material adverse claim asserted against any Restricted Person or with respect to any Restricted Person’s properties taken as a whole, (f) the filing of any suit or proceeding, or the assertion in writing of a claim against any Restricted Person or with respect to any Restricted Person’s properties in which an adverse decision could reasonably be expected to have a Material Adverse Effect, and   61 -------------------------------------------------------------------------------- (g) the occurrence of any event of default by the Borrower or any of its Subsidiaries in the payment or performance of (i) any material obligations such Person is required to pay or perform under the terms of any indenture, mortgage, deed of trust, security agreement, lease, and franchise, or other agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound, to the extent such default or event of default could reasonably be expected to have a Material Adverse Effect on the consolidated financial condition, business, operations, assets or prospects of the Borrower, or (ii) any Indebtedness. Upon the occurrence of any of the foregoing (other than with respect to the Borrower and its Subsidiaries (other than Restricted Persons)), Restricted Persons will take all necessary or appropriate steps to remedy promptly any such Material Adverse Effect, Default, acceleration, default, or Termination Event, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. 6.05 Maintenance of Properties. Each Restricted Person will 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 this Section shall not prevent the Borrower or any of the Restricted Subsidiaries 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 Borrower has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.06 Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable Law, except where the failure so to qualify has not had, and could not reasonably be expected to have, a Material Adverse Effect. 6.07 Payment of Trade Liabilities, Taxes, etc. Each Restricted Person will (a) timely file all tax returns required to be filed in any jurisdiction; (b) timely 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 Borrower or any Restricted Person; (c) timely pay all Liabilities owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business, (e) timely pay and discharge when due all other Liabilities now or hereafter owed by it, other than royalty payments suspended in the ordinary course of business; and (f) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP. Each Restricted Person may, however, delay paying or discharging any of the foregoing so long as (i) the amount, applicability or validity thereof is contested by the Borrower or such Restricted Person on a timely basis in good faith and in appropriate proceedings, and the Borrower or such Restricted Person has established adequate reserves therefor in accordance with GAAP on the books of the Borrower or such   62 -------------------------------------------------------------------------------- Restricted Person or (ii) the nonpayment of all such taxes, assessments, charges, levies and Liabilities in the aggregate could not reasonably be expected to have a Material Adverse Effect. 6.08 Insurance. Each Restricted Person shall at all times maintain at its own expense with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. 6.09 Compliance with Agreements and Law. Each Restricted Person will perform all material obligations it is required to perform under the terms of each material indenture, mortgage, deed of trust, security agreement, lease, and franchise, and each material agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound. Each Restricted Person will conduct its business and affairs in compliance with all Laws applicable thereto and will maintain in good standing all licenses that may be necessary or appropriate to carry on its business, except for failures so to comply that have not had, and could not reasonably be expected to have, a Material Adverse Effect. 6.10 Environmental Matters. (a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Restricted Person as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect. (b) Each Restricted Person will promptly furnish to the Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by any Restricted Person or General Partner, or of which it has notice, pending or threatened against any Restricted Person, the potential liability of which exceeds or might reasonably be expected to exceed $50,000,000 or could reasonably be expected to have a Material Adverse Effect if resolved adversely against any Restricted Person, by any Governmental Authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with its ownership or use of its properties or the operation of its business. (c) Each Restricted Person will promptly furnish to the Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by any Restricted Person or General Partner in connection with its ownership or use of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location, the potential liability of which exceeds or might reasonably be expected to exceed $50,000,000 or could reasonably be expected to have a Material Adverse Effect if resolved adversely against any Restricted Person.   63 -------------------------------------------------------------------------------- 6.11 Guaranties of Subsidiaries. (a) Each Subsidiary, whether existing on the Closing Date or created, acquired or coming into existence after the Closing Date, that Guarantees any other Indebtedness of the Borrower shall execute and deliver to the Administrative Agent a Guaranty. (b) Each Restricted Subsidiary (other than LA GP, LLC, Heritage ETC, L.P., and Heritage ETC GP, L.L.C., in each case so long as such entity has no operations, Indebtedness or Liens other than operations, Indebtedness or Liens as would be deemed de minimis and no material assets other than Equity Interests in Subsidiaries), whether existing on the Closing Date or created, acquired or coming into existence after the Closing Date, which holds Equity Interests in another Guarantor, or which has EBITDA in any Fiscal Quarter which constitutes ten percent (10%) or more of Borrower’s Consolidated EBITDA for such Fiscal Quarter or which has assets at any time with a book value equal to or exceeding (10%) of the book value of Borrower’s Consolidated assets at such time shall execute and deliver to the Administrative Agent a Guaranty. (c) Without limiting Section 6.11(a) or (b), a sufficient number of Restricted Subsidiaries existing on the Closing Date shall execute and deliver to Administrative Agent a Guaranty such that: (i) the aggregate amount of the Borrower’s EBITDA for the Fiscal Year ended August 31, 2005 plus the EBITDA of each of the Guarantors during such Fiscal Year is equal to seventy five percent (75%) or more of the Consolidated EBITDA for such Fiscal Year (the “Minimum Guarantor EBITDA”), and (ii) the book value of Borrower’s assets plus the aggregate book value of the assets of Guarantors, in each case other than assets consisting of investments in Subsidiaries of such Person, exceeds seventy five percent (75%) of the book value of the Borrower’s Consolidated assets (the “Minimum Guarantor Book Value”). (d) If (i) the aggregate amount of the Borrower’s EBITDA for any Fiscal Quarter plus the EBITDA of each Guarantor during such Fiscal Quarter is less than the Minimum Guarantor EBITDA or (ii) the book value of the Borrower’s assets at any time plus the aggregate book value of the assets of the Guarantors at such time does not exceed the Minimum Guarantor Book Value, then the Borrower, shall within ten (10) days following the date that financial statements in respect of such Fiscal Quarter are available to the Borrower cause one or more Restricted Subsidiaries, with aggregate assets and/or EBITDA sufficient to comply with the test contained in Section 6.11(c), to execute and deliver to the Administrative Agent a Guaranty. (e) For purposes of Section 6.11(b), (c) and (d), references to “EBITDA” of a Person (other than Consolidated EBITDA) shall mean that portion of Consolidated EBITDA derived from the operating revenues of such Person on an unconsolidated basis and references to assets of a Person (other than Consolidated assets) shall mean the assets of such Person on an unconsolidated basis. (f) Simultaneously with its delivery of such a Guaranty, each Subsidiary shall, at the request of the Administrative Agent, provide written evidence reasonably satisfactory to the   64 -------------------------------------------------------------------------------- Administrative Agent and its counsel that such Subsidiary has taken all corporate, limited liability company or partnership action necessary to duly approve and authorize its execution, delivery and performance of such Guaranty and any other documents which it is required to execute. (g) The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided that the Borrower may not make such a designation unless at the time of such action and after giving effect thereto, (i) none of such Unrestricted Subsidiaries have outstanding Indebtedness or Guarantees, other than Indebtedness permitted under Section 7.01 or Liens on any of their property, other than Permitted Liens (in each case taking into account the other Indebtedness and Liens of the Restricted Persons), (ii) no Default or Event of Default shall exist, (iii) all representations and warranties herein will be true and correct in all material respects if remade at the time of such designation, except to the extent such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date, and (iv) the Borrower has provided to the Administrative Agent an officer’s certificate in form satisfactory to the Administrative Agent to the effect that each of the foregoing conditions have been satisfied. (h) The Borrower may designate any Person who becomes a Subsidiary of the Borrower after the date hereof to be an Unrestricted Subsidiary, provided that all Investments in such Subsidiary at the time of such designation shall be treated as Investments made on the date of such designation, and provided further that the Borrower may not make such a designation unless such designation is made not later than 30 days after the date such Person becomes a Subsidiary and, at the time of such action and after giving effect thereto, (i) such Subsidiary does not own, directly or indirectly, any Indebtedness or Equity Interests of the Borrower or any Restricted Subsidiary, (ii) no Default or Event of Default shall exist, (iii) all representations and warranties herein will be true and correct in all material respects if remade at the time of such designation, except to the extent such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date, (iv) the Investment represented by such designation is permitted under clause (i) of the definition of Permitted Investments and (v) the Borrower has provided to the Administrative Agent an officer’s certificate in form satisfactory to the Administrative Agent to the effect that each of the foregoing conditions have been satisfied. 6.12 Compliance with Agreements. Each Restricted Person shall observe, perform or comply in all material respects with any agreement with any Person or any term or condition of any instrument, if such agreement or instrument is materially significant to such Restricted Person or to Restricted Persons on a Consolidated basis, unless any such failure to so observe, perform or comply is remedied within the applicable period of grace (if any) provided in such agreement or instrument. 6.13 Maintenance of Separateness. So long as any of the HOLP Companies are Unrestricted Subsidiaries: (a) The Borrower will, and will cause each other Restricted Person to: (i) maintain books and records separate from those of the Unrestricted Subsidiaries; (ii) maintain its assets in   65 -------------------------------------------------------------------------------- such a manner that it is not more costly or difficult to segregate, identify or ascertain such assets from those of the Unrestricted Subsidiaries; and (iii) observe all organizational formalities. (b) The Borrower and the other Restricted Persons, collectively, will (i) hold themselves out to creditors and the public as separate and distinct from any other Person, including the Unrestricted Subsidiaries; (ii) conduct their business in their respective names or in business names or trade names of the Borrower, and use stationary, invoices and checks separate from those of any other Person, including the Unrestricted Subsidiaries; and (iii) not assume, guarantee or pay the debts or obligations of or hold themselves out as being available to satisfy the obligations of any other Person, including the Unrestricted Subsidiaries, except as is expressly permitted by the terms of this Agreement or with respect to Performance Guaranties. (c) To the extent that the Borrower or any other Restricted Person jointly contracts with any of the Unrestricted Subsidiaries to do business with vendors or service providers or to share overhead expenses, the costs incurred in doing so shall be allocated fairly among such entities and each such entity shall bear its fair share of such costs. To the extent that the Borrower or any other Restricted Person contracts or does business with vendors or service providers where the goods and services are partially for the benefit of the Unrestricted Subsidiaries, the costs incurred in doing so shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. ARTICLE VII. NEGATIVE COVENANTS To conform with the terms and conditions under which each Lender is willing to have credit outstanding to the Borrower, and to induce each Lender to enter into this Agreement and make the Loans, the Borrower covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Majority Lenders, or all Lenders as required under Section 10.01, have previously agreed otherwise: 7.01 Indebtedness. No Restricted Subsidiary will in any manner owe or be liable for Indebtedness except: (a) the Obligations; (b) Indebtedness of any Restricted Subsidiary owing to another Restricted Person (provided that such Indebtedness owed to a non-Guarantor Restricted Subsidiary shall be unsecured and subordinated in right of payment to the payment in full of the Obligations on terms reasonably satisfactory to the Administrative Agent); (c) Guarantees by any Restricted Subsidiary of Indebtedness of the Borrower; (d) Indebtedness in respect of bonds that are performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of   66 -------------------------------------------------------------------------------- business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (e) Indebtedness in respect to future payment for non-competition covenants and similar payments under agreements governing a Permitted Acquisition by a Restricted Subsidiary; (f) unsecured Indebtedness of any Person that becomes a Restricted Subsidiary after the date hereof incurred prior to the time such Person becomes a Subsidiary; provided that (i) such Indebtedness is not created in contemplation of such Person becoming a Subsidiary and (ii) such Indebtedness is not assumed or Guaranteed by any other Restricted Subsidiary; and (g) Permitted Priority Debt. 7.02 Limitation on Liens. No Restricted Person will create, assume or permit to exist any Lien upon or with respect to any of its properties or assets now owned or hereafter acquired, except the following Liens (to the extent permitted by this Section, herein called “Permitted Liens”): (a) Liens existing on the date of this Agreement and listed in the Disclosure Schedule; (b) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or the validity of which is being contested in good faith and by appropriate proceedings, if necessary, for which adequate reserves are maintained on the books of any Restricted Person in accordance with GAAP; (c) pledges or deposits of cash or securities under worker’s compensation, unemployment insurance or other social security legislation; (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s, or other like Liens (including, without limitation, Liens on property of any Restricted Person in the possession of storage facilities, pipelines or barges) arising in the ordinary course of business for amounts which are not more than 60 days past due or the validity of which is being contested in good faith and by appropriate proceedings, if necessary, and for which adequate reserves are maintained on the books of any Restricted Person in accordance with GAAP; (e) deposits of cash or securities to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of real property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from   67 -------------------------------------------------------------------------------- the value of the property subject thereto or interfere with the ordinary conduct of the business of any Restricted Person; (g) rights reserved to or vested in any Governmental Authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to revoke or terminate any such right, power, franchise, grant, license or permit or to condemn or acquire by eminent domain or similar process; (h) rights reserved to or vested by Law in any Governmental Authority to in any manner, control or regulate in any manner any of the properties of any Restricted Person or the use thereof or the rights and interests of any Restricted Person therein, in any manner under any and all Laws; (i) rights reserved to the grantors of any properties of any Restricted Person, and the restrictions, conditions, restrictive covenants and limitations, in respect thereto, pursuant to the terms, conditions and provisions of any rights-of-way agreements, contracts or other agreements therewith; (j) inchoate Liens in respect of pending litigation or with respect to a judgment which has not resulted in an Event of Default under Section 8.01; (k) statutory Liens in respect of payables; (l) any Lien existing on any property prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property of the Borrower or any Subsidiary, (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be; and (iv) such Liens do not secure Indebtedness other than Permitted Priority Debt; (m) Liens on cash margin collateral securing Hedging Contracts permitted under Section 7.10; (n) Liens in respect of operating leases covering only the property subject thereto; and (o) Liens in respect of Permitted Priority Debt. 7.03 Limitation on Mergers, Issuances of Subsidiary Securities. No Restricted Person will enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself or suffer any liquidation or dissolution, except (i) Permitted Acquisitions and (ii) the merger, dissolution or liquidation into or consolidation of a Restricted Subsidiary with or into the Borrower (so long as the Borrower is the surviving entity) or another Restricted Subsidiary (so long as if one such Restricted Person is a Guarantor, the surviving entity shall be a Guarantor). Except in connection with a sale of all of the Equity Interest of a   68 -------------------------------------------------------------------------------- Restricted Subsidiary permitted under Section 7.04(g) or (h): (i) the Borrower will not, and will not permit any Restricted Subsidiary to, sell, transfer or otherwise dispose the Equity Interest of any Restricted Subsidiary and no Restricted Subsidiary will issue any additional Equity Interests if such action will result in or allow any diminution of the Borrower’s Equity Interest (direct or indirect) in such Restricted Subsidiary, and (ii) no Restricted Subsidiary of the Borrower that is a partnership will allow any diminution of the Borrower’s interest (direct or indirect) in such Restricted Subsidiary. 7.04 Limitation on Sales of Property and Sale-Leaseback Transactions. No Restricted Person will sell, transfer, lease, exchange, alienate or dispose of any of its property or any material interest therein except: (a) equipment and other personal property and fixtures that are either (i) obsolete for their intended purposes and disposed of in the ordinary course of business, or (ii) replaced by personal property or fixtures of comparable suitability owned by such Restricted Person free and clear of all Liens except Permitted Liens; (b) inventory which is sold in the ordinary course of business on ordinary trade terms; (c) property sold or transferred by any Restricted Subsidiary to any other Restricted Subsidiary (so long as if the transferor is a Guarantor, the transferee shall be a Guarantor); (d) property subject to a Sale and Lease-Back Transaction with respect to which the Attributable Debt and Liens are permitted by the provisions of this Agreement; (e) assignment of accounts receivable for collection purposes in the ordinary course of business; (f) property sold to comply with any divestment requirement imposed in connection with the approval of an acquisition under Hart-Scott-Rodino Act of 1976; (g) sales, transfers or other dispositions of other property or issuances or sales of Equity Interests of any Restricted Subsidiary (hereafter referred to as an “Asset Sale”), in any case for fair consideration that are in the best interests of the Borrower, provided that: (i) the Restricted Persons shall not, in any consecutive twelve-month period, make Asset Sales in respect of assets accounting for more than (i) 10% of Consolidated Net Tangible Assets or (ii) 10% of Consolidated EBITDA; (ii) the Restricted Persons shall not, during the term of this Agreement, make Asset Sales in respect of assets accounting for more than 30% of the Consolidated Net Tangible Assets on a cumulative basis; and (iii) immediately after giving effect to such proposed disposition no Default or Event of Default shall exist and be continuing; and   69 -------------------------------------------------------------------------------- (h) sales, transfers or other dispositions of other property or issuances or sales of Equity Interests of any Restricted Subsidiary, in any case for fair consideration that are in the best interests of the Borrower to any Person; provided that (i) such sale, transfer or disposition is in exchange for other assets used by the Borrower or its Restricted Subsidiaries in the furtherance of their business, (ii) the amount of the proceeds of such sale, transfer or disposition (other than such assets received in exchange), net of customary costs of sale (the “Net Proceeds”), are applied within 12 months to the purchase of other assets used by the Borrower or its Restricted Subsidiaries in the furtherance of their business and (iii) the Aggregate Commitments are permanently reduced within 12 months by the amount of any such Net Proceeds not so applied to the purchase of such assets used by the Borrower or its Restricted Subsidiaries in the furtherance of their business. 7.05 Limitation on Restricted Payment. No Restricted Person will declare or make, directly or indirectly any Restricted Payments. Notwithstanding the foregoing, (i) no Restricted Person shall be restricted, directly or indirectly, from declaring and making Restricted Payments to another Restricted Person and (ii) so long as the Borrower shall be in compliance with Section 7.12 under clause (iii) thereof prior to and after giving effect to any distribution, and so long as no Event of Default has occurred and is continuing or would result therefrom, the Borrower may declare or order and make, pay or set apart, during each Fiscal Quarter, Restricted Payments consisting of cash distribution to its general partner and limited partner unit holders pursuant to the requirements of the Partnership Agreement. In determining the amount of Restricted Payments to be made or declared pursuant to clause (ii) of this Section 7.05, at any time that Ratings of BBB-/Baa3/BBB- or better are not maintained by at least two Rating Agencies, the Borrower shall for purposes of clause (ii) of this Section 7.05 only, calculate the aggregate cash available for such Restricted Payments as if the Aggregate Commitments hereunder available for working capital purposes were equal to the lesser of (x) $225,000,000 or (y) the Aggregate Commitments minus the Facility Usage. 7.06 Limitation on Investments, Loans and Advances. No Restricted Person will make or commit to make any capital contributions to, or make or hold any other Investments in, any Person, other than Permitted Investments, nor acquire properties or assets except (i) in the ordinary course of business, (ii) any acquisition of capital assets that will become a part of the operations of such Restricted Person (and provided that the same shall not result in a violation of Section 7.07) and (iii) any Permitted Acquisition. Except for Permitted Investments and Hedging Contracts permitted under Section 7.10, no Restricted Person will extend credit, make advances or make loans other than normal and prudent extensions of credit to customers in the ordinary course of business or to another Restricted Person in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner. No Equity Interest of a Restricted Subsidiary shall be held by an Unrestricted Subsidiary, and no Indebtedness, obligations or liabilities of an Restricted Subsidiary shall be held by an Unrestricted Subsidiary if, as a result thereof, the Indebtedness, obligations or liabilities of all Restricted Subsidiaries held by one or more Unrestricted Subsidiary shall in the aggregate exceed $20,000,000 at any one time.   70 -------------------------------------------------------------------------------- 7.07 Change in Nature of Businesses. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business if, as a result, the nature of the business of the Borrower would not be the Permitted Line of Business. 7.08 Transactions with Affiliates. No Restricted Person will directly or indirectly engage in any material transaction or material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any of its Affiliates except: (a) transactions among the Restricted Persons, subject to the other provisions of this Agreement and (b) transactions entered into in the ordinary course of business of such Restricted Person on terms which are no less favorable to such Restricted Person than those which would have been obtainable at the time in arm’s-length transactions with Persons that are not Affiliates. 7.09 Restrictive and Negative Pledge Agreements. Except as expressly provided for in the Loan Documents and as described in the Disclosure Schedule, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make other distributions, (b) redeem Equity Interests held in it by the Borrower or another Restricted Subsidiary, (c) repay loans and other indebtedness owing by it to the Borrower or another Restricted Subsidiary, or (d) transfer any of its assets to the Borrower or another Restricted Subsidiary. No Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Restricted Person to create Liens on any of its assets or property to secure the Obligations other than as permitted in connection with Indebtedness under Section 7.01(c). 7.10 Hedging Arrangements and Open Positions. (a) Hedging Arrangements. No Restricted Person will be a party to or in any manner be liable on any Hedging Contract except (i) in compliance with the Risk Management Policy and (ii) transactions entered into with a good faith belief that no violation of the Risk Management Policy exists and where such violation is remedied as promptly as possible and in any event by the close of business on the Business Day following the date that such violation was discovered. (b) Open Positions. No Restricted Person will permit to exist any risk (including price, basis and time risk) in respect to commodities traded, purchased, sold or held by it except (i) in compliance with Risk Limits in effect on the date hereof as defined in and set forth on Schedule 7.10, as such Risk Limits may be modified by the Borrower from time to time after the date hereof pursuant to its Risk Management Policy, and (ii) transactions entered into with a good faith belief that no violation of such Risk Limits exists and where such violation is remedied as promptly as possible and in any event by the close of business on the Business Day following the date that such violation was discovered. 7.11 Commingling of Deposit Accounts and Accounts. So long as any of the HOLP Companies are Unrestricted Subsidiaries, the Borrower will not, nor will it permit any of its Restricted Subsidiaries to, commingle their respective Deposit Accounts or Accounts (as such   71 -------------------------------------------------------------------------------- terms are defined in Article 9 of the UCC) with the Deposit Accounts or Accounts of any of its Unrestricted Subsidiaries. 7.12 Leverage Ratio. (i) On each Quarterly Testing Date using the Consolidated Funded Indebtedness outstanding on such day and using Consolidated EBITDA for the four Fiscal Quarter period ending on such day, (ii) on the date of each Specified Acquisition using the Consolidated Funded Indebtedness that will be outstanding after giving effect to such Specified Acquisition and using Consolidated EBITDA for the four Fiscal Quarter period most recently ending prior to such Specified Acquisition for which financial statements contemplated by Section 6.02(b) are available to the Borrower (and giving pro forma effect to such specified Acquisition as provided in the definition of Consolidated EBITDA), (iii) on each date on which the Borrower makes a distribution permitted under Section 7.05, after giving effect thereto and using Consolidated EBITDA for the four Fiscal Quarter period most recently ending prior to such date for which financial statements contemplated by Section 6.02(b) are available to the Borrower, and (iv) on each date of the Clean Down Period and using Consolidated EBITDA for the four Fiscal Quarter period most recently ending prior to such date for which financial statements contemplated by Section 6.02(b) are available to the Borrower, the Leverage Ratio will not exceed (A) 4.75 to 1.00 at any time other than during a Specified Acquisition Period and (B) 5.25 to 1.00 during a Specified Acquisition Period. ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default. Each of the following events constitutes an Event of Default under this Agreement (each an “Event of Default”): (a) Any Restricted Person fails to pay the principal component of any Loan or any reimbursement obligation with respect to any Letter of Credit when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise; (b) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (a) above), whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within five Business Days after the same becomes due; (c) Any event defined as a “default” or “event of default” in any Loan Document (other than this Agreement) occurs, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document; (d) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 6.04 or Article VII; (e) Any Restricted Person fails (other than as referred to in subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document to which it is a party, and such failure remains unremedied for   72 -------------------------------------------------------------------------------- a period of thirty (30) days after notice of such failure is given by the Administrative Agent to the Borrower; (f) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made; (g) Any Loan Document at any time ceases to be valid, binding and enforceable as warranted in Section 5.05 for any reason, or shall be declared null and void or any Restricted Person shall repudiate in writing its obligations thereunder, or any Restricted Person shall contest the validity or enforceability of any Loan Document in writing or deny in writing that it has any further liability, under any Loan Document to which it is a party, in each case other than its release by Lenders or the Administrative Agent (as permitted under Section 9.10); (h) (i) Any Restricted Person (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Hedging Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $50,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, in each case, following any applicable cure period, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Hedging Contract an Early Termination Date (as defined in such Hedging Contract) resulting from (A) any event of default under such Hedging Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Hedging Contract) or (B) any Termination Event (as defined in such Hedging Contract) under such Hedging Contract as to which the Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Hedging Termination Value owed by the Borrower or such Subsidiary to a single counterparty as a result thereof is greater than $50,000,000 for such Hedging Contract; (i) Either (i) any “accumulated funding deficiency” (as defined in Section 412(a) of the Code) in excess of $50,000,000 with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan’s benefit liabilities exceeds the then current value of such ERISA Plan’s assets available for the payment of such benefit liabilities by more than $5,000,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the withdrawing employer’s proportionate share of such excess exceeds such amount);   73 -------------------------------------------------------------------------------- (j) The Borrower, any Guarantor or any of the HOLP Companies: (i) has entered against it a judgment, decree or order for relief by a Tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it, in each case, which remains undismissed for a period of sixty days; or (ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or is generally unable to pay (or admits in writing its inability to so pay) its debts as such debts become due; or takes corporate or other action to authorize any of the foregoing; or (iii) has entered against it the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or (iv) has entered against it a final judgment for the payment of money in excess of $50,000,000 (in each case not covered by insurance or third party indemnification obligations satisfactory to the Administrative Agent), unless the same is discharged within sixty days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or (v) suffers a writ or warrant of attachment or any similar process to be issued by any Tribunal against all or any substantial part of its assets, and such writ or warrant of attachment or any similar process is not stayed or released within sixty days after the entry or levy thereof or after any stay is vacated or set aside; or (k) Any Change of Control occurs; or (l) Any event of default under any agreement governing secured indebtedness of any of the HOLP Companies relating to (i) bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law with respect to any of the HOLP Companies, beyond any period of grace provided with respect thereto in such agreement, or (ii) non-payment of such secured indebtedness or any other indebtedness of any of the HOLP Companies, subject to the minimum dollar amount threshold of such indebtedness set forth in such agreement, provided that such non-payment continues for a period of three (3) Business Days beyond any period of grace provided with respect thereto in such agreement,   74 -------------------------------------------------------------------------------- unless, prior to the end of the three (3) Business Day period the lenders party to such agreement have accelerated the maturity of such indebtedness thereunder or blocked the payment or otherwise limited the payment by any of the HOLP Companies of any scheduled “restricted payment” distribution in respect of any Equity Interest in HOLP, in which case such three (3) Business Day period shall no longer apply. 8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Majority Lenders, take any or all of the following actions: (a) declare the commitment of each Lender to make Loans and any obligation of the LC Issuer to make LC Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; (c) require that the Borrower Cash Collateralize the LC Obligations (in an amount equal to the then outstanding amount thereof); and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents; provided, however, that upon the occurrence of an Event of Default described in subsections (j)(i), (j)(ii) or (j)(iii) of Section 8.01, the obligation of each Lender to make Loans and any obligation of the LC Issuer to make LC Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the LC Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender. 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the LC Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order: First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders and the LC Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the LC   75 -------------------------------------------------------------------------------- Issuer (including fees and time charges for attorneys who may be employees of any Lender or the LC Issuer) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them; Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, Matured LC Obligations and other Obligations, ratably among the Lenders and the LC Issuer in proportion to the respective amounts described in this clause Third payable to them; Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and Matured LC Obligations, ratably among the Lenders and the LC Issuer in proportion to the respective amounts described in this clause Fourth held by them; Fifth, to the Administrative Agent for the account of the LC Issuer, to Cash Collateralize that portion of LC Obligations comprised of the aggregate undrawn amount of Letters of Credit; and Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law. Amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as LC Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above. ARTICLE IX. ADMINISTRATIVE AGENT 9.01 Appointment and Authority. Each of the Lenders and the LC Issuer hereby irrevocably appoints Wachovia Bank, National Association to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the LC Issuer, and the Borrower shall not have rights as a third party beneficiary of any of such provisions. 9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with   76 -------------------------------------------------------------------------------- the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. 9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent: (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing; (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the LC Issuer. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message,   77 -------------------------------------------------------------------------------- Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the LC Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the LC Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the LC Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. 9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. 9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders, the LC Issuer and the Borrower. Upon receipt of any such notice of resignation, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the LC Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Cash Collateral held by the Administrative Agent on behalf of the Lenders or the LC Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such Cash Collateral until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the LC Issuer directly, until such time as the Majority Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or   78 -------------------------------------------------------------------------------- under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent. Any resignation by Wachovia Bank, National Association as Administrative Agent pursuant to this Section shall also constitute its resignation as LC Issuer. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring LC Issuer, (b) the retiring LC Issuer shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor LC Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangement satisfactory to the retiring LC Issuer to effectively assume the obligations of the retiring LC Issuer with respect to such Letters of Credit. 9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the LC Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the LC Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. 9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Book Manager, Arranger, Co-Syndication Agents, Co-Documentation Agents, Senior Managing Agents, Managing Agents, or other Agents named herein shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the LC Issuer hereunder. 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Restricted Person, the Administrative Agent (irrespective of whether the principal of any Loan or LC Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Obligations and all other Obligations that are owing and   79 -------------------------------------------------------------------------------- unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the LC Issuer and the Administrative Agent allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the LC Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the LC Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.12 and 10.04. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the LC Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. 9.10 Guaranty Matters. The Lenders and the LC Issuer irrevocably authorize the Administrative Agent to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by the Administrative Agent at any time, the Majority Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10. ARTICLE X. MISCELLANEOUS 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Restricted Person therefrom, shall be effective unless in writing signed by the Majority Lenders and the Borrower or the applicable Restricted Person, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall: (a) waive any condition set forth in Section 4.01(a) without the written consent of each Lender; (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;   80 -------------------------------------------------------------------------------- (c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; (d) reduce the principal of, or the rate of interest specified herein on, any Loan or LC Obligation, or (subject to clause (iii) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial ratio (including any change in any applicable defined term) used in determining the Applicable Leverage Level that would result in a reduction of any interest rate on any Loan or any fee payable hereunder without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Majority Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or letter of credit fees at the Default Rate; (e) change Section 2.15 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender; (f) change any provision of this Section or the definition of “Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; or (g) except as provided in Section 9.10, release all or substantially all of the Guarantors from the Guaranty without the written consent of each Lender; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the LC Issuer in addition to the Lenders required above, affect the rights or duties of the LC Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement or any other Loan Document; and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. 10.02 Notices; Effectiveness; Electronic Communication. (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows: (i) if to the Borrower, the Administrative Agent, the Swingline Lender or the LC Issuer, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and   81 -------------------------------------------------------------------------------- (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). (b) Electronic Communications. Notices and other communications to the Lenders and the LC Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the LC Issuer pursuant to Article II if such Lender or the LC Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. (c) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Restricted Persons, the Administrative Agent, the LC Issuer, and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (d) Change of Address, Etc. Each of the Borrower, the Administrative Agent and the LC Issuer may change its address, telecopier or telephone number for notices and other   82 -------------------------------------------------------------------------------- communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent and the LC Issuer. (e) Reliance by Administrative Agent, LC Issuer and Lenders. The Administrative Agent, the LC Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the LC Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the LC Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the LC Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the LC Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the LC Issuer), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the LC Issuer, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the LC Issuer, and each   83 -------------------------------------------------------------------------------- Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Restricted Person arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the LC Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Liability under Environmental Law related in any way to the Borrower or any of its Subsidiaries, (iv) any civil penalty or fine assessed by the U. S. Department of the Treasury’s Office of Foreign Assets Control against, and all reasonable costs and expenses (including counsel fees and disbursements) incurred in connection with defense thereof by the Administrative Agent or any Lender as a result of the funding of Loans, the issuance of Letters of Credit, the acceptance of payments under the Loan Documents, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Restricted Person, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Restricted Person against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Restricted Person has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the LC Issuer, the Swingline Lender, or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the LC Issuer, the Swingline Lender, or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Swingline Lender, or the LC Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any   84 -------------------------------------------------------------------------------- such sub-agent), the Swingline Lender, or LC Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.14(d). (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor. (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. 10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent, the LC Issuer or any Lender, or the Administrative Agent, the LC Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the LC Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the LC Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the LC Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement. 10.06 Successors and Assigns. (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent   85 -------------------------------------------------------------------------------- and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the LC Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in LC Obligations) at the time owing to it); provided that, except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (i) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned; (ii) any assignment of a Commitment must be approved by the Administrative Agent and the LC Issuer unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and   86 -------------------------------------------------------------------------------- obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and LC Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by each of the Borrower and the LC Issuer at any reasonable time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or substantive change to the Loan Documents is pending, any Lender wishing to consult with other Lenders in connection therewith may request and receive from the Administrative Agent a copy of the Register. (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in LC Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the LC Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also   87 -------------------------------------------------------------------------------- shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15 as though it were a Lender. (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender. (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. (h) Resignation as LC Issuer after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Wachovia Bank, National Association assigns all of its Commitment and Loans pursuant to subsection (b) above, Wachovia Bank, National Association may, upon 30 days’ notice to the Borrower and the Lenders, resign as LC Issuer. In the event of any such resignation as LC Issuer, the Borrower shall be entitled to appoint from among the Lenders a successor LC Issuer hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Wachovia Bank, National Association as LC Issuer. If Wachovia Bank, National Association resigns as LC Issuer, it shall retain all the rights and obligations of the LC Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as LC Issuer and all LC Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Matured LC Obligations pursuant to Section 2.09). 10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the LC Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be   88 -------------------------------------------------------------------------------- informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it or its Affiliates or to any such regulatory authority in accordance with such Lender’s regulatory compliance policy, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the LC Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the LC Issuer on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the LC Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the LC Issuer or any such Affiliate 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 this Agreement or any other Loan Document to such Lender or the LC Issuer, irrespective of whether or not such Lender or the LC Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender or the LC Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the LC Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the LC Issuer or their respective Affiliates may have. Each Lender and the LC Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.   89 -------------------------------------------------------------------------------- 10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder. 10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.   90 -------------------------------------------------------------------------------- 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that: (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b); (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Letter of Credit participations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts); (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and (d) such assignment does not conflict with applicable Laws. A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. 10.14 Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (b) SUBMISSION TO JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO   91 -------------------------------------------------------------------------------- AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE LC ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) WAIVER OF VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. 10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 10.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative   92 -------------------------------------------------------------------------------- Agent, as applicable, to identify the Borrower in accordance with the Act. The Borrower will comply with reasonable requests of any Lender for such information. 10.17 Time of the Essence. Time is of the essence of the Loan Documents. 10.18 No Recourse. The parties hereto hereby acknowledge and agree that neither the General Partner nor any director, officer, employee, limited partner or shareholder of the Borrower or the General Partner shall have any personal liability in respect of the obligations of the Borrower and the Guarantors under this Agreement and the other Loan Documents by reason of his, her or its status. 10.19 Existing Credit Agreement. In connection with the amendment and restatement of the Existing Credit Agreement pursuant hereto, the Borrower, the Administrative Agent and the Lenders shall, as of the Closing Date make adjustments to the outstanding principal amount of “Loans” under the Existing Credit Agreement (as such term is defined therein) (but not any interest accrued thereon prior to the Closing Date or any accrued commitment fees under the Existing Credit Agreement prior to the Closing Date), including the borrowing of additional Loans hereunder and the repayment of “Loans” under the Existing Credit Agreement (as such term is defined therein) plus all applicable accrued interest, fees and expenses as shall be necessary to provide for Loans by each Lender in proportion to, and in any event not in excess of, the amount of its Commitment as of the Closing Date, but in no event shall such adjustment of any Eurodollar Loans entitle any Lender to any reimbursement under Section 3.05 hereof; provided that the foregoing is not intended to relieve the Borrower for paying any such costs to lenders under the Existing Credit Agreement to the extent such lenders are not Lenders under this Agreement, and each Lender shall be deemed to have made an assignment of its outstanding Loans and commitments under the Existing Credit Agreement, and assumed outstanding Loans and commitments under the Existing Credit Agreement, and assumed outstanding Loans and commitments of other Lenders under the Existing Credit Agreement as may be necessary to effect the foregoing. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]   93 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.   ENERGY TRANSFER PARTNERS, L.P. By:   Energy Transfer Partners GP, L.P., its general partner   By: Energy Transfer Partners, L.L.C., its general partner   By:          H. Michael Krimbill     President Signature Page to Credit Agreement – Energy Transfer Partners, L.P.   S-1 -------------------------------------------------------------------------------- WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent, LC Issuer, Swingline Lender, and a Lender By:        Name:   Title: Signature Page to Credit Agreement – Energy Transfer Partners, L.P.   S-2

Exhibit 10.4   CONSULTING AGREEMENT This Consulting Agreement (the “Agreement”), effective as of August 1, 2006 is entered into by and between SURFECT TECHNOLOGIES, INC., a Delaware corporation (herein referred to as the “Company”) and Vision Advisors, Inc., a California corporation (herein referred to as the “Consultant”). RECITALS WHEREAS, Company is a privately-held company and has immediate plans to be part of a reverse merger transaction that will result in the Company being a public company with its common stock traded on the OTCBB Market; and WHEREAS, Company desires to engage the services of Consultant to represent the company in investors’ communications and public relations with existing shareholders, brokers, dealers and other investment professionals as to the Company’s current and proposed activities, and to consult with management concerning such Company activities; NOW THEREFORE, in consideration of the promises and the mutual covenants and Agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1.             Term of Consultancy.   Company hereby agrees to retain the Consultant to act in a consulting capacity to the Company, and the Consultant hereby agrees to provide services to the Company commencing immediately and ending on August 30, 2007. 2.             Duties of Consultant.   The Consultant agrees that it will generally provide the following specified consulting services; (a) Consult and assist the Company in developing and implementing appropriate plans and means for presenting the Company and its business plans, strategy and personnel to the financial community, establishing an image for the Company in the financial community, and creating the foundation for subsequent financial public relations efforts; (b) Introduce the Company to the financial community; (c) With the cooperation of the Company, maintain an awareness during the term of this Agreement of the Company’s plans, strategy and personnel, as they may evolve during such period, and consult and assist the Company in communicating appropriate information regarding such plans, strategy and personnel to the financial community; (d) Assist and consult the Company with respect to its (i) relations with stockholders, (ii) relations with brokers, dealers, analysts and other investment professionals, and (iii) financial public relations generally; (e) Perform the functions generally assigned to stockholder relations and public relations departments in major corporations, including responding to telephone and written inquiries (which may be referred to the Consultant by the Company); preparing press releases for the Company with the Company’s involvement and approval of press releases, reports and other communications with or to shareholders, the investment community and the general public; consulting with respect to the timing, form, distribution and other matters related to such releases, reports and communications; and, at the Company’s request and 1 -------------------------------------------------------------------------------- subject to the Company’s securing its own rights to the use of its names, marks, and logos, consulting with respect to corporate symbols, logos, names, the presentation of such symbols, logos and names, and other matters relating to corporate image; (f) Upon the Company’s direction and approval, disseminate information regarding the Company to shareholders, brokers, dealers, other investment community professionals and the general investing public; (g) Upon the Company’s approval, conduct meetings, in person or by telephone, with brokers, dealers, analysts and other investment professionals to communicate with them regarding the Company’s plans, goals and activities, and assist the Company in preparing for press conferences and other forums involving the media, investment professionals and the general investment public; (h) At the Company’s request, review business plans, strategies, mission statements budgets, proposed transactions and other plans for the purpose of advising the Company of the public relations implications thereof; and, (i) Otherwise perform as the Company’s consultant for public relations and relations with financial professionals. 3.             Allocation of Time and Energies. The Consultant hereby promises to perform and discharge faithfully the responsibilities which may be assigned to the Consultant from time to time by the officers and duly authorized representatives of the Company in connection with the conduct of its financial and public relations and communications activities, so long as such activities are in compliance with applicable securities laws and regulations. Consultant and staff shall diligently and thoroughly provide the consulting services required hereunder: Although no specific hours-per-day requirement will be required, Consultant and the Company agree that Consultant will perform the duties set forth herein above in a diligent and professional manner. The parties acknowledge and agree that a disproportionately large amount of the effort to be expended and the costs to be incurred by the Consultant and the benefits to be received by the Company are expected to occur within or shortly after the first two months of the effectiveness of this Agreement. It is explicitly understood that Consultant’s performance of its duties hereunder will in no way be measured by the price of the Company’s common stock, nor the trading volume of the Company’s common stock. It is also understood that the Company is entering into this Agreement with Vision Advisors, Inc. (“VA”), a corporation and not any individual member of VA, and, as such, Consultant will not be deemed to have breached this Agreement if any member, officer or director of VA leaves the firm or dies or becomes physically unable to perform an y meaningful activities during the term of the Agreement, provided the Consultant otherwise performs its obligations under this Agreement . 4.             Remuneration. As full and complete compensation for services described in this Agreement, the Company shall compensate VA as follows: 4.1  For undertaking this engagement, for previous services rendered, for performing due diligence, and for other good and valuable consideration, the Company agrees to issue and deliver to the Consultant a “Commencement Bonus” payable in the form of that number of shares of common stock that will equate to 200,000 shares of the Company’s common stock once the planned reverse merger is completed (“Common Stock”). This Commencement Bonus shall be issued to the Consultant immediately following execution of this Agreement and shall, when issued and delivered to Consultant 2 -------------------------------------------------------------------------------- be fully paid and non-assessable. The Company understands and agrees that Consultant has foregone significant opportunities to accept this engagement and that the Company derives substantial benefit from the execution of this Agreement and the ability to announce its relationship with Consultant. The 200,000 shares of Common Stock issued as a Commencement Bonus, therefore, constitute payment for Consultant’s Agreement to consult to the Company and are a nonrefundable, non-apportionable, and non-ratable retainer; such shares of common stock are not a prepayment for future services. If the Company decides to terminate this Agreement prior to August 30, 2007 for any reason whatsoever, it is agreed and understood that Consultant will not be requested or demanded by the Company to return any of the shares of Common Stock paid to it as Commencement Bonus hereunder. Further, if and in the event the Company is acquired in whole or in part, during the term of this Agreement, it is agreed and understood Consultant will not be requested or demanded by the Company to return any of the 200,000 shares of Common stock paid to it hereunder. It is further agreed that if at any time during the term of this Agreement, the Company or substantially all of the Company’s assets are merged with or acquired by another entity, or some other change occurs in the legal entity that constitutes the Company, the Consultant shall retain and will not be requested by the Company to return any of the 200,000 shares. The Company further agrees that all shares issued to Consultant hereunder shall carry “piggyback registration rights” whereby such shares will be included in the next registration statement filed by the company. 4.2  With each transfer of shares of Common Stock to be issued pursuant to this Agreement (collectively, the “Shares”), Company shall cause to be issued a certificate representing the Common Stock and a written opinion of counsel for the Company stating that said shares are validly issued, fully paid and non-assessable and that the issuance and eventual transfer of them to Consultant has been duly authorized by the Company. Company warrants that all Shares issued to Consultant pursuant to this Agreement shall have been validly issued, fully paid and non-assessable and that the issuance and any transfer of them to Consultant shall have been duly authorized by the Company’s board of directors. 4.3  Consultant acknowledges that the shares of Common Stock to be issued pursuant to this Agreement (collectively, the “Shares”) have not been registered under the Securities Act of 1933, and accordingly are “restricted securities” within the meaning of Rule 144 of the Act. As such, the Shares may not be resold or transferred unless the Company has received an opinion of counsel reasonably satisfactory to the Company that such resale or transfer is exempt from the registration requirements of that Act. 4.5  In connection with the acquisition of Shares hereunder, the Consultant represents and warrants to the Company, to the best of its/his knowledge, as follows: (a) Consultant acknowledges that the Consultant has been afforded the opportunity to ask questions of and receive answers from duly authorized officers to other representatives of the Company concerning an investment in the Shares, and any additional information which the Consultant has requested. (b) Consultant’s investment in restricted securities is reasonable in relation to the Consultant’s net worth, which is in excess of ten (10) times the Consultant’s cost basis in the Shares. Consultant has had experience in investments in restricted and publicly traded securities, and Consultant has had experience in investments in speculative securities and 3 -------------------------------------------------------------------------------- other investments which involve the risk of loss of investment. Consultant acknowledges that an investment in the Shares is speculative and involves the risk of loss. Consultant has the requisite knowledge to assess the relative merits and risks of this investment without the necessity of relying upon other advisors, and Consultant can afford the risk of loss of his entire investment in the Shares. Consultant is (i) an accredited investor, as that term is defined in Regulation D promulgated under the Securities Act of 1933, and (ii) a purchaser described in Section 25102 (f) (2) of the California Corporate Securities Law of 1968, as amended. (c) Consultant is acquiring the Shares for the Consultant’s own account for long-term investment and not with a view toward resale or distribution thereof except in accordance with applicable securities laws 5.             Monthly Cash Compensation. For performance under this agreement on a month-to-month basis, Company will pay Consultant a cash fee in the amount of $4,000 per month over the term of this Agreement, the first monthly payment due and payable on September 1, 2006 and each following monthly payment payable in full on the first day of the respective month. The Company shall not be obligated to Consultant for any monthly cash fee for any month or part thereof remaining from the date of any valid cancellation to August 30, 2007. 6.             Non-Assignability of Services. Consultant’s services under this contract are offered to Company only and may not be assigned by Company to ant entity with which Company merges or which acquires the Company or substantially all of its assets. In the event of such merger or acquisition, all compensation to Consultant herein under the schedules set forth herein shall remain due and payable, and any compensation received by the Consultant may be retained in the entirety by Consultant, all without any reduction or pro-rating and shall be considered and remain fully paid and non-assessable. Notwithstanding the non-assignability of Consultant’s services, Company shall assure that in the event of any merger, acquisition, or similar change of form of entity, that its successor entity shall agree to complete an obligations to Consultant, including the provision and transfer of all compensation herein, and the preservation of the value thereof consistent with the rights granted to Consultant by the Company herein, and to Shareholders. 7.             Expenses. Consultant agrees to pay for all its ordinary expenses (phone, faxing, labor, etc.). Out of pocket expenses for extraordinary items (travel required by/or specifically requested by the Company, luncheons or dinners to large groups of investment professionals, mass faxing to a sizable percentage of the Company’s constituents, investor conference calls, print advertisements in publications, etc. shall be paid by the Company within ten business days of receipt of invoice 8.             Indemnification. The Company warrants and represents that all oral communications, written documents or materials furnished to Consultant by the Company with respect to financial affairs, operations, profitability and strategic planning of the Company are accurate and Consultant may rely upon the accuracy thereof without independent investigation. The Company will protect, indemnify and hold harmless Consultant against any claims or litigation including any damages, liability, cost and reasonable attorney’s fees as incurred with respect thereto resulting from Consultant’s communication or dissemination of any said 4 -------------------------------------------------------------------------------- information, documents or materials excluding any such claims or litigation resulting from Consultant’s communication or dissemination of information not provided or authorized by the Company 9.             Representations. Consultant represents that it is not required to maintain any licenses and registrations under federal or any state regulations necessary to perform the services set forth herein. Consultant acknowledges that, to the best of its knowledge, the performance of the services set forth under this Agreement will not violate any rule or provision of any regulatory agency having jurisdiction over Consultant. Consultant acknowledges that, to the best of its knowledge. Consultant and its officers and directors are not the subject of any investigation, claim, decree or judgment involving any violation of the SEC or securities laws. Consultant further acknowledges that it is not a securities Broker Dealer or a registered investment advisor. Company acknowledges that, to the best of its knowledge, that it has not violated any rule or provision of any regulatory agency having jurisdiction over the Company. Company acknowledges that, to the best of its knowledge, Company is not the subject of any investigation, claim, decree or judgment involving any violation of the SEC or securities laws 10.           Legal Representation. The Company acknowledges that it has been represented by independent legal counsel in the preparation of this Agreement. Consultant represents that it has consulted with independent legal counsel and/or tax, financial and business advisors, to the extent the Consultant deemed necessary. 11.           Status as Independent Contractor. Consultant’s engagement pursuant to this Agreement shall be as independent contractor, and not as an employee, officer or other agent of the Company. Neither party to this Agreement shall represent or hold itself out to be the employer of employee of the other. Consultant further acknowledges the consideration provided hereinabove is a gross amount of consideration and that the Company will not withhold from such consideration any amounts as to income taxes, social security payments or any other payroll taxes. All such income taxes and other such payment shall be made or provided for by Consultant and the Company shall have no responsibility or duties regarding such matters. Neither the Company nor the Consultant possesses the authority to bind each other in any Agreements without the express written consent of the entity to be bound. 12.           Attorney’s Fee. If any legal action or any arbitration or other proceeding is brought for the enforcement or interpretation of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with or related to this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs in connection with that action or proceeding, in addition to any other relief to which it or they may be entitled. 13.           Notices. All notices, requests, and other communications hereunder shall be deemed to be duly given if sent by U.S. mail, postage prepaid, addressed to the other party at the address as set forth herein below: 5 -------------------------------------------------------------------------------- To the Company:   Surfect Technologies, Inc. Steve Anderson, Chief Executive Officer 12000 G Candelaria NW Albuquerque, NM 87112 Phone 505-294-6354 Fax       505-294-6311 [email protected]   To the Consultant:   Vision Advisors, Inc. Terry McGovern, Managing Director 3 Harbor Point, 3J Mill Valley, CA 94941 Phone: 415-902-3001 Fax: 415-380-8875 fax [email protected]   It is understood that either party may change the address to which notices for it shall be addressed by providing notice of such change to the other party in the manner set forth in this paragraph. 14.           Waiver. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. 15.           Choice of Law, Jurisdiction and Venue. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of California. The parties agree that San Francisco County, CA will be the venue of any dispute and will have jurisdiction over all parties 16.           Arbitration.  Any controversy or claim arising out of or relating to this Agreement, or the alleged breach thereof, or relating to Consultant’s activities or remuneration under this Agreement shall be settled by binding arbitration in California, in accordance with the applicable rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator(s) shall be binding on the parties and may be entered in any court having jurisdiction as provided by Paragraph 14 herein. The provisions of Title 9 of Part 3 of the California Code of Civil Procedure, including section 1283.05, and successor statutes, permitting expanded discovery proceedings shall be applicable to all disputes that are arbitrated under this paragraph. 17.           Complete Agreement. This Agreement contains the entire Agreement of the parties relating to the subject matter hereof. This Agreement and its terms may not be changed orally but only by an Agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 6 --------------------------------------------------------------------------------   AGREED TO                 “Company” SURFECT TECHNOLOGIES, INC.           Date: By: /s/ Steve Anderson       Steve Anderson, CEO           “Consultant” Vision Advisors Inc.             Date: 8/5/06 By: /s/ Terry McGovern       Terry McGovern, Managing Director   7 --------------------------------------------------------------------------------

Exhibit 10.1 RESTRICTED STOCK AGREEMENT UNDER THE THE PEOPLES BANCTRUST COMPANY, INC. 2006 KEY EMPLOYEE RESTRICTED STOCK PLAN THIS AGREEMENT is entered into as of September 1, 2006, by and between The Peoples BancTrust Company, Inc. (the “Company”) and Don J. Giardina (the “Award Recipient”). WHEREAS, the Company maintains The Peoples BancTrust Company, Inc. 2006 Key Employee Restricted Stock Plan (the “Plan”), under which the Board of Directors of the Company (the “Board”) acting through its Compensation Committee (the “Committee”) may award restricted shares of the Company’s common stock, $.10 par value per share (the “Restricted Stock”), to key employees and prospective key employees of the Company or its subsidiaries as the Committee may determine, subject to terms, conditions, or restrictions as it may deem appropriate; and WHEREAS, the Company and Don J. Giardina, as Executive, have entered into an employment agreement dated August 11, 2006 (the “Employment Agreement”) under the terms of which the Company, among other provisions, has agreed to issue 6,000 shares of Restricted Stock under the Plan effective on September 1, 2006, the commencement date of employment; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed as follows: I. AWARD OF SHARES Under the terms of the Plan, the Company has awarded to the Award Recipient a restricted stock award effective September 1, 2006, of 6,000 shares of Restricted Stock subject to the terms, conditions, and restrictions set forth in the Plan and in this Agreement. The definition of all capitalized terms used herein and not otherwise defined herein shall be as provided in the Plan. II. AWARD RESTRICTIONS 2.1 The period during which the restrictions imposed on Restricted Stock by this Agreement are in effect is referred to herein as the “Restricted Period.” During the Restricted Period, the Award Recipient shall be entitled to vote the shares. Whenever Restricted Stock shall become vested, the Award Recipient shall also be entitled to receive, with respect to each share of vested Restricted Stock, an amount equal to any cash dividends and number of shares equal to any stock dividends declared and paid to holders of the Company’s common stock during the Restricted Period. Cash and stock dividends declared and paid during the Restricted Period shall be held by the Company in an account with The Peoples Bank and Trust Company. -------------------------------------------------------------------------------- The Restricted Stock and the right to vote the Restricted Stock may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered during the Restricted Period. 2.2 The Restricted Period for the Restricted Stock shall end and the shares of Restricted Stock shall become vested and freely transferable as set forth below: With respect to 33 1/3% of the shares of Restricted Stock on September 1, 2007; With respect to an additional 33 1/3% of the shares of Restricted Stock on September 1, 2008; and With respect to an additional 33 1/3% of the shares of Restricted Stock on September 1, 2009. 2.3 If the employment of the Award Recipient is terminated by the Company for Cause, or by the Executive pursuant to paragraph 4(a)(v) of the Employment Agreement, any shares of Restricted Stock with respect to which the Restricted Period has not ended will be immediately forfeited. 2.4 To the extent Restricted Stock has not otherwise become vested and freely transferable in accordance with Section 2.2, the Restricted Period shall end and the Restricted Stock will become fully vested and freely transferable by the Award Recipient or his estate (1) upon the death of the Award Recipient (other than by suicide), (2) upon a determination by the Committee that the Award Recipient has become disabled, (3) upon a termination of the Award Recipient without Cause, (4) upon a Change in Control, or (5) upon any other vesting event provided for in the Employment Agreement. 2.5 “Cause” shall have the meaning as defined under paragraph 19(d) of the Employment Agreement. 2.6 “Change in Control” shall have the meaning as defined under paragraph 19(e) of the Employment Agreement. 2.7 The Committee may declare the Restricted Period and shares of Restricted Stock fully vested at any time in its discretion. 2.8 The Restricted Stock shall not be issued until the Company has had an opportunity to satisfy Nasdaq notification requirements and to file a registration statement on Form S-8 with the Securities and Exchange Commission to register the Restricted Stock, which notification and registration the Company will make reasonable efforts to complete and file as soon as administratively practicable after the Award Recipient’s employment commences. -------------------------------------------------------------------------------- III. STOCK CERTIFICATES 3.1 Shares of the Restricted Stock shall be issued in book entry form, registered in the name of the Award Recipient and held in a segregated account with the Company’s transfer agent subject to appropriate “stop transfer” instructions. The Award Recipient shall also provide the Company with a stock power executed by the Award Recipient in blank. 3.2 Upon termination of the Restricted Period with respect to the Restricted Stock, the Company shall cause a stock certificate without a restrictive legend covering the Restricted Stock to be issued in the name of the Award Recipient or his nominee within 30 days after the end of the Restricted Period. Upon receipt of such stock certificate, the Award Recipient shall be free to hold or dispose of the shares represented by such certificate, subject to applicable securities laws. IV. WITHHOLDING TAXES 4.1 At any time that an Award Recipient is required to pay to the Company an amount required to be withheld under the applicable income tax laws in connection with the issuance of or the lapse of restrictions on Restricted Stock, the participant may, subject to the Committee’s right of disapproval, satisfy this obligation in whole or in part by electing (the “Election”) to have the Company withhold from the distribution shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares to be withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (the “Tax Date”). 4.2 Each Election must be made prior to the Tax Date. The Committee may disapprove of any Election or may suspend or terminate the right to make Elections. V. RIGHT TO CONTINUED EMPLOYMENT Nothing in the Plan or in this Agreement shall confer upon an Award Recipient any right to continue in the employ of the Company or a subsidiary or in any way affect the Company’s or a subsidiary’s right to terminate the Award Recipient’s employment. VI. BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of the successors, executors, administrators, and heirs of the respective parties. -------------------------------------------------------------------------------- VII. INCONSISTENT PROVISIONS The Restricted Shares granted hereby are subject to the provisions of the Plan as in effect on the date hereof and as it may be amended. In the event any provision of this Agreement conflicts with a provision of the Plan, the Plan provisions shall control. VIII. FORCE AND EFFECT The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions of this Agreement. IN WITNESS WHEREOF, the parties have signed this Agreement as of the date hereof.   THE PEOPLES BANCTRUST COMPANY, INC. By:   /s/ Ted M. Henry Name:   Ted M. Henry Title:   Chairman of the Board AWARD RECIPIENT /s/ Don J. Giardina Don J. Giardina

Exhibit 10.2 ADE CORPORATION 2000 EMPLOYEE STOCK OPTION PLAN1   1. PURPOSES OF THE PLAN The ADE Corporation 2000 Employee Stock Option Plan is intended to encourage ownership of shares of the Common Stock of ADE Corporation (the “Company”) by key employees and consultants of the Company or of its Affiliates in order to attract such persons, to induce them to work for the benefit of the Company or of an Affiliate, and to provide additional incentive for them to promote the long-term success of the Company or of an Affiliate. The Company desires to reward its key employees and consultants equitably for their service, value, and commitment to the Company. The Company believes that the Plan will cause participants to contribute materially to the growth of the Company, thereby benefiting the Company’s shareholders.   2. DEFINITIONS Unless otherwise specified or unless the context otherwise requires, the following terms, as used in the Plan, have the following meanings: AFFILIATE means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect. BOARD OF DIRECTORS means the Board of Directors of the Company. CODE means the United States Internal Revenue Code of 1986, as amended. COMMITTEE means the Compensation Committee of the Board of Directors or any successor thereto appointed by the Board of Directors pursuant to Section 4 hereof to administer this Plan, or in the absence of any such Committee, means the full Board of Directors. COMMON STOCK means shares of the Company’s common stock, $.01 par value. COMPANY means ADE Corporation, a Massachusetts corporation. DISABILITY or DISABLED means permanent and total disability as defined in Section 22(e)(3) of the Code. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. FAIR MARKET VALUE of a Share of Common Stock on a particular date shall be the mean between the highest and lowest quoted selling prices on such date (the “valuation date”) on the securities market where the Common Stock of the Company is traded, or if there were no sales on the valuation date, on the next preceding date within a reasonable period (as determined in the sole discretion of the Committee) on which there were sales. In the event that there were no sales in such a market within a reasonable period, or in the event the Common Stock of the Company is not traded on any securities market, the Fair Market Value shall be as determined in good faith by the Committee in its sole discretion. ISO means an option intended to qualify as an incentive stock option under Code Section 422. -------------------------------------------------------------------------------- 1 As amended on September 15, 2004. Changed text appears in italics. -------------------------------------------------------------------------------- KEY EMPLOYEE means an employee of, or a consultant who is an individual rendering services to, the Company or an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate), designated by the Committee to be eligible to be granted one or more Stock Rights under the Plan. NQSO means an option which is not intended to qualify as an ISO. OPTION means an ISO or NQSO granted under the Plan. PARTICIPANT means a Key Employee to whom one or more Stock Rights are granted under the Plan. As used herein, “Participant” shall include “Participant’s Survivors” and a Participant’s permitted transferees where the context requires. PARTICIPANT’S SURVIVORS means a deceased Participant’s legal representatives and/or any person or persons who acquires the Participant’s rights to a Stock Right by will or by the laws of descent or distribution. PLAN means this ADE Corporation 2000 Employee Stock Option Plan, as amended from time to time. SHARES means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Section 3 of the Plan. The Shares issued upon exercise of Stock Rights granted under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both. STOCK AGREEMENT means an agreement between the Company and a Participant executed and delivered pursuant to the Plan, in such form as the Committee shall approve. STOCK AWARD means an award of Shares or the opportunity to make a direct purchase of Shares of the Company granted under the Plan. STOCK RIGHT means a right to Shares of the Company granted pursuant to the Plan as an ISO, an NQSO, or a Stock Award.   3. SHARES SUBJECT TO THE PLAN The number of Shares subject to the Plan as to which Stock Rights may be granted from time to time shall be 900,000, plus the number of shares of Common Stock previously reserved for the granting of options under either the Company’s 1995 Stock Option Plan or 1997 Stock Option Plan which are not granted under either of those plans or which are not exercised and cease to be outstanding by reason of cancellation or otherwise, or the equivalent of such number of Shares after the Committee, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization, or similar transaction in accordance with Section 16 of the Plan. If an Option granted hereunder ceases to be “outstanding”, in whole or in part, the Shares which were subject to such Option shall also be available for the granting of other Stock Rights under the Plan. Any Stock Right shall be treated as “outstanding” until such Stock Right is exercised in full or terminates or expires under the provisions of the Plan, or by agreement of the parties to the pertinent Stock Agreement, without having been exercised in full.   - 2 - -------------------------------------------------------------------------------- 4. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. The Committee shall be comprised of two or more members of the Board of Directors, all of whom shall be Non-employee Directors as defined in Rule 16b-3 under the Exchange Act and “outside directors” as that term is used in Section 162 of the Code and the regulations promulgated thereunder, or the entire Board of Directors acting as such a committee. Any provision in this Plan with respect to the Committee contrary to Rule 16b-3 or Code Section 162 shall be deemed null and void to the extent permitted by law and deemed appropriate by the Committee. The Committee may delegate authority to the Chief Executive Officer to grant Stock Rights with respect to a fixed number of Shares, to be reserved from time to time for such purpose by vote of the Committee, to Key Employees; provided, however, that no such delegation shall be permitted with respect to the grant of Stock Rights to any person who is an officer or director of the Company for purposes of Section 16(b) of the Exchange Act. Subject to the provisions of the Plan, the Committee is authorized to:     (a) Interpret the provisions of the Plan or of any Option, Stock Award, or Stock Agreement and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan;     (b) Determine which employees and consultants of the Company or of an Affiliate shall be designated as Key Employees and which of the Key Employees shall be granted Stock Rights;     (c) Determine the number of Shares and exercise price for which a Stock Right or Stock Rights shall be granted;     (d) Specify the terms and conditions upon which a Stock Right or Stock Rights may be granted; and     (e) In its discretion, accelerate the date of exercise of any installment of any Stock Right; provided that the Committee shall not, without the consent of the Participant, accelerate the exercise date of any installment of any Option granted to such Participant as an ISO (and not previously converted into an NQSO pursuant to Section 18) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in paragraph (b)(3) of Section 6; provided, however, that all such interpretations, rules, determinations, terms, and conditions shall be made and prescribed in the context of preserving the tax status under Code Section 422 of those Options which are designated as ISOs and shall be in compliance with any applicable provisions of Rule 16b-3 under the Exchange Act. Subject to the foregoing, the interpretation and construction by the Committee of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise determined by the Board of Directors, if the Committee is other than the Board of Directors. The Committee may employ attorneys, consultants, accountants, or other persons, and the Committee, the Company, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Company, all Participants, and all other interested persons. No member or agent of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or grants hereunder. Each member of the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member’s own fraud or bad faith.   - 3 - -------------------------------------------------------------------------------- Such indemnification shall be in addition to any rights of indemnification the members of the Committee may have as directors or otherwise under the by-laws of the Company, or any agreement, vote of stockholders, or disinterested directors, or otherwise.   5. ELIGIBILITY FOR PARTICIPATION The Committee shall, in its sole discretion, name the Participants in the Plan, provided, however, that each Participant must be a Key Employee of the Company or of an Affiliate at the time a Stock Right is granted. Notwithstanding the foregoing, the Committee may authorize the grant of a Stock Right to a person not then an employee of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of execution of the Stock Agreement evidencing such Stock Right. The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in other grants of Stock Rights.   6. TERMS AND CONDITIONS OF OPTIONS     (a) GENERAL. Each Option shall be set forth in writing in a Stock Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Committee may provide that Options be granted subject to such conditions as the Committee may deem appropriate, including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto; provided, however, that the option price per share of the Shares covered by each Option shall not be less than the par value per share of the Common Stock. Each Stock Agreement shall state the number of Shares to which it pertains, the date or dates on which it first is exercisable, and the date after which it may no longer be exercised. Option rights may accrue or become exercisable in installments over a period of time, or upon the achievement of certain conditions or the attainment of stated goals or events. Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Committee providing for certain protections for the Company and its other shareholders, including requirements that the Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted, and the Participant or the Participant’s Survivors may be required to execute letters of investment intent and to acknowledge that the Shares will bear legends noting any applicable restrictions.     (b) ISOS. In addition to the minimum standards set forth in paragraph (a) of this Section 6, ISOs shall be subject to the following terms and conditions, with such additional restrictions or changes as the Committee determines are appropriate but not in conflict with Code Section 422 and relevant regulations and rulings of the Internal Revenue Service:     (1) ISO OPTION PRICE: The Option price per Share of the Shares subject to an ISO shall not be less than one hundred percent (100%) of the Fair Market Value per share of the Common Stock on the date of grant of the ISO; provided, however that the Option price per share of the Shares subject to an ISO granted to a Participant who owns, directly or by reason of the applicable attribution rules in Code Section 424(d), more than ten percent (10%) of the total combined voting power of all classes of share capital of the Company or an Affiliate shall not be less than one hundred ten percent (110%) of the said Fair Market Value on the date of grant.     (2) TERM OF ISO: Each ISO shall expire not more than ten (10) years from the date of grant; provided, however, that an ISO granted to a Participant who owns, directly or by reason of the applicable attribution rules in Code Section 424(d), more than ten percent   - 4 - --------------------------------------------------------------------------------   (10%) of the total combined voting power of all classes of share capital of the Company or an Affiliate, shall expire not more than five (5) years from the date of grant.     (3) LIMITATION ON YEARLY ISO EXERCISABILITY: The aggregate Fair Market Value (determined at the time each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by a Participant in any calendar year (under this or any other ISO plan of the Company or an Affiliate) shall not exceed the maximum amount allowable under Section 422 of the Code.     (4) LIMITATION ON GRANT OF ISOS: No ISOs shall be granted after June 21, 2010, the date which is ten (10) years from the date of the approval of the Plan by the Board of Directors.     (c) LIMITATION ON NUMBER OF OPTIONS GRANTED. Notwithstanding anything in the Plan to the contrary, no Participant shall be granted Options in any calendar year for the purchase of more than 75,000 Shares.   7. TERMS AND CONDITIONS OF STOCK AWARDS Each Stock Award shall be set forth in a Stock Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Stock Agreement shall be in the form approved by the Committee, with such changes and modifications to such form as the Committee, in its discretion, shall approve with respect to any particular Participant or Participants. The Stock Agreement shall contain terms and conditions which the Committee determines to be appropriate and in the best interest of the Company; provided, however, that the purchase price per share of the Shares covered by each Stock Award shall not be less than the par value per Share. Each Stock Agreement shall state the number of Shares to which the Stock Award pertains, the date prior to which the Stock Award must be exercised by the Participant, and the terms of any right of the Company to reacquire the Shares subject to the Stock Award, including the time and events upon which such rights shall accrue and the purchase price therefor, and any restrictions on the transferability of such Shares.   8. EXERCISE OF STOCK RIGHTS AND ISSUANCE OF SHARES A Stock Right (or any part or installment thereof) shall be exercised by giving written notice to the Company, together with provision for payment of the full purchase price in accordance with this Section for the Shares as to which such Stock Right is being exercised, and upon compliance with any other conditions set forth in the Stock Agreement. Such written notice shall be signed by the person exercising the Stock Right, shall state the number of Shares with respect to which the Stock Right is being exercised, and shall contain any representation required by the Plan or the Stock Agreement. Payment of the purchase price for the Shares as to which such Stock Right is being exercised shall be made (i) in United States dollars in cash or by check, (ii) through delivery of shares of Common Stock already owned by the Participant not subject to any restriction under any plan and having a Fair Market Value equal as of the date of exercise to the cash exercise price of the Stock Right, (iii) at the discretion of the Committee, by any other means, including a promissory note of the Participant, which the Committee determines to be consistent with the purpose of this Plan and applicable law, (iv) at the discretion of the Committee, in accordance with a cashless exercise program established with a securities brokerage firm and approved by the Committee, or (v) at the discretion of the Committee, by any combination of (i), (ii), (iii), and (iv) above. Notwithstanding the foregoing, the Committee shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.   - 5 - -------------------------------------------------------------------------------- The Company shall reasonably promptly deliver the Shares as to which such Stock Right was exercised to the Participant (or to the Participant’s Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the delivery of the Shares may be delayed by the Company in order to comply with any law or regulation which requires the Company to take any action with respect to the Shares prior to their issuance. The Shares shall, upon delivery, be fully paid, non-assessable Shares.   9. RIGHTS AS A SHAREHOLDER No Participant to whom a Stock Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Stock Right, except after due exercise thereof and tender of the full purchase price for the Shares being purchased pursuant to such exercise and registration of the Shares in the Company’s share register in the name of the Participant.   10. ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS Stock Rights shall not be transferable by the Participant other than by will or by the laws of descent and distribution; provided, however, that the designation of a beneficiary of a Stock Right by a Participant shall not be deemed a transfer prohibited by this Section. A Stock Right shall be exercisable, during the Participant’s lifetime, only by such Participant (or by his or her legal representative) and shall not be assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment, or similar process. Any attempted transfer, assignment, pledge, hypothecation, or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void.   11. EFFECT OF TERMINATION OF SERVICE     (a) Except as otherwise provided in the pertinent Stock Agreement or as otherwise provided in Section 12, 13, or 14, if a Participant ceases to be an employee of or consultant to the Company and its Affiliates (a “Termination of Service”) for any reason other than termination “for cause”, Disability, or death before the Participant has exercised all Stock Rights, the Participant may exercise any Stock Right granted to him or her to the extent that the Stock Right is exercisable on the date of such Termination of Service, but only within a period of not more than three (3) months after the date of the Participant’s Termination of Service or, if earlier, within the originally prescribed term of the Stock Right. Notwithstanding the foregoing, except as provided in Section 13 or 14, in no event may an ISO be exercised later than three (3) months after the Participant’s termination of employment with the Company and its Affiliates.     (b) The provisions of this Section, and not the provisions of Section 13 or 14, shall apply to a Participant who subsequently becomes disabled or dies after the Termination of Service; provided, however, that in the case of a Participant’s death within three (3) months after the Termination of Service, the Participant’s Survivors may exercise the Stock Right within one (1) year after the date of the Participant’s death, but in no event after the date of expiration of the term of the Stock Right.     (c) Notwithstanding anything herein to the contrary, if subsequent to a Participant’s Termination of Service, but prior to the exercise of a Stock Right, the Committee determines that, either prior or subsequent to the Participant’s Termination of Service, the Participant engaged in conduct which would constitute “cause” (as defined in Section 12), then such Participant shall forthwith cease to have any right to exercise any Stock Right.   - 6 - --------------------------------------------------------------------------------   (d) Absence from work with the Company or an Affiliate because of temporary disability (any disability other than a permanent and total Disability as defined in Section 2 hereof), or a leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, a Termination of Service, except as the Committee may otherwise expressly provide.     (e) A change of employment or other service within or among the Company and its Affiliates shall not be deemed a Termination of Service, so long as the Participant continues to be an employee of or consultant to the Company or any Affiliate; provided, however, that if a Participant’s employment with the Company or an Affiliate should cease (other than to become an employee of another Affiliate or of the Company), then paragraph (a) of this Section 11 shall apply as to any ISOs granted to such Participant.   12. EFFECT OF TERMINATION OF SERVICE FOR “CAUSE” Except as otherwise provided in the pertinent Stock Agreement, in the event of a Termination of Service of a Participant “for cause,” all outstanding and unexercised Stock Rights as of the date the Participant is notified his or her service is terminated “for cause” will immediately be forfeited. For purposes of this Section 12, “cause” shall include (and is not limited to) dishonesty with respect to the Company and its Affiliates, insubordination, substantial malfeasance or nonfeasance of duty, unauthorized disclosure of confidential information, conduct substantially prejudicial to the business of the Company or any Affiliate, and termination by the Participant in violation of an agreement by the Participant to remain in the employ or service of the Company or an Affiliate. The determination of the Committee as to the existence of cause will be conclusive on the Participant and the Company. “Cause” is not limited to events which have occurred prior to a Participant’s Termination of Service, nor is it necessary that the Committee’s finding of “cause” occur prior to termination. If the Committee determines, subsequent to a Participant’s Termination of Service but prior to the exercise of a Stock Right, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute “cause,” then the right to exercise any Stock Right shall be forfeited. Any definition in an agreement between a Participant and the Company or an Affiliate which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination shall supersede the definition in this Plan with respect to that Participant.   13. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY Except as otherwise provided in the pertinent Stock Agreement, in the event of a Termination of Service by reason of Disability, the Disabled Participant may exercise any Stock Right granted to him or her to the extent exercisable but not exercised on the date of Disability. A Disabled Participant may exercise such rights only within a period of not more than one (1) year after the date that the Participant became Disabled or, if earlier, within the originally prescribed term of the Stock Right. The Committee shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Committee, the cost of which examination shall be paid for by the Company.   14. EFFECT OF DEATH WHILE AN EMPLOYEE Except as otherwise provided in the pertinent Stock Agreement, in the event of death of a Participant while the Participant is an employee of or consultant to the Company or an Affiliate, any Stock Rights granted to such   - 7 - -------------------------------------------------------------------------------- Participant may be exercised by the Participant’s Survivors to the extent exercisable but not exercised on the date of death. Any such Stock Right must be exercised within one (1) year after the date of death of the Participant.   15. PURCHASE FOR INVESTMENT Unless the offering and sale of the Shares to be issued upon the particular exercise of a Stock Right shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended (the “Securities Act”), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:     (a) The person who exercises such Stock Right shall warrant to the Company, at the time of such exercise or receipt, as the case may be, that such person is acquiring such Shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate evidencing the Shares issued pursuant to such exercise or such grant: “The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.     (b) The Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Securities Act without registration thereunder. The Company may delay issuance of the Shares until completion of any action or obtaining of any consent which the Company deems necessary under any applicable law (including, without limitation, state securities or “blue sky” laws).   16. ADJUSTMENTS Upon the occurrence of any of the following events, a Participant’s rights with respect to any Stock Right granted to him or her hereunder which have not previously been exercised in full shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the Participant and the Company relating to such Stock Right or in any employment agreement between a Participant and the Company or an Affiliate:     (a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of such Stock Right shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination, or stock dividend     (b) MERGERS OR CONSOLIDATIONS. If the Company is to be consolidated with or acquired by another entity in a merger, or in the event of a sale of all or substantially all of the Company’s assets (an “Acquisition”), the Company may take such action with respect to outstanding Stock   - 8 - --------------------------------------------------------------------------------   Rights as the Committee or the Board of Directors may deem to be equitable and in the best interests of the Company and its stockholders under the circumstances, including, without limitation, (i) giving the Participant reasonable advance notice of the pendency of the Acquisition and accelerating the vesting of the Stock Rights so that they become exercisable in full immediately prior to the Acquisition, (ii) making appropriate provision for the continuation of the Stock Rights by substituting on an equitable basis for the shares then subject to the Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition or securities of any successor or acquiring entity, or (iii) giving the Participant reasonable advance notice of the pendency of the Acquisition and canceling the Stock Rights effective upon the Acquisition if they are not exercised prior to the Acquisition.     (c) RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization or reorganization of the Company (other than a transaction described in paragraph (b) of this Section 16) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising a Stock Right shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such Stock Right prior to such recapitalization or reorganization.     (d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments made pursuant to paragraph (a), (b), or (c) of this Section 16 with respect to ISOs shall be made only after the Committee determines whether such adjustments would constitute a “modification” of such ISOs (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holders of such ISOS. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments, unless the holder of an ISO specifically requests in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the ISO.   17. FRACTIONAL SHARES No fractional share shall be issued under the Plan, and the person exercising any Stock Right shall receive from the Company cash in lieu of any such fractional share equal to the Fair Market Value thereof determined in good faith by the Board of Directors of the Company.   18. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS. Any Options granted under this Plan which do not meet the requirements of the Code for ISOs shall automatically be deemed to be NQSOs without further action on the part of the Committee. The Committee, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portion thereof) that have not been exercised on the date of conversion into NQSOs at any time prior to the expiration of such ISOs, regardless of whether the Participant is an employee of the Company or an Affiliate at the time of such conversion. Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such Options. At the time of such conversion, the Committee (with the consent of the Participant) may impose such conditions on the exercise of the resulting NQSOs as the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into NQSOs, and no such conversion shall occur until and   - 9 - -------------------------------------------------------------------------------- unless the Committee takes appropriate action. The Committee, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such termination.   19. WITHHOLDING In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“FICA”) withholdings, or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages, or other remuneration in connection with the exercise of a Stock Right or a Disqualifying Disposition (as defined in Section 20), the Participant shall advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock, is authorized by the Committee (and permitted by law); provided, however, that with respect to persons subject to Section 16 of the Exchange Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 promulgated under Section 16 of the Exchange Act. For purposes hereof, the Fair Market Value of any shares withheld for purposes of payroll withholding shall be determined in the manner provided in Section 2 hereof, as of the most recent practicable date prior to the date of exercise. If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer. The Committee in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.   20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION Each Key Employee who receives an ISO must agree to notify the Company in writing immediately after the Key Employee makes a Disqualifying Disposition of any Shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any disposition (including any sale) of such shares before the later of (a) two years after the date the Key Employee was granted the ISO, or (b) one year after the date the Key Employee acquired Shares by exercising the ISO. If the Key Employee has died before such Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.   21. EFFECTIVE DATE; TERMINATION OF THE PLAN The Plan shall be effective on June 21, 2000, the date it was approved by the Board of Directors. Stock Rights may be granted under the Plan on and after its effective date; provided, however, that any such Stock Rights shall be null and void if the Plan is not approved by the stockholders of the Company within twelve (12) months after the effective date. The Plan will terminate on June 21, 2010, the date which is ten (10) years from the date of its approval by the Board of Directors. The Plan may be terminated at an earlier date by vote of the stockholders of the Company; provided, however, that any such earlier termination will not affect any Stock Rights granted or Stock Agreements executed prior to the effective date of such termination.   22. AMENDMENT OF THE PLAN The Plan may be amended by the stockholders of the Company. The Plan may also be amended by the Board of Directors or the Committee, including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under the Plan for favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code, to the extent necessary to ensure the qualification of the Plan under Rule 16b-3 under the Exchange Act, and to the extent necessary to qualify the shares issuable upon exercise of any outstanding Stock Rights granted, or Stock Rights to be granted, under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers. Any   - 10 - -------------------------------------------------------------------------------- amendment approved by the Board of Directors or the Committee which is of a scope that requires stockholder approval in order to ensure favorable federal income tax treatment for any ISOs or requires stockholder approval in order to ensure the compliance of the Plan with Rule 16b-3 or Section 162(m) of the Code shall be subject to obtaining such stockholder approval. No modification or amendment of the Plan shall adversely affect any rights under a Stock Right previously granted to a Participant without such Participant’s consent. In its discretion, the Committee may amend any term or condition of any outstanding Stock Right, provided (i) such term or condition as amended is permitted by the Plan, (ii) if the amendment is adverse to the Participant, such amendment shall be made only with the consent of the Participant, (iii) any such amendment of any ISO shall be made only after the Committee determines whether such amendment would constitute a “modification” of any Stock Right which is an ISO (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holder of such ISO, and (iv) with respect to any Stock Right held by any Participant who is subject to the provisions of Section 16(a) of the 1934 Act, any such amendment shall be made only after the Committee determines whether such amendment would constitute the grant of a new Stock Right.   23. EMPLOYMENT OR OTHER RELATIONSHIP Nothing in the Plan or any Stock Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment status of a Participant, nor to prevent a Participant from terminating his or her own employment, or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time.   24. GOVERNING LAW This Plan shall be construed and enforced in accordance with the law of the Commonwealth of Massachusetts.   - 11 -

Exhibit 10.18   WONDER AUTO LIMITED No. 56 Lingxi Street Taie District Jinzhou City, Liaoning People’s Republic of China, 121013 (86) 0416-5186632   June 21, 2006   By Hand Delivery Meirong Yuan Dear Mr. Yuan:   The purpose of this letter agreement (the “Agreement”) is to confirm your employment arrangement with WONDER AUTO LIMITED (the “Company”), on the following terms and conditions:   1.  Duties. You will be employed as the Chief Financial Officer, subject to the supervision of the Chief Executive Officer. Your duties will include, but not be limited to, overseeing all financial matters relating to the Company, including the preparation of the Company’s financial statements and related matters. You shall devote your entire business time, energies, attention and abilities to the business of Company unless otherwise authorized by the board of directors. During your employment by Company, you shall not engage in any activity or have any business interest which in any manner interferes with the proper performance of your duties, conflicts with the interest of Company or brings into disrepute the business reputation of Company.   2.  Salary. Your salary will be at the rate of Sixty Thousand Dollars ($60,000) per year, to be paid in monthly installments or otherwise in accordance with Company’s normal payroll practices.   3.  Bonus. You shall be eligible for a bonus, which will be payable in the sole discretion of Company based upon your performance and the Company’s performance during any year of your employment with the Company.   4.  Term of Employment. You will be an employee-at-will. This means that either you or Company may end your employment at any time, with or without cause, and with or without notice.   5.  Vacation. You shall be entitled to twenty paid vacation days. You may not take more than 10 vacation days consecutively. Vacation days will not be carried over to future years of employment.   6.  Incentive and Other Plans. You will be entitled to participate in such pension, 401(k), major medical, life insurance and other plans and benefit programs as may be made available from time to time to employees of Company having responsibilities comparable to yours and under the terms of which you are eligible to participate.   --------------------------------------------------------------------------------   7.  Company Policies. You shall at all times be subject to and comply with policies, rules and procedures of Company then in effect, including without limitation with respect to hours of work, holidays, vacation and sick leave and pay, conflict of interest, improper payments, political contributions and payments to government officials.   8.  Patents. You hereby assign to Company all rights to any inventions, techniques, processes, concepts, ideas, programs, source codes, formulae, research and development and marketing plans, whether or not patentable or copyrightable, made, conceived or reduced to practice by you during the course of your employment by Company.   9.  Covenants. During your employment by Company and at all times thereafter, you shall not (a) disrupt, disparage, impair or interfere with the business of Company or (b) disclose to anyone else, directly or indirectly, any proprietary or business sensitive information concerning the business of Company or use, or permit or assist, by acquiescence or otherwise, anyone else to use, directly or indirectly, any such information. Such information shall include all information to the extent not generally known to the public which, if released to unauthorized persons, could be detrimental to the reputation or business interests of Company or parties with which Company contracts or which would permit such person to benefit improperly.   10.  Company Property. Upon termination of your employment for any reason, you shall promptly deliver to Company all property belonging to Company and shall not retain any copies of any correspondence, reports, lists or other documents relating in any way to the affairs of Company or its clients.   11.  Non-Solicitation. During the term of your employment by Company and for a period of twelve months following the termination of your employment, whether voluntary or involuntary, you shall not, directly or indirectly:   (a)  solicit customers or business patronage which results in competition with the business of Company or any of its affiliates, or   (b)  approach or attempt to induce any person who is then in the employ of Company to leave the employ of Company or employ or attempt to employ any person who was in the employ of Company at any time during the prior twelve months.   12.  Notices.    All notices hereunder shall be to the parties’ addresses set forth above for the Company and on the Signature Page for you, in writing and given by registered or certified mail, return receipt requested, postage and registration fees prepaid, and shall be deemed given when so mailed. The addresses set forth herein may be changed by notice given in the manner set forth in this Section.   13.  Miscellaneous.   This Agreement (a) shall be governed by, and construed in accordance with, the laws of the British Virgin Islands, without regard for the conflict of laws principles thereof, (b) shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective heirs, legal representatives and assigns, (c) may not be changed orally but only by an agreement in writing signed by the party against whom any waiver, change, amendment, notification or discharge is sought, and (d) contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, oral or written, between the parties hereto. The invalidity of all or any part of any section of this Agreement shall not render invalid the remainder of this Agreement. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.   2 --------------------------------------------------------------------------------   Very truly yours,   WONDER AUTO LIMITED   By:/s/ Qingjie Zhao Name: Qingjie Zhao Title: CEO and Chairman   ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:   /s/ Meirong Yuan MEIRONG YUAN Address: c/o Wonder Auto Limited No. 56 Lingxi Street Taihe District Jinzhou City, Liaoning People’s Republic of China, 121013     3 --------------------------------------------------------------------------------  

Exhibit 10.2 LEASE TERMINATION AGREEMENT This LEASE TERMINATION AGREEMENT (this “Agreement”) is entered into as of the Reference Date by and between Landlord and Tenant, with reference to the following: 1. General Terms.   (a)   Reference Date:   May 15, 2006 (b)   Landlord:   TRIZEC PARTNERS REAL ESTATE, L.P., a Delaware limited partnership, the successor of TrizecHahn Tower Three Galleria Management, L.P., a Delaware limited partnership (c)   Tenant:   THE VIALINK COMPANY, a Delaware corporation (d)   Building:   Three Galleria Tower, 13155 Noel Road, Dallas, Texas (e)   Lease:   Three Galleria Tower Office Lease Agreement dated May 31, 2001, as amended by the First Amendment to Office Lease Agreement dated December 1, 2001, the Second Amendment to Office Lease Agreement dated February 10, 2004 and the Third Amendment to Office Lease dated November 2, 2004 (collectively, the “Lease”). (f)   Premises:   Approximately 11,658 square feet of Net Rentable Area on the third floor of the Building (g)   Termination Date:   May 31, 2006 2. Recitals. (a) Pursuant to the Lease, Landlord leased to Tenant, and Tenant leased from Landlord, the Premises upon the terms set forth therein. (b) Tenant desires to terminate the Lease and Landlord is willing to agree to a termination of the Lease subject to the terms and conditions set forth herein. Unless expressly provided otherwise herein, capitalized terms used in this Agreement shall have the same meanings given to such terms in the Lease. 3. Continuing Lease Obligations. Landlord’s consent to terminate the Lease shall not relieve Tenant of any monetary or non-monetary obligations arising under the Lease prior to the Termination Date. Except as may be modified below, from the date of this Agreement through the Termination Date, Tenant shall continue to make all payments due to Landlord under the Lease, and shall be liable for accrued monetary obligations which may be unbilled as of the Termination Date. -------------------------------------------------------------------------------- 4. Rents and Other Charges Due Landlord. Tenant shall remain obligated to pay to Landlord all amounts payable pursuant to the terms of the Lease accruing through the Termination Date, including, but not limited to Basic Rent and Additional Rent and including any adjustment or other amounts billed after the Termination Date, such as, (1) Tenant’s Pro Rata Share of Electrical Expenses; (2) Tenant’s Pro Rata Share Percentage of Real Estate Taxes which exceed Tenant’s Real Estate Taxes Stop; (3) Tenant’s Pro Rata Share Percentage of Operating Expenses which exceed Tenant’s Operating Expense Stop; and (4) Tenant’s Pro Rata Share Percentage or any Additional Pass Through Costs. 5. Termination. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Lease is terminated as of the Termination Date, subject to the conditions set forth in this Agreement. Thereafter, Tenant shall have no further right to occupy and/or use the Premises. In addition, any and all rights Tenant has to any storage space in the Building shall also terminate on the Termination Date. After the Termination Date, neither Tenant nor Landlord shall have any further liability or obligation to the other with respect to the Lease, except as expressly set forth herein. Notwithstanding anything to the contrary, this Agreement shall not be effective unless Landlord and Prescient Applied Intelligence, Inc., an affiliate of Tenant, have entered into a new lease for approximately 3,523 rentable square feet of office space at that certain building commonly known as One Galleria Tower and whereby such lease is to commence on June 1, 2006 (the “Substitute Lease”). 6. Tenant’s Obligations. By 11:59 p.m. on the Termination Date, Tenant shall have (a) peaceably vacated and surrendered the Premises to Landlord broom-clean and in the condition the same were in upon Tenant’s initial occupancy thereof and otherwise in accordance with the applicable provisions of the Lease; (b) removed from the Premises all persons occupying and using same, returned to Landlord all suite keys, restroom keys and security cards issued to Tenant in connection with its use of the Premises; and (c) removed from the Premises all personal property owned by Tenant, except for those items otherwise conveyed to Landlord pursuant to the Lease or any other written agreement between the parties. After the Termination Date, Landlord may prohibit access by Tenant to any portion of the Premises by changing the locks to such portion of the Premises or any other means permitted by the Lease, at law or in equity. 7. Mutual Release. (a) Tenant, on behalf of itself and its partners, officers, directors, agents, employees, successors in interest and assigns, hereby releases and discharges Landlord, its affiliates, subsidiaries and designated property management, construction and marketing firms, and their respective partners, members, officers, directors, agents, employees, contractors, successors in interest and assigns, from and against any and all claims, demands, causes of action, liabilities and obligations, known and unknown, foreseen and unforeseen, direct and indirect, in any way arising out of or relating to the Lease and/or Tenant’s use and occupancy of the Premises pursuant to the Lease; it being the express intention of the parties that the foregoing shall be deemed to be a full and general release. (b) Landlord, on behalf of itself and its affiliated companies, partners, officers, directors, agents, employees, successors in interest and assigns, hereby releases and discharges   -2- -------------------------------------------------------------------------------- Tenant and Tenant’s partners, officers, directors, agents, employees, successors in interest and assigns from and against any and all claims, demands, causes of action, liabilities and obligations, known and unknown, foreseen and unforeseen, direct and indirect, in any way arising out of or relating to the Lease and/or Tenant’s use and occupancy of the Premises pursuant to the Lease; it being the express intention of the parties that the foregoing shall be deemed to be a full and general release; provided, however, the release and discharge set forth in this Paragraph 7(b) shall not apply to the following: (i) Tenant’s obligations under the Lease which pertain to the vacation or condition of the Premises, holdover, indemnification and any other provisions thereof which expressly survive the termination of the Lease; and (ii) the provisions of this Agreement. 8. Removal of Property. (a)Notwithstanding anything in the Lease to the contrary, all permanent or built-in fixtures or improvements, and all mechanical, electrical and plumbing equipment in the Premises shall be and remain the property of Landlord as of the Termination Date. Otherwise, all furnishings, equipment, furniture and other removable personal property placed in the Premises by Tenant shall remain the property of Tenant and shall be removed by Tenant on or before the Termination Date (unless otherwise agreed by Landlord and Tenant in writing). Tenant shall promptly reimburse Landlord for the estimated cost to repair any damage caused by such removal. (b) If any of Tenant’s personal property is not removed on or before the Termination Date, Tenant grants to Landlord the option, exercisable at any time thereafter without the requirement of any notice to Tenant, (i) to treat such property, or any portion thereof, as being abandoned by Tenant to Landlord, whereupon Landlord shall be deemed to have full rights of ownership thereof; (ii) to elect to remove and store such property, or any portion thereof, on Tenant’s behalf (but without assuming any liability to any person) and at Tenant’s sole cost and expense, with reimbursement therefor to be made to Landlord upon demand; and/or (iii) to sell, give away, donate or dispose of as trash or refuse any or all of such property without any responsibility to deliver to Tenant any proceeds therefrom. Landlord shall have no liability of any kind whatsoever to Tenant in respect of the exercise or failure to exercise the options set forth in this Paragraph. Specifically, Tenant shall not have the right to assert against Landlord a claim either for the value, or the use, of any such property, either as an offset against any amount of money owing to Landlord or otherwise. The provisions of this Paragraph shall supersede the applicable provisions of the Texas Property Code, specifically including without limitation Section 93.002(d) and (e) thereof, as amended from time to time, and any other law purporting to restrict the options granted to Landlord herein. 9. Security Deposit. Landlord and Tenant acknowledge that a Security Deposit in the amount of $40,717.50 has been deposited with Landlord. After the Termination Date Landlord shall apply, as credit on Tenant’s account, all or any part of this Security Deposit for payment of any of the following: (i) rental payments or other charges in arrears due under invoices sent to Tenant after the Termination Date and (ii) expenses incurred by Landlord as direct or indirect result of Tenant’s failure to surrender the Premises, or as a result of Tenant’s default under the Lease, and this Agreement. Should any balance exist after the fulfillment of Tenant’s obligations under the Lease and this Agreement, said balance shall applied toward the security deposit   -3- -------------------------------------------------------------------------------- required pursuant to the Substitute Lease and Tenant hereby releases any and all claim thereto for such purpose and Landlord shall be entitled to hold such amount as security as provided in the Substitute Lease for the full and faithful performance of the Substitute Lease by the tenant thereunder. 10. Attorneys’ Fees. In the event of any action to enforce this Agreement, the prevailing party shall be entitled to receive from the other party all costs and expenses, including all attorneys’ fees and costs of court, incurred in connection with such action. 11. Successors and Assigns; Time. This Agreement shall be binding upon and inure to the benefit of Landlord and Tenant and their respective predecessors, successors and assigns. Time is of the essence with respect to all provisions of this Agreement. 12. Counterparts. This Agreement is executed in multiple originals and any counterpart of which is to be considered an original. 13. Condition to Effectiveness of Agreement. If all Tenant’s obligations set forth in Paragraph 6 and elsewhere in this Agreement are not fully satisfied as and when required under this Agreement (time being of the essence with respect to the performance thereof), then this Agreement shall, at Landlord’s option, be null and void, in which event the Lease shall remain in effect and unaffected by this Agreement. EXECUTED by Landlord and Tenant as of the Reference Date.   LANDLORD: TRIZEC PARTNERS REAL ESTATE, L.P., a Delaware limited partnership   By:   THOPI TRS, Inc., a Delaware corporation, as general partner     By:   /s/ Paul H. Layne       Paul H. Layne, Vice President     By:   /s/ Steven M. Lukingbeal       Steven M. Lukingbeal, Assistant Secretary   TENANT:   THE VIALINK COMPANY, a Delaware corporation   By:   /s/ Thomas W. Aiken   Name:   Thomas W. Aiken   Title:   SVP & CFO   -4-

Exhibit 10.1 Non-Employee Director Compensation Schedule Annual Retainer Each non-employee director will receive $54,000 as an annual cash retainer on or about May 1 of each year for service on the Board of Directors of DPL Inc. and The Dayton Power and Light Company (collectively, the “Company”). Meeting Fees For each Board of Directors and committee meeting attended in person, a non-employee director will receive $1,500.  A non-employee director will receive $750 for Board of Directors and committee meetings attended by telephone.  Committee Chair The chair of each committee of the Board of Directors of the Company, currently including the Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee, will receive an annual cash retainer of $10,000. Equity Compensation Each non-employee director will receive under the DPL Inc. 2006 Equity and Performance Incentive Plan an equity grant consisting of an amount of restricted stock units having an approximate value of $54,000 (the “Units”).  The Units will be granted on the date of each DPL Inc. Annual Meeting of Shareholders and will vest 100% on the day before the next DPL Inc. Annual Meeting of Shareholders immediately following the date of the grant.  Each non-employee director will have the opportunity to defer the Units.  The Units will be subject to the terms and conditions set forth in an evidence of award between DPL Inc. and the non-employee director. Fee Structure Each non-employee director will receive only one (i) annual cash retainer, (ii) annual committee chair fee, and (iii) annual equity grant for service on both Boards of Directors of DPL Inc. and The Dayton Power and Light Company.  Each non-employee director will receive only one meeting fee for concurrent meetings of the Board of Directors and a committee of DPL Inc. or The Dayton Power and Light Company. --------------------------------------------------------------------------------

Exhibit 10.4 MAF BANCORP, INC. AMENDED AND RESTATED 1993 PREMIUM PRICE STOCK OPTION PLAN 1. PURPOSE. The purpose of the MAF Bancorp, Inc. (the “Holding Company”) Amended and Restated 1993 Premium Price Stock Option Plan (the “Plan”) is to advance the interests of the Holding Company and its shareholders by providing those directors, officers and employees of the Holding Company and its affiliates, including Mid America Federal Savings Bank (the “Bank”), upon whose judgment, initiative and efforts the successful conduct of the business of the Holding Company and its affiliates largely depends, with additional financial incentive to act in the long term interest of the Holding Company and its shareholders. 2. DEFINITIONS. (a) “Affiliate” means (i) a member of a controlled group of corporations of which the Holding Company is a member or (ii) an unincorporated trade or business which is under common control with the Holding Company as determined in accordance with Section 414(c) of the Internal Revenue Code of 1986, as amended, (the “Code”) and the regulations issued thereunder. For purposes hereof, a “controlled group of corporations” shall mean a controlled group of corporations as defined in Section 1563(a) of the Code determined without regard to Section 1563(a)(4) and (e)(3)(C). (b) “Award” means a grant of Non-statutory Options, Incentive Options, and/or Limited Rights under the provisions of this Plan. (c) “Base Salary,” for purposes of this Plan only, means the fixed portion of the Participant’s compensation. It specifically excludes any amount paid pursuant to any annual or long-term incentive plan of the Holding Company or the Bank. (d) “Board of Directors” or “Board” means the board of directors of MAF Bancorp, Inc. (e) “Change in Control” of the Bank or the Holding Company means a Change in Control of a nature that: (i) would be required to be reported in response to Item 1(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the Holding Company within the meaning of the Home Owners’ Loan Act of 1933, as amended, and the Rules and Regulations promulgated by the Office of Thrift Supervision (“OTS”) (or its predecessor agency), as in effect on the Effective Date, as defined in Section 17 hereof (provided, that in applying the definition of change in control as set forth under the rules and regulations of the OTS, the Board shall substitute its judgment for that of the OTS); or (iii) without limitation such a Change in Control shall be deemed to have occurred at such time as (a) any “person” (as the term is used in Sections 13(d) and 14(d) of the   1 -------------------------------------------------------------------------------- Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or the Holding Company representing 20% or more of the Bank’s or the Holding Company’s outstanding securities ordinarily having the right to vote at the election of directors except for any securities of the Bank purchased by the Holding Company in connection with the conversion of the Bank to the stock form and any securities purchased by the Bank’s employee stock benefit plans; or (b) individuals who constitute the Board of Directors of the Holding Company or the Bank on the date hereof (the “Incumbent Board”), cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least 75% of the directors comprising the Incumbent Board, or whose nomination for election by the Holding Company’s shareholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (b), considered as though he were a member of the Incumbent Board; (c) a plan of reorganization, merger, consolidation, sale of all or substantially all assets of the Bank or the Holding Company or similar transaction occurs in which the Bank or Holding Company is not the resulting entity or (d) the approval by shareholders of a proxy statement proposal soliciting proxies from shareholders of the Holding Company, by someone other than the current management of the Holding Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Holding Company or the Bank or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Bank or the Holding Company; or (e) a tender offer is made and completed for 20% or more of the voting securities of the Bank or the Holding Company. However, notwithstanding anything contained in this section to the contrary, a Change in Control shall not be deemed to have occurred as a result of an event described in (i), (ii), or (iii) (a), (c), or (e) above which resulted from an acquisition or proposed acquisition of stock of the Holding Company by a person, as defined in the OTS’ Acquisition of Control Regulations (12 C.F.R. (S)574) (the “Control Regulations”), who was an executive officer of the Holding Company on January 19, 1990 and who has continued to serve as an executive officer of the Holding Company as of the date of the event described in (i), (ii), or (iii) (a), (c) or (e) above (an “incumbent officer”). In the event a group of individuals acting in concert satisfies the definition of “person” under the Control Regulations, the requirements of the preceding sentence shall be satisfied and thus a change in control shall not be deemed to have occurred if at least one individual in the group is an incumbent officer. (f) “Committee” means the Administrative/Compensation Committee of the Board of Directors consisting of non-employee members of the Board of Directors, all of whom are “disinterested directors” as such term is defined under Rule 16b-3 under the Exchange Act, as amended, as promulgated by the Securities and Exchange Commission. (g) “Common Stock” means the Common Stock of MAF Bancorp, Inc., par value $.01 per share. (h) “Date of Grant” means the date an Award granted by the Committee is effective pursuant to the terms hereof.   2 -------------------------------------------------------------------------------- (i) “Disability” shall have the same meaning as such term is defined in the Mid America Federal Savings Bank Employees’ Profit Sharing Plan. (j) “Fair Market Value” means, when used in connection with the Common Stock on a certain date, the average of the reported closing bid and ask prices of the Common Stock as reported by the Nasdaq National Market (as published by the Wall Street Journal, if published) on such date or if the Common Stock was not traded on such date, on the next preceding day on which the Common Stock was traded thereon or the last date on which a sale is reported. (k) “Incentive Option” means an Option granted by the Committee to a Participant, which Option is designed as an Incentive Option pursuant to Section 9. (l) “Limited Right” means the right to receive an amount of cash based upon the terms set forth in Section 10. (m) “Non-statutory Option” means an Option granted by the Committee to a Participant and which is not designated by the Committee as an Incentive Option, pursuant to Section 8. (n) “Normal Retirement” means, with respect to employees including executive officers, retirement at the normal retirement date as set forth in the Mid America Federal Savings Bank Employee’s Profit Sharing Plan, unless otherwise determined by the Committee. Normal Retirement means, with respect to non-employee directors, retirement at the mandatory retirement established by the Board of Directors of the Holding Company or Bank. (o) “Option” means an Award granted under Section 8 or Section 9. (p) “Participant” means a director, officer or employee of the Holding Company or its Affiliates chosen by the Committee to participate in the Plan. (q) “Plan Year(s)” means a fiscal year or years commencing on or after June 30, 1995. (r) “Termination for Cause” means the termination upon an intentional failure to perform stated duties, breach of a fiduciary duty involving personal dishonesty, which results in material loss to the Holding Company or one of its Affiliates or willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order which results in material loss to the Holding Company or one of its Affiliates. 3. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it sees necessary for the proper administration of the Plan and to make whatever determinations and interpretations in connection with the Plan it sees as necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants in the Plan and on their legal representatives and beneficiaries.   3 -------------------------------------------------------------------------------- 4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or a combination of:     (a) Non-statutory Options;     (b) Incentive Options; and     (c) Limited Rights as defined below in paragraphs 8 through 10 of the Plan. 5. STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 14, the maximum number of shares reserved for purchase pursuant to the exercise of options granted under the Plan is 247,500 shares of Common Stock. These shares of Common Stock may be either authorized but unissued shares or shares previously issued and reacquired by the Holding Company. To the extent that Options or Limited Rights are granted under the Plan, the shares underlying such Options will be unavailable for future grants under the Plan except that, to the extent that Options together with any related Limited Rights granted under the Plan terminate, expire or are cancelled without having been exercised (in the case of Limited Rights, exercised for cash) new Awards may be made with respect to these shares. Subject to adjustment as provided in Section 14, no participant under the Plan may receive awards with respect to shares of Common Stock that in the aggregate exceed 25,000 shares underlying options in any calendar year. 6. ELIGIBILITY. Executive officers and employees of the Holding Company or its Affiliates shall be eligible to receive Incentive Options, Non-statutory Options and/or Limited Rights under the Plan. Directors who are not employees of the Holding Company or its Affiliates shall be eligible to receive Non-statutory Options under the Plan. (a) Executive Officers. Participants who are executive officers of the Holding Company or its affiliates shall initially be classified into four groups. At the Committee’s discretion, the composition of such groups may be changed. Initially, these four groups shall include;   Group I:    The Chairman/Chief Executive Officer and President Group II:    Selected executives with company-wide responsibilities. Initially this shall include; the Chief Financial Officer and Senior Vice President of Loan Operations. Group III:    Selected executives with primary accountability for one or more key functional areas. Initially this shall include:    •      Senior Vice President-Operations/Information Systems    •      Senior Vice President-Retail Banking   4 --------------------------------------------------------------------------------    •      Senior Vice President-Residential Lending    •      First Vice President and Controller    •      First Vice President-Administration/Savings    •      First Vice President-Investor Relations/Taxation    •      Vice President-Secondary Mortgage Marketing    •      President of MAF Developments Inc.   Group IV:    Selected executives with accountability for other functional areas. Initially this shall include:    •      Vice President-Check Operations    •      Vice President-Teller Operations (b) Directors. Any non-employee director of the Holding Company who is serving as a director on the Effective Date (as defined in section 17) shall become a Participant in the Plan on the Effective Date. Any non-employee director of the Holding Company who is not serving as a director on the Effective Date shall become a Participant in the Plan on the date he is first elected as a director of the Holding Company by the affirmative vote of shareholders. Notwithstanding the foregoing, former directors of N.S. Bancorp, Inc. who serve as non-employee directors of the Holding Company following the merger of N.S. Bancorp, Inc. with the Holding Company, shall become Participants in the Plan on the date of the first annual meeting of shareholders following the date of the merger. (c) Employees other than executive officers. Employees who are not executive officers of the Holding Company or its Affiliates will be eligible to be a Participant in the Plan at the discretion of the Committee. 7. OPTION AWARDS. (a) Executive Officers. Before the beginning of each fiscal year, the Committee shall establish award opportunities for each Participant group of executive officers. As a general guideline, award opportunities shall correspond to the competitive market practices and the relative priority placed by the Company on achieving annual versus long-term performance goals. The dollar value of the initial award levels shall be:     •   25 percent of Base Salaries for Group I Participants;     •   20 percent of Base Salaries for Group II Participants;     •   11 percent of Base Salaries for Group III Participants; and     •   6 percent of Base Salaries for Group IV Participants. The determination of the number of options to be granted will be equivalent to the dollar value of the Award divided by the value of the options on the Date of Grant, determined based on an appropriate pricing model or similar computation.   5 -------------------------------------------------------------------------------- (b) Directors. Non-employee directors of the Holding Company shall receive an initial grant of 1,000 options on the date they become a Participant in the Plan except that in the event a non-employee director did not previously receive a grant of options under the MAF Bancorp Inc. Stock Option Plan for Outside Directors he shall receive an initial grant of 2,500 options on the date he becomes a Participant in the Plan. In each year subsequent to the year in which a non-employee director receives an initial grant of options under the Plan in accordance with the previous sentence, any non-employee director who is a Participant in the Plan and who is serving as a director of the Holding Company on the Date of Grant, shall receive an annual grant of 1,000 options on the day following the day on which the annual meeting of shareholders for such year is formally adjourned. In the event there are not sufficient options available under the Plan to satisfy an initial grant or annual grant of options to one or more non-employee directors, such director or directors shall receive a grant of such lesser number of shares as remain in the Plan, sharing pro-rata with all such non-employee directors entitled to receive option awards. If, pursuant to this section, a non-employee director who is eligible to be a Participant in the Plan receives an initial grant of options to purchase fewer than the number of shares of Common Stock to which he is entitled pursuant to the previous paragraph, and options for shares subsequently become available under the Plan, such options for shares shall first be allocated as options granted, as of the date of availability, to any non-employee director who is eligible to be a Participant in the Plan and who has not previously been granted an initial grant of options covering the full number of shares of Common Stock to which he is entitled pursuant to the previous paragraph. Such options shall be granted to purchase a number of shares of Common Stock no greater than the number of shares covered by an initial grant of options to other non-employee directors, but who have received an initial grant of options to purchase fewer than the number of shares of Common Stock to which they are entitled pursuant to the previous paragraph. Options for any remaining shares shall then be granted pro rata among all non-employee directors who received an initial grant of options to purchase fewer than the number of shares of Common Stock to which they are entitled pursuant to the previous paragraph. No non-employee director shall receive an initial grant of options to purchase more than 2,500 shares of Common Stock. No non-employee director shall be entitled to receive an annual grant of 1,000 options until all non-employee directors eligible to be Participants in the Plan have received in full, an initial grant of options to which such director is entitled pursuant to the previous paragraph. If, after making and fully satisfying an initial grant of options to all non-employee directors eligible to be Participants, options for sufficient shares are not available under the Plan to fulfill the annual grant of 1,000 options to a non-employee director or directors and thereafter options become available, such non-employee director shall then receive options to purchase shares of Common Stock, sharing pro rata among each such non-employee director in the number of shares then available under the Plan (not to exceed the amount to which he is entitled under this section). (c) Employees other than executive officers. The Committee may from time to time, grant options to employees other than executive officers in amounts that it, in its sole discretion, may determine.   6 -------------------------------------------------------------------------------- 8. NON-STATUTORY OPTIONS. 8.1 Grant of Non-statutory Options. Upon such terms and conditions as stated herein and as the Committee may determine, the Committee may grant new Non-statutory options or may grant Non-statutory options in exchange for and upon surrender of previously granted Awards under this Plan. All options granted to non-employee directors pursuant to Section 7(b) shall be Non-statutory options. Non-statutory Options granted under this Plan are subject to the following terms and conditions: (a) Price. The purchase price per share of Common Stock deliverable upon the exercise of each Non-statutory Option shall be (i) 133 percent of the Fair Market Value of the Common Stock on the Date of Grant of the option with respect to options granted to executive officers pursuant to Section 7(a), (ii) 110% of the Fair Market Value of the Common Stock on the Date of Grant of the option with respect to options granted to non-employee directors pursuant to Section 7(b), and (iii) not less than 100% of the Fair Market Value of the Common Stock on the Date of Grant of the option with respect to options granted to employees other than executive officers pursuant to Section 7(c). Shares may be purchased only upon full payment of the purchase price. Payment of the purchase price may be made, in whole or in part in cash or through the surrender of shares of the Common Stock at the Fair Market Value of such shares on the date of surrender determined in the manner described in Section 2(j). (b) Terms of Options. With respect to Non-statutory Options granted to executive officers and employees, the term during which each Non-statutory Option may be exercised shall be determined by the Committee, but in no event shall a Non-statutory Option be exercisable in whole or in part more than 10 years from the date of Grant. Non-statutory Options granted to non-employee directors shall have a term of 10 years from the date of Grant. Non-statutory Options shall become exercisable in three equal annual installments, with the first such installment to become exercisable one year after the Date of Grant, except that the Committee may determine otherwise with respect to Non-statutory Options granted to executive officers and employees. The shares comprising each installment may be purchased in whole or in part at any time after such installment becomes purchasable. With respect to Non-statutory Options granted to executive officers and employees, the Committee may, in its sole discretion, accelerate the time at which any Non-statutory Option may be exercised in whole or in part. Notwithstanding the above, in the event of a Change in Control of the Bank or the Holding Company, all Non-statutory Options shall become immediately exercisable. (c) Termination of Employment. Upon the termination of a Participant’s service for any reason other than Disability, Normal Retirement, Change in Control, death or Termination for Cause, the Participant’s Non-statutory Options   7 -------------------------------------------------------------------------------- shall be exercisable only as to those shares which were immediately purchasable by the Participant at the date of termination and only for a period of three months following termination. In the event of Termination for Cause, all rights under the Participant’s Non-statutory Options shall expire upon termination. In the event of death, Disability, Change in Control or Normal Retirement of any Participant, all Non-statutory Options held by the Participant, whether or not exercisable at such time, shall be exercisable by the Participant or his legal representatives or beneficiaries of the Participant for three years following the date of the Participant’s death, Normal Retirement or cessation of employment due to Change in Control or Disability; except that the Committee may designate a longer period for Non-statutory Options granted to executive officers and employees, provided that in no event shall the period extend beyond the expiration of the Non-statutory Option term. 9. INCENTIVE OPTIONS. 9.1 Grant of Incentive Options. Incentive Options granted pursuant to the Plan shall be available to be granted to executive officers and employees and shall be subject to the following terms and conditions: (a) Price. The Purchase price per share of Common Stock deliverable upon the exercise of each Incentive Option shall be (i) 133 percent of the Fair Market Value of the Common Stock on the Date of Grant of the option with respect to options granted to executive officers pursuant to Section 7(a); and (ii) not less than 100% of the Fair Market Value of the Common Stock on the Date of Grant of the option with respect to options granted to employees other than executive officers pursuant to Section 7(c). Shares may be purchased only upon payment of the full purchase price. Payment of the purchase price may be made, in whole or in part, in cash or through the surrender of shares of the Common Stock at the Fair Market Value of such shares on the date of surrender determined in the manner described in Section 2(j). (b) Amounts of Options. Incentive Options may be granted to any Participant (other than non-employee directors) in such amounts stated herein and as determined by the Committee. In the case of an option intended to qualify as an Incentive Option, the aggregate Fair Market Value (determined as of the time the option is granted) of the Common Stock with respect to which Incentive Options granted are exercisable for the first time by the Participant during any calendar year (under all plans of the Participant’s employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. The provisions of this Section 9.1(b) shall be construed and applied in accordance with Section 422(d) of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations, if any, promulgated thereunder. To the extent an Award under this Section 9.1 exceeds this $100,000 limit, the portion of the Award in excess of such limit shall be deemed a Non-statutory Option. (c) Terms of Options. The term during which each Incentive Option may be   8 -------------------------------------------------------------------------------- exercised shall be determined by the Committee, but in no event shall an Incentive Option be exercisable in whole or in part more than 10 years from the Date of Grant. If at any time an Incentive Option is granted to an executive officer or employee, the executive officer or employee owns Common Stock representing more than 10% of the total combined voting power of the Holding Company (or, under Section 424(d) of the Code, is deemed to own Common Stock representing more than 10% of the total combined voting power of all such classes of Common Stock, by reason of the ownership of such classes of Common Stock, directly or indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent of such executive officer, or by or for any corporation, partnership, estate or trust of which such executive officer is a shareholder, partner or beneficiary), the Incentive Option granted to such executive officer shall not be exercisable after the expiration of five years from the Date of Grant and, with respect to an employee, shall not be exercisable at a price which is less than 110% of the fair market value of the Common Stock on the Date of Grant. No Incentive Option granted under this Plan is transferable except by will or the laws of descent and distribution and is exercisable in his lifetime only by the executive officer or employee to whom it is granted. Incentive Options shall become exercisable in three equal annual installments with the first such installment to become exercisable one year after the Date of Grant, unless determined otherwise by the Committee. The shares comprising each installment may be purchased in whole or in part at any time after such installment becomes purchasable, provided that the amount able to be first exercised in a given year is consistent with the terms of Section 422 of the Code. The Committee may, in its sole discretion, accelerate the time at which any Incentive Option may be exercised in whole or in part, provided that it is consistent with the terms of Section 422 of the Code. Notwithstanding the above, in the event of a Change in Control of the Bank or the Holding Company, all Incentive Options shall become immediately exercisable. (d) Termination of Employment. Upon the termination of a Participant’s service for any reason other than Disability, Normal Retirement, Change in Control, death or Termination for Cause, the Participant’s Incentive Options shall be exercisable only as to those shares which were immediately purchasable by the Participant at the date of termination and only for a period of three months following termination. In the event of Termination for Cause all rights under the Participant’s Incentive Options shall expire upon termination. In the event of death or Disability of any executive officer, all Incentive Options held by such Participant, whether or not exercisable at such time, shall be exercisable by the Participant or the Participant’s legal representatives or beneficiaries for one year following the date of the Participant’s death or cessation of employment due to Disability. Upon termination of the Participant’s service due to Normal Retirement or a Change in Control, all Incentive Options held by such Participant, whether or not exercisable at such time, shall be exercisable for a period of one year following the date of Participant’s cessation of employment, provided however, that such option shall not be eligible for treatment as an Incentive Option in the event such option is exercised more than three months following the date of the Participant’s termination of employment. In no event shall the exercise period extend beyond the expiration of the Incentive Option term.   9 -------------------------------------------------------------------------------- (e) Compliance with Code. The options granted under this Section 9 of the Plan are intended to qualify as incentive stock options within the meaning of Section 422 of the Code, but the Holding Company makes no warranty as to the qualification of any option as an incentive stock option within the meaning of Section 422 of the Code. 10. LIMITED RIGHTS. 10.1 Grant of Limited Rights. Simultaneously with the grant of any option, the Committee may grant a Limited Right to executive officers and employees with respect to all or some of the shares covered by such option. Limited Rights granted under this Plan are subject to the following terms and conditions: (a) Terms of Rights. In no event shall a Limited Right be exercisable in whole or in part before the expiration of six months from the Date of Grant of the Limited Right. A Limited Right may be exercised only in the event of a Change of Control of the Holding Company. The Limited Right may be exercised only when the underlying option is eligible to be exercised, and only when the Fair Market Value of the underlying shares on the day of exercise is greater than the exercise price of the related option. Upon exercise of a Limited Right, the related option shall cease to be exercisable. Upon exercise or termination of an option, any related Limited Right shall terminate. The Limited Rights may be for no more than 100% of the difference between the exercise price and the Fair Market Value of the Common Stock subject to the underlying option. The Limited Right is transferable only when the underlying option is transferable and under the same conditions. (b) Payment. upon exercise of a Limited Right, the Participant shall promptly receive from the Holding Company an amount of cash equal to the difference between the exercise price per share on the Date of Grant of the related option and the Fair Market Value of the underlying shares on the date the Limited Right is exercised, multiplied by the number of shares with respect to which such Limited Right is being exercised. (c) Termination of Employment. Upon the termination of a Participant’s service for any reason other than Termination for Cause, any Limited Rights held by the Participant shall then be exercisable for a period of one year following termination. In the event of Termination for Cause, all Limited Rights held by the Participant shall expire immediately. Upon termination of the Participant’s employment for reason of death, Normal Retirement or Disability, all Limited   10 -------------------------------------------------------------------------------- Rights held by such Participant shall be exercisable by the Participant or the Participant’s legal representative or beneficiaries for a period of one year from the date of such termination. In no event shall the period extend the expiration of the term of the related option. 11. RIGHTS OF A SHAREHOLDER; NONTRANSFERABILITY. No Participant shall have any rights as a shareholder with respect to any shares covered by a Non-Statutory and/or Incentive Option until the date of issuance of a stock certificate for such shares. Nothing in this Plan or in any Award granted confers on any person any right to continue in the employ of the Holding Company or its Affiliates or to continue to perform services for the Holding Company or its Affiliates or interferes in any way with the right of the Holding Company or its Affiliates to terminate a Participant’s services as a director, executive officer or employee at any time. No Award under the Plan shall be transferable by the optionee other than by will or the laws of descent and distribution and may only be exercised during his lifetime by the optionee, or by a guardian or legal representative. 12. AGREEMENT WITH GRANTEES. Each Award of Options, and/or Limited Rights will be evidenced by a written agreement, executed by the Participant and the Holding Company or its Affiliates which describes the conditions for receiving the Awards including the date of Award, the purchase price if any, applicable periods, and any other terms and conditions as may be required by the Board of Directors or applicable securities law. 13. DESIGNATION OR BENEFICIARY. A Participant may, with the consent of the Committee, designate a person or persons to receive, in the event of death, any stock option or Limited Rights Award to which the Participant would then be entitled. Such designation will be made upon forms supplied by and delivered to the Holding Company and may be revoked in writing. If a Participant fails effectively to designate a beneficiary, then the Participant’s estate will be deemed to be the beneficiary. 14. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the outstanding shares of Common Stock of the Holding Company by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares, or other similar corporate change, or other increase or decrease in such shares effected without receipt or payment of consideration by the Holding Company, the Committee will make such adjustments to previously granted Awards, to prevent dilution or enlargement of the rights of the Participant, including any or all of the following:     (a) adjustments in the aggregate number or kind of shares of Common Stock which may be awarded under the Plan;   11 --------------------------------------------------------------------------------   (b) adjustments in the aggregate number or kind of shares of Common Stock covered by Awards already made under the Plan;     (c) adjustments in the maximum number of shares of Common Stock which may be awarded under the Plan to a Participant in any one calendar year; or     (d) adjustments in the purchase price of outstanding Incentive and/or Non-statutory Options, or any Limited Rights attached to such options. No such adjustments may, however, materially change the value of benefits available to a Participant under a previously granted Award. 15. TAX WITHHOLDING. There shall be deducted from each distribution of cash and/or Common Stock under the Plan the amount required by any governmental authority to be withheld for income tax purposes. 16. AMENDMENT OF THE PLAN. The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect; provided, however, that Sections 8.1, 9.1 and 10.1 governing grants of options and Limited Rights shall not be amended more than once every six months other than to comport with the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended; provided further that if it has been determined to continue to qualify the Plan under the Securities and Exchange Commission Rule 16b-3, shareholders’ approval shall be required for any such modification or amendment which:     (a) increase the maximum number of shares for which options may be granted under the Plan (subject, however, to the provisions of Section 14 hereof);     (b) reduces the exercise price at which Awards may be granted (subject, however, to the provisions of Section 14 hereof):     (c) extends the period during which options may be granted or exercised beyond the times originally prescribed; or     (d) changes the persons eligible to participate in the Plan. Failure to ratify or approve amendments or modifications to subsections (a) through (d) of this Section by shareholders shall be effective only as to the specific amendment or modification requiring such ratification. Other provisions, sections, and subsections of this Plan will remain in full force and effect.   12 -------------------------------------------------------------------------------- No such termination, modification or amendment may affect the rights of a Participant under an outstanding Award. 17. EFFECTIVE DATE OF PLAN. The Plan, as amended, shall become effective on the date of the 1995 Annual Meeting of Shareholders, October 25, 1995 (the “Effective Date”). The Plan shall be presented to shareholders of the Holding Company for ratification for purposes of: (i) obtaining favorable treatment under Section 16(b) of the Securities Exchange Act of 1934; (ii) satisfying one of the requirements of Section 422 of the Code governing the tax treatment for Incentive Options; and (iii) maintaining listing on the Nasdaq National Market. The failure to obtain shareholder ratification will result in termination of the amended Plan by the Board. In such a case, the Plan approved by shareholders on October 27, 1993 shall remain effective and all awards previously granted under this Plan shall remain effective for all purposes. 18. TERMINATION OF THE PLAN. The right to grant Awards under the Plan will terminate upon the earlier of (a) failure to obtain shareholder approval (in which case, the plan approved by shareholders on October 27, 1993 shall remain effective); (b) ten (10) years after the Effective Date of the Plan; or (c) the issuance of Common Stock or the exercise of options or related Limited Rights equivalent to the maximum number of shares reserved under the Plan as set forth in Section 5. The Board of Directors has the right to suspend or terminate the Plan at any time, provided that no such action will, without the consent of a Participant, adversely affect his rights under a previously granted Award. 19. APPLICABLE LAW. The Plan will be administered in accordance with the laws of the State of Delaware. 20. COMPLIANCE WITH SECTION 16. If this Plan is qualified under 17 C.F.R. (S) 240.16b-3 of the Exchange Act Rules, with respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provisions of the Plan or action by the Committee fail to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.   13 -------------------------------------------------------------------------------- CERTIFICATE OF RESOLUTION I, Carolyn Pihera, do hereby certify that I am the duly elected and acting Secretary of MAF Bancorp, Inc. and that the following is a true and correct copy of a certain resolution adopted by the Board of Directors of said Company at their regular meeting held February 23, 1999, at which meeting a quorum of the members of said Board were present and acting throughout. WHEREAS, the 1993 Amended and Restated Premium Option Plan (the “Plan”) provides that non-employee directors shall receive: (a) an initial grant of stock options covering 1,000 shares of MAF Bancorp stock (except for certain new non-employee directors who shall receive an initial grant covering 2,500 shares); and (b) an annual grant of stock options covering 1,000 shares of MAF Bancorp stock; and WHEREAS, Section 14 of the Plan provides for various adjustments to be made under the Plan in the case of certain events, including stock splits and stock dividends; and WHEREAS, Section 14 of the Plan does not specifically address whether the initial and annual option grant amounts shall be adjusted in the case of stock splits, stock dividends, and other similar capital transactions; WHEREAS, pursuant to the authority granted to the Committee under Section 3 of the Plan, it has been the prior interpretation of the Committee that the amounts of the initial and annual grants of stock options as set forth in the plan shall be adjusted for any stock splits, stock dividends and other similar capital transactions; and WHEREAS, in 1998 the Board approved various amendments to the 1990 Incentive Stock Option Plan, as amended, including a provision that allowed for the transfer of certain non-statutory options and a provision that allowed the Committee, in its discretion, to satisfy certain limited rights obligations through the issuance of shares of MAF Bancorp common stock rather than in cash; WHEREAS, the Board desires to amend the Plan to: (1) clarify that the initial and annual grant of stock options to non-employee directors under the Plan is appropriately adjusted for certain capital transactions including stock dividends and stock splits; (2) provide that certain non-statutory stock options may be transferred by option holders; and (3) provide that the Committee, in its discretion, may satisfy limited rights obligations through the issuance of MAF Bancorp common stock rather than in cash; NOW THEREFORE BE IT HEREBY RESOLVED, that the amendments to the Plan shown on the attached Exhibit A are hereby ratified and approved. I do further certify that the foregoing resolution has not been altered or amended, but remains in force and effect. IN WITNESS WHEREOF, I have executed this certificate and affixed the Bank’s seal this 4th day of March, 1999.   /s/ Carolyn Pihera Corporate Secretary   14 -------------------------------------------------------------------------------- EXHIBIT A AMENDMENTS TO 1993 AMENDED AND RESTATED PREMIUM OPTION PLAN Section 14 - DILUTION AND OTHER ADJUSTMENTS, is amended by adding new subsection (c) as follows: (c) adjustments in the initial and annual grant of stock options to non-employee directors pursuant to Section 7(b). Section 8.1 - Grant of Non-Statutory Options, is amended by adding new subsection (d) as follows: (d) Limited Transferability of Options. Except as provided below, no Non-Statutory Stock Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and dissolution. Further, all Non-Statutory Stock Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of the Non-Statutory Stock Options granted to a Participant to be on terms which permit transfer by such Participant to: (i) the spouse, children or grandchildren of the Participant (“Immediate Family Members”); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners, provided that: (A) there may be no consideration for any such transfer; (B) the written agreement pursuant to which such Non-Statutory Stock Options are granted expressly provides for transferability in a manner consistent with this Section 8.1(d); and (iii) subsequent transfers of transferred Non-Statutory Stock Options shall be prohibited except those in accordance with Section 13. Following a transfer, any such Non-Statutory Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer, provided that for purposes of Section 13 hereof, the term “Participant” shall be deemed to refer to the transferee. The provisions of this Section 8.1 relating to the period of exercisability and expiration of the Non-Statutory Stock Option shall continue to be applied with respect to the original Participant, and the Non-Statutory Stock Options shall be exercisable by the transferee only to the extent, and for the periods, set forth in this Section 8.1. Section 10.1(b) - Payment, is hereby amended by adding the following sentence at the end of the paragraph: Notwithstanding the foregoing, the Committee may substitute Common Stock for cash in satisfaction of any payment due to a Participant under this section 10.1(b) if it considers such substitution to be in the best interest of the Company and its shareholders.   15

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Exhibit 10.1 NORTHEAST COMMUNITY BANCORP, INC. EMPLOYMENT AGREEMENT THIS AGREEMENT (the “Agreement”) made this 5th day of July, 2006, by and between NORTHEAST COMMUNITY BANCORP, INC., a federally chartered corporation (the “Company”), and KENNETH A. MARTINEK (the “Executive”). WHEREAS, Executive serves in a position of substantial responsibility; and WHEREAS, the Company wishes to assure Executive’s services for the term of this Agreement; and WHEREAS, Executive is willing to serve in the employ of the Company during the term of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and upon the other terms and conditions provided for in this Agreement, the parties hereby agree as follows: 1. Employment. The Company will employ Executive as President and Chief Executive Officer. Executive will perform all duties and shall have all powers commonly incident to the offices of President and Chief Executive Officer or which, consistent with those offices, the Board of Directors of the Company (the “Board”) delegates to Executive. During the term of this Agreement, Executive also agrees to serve, if elected, as an officer and/or director of any subsidiary or affiliate of the Company and to carry out the duties and responsibilities reasonably appropriate to those offices. 2. Location and Facilities. The Company will furnish Executive with the working facilities and staff customary for executive officers with the titles and duties set forth in Section 1 and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Company and the Bank, or at such other site or sites customary for such offices. 3. Term.     a. The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 3.     b. Commencing prior to the first anniversary of the Effective Date and continuing on each anniversary of the Effective Date thereafter, the disinterested members of the Board may extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes thirty-six (36) months, unless Executive elects not to extend the term of this Agreement by giving written notice in accordance with Section 19 of this Agreement. The Board will review the Agreement term and Executive’s performance annually for purposes of determining whether to extend the Agreement and will include the rationale and results of its review in the minutes of the meeting. The Board will notify Executive as soon as possible after its annual review whether the Board has determined to extend the Agreement. -------------------------------------------------------------------------------- 4. Base Compensation.     a. The Company agrees to pay Executive during the term of this Agreement a base salary at the rate of $235,000 per year, payable in accordance with customary payroll practices.     b. Each year, the Board will review the level of Executive’s base salary, based upon factors they deem relevant, in order to determine whether to maintain or increase his base salary. 5. Bonuses. Executive will participate in discretionary bonuses or other incentive compensation programs that the Company may award from time to time to senior management employees. 6. Benefit Plans. Executive will participate in life insurance, medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements that the Company may sponsor or maintain. 7. Vacations and Leave.     a. Executive may take vacations and other leave in accordance with policy for senior executives, or otherwise as approved by the Board.     b. In addition to paid vacations and other leave, the Board may grant Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board, in its discretion, may determine. 8. Expense Payments and Reimbursements. The Company will reimburse Executive for all reasonable out-of-pocket business expenses incurred in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Company. 9. Automobile Allowance. During the term of this Agreement, the Company will provide Executive with the use of an automobile, including insurance, maintenance and work-related fuel expenses, or, in the alternative and the sole discretion of the Company, the Company will provide Executive with an automobile allowance which would approximate the expense of a Company-provided automobile and related insurance, maintenance and fuel costs. Executive will comply with reasonable reporting and expense limitations on the use of such automobile as the Company may establish from time to time, and the Company shall annually include on Executive’s Form W-2 any income attributable to Executive’s personal use of the automobile. 10. Loyalty and Confidentiality.     a. During the term of this Agreement, Executive will devote all his business time, attention, skill, and efforts to the faithful performance of his duties under this Agreement; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations that will not present any conflict of interest with the Company or any of its subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation. Executive will not engage in any business or activity contrary to the business affairs or interests of the Company or any of its subsidiaries or affiliates.   2 --------------------------------------------------------------------------------   b. Nothing contained in this Agreement will prevent or limit Executive’s right to invest in the capital stock or other securities or interests of any business dissimilar from that of the Company, or, solely as a passive, minority investor, in any business.     c. Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and its affiliates; the names or addresses of any borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company or its affiliates to which he may be exposed during the course of his employment. Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor will he use the information in any way other than for the benefit of the Company. 11. Termination and Termination Pay. Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:     a. Death. Executive’s employment under this Agreement will terminate upon his death during the term of this Agreement, in which event Executive’s estate will receive the compensation due to Executive through the last day of the calendar month in which his death occurred.     b. Retirement. This Agreement will terminate upon Executive’s retirement under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement or otherwise.     c. Disability.     i. The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company (or, if no such plans exist, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Board will determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that the Board reasonably believes to be relevant. As a condition to any benefits, the Board may require Executive to submit to physical or mental evaluations and tests as the Board or its medical experts deem reasonably appropriate.     ii. In the event of his Disability, Executive will no longer be obligated to perform services under this Agreement. The Company will pay Executive, as Disability pay, an amount equal to seventy-five percent (75%) of Executive’s rate of base salary in effect as of the date of his termination of employment due to Disability. The Company will make Disability payments on a monthly basis commencing on the first day of the month following the effective date of Executive’s termination of employment due to Disability and ending on the earlier of: (A) the date he returns to full-time employment in the same capacity as he was employed prior to his termination for Disability; (B) his death; (C) his attainment of age 65 or (D) the date   3 --------------------------------------------------------------------------------   this Agreement would have expired had Executive’s employment not terminated by reason of Disability. The Company will reduce Disability payments by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company. In addition, during any period of Executive’s Disability, the Company will continue to provide Executive and his dependents, to the greatest extent possible, with continued coverage under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) in which Executive and/or his dependents participated prior to Executive’s Disability on the same terms as if he remained actively employed by the Company.     d. Termination for Cause.     i. The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause, except for already vested benefits. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:     (1) Personal dishonesty;     (2) Incompetence;     (3) Willful misconduct;     (4) Breach of fiduciary duty involving personal profit;     (5) Intentional failure to perform stated duties;     (6) Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or     (7) Material breach of any provision of this Agreement.     ii. Notwithstanding the foregoing, Executive’s termination for Cause will not become effective unless the Company has delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board, at a meeting of the Board called and held for the purpose of finding that, in the good faith opinion of the Board (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), Executive was guilty of the conduct described above and specifying the particulars of this conduct.     e. Voluntary Termination by Executive. In addition to his other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Board. Upon Executive’s voluntary termination, he will receive only his compensation and vested rights and benefits up to the date of his termination. Following his voluntary termination of employment under this Section 11(e), Executive will be subject to the restrictions set forth in Sections 11(g)(i) and 11(g)(ii) of this Agreement for a period of one (1) year from his termination date.   4 --------------------------------------------------------------------------------   f. Without Cause or With Good Reason.     i. In addition to termination pursuant to Sections 11(a) through 11(e), the Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).     ii. Subject to Section 12 of this Agreement, in the event of termination under this Section 11(f), Executive will receive his base salary and the value of employer contributions to benefit plans in which the Executive participated upon termination for the remaining term of the Agreement, paid in one lump sum within ten (10) calendar days of his termination. Executive will also continue to participate in any benefit plans of the Company that provide medical, dental and life insurance coverage for the remaining term of the Agreement, under terms and conditions no less favorable than the most favorable terms and conditions provided to senior executives of the Company during the same period. If the Company cannot provide such coverage because Executive is no longer an employee, the Company will provide Executive with comparable coverage on an individual policy basis or the cash equivalent.     iii. “Good Reason” shall exist if, without Executive’s express written consent, the Company materially breaches any of its obligations under this Agreement. Without limitation, such a material breach shall be deemed to occur upon any of the following:     (1) A material reduction in Executive’s responsibilities or authority in connection with his employment with the Company;     (2) Assignment to Executive of duties of a non-executive nature or duties for which he is not reasonably equipped by his skills and experience;     (3) Failure of Executive to be nominated or renominated to the Board to the extent Executive is a Board member prior to the Effective Date;     (4) A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts Executive was entitled to receive prior to the Change in Control;     (5) Termination of incentive and benefit plans, programs or arrangements, or reduction of Executive’s participation, to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;     (6) A requirement that Executive relocate his principal business office or his principal place of residence outside of the area consisting of a twenty-five (25) mile radius from the current main office of the Company and any branch of the Bank, or the assignment to Executive of duties that would reasonably require such a relocation; or   5 --------------------------------------------------------------------------------   (7) Liquidation or dissolution of the Company.     iv. Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained as part of a good faith, overall reduction or elimination of such plans or benefits, applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law), will not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans prior to the reduction or elimination are not available to other officers of the Company or any affiliate under a plan or plans in or under which Executive is not entitled to participate.     g. Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Company or Executive pursuant to Section 11(e) or 11(f):     i. Executive’s obligations under Section 10(c) of this Agreement will continue in effect; and     ii. During the period ending on the first anniversary of such termination, Executive will not serve as an officer, director or employee of any bank holding company, bank, savings association, savings and loan holding company, mortgage company or other financial institution that offers products or services competing with those offered by the Company or its subsidiaries or affiliates from any office within thirty-five (35) miles from the main office of the Company or any branch of the Bank and, further, Executive will not interfere with the relationship of the Company, its subsidiaries or affiliates and any of their employees, agents, or representatives.     h. To the extent Executive is a member of the Board on the date of termination of employment, Executive will resign from the Board immediately following such termination of employment. Executive will be obligated to tender this resignation regardless of the method or manner of termination, and such resignation will not be conditioned upon any event or payment. 12. Termination in Connection with a Change in Control.     a. For purposes of this Agreement, a “Change in Control” means any of the following events:     i. Merger: The Company merges into or consolidates with another entity, or merges another corporation into the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation;     ii. Acquisition of Significant Share Ownership: There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert   6 --------------------------------------------------------------------------------   has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;     iii. Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the members) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or     iv. Sale of Assets: The Company sells to a third party all or substantially all of its assets.     b. Termination. If within the period ending one year after a Change in Control, (i) the Company terminates Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company will, within ten calendar days of the termination of Executive’s employment, make a lump-sum cash payment to him equal to three times Executive’s average “Annual Compensation” over the five (5) most recently completed calendar years, ending with the year immediately preceding the effective date of the Change in Control. “Annual Compensation” will include base salary and any other taxable income, including, but not limited to, amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses, retirement benefits, director or committee fees and fringe benefits paid or accrued for Executive’s benefit. Annual compensation will also include profit sharing, employee stock ownership plan and other retirement contributions or benefits, including to any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. The cash payment made under this Section 12(b) shall be made in lieu of any payment also required under Section 11(f) of this Agreement because of Executive’s termination of employment, however, Executive’s rights under Section 11(f) are not otherwise affected by this Section 12. Following termination of employment, executive will also continue to participate in any benefit plans that provide medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives. If the Company cannot provide such coverage because Executive is no longer an employee, the Company will provide Executive with comparable coverage on an individual basis or the cash equivalent. The medical, dental and life insurance coverage provided under this Section 12(b) shall cease upon the earlier of: (i) Executive’s death; (ii) Executive’s employment by another employer other than one of which he is the majority owner; or (iii) thirty-six (36) months after his termination of employment.     c. The provisions of Section 12 and Sections 14 through 26, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one year following a Change in Control.     d. Notwithstanding anything in this Section 12 to the contrary, a “Change in Control” for purposes of this Agreement shall not include any corporate restructuring transaction by the Company, including, but not limited to, a mutual to stock conversion, provided that the Board of Directors of the Company immediately preceding such transaction constitutes at least a majority of the Board of Directors of the Company after such transaction.   7 -------------------------------------------------------------------------------- 13. Indemnification and Liability Insurance.     a. Indemnification. The Company agrees to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related to this indemnification, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities that Executive reasonably incurs in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his service as a director or Executive of the Company or any of its subsidiaries or affiliates (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities). Covered expenses and liabilities include, but are not limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, subject to Board approval, if the action is brought against Executive in his capacity as an Executive or director of the Company or any of its subsidiaries or affiliates. Indemnification for expenses will not extend to matters related to Executive’s termination for Cause. Notwithstanding anything in this Section 13(a) to the contrary, the Company will not be required to provide indemnification prohibited by applicable law or regulation. The obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.     b. Insurance. During the period for which the Company must indemnify Executive under this Section, the Company will provide Executive (and his heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy, at the Company’s expense, that is at least equivalent to the coverage provided to directors and senior executives of the Company. 14. Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company will reimburse Executive for all out-of-pocket expenses, including, without limitation, reasonable attorney fees, incurred by Executive in connection with his successful enforcement of the Company’s obligations under this Agreement. Successful enforcement means the grant of an award of money or the requirement that the Company take some specified action: (i) as a result of court order; or (ii) otherwise following an initial failure of the Company to pay money or take action promptly following receipt of a written demand from Executive stating the reason that the Company make payment or take action under this Agreement. 15. Limitation of Benefits Under Certain Circumstances. If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits Executive has the right to receive from the Company, would constitute a “parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The Bank’s independent public accountants will determine any reduction in the payments and benefits to be made pursuant to Section 12; the Company will pay for the accountant’s opinion. If the Company and/or Executive do not agree with the accountant’s opinion, the Company will pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, that the opinion indicates have a high probability of not causing any payments and benefits to be non-deductible to the Company and subject to the imposition of the excise tax imposed under Section 4999 of the Code. The Company may also request, and Executive has the right to demand that the Company request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such tax consequences.   8 -------------------------------------------------------------------------------- The Company will promptly prepare and file the request for a ruling from the IRS, but in no event later than thirty (30) days from the date of the accountant’s opinion referred to above. The request will be subject to Executive’s approval prior to filing; Executive shall not unreasonably withhold his approval. The Company and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any IRS rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained in this Agreement shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12, below zero. 16. Injunctive Relief. Upon a breach or threatened breach of Section 11(g) of this Agreement or the prohibitions upon disclosure contained in Section 10(c) of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and the Company shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy for a breach of this Agreement. The parties further agree that Executive, without limitation, may seek injunctive relief to enforce the obligations of the Company under this Agreement. 17. Successors and Assigns.     a. This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company.     b. Since the Company is contracting for the unique and personal skills of Executive, Executive shall not assign or delegate his rights or duties under this Agreement without first obtaining the written consent of the Company. 18. No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement 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. 19. Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company at its principal business offices and to Executive at his home address as maintained in the records of the Company. 20. No Plan Created by this Agreement. Executive and the Company expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”) or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that an ERISA plan was created by this Agreement shall be deemed a material breach of this Agreement by the party making the assertion. 21. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.   9 -------------------------------------------------------------------------------- 22. Applicable Law. Except to the extent preempted by federal law, the laws of the State of New York shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. 23. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any one provision shall not affect the validity or enforceability of the other provisions of this Agreement. 24. Headings. Headings contained in this Agreement are for convenience of reference only. 25. Entire Agreement. This Agreement, together with any modifications subsequently agreed to in writing by the parties, shall constitute the entire agreement among the parties with respect to the foregoing subject matter, other than written agreements applicable to specific plans, programs or arrangements described in Sections 5 and 6. 26. Source of Payments. Notwithstanding any provision in this Agreement to the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by Executive under the Employment Agreement in effect between Executive and the Bank, the payments and benefits paid by the Bank will be subtracted from any amount or benefit due simultaneously to Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by Executive on activities related to the Company and the Bank, respectively, as determined by the Company and the Bank. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on July 5, 2006.   ATTEST:     NORTHEAST COMMUNITY BANCORP, INC. /s/ Anne Stevenson - DeBlasi     By:   /s/ Linda M. Swan Witness       For the Entire Board of Directors WITNESS:     EXECUTIVE /s/ Anne Stevenson - DeBlasi     By:   /s/ Kenneth A. Martinek       Kenneth A. Martinek   10

Exhibit 10.35 FIRST AMENDMENT TO OFFICE LEASE AGREEMENT This First Amendment to Office Lease Agreement (this “Amendment”) is dated for reference purposes as of the 15th day of September, 2005, by and between NEWPORT CORPORATE CENTER LLC, a Washington limited liability company (“Landlord”), and SCOLR Pharma, INC., a Delaware corporation (“Tenant”). RECITALS A. Landlord and Tenant entered into that certain Two Newport Office Lease Agreement dated April 15, 2003 (the “Lease”), for the lease of certain premises (the “Premises”) located at Suite 300, Two Newport, 3625 – 132nd Avenue S.E., Bellevue, Washington 98006, consisting of 10,510 rentable square feet. B. Landlord and Tenant desire to expand the Premises on the terms and conditions set forth in this Amendment. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Defined Terms. Unless otherwise defined in this Amendment, the capitalized terms used herein shall have the same meaning as they are given in the Lease. 2. Expansion of Premises. The existing lease covering the Expansion Space (as defined below) is scheduled to expire on January 31, 2006. Commencing on the earlier of (a) February 15, 2006, or (b) the date that is ten (10) days after the existing tenant surrenders possession of the Expansion Space to Landlord and Landlord notifies Tenant that the Expansion Space is available for occupancy (the earlier of which is the “Expansion Space Commencement Date”), the Premises shall be expanded by approximately 4,125 rentable square feet (and 3,484 useable square feet) of space on the fourth (4th) floor of the Building in the location commonly known as Suite 400 and shown on the floor plan for the fourth (4th) floor attached hereto as Exhibit A (the “Expansion Space”; for a total Premises size of 14,635 rentable square feet and 13,038 useable square feet). All references in the Lease to the Premises shall be deemed to include the Premises as expanded by the Expansion Space. 3. Basic Rent and Operating Expenses. Commencing on the Expansion Space Commencement Date, Tenant shall commence paying Basic Rent and Operating Expenses with respect to the Expansion Space at the same rate that is applicable to the initial Premises. As a result, the Basic Rent schedule and Tenant’s Proportionate Share shall be adjusted as set forth below: --------------------------------------------------------------------------------   (a) Basic Rent:   Month(s)    Monthly Rent Installment    Sq. Ft. Per Year ESCD* – 8/31/06    $ 17,683.96    $ 14.50, NNN 9/1/06 – 8/31/07    $ 18,293.75    $ 15.00, NNN 9/1/07 – 8/31/08    $ 18,903.54    $ 15.50, NNN -------------------------------------------------------------------------------- * Expansion Space Commencement Date     (b) Operating Expenses.   (1)    Tenant’s Proportionate Share of Building:   Approximately 36.79% (based on the Building size of 39,775 rentable square feet). (2)    Tenant’s Proportionate Share of Project:   Approximately 1.58% (based on the current Project size of 925,659 rentable square feet). 4. Expansion Space Tenant Improvements. Tenant is leasing the Expansion Space in its current “as is” condition and Landlord shall not be obligated to make any improvements thereto. Upon the existing tenant vacating the Expansion Space and such space being available for Tenant’s occupancy, Tenant shall have access to the Expansion Space for the purpose of installing Tenant’s cabling, fixtures, and furniture. 5. Parking. Commencing on the Expansion Space Commencement Date, Tenant shall be entitled to an additional four (4) unreserved parking passes for every 1,000 square feet of useable space in the Expansion Space. Such parking passes shall be free of charge during the initial Lease Term and otherwise subject to the same terms and conditions of the Lease. 6. Landlord’s Right to Terminate. Tenant acknowledges that Landlord may decide to demolish or substantially renovate the Building at some time in the future. Therefore, notwithstanding any other provision of this Amendment or the Lease to the contrary, Tenant’s lease of the Expansion Space shall be subject to Landlord’s right to terminate Tenant’s lease of the Expansion Space (the “Termination Option”) for the purposes of demolishing or substantially renovating the Building. Landlord shall exercise the Termination Option by giving Tenant not less than twelve (12) months advance written notice thereof (the “Termination Notice”). The Termination Notice shall set forth the effective date of the termination (the “Termination Date”). In the event Landlord exercises the Termination Option, Tenant’s lease of the Expansion Space shall expire on the Termination Date. 7. Ratification. Except as expressly set forth herein, the terms and conditions of the Lease shall remain in full force and effect and are hereby ratified.   2 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.   TENANT:   SCOLR Pharma, INC., a Delaware corporation   By   /s/ Daniel O. Wilds     Its President and CEO LANDLORD:   NEWPORT CORPORATE CENTER, LLC A Washington limited liability company   By:         Bentall Capital (U.S.), Inc.,     Its Authorized Agent     By:   /s/ Gary Carpenter       Gary Carpenter,       Executive Vice President     By:   /s/ Lisa C. Rowe       Lisa C. Rowe,       Vice President of Leasing   3 -------------------------------------------------------------------------------- TENANT ACKNOWLEDGEMENT   STATE OF WASHINGTONE   )   ) ss. COUNTY OF KING   ) I certify that I know or have satisfactory evidence that the person appearing before me and making this acknowledgement is the person whose true signature appears on this document. On this 30 day of September, 2005, before me personally appeared Daniel O. Wilds, to me known to be the Chief Executive Officer of SCOLR Pharma, INC., the corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he/she was authorized to execute said instrument. WITNESS my hand and official seal hereto affixed the day and year first above written.   /s/ Kelly R. Hill NOTARY PUBLIC in and for the State of Washington residing at King County My commission expires: 04.09.08 Print Name Kelly R. Hill   4 -------------------------------------------------------------------------------- LANDLORD’S ACKNOWLEDGEMENT   STATE OF WASHINGTON   )   ) ss. COUNTY OF KING   ) I certify that I know or have satisfactory evidence that the person appearing before me and making this acknowledgment is the person whose true signature appears on this document. On this 7th day of October, 2006, before me personally appeared Gary Carpenter and Lisa Rowe, to me known to be the Executive Vice President and Vice President – Leasing, respectively, of BENTALL CAPITAL (U.S.), INC., the Authorized Agent of NEWPORT CORPORATE CENTER LLC, the limited liability company that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said company, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument. WITNESS my hand and official seal hereto affixed the day and year first above written.   /s/ Michele R. Acheson Notary Public in and for the State of Washington, residing at Seattle, WA My commission expires: November 29, 2006 Michele R. Acheson [Type or Print Notary Name] (Use This Space for Notarial Seal Stamp)   5 -------------------------------------------------------------------------------- EXHIBIT A EXPANSION SPACE   6

  Exhibit 10.05       CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS DOCUMENT   ***Confidential treatment has been requested with respect to the information contained within the "[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission 2006 Compensation Plan       To:   Scipio M. Carnecchia,     Senior Vice President of Worldwide Sales       Effective dates:   January 1, 2006 to December 31, 2006 This document outlines your individual compensation package (“Compensation Plan”) for calendar year 2006 including the at-risk components (“Incentive Pay”) determined under the Sales Compensation Plan. All other terms and conditions of your employment are governed by your offer letter. In your role, you are responsible for the Interwoven’s worldwide sales organization. Interwoven reserves the right to change your responsibilities from time to time and modify your Compensation Plan to take into account its business needs. COMPENSATION PACKAGE Your Compensation Plan is comprised of a Base Salary and Incentive Pay, which is an at-risk component of your overall compensation package. The 2006 Sales Compensation Plan outlines the guidelines under which you will be paid your Incentive Pay component. Your on-target earnings for calendar year 2006 are $475,000.00. Your on-target earnings are composed of the following:   •   Annual Base Salary of $200,000.00.     •   On-target Incentive Pay of $275,000.00:   •   $250,000.00 related to Software License bookings.     •   $25,000.00 related to Professional Services revenue.     •   A Direct Margin Percentage factor will be applied in computing your commissions earned for Software License bookings and Professional Services revenue. From your actual earnings, we will subtract payroll deductions, all required withholdings and other voluntary deductions you authorize Interwoven to make on your behalf. BASE SALARY Your annual base salary will be paid to you ratably over the year in accordance with Interwoven’s standard payroll practices. INCENTIVE PAY Your Incentive Pay will be calculated under the following process. Please be aware, this Incentive Pay process does not guarantee you a level of income.   --------------------------------------------------------------------------------   Commissions on Software License Bookings and Professional Services Revenue Of your on-target Incentive Pay, $250,000.00 will be related to commissions for Software License bookings and $25,000.00 will be related to commissions for Professional Services revenue. Commissions on Software License bookings relate to achieving the Company’s business plan objectives for Software License bookings. Customer support and maintenance is not included in the measurement of Software License bookings. Commissions on Professional Services relate to assisting the Professional Services Organization in achieving the Company’s business plan objectives for revenue from consulting and education services (collectively “Professional Services”). Commissions will be earned upon recognition of bookings for Software License and revenue for Professional Services by Interwoven in accordance with the following rates:           Quarterly   License Bookings   Professional Services Quota Attainment   Commission Rates   Commission Rates 0% to 100%   [***]%   [***]% 101% to 102%   [***]%   [***]% 103% to 104%   [***]%   [***]% 105% to 106%   [***]%   [***]% Greater than 107%   [***]%   [***]% All Quarterly Quota Attainment percentages will be rounded to the next whole number (ie: greater than or equal to 0.5 will be rounded up and less than 0.5 will be rounded down). Additionally, the commission earned above will be multiplied by the following adjustment factor based on the Direct Margin Percentage achieved by the Sales organization on Software License bookings and Professional Services revenue for each quarter:       Direct   Adjustment Margin Percentage   Factor >3% below target   [***]% 2% below target   [***]% At target   [***]% 2% above target   [***]% 3% above target   [***]% 4% above target   [***]% >4% above target   [***]% Direct Margin Percentage is defined as Software License bookings and Professional Services revenue less the cost of license revenues and the direct expenses incurred by the worldwide sales organization to acquire that revenue. Your quota for the period January 1, 2006 to December 31, 2006 is $[***] for Software License booking and $[***] for Professional Services revenue as follows:   ***   Confidential treatment has been requested with respect to the information contained within the “[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission.   --------------------------------------------------------------------------------         Software   Professional License Bookings   Services Revenues $[***] for Q1 2006   $[***] for Q1 2006 $[***] for Q2 2006   $[***] for Q2 2006 $[***] for Q3 2006   $[***] for Q3 2006 $[***] for Q4 2006   $[***] for Q4 2006 As outlined in the 2006 Sales Compensation Plan, Software License bookings and Professional Services revenue are computed in accordance with generally accepted accounting principles (as determined by the Company’s Finance Department and the Audit Committee of the Board of Directors). For Software License bookings, credit will be received for the amount of revenue that can be recognized in accordance with Interwoven’s revenue recognition policy. If the recognition of revenue extends beyond the end of the then current quarter, bookings credit will be received in the quarter when the revenue is recognized. Such amounts are subject to reduction for carve-outs, any returns, or uncollectible accounts as outlined in the Interwoven 2006 Sales Compensation Plan. Your Direct Margin Percentage targets for the period January 1, 2006 to December 31, 2006 are as follows:   o   [***]% for first quarter of 2006     o   [***]% for the second quarter of 2006     o   [***]% for the third quarter of 2006     o   [***]% for the fourth quarter of 2006 By way of example, if Software License bookings for the first quarter of 2006 was $[***] and Professional Services revenue for the first quarter was $[***] (achievement of 101% of quota for both Software License and Professional Services revenue) and the direct gross margin was [***]%, your commission due would be computed as follows: Software License bookings – ((($[***] times [***]%) + ($[***] times [***]%)) times [***]%) equals $[***]. Professional Services revenues – ((($[***] times [***]%) + ($[***] times [***]%)) times [***]%) equals $[***]. Total earned equals $[***]. Please acknowledge your acceptance with this Compensation Plan by signing below. Have a great 2006!             Read and accepted:       Signed:             /s/ Scipio M. Carnecchia         /s/ John E. Calonico, Jr. Scipio M. Carnecchia       John E. Calonico, Jr. Senior Vice President of Worldwide Sales       Chief Financial Officer Interwoven, Inc.       Interwoven, Inc.   ***   Confidential treatment has been requested with respect to the information contained within the “[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission.  

  Exhibit 10.18 AMENDMENT NO. 4 TO CREDIT AGREEMENT      Amendment No. 4 dated as of January 24, 2006 to CREDIT AGREEMENT dated as of January 21, 2004 (as amended and modified prior to the date hereof, the “Loan Agreement”), among BIOCREST MANUFACTURING, L.P., a Delaware limited partnership, having its principal office at 1834 State Highway 71 West, Cedar Creek, Texas 78612 (“Customer”), STRATAGENE CORPORATION, a Delaware corporation (formerly known as Stratagene Holding Corporation), having its principal office at 11011 North Torrey Pines Road, La Jolla, California 92037 (“Stratagene”), BIOCREST HOLDINGS, L.L.C., a Delaware limited liability company, having its principal office at 5320 Pine Meadow Road, Wilson, Wyoming 83014 (“BH LLC”), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 222 North LaSalle Street, 17th Floor, Chicago, IL 60601 (“MLBFS”).      WHEREAS, MLBFS, Customer, Stratagene and BH LLC wish to amend the Loan Agreement in certain respects.      NOW, THEREFORE, in consideration of the premises and other good and valuable consideration (the receipt and adequacy of which are hereby acknowledged), the parties hereto hereby agree as follows:      1. Definitions. All capitalized terms used herein which are defined in the Loan Agreement and not otherwise defined herein are used herein as defined therein.      2. WCMA L/C Line of Credit. MLBFS hereby renews the WCMA L/C Line of Credit for the period ending on July 31, 2008. By its execution of this Amendment No. 4, Customer confirms its approval of the changes to the definition of “Maturity Date” and “Maximum Letter of Credit Amount”.      3. Amendments to Loan Agreement.                (a) The definition of “Fixed Charge Coverage Ratio” in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows: ““Fixed Charge Coverage Ratio” shall mean the ratio of: (a) EBITDA minus unfunded Capital Expenditures of Stratagene and its consolidated subsidiaries to (b) the sum of the aggregate principal and interest paid or accrued in respect of any Indebtedness by Stratagene and its consolidated subsidiaries (excluding any voluntary prepayment of the principal amount of any Indebtedness   --------------------------------------------------------------------------------   owed to MLBFS and excluding the prepayment by Stratagene in calendar year 2004 of $1,703,438 under a promissory note issued to JAS), the aggregate rental under Capital Leases paid or accrued by Stratagene and its consolidated subsidiaries, the amount of any Permitted Stock Repurchases, all payments made pursuant to clause (e) of Section 7.3(q), any dividends and other distributions paid or payable by Stratagene to its stockholders (excluding the one-time permitted dividend in the amount of $5,571,321 paid on January 6, 2006), any management fees paid to any Person other than a wholly owned domestic subsidiary of Stratagene or BH LLC, any earn-out payments made by Stratagene pursuant to the Merger Agreement, and taxes paid in cash (excluding adjustments to taxes paid in cash resulting from gains or losses associated with extraordinary transactions) (collectively “Fixed Charges”); all as determined in accordance with GAAP, consistently applied, on a trailing twelve-month basis or on an annual basis from the regular fiscal year end consolidated financial statements of Stratagene furnished to MLBFS pursuant to Section 7.2(a)(i) or 7.2(a)(ii) hereof, as the case may be.”                 (b) The definition of “Maturity Date” in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows: ““Maturity Date” shall mean (i) in the case of the WCMA Reducing Revolving Loan, January 31, 2008, and (ii) in the case of the WCMA L/C Line of Credit, July 31, 2008 (subject to renewal in accordance with the terms hereof).”                (c) The definition of “Maximum Letter of Credit Amount” in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows: “Maximum Letter of Credit Amount” shall mean, with respect to all Letters of Credit requested to be outstanding at the same time pursuant to Article VI (whether or not issued at the same time) an aggregate available amount not exceeding $5,748,416.44 for the period ending December 31, 2004; $4,820,273.98 for the period ending March 31, 2005; $4,085,273 for the period ending March 31, 2006; $3,845,273 for the period ending March 31, 2007; and $3,605,273 for the period ending March 31, 2008.                (d) The definition of “Maximum WCMA Reducing Revolving Line of Credit” in Section 1.1 of the Loan Agreement is hereby amended in its entirety to read as follows: “Maximum WCMA Reducing Revolving Line of Credit” shall mean the lesser of (i) $9,000,000 and (ii) the Borrowing Base.                 (e) WCMA Reducing Revolving Loans. Article III of the Loan Agreement is hereby amended in its entirety to read as follows: 2 --------------------------------------------------------------------------------        “3.1 Commitment. Subject to the terms and conditions hereof, MLBFS hereby agrees to make the WCMA Reducing Revolving Loan to Customer up to an aggregate outstanding amount not to exceed the Maximum WCMA Reducing Revolving Line of Credit.      3.2 Conditions of MLBFS’ Obligation. The Closing Date and MLBFS’ obligations to activate the WCMA Line of Credit for the WCMA Reducing Revolving Loan, as hereafter set forth, and make the WCMA Reducing Revolving Loan are subject to the prior fulfillment of each of the following conditions: (a) not less than two Business Days prior to any requested funding date, MLBFS shall have received a Closing Certificate, duly executed by Customer, setting forth, among other things, the amount of the WCMA Reducing Revolving Loan and the method of payment and payee(s) of the proceeds thereof; (b) after giving effect to the WCMA Reducing Revolving Loan, the aggregate outstanding principal amount of the WCMA Reducing Revolving Loan will not exceed the Maximum WCMA Reducing Revolving Line of Credit; and (c) the Commitment Expiration Date shall not then have occurred; and (d) each of the General Funding Conditions shall then have been met or satisfied to the reasonable satisfaction of MLBFS.      3.3 Commitment Fee. In consideration of the agreement by MLBFS to extend the WCMA Reducing Revolving Loan and any subsequent WCMA Reducing Revolving Loan to Customer in accordance with and subject to the terms hereof, Customer paid on or before the Closing Date, a nonrefundable commitment fee in the amount of $9,000 to MLBFS. Customer acknowledges and agrees that such commitment fee has been fully earned by MLBFS, and that it will not under any circumstances be refundable.      3.4 Use of Loan Proceeds. The proceeds of WCMA Reducing Revolving Loans shall be used for working capital in the ordinary course of business, or, with the prior written consent of MLBFS, for other lawful business purposes of Customer not prohibited hereby. Customer agrees that under no circumstances will the proceeds of any WCMA Reducing Revolving Loan be used: (i) for personal, family or household purposes of any person whatsoever, or (ii) to purchase, carry or trade in margin securities, or repay debt incurred to purchase, carry or trade in margin securities, whether in or in connection with the WCMA Account for WCMA Reducing Revolving Loans, another account of Customer with MLPF&S or an account of Customer at any other broker or dealer in securities, provided that the foregoing shall not prohibit or otherwise limit any of the foreign currency hedging activities engaged in by the Business Credit Parties in the ordinary course of business or (iii) unless otherwise consented to in writing by MLBFS, to pay any amount to Merrill Lynch and Co., Inc. or any of its subsidiaries, other than Merrill Lynch Bank USA, Merrill Lynch Bank & Trust Co. or any subsidiary of either of them (including MLBFS and Merrill Lynch Credit Corporation). 3 --------------------------------------------------------------------------------        3.5 Activation Date. Subject to the terms and conditions hereof, on the Closing Date MLPF&S activated a WCMA Line of Credit for WCMA Reducing Revolving Loans for Customer in the amount of the Maximum WCMA Reducing Revolving Line of Credit. The WCMA Reducing Revolving Loan will be funded out of the WCMA Line of Credit for WCMA Reducing Revolving Loans immediately after such activation (or, if otherwise directed in the Closing Certificate and hereafter expressly agreed by MLBFS, all or part of the WCMA Reducing Revolving Loan may be made available as a WCMA Line of Credit and funded by Customer).      3.6 Subsequent WCMA Loans. Subject to the terms and conditions hereof, during the period from and after the Closing Date to the Maturity Date: (a) subject to Section 3.12, Customer may repay the outstanding principal amount of the WCMA Reducing Revolving Loans in whole or in part at any time without premium or penalty, and request a re-borrowing of amounts repaid on a revolving basis, and (b) in addition to WCMA Reducing Revolving Loans made automatically to pay accrued interest, as hereafter provided, MLBFS will make such WCMA Reducing Revolving Loans as Customer may from time to time request or be deemed to have requested in accordance with the terms hereof. Customer may request WCMA Reducing Revolving Loans by use of WCMA Checks, FTS, Visa® charges, wire transfers, or such other means of access to the WCMA Line of Credit for WCMA Reducing Revolving Loans as may be permitted by MLBFS from time to time; it being understood that so long as the WCMA Line of Credit for WCMA Reducing Revolving Loans shall be in effect, any charge or debit to the WCMA Account for WCMA Reducing Revolving Loans that but for the WCMA Line of Credit for WCMA Reducing Revolving Loans would under the terms of the WCMA Agreement for WCMA Reducing Revolving Loans result in an overdraft, shall be deemed a request by Customer for a WCMA Reducing Revolving Loan.      3.7 Conditions of Subsequent WCMA Reducing Revolving Loans. Notwithstanding the foregoing, MLBFS shall not be obligated to make any WCMA Reducing Revolving Loan, and may without notice refuse to honor any such request by Customer, if at the time of receipt by MLBFS of Customer’s request: (a) giving effect to the WCMA Reducing Revolving Loan would cause the aggregate outstanding principal amount of the WCMA Reducing Revolving Loan to exceed the Maximum WCMA Reducing Revolving Line of Credit; or (b) the Maturity Date shall have occurred or the WCMA Reducing Revolving Loan shall have otherwise been terminated in accordance with the terms hereof; (c) Stratagene shall not have delivered the most recently required Borrowing Base Certificate (as defined in and pursuant to Section 7.2(a)(iv);or (d) an event shall have occurred and be continuing which shall have caused any of the General Funding Conditions to not then be met or satisfied to the reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Reducing Revolving Loan (including, without limitation, the making of a WCMA Reducing Revolving Loan to pay accrued interest or late charges, as hereafter provided) at a time when any one or more of said conditions shall not have been met shall not in any event be 4 --------------------------------------------------------------------------------   construed as a waiver of said condition or conditions or of any Default, and shall not prevent MLBFS at any time thereafter while any condition shall not have been met from refusing to honor any request by Customer for a WCMA Reducing Revolving Loan.      3.8 WCMA Reducing Revolving Note. Customer hereby unconditionally promises to pay to the order of MLBFS, at the times and in the manner set forth in this Loan Agreement, or in such other manner and at such place as MLBFS may hereafter designate in writing: (a) the outstanding principal amount of all WCMA Reducing Revolving Loans; (b) interest at the Applicable Interest Rate on the outstanding principal amount of all WCMA Reducing Revolving Loans (computed for the actual number of days elapsed on the basis of a year consisting of 360 days), from and including the date on which each WCMA Reducing Revolving Loan is made until the date of payment of all WCMA Reducing Revolving Loans in full; and (c) on demand, all other sums payable pursuant to this Loan Agreement with respect to WCMA Reducing Revolving Loans, including, but not limited to, any late charges. Except as otherwise expressly set forth herein, Customer hereby waives presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate and all other notices and formalities in connection with the WCMA Reducing Revolving Loans and this Loan Agreement.      3.9 Interest. (a) An amount equal to accrued interest on the daily outstanding principal amount of the WCMA Reducing Revolving Loans shall be payable by Customer monthly on each Interest Due Date, commencing with the first Interest Due Date after the Closing Date shall occur. Unless otherwise hereafter directed in writing by MLBFS on or after the Maturity Date, such interest will be automatically charged to the WCMA Account for WCMA Reducing Revolving Loans on the applicable Interest Due Date, and, to the extent not paid with free credit balances or the proceeds of sales of any Money Accounts then in the WCMA Account for WCMA Reducing Revolving Loans, as hereafter provided, such interest will be paid by a WCMA Reducing Revolving Loan, to the extent of availability, and added to the outstanding principal amount of WCMA Reducing Revolving Loans. All interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days.      (b) Upon the occurrence and during the continuance of any Event of Default, but without limiting the rights and remedies otherwise available to MLBFS hereunder or waiving such Event of Default, the interest payable by Customer hereunder shall at the option of MLBFS accrue and be payable at the Default Rate. The Default Rate, once implemented, shall continue to apply to the Obligations under this Loan Agreement and be payable by Customer until the date such Event of Default has been cured to the reasonable satisfaction of MLBFS.      (c) Notwithstanding any provision to the contrary in any of the Loan Documents, no provision of the Loan Documents shall require the payment or 5 --------------------------------------------------------------------------------   permit the collection of Excess Interest. If any Excess Interest is provided for, or is adjudicated as being provided for, in the Loan Documents, then: (i) Customer shall not be obligated to pay any Excess Interest; and (ii) any Excess Interest that MLBFS may have received pursuant to this Article III or under any of the Loan Documents shall, at the option of MLBFS, be either applied as a credit against the then unpaid principal amount of WCMA Reducing Revolving Loans, or refunded to the payor thereof      3.10 Repayment. Unless the WCMA Line of Credit for WCMA Reducing Revolving Loans shall have been earlier terminated pursuant to the terms hereof, on the last Business Day of January, 2008, the WCMA Line of Credit for WCMA Reducing Revolving Loans shall, without further action of either of the parties hereto, be terminated, Customer shall pay to MLBFS the outstanding principal amount of all outstanding WCMA Reducing Revolving Loans, if any, together with all accrued and unpaid interest thereon, and the WCMA Account for WCMA Reducing Revolving Loans, at the option of Customer, will either be converted to a WCMA Cash Balance (subject to any requirements of MLPF&S) or terminated.      3.11 Mandatory Payments. CUSTOMER AGREES THAT IT WILL, WITHOUT DEMAND, INVOICING OR THE REQUEST OF MLBFS, FROM TIME TO TIME MAKE SUFFICIENT PAYMENTS ON ACCOUNT OF THE WCMA REDUCING REVOLVING LOAN BALANCE TO ASSURE THAT THE SUM OF THE WCMA REDUCING REVOLVING LOAN BALANCE WILL NOT AT ANY TIME EXCEED THE MAXIMUM WCMA REDUCING REVOLVING LINE OF CREDIT.”                (e) Senior Debt To EBITDA. Section 7.3(h) of the Loan Agreement is hereby amended by deleting the text thereof and replacing said text with the words “Intentionally Omitted”.                 (f) Minimum Net Worth. Section 7.3(k) of the Loan Agreement is hereby amended in its entirety to read as follows:      “Minimum Net Worth. Stratagene will have a Net Worth as of the fiscal year ended December 31, 2003 equal to the sum of (x) an amount equal to 95% of Stratagene’s Net Worth as of September 30, 2003 and (y) 75% of its net income for the quarter ended December 31, 2003 and for each fiscal quarter thereafter for fiscal quarters ending on or before September 30, 2004, Stratagene shall maintain a Net Worth in an amount equal to the sum of the Net Worth Stratagene was required to have for the fiscal quarter immediately preceding the date of determination, plus 75% of its net income for the fiscal quarter ending on the date of determination, plus 95% of the book value of Hycor on the Merger Effective Date; provided, however, that the net worth of each of Stratagene and Hycor shall be adjusted downwards in a manner satisfactory to MLBFS to take into account one-time merger related expenses incurred in connection with the Merger 6 --------------------------------------------------------------------------------   Agreement and the transactions contemplated thereby (provided that with respect to Stratagene such adjustment shall not exceed (i) $2,082,000 if the Merger Agreement is terminated and the Merger Effective Date has not occurred or (ii) $4,532,000 if the Merger Effective Date occurs). Stratagene will have a Net Worth as of the fiscal year ended December 31, 2004 equal to or greater than $49,000,000; and for the fiscal quarters ended March 31, June 30 and September 30, 2005 and for each fiscal quarter thereafter Stratagene will have a Net Worth as of the end of each such fiscal quarter equal to or greater than $57,000,000. The Net Worth requirement set forth in this covenant shall be determined based on the fiscal quarter and year results reported in the financial statements furnished to MLBFS pursuant to Section 7.2 hereof.”                 (g) The Disclosure Schedule annexed to the Loan Agreement is hereby deleted in its entirety and replaced with the Disclosure Schedule attached hereto.           4. Litigation Review. The parties acknowledge that MLBFS has agreed to enter into this Amendment No. 4 without completing a full review of all existing and potential litigation involving the Business Credit Parties. Accordingly, the Business Credit Parties hereby agree that within sixty (60) days after the date hereof the Business Credit Parties shall provide MLBFS with such information and documentation as MLBFS may require in connection with any such litigation. MLBFS reserves its right to declare an Event of Default under Section 7.5(g) of the Loan Agreement if MLBFS determines, in its reasonable discretion, that the outcome of any litigation, if adversely decided, could reasonably be expected to have a Material Adverse Effect.           5. IP Review. The parties acknowledge that MLBFS has agreed to enter into this Amendment No. 4 without completing a full review of all Intellectual Property of the Business Credit Parties. Accordingly, the Business Credit Parties agree that, within sixty (60) days after the date hereof, the Business Credit Parties shall provide MLBFS with such information and documentation as MLBFS may require in connection with such Intellectual Property, including without limitation, information regarding the revenues associated with such Intellectual Property. MLBFS reserves its rights under Section 7.1(j) of the Loan Agreement, including without limitation its right to require additional instruments of assignment, pledges, consents and other further assurances in connection with such Intellectual Property.           6. Representations and Warranties. In order to induce MLBFS to enter into this Amendment No. 4, Customer, Stratagene and BH LLC (with respect to itself only) makes the following representations and warranties to MLBFS which shall survive the execution and delivery hereof:                 (a) Each Business Credit Party is duly organized, validly existing and in good standing under the laws of its state of organization. Each Business Credit Party is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary, except for such states where the failure to so qualify or be in good standing would not have a Material Adverse Effect; 7 --------------------------------------------------------------------------------                   (b) The execution and delivery of this Amendment No. 4 has been authorized by all requisite action on the part of each Business Credit Party, this Amendment No. 4 has been duly executed and delivered by it, and this Amendment No. 4 and the Loan Agreement, as amended hereby constitute its legal, valid and binding obligations enforceable in accordance with their respective terms subject to applicable bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally, moratorium laws from time to time in effect and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and                (c) No action of, or filing with, any governmental or public body or authority is required to authorize, or, except for the filing of this Amendment No. 4 with the Securities and Exchange Commission, is otherwise required in connection with the execution, delivery and performance of this Amendment No. 4 by Customer, Stratagene or BH LLC.           7. Expenses. Customer shall pay all reasonable expenses, including, without limitation, reasonable legal fees, incurred by MLBFS in connection with the preparation, negotiation, execution and delivery and review of this Amendment No. 4, and all other documents and instruments executed in connection with this transaction.           8. References to Loan Agreement. The Loan Agreement is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that after giving effect to this Amendment No. 4 all references in the Loan Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Loan Agreement shall mean the Loan Agreement, as amended.           9. Amendment No. 4. This Amendment No. 4 is limited as written and shall not be deemed (i) to be an amendment of or a consent under or waiver of any other term or condition of the Loan Agreement, or any of the other Loan Documents or (ii) to prejudice any right or rights which MLBFS now has or may have in the future under or in connection with the Loan Agreement or the other Loan Documents except as expressly waived hereby.           10. Security Documents. It is agreed and confirmed that after giving effect to this Amendment No. 4 that each Loan Document remains in full force and effect.           11. Condition Precedent. It is a condition to the effectiveness of this Amendment No. 4 that Customer shall have fulfilled the following conditions precedent to the satisfaction of MLBFS, determined in its sole and absolute discretion:                 (i) MLBFS shall have received original counterparts of this Amendment No. 4, executed and delivered by duly authorized officers of each of the parties hereto;                 (ii) MLBFS shall have received and approved the updated Disclosure Schedule referenced in Section 3(g) above;                 (iii) MLBFS shall have received irrevocable non-refundable payment of the $9,000 commitment fee referenced in Section 3.3 of the Loan Agreement (as amended hereunder); 8 --------------------------------------------------------------------------------                   (iv) Customer shall have paid the fees and expenses of outside counsel to MLBFS;                 (v) MLBFS shall have received all other disclosure, information, affirmations, acknowledgments, instruments, certification under other forms of assurances as may be reasonably incidental to the transaction herein contemplated and reasonably requested by MLBFS.           10. Governing Law. This Amendment No. 4, including the validity thereof and the rights and obligations of the parties hereunder, shall be construed in accordance with and governed by the laws of the State of Illinois.           11. Counterparts. This Amendment No. 4 may be executed by one or more of the parties to this Amendment No. 4 on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [Remainder of Page Intentionally Left Blank, Signatures on Next Page] 9 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 4 this 24th day of January 2006                   MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.                       By:   /s/ Patrick A. Lucas         Name: Patrick A. Lucas         Title: Vice President                       BIOCREST MANUFACTURING, L.P.                       By:   BioCrest Management, L.L.C.         Its:   General Partner                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Sole Member                       STRATAGENE CORPORATION                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Chief Executive Officer                       BIOCREST HOLDINGS, L.L.C.                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Sole Manager                       The undersigned consent to the foregoing and acknowledge that the Loan Documents to which they are a party remain in full force and effect.                       HYCOR BIOMEDICAL INC.                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D. Title: Chief Executive Officer     10 --------------------------------------------------------------------------------                     STRATAGENE CALIFORNIA                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Chief Executive Officer                       BIOCREST CORPORATION                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Chief Executive Officer                       BIOCREST MANAGEMENT, L.L.C.                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Sole Manager                       BIOCREST LIMITED, L.L.C.                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Sole Manager                       BIOCREST SALES, L.P.                       By:   BIOCREST MANAGEMENT, L.L.C.         Its:   General Partner                       By:   /s/ Joseph A. Sorge, m.d.                           Name: Joseph A. Sorge, M.D.             Title: Sole Manager     11

Exhibit 10.1       DEBTOR IN POSSESSION CREDIT AGREEMENT   DATED AS OF MARCH 30, 2006     AMONG   CURATIVE HEALTH SERVICES, INC., AS BORROWER REPRESENTATIVE,   THE BORROWERS SIGNATORY HERETO,   THE LENDERS REFERRED TO HEREIN,   GECC CAPITAL MARKETS GROUP, INC., AS LEAD ARRANGER   AND   GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT       --------------------------------------------------------------------------------   TABLE OF CONTENTS     Page ARTICLE I. DEFINITIONS 2   Section 1.1. Certain Defined Terms 2   Section 1.2. Accounting Terms and Determinations 36   Section 1.3. Other Definitional Provisions 36   Section 1.4. Disclosure Schedules 37 ARTICLE II. THE FACILITIES 37   Section 2.1. The Facilities 37   Section 2.2. Notes 38   Section 2.3. Method of Borrowing; Funding of Loans; Agent May Assume Funding; Failure to Fund 38   Section 2.4. Interest on Loans 40   Section 2.5. Letters of Credit 41   Section 2.6. Swingline Loans 48   Section 2.7. Certain Fees 51   Section 2.8. Mandatory Prepayments 52   Section 2.9. Optional Prepayments 53   Section 2.10. Application of Payments 53   Section 2.11. Reduction of Commitments 54   Section 2.12. Loan Account and Accounting 54   Section 2.13. Computation of Interest and Fees 54   Section 2.14. General Provisions Regarding Payments 55   Section 2.15. Maximum Interest 55   Section 2.16. Additional Borrowers 56 ARTICLE III. CONDITIONS 57   Section 3.1. Conditions to Closing 57   Section 3.2. Conditions to Each Extension of Credit 60 ARTICLE IV. REPRESENTATIONS AND WARRANTIES 60   Section 4.1. Existence and Organizational Power; Compliance with Organizational Documents 60   Section 4.2. Governmental Compliance with Laws and Compliance with Agreements with Third Parties 61   Section 4.3. Organizational and Governmental Approvals; No Contravention 61   Section 4.4. Binding Effect; Liens of Collateral Documents 61   Section 4.5. Financial Statements 61   Section 4.6. Material Adverse Effect 62   Section 4.7. Litigation 62   Section 4.8. Full Disclosure 62   Section 4.9. No Adverse Fact 63   Section 4.10. Ownership of Property, Liens 63   Section 4.11. Environmental Laws 63   Section 4.12. ERISA 63   Section 4.13. Subsidiaries Capitalization 63   Section 4.14. Government Regulations 64   i --------------------------------------------------------------------------------     Section 4.15. Margin Regulations 64   Section 4.16. Taxes 64   Section 4.17. Intellectual Property 64   Section 4.18. Reserved 65   Section 4.19. Insurance 65   Section 4.20. Brokers 65   Section 4.21. Compliance with HIPAA 65 ARTICLE V. REPORTING COVENANTS 66   Section 5.1. Financial Statements and Other Reports 66   Section 5.2. Collateral Reports 68   Section 5.3. Financial Statements and Other Reports 70 ARTICLE VI. AFFIRMATIVE COVENANTS 72   Section 6.1. Payment of Obligations 72   Section 6.2. Conduct of Business and Maintenance of Existence 72   Section 6.3. Maintenance of Assets and Properties 72   Section 6.4. Insurance; Damage to or Destruction of Collateral 72   Section 6.5. Compliance with Laws 74   Section 6.6. Inspection of Property, Books and Records 74   Section 6.7. Supplemental Disclosure 75   Section 6.8. Use of Proceeds 75   Section 6.9. Further Assurances 76   Section 6.10. Reserved. 76   Section 6.11. Environmental Matters 76   Section 6.12. Landlord and Warehouseman Waivers 77   Section 6.13. Mortgages on Real Property; Title Insurance and Survey 77   Section 6.14. Additional Subsidiaries 78   Section 6.15. Compliance Program 79   Section 6.16. Cash Management Systems 79   Section 6.17. Accreditation and Licensing 81   Section 6.18. [Reserved] 81   Section 6.19. [Reserved] 81 ARTICLE VII. NEGATIVE COVENANTS 81   Section 7.1. Indebtedness 82   Section 7.2. Liens; Negative Pledges 83   Section 7.3. Guaranteed Obligations 84   Section 7.4. Capital Stock; Nature of Business 84   Section 7.5. Restricted Payments 85   Section 7.6. No Restrictions on Subsidiary Distributions to the Borrowers 85   Section 7.7. ERISA 85   Section 7.8. Consolidations; Mergers; Sales of Assets; Creation of Subsidiaries 85   Section 7.9. Purchase of Assets; Investments 86   Section 7.10. Transactions with Affiliates 86   Section 7.11. Amendments or Waivers 86   Section 7.12. Fiscal Year 86   Section 7.13. Capital Expenditures 87   Section 7.14. Lease Limits 87   ii --------------------------------------------------------------------------------     Section 7.15. Total Leverage Ratio 87   Section 7.16. Senior Secured Leverage Ratio 87   Section 7.17. Fixed Charge Coverage Ratio 87   Section 7.18. Pro Forma Adjustments. 88   Section 7.19. Accounts Receivable DSO 89   Section 7.20. Sale-Leasebacks 89 ARTICLE VIII. EVENTS OF DEFAULT 89   Section 8.1. Events of Default 89   Section 8.2. Remedies 93   Section 8.3. Waivers by Credit Parties 94 ARTICLE IX. EXPENSES AND INDEMNITIES 94   Section 9.1. Expenses 94   Section 9.2. Indemnity 95   Section 9.3. Taxes 96   Section 9.4. Capital Adequacy; Increased Costs; Illegality; Funding Losses 96 ARTICLE X. THE AGENT 97   Section 10.1. Appointment and Authorization 97   Section 10.2. Delegation of Duties 98   Section 10.3. Agent and Affiliates 98   Section 10.4. Action by Agent 98   Section 10.5. Consultation with Experts 98   Section 10.6. Liability of Agent 98   Section 10.7. Indemnification 99   Section 10.8. Credit Decision 99   Section 10.9. Successor Agent 99   Section 10.10. Reliance by Agent 100   Section 10.11. Notice of Default 100 ARTICLE XI. MISCELLANEOUS 101   Section 11.1. Survival 101   Section 11.2. No Waivers; Remedies Cumulative 101   Section 11.3. Notices 101   Section 11.4. Severability 102   Section 11.5. Amendments and Waivers 103   Section 11.6. Successors and Assigns; Registration 103   Section 11.7. Setoffs and Sharing of Payments 105   Section 11.8. Collateral 106   Section 11.9. Headings 106   Section 11.10. Governing Law; Submission To Jurisdiction 106   Section 11.11. Notice of Breach by Agent or Lender 106   Section 11.12. Waiver Of Jury Trial 107   Section 11.13. Counterparts; Entire Agreement 107   Section 11.14. Confidentiality; Press Release 107   Section 11.15. Reinstatement 108   Section 11.16. Advice of Counsel 108   Section 11.17. No Strict Construction 108   Section 11.18. Conflict of Terms 109   iii --------------------------------------------------------------------------------     Section 11.19. Reserved 109   Section 11.20. New Lenders 109 ARTICLE XII. CROSS-GUARANTY 109   Section 12.1. Cross-Guaranty 109   Section 12.2. Waivers by Borrowers 110   Section 12.3. Benefit of Guaranty 110   Section 12.4. Subordination of Subrogation, Etc. 110   Section 12.5. Election of Remedies 110   Section 12.6. Limitation 111   Section 12.7. Contribution with Respect to Guaranty Obligations 111   Section 12.8. Liability Cumulative 112 ARTICLE XIII. SPECIAL BANKRUPTCY PROVISIONS 112   Section 13.1. Post-Petition Security 112   Section 13.2. Liens Perfected without Filing Or Recording 112   Section 13.3. Relief from Stay. 113   Section 13.14. Extension of Post-Petition Credit and Other Remedies of Lenders 113   Section 13.5. Plan of Reorganization 113   Section 13.6. Disavowal and Waiver of Any Subsequent Relief Based on Changed Circumstances 114   Section 13.7. Exclusive Remedy For Any Alleged Post-Petition Claim 115   Section 13.8. Prohibition on Priming of the Liens of Lender on the Collateral 115   Section 13.9. Marshalling Obligations 115   iv --------------------------------------------------------------------------------   EXHIBIT A - Revolving Note EXHIBIT B - [Reserved] EXHIBIT C - Swingline Note EXHIBIT D-1 - Notice of Borrowing EXHIBIT D-2 - Notice of Swingline Borrowing EXHIBIT E - Borrower Security Agreement EXHIBIT F - Borrower Pledge Agreement EXHIBIT G - Subsidiary Guaranty Agreement EXHIBIT H - Guarantor Security Agreement EXHIBIT I - Opinion of Counsel to the Credit Parties EXHIBIT J - [Reserved] EXHIBIT K - Closing Checklist EXHIBIT L - Assignment Agreement EXHIBIT M - HIPAA Business Associate Agreement EXHIBIT N - [Reserved] EXHIBIT O - Form of Borrowing Base Certificate       EXHIBIT 5.1(b)   Compliance Certificate (Annual) EXHIBIT 5.1(n)   Compliance Certificate (Monthly)   DISCLOSURE SCHEDULE 1.1 - [Reserved] DISCLOSURE SCHEDULE 2.5(l). - Existing L/Cs DISCLOSURE SCHEDULE 4.5(a) - Financial Statements DISCLOSURE SCHEDULE 4.5(b) - Borrowers’ Financial Budget DISCLOSURE SCHEDULE 4.7 - Litigation DISCLOSURE SCHEDULE 4.13 - Subsidiaries, Other Equity Investments DISCLOSURE SCHEDULE 4.19 - Insurance Policies DISCLOSURE SCHEDULE 6.15 - Compliance Program DISCLOSURE SCHEDULE 6.16(a) - Government Receivables Deposit Accounts and Concentration Account DISCLOSURE SCHEDULE 6.16(c) - Blocked Accounts DISCLOSURE SCHEDULE 7.1 - Indebtedness DISCLOSURE SCHEDULE 7.2 - Effective Date Liens DISCLOSURE SCHEDULE 7.4 - Capital Structure DISCLOSURE SCHEDULE 7.9 - Existing Investments DISCLOSURE SCHEDULE 7.10(b) - Existing Loans to Employees   v --------------------------------------------------------------------------------   DEBTOR IN POSSESSION CREDIT AGREEMENT   This DEBTOR IN POSSESSION CREDIT AGREEMENT, dated as of March 30, 2006 (the “Agreement”), among CURATIVE HEALTH SERVICES, INC., a Minnesota corporation formerly known as Curative Holding Co. (“Holdings”), EBIOCARE.COM, INC., a Delaware corporation (“Ebiocare”), HEMOPHILIA ACCESS, INC., a Tennessee corporation (“Hemophilia Access”), APEX THERAPEUTIC CARE, INC., a California corporation (“Apex”), CHS SERVICES, INC., a Delaware corporation (“CHS”), CURATIVE HEALTH SERVICES CO., a Minnesota corporation formerly known as Curative Health Services, Inc. (“CHSC”), CURATIVE HEALTH SERVICES OF NEW YORK, INC., New York corporation (“CHSNY”), OPTIMAL CARE PLUS, INC., a Delaware corporation (“Optimal Care”), INFINITY INFUSION, LLC, a Delaware limited liability company (“Infinity”), INFINITY INFUSION II, LLC, a Delaware limited liability company (“Infinity II”), INFINITY INFUSION CARE, LTD., a Texas limited partnership (“Infinity Infusion”), MEDCARE, INC., a Delaware corporation (“Medcare”), CURATIVE PHARMACY SERVICES, INC., a Delaware corporation (“CPS”), CRITICAL CARE SYSTEMS, INC., a Delaware corporation (“CCS”), any Additional Borrowers that hereafter may from time to time become a party hereto pursuant to Section 2.16 hereof (Holdings, Ebiocare, Hemophilia Access, Apex, CHS, CHSNY, CHSC, Optimal Care, Infinity, Infinity II, Infinity Infusion, Medcare, CPS, CCS and such Additional Borrowers are sometimes collectively referred to herein as the “Borrowers” and individually as a “Borrower”), the Lenders listed on the signature pages hereof, and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent.   INTRODUCTORY STATEMENT   A.                                   The Borrowers are party to that certain Existing Credit Facility (as defined below), among the Borrowers, the lenders party thereto, General Electric Capital Corporation, individually as a lender and in its capacity as agent, pursuant to which such lenders have agreed to extend, and have extended, credit and other financial accommodations to the Borrowers.   B.                                     The Borrowers have filed voluntary petitions commencing jointly administered Chapter 11 cases (the “Bankruptcy Cases”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).   C.                                     The Borrowers desire to establish certain post-petition, debtor-in-possession (“DIP”) financing arrangements with and borrow funds from the Lenders, and the Agent and the Lenders are willing to establish such arrangements for and to extend DIP financing to the Borrowers, on the terms and conditions set forth below (subject to the approval of the Bankruptcy Court).   --------------------------------------------------------------------------------   D.                                    Each of the Borrowers desires to secure all of its Obligations (as hereinafter defined) under the Loan Documents (as hereinafter defined) by granting to the Agent, for the benefit of the Agent and Lenders, a security interest in and lien upon all of its existing and after-acquired personal and Real Property including a pledge of the capital stock of all of its subsidiaries.   NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree that, on the Effective Date (as defined below), the Existing Credit Facility shall be terminated, subject to the continued effectiveness of certain provisions thereof pursuant to this Agreement and the Loan Documents, and this agreement shall be effective in its entirety as follows:   ARTICLE I.   DEFINITIONS   Section 1.1. Certain Defined Terms. The following terms used herein shall have the following meanings:   “2005 Unaudited Financials” has the meaning ascribed to it in Section 3.1(x).   “Account Debtor” means any Person who may become obligated to a Credit Party under, with respect to, or on account of an Account of such Credit Party (including without limitation any guarantor of the payment or performance of an Account).   “Accounts Receivable Advance Rate” means 85%, subject to adjustment pursuant to Section 2.1(d).   “Accounts Receivable Days Sales Outstanding” means net accounts receivable of Borrowers and their Subsidiaries on a consolidated basis divided by total net revenue of Borrowers and their Subsidiaries on a consolidated basis for the last three months divided by 90.   “Acquisition” means the purchase by any Credit Party of: (i) any company, limited liability company, association, partnership or other organization that is engaged in any business that is not materially different than the businesses engaged in by the Credit Parties on the Closing Date; (ii) all or substantially all of the assets of any such Person or (iii) a business line of any Person which business line is related to the business line of the Borrowers.   “Additional Borrower” has the meaning ascribed to it in Section 2.16.   “Advance” means either a LIBOR Loan Advance or a Base Rate Advance, as applicable.   “Affiliate” means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock of such Person, (b) each Person that controls, is controlled by   2 --------------------------------------------------------------------------------   or is under common control with such Person, (c) each of such Person’s officers, directors, joint venturers and partners and (d) in the case of the Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of the Borrowers. For the purposes of this definition, “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term “Affiliate” when used with respect to any Credit Party shall specifically exclude each Lending Party.   “Agent” means GE Capital in its capacity as Agent for the Lenders hereunder and under the Loan Documents, and its successors in such capacity.   “Aggregate L/C Exposure” means, at any time, the sum, without duplication, of (a) the aggregate amount that is (or may thereafter become) available for drawing under all Letters of Credit outstanding at such time plus (b) the aggregate unpaid principal amount of all Reimbursement Obligations outstanding at such time.   “Agreement” means this Debtor In Possession Credit Agreement, including all schedules and exhibits hereto as the same may be amended, modified, supplemented or restated from time to time.   “Allocable Amount” has the meaning ascribed to it in Section 12.7(b).   “Apex” has the meaning ascribed thereto in the preamble to this Agreement.   “Apex Adjustment” shall mean a one time add back, in the aggregate, of up to $2,500,000 of Accounts Receivable earned by Apex in Fiscal Years 2003 and 2004 which were reserved for in the Fiscal Quarter ended December 31, 2005.   “Applicable Law” means, anything in Section 11.10 to the contrary notwithstanding, (i) all applicable common law and principles of equity and (ii) all applicable provisions of all (A) constitutions, statutes, rules, regulations and orders of Governmental Authorities, (B) Governmental Approvals and (C) orders, decisions, judgments and decrees of all courts and arbitrators.   “Applicable Margin” means: (a) from the Effective Date to and including the fifth day following the receipt of financial statements for the Fiscal Year ended [December 31, 2005] delivered pursuant to Section 5.1(b) (the “Initial Adjustment Date”), (i) 3.50% per annum for LIBOR Loan Advances and 2.25% per annum for Base Rate Advances, (ii) 2.25% per annum for Swingline Loans, and (iii) 3.50% per annum for the Letter of Credit Fee Applicable Margin; and (b) commencing on the Initial Adjustment Date and on the first day of each Fiscal Quarter thereafter that follows by at least five (5) days the receipt of financial statements delivered pursuant to Section 5.1(n), the Applicable Margin for each Class of Extension of Credit shall be that determined from the chart below based on such financial statements:   3 --------------------------------------------------------------------------------   If Total Leverage Ratio is:   Level of Applicable Margins: <3.50x   Level I >3.50x but <4.25x   Level II >4.25x   Level III       Applicable Margins       Level I   Level II   Level III   Applicable Margin for Base Rate Advances   1.75 % 2.00 % 2.25 % Applicable Margin for LIBOR Loan Advances   3.00 % 3.25 % 3.50 % Applicable Margin for Letter of Credit Fee   3.00 % 3.25 % 3.50 % Applicable Margin for Overadvance Facility Advances           4.00 %   Notwithstanding the foregoing, if a Default or Event of Default shall have occurred and be continuing, any quarterly adjustment in the Applicable Margins as provided for above in this definition which would result in a decrease in any Applicable Margin shall be deferred until the first day of the calendar month following the date that such Default or Event of Default has been cured or waived.   “Assessments” has the meaning ascribed to it in Section 4.21.   “Asset Disposition” means any disposition, whether by sale, lease, transfer, loss, damage, destruction, casualty, condemnation or otherwise (including any such transaction effected by way of merger or consolidation), of any Stock or other property (whether real, personal or mixed) of any Credit Party, but excluding (a) dispositions of Inventory in the ordinary course of business, (b) any single casualty event that results in less than $100,000 of insurance proceeds being payable to any Credit Party, (c) dispositions of Temporary Cash Investments and cash payments otherwise permitted under this Agreement, and (d) dispositions of assets from one Credit Party to another Credit Party.   “Assignment Agreement” has the meaning ascribed to it in Section 11.6(a).   “Authorized Signatory” means any Person or Persons designated as such by the Borrowers to the Agent in a writing in a form reasonably satisfactory to the Agent.   “Bankruptcy Cases” shall have the meaning established in the recitals hereto.   “Bankruptcy Code” means 11 U.S.C. §§ 101 et seq.   “Bankruptcy Court Order” means the following orders entered by the Bankruptcy Court:  (i) an Order approving this Agreement on an interim basis in form and substance acceptable to the Agent and the Borrowers (the “Interim Order”), a proposed form of which is attached to this Agreement as Exhibit A;  (ii) an Order approving this Agreement on final basis   4 --------------------------------------------------------------------------------   in a form and substance acceptable to the Agent and the Borrowers (the “Final Order”); and (iii) and any other orders in form and substance acceptable to the Agent and the Borrowers and entered by the Bankruptcy Court in connection with the Loan.   “Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure.   “Base Rate” means, for any day, a floating rate equal to the greater of (a) the rate publicly quoted from time to time by The Wall Street Journal as the “Prime Rate” (or, if The Wall Street Journal ceases quoting a prime rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), and (b) the Federal Funds Rate plus 50 basis points per annum. Any change in the Base Rate due to a change in the prime rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the prime rate or the Federal Funds Rate, respectively.   “Base Rate Advance” means a Revolving Credit Advance bearing interest by reference to the Base Rate.   “Base Rate Borrowing” means a Borrowing that is constituted of Base Rate Loans.   “Base Rate Loan” means that portion of a Loan, the interest on which is, or is to be, as the context may require, computed on the basis of the Base Rate.   “Benefit Arrangement” means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA that is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the Controlled Group.   “Blocked Accounts” has the meaning ascribed to it in Section 6.16(a).   “Borrowers” and “Borrower” have the respective meanings ascribed thereto in the preamble to this Agreement.   “Borrower Pledge Agreement” means the Borrower Pledge Agreement dated as of the date hereof between the Credit Parties and the Agent, substantially in the form of Exhibit F.   “Borrower Representative” means Holdings.   “Borrower Security Agreement” means the Security Agreement dated as of the date hereof between the Borrowers and the Agent, substantially in the form of Exhibit E.   “Borrowing” means the aggregation of Advances to be made to the Borrowers by the Lenders pursuant to Article II on the same day, all of which Advances are of the same Type (subject to Article II) and, except in the case of Base Rate Advances, have the same initial LIBOR Period. Borrowings are also classified for purposes hereof by reference to the pricing of Advances comprising such Borrowing (for example, a “LIBOR Borrowing” is a Borrowing comprised of LIBOR Loan Advances).   5 --------------------------------------------------------------------------------   “Borrowing Availability” means as of any date of determination as to the Borrowers, the lesser of (a) the Maximum Commitment Amount and (b) the Borrowing Base, in each case, minus the sum of (without duplication) the aggregate Revolving Loans and Swingline Loans then outstanding.   “Borrowing Base” means, on any date, a dollar amount equal to (a) the sum of:  (i) the Accounts Receivable Advance Rate multiplied by the book value of Eligible Accounts, plus (ii) the Inventory Advance Rate multiplied by the value of Eligible Inventory valued at the lower of cost (determined on a first-in, first-out basis) or market, minus (b) any Reserves.   “Borrowing Base Certificate” means a certificate, duly executed by the chief financial officer, controller or treasurer of the Borrower Representative, appropriately completed and substantially in the form of Exhibit O.   “Budget” has the meaning ascribed to such term in Section 5.1(c).   “Business Day” means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of Maryland and/or New York and, in reference to LIBOR Loans, means any such day that is also a LIBOR Business Day.   “Capital Expenditures” means, with respect to any Person, all expenditures (including, without limitation, by the expenditure of cash or the incurrence of Indebtedness but excluding any such expenditures incurred in connection with an Acquisition, but including any such expenditures incurred by way of assumption of indebtedness or other obligations of a Person, to the extent reflected as plant, property and equipment) by such Person during any measuring period for any real property, fixtures, plant or equipment or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one (1) year and that are required to be capitalized under GAAP.   “Capital Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.   “Capital Lease Obligation” means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease.   “Carve Out” means a carve out from liens and superiority claims granted to the Agent and the Lenders pursuant to this Agreement and the Bankruptcy Court Orders for expenses arising from Claims in the Bankruptcy Cases of the following parties for the following amounts: (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under Section 1930(a) of Title 28 of the United States Code, (ii) all fees and expenses incurred by any trustee under Section 726(b) of the Bankruptcy Code and (iii) the fees and expenses payable under Sections 330 and 331 of the Bankruptcy Code to professional persons retained (each such person, a “Professional”) and committee members appointed pursuant to an order of the Bankruptcy Court by any Credit Party or any statutory committees appointed in the Bankruptcy Cases (each such committee, a “Committee”), which in the case of clause (iii), above collectively may not exceed the sum of $500,000 in the aggregate,   6 --------------------------------------------------------------------------------   inclusive of any holdbacks, provided, however, that any fees or disbursements paid to any Professional or any Committee during the Bankruptcy Cases pursuant to an appropriate Bankruptcy Court Order shall not reduce the Carve Out.   “Cash Collateral Account” has the meaning ascribed to it in Section 2.5(k)(i).   “Cash Equivalents” means cash or cash equivalents acceptable to Agent.   “Cash Management Systems” has the meaning ascribed to it in Section 6.16.   “CCS” has the meaning ascribed thereto in the preamble to this Agreement.    “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from time to time, and the regulations promulgated thereunder.   “CHAMPVA” means, collectively, the Civilian Health and Medical Program of the Department of Veteran Affairs, a program of medical benefits covering retirees and dependents of former members of the armed services administered by the United States Department of Veteran Affairs, and all laws, rules, regulations, manuals, orders, guidelines or requirements pertaining to such program including, without limitation, (a) all federal statutes (whether set forth in 38 U.S.C. §1713 or elsewhere) affecting such program or, to the extent applicable to CHAMPVA and (b) all rules, regulations (including 38 C.F.R. §17.54), manuals, orders and administrative, reimbursement and other guidelines of all Governmental Authorities promulgated in connection with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.   “CHAMPVA Account” means an Account payable pursuant to CHAMPVA.   “CHSNY” has the meaning ascribed thereto in the preamble to this Agreement.   “Change of Control” means any of the following: (a) any person or group of persons (within the meaning of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of twenty percent (20%) or more of the issued and outstanding shares of Stock of Holdings having the right to vote for the election of directors of Holdings under ordinary circumstances; (b) during any period of twelve (12) consecutive calendar months, individuals, who at the beginning of such period, constituted the board of directors of Holdings (together with any new directors whose election by the board of directors of Holdings or whose nomination for election by the holder of stock or equity interests of Holdings 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 such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; or (c) Holdings ceases to own and control all of the economic and voting rights associated with all of the outstanding Stock of any of its Subsidiaries, except to the extent expressly permitted under Section 7.8.   7 --------------------------------------------------------------------------------   “Changed Circumstances” has the meaning ascribed to it in Section 13.6.   “Charges” means any and all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Credit Party, (d) any Credit Party’s ownership or use of any properties or other assets, or (e) any other aspect of any Credit Party’s business including, without limitation, charges for necessary business permits and governmental authorizations.   “Class” defines an Extension of Credit by reference to the Commitment and/or subfacility under which it is made.   “Closing Checklist” means the Closing Checklist in the form of Exhibit K attached hereto.   “Closing Date” means March 30, 2006. All documents held in escrow and shall be of no force or effect until the Effective Date.   “CMS” means the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration or HCFA.   “Collateral” means the property subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, pursuant to the Security Agreements and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations.   “Collateral Documents” means the Security Agreements, the Pledge Agreements, the Guaranty Agreements, the Mortgages, blocked account agreements, lockbox account agreements and all similar agreements entered into guaranteeing payment of, granting or perfecting a Lien upon property as security for, the Obligations.   “Collateral Reports” means the reports with respect to the Collateral referred to in Section 5.2.   “Collection Account” means that certain account of Agent, or such other account as may be specified in writing by Agent as the “Collection Account”, as follows:   Deutsche Bank/Banker’s Trust New York, NY ABA No.:  021-001-033 Account No.:  50-271-079 Account Name:  GE-HFS Cash Flow Collections Re:  Curative Health Services, Inc.   8 --------------------------------------------------------------------------------   “Commitment” means (a) as to any Lender, such Lender’s Revolving Credit Commitment (including without duplication the Swingline Lender’s Swingline Commitment) and (b) as to all Lenders, the aggregate of all of Lenders’ Revolving Credit Commitments (including without duplication the Swingline Lender’s Swingline Commitment, as such Commitments may be reduced, amortized or adjusted from time to time in accordance with this Agreement).   “Commitment Extension Fee” means 0.50% (calculated on the basis of a 360-day year for actual days elapsed) of the Maximum Commitment Amount.   “Commitment Letter” means that certain Commitment Letter, dated January 30, 2006, by and between GE Capital and certain of the Credit Parties party thereto.   “Commitment Termination Date” means the earliest of:   (i) 12 months from the filing of the Bankruptcy Cases, (ii) the effective date of the Plan of Reorganization in the Bankruptcy Cases, (iii) 15 days after the filing of the Bankruptcy Case if entry of an Interim Order approving this Agreement has not been entered by such date in all of the Bankruptcy Cases or (iv) 45 days after the filing of any Bankruptcy Case if entry of a Final Order approving this Agreement has not been entered by such date in all Bankruptcy Cases; provided, that prior to the Commitment Termination Date and provided no Default has occurred, upon Borrowers’ request and payment of the Commitment Extension Fee, the Commitment Termination Date (for the conditions set forth in (i) and (ii) of this paragraph only) may be extended by six (6) months, to a period of up to eighteen (18) months in the aggregate, but in no event shall the Commitment Termination Date be later than the effective date of the Plan of Reorganization in any Bankruptcy Case.    “Competitor” means a Person that directly provides products or services that are the same or substantially similar to the products or services provided by, and that constitute a material part of the business of, a Credit Party.   “Compliance Certificate” means any of the compliance certificates delivered pursuant to Sections 5.1(b), and/or (n).   “Concentration Accounts” has the meaning ascribed to it in Section 6.16.   “Concentration Account Bank” has the meaning ascribed to it in Section 6.16.    “CONDITIONALLY WAIVED PRE-PETITION FEES” MEANS THE PIK SPREAD AND THE PRE-PAYMENT FEE DUE UNDER THE EXISTING CREDIT FACILITY, WHICH WERE CONDITIONALLY WAIVED UNDER THE SECTIONS 1(C) AND 3(C) OF THE FORBEARANCE AGREEMENT.    “Continuation” has the meaning ascribed to it in Section 2.3(a).   “Control Letter” means a letter agreement between Agent and (a) the issuer of uncertificated securities with respect to uncertificated securities in the name of any Credit Party, (b) a securities intermediary with respect to securities, whether certificated or uncertificated, securities entitlements and other financial assets held in a securities account in the name of any   9 --------------------------------------------------------------------------------   Credit Party, (c) a futures commission merchant or clearing house, as applicable, with respect to commodity accounts and commodity contracts held by any Credit Party, in each case whereby, among other things, the issuer, securities intermediary, futures commission merchant or clearing house disclaims (or subordinates in a manner satisfactory to Agent in its sole discretion) any security interest in the applicable financial assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such financial assets, and agrees to follow the instructions or entitlement orders of Agent without further consent by the affected Credit Party.   “Controlled Group” means, with respect to any Credit Party, any trade or business (whether or not incorporated) that, together with such Credit Party, is treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC or Section 4001 of ERISA.   “Conversion” has the meaning set forth in Section 2.3(a).    “Credit Parties” means the Borrowers and each Guarantor.   “Current Assets” means, with respect to any Person, all current assets of such Person as of any date of determination calculated in accordance with GAAP, but excluding Cash Equivalents and debts due from Affiliates.   “Current Liabilities” means, with respect to any Person, all liabilities that should, in accordance with GAAP, be classified as current liabilities, and in any event shall include (a) all Indebtedness payable on demand or within one (1) year from any date of determination without any option on the part of the obligor to extend or renew beyond such year, but excluding the current portion of long-term debt required to be paid within one (1) year, and (b) all accruals for federal or other taxes based on or measured by income and payable within such year.    “Damage Lawsuit” has the meaning ascribed to it in Section 13.7.   “Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived within any applicable grace or cure period, become an Event of Default.   “Default Rate” means, subject to Section 2.15, the rate otherwise applicable to an Obligation plus 2.00% per annum, or if no such rate is provided, the Base Rate, plus the Applicable Margin for Base Rate Advances, plus 2.00%.    “Disbursement Account” has the meaning ascribed to it in Section 6.16.   “Dollars” or “$” means lawful currency of the United States of America.   “EBITDA” means, with respect to any Person for any fiscal period, without duplication, an amount equal to (a) consolidated net income (or loss) of such Person for such period (excluding extraordinary gains and non-cash items), minus (b) the sum of, without duplication, (i) income tax credits, (ii) interest income, (iii) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all   10 --------------------------------------------------------------------------------   inventory sold in conjunction with the disposition of fixed assets and all securities), plus, (c) to the extent deducted in determining such consolidated net income (or loss) for such period, the sum of, without duplication, (i) income tax expense, (ii) Interest Expense and Fees, (iii) loss from extraordinary items for such period, (iv) the amount of non-cash charges (including depreciation and amortization) for such period, (v) amortized debt discount for such period, (vi) the amount of any deduction to consolidated net income as the result of any grant to any employees, officers or directors of such Person of any Stock, (vii) the Apex Adjustment and (viii) the Pharmacy Adjustment. For purposes of this definition, the following items shall be excluded in determining consolidated net income of a Person: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person; (8) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets; and (9) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary.   “Effective Date” means the date upon which the Bankruptcy Court signs or enters the Interim Order authorizing the Borrowers to enter into this Agreement.   “Eligible Accounts” means, at any date of determination thereof, the aggregate amount of all Accounts at such date due to any Borrower except to the extent that (determined without duplication):   (a)                                  such Account does not arise from the sale of goods or the performance of services by such Borrower in the ordinary course of its business;   (b)                                 (i) such Borrower’s right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) as to which such Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process or (iii) if the Account represents a progress billing consisting of an invoice for goods sold or used or services rendered pursuant to a contract under which the Account Debtor’s obligation to pay that invoice is subject to such Borrower’s completion of further performance under such contract or is subject to the equitable lien of a surety bond issuer;   (c)                                  any defense, counterclaim, setoff or dispute exists as to such Account, but only to the extent of such defense, counterclaim, setoff or dispute;   11 --------------------------------------------------------------------------------   (d)                                 such Account is not a true and correct statement of bona fide indebtedness incurred in the amount of the Account for merchandise sold to or services rendered and accepted by the applicable Account Debtor;   (e)                                  an invoice, reasonably acceptable to Agent in form and substance, has not been sent to the applicable Account Debtor in respect of such Account;   (f)                                    such Account (i) is not owned by such Borrower or (ii) is subject to any right, claim, security interest or other interest of any other Person, other than Liens in favor of Agent, on behalf of itself and Lenders;   (g)                                 such Account arises from a sale to any director, officer, other employee or Affiliate of any Credit Party, or to any entity that has any common officer or director with any Credit Party;   (h)                                 except for Government Accounts, such Account is the obligation of an Account Debtor that is the United States government or a political subdivision thereof, or department, agency or instrumentality thereof unless Agent, in its sole discretion, has agreed to the contrary in writing and such Borrower, if necessary or desirable, has complied with respect to such obligation with the Federal Assignment of Claims Act of 1940, or any applicable state, county or municipal law restricting assignment thereof;   (i)                                     such Account is the obligation of an Account Debtor located in a foreign country;   (j)                                     such Borrower or any Subsidiary thereof is liable for goods sold or services rendered by the applicable Account Debtor to such Borrower or any Subsidiary thereof but only to the extent of the potential offset;   (k)                                  such Account arises with respect to goods that are delivered on a bill and hold, cash on delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor is or may be conditional;   (l)                                     such Account is in default; provided that, without limiting the generality of the foregoing, an Account shall be deemed in default upon the occurrence of any of the following:   (i)                                     the Account is not paid within the earlier of: (a) one hundred twenty (120) days following its due date or (b) one hundred fifty (150) days following the original invoice date;   (ii)                                  the Account Debtor obligated upon such Account suspends business, makes a general assignment for the benefit of creditors or fails to pay its debts generally as they come due; or   (iii)                               any Account Debtor obligated upon such Account is a debtor or a debtor in possession under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors;   12 --------------------------------------------------------------------------------   (m)                               such Account is the obligation of an Account Debtor if fifty percent (50%) or more of the Dollar amount of all Accounts owing by that Account Debtor are ineligible under the other criteria set forth in this definition;   (n)                                 such Account, as to which Agent’s Lien attaches thereon on behalf of itself and Lenders, is not a first priority perfected Lien, subject to Permitted Encumbrances;   (o)                                 any of the representations or warranties in the Loan Documents with respect to such Account are untrue or incomplete with respect to such Account;   (p)                                 such Account is evidenced by a judgment, Instrument or Chattel Paper (other than Instruments or Chattel Paper that have been delivered to the Agent);   (q)                                 such Account exceeds any credit limit established by Agent, in its sole credit judgment;   (r)                                    except with respect to Government Accounts, such Account, together with all other Accounts owing by such Account Debtor and its Affiliates as of any date of determination, exceeds 10% of all Eligible Accounts;   (s)                                  such Account is payable in any currency other than Dollars; or   (t)                                    such Account is otherwise unacceptable to Agent in its reasonable credit judgment.   “Eligible Inventory” means, at any date of determination thereof, the aggregate amount of all Inventory at such date owned by any Borrower other than any item of Inventory (determined without duplication) that:   (a)                                  is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the first priority perfected Liens in favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in favor of bailees to the extent expressly permitted hereunder (subject to Reserves established by Agent in accordance with Section 2.1(d) hereof);   (b)                                 (i) is not located on premises owned, leased or rented by such Borrower and set forth in Disclosure Schedule 3 to the Security Agreements, or (ii) is stored at a leased location, unless a reasonably satisfactory landlord waiver has been duly executed and delivered by landlord to Agent, or (iii) is stored with a bailee or warehouseman, unless a reasonably satisfactory, acknowledged bailee letter has been received by Agent and Reserves reasonably satisfactory to Agent have been established with respect thereto, or (iv) is located at an owned location subject to a mortgage in favor of a Person other than Agent unless a reasonably satisfactory mortgagee waiver has been duly executed and delivered by mortgagee to Agent, or (v) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000;   (c)                                  is placed on consignment or is in transit;   13 --------------------------------------------------------------------------------   (d)                                 is covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent and Lenders;   (e)                                  is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;   (f)                                    consists of display items or packing or shipping materials, manufacturing supplies, work-in-process Inventory or replacement parts;   (g)                                 consists of goods which have been returned by the buyer;   (h)                                 is not of a type held for sale in the ordinary course of such Borrower’s business;   (i)                                     is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances;   (j)                                     any of the representations or warranties in the Loan Documents with respect to such Inventory are untrue or incomplete with respect to such Inventory;   (k)                                  consists of any costs associated with “freight-in” charges;   (l)                                     consists of Hazardous Materials or goods that can be transported or sold only with licenses that are not readily available;   (m)                               is not covered by casualty insurance reasonably acceptable to Agent; or   (n)                                 is otherwise unacceptable to Agent in its reasonable credit judgment.    “Environmental Laws” means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.   14 --------------------------------------------------------------------------------   “Environmental Liabilities” means, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws or Environmental Permits or in connection with any Release or threatened Release or the presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.   “Environmental Permits” means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.   “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rules and regulations promulgated thereunder.   “ERISA Event” means, with respect to any Credit Party or any member of a Controlled Group, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan, (b) the withdrawal of any Credit Party or any member of a Controlled Group from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal of any Credit Party or any member of a Controlled Group from any Multi-employer Plan, (d) the termination of, the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA, (e) the institution of proceedings to terminate a Title IV Plan or Multi-employer Plan by the PBGC, (f) the failure by any Credit Party or any member of a Controlled Group to make when due required contributions to a Multi-employer Plan or Title IV Plan unless such failure is cured within thirty (30) days, (g) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multi-employer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA, (h) the termination of a Multi-employer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multi-employer Plan under Section 4241 or 4245 of ERISA, (i) the loss of a Qualified Plan’s qualification or tax exempt status, or (j) the termination of a Plan described in Section 4064 of ERISA.   “ESOP” means a Plan that is intended to satisfy the requirements of Section 4975(e)(7) of the IRC.   “Event of Default” has the meaning ascribed to it in Section 8.1.   “Excess Cash Flow Offer” shall have the meaning assigned to such term in the Senior Unsecured High Yield Note Indenture as in effect on the Effective Date.   15 --------------------------------------------------------------------------------   “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any rules and regulations promulgated thereunder.   “Existing Credit Facility” means the secured Amended and Restated Credit Agreement dated as of April 23, 2004, by and among the Credit Parties, and GECC Capital Markets Group, Inc., as Lead Arranger, General Electric Capital Corporation, as Agent, and the Existing Lenders, as amended or modified by the Amendments dated May 3, 2004, June 30, 2004, October 20, 2004 and December 31, 2004, the Waiver Agreements dated August 8, 2005, October 14, 2005, November 7, 2005, and the Forbearance Agreement, and as may be further amended or modified from time to time.   “Existing L/C” means any Letter of Credit issued under the Existing Credit Facility which remains outstanding on the Effective Date, each as scheduled on Schedule 2.5(l).   “Existing Lenders” means the “Lenders” signatory to the Existing Credit Facility.   “Exit Facility” has the meaning ascribed to it in Section 2.7(e).   “Exit Fee” has the meaning ascribed to it in Section 2.7(e).    “Extension of Credit” means, as the context requires, (a) an Advance, (b) the making of an Advance, (c) the conversion of a Base Rate Loan to a LIBOR Loan or the continuation of a LIBOR Loan as a LIBOR Loan for an additional LIBOR Period, or (d) the issuance of any Letter of Credit or the incurrence of any Reimbursement Obligation.   “Federal Funds Rate” means, for any day, a floating rate equal to the weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by the Agent, which determination shall be final, binding and conclusive (absent manifest error).   “Fees” means any and all fees payable (after giving effect to any fee waivers) to Agent or any Lender pursuant to this Agreement, the Existing Credit Facility, the Forbearance Agreement, the Commitment Letter or any of the other Loan Documents.   “Filing Date” has the meaning ascribed to it in Section 13.   “Fiscal Quarter” means any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30 and December 31 of each year.   “Fiscal Year” means any of the annual accounting periods of the Borrowers ending on December 31 of each year.   16 --------------------------------------------------------------------------------   “Fixed Charge Coverage Ratio” means, with respect to any Person for any fiscal period, the ratio obtained by dividing (a) EBITDA, as calculated pursuant to its definition herein and subject to any adjustments as required under Section 7.18, minus Capital Expenditures made during such period, minus cash payments of taxes during such Period, by (b) Fixed Charges.   “Fixed Charges” means, with respect to any Person for any fiscal period, the sum of (a) the aggregate of all cash Interest Expense paid during such period, plus (b) scheduled payments of principal with respect to any Indebtedness during such period.   “Forbearance Agreement” means the Forbearance Agreement dated December 1, 2005, as amended by the First Amendment to Forbearance Agreement (the “First Amendment”) dated as of December 23, 2005, the Second Amendment to Forbearance Agreement (the “Second Amendment”) dated as of January 30, 2006 and the Third Amendment to Forbearance Agreement (the “Third Amendment”) dated as of March 14, 2006.   “Forbearance Period’ means the period commencing December 1, 2005 and ending on the Commitment Termination Date, as extended pursuant to the terms hereof.   “Funded Debt” means all of the following, with respect to the Borrowers and their Subsidiaries calculated on a consolidated basis, without duplication, (a) all Indebtedness for borrowed money, (b) the Subordinated Notes, (c) the Aggregate L/C Exposure, (d) all Senior Unsecured Debt, and (e) all Indebtedness evidenced by notes, bonds, debentures or similar instruments, or upon which interest payments are customarily made, in each case, that by its terms matures more than one (1) year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one (1) year from, the date of creation thereof, and specifically including, without limitation, Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one (1) year at the option of the debtor, and also including, in the case of the Borrowers, the Obligations and, without duplication, Guaranteed Obligations in respect of Funded Debt of other Persons.   “GAAP” has the meaning ascribed to it in Section 1.2.   “GE Capital” means General Electric Capital Corporation, a Delaware corporation, and its successors and assigns.    “GECMG” means GECC Capital Markets Group, Inc., and its successors and permitted assigns.   “Government Accounts” means, collectively, any and all Accounts which are (a) Medicare Accounts, (b) Medicaid Accounts, (c) TRICARE Accounts, (d) CHAMPVA Accounts, or (e) any other Account payable by a Governmental Authority acceptable to the Agent in its sole discretion.   “Government Receivables Deposit Account” has the meaning ascribed to it in Section 6.16.   17 --------------------------------------------------------------------------------   “Government Receivables Deposit Account Agreement” has the meaning ascribed to it in Section 6.16.   “Governmental Approval” means an authorization, consent, approval, license or exemption of, registration or filing with, or report or notice to any Governmental Authority.   “Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.   “Guaranteed Obligations” means as to any Person, without duplication, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary obligation”) of any other Person (the “primary obligor”) in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof; provided that the term Guaranteed Obligations shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guaranteed Obligations at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Obligations is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Obligations, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof.   “Guarantors” means Curative Health Services III Co. and each Person (including, without limitation, any Subsidiary of any Borrower acquired or created after the Effective Date) that executes a Guaranty Agreement or other similar agreement in favor of Agent, for itself and the ratable benefit of Lenders, in connection with the transactions contemplated by this Agreement and the other Loan Documents.   “Guarantor Payment” has the meaning ascribed to it in Section 12.7(a).   “Guarantor Security Agreement” means a Guarantor Security Agreement substantially in the form of Exhibit H to this Agreement.   “Guaranty Agreements” means, collectively, that certain Subsidiary Guaranty dated as of March 30, 2006 by and among Curative Health Services III Co., and any other guaranty agreements now or hereafter executed by any Person in favor of Agent and Lenders to guarantee the Obligations.    “Hazardous Material” means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter under, any Environmental Laws, including any   18 --------------------------------------------------------------------------------   material or substance that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.   “Healthcare Laws” means, collectively, any and all federal, state or local laws, rules, regulations and administrative manuals, orders, guidelines and requirements issued under or in connection with Medicare, Medicaid CHAMPVA, TRICARE or any government payment program or any law governing the licensure of or regulating healthcare providers, professionals, facilities or payors or otherwise governing or regulating the provision of, or payment for, Medical Services, or the sale of medical supplies. Without limiting the generality of the foregoing, Healthcare Laws include, without limitation, Section 1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the “Federal Anti-Kickback Statute,” and the Social Security Act, as amended, and Section 1877, 42 U.S.C Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as “Stark Statute”.   “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended from time to time, and any rules or regulations promulgated from time to time thereunder.   “HIPAA Business Associate Agreement” means, collectively, one or more Business Associate Agreements in substantially the form attached hereto as Exhibit M, between Agent and one or more Credit Parties, as amended, restated, supplemented or otherwise modified from time to time.   “HIPAA Compliance Date” has the meaning ascribed to it in Section 4.21.   “HIPAA Compliance Plan” has the meaning ascribed to it in Section 4.21.   “HIPAA Compliant” has the meaning ascribed to it in Section 4.21.   “Holdings” has the meaning ascribed thereto in the preamble to this Agreement.   “Holdings Pledge Agreement” has the meaning ascribed thereto in the definition of Pledge Agreements.   “Holdings Security Agreement” has the meaning ascribed thereto in the definition of Security Agreements.    “Indebtedness” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money (but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than 6 months unless being contested in good faith and for which adequate reserves have been established in accordance with GAAP), (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person to pay the deferred purchase price of property or service   19 --------------------------------------------------------------------------------   incurred in the ordinary course of business if the purchase price is due more than six (6) months from the date the obligation is incurred, (d) all Capital Lease Obligations of such Person, (e) any obligation under any lease (a “synthetic lease”) treated as an operating lease under GAAP and as a loan or financing for United States income tax purposes or creditors rights purposes, (f) all obligations of such Person to purchase securities (or other property) which arise out of or in connection with the issuance or sale of the same or substantially similar securities (or property), (g) all contingent or non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (h) all equity securities of such Person subject to repurchase or redemption otherwise than at the sole option of such Person, (i) all “earnouts” and similar payment obligations of such Person, (j) all indebtedness secured by a Lien on any asset of such Person, whether or not such indebtedness is otherwise an obligation of such Person, (k) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, net of liabilities owed to such Person by the counterparty thereon, (l) all Guaranteed Obligations of such Person.   “Indemnitees” has the meaning ascribed to it in Section 9.2.   “Information” means written data, reports, statements (including, but not limited to, financial statements delivered pursuant to or referred to in Sections 5.1 and 5.2), documents and other information, whether, in the case of any such in writing, the same was prepared by any Credit Party or any other Person on behalf of any Credit Party.   “Insurer” means a Person that insures a Patient against certain of the costs incurred in the receipt by such Patient of Medical Services, or that has an agreement with a Credit Party to compensate such Credit Party for providing goods or services to a Patient.   “Intercompany Notes” has the meaning ascribed to it in Section 7.1(d).   “Interest Expense” means, with respect to any Person for any period, the aggregate interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including interest expense with respect to any Indebtedness of such Person and interest expense for the relevant period that has been capitalized on the balance sheet of such Person.   “Interest Payment Date” means (a) as to any Base Rate Loan, the first Business Day of each calendar quarter to occur while such Loan is outstanding, and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period, provided that in the case of any LIBOR Period greater than three months in duration, interest shall be payable at three-month intervals and on the last day of such LIBOR Period; and provided further that, in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid in full and (y) the Commitment Termination Date, shall be deemed to be an “Interest Payment Date” with respect to any interest (including interest accruing at the Default Rate) that has then accrued under this Agreement and remains unpaid.   20 --------------------------------------------------------------------------------   “Interest Rate Protection Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to hedge against fluctuations in interest rates under which the Borrowers or any of their Subsidiaries is a party or a beneficiary on the date hereof or becomes a party or a beneficiary hereafter.   “Interim Order” has the meaning set forth in the definition of the Bankruptcy Court Order.   “Inventory Advance Rate” means 60%, subject to adjustment pursuant to Section 2.1(d).   “Investment” means, with respect to any Person, any investment by such Person in any other Person, whether by means of acquiring or holding Stock, capital contribution, loan, advance, extension of credit, purchase of Indebtedness, guarantee, deposit or otherwise, but excluding any trade account receivable arising in the ordinary course of business.   “IRC” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations promulgated thereunder.   “IRS” means the Internal Revenue Service.   “Joinder Agreement” has the meaning ascribed to it in Section 2.16.   “L/C Exposure” means, with respect to any Lender at any time, its Percentage of the Aggregate L/C Exposure at such time.   “L/C Issuer” means (a) GE Capital and (b) any other Lender designated as an “L/C Issuer” for purposes hereof in a notice to the Agent signed by the Borrower Representative and such Lender, acting in each case in the capacity of an L/C Issuer under the letter of credit facility described in Section 2.5, and their respective successors.   “L/C Limit” means $7,500,000.   “L/C Obligations” means all outstanding obligations incurred by L/C Issuer and Revolving Lenders, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of a participation as set forth in Section 2.5 with respect to any Letter of Credit. The amount of such L/C Obligations shall equal the maximum amount that may be payable at such time or at any time thereafter by Agent or Revolving Lenders thereupon or pursuant thereto. L/C Obligations shall include the obligations under the Existing L/Cs.   “L/C Payment Date” has the meaning ascribed to it in Section 2.5(f).   “Lead Arranger” means GECMG in its capacity as Lead Arranger hereunder and under the Loan Documents, and its successors in such capacity.   21 --------------------------------------------------------------------------------   “Lenders” means GE Capital, the other Lenders named on the signature pages of this Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations pursuant to Section 11.6, such term shall include any assignee of such Lender permitted under this Agreement.   “Lending Party” means the Agent, Lead Arranger, the Lenders and any L/C Issuer.   “Letter of Credit Fee” has the meaning ascribed to it in Section 2.7(d).   “Letters of Credit” has the meaning ascribed to it in Section 2.5(a).   “LIBOR Borrowing” means a Borrowing that is constituted of LIBOR Loans.   “LIBOR Business Day” means a Business Day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions.   “LIBOR Loan” means a Loan or any portion thereof bearing interest by reference to the LIBOR Rate.   “LIBOR Loan Advance” means a Revolving Credit Advance bearing interest by reference to the LIBOR Rate.   “LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day and ending one (1), two (2), three (3) or six (6) months thereafter, in each case as selected by the Borrower Representative’s irrevocable notice to Agent as set forth in Section 2.3; provided that the foregoing provision relating to LIBOR Periods is subject to the following:   (a)                                  if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day;   (b)                                 no LIBOR Period shall extend beyond the Commitment Termination Date;   (c)                                  any LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;   (d)                                 the Borrower Representative shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and   22 --------------------------------------------------------------------------------   (e)                                  the Borrower Representative shall select LIBOR Periods so that there shall be no more than five (5) separate LIBOR Loans in existence at any one time.   “LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent equal to:   (a)                                  the offered rate for deposits in Dollars for the applicable LIBOR Period that appears on Telerate Page 3750 (or any successor or substitute page) as of 11:00 a.m. (London time) on the second full LIBOR Business Day next preceding the first day of such LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by   (b)                                 a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board that are required to be maintained by a member bank of the Federal Reserve System.   If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower Representative.   “Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien (statutory or other), charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease, conditional sale or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).   “Litigation” has the meaning ascribed to it in Section 4.7.   “Loan Account” has the meaning ascribed to it in Section 2.12.   “Loan Documents” means this Agreement, the Notes, the Commitment Letter, the Collateral Documents, the master documentary agreement relating to the issuance of documentary Letters of Credit, the HIPAA Business Associate Agreement, and all other agreements, instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Credit Party, or any employee of   23 --------------------------------------------------------------------------------   any Credit Party, and delivered to Agent or any Lender in connection with this Agreement or the transactions contemplated thereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.   “Loans” means any one or more of the Revolving Loan or the Swingline Loans, or any other extension of credit hereunder, as the context may require.   “Lock Boxes” has the meaning ascribed to it in Section 6.16.   “Margin Stock” has the meaning assigned thereto in Regulation U of the Federal Reserve Board, as the same may be amended, supplemented or modified from time to time.   “Material Adverse Effect” means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Credit Parties taken as a whole, (b) the rights and remedies of the Agent or the Lenders under the Loan Documents, or the ability of any Credit Party to perform its obligations under the Loan Documents to which it is a party, as applicable, (c) the legality, validity or enforceability of any Loan Document, or (d) the existence, perfection or priority of any security interest granted in the Loan Documents or the value of the Collateral (including its value to the Agent and the Lenders as security for the Obligations). If (x) a fact or circumstance disclosed in the financial statements referred to in Section 4.5 or a Disclosure Statement, or if an investigation, action, suit or proceeding disclosed in Disclosure Schedule 4.7, that, at the time of such disclosure did not appear reasonably likely to have a Material Adverse Effect, should in the future have, or appear reasonably likely to have, a Material Adverse Effect, or (y) a development or change shall occur with respect to any fact or circumstance disclosed in any financial statement, Disclosure Schedule or previously described investigation, action, suit or proceeding that should in the future have or appear reasonably likely to have a Material Adverse Effect, then in each case ((x) and (y)) such Material Adverse Effect shall be a change or event subject to Section 4.6 notwithstanding such prior disclosure.   “Maximum Commitment Amount” means, as of any date of determination, an amount equal to the Revolving Credit Commitments of all Lenders as of that date.   “Maximum Lawful Rate” has the meaning ascribed to it in Section 2.15(b).   “Medicaid” means, collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§1396 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders, guidelines or requirements (whether or not having the force of law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.   24 --------------------------------------------------------------------------------   “Medicaid Account” means an Account payable pursuant to a Medicaid Provider Agreement.   “Medicaid Certification” means certification of a facility by CMS or a state agency or entity under contract with CMS that such healthcare facility fully complies with all the conditions of Medicaid.   “Medicaid Provider Agreement” means an agreement entered into between a state agency or other entity administering Medicaid in such state and a health care facility or physician under which the health care facility or physician agrees to provide services or merchandise for Medicaid patients.   “Medical Services” means medical or health care services provided to a Patient, including, but not limited to, medical or health care services provided to a Patient and performed by a Credit Party which are covered by a policy of insurance issued by an Insurer, and includes, without limitation, physician services, pharmacy services, nurse and therapist services, dental services, hospital services, skilled nursing facility services, comprehensive outpatient rehabilitation services, home health care services, residential and out-patient behavioral healthcare services, and medicine, pharmaceutical products or health care equipment provided by a Credit Party to a Patient for a necessary or specifically requested valid and proper medical or health purpose.   “Medicare” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§1395 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines (whether or not having the force of law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.   “Medicare Account” means an Account payable pursuant to a Medicare Provider Agreement.   “Medicare Certification” means certification of a facility by CMS or a state agency or entity under contract with CMS that such healthcare facility fully complies with all conditions for such facility’s participation in Medicare.   “Medicare Provider Agreement” means an agreement entered into between a state agency or other entity administering Medicare in such state and a health care facility or physician under which the health care facility or physician agrees to provide services or merchandise for Medicare patients.    “Mortgaged Property” has the meaning set forth to it in Section 6.13.   “Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other Real Property security documents delivered by any Credit Party to Agent on behalf of itself and Lenders with respect to the Mortgaged Properties, all in form and substance reasonably satisfactory to Agent.   25 --------------------------------------------------------------------------------   “Multi-employer Plan” means a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or any member of a Controlled Group is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.   “Net Cash Proceeds” means, with respect to any transaction, an amount equal to the cash proceeds received by a Credit Party or any Subsidiary from or in respect of such transaction (including any cash proceeds received as income or other cash proceeds of any non-cash proceeds of such transaction), less (x) any commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by the Credit Party in connection therewith (in each case, paid to non-Affiliates) and (y) in the case of an Asset Disposition, any amounts payable to holders of senior Liens (to the extent such Liens are permitted by Section 7.2) and any taxes paid or payable by such Person (as reasonably estimated by the chief financial officer of the Borrower Representative giving effect to the overall tax position of such Person) in respect of such Asset Disposition and (z) the amount of any reasonable reserve established in accordance with GAAP against any liabilities retained by such Person (other than taxes deducted pursuant to the foregoing clause (y)) associated with the asset disposed of in such Asset Disposition.   “Net Proceeds Offer” shall have the meaning assigned to such term in Senior Unsecured High Yield Note Indenture as in effect on the Effective Date.   “Notes” means, collectively, the Revolving Notes and the Swingline Notes.   “Notice of Borrowing” has the meaning ascribed to it in Section 2.3(a).   “Obligations” means (a) all Loans, fees, indebtedness, liabilities, obligations, covenants and duties of any Credit Party to any Lending Party of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, in contract or tort, liquidated or unliquidated, arising under this Agreement, or under the other Loan Documents, by operation of law or otherwise in connection with the transactions contemplated hereby, now existing or hereafter arising, and whether or not for the payment of money or the performance or non-performance of any act, including, but not limited to, all damages that any Credit Party may owe to the Agent and/or the Lenders by reason of any breach by any Credit Party of any representation, warranty, covenant, agreement or other provision of this Agreement or any of the other Loan Documents. Without limiting the generality of the foregoing, this term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against any Credit Party in bankruptcy, whether or not allowed in such case or proceeding), Fees, Charges, expenses, attorneys’ fees and any other sum payable by any Credit Party to a Lending Party under this Agreement or any of the other Loan Documents.   “Officer’s Certificate” means a certificate executed on behalf of a Person by one or more of its chairman of the board (if an officer), chief executive officer, president, chief financial officer or treasurer.   26 --------------------------------------------------------------------------------   “Organizational Documents” means, for any corporation, the certificate or articles of incorporation, the bylaws, or other similar organizational documents, any certificate of designation or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation adopting, supplementing or modifying any of the foregoing and, for any entity other than a corporation, the equivalent of the foregoing, including, without limitation, the partnership agreement, and the operating agreement (or comparable agreement) of any partnership or limited liability company, respectively.   “Outstanding Amount” means, with respect to any Lender at any time, the sum of (a) the aggregate outstanding principal amount of its Advances, plus (b) its Percentage of the aggregate outstanding principal amount of the Swingline Loans (if any) plus (c) its L/C Exposure, all determined at such time after giving effect to any prior assignments by or to such Lender pursuant to Section 11.6.   “Overadvance” has the meaning ascribed to it in Section 2.17(a).   “Overadvance Commitment” has the meaning ascribed to it in Section 2.17(b).   “Overadvance Loan” has the meaning ascribed to it in Section 2.17(a).   “Patient” means any Person receiving Medical Services from any Credit Party and all Persons legally liable to pay such Credit Party for such Medical Services other than Insurers or Governmental Authorities.   “Payment Account” means, with respect to each Lender, the account specified on the signature pages hereof into which all payments by or on behalf of the Borrowers to such Lender under the Loan Documents shall be made, or such other account as such Lender shall from time to time specify by notice to the Borrower Representative and Agent.   “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.   “Pension Plan” means a Plan described in Section 3(2) of ERISA.   “Percentage” means, with respect to any Lender at any time, the percentage which the amount of its Commitment for a particular Class at such time represents of the aggregate amount of all the Commitments for such Class at such time. At any time after the Commitments for a Class shall have terminated, the term “Percentage” shall refer to a Lender’s Percentage for that Class immediately before such termination, adjusted to reflect any subsequent assignments pursuant to Section 11.6.   “Permitted Contest” means, with respect to any Credit Party, a good faith contest by such Credit Party, by appropriate proceedings, of the validity or amount of any Charges, claims, obligations or liabilities of such Credit Party; provided, that (a) such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges, (b) no Lien shall be imposed to secure payment of such Charges, claims, obligations or liabilities (other than payments to warehousemen and/or bailees) that is   27 --------------------------------------------------------------------------------   superior to any of the Liens securing the Obligations, (c) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, (d) such Credit Party shall promptly pay or discharge such contested Charges, claims, obligations, liabilities and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Credit Party or the conditions set forth above in clauses (a), (b) and (c) of this definition are no longer met, and (e) Agent has not advised Borrower Representative in writing that Agent reasonably believes that nonpayment or nondischarge thereof could have, or result in, a Material Adverse Effect.   “Permitted Encumbrances” means the following encumbrances: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are the subject of a Permitted Contest; (b) pledges or deposits of money securing statutory obligations under workmen’s compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money made in the ordinary course of business and securing bids, tenders, contracts (other than contracts for the payment of money), securing leases to which any Credit Party is a party as lessee made in the ordinary course of business, or securing indemnity, performance or other similar bonds incurred in the ordinary course of business and to the extent required by applicable law for the performance of bids, tenders or contracts (other than for the repayment of Debt and excluding Liens under ERISA); (d) inchoate and unperfected workers’, mechanics’ or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Property; (e) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $25,000 at any time, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (g) any attachment or judgment lien not constituting an Event of Default under Section 8.1(k); (h) zoning restrictions, easements, licenses, or other restrictions on the use of any Real Property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Property; (i) presently existing or hereafter created Liens in favor of Agent, on behalf of the Lenders and the other Secured Creditors; (j) Liens in respect of the Carve Out, as required by the Bankruptcy Court Order and (k) Liens expressly permitted under clauses (b), (c), (e) and (f) of Section 7.2 of this Agreement.    “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).   “Pharmacy Adjustment” shall mean a one time add back, in the aggregate, of up to $1,700,000 of Accounts Receivable due from Park Compounding Pharmacy, Inc. American Surgical Pharmacy, Inc. and Siskin’s San Carlos Pharmacy, Inc. which were reserved for in the Fiscal Quarter ended December 31, 2005.   28 --------------------------------------------------------------------------------    “PIK SPREAD” MEANS THE DIFFERENCE BETWEEN THE INTEREST ACCRUED AND THE INTEREST PREVIOUSLY PAID UNDER THE EXISTING CREDIT FACILITY.   “Plan” means, at any time, an “employee benefit plan” as defined in Section 3(3) of ERISA, that any Credit Party or any member of a Controlled Group maintains, contributes to or has an obligation to contribute to or has maintained, contributed to or had an obligation to contribute to at any time within the past seven (7) years on behalf of participants who are or were employed by any Credit Party or any member of a Controlled Group.   “Plan of Reorganization” means any plan of reorganization filed in pursuant to Chapter 11 of the Bankruptcy Code by any Credit Party, by any Affiliate of any Credit Party, or by any other party in interest in a Bankruptcy Case.   “Pledge Agreements” means, collectively, (i) the Borrower Pledge Agreement, and (ii) any pledge agreements entered into after the Effective Date by any Credit Party (as required by this Agreement or any other Loan Document).    “Privacy and Security Rules” has the meaning ascribed to it in Section 4.21.   “Private Accounts” means, collectively, any and all Accounts that are not Government Accounts.    “Pro Rata Share” shall mean, when calculating a Secured Creditor’s portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor’s Obligations, and the denominator of which is the then outstanding amount of all Obligations.   “Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with respect to any Lender that is an investment fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act) that extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, and that in each case, has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender and that, through its applicable lending office, is capable of lending to the Borrowers without the imposition of any withholding or similar taxes; provided that (i) no Person determined by Agent to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, (ii) no Person or Affiliate of such Person (other than a Person that is already a Lender) holding Subordinated Debt or Stock issued by any Credit Party shall be a Qualified Assignee, and (iii) no Person that is a Competitor or a Subsidiary of a Competitor shall be a Qualified Assignee.   29 --------------------------------------------------------------------------------   “Qualified Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC.   “Quarterly Date” means the first Business Day of each of January, April, July and October occurring after the Effective Date.   “Real Property” with respect to any Person, means all of such Person’s right, title and interest in and to any owned or leased real property and any buildings and Fixtures located thereon.   “Reimbursement Obligations” means, at any time, all obligations of the Borrowers to reimburse the L/C Issuers pursuant to Section 2.5 for amounts paid by the L/C Issuers in respect of drawings under any Letters of Credit, including any portion of any such obligation to which a Lender has become subrogated pursuant to Section 2.5.   “Reinvestment Period” has the meaning ascribed to it in Section 2.8(b).   “Related Person” has the meaning ascribed to it in Section 6.16.    “Release” means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property.   “Reportable Event” means a reportable event as defined in Section 4043 of ERISA other than a reportable event for which the requirement to provide notice to the PBGC has been waived by regulation.   “Required Lenders” means Lenders having (a) more than 66 -2/3% of the Commitments of all Lenders, or (b) if the Commitments have been terminated, more than 66 -2/3% of the aggregate outstanding principal amount of all Loans and Reimbursement Obligations.   “Reserves” means (a) a reserve in an amount equal to the Carve Out and (b) any other reserves established by Agent from time to time pursuant to Section 2.1(d) hereof against Eligible Accounts, Eligible Inventory or Borrowing Availability of the Borrowers. Without limiting the generality of the foregoing, Reserves may be established by Agent from time to time to ensure the payment of accrued Interest Expenses or any Indebtedness.    “Restricted Payment” means, with respect to any Credit Party (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock, (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of such Credit Party’s Stock or any other payment or distribution made in respect thereof, either directly or indirectly, (c) 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, any Subordinated Debt, (d) any   30 --------------------------------------------------------------------------------   payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of such Credit Party now or hereafter outstanding, (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of such Credit Party’s Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission, (f) any payment, loan, contribution, or other transfer of funds or other property to any holder of stock or equity interests of such Credit Party other than payment of compensation in the ordinary course of business to any holders of stock or equity interests who are employees, officers or directors of such Person, (g) any payment of management fees (or other fees of a similar nature) by such Credit Party to any holder of Stock of such Credit Party or its Affiliates, (h) 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, any Senior Unsecured Debt.   “Revolving Credit Advance” has the meaning ascribed to it in Section 2.1(a).   “Revolving Credit Commitment” means: (a) as to any Lender, the amount (if any) set forth thereon opposite the name of such Lender on the signature pages hereof under the heading “Revolving Credit Commitment”; (b) with respect to any assignee of a Revolving Credit Commitment, the amount of the transferor Lender’s Revolving Credit Commitment assigned to such assignee pursuant to Section 11.6; and (c) as to all Lenders having a Revolving Credit Commitment, the aggregate commitment of all Lenders to make Revolving Credit Advances, which aggregate commitment shall be $45,000,000 on the Effective Date, as such amount may be reduced from time to time pursuant to Section 2.8 or changed as a result of an assignment pursuant to Section 11.6. The term “Revolving Credit Commitment” does not include the Swingline Commitment.   “Revolving Credit Commitments” means the sum of the Revolving Credit Commitments of all Lenders in effect at such time.   “Revolving Lenders” means, as of any date of determination, Lenders having a Revolving Credit Commitment.   “Revolving Loan” means, at any time, the sum of (a) the aggregate amount of Revolving Credit Advances outstanding to the Borrowers plus (b) the aggregate L/C Obligations incurred on behalf of the Borrowers. Unless the context otherwise requires, references to the outstanding principal balance of the Revolving Loan shall include the outstanding balance of L/C Obligations.   “Revolving Note” has the meaning ascribed to it in Section 2.2.   “Secured Creditors” means, collectively, the Lenders and the Agent together with their respective successors and assigns.   “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.   31 --------------------------------------------------------------------------------   “Security Agreements” means collectively, (i) the Borrower Security Agreement and (ii) any other security agreements now or hereafter executed by any Person in favor of Agent and Lenders to secure the Obligations.   “Senior Funded Debt” means Indebtedness incurred under this Agreement and any other Funded Debt (other than Senior Unsecured Debt) that does not constitute Subordinated Debt.   “Senior Management” shall mean with respect to each Credit Party, the chief executive officer, the chief operating officer, and the chief financial officer.   “Senior Secured Leverage Ratio” means, at any time with respect to the Holdings and its Subsidiaries, on a consolidated basis, the ratio obtained by dividing (a) Senior Funded Debt by (b) EBITDA for the twelve (12) months ending as of the last day of the most recent month for which financial statements have been delivered pursuant to Section 5.1(n).   “Senior Unsecured Debt” means the Indebtedness under the Senior Unsecured High Yield Notes.   “Senior Unsecured High Yield Note Documents” means, collectively, the Senior Unsecured High Yield Notes, the Senior Unsecured High Yield Note Indenture and any and all agreements, instruments or other documents from time to time evidencing or guaranteeing the obligations of any of the Credit Parties under or in respect of the Senior Unsecured High Yield Notes, in each case, as amended, restated, supplemented or modified from time to time.   “Senior Unsecured High Yield Note Indenture” means that certain Indenture dated as of April 23, 2004 between Wells Fargo Bank, N.A., as trustee, and Holdings, pursuant to which Holdings issued its Senior Unsecured High Yield Notes, as amended, restated, supplemented or modified from time to time.   “Senior Unsecured High Yield Notes” means, collectively, the unsecured senior notes of Holdings issued pursuant to the Senior Unsecured High Yield Note Indenture.   “Single Employer Plan” means a Plan maintained by the Borrowers or any member of the Controlled Group for employees of the Borrowers or any member of the Controlled Group.   “Solvent” means, with respect to any Person on a particular date, that on such date (a) the assets of such Person, at a fair valuation (with such assets being measured on a going concern basis if and only to the extent that such Person’s business could reasonably be viewed at the time of any such determination as in fact being conducted as a going concern in light of the business historically conducted by such Person and such other facts and circumstances existing at such time that are relevant under Applicable Law to such determination, and otherwise, if such Person is not conducting its business as a going concern, such assets shall be measured on a liquidation basis and in any event without attributing any value to any asset of such Person constituting goodwill), exceed its liabilities, including contingent liabilities, (b) the remaining   32 --------------------------------------------------------------------------------   capital of such Person is not unreasonably small to conduct its business and (c) such Person will not have incurred debts, and does not have the present intent to incur debts, beyond its ability to pay such debts as they mature. For purposes of this definition, “debt” means any liability on a claim, and “claim” means any (i) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. In computing the amount of contingent liabilities of any Person on any date, such liabilities shall be computed at the amount that, in the reasonable credit judgment of the Agent in light of all facts and circumstances existing at such time, represents the amount of such liabilities that reasonably can be expected to become actual or matured liabilities.   “Stated Rate” has the meaning ascribed to it in Section 2.15(b).   “Statement of Sources and Uses” means the Statement of Sources and Uses prepared by Holdings dated as of the Effective Date setting forth the amounts and uses of the proceeds of the Senior Unsecured Debt incurred by Holdings and Loans made available to the Borrowers on the Effective Date, which statement shall be in form and substance satisfactory to the Agent.   “Stock” means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Exchange Act).   “Stock Purchase Agreement” has the meaning ascribed to it in Section 3.1(m).   “Subordinated Debt” means any Indebtedness of any Credit Party subordinated to the Obligations in a manner and form satisfactory to Agent and Lenders in their sole discretion, as to right and time of payment and as to any other rights and remedies thereunder.   “Subordinated Notes” means that certain 4.4% Amended and Restated Promissory Note due February 28, 2007 issued by Holdings in favor of Jon M. Tamiyasu, in his capacity as Stockholder Representative, in an aggregate outstanding principal amount as of the Original Closing Date of $3,600,000 pursuant to the provisions of that certain Stock Purchase Agreement, dated January 27, 2002, by and among Holdings and the stockholders of Apex Therapeutic Care, Inc., as amended through the Original Closing Date.   “Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with   33 --------------------------------------------------------------------------------   respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of the Borrowers.   “Subsidiary Guaranty Agreement” means a Subsidiary Guaranty Agreement substantially in the form of Exhibit G to this Agreement   “Subsidiary Pledge Agreement” has the meaning ascribed to it in the definition of Pledge Agreements.   “Swingline Advance” has the meaning ascribed to it in Section 2.1(b).   “Swingline Availability Period” means the period from and including the Effective Date to but excluding the Swingline Maturity Date.   “Swingline Borrowing” means a borrowing of a Swingline Loan pursuant to Section 2.6(a).   “Swingline Commitment” means the obligation of the Swingline Lender to make Swingline Loans to the Borrowers in an aggregate principal amount at any one time outstanding not to exceed $5,000,000.   “Swingline Lender” means GE Capital, in its capacity as the Swingline Lender under the swingline facility described in Section 2.6, and its successors in such capacity.   “Swingline Loan” means a loan made by the Swingline Lender pursuant to Section 2.6(a).   “Swingline Maturity Date” means the day that is thirty (30) days before the Commitment Termination Date.   “Swingline Note” has the meaning ascribed to it in Section 2.2(b).   “Target” means a Person, group of assets or business line that is the subject of an Acquisition.   “Target Seller” means the seller of a Target in an Acquisition.   “Temporary Cash Investment” means any Investment in (a) direct obligations of the United States or any agency thereof, or obligations fully guaranteed by the United States or any agency thereof, (b) commercial paper rated at least A-1 by Standard & Poor’s Rating Group and P-1 by Moody’s Investors Service, Inc., (c) time deposits with, including certificates of deposit issued by, any office located in the United States of any bank or trust company which is organized under the laws of the United States or any State thereof and has capital, surplus and   34 --------------------------------------------------------------------------------   undivided profits aggregating at least $500,000,000 and which issues (or the parent of which issues) certificates of deposit or commercial paper with a rating described in clause (b) above, (d) repurchase agreements with respect to securities described in clause (a) above entered into with an office of a bank or trust company meeting the criteria specified in clause (c) above, provided in each case that such Investment matures within one (1) year from the date of acquisition thereof by any Credit Party or (e) any money market or mutual fund that invests only in the foregoing and the manager of which and the liquidity of which is reasonably satisfactory to the Agent.   “Termination Date” the date on which (a) the Loans have been indefeasibly repaid in full in cash, (b) all other Obligations under this Agreement and the other Loan Documents have been completely discharged, (c) all of the L/C Obligations have been cash collateralized, cancelled or backed by standby letters of credit in accordance with Section 2.5 hereof, and (d) the Borrowers shall not have any further right to borrow any monies under this Agreement.   “Third Party Payor” means any governmental entity, insurance company, health maintenance organization, professional provider organization or similar entity that is obligated to make payments on any Account.   “Title IV Plan” means a Pension Plan (other than a Multi-employer Plan), that is covered by Title IV of ERISA, and that any Credit Party or any member of a Controlled Group maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.   “Total Leverage Ratio” means, at any time with respect to the Borrowers and their Subsidiaries, on a consolidated basis, the ratio obtained by dividing (a) Funded Debt by (b) EBITDA for the twelve (12) months ending as of the last day of the most recent month for which financial statements have been delivered pursuant to Section 5.1(n).   “Transactions Rule” has the meaning ascribed to it in Section 4.21.   “TRICARE” means, collectively, a program of medical benefits covering former and active members of the uniformed services and certain of their dependents, financed and administered by the United States Departments of Defense, Health and Human Services and Transportation, which program was formerly known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), and all laws, rules, regulations, manuals, orders and administrative, reimbursement and other guidelines of all Governmental Authorities promulgated in connection with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.   “TRICARE Account” means an Account payable pursuant to TRICARE.   “Type” defines a Loan by reference to whether such Loan is a LIBOR Loan or Borrowing or a Base Rate Loan or Borrowing. Identification of a Borrowing or group of Advances by Type indicates that such Borrowing or group of Advances is comprised of Advances of the specified Type.   35 --------------------------------------------------------------------------------   “Unfunded Pension Liability” means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, plus (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Credit Party or any member of a Controlled Group as a result of such transaction.   “Unused Line Fee” has the meaning ascribed to it in Section 2.7(b).   “Welfare Plan” means a Plan described in Section 3(i) of ERISA.   “Working Capital” shall mean, as of any date of determination, Borrowers’ and their Subsidiaries’ Current Assets less their Current Liabilities.   Section 1.2. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), applied on a basis consistent (except for changes concurred in by the Credit Parties’ independent public accountants) with the most recent audited consolidated financial statements of the Credit Parties delivered to the Lenders; provided that, if:  (a) the Borrower Representative notifies the Lenders that the Borrowers wish to amend any provision of any Loan Document to eliminate the effect of any change in GAAP on the operation of such provision, or (b) the Agent notifies the Borrower Representative that the Required Lenders wish to amend any provision of any Loan Document for such purpose, then compliance with such provision shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such provision is amended in a manner satisfactory to the Borrower Representative and the Required Lenders.   Section 1.3. Other Definitional Provisions. The terms “Accounts”, “Chattel Paper”, “Code”, “Contracts”, “Deposit Accounts”, “Documents”, “Fixtures”, “Equipment”, “General Intangibles”, “Goods”, “Intellectual Property”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “License” and “Software” have the meanings assigned to such terms in Section 1 of the Borrower Security Agreement. References in this Agreement to “Articles”, “Sections”, “Schedules” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of or to this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or plural depending on the reference. “Include”, “includes” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words on paper. Except as otherwise expressly provided herein, references to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References   36 --------------------------------------------------------------------------------   to any Person include the successors and permitted assigns of such Person; provided that no Credit Party may assign its rights or obligations under any Loan Document without the prior written consent of the Agent and the Lenders. References “from”, “through” or “to” any date mean, unless otherwise specified, mean “from and including”, “through and including”, and “to but excluding”, respectively. References to any statute and related regulation shall include any amendments, modifications and supplements of the same and any successor statutes and regulations.   Section 1.4. Disclosure Schedules. Disclosures included in the disclosure schedules to this Agreement (collectively, the “Disclosure Schedules”) shall be considered to be made for purposes of all sections thereof if it is reasonably apparent from the face of such disclosure that the disclosure would also be applicable to some other section. Inclusion of any matter or item in any section of any Disclosure Schedule does not imply that such matter or item would, under the provisions of this Agreement, have to be included in any section thereof or that such matter or term is otherwise material. In addition, matters disclosed in the Disclosure Schedules are not necessarily limited to matters required by this Agreement to be disclosed in the Disclosure Schedules, and any such additional matters are set forth for informational purposes only and do not necessarily include other matters of a similar nature.   ARTICLE II.   THE FACILITIES   Section 2.1. The Facilities.   (a)           Revolving Credit Advances.              Upon the terms and subject to the conditions set forth herein, from time to time during the period from the Effective Date to the Commitment Termination Date, each Lender, severally and not jointly, agrees to advance funds to the Borrowers (each a “Revolving Credit Advance”); provided that immediately after each such Advance is made (and after giving effect to any substantially concurrent application of the proceeds thereof to repay outstanding Advances, Reimbursement Obligations or Swingline Loans):   (i)            such Lender’s Outstanding Amount shall not exceed its Revolving Credit Commitment; and   (ii)           the aggregate Outstanding Amount of all the Lenders shall not exceed the lesser of the Maximum Commitment Amount or the Borrowing Base then in effect.   (b)           Swingline Facility.                The Swingline Lender agrees to advance funds to the Borrowers (each as “Swingline Advance”), and the Revolving Lenders agree to purchase participations therein from time to time, all upon the terms and conditions specified in Section 2.6.   37 --------------------------------------------------------------------------------   (c)           Letter of Credit Facility.      The Revolving Lenders agree to incur, or purchase participations in, L/C Obligations incurred by the L/C Issuer upon the terms and subject to the conditions specified in Section 2.5.   (d)           Reserves; Borrowing Base Adjustment.          The Agent shall have the right to establish, modify or eliminate Reserves against Borrowing Availability, the Borrowing Base or any component thereof from time to time in its sole credit judgment. In addition, Agent reserves the right, at any time and from time to time after the Effective Date, to adjust any of the criteria used to determine eligibility of any component of the Borrowing Base, to establish new criteria and to adjust advance rates with respect to such component, in its sole credit judgment, subject to the approval of the Required Lenders in the case of adjustments, new criteria or changes in advance rates that have the effect of making more credit available to the Borrowers. Agent shall endeavor to give prior notice to the Borrower Representative of the imposition of such Reserves, the adjustment of any eligibility criteria or the adjustment of any advance rates, provided that the failure to give such notice shall not invalidate the imposition of such Reserve or any such adjustments, or result in any liability of the Agent or Lenders to any Credit Party or any other Person.   Section 2.2. Notes.   (a)           Revolving Notes. The Revolving Loan of each Lender shall be evidenced by a single revolving note, substantially in the form of Exhibit A (each such note, a “Revolving Note”), dated the Effective Date (or, if issued after the Effective Date, be dated the date of the issuance thereof) in an aggregate principal amount equal to the amount of such Lender’s Revolving Credit Commitment, duly executed and delivered and payable by the Borrowers to such Lender. Each Lender shall record the date and amount of each Revolving Credit Advance made by it, and the date and amount of each payment of principal made by the Borrowers with respect thereto, and prior to any transfer of its Revolving Note shall endorse on Schedule A thereto (or any continuation thereof) forming a part thereof appropriate notations to evidence the foregoing information with respect to such Revolving Loan then outstanding; provided that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers hereunder or under any Revolving Note. Each Lender is hereby irrevocably authorized by the Borrowers to so endorse its Revolving Note and to attach to and make a part of its Revolving Note a continuation of any such schedule as and when required.   (b)           Swingline Notes. The Swingline Loan shall be evidenced by a swingline note substantially in the form of Exhibit C (such note, the “Swingline Note”), dated the Effective Date (or, if issued after the Effective Date, be dated the date of the issuance thereof) in a principal amount equal to the Swingline Commitment or the portion of such Swingline Loan assigned to any Lender in accordance with Section 11.6, duly executed and delivered by the Borrowers and payable to the Swingline Lender or other holder of such Swingline Loan.   Section 2.3. Method of Borrowing; Funding of Loans; Agent May Assume Funding; Failure to Fund.   (a)           Method of Borrowing. Whenever the Borrowers desire to receive an Advance, including the initial Advance, or to convert any portion of the outstanding Base Rate   38 --------------------------------------------------------------------------------   Loans into one or more LIBOR Borrowings (a “Conversion”), or to continue all or any portion of an outstanding LIBOR Loan for another or additional LIBOR Period (a “Continuation”), Borrower Representative on behalf of the applicable Borrower shall give the Agent notice in writing (by telecopy or by telephone confirmed immediately in writing) in the form of a duly completed Exhibit D-1 (a “Notice of Borrowing”) duly executed by an Authorized Signatory, in the case of an Advance or Continuation of, or a Conversion into, a LIBOR Borrowing, three (3) Business Days before the requested date of such Advance, Conversion or Continuation, and in the case of an Advance of a Base Rate Borrowing, not later than 11:00 a.m. (New York City time) on the Business Day before the requested date of such Advance (which shall be a Business Day). Such Notice of Borrowing shall specify (i) the requested date of the Advance, Conversion or Continuation, which shall be a Business Day, (ii) in the case of a Conversion or Continuation, which existing Borrowings include the Loans or portions thereof to be affected by such Notice, (iii) the amount of the Advances to be incurred, and/or the Borrowings to be created by such Conversion or Continuation, (iv) the Class of the Loans comprising each requested Borrowing, (v) in the case of a LIBOR Advance, Conversion or Continuation, the duration of the LIBOR Period of the requested Borrowing and (vi) such other information as the Agent shall request. If a request for a Conversion or Continuation is not timely made prior to the expiration of a LIBOR Period, or is not made in accordance with this Section, the portions of the Loans proposed to be affected thereby shall be converted into, or continued as, Base Rate Loans. Any Notice of Borrowing received after 2:00 p.m. (New York City time) shall be deemed received on the following Business Day. Each Notice of Borrowing shall be irrevocable upon receipt by the Agent.   (b)           Funding of Loans. Promptly after receiving a Notice of Borrowing, the Agent shall notify each Lender of the contents of such Notice of Borrowing, of such Lender’s Percentage of the Advances or Borrowings requested by such Notice of Borrowing and, in the case of a LIBOR Borrowing, the applicable LIBOR Period. In the case of an Advance, each Lender shall make available to the Agent at the Agent’s Office its Percentage of such requested Advance, in lawful money of the United States of America in immediately available funds, prior to 1:00 p.m. (New York City time) on the specified date. The Agent shall, unless it shall have determined that one of the conditions set forth in Article III has not been satisfied, by 3:00 p.m. (or in the case of a LIBOR Borrowing, 12 p.m.) (New York City time) on such day, credit the amounts received by it in like funds to the Borrowers Account, to repay Swingline Loans, to repay Reimbursement Obligations, to pay expenses incurred by the Agent for the Borrowers’ account or in such other manner as the Agent shall reasonably determine.   (c)           Agent May Assume Funding. Unless the Agent shall have received notice from a Lender prior to the date of any particular Advance that such Lender will not make available to the Agent such Lender’s Percentage of such Advance, the Agent may assume that such Lender has made such amount available to it on the date of such Advance in accordance with subsection (b) of this Section 2.3, and may (but shall not be obligated to), in reliance upon such assumption, make available a corresponding amount for the account of the Borrowers on such date. If and to the extent that such Lender shall not have so made such amount available to the Agent, such Lender and the Borrowers severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the day such amount is made available to the Borrowers until the day such amount is repaid to the Agent, at (i) in the case of the Borrowers, a rate per annum equal to the greater of (x) the Federal Funds   39 --------------------------------------------------------------------------------   Rate and (y) the interest rate applicable thereto pursuant to Section 2.4, and (ii) in the case of such Lender, a rate per annum equal to (x) for each day from the day such amount is made available to the Borrowers through the third succeeding Business Day, the Federal Funds Rate for such day as determined by the Agent and (y) for each day thereafter until the day such amount is repaid to the Agent, the Base Rate for such day. If such Lender shall repay such corresponding amount to the Agent, the amount so repaid shall constitute such Lender’s Loan included in such Borrowing for purposes of this Agreement.   (d)           Lender’s Failure to Fund. The failure of any Lender to make an Advance on the date of any Borrowing shall not relieve any other Lender of its obligation hereunder, if any, to make its Advance on that date. Neither the Agent nor any Lender shall be responsible for the failure of any other Person to make any Advance hereunder on the date required therefor.   (e)           Reliance on Notices; Appointment of Borrower Representative. Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Borrowing or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering any notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary. Each Borrower hereby designates Holdings as its representative and agent on its behalf for the purposes of issuing Notices of Borrowing, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.   Section 2.4. Interest on Loans.   (a)           Interest. Each Loan shall bear interest on the outstanding principal amount thereof from the date of the applicable Advance until repaid in full, whether before or after default, judgment or the institution of proceedings under any bankruptcy, insolvency or other similar law, as provided in this Section 2.4. Unless the Default Rate has been imposed, each Loan shall bear interest on the outstanding principal amount thereof until due at a rate per annum equal to, (i) to the extent and so long as it is a Base Rate Loan, the Base Rate as in effect from time to time plus the Applicable Margin, and (ii) to the extent and so long as it is a LIBOR Loan, the LIBOR Rate plus the Applicable Margin.   (b)           Interest Options. Subject to the provisions hereof, all or portions of the Loans, at the option of the Borrower Representative, may be made or Continued as, or Converted   40 --------------------------------------------------------------------------------   into, Base Rate Loans or one or more LIBOR Loan, or any combination thereof; provided that LIBOR Loans may not be Converted, but may be Continued, and such Continuation may occur on (and only on) the last day of an applicable LIBOR Period; provided, further, that Loans of any Class may only be part of a Borrowing consisting of Loans of the same Class; and provided, further, that no Advances shall be made as part of, and no Loans shall be Continued as, LIBOR Loans, and all existing LIBOR Loans shall be Converted into Base Rate Loans on the last day of the applicable LIBOR Period, so long as a Default shall have occurred and be continuing and the Agent shall have determined in its sole discretion to suspend the Borrowers’ LIBOR Borrowing option. Each LIBOR Borrowing shall be in a minimum amount of $500,000 and in greater whole multiples of $500,000. There shall at no time be in effect more than five (5) LIBOR Borrowings.   (c)           Post-Default Interest. During the period that any Default or Event of Default shall have occurred and be continuing, at the election of the Agent (or at the written request of Required Lenders), all Loans and other outstanding Obligations shall bear interest at the Default Rate. Agent shall endeavor to give Borrower Representative notice of the imposition of such Default Rate within a reasonable time thereafter; provided that the failure to give such notice shall not invalidate the imposition of such Default Rate or result in any liability of the Agent or Lenders to any Credit Party or any other Person.   (d)           Payments. Interest due pursuant to this Agreement shall be payable (i) in the case of any Loans, on the Interest Payment Date, and (ii) in the case of any other Obligation, when any portion of such Obligation shall be due (whether at maturity, by reason of prepayment or acceleration or otherwise), but only to the extent then accrued on the amount then so due. Interest at the Default Rate shall be payable on demand.   (e)           Determination. Each determination by the Agent of the interest rate hereunder shall be conclusive and binding for all purposes, absent clear and convincing evidence to the contrary.   Section 2.5. Letters of Credit.   (a)           Letters of Credit. Upon the terms and subject to the conditions set forth herein, from time to time during the period commencing on the Effective Date and ending on the date that is thirty (30) days prior to the latest possible Commitment Termination Date, the Revolving Credit Commitment may, in addition to Advances under the Revolving Loan, be utilized, upon the request of Borrower Representative on behalf of the applicable Borrower, for (i) the issuance of standby letters of credit for the account of such Borrower by GE Capital or any other L/C Issuer approved by the Agent, (ii) the issuance of commercial letters of credit for the account of such Borrower by any L/C Issuer other than GE Capital approved by Agent or (iii) the issuance of standby letters of credit or commercial letters of credit for the account of such Borrower under risk participation agreements entered into by GE Capital, as L/C Issuer, with other banks or financial institutions (the letters of credit described in clauses (i), (ii) and (iii), together with the Existing L/Cs, will be referred to hereinafter collectively as “Letters of Credit”). Immediately upon the issuance by a L/C Issuer of a Letter of Credit, and without further action on the part of Agent or any of the Lenders, each Lender with a Revolving Credit Commitment shall be deemed to have purchased from such L/C Issuer a participation in such   41 --------------------------------------------------------------------------------   Letter of Credit (or in its obligation under a risk participation agreement with respect thereto) equal to such Lender’s Percentage of the aggregate amount available to be drawn under such Letter of Credit. Immediately after each such Letter of Credit is issued and participations therein are sold to the Lenders as provided in this subsection:   (i)            the Aggregate L/C Exposure shall not exceed the L/C Limit;   (ii)           in the case of each Lender, its Outstanding Amount shall not exceed its Revolving Credit Commitment; and   (iii)          the aggregate Outstanding Amount of all the Lenders shall not exceed the lesser of the Maximum Commitment Amount or the Borrowing Availability then in effect.   If required to obtain such issuance by an L/C Issuer that is not Agent, an affiliate or a subsidiary thereof or a Lender, Agent agrees to enter into risk participation agreements with respect to the obligations of the applicable Borrower under the Letter of Credit pursuant to which Agent acquires the credit risk with respect to such Borrower’s payment and performance of its obligations arising under and with respect to such Letter of Credit to the L/C Issuer. Upon any such issuance or entering into a risk participation agreement, without further action by any party hereto, (x) each Revolving Lender shall be deemed to have purchased from Agent and/or such L/C Issuer, and (y) such L/C Issuer or Agent shall be deemed to have sold to each Revolving Lender, a participation in the then existing or thereafter arising Reimbursement Obligations with respect to such Letter of Credit, on the terms specified in this Agreement, in each case equal to such Lender’s Percentage thereof.   (b)           Permitted Terms. Each Letter of Credit (other than the Existing L/Cs) must (i) support a transaction entered into in the ordinary course of business of the applicable Borrower on or after the filing of the Bankruptcy Cases and (ii) be in a form, for an amount and contain such terms and conditions as are reasonably satisfactory to each of the L/C Issuer and the Agent in its sole discretion. No Letter of Credit shall have an expiration date later than the close of business on the date that is one (1) year after such Letter of Credit is issued (or, in the case of any renewal or extension thereof, one (1) year after the expiration of such renewal or extension). Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiration date for one (1) or more successive one year periods; provided that the L/C Issuer that issued such Letter of Credit has the right to terminate such Letter of Credit on each such annual expiration date and no renewal term may extend the term of the Letter of Credit to a date that is later than the latest possible Commitment Termination Date (exclusive of any extentions).   (c)           Request for Issuance of Letter of Credit. The Borrower Representative shall give Agent at least three (3) Business Days’ prior written notice requesting the issuance of any Letter of Credit. The notice shall be accompanied by the form of the Letter of Credit (which shall be acceptable to the Agent and the L/C Issuer) and a completed application for standby letter of credit, master standby agreement, application for agreement for documentary letter of credit or master documentary agreement (as applicable), in each case, in form and substance satisfactory to Agent.   42 --------------------------------------------------------------------------------   (d)           Notice of Proposed Extensions of Expiration Dates. The L/C Issuer or the Borrower Representative shall give the Agent at least three (3) Business Days’ notice before such L/C Issuer extends (or allows an automatic extension of) the expiration date of any Letter of Credit issued by it (whether such extension results from a request therefor by the Borrower Representative or, in the case of an evergreen Letter of Credit, from the absence of a request by the Borrower Representative for the termination thereof). Such notice shall (i) identify such Letter of Credit, (ii) specify the date on which such extension is to be made (or the last day on which such L/C Issuer can give notice to prevent such extension from occurring) and (iii) specify the date to which such expiration date is to be so extended. Upon receipt of such notice, the Agent shall promptly notify each Lender of the contents thereof. No L/C Issuer shall extend (or allow the extension of) the expiration date of any Letter of Credit if (x) the extended expiration date would be after the date that is one (1) year after the date on which such Letter of Credit is to be extended (y) such L/C Issuer shall have been notified by the Agent or the Required Lenders expressly to the effect that any condition specified in Section 3.2 is not satisfied at the time such Letter of Credit is to be extended; provided that, in the case of such notice from the Agent or Required Lenders, such L/C Issuer receives such notice prior to the date notice of non-renewal is required to be given by such L/C Issuer and such L/C Issuer has had a reasonable period of time to act on such notice.   (e)           Notice of Issuances. Promptly upon issuing any Letter of Credit, the relevant L/C Issuer will notify the Agent of the date of such Letter of Credit, the amount thereof, the beneficiary or beneficiaries thereof and the expiration date. Upon receipt of such notice, the Agent shall promptly notify each Revolving Lender of the contents thereof and the amount of such Revolving Lender’s participation in the relevant Letter of Credit. Promptly upon issuing any Letter of Credit, the relevant L/C Issuer will send a copy of such Letter of Credit to the Agent.   (f)            Drawings. Upon receiving a demand for payment under any Letter of Credit from the beneficiary thereof, the relevant L/C Issuer shall determine, in accordance with the terms of such Letter of Credit, whether such demand for payment should be honored. If such L/C Issuer determines that any such demand for payment should be honored, such L/C Issuer shall (i) promptly notify the Borrower Representative and the Agent as to the amount to be paid by such L/C Issuer as a result of such demand and the date on which such amount is to be paid (an “L/C Payment Date”) and (ii) on such L/C Payment Date make available to such beneficiary in accordance with the terms of such Letter of Credit the amount of the drawing under such Letter of Credit.   (g)           Reimbursement and Other Payments by the Borrowers. If any amount is drawn under any Letter of Credit:   (i)            the Borrowers irrevocably and unconditionally agree to reimburse the relevant L/C Issuer for all amounts paid by such L/C Issuer immediately upon such drawing, together with interest on the amount drawn at the rate applicable to Base Rate Loans for each day from and including the date such amount is drawn to but excluding the date such reimbursement payment is due and payable. Such reimbursement payment shall be due and payable on the relevant L/C Payment Date and Borrowers hereby authorize and direct Agent, at   43 --------------------------------------------------------------------------------   Agent’s option, to debit the Loan Account (by increasing the outstanding principal balance of the Revolving Loan) in the amount of any payment made by an L/C Issuer with respect to any Letter of Credit; and   (ii)           in addition, the Borrowers agree to pay to the relevant L/C Issuer interest on any and all amounts not paid by the Borrowers when due hereunder with respect to a Letter of Credit, for each day from and including the date when such amount becomes due, but excluding the date such amount is paid in full, payable on demand, at a rate per annum equal to the Default Rate.   Each payment to be made by the Borrowers pursuant to this Section 2.5(g) shall be made to the relevant L/C Issuer in federal or other funds immediately available to it at its address specified in or pursuant to Section 11.3.   (h)           Payments by Lenders with Respect to Letters of Credit. In the event Agent elects not to debit the Loan Account for any Reimbursement Obligations and the Borrowers fail to reimburse the relevant L/C Issuer as and when required by Section 2.5(g) above for all or any portion of any amount drawn under a Letter of Credit issued by it:   (i)            such L/C Issuer may notify the Agent of such unpaid Reimbursement Obligation and request that the Revolving Lenders reimburse such L/C Issuer for their respective Percentages thereof. Upon receiving any such notice from an L/C Issuer, the Agent shall promptly notify each Revolving Lender of such unpaid Reimbursement Obligation and such Lender’s Percentage thereof. Upon receiving such notice from the Agent, each Lender shall make available to such L/C Issuer, at its address specified in or pursuant to Section 11.3, an amount equal to such Revolving Lender’s Percentage of such unpaid Reimbursement Obligation as set forth in such notice, in federal or other funds immediately available to such L/C Issuer, by 3:00 p.m. (New York City time) (A) on the day such Revolving Lender receives such notice if it is received at or before 12:00 Noon (New York City time) on such day or (B) on the first Business Day following such Lender’s receipt of such notice if it is received after 12:00 Noon (New York City time) on the date of receipt, in each case together with interest on such amount for each day from and including the relevant L/C Payment Date to but excluding the day such payment is due from such Revolving Lender at the Federal Funds Rate for such day. Upon payment in full thereof, such Revolving Lender shall be subrogated to the rights of such L/C Issuer against the Borrowers to the extent of such Revolving Lender’s Percentage of such unpaid Reimbursement Obligation (including interest accrued thereon). Nothing in this Section 2.5(h) shall affect any rights any Revolving Lender may have against any L/C Issuer for any action or omission for which such L/C Issuer is not indemnified under Section 2.5(j); and   (ii)           if any Revolving Lender fails to pay any amount required to be paid by it pursuant to this Section 2.5(h) on the date on which such payment is due, interest shall accrue on such Revolving Lender’s obligation to make such payment, for each day from and including the date such payment became due to   44 --------------------------------------------------------------------------------   but excluding the date such Lender makes such payment, at a rate per annum equal to (x) for each day from the day such payment is due through the third succeeding Business Day, inclusive, the Federal Funds Rate for such day as determined by the relevant L/C Issuer and (y) for each day thereafter, the Base Rate for such day. Any payment made by any Revolving Lender after 3:00 p.m. (New York City time) on any Business Day shall be deemed for purposes of the preceding sentence to have been made on the next succeeding Business Day.   If the Borrowers shall reimburse any L/C Issuer for any drawing with respect to which any Revolving Lender shall have made funds available to such L/C Issuer in accordance with this Section 2.5(h), such L/C Issuer shall promptly upon receipt of such reimbursement distribute to such Revolving Lender its Percentage thereof, including interest, to the extent received by such L/C Issuer.   (i)            Obligation Absolute. The obligation of the Borrowers to reimburse Agent and any applicable Revolving Lenders for payments made with respect to any L/C Obligation shall be absolute, unconditional and irrevocable, without necessity of presentment, demand, protest or other formalities, and the obligation of each applicable Revolving Lender to make payments to Agent with respect to Letters of Credit shall be unconditional and irrevocable. Such obligations of the Borrowers and Revolving Lenders shall be paid strictly in accordance with the terms hereof under all circumstances including the following:   (i)            any lack of validity or enforceability of any Letter of Credit or this Agreement or the other Loan Documents or any other agreement relating to the Letter of Credit;   (ii)           the existence of any claim, setoff, defense or other right that any Credit Party or any of their respective Affiliates or any Lender may at any time have against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such transferee may be acting), Agent, any Lender, or any other Person, whether in connection with this Agreement, the Letter of Credit, the transactions contemplated herein or therein or any unrelated transaction (including any underlying transaction between the Credit Party or any of their respective Affiliates and the beneficiary of the Letter of Credit);   (iii)          any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;   (iv)          payment by Agent (except as otherwise expressly provided in paragraph (j)(ii)(C) below) or any L/C Issuer under any Letter of Credit or L/C Obligation against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit or L/C Obligation;   (v)           any other circumstance or event whatsoever that is similar to any of the foregoing;   45 --------------------------------------------------------------------------------   (vi)          the fact that a Default or an Event of Default has occurred and is continuing;   (vii)         any amendment or waiver of or any consent or departure from all or any of the provisions of any Letter of Credit or any Loan Document; or   (viii) any other act or omission to act or delay of any kind of any L/C Issuer, Agent, any Lender or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this subsection, constitute a legal or equitable discharge of any Borrowers’ obligations hereunder.   (j)            Indemnification; Nature of Lenders’ Duties.   (i)            In addition to amounts payable as elsewhere provided in this Agreement, each Borrower hereby agrees to pay and to protect, indemnify and save harmless Agent and each Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees and allocated costs of internal counsel) that Agent or any Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or the incurrence of any L/C Obligation in respect thereof, or (B) the failure of Agent or any Lender seeking indemnification or of any L/C Issuer to honor a demand for payment under any Letter of Credit or of the Agent to make any payment under any L/C Obligation as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority, in each case other than to the extent solely as a result of the gross negligence or willful misconduct of Agent or such Lender (as finally determined by a court of competent jurisdiction).   (ii)           As between Agent and any Lender, on the one hand, and any Borrower, on the other hand, such Borrower assumes all risks of the acts and omissions of, or misuse of any Letter of Credit by, beneficiaries of any Letter of Credit. In furtherance and not in limitation of the foregoing, to the fullest extent permitted by law, neither Agent nor any Lender shall be responsible for (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document issued by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason, (C) the failure of the beneficiary of any Letter of Credit to comply fully with conditions required to demand payment under such Letter of Credit; provided that in the case of any payment by Agent under any Letter of Credit or L/C Obligation, Agent shall be liable only to the extent such payment was made solely as a result of its gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in determining that the demand for payment under such Letter of   46 --------------------------------------------------------------------------------   Credit or L/C Obligation complies on its face with any applicable requirements for a demand for payment under such Letter of Credit or any guaranty thereof, (D) errors, omissions, interruptions or delays in transmission or delivery of any messages by mail, cable, telegraph, telex or otherwise, whether or not they may be in cipher, (E) errors in interpretation of technical terms, (F) any loss or delay in the transmission or otherwise of any document required to make a payment under any Letter of Credit or L/C Obligation, (G) the credit of the proceeds of any drawing under any Letter of Credit or L/C Obligation and (H) any consequences arising from causes beyond the control of Agent or any Lender. None of the above shall affect, impair or prevent the vesting of any of Agent’s or any Lender’s rights or powers hereunder or under this Agreement.   (iii)          Nothing contained herein shall be deemed to limit or expand any waivers, covenants or indemnities made by any Borrower in favor of any L/C Issuer in any letter of credit application, reimbursement agreement or similar document, instrument or agreement between any Borrower and such L/C Issuer, including the application for standby Letter of Credit, master standby agreement, application for documentary Letter of Credit or master agreement for documentary Letter of Credit.   (k)           Cash Collateral.   (i)            If the Borrowers are required to provide cash collateral for any L/C Obligations pursuant to this Agreement prior to the Commitment Termination Date, the Borrowers will pay to Agent for the ratable benefit of itself and the Revolving Lenders cash in an amount equal to one hundred three percent (103%) of the maximum amount then available to be drawn under each applicable Letter of Credit. Such cash shall be held by Agent in a cash collateral account (the “Cash Collateral Account”) maintained at a bank or financial institution acceptable to Agent in its sole discretion. The Cash Collateral Account shall be in the name of the Borrowers and shall be pledged to, and subject to the control of, Agent, for the benefit of Agent and the Revolving Lenders, in a manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent, on behalf of itself and the Revolving Lenders, a security interest in all such funds and Cash Equivalents held in the Cash Collateral Account from time to time and all proceeds thereof, as security for the payment of all amounts due in respect of the L/C Obligations and other Obligations, whether or not then due. This Agreement, including the provisions of this Section 2.5(k), shall constitute a security agreement under applicable law.   (ii)           If any L/C Obligations, whether or not then due and payable, shall for any reason be outstanding on the Commitment Termination Date, the Borrowers shall either (A) provide cash collateral therefor in the manner described above, (B) cause all such Letters of Credit and L/C Obligations, if any, to be canceled and returned, or (C) deliver a stand-by letter (or letters) of credit in guaranty of such L/C Obligations, which stand-by letter (or letters) of credit shall be of like tenor and duration (plus thirty (30) additional days) as, and in an   47 --------------------------------------------------------------------------------   amount equal to one hundred three percent (103%) of the aggregate maximum amount then available to be drawn under, the Letters of Credit to which such outstanding L/C Obligations relate and shall be issued by a Person, and shall be subject to such terms and conditions, as are satisfactory to Agent in its sole discretion.   (iii)          From time to time after funds are deposited in the Cash Collateral Account by the Borrowers, whether before or after the Commitment Termination Date, Agent may apply such funds or Cash Equivalents then held in the Cash Collateral Account to the payment of any amounts, and in such order as Agent may elect, as shall be or shall become due and payable by the Borrowers to Agent and the Revolving Lenders with respect to such L/C Obligations and, upon the satisfaction in full of all L/C Obligations, to any other Obligations of the Borrowers then due and payable.   (iv)          Neither the Borrowers nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds or Cash Equivalents held in the Cash Collateral Account, except that upon the termination of all L/C Obligations and the payment of all amounts payable by the Borrowers to Agent and Lenders in respect thereof, any funds remaining in the Cash Collateral Account shall be applied to other Obligations then due and owing and upon payment in full of such Obligations, any remaining amount shall be paid to the Borrower or as otherwise required by law. Interest earned on deposits in the Cash Collateral Account shall be for the account of the Borrowers.   (v)           The Borrowers agree to execute such Control Letters and such other documents and instruments as the Agent shall require with respect to the security interests created under this Section.   (l) Existing L/Cs   The Borrowers, the Agent and the Lenders agree that, as between themselves, the Existing L/Cs shall be deemed issued under this Agreement and the Borrowers shall bear all responsibility for the Existing L/Cs as if issued hereunder. The L/C Issuer hereby assumes and reaffirms each Existing L/C, as if such Letter of Credit were issued under this Agreement.   Section 2.6. Swingline Loans.   (a)           Swingline Commitment.       Upon the terms and subject to the conditions set forth herein, from time to time during the Swingline Availability Period, the Swingline Lender agrees to advance funds to the Borrowers pursuant to this Section; provided that, immediately after each such Advance is made (and after giving effect to any substantially concurrent application of the proceeds thereof to repay outstanding Advances or Reimbursement Obligations and to any Lender interest therein):   48 --------------------------------------------------------------------------------   (i)            the aggregate outstanding principal amount of the Swingline Loans shall not exceed the Swingline Commitment;   (ii)           in the case of each Lender, its Outstanding Amount shall not exceed its Revolving Credit Commitment; and   (iii)          the aggregate Outstanding Amount of all the Lenders shall not exceed the lesser of (A) the Borrowing Availability then in effect and (B) the aggregate Revolving Credit Commitment then in effect.   Each Swingline Advance shall be in a minimum amount of $100,000 or integral multiples of $10,000 in excess thereof. Subject to the foregoing limits, the Borrowers may borrow, repay and reborrow Swingline Advances at any time during the Swingline Availability Period.   (b)           Notice of Swingline Borrowing.         The Borrower Representative shall give the Swingline Lender notice (a “Notice of Swingline Borrowing”), substantially in the form of Exhibit D-2 hereto, not later than 11:00 a.m. (New York City time) on the date of each requested Swingline Advance, specifying:   (i)            the date of such Advance, which shall be a Business Day; and   (ii)           the amount of such Advance.   (c)           Funding of Swingline Loans. As promptly as practicable following receipt of a Notice of Swingline Borrowing, the Swingline Lender shall, unless the Swingline Lender determines that any applicable condition specified in Article III has not been satisfied, make available the amount of such Swingline Advance in federal or other funds immediately available as provided in Section 2.3(b).   (d)           Interest. The Swingline Loans shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swingline Advance is made to but excluding the date repaid, at a rate per annum equal to the rate applicable to Base Rate Advances for such day. Such interest shall be payable on the Interest Payment Date.   (e)           Optional Prepayment of Swingline Loans. The Borrowers may prepay the Swingline Loans in whole at any time, or from time to time in part, by giving notice of such prepayment to the Swingline Lender not later than 12:00 Noon (New York City time) on the date of prepayment and paying the principal amount to be prepaid, together with interest accrued thereon to the date of prepayment, to the Swingline Lender in the manner provided in Section 2.14 not later than 3:00 p.m. (New York City time) on the date of prepayment.   (f)            Mandatory Prepayment of Swingline Loan. The Borrowers shall prepay the Swingline Loans, together with interest accrued thereon to the date of prepayment, upon the acceleration of the Obligations pursuant to Article VIII. On the date of each Revolving Credit Advance, the Agent shall apply the proceeds thereof to prepay all Swingline Loans then outstanding, together with interest accrued thereon to the date of prepayment.   49 --------------------------------------------------------------------------------   (g)           Maturity of Swingline Loan. The Swingline Loans outstanding on the Swingline Maturity Date shall be due and payable on such date, together with interest accrued thereon to such date.   (h)           Refunding Unpaid Swingline Loans. If (x) the Swingline Loans are not paid in full on the Swingline Maturity Date or (y) the Swingline Loans become immediately due and payable pursuant to Article VIII, the Swingline Lender (or the Agent on its behalf) may, by notice to the Lenders (including the Swingline Lender, in its capacity as a Lender), require each Lender to pay to the Swingline Lender an amount equal to such Lender’s Percentage of the aggregate unpaid principal amount of the Swingline Loans then outstanding. Such notice shall specify the date on which such payments are to be made, which shall be the first Business Day after such notice is given. Not later than 12:00 Noon (New York City time) on the date so specified, each Lender shall pay the amount so notified to it to the Swingline Lender at its address specified in or pursuant to Section 11.3, in federal or other funds immediately available in New York, New York. The amount so paid by each Lender shall constitute a Base Rate Advance to the Borrowers and each Lender hereby irrevocably agrees (absent gross negligence of the Swingline Lender as determined by a court of competent jurisdiction) to the making of such Base Rate Advance notwithstanding (i) the amount of such Advance may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 3.1 or 3.2 as applicable, are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the failure of any such request or deemed request for Revolving Loans to be made by the time otherwise required in Section 2.1, (v) the date of such mandatory Advance or (vi) any reduction in the Revolving Credit Commitments or termination of the Revolving Credit Commitments immediately prior to such mandatory Advance contemporaneously therewith; provided that, if the Lenders are prevented from making such Base Rate Revolving Credit Advances to the Borrowers by the provisions of the United States Bankruptcy Code or otherwise, the amount so paid by each Lender shall constitute a purchase by it of a participation in the unpaid principal amount of the Swingline Loan and interest accruing thereon after the date of such payment; provided that (x) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender, to the extent not paid to the Swingline Lender by the Borrowers in accordance with the terms of subsection (d) hereof, interest on the principal amount of participation purchased for each day from and including the day upon which such borrowing would otherwise have occurred to, but excluding, the date of payment for such participation. Each Lender’s obligation to make such payment or to purchase such participation under this subsection shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (1) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Swingline Lender or the Borrowers, (2) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments, (3) any adverse change in the condition (financial or otherwise) of the Borrowers or any other Person, (4) any breach of this Agreement by any party hereto or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.   (i)            Termination of Swingline Commitment. The Borrowers may, upon at least three (3) Business Days’ notice to the Swingline Lender and the Agent, terminate the   50 --------------------------------------------------------------------------------   Swingline Commitment at any time, if no Swingline Loans are outstanding at such time. Unless previously terminated, the Swingline Commitment shall terminate at the close of business on the Swingline Maturity Date.   Section 2.7. Certain Fees.   (a)           Agent Fees. The Borrowers shall pay to GE Capital, individually, the Fees as and when required pursuant to the Commitment Letter at the times specified for payment therein.   (b)           Unused Line Fee. As additional compensation for the Revolving Lenders, the Borrowers shall pay to Agent, for the ratable benefit of such Revolving Lenders, in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the Commitment Termination Date, a fee (the “Unused Line Fee”) for the Borrowers’ non-use of available funds in an amount equal to the product of (i) 0.50% per annum multiplied by (ii) the difference between (x) the Maximum Commitment Amount (as it may be reduced from time to time) minus (y) the average for the period of the daily closing balances of the aggregate Revolving Loans and the Swingline Loans outstanding during the period for which such Unused Line Fee is due, calculated for such period on the basis of a 360-day year for the actual number of days elapsed during such period.   (c)           [Reserved.]   (d)           Letter of Credit Fee. (i) The Borrowers agree to pay to the Agent for the ratable benefit of Revolving Lenders, with respect to the L/C Obligations incurred hereunder, (A) for the benefit of the Agent and the L/C Issuer, all customary costs and expenses incurred by the Agent and the L/C Issuer on account of such L/C Obligations, (B) for the ratable benefit of the Revolving Lenders, for each day during any month in which any L/C Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to (x) the Applicable Margin (calculated on the basis of a 360 -day year for actual days elapsed) multiplied by (y) the maximum amount available for drawing (whether or not such day is a Business Day and whether or not the conditions for drawing thereunder have been satisfied) under all Letters of Credit at the close of business on such day, and (C) for the sole benefit of the L/C Issuer, a fronting fee (the “Fronting Fee”) in an amount equal to 0.125% of the face amount of each Letter of Credit. The Letter of Credit Fee shall be paid to Agent for the ratable benefit of the Revolving Lenders monthly in arrears, on the first day of each month and on the Commitment Termination Date. The Fronting Fee shall be paid to the Agent, for the benefit of the L/C Issuer, on the date of issuance of the applicable Letter of Credit. In addition, the Borrowers shall pay to any L/C Issuer, on demand, such fees (including all per annum fees), customary charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of any Letter of Credit or otherwise payable pursuant to the application and related documentation under which any Letter of Credit is issued. During any period during which the Default Rate shall have been imposed pursuant Section 2.4(c), or, in the absence of such imposition, during any period during which the Required Lenders could have imposed the Default Rate pursuant to such Section and instead elect to impose the provisions of this paragraph, the Letter of Credit Fee otherwise in effect pursuant to the preceding paragraph shall be increased by two percent (2%) per annum.   51 --------------------------------------------------------------------------------   (e)           Exit Fee. The Borrowers shall be required to satisfy all obligations under this Agreement on or before the Commitment Termination Date. Upon termination of this Agreement, whether by the satisfaction of the Loan or upon the occurrence of a Default hereunder, the Borrowers shall pay to the Lenders an exit fee equal to 1.00% of the Revolving Credit Commitment (the “Exit Fee”), provided, however, that:  (A) if the Lenders provide to the Borrowers a credit facility, in an amount not less than the Revolving Credit Commitment hereunder, to enable their emergence and exit from the Bankruptcy Cases (the “Exit Facility”), then the Exit Fee, to the extent paid, will be credited to any upfront fees due to the Lenders upon closing of the Exit Facility, or (B) if the Lenders do not provide the Exit Facility then, upon payment in full of all obligations under this Agreement and the Existing Credit Facility, the Exit Fee will be waived as provided in the Forbearance Agreement.   Section 2.8. Mandatory Repayments and Prepayments.   (a)           Prepayment of Excess Outstanding Amount; Maturity of Obligations.   (i)            If at any time the aggregate unpaid principal balance of the Revolving Loans exceeds the Borrowing Availability, then, the Borrowers shall immediately prepay Revolving Loans without premium or penalty in an aggregate principal amount sufficient to eliminate such excess (or if no such Loans and Swingline Loans are outstanding, deposit cash in a collateral account in accordance with Section 2.5(k)).   (ii)           The Revolving Credit Commitment of each Lender shall terminate at the opening of business on the Commitment Termination Date, and there shall become due and the Borrowers shall pay on the Commitment Termination Date, the entire outstanding principal amount of each Revolving Loan and of each L/C Obligation, together with accrued and unpaid interest thereon to but excluding the Commitment Termination Date.   (b)           Asset Dispositions. Immediately upon any Credit Party’s receipt of Net Cash Proceeds of any Asset Disposition or any sale of Stock of any Subsidiary of any Credit Party, the Borrowers shall prepay an aggregate principal amount of Loans (and to the extent that any Net Cash Proceeds in excess of the outstanding principal amount of Loans, cash collateralize L/C Obligations in accordance with Section 2.5(k)) equal to one hundred percent (100%) of all such Net Cash Proceeds.   (c)           [Reserved].   (d)           [Reserved].   (e)           [Reserved].   52 --------------------------------------------------------------------------------   Section 2.9. Optional Prepayments. Borrowers may prepay the Loans in whole or in part (in minimum principal amounts of $100,000 or in any larger integral multiple of $10,000, or the total remaining amount outstanding) upon at least three (3) Business Days’ (or, in the case of Base Rate Revolving Loans, one (1) Business Day’s) prior irrevocable written notice to the Lenders, subject to the payment of any prepayment charges incurred pursuant to Section 9.4(d). The aggregate principal amount of Loans designated for prepayment in any notice of optional prepayment given pursuant to this Section shall become due and payable on the date fixed for prepayment as specified in such notice.   Section 2.10. Application of Payments.   (a)           Mandatory prepayment pursuant to Section 2.8 and optional prepayments pursuant to Section 2.9 shall be applied to Revolving Loans. Each payment or prepayment of less than all of the outstanding aggregate principal amount of the Loans shall be applied pro rata to the Loans of all Lenders according to the respective outstanding principal amounts of Loans held by each such Lender. Any such prepayment shall be applied first to any Base Rate Loans before application to LIBOR Loans, in each case in a manner which minimizes any resulting LIBOR breakage fee.   (b)           During the occurrence and continuance of any Event of Default, the Agent shall apply all or any part of proceeds constituting Collateral and any and all proceeds thereof turned over to, held by or realized through the exercise by the Agent of its remedies hereunder or under the other Loan Documents, in payment of the Obligations in following order:   (i)            first, to the payment of all amounts owing to the Agent or any Lender of the following type: (x) any and all sums advanced by the Agent or any Lender in order to preserve the Collateral or preserve its security interest in the Collateral, (y) the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Agent or any Lender of its rights hereunder or under any other Loan Document, together with reasonable attorneys’ fees and court costs, and (z) all amounts paid by Agent or any Lender as to which Agent or such Lender has an express right to reimbursement or indemnification from any Credit Party (or, in the case of Agent, from any Lender) under this Agreement or any other Loan Document;   (ii)           second, to the extent proceeds remain after the application pursuant to the preceding clause (i), to the payment of all other amounts owing to Agent pursuant to any of the Loan Documents in its capacity as such;   (iii)          third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), to the payment to the Lenders, pro rata, of any accrued but unpaid interest under the Loan Documents;   (iv)          fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i), (ii) and (iii), to the payment to the Lenders, pro rata, of any principal balance under the Loan Documents;   53 --------------------------------------------------------------------------------     (v)                                 fifth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iv), inclusive, to the payment of an amount equal to all other outstanding Obligations in such order as Agent may in its sole discretion elect; and   (vi)                              sixth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (v), inclusive, and following the Termination Date, to the payment of the relevant Credit Party or to whomever may be lawfully entitled to receive such surplus.   Section 2.11. Reduction of Revolving Credit Commitments. (a) The Revolving Credit Commitment shall be permanently reduced (i) by the amount of each payment made pursuant to Section 2.11(b) applied to Revolving Loans to the extent directed by the Borrower Representative, and (ii) to zero Dollars ($0) on the Commitment Termination Date.   (b)                                 The Borrowers shall have the right to terminate in whole the Revolving Credit Commitments or, from time to time, irrevocably to reduce in part the amount of the Revolving Credit Commitments upon at least thirty (30) days’ prior written notice from Borrower Representative to the Agent.    (c)                               In the event the Borrowers exercise their rights under Section 2.11(b) to reduce the Revolving Credit Commitment, the Borrowers agree that any such prepayment or reduction shall be accompanied by (i) in the case of a prepayment in full and termination of this Agreement, the payment by the Borrowers to the Agent for the ratable account of the Lenders of all accrued and unpaid interest and all fees and other remaining Obligations hereunder and (ii) the payment of any prepayment charges incurred pursuant to Section 9.4(d).   Section 2.12. Loan Account and Accounting. The Agent shall maintain a loan account (the “Loan Account”) on its books to record all Loans, all payments made by the Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with the Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on the Agent’s most recent printout or other written statement, shall, absent clear and convincing evidence to the contrary, be presumptive evidence of the amounts due and owing to each Lender and the Agent by the Borrowers; provided that any failure to so record or any error in so recording shall not limit or otherwise affect the Borrowers’ duty to pay the Obligations. The Agent shall render to the Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account. Unless the Borrower Representative notifies the Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) days after the date thereof, each and every such accounting shall (absent clear and convincing error) be deemed final, binding and conclusive upon the Credit Parties in all respects as to all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by the Borrowers.   Section 2.13. Computation of Interest and Fees. Unused Line Fees pursuant to Section 2.7(b), Letter of Credit Fees pursuant to Section 2.7(d) and all interest on LIBOR Loans   54 --------------------------------------------------------------------------------   hereunder and under the Notes shall be calculated for any period on the basis of a 360-day year for the actual number of days elapsed during such period, including the first day but excluding the last day of such period. All interest on Base Rate Loans hereunder shall be calculated for any period on the basis of a 365-day year for the actual number of days elapsed during such period, including the first day but excluding the last day of such period.   Section 2.14. General Provisions Regarding Payments. All payments (including prepayments) to be made by the Credit Parties under any Loan Document, including payments of principal of and interest on the Notes, fees, expenses and indemnities, shall be made without set-off or counterclaim and in immediately available funds to each Lender’s Payment Account before 3:00 p.m. (New York City time) on the date when due. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon, shall be payable at the then applicable rate during such extension. For purposes of computing interest and Fees and determining Borrowing Availability as of any date, all payments shall be deemed received on the first Business Day following the Business Day on which immediately available funds therefor are received in the Collection Account prior to 1:00 p.m. (New York City time). Payments received after 1:00 p.m. (New York City time) on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day.   Section 2.15. Maximum Interest. (a)  In no event shall the interest charged with respect to the Loans, the Notes or any other Obligations of any Credit Party under the Loan Documents exceed the maximum amount permitted under the laws of the jurisdiction whose law is specified as the governing law of this document pursuant to Section 11.10 or of any other applicable jurisdiction. For the purposes of making any such determination hereunder, the Loans hereunder shall be deemed a single loan in the amount of the Commitments.   (b)                                 Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable for the account of any Lender hereunder or any other Loan Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable law to be charged by such Lender (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable for the account of such Lender shall be equal to the Maximum Lawful Rate; provided that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, the Borrowers shall, to the extent permitted by law, continue to pay interest for the account of such Lender at the Maximum Lawful Rate until such time as the total interest received by such Lender is equal to the total interest which such Lender would have received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable for the account of such Lender shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply.   (c)                                  In no event shall the total interest received by any Lender exceed the amount which such Lender could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate with respect to such Lender.   55 --------------------------------------------------------------------------------   (d)                                 In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.   (e)                                  If any Lender has received interest hereunder in excess of the Maximum Lawful Rate with respect to such Lender, such excess amount shall be applied to the reduction of the outstanding principal balance of its Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to the Borrowers.   Section 2.16. Additional Borrowers. The Borrower Representative may request in writing from time to time that any Subsidiary of Holdings be allowed to become a Borrower under this Agreement (each, an “Additional Borrower”); provided that such Subsidiary shall not become an Additional Borrower unless and until each and every of the following conditions precedent with respect to such Subsidiary have been satisfied or provided for in a manner reasonably satisfactory to Agent or waived in writing by Agent and the Lenders: (a) such Subsidiary shall have been formed or acquired by Holdings or any other Borrower; (b) the Agent shall have consented in writing to such Subsidiary becoming an Additional Borrower; (c) no Default or Event of Default shall exist at the time of or after giving effect to such Subsidiary’s becoming an Additional Borrower; and (d) the Agent shall have received the following documents with respect to such Subsidiary (each duly executed and delivered by the appropriate Persons specified below): (i) from such Subsidiary, the other Borrowers and the Guarantors, a joinder agreement in form and substance reasonably satisfactory to Agent (each, a “Joinder Agreement”), (ii) from such Subsidiary and the other Borrowers, a replacement Revolving Note in favor of each Revolving Lender in the form of Exhibit A and a replacement Swing Line Note in favor of the Swing Line Lender substantially in the form of Exhibit C, and (iii) from such and any other applicable Credit Parties, the various Loan Documents with respect to such Subsidiary required to be delivered under Section 6.14.   Section 2.17 Overadvance Facility   (a)                            Upon the terms and subject to the conditions set forth herein, from time to time during the period commencing on the Effective Date and ending on the date that is ten (10) days prior to the Commitment Termination Date, Borrower Representative may request that the Lenders make advances of Revolving Credit Loans to a Borrower, which advances will cause the principal balance of all Revolving Credit Loans of the Borrowers then outstanding to exceed the Borrowing Base (each such advance of Revolving Credit Loans, an “Overadvance Loan” and, collectively, the “Overadvance”), but which Overadvance Loans shall not in the aggregate exceed the Overadvance Commitment (as defined below). The Lenders have agreed to make the Overadvance available to the Borrowers, effective as of the Effective Date, subject to the terms and conditions set forth herein.   (b)                                 The maximum aggregate principal amount of the Overadvance shall be Two Million, Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) (the “Overadvance Commitment”). Subject to the Borrowers’ compliance with the conditions to funding set forth in Section 3.2 of this Agreement, one or more of the Borrowers may, at any time and from time to time on and after the Effective Date and until the Commitment Termination Date, borrow, repay and re-borrow all or any portion of the Overadvance up to the Overadvance Commitment;   56 --------------------------------------------------------------------------------   provided, however, that, notwithstanding anything to the contrary set forth in this Agreement, until the Overadvance has been repaid in full and all obligations of the Lenders to make advances of Overadvance Loans has terminated, the Borrowers shall not request, and Lender shall not be obligated to make, any advances of Revolving Credit Loans (including, without limitation, Overadvance Loans) that exceed the Revolving Credit Commitment at any time less any applicable Reserves. Overadvances shall be made as Base Rate Advances only and shall not be eligible for the LIBOR Rate.   (c)                                  Notwithstanding anything else contained in this Section 2.17, Borrower acknowledges that the Overadvance Facility is not a commitment to lend and any individual Overadvance may be made or refused in the sole and absolute discretion of the Lenders.   ARTICLE III.   CONDITIONS   Section 3.1. Conditions to Effectiveness of this Agreement and to the initial Extensions of Credit on the Effective Date.   The effectiveness of this Agreement and the obligation of each Lender to make any Extension of Credit on the Effective Date or for the Agent or any Lender to take, fulfill or perform any other action hereunder, shall be subject to satisfaction of all of the following conditions in a manner satisfactory to Agent:   (a)                                  This Agreement or counterparts hereof, the Notes and the other Loan Documents shall have been duly executed by the Borrowers and the other Credit Parties party thereto, and delivered to the Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement, including an opinion of counsel to the Credit Parties substantially in the form of Exhibit I and the other documents, instruments, agreements and opinions listed in the Closing Checklist attached hereto as Exhibit K, each in form and substance reasonably satisfactory to the Agent. The Agent shall have received and approved revised Schedules to this Agreement and, if appropriate, the other Credit Documents, dated as of the Effective Date;   (b)                                 The Interim Order shall have been entered or approved by the Bankruptcy Court in form and substance acceptable to the Borrowers, the Agent and the Lenders;   (c)                                  Agent shall have received (i) evidence satisfactory to it in its sole discretion that the Credit Parties have obtained all required consents and approvals, including regulatory and other third party approvals, of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the continuing operations of the Credit Parties, and the same shall be in full force and effect or (ii) an Officer’s Certificate in form and substance satisfactory to Agent affirming that no such consents or approvals are required;   (d)                                 Agent shall have received the Fees required to be paid by the Borrowers on the Effective Date in the respective amounts specified in Section 2.7 or in the Commitment   57 --------------------------------------------------------------------------------   Letter and shall have reimbursed the Agent for all fees, costs and expenses of closing presented as of the Effective Date;   (e)                                  The corporate structure, capital structure, other debt instruments, material contracts of CCS, and governing documents of the Credit Parties and their Subsidiaries shall be acceptable to Agent and Lenders in their respective sole discretion;   (f)                                    Agent shall have received evidence satisfactory to it in its sole discretion that Agent (on behalf of the Lenders) holds a perfected, first priority lien in all of the Collateral, subject to no other liens except for Permitted Encumbrances;   (g)                                 As of the Effective Date, there shall have been (i) other than the commencement of the Bankruptcy Cases and the events contemplated by the Forbearance Agreement, since January 30, 2006, no material adverse change in the business, financial or other condition of the Credit Parties taken as a whole, the Collateral which would be subject to the security interest granted to the Agent, or in the projections of the Credit Parties and (ii) no litigation commenced that has not been stayed by the Bankruptcy Court, that has a reasonable likelihood of being determined adversely to any Credit Party and that, if so determined, could reasonably be expected to have a Material Adverse Effect;   (h)                                 [Reserved.]   (i)                                     After giving effect to any Extensions of Credit to be made on the Effective Date, Borrowers shall be in compliance with all financial covenants set forth in this Agreement and Agent shall have received such certificates and information as it may request in order to verify such pro forma compliance with the financial covenants;   (j)                                     After giving effect to any Extensions of Credit to be made on the Effective Date, Borrowers shall have Borrowing Availability (calculated on a pro forma basis with trade payables being paid currently, expenses and liabilities being paid in the ordinary course of business and without acceleration of sales and without deterioration of working capital) of at least $2,000,000, in the aggregate;   (k) [Reserved]   (l)  [Reserved]   (m)                               There shall not exist (i) any Default or Event of Default under the Loan Documents or (ii) any default or event of default under any other Indebtedness or agreement of any Credit Party not disclosed on the Disclosure Schedules, which could reasonably be expected to have a Material Adverse Effect;   (n)                                 There shall have been no direct or indirect change in Senior Management of any Credit Party, except as set forth in Section 7.22;   (o)                                 [Reserved.]   58 --------------------------------------------------------------------------------   (p)                                 The Fixed Charge Coverage Ratio shall not exceed 0.50 to 1.00, determined on a pro forma basis after giving effect to the Loans to be made on the Effective Date;   (q)                                 All Loan Documents shall be in form and substance satisfactory to the Agent and the Lenders;   (r)                                    The Credit Parties shall be in pro forma compliance (based on the 2005 Unaudited Financials) with all financial covenants set forth in Sections 7.15, 7.16, 7.17 and 7.19 as of the Effective Date after giving effect to the Loans to be made on the Effective Date and Agent shall have received evidence in form and substance satisfactory to it in its sole discretion of such pro form compliance;    (s)                               Holdings and its consolidated Subsidiaries shall have pro forma trailing twelve month EBITDA of at least $16,500,000 (based on the 2005 Unaudited Financials), with any adjustments to such pro forma EBITDA to be satisfactory to Agent in its sole discretion;   (t)                                    The Senior Secured Leverage Ratio shall not exceed 2.00 to 1.00, (based on the 2005 Unaudited Financials) determined on a pro forma basis after giving effect to the Loans to be made on the Effective Date;   (u)                                 The Total Leverage Ratio shall not exceed 13.75 to 1.00, (based on the 2005 Unaudited Financials) determined on a pro forma basis after giving effect to the Loans to be made on the Effective Date;   (v)                                 The Agent shall not have become aware of any information or other matter affecting any Credit Party or the transactions contemplated hereby that is inconsistent in a material and adverse manner with any such information or other matter disclosed to the Agent prior to January 30, 2006;   (w)                               The Agent shall have received a duly executed Borrowing Base Certificate, dated not more than 15 days prior to the Effective Date, in form and substance satisfactory to Agent;   (x)                                   Agent shall have received and reviewed (i) the audited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of each of Holdings and its consolidated Subsidiaries and CCS prepared in accordance with GAAP for the Fiscal Year ended December 31, 2004, (ii) the unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of each of Holdings and its consolidated Subsidiaries and CCS prepared in accordance with GAAP for the Fiscal Year ended December 31, 2005 (the “2005 Unaudited Financials”) and (iii) any changes to the forecasts of the financial performance of Holdings and its Subsidiaries through 2008. Agent shall be satisfied with the items specified in clause (i) (it being understood that Agent is satisfied with the draft consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of Holdings for the Fiscal Year ended December 31, 2005 delivered to Agent prior to March 31, 2006, provided, that if the Credit Parties obtain an extension from the Securities and Exchange Commission regarding the filing of audited financial statements, the preceding date   59 --------------------------------------------------------------------------------   may be extended to April 30, 2006. Any changes specified in clause (ii) shall not be materially worse than the forecasts previously provided to Agent.   Section 3.2 Conditions to Each Extension of Credit. The obligation of any Lender to make any Extension of Credit (including on the Effective Date), is subject to the satisfaction of the following additional conditions:   (a)                                  receipt by the Agent of a Notice of Borrowing in accordance with Section 2.3(a), 2.5(c) or 2.6(b);   (b)                                 immediately before and after giving effect to such Extension of Credit, no Default or Event of Default shall have occurred and be continuing;   (c)                                  the representations and warranties of the Credit Parties contained in the Loan Documents shall be true and correct in all material respects on and as of the date of and after giving effect to such Extension of Credit, except for such changes therein as are expressly permitted by the terms of this Agreement or consented to in writing by the Required Lenders and except to the extent that such representations and warranties are expressly stated to be made as of an earlier date, in which case they shall be true as of such earlier date; and   (d)                                 [Reserved].   Each Extension of Credit hereunder shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by each Borrower on the date of such Extension of Credit as to the facts specified in clauses (b) and (c) of this Section and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section 12 and of the granting and continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.   ARTICLE IV.   REPRESENTATIONS AND WARRANTIES   To induce each Lending Party to enter into the Loan Documents and to make Extensions of Credit, each Borrower, jointly and severally, makes the following representations and warranties to each Lending Party, each and all of which shall survive the execution and delivery of this Agreement:   Section 4.1. Existence and Organizational Power; Compliance with Organizational Documents. Each Credit Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) is duly qualified to conduct its business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect, (c) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, (d) has all organizational powers necessary for the conduct of its business as now conducted or hereafter proposed to be conducted, and (e) is in full compliance with all provisions of its Organizational Documents.   60 --------------------------------------------------------------------------------   Section 4.2. Governmental Approvals, Compliance with Laws and Compliance with Agreements with Third Parties. Each Credit Party possesses in full force and effect all Governmental Approvals (including, as applicable, accreditations, licenses and certifications as a provider of health care services including those necessary for it to be eligible to receive payment and compensation and to participate under Medicare, Medicaid, TRICARE or CHAMPVA or any Blue Cross/Blue Shield or equivalent program) necessary for the conduct of its business and is in compliance with all provisions of all Healthcare Laws and all other Applicable Laws, except where the failure to possess such Governmental Approval or of such Governmental Approval to be in full force and effect or the failure to comply with Healthcare Laws or Applicable Laws could not reasonably be expected to have a Material Adverse Effect. No Credit Party is in breach of or default under or with respect to any contract, agreement, lease or other instrument to which it is a party or by which any of its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.   Section 4.3. Organizational and Governmental Approvals; No Contravention. The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated to occur thereunder, (a) are within its organizational powers, have been duly authorized by all necessary organizational action, (b) require no Governmental Approval (other than the Interim Order, the Final Order, the filing of UCC-1 financing statements, and such other filings as have been made and are in full force and effect), (c) do not contravene, or constitute a default under (i) any provision of Applicable Law the violation of which could reasonably be expected to have a Material Adverse Effect, (ii) the Organizational Documents of such Credit Party or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon any Credit Party and (d) do not result in the creation or imposition of any Lien (other than the Liens created by the Collateral Documents) on any asset of any such Credit Party.   Section 4.4. Binding Effect; Liens of Collateral Documents. (a)  Each Loan Document to which any Credit Party, is a party constitutes a valid and binding agreement of such Credit Party in each case enforceable in accordance with its terms, subject to (i) the effect of any applicable bankruptcy, fraudulent transfer, moratorium, insolvency, reorganization or other similar laws affecting the rights of creditors generally and (ii) the effect of general principles of equity whether applied by a court of equity or law.   (b)                                 The Collateral Documents create valid security interests in the Collateral purported to be covered thereby, which security interests are perfected security interests, prior to all other Liens other than Permitted Prior Liens.   Section 4.5. Financial Statements.   (a)                                  The financial information set forth in the financial statements listed on, and attached to, Disclosure Schedule 4.5(a) present fairly, in all material respects, in accordance with GAAP, the consolidated and consolidating financial position of the Credit Parties as at their respective dates and the consolidated and consolidating income, shareholders’ equity and cash flows of the Credit Parties for the respective periods to which such statements relate (except in the case of unaudited interim financial statements for the absence of footnotes and normally recurring year-end adjustments). Any information other than financial information presented in   61 --------------------------------------------------------------------------------   such statements is true, correct and complete in all material respects. Except as disclosed or reflected in such financial statements or in Disclosure Schedule 4.5(a), no Credit Party has any liabilities, contingent or otherwise, nor any unrealized or anticipated losses, that, singly or in the aggregate, have had or might have a Material Adverse Effect.   (b)                                 The Budget delivered on the date hereof and attached hereto as Disclosure Schedule 4.5(b) was prepared by the Borrowers in light of the past operations of their businesses, but including future payments of known contingent liabilities, and reflect projections for the three year period beginning on January 1, 2006 on a month-by-month basis for the first year and on a year-by-year basis thereafter. The Budget is based upon estimates and assumptions stated therein, all of which the Borrowers believe to be reasonable and fair in light of current conditions and current facts known to the Borrowers and, as of the Effective Date, reflect the Borrowers’ good faith and reasonable estimates of the future financial performance of the Borrowers and their Subsidiaries and of the other information projected therein for the period set forth therein. The monthly Budget for the month beginning on January 1, 2006 and the projections for the years beginning on January 1, 2007 and 2008 shall include an income statement, balance sheet and cash flow statement.   Section 4.6. Material Adverse Effect. Between December 31, 2005 and the Effective Date, other than the filing of the Bankruptcy Cases and the events detailed in the Forbearance Agreement: (a) no Credit Party has incurred any obligations, contingent or noncontingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (b) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon any Credit Party’s assets and no law or regulation applicable to any Credit Party has been adopted that has had or could reasonably be expected to have a Material Adverse Effect; (c) no Credit Party is in default and, to the best of each Credit Party’s knowledge, no third party is in default under any material contract, lease or other agreement or instrument which default could reasonably be expected to have a Material Adverse Effect; and (d) no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect. December 31,   Section 4.7. Litigation. Except as disclosed on Disclosure Schedule 4.7, there is no action, suit, investigation or proceeding (collectively, “Litigation”) pending or, to the knowledge of any Credit Party, threatened against or affecting any Credit Party or its property before any court or arbitrator or any Governmental Authority, that has a reasonable likelihood of being determined adversely to any Credit Party and that, if so determined, could reasonably be expected to have a Material Adverse Effect. There is no Litigation pending or, to the best knowledge of any Credit Party, threatened against or affecting, any party to this Agreement before any court or arbitrator or any Governmental Authority which questions or challenges the validity of this Agreement or any transaction contemplated herein or therein.   Section 4.8. Full Disclosure. None of the Information (financial or otherwise) furnished by or on behalf of any Credit Party to the Agent or any other Lending Party hereunder or in connection with the Loan Documents or any of the transactions contemplated here by or thereby contains any untrue statement of a material fact or omits to state a material fact necessary   62 --------------------------------------------------------------------------------   to make the statements contained herein or therein not misleading in the light of the circumstances under which such statements were made.   Section 4.9. No Adverse Fact. No fact or circumstance is known to any Credit Party that, either alone or in conjunction with all other such facts and circumstances, has had or reasonably could be expected in the future to have a Material Adverse Effect, that has not been set forth or referred to in the financial statements referred to in Section 4.5 or in a writing specifically captioned “Disclosure Statement” and delivered to the Agent prior to the Agreement Date.   Section 4.10. Ownership of Property, Liens. Each Credit Party is the lawful owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties and other assets (real or personal, tangible, intangible or mixed) purported to be owned, leased, subleased or used as the case may be, by such Credit Party on the most recent balance sheet referred to in Section 4.5 or, if more recent, delivered pursuant to Section 5.1, and none of such Credit Party’s properties or assets is subject to any Liens, except Liens permitted pursuant to Section 7.2.   Section 4.11. Environmental Laws. Each Credit Party and its respective operations are (a) in material compliance with the requirements of all Environmental Laws and (b) not the subject of any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a Release of any Hazardous Material into the environment or the work place or the use of any such substance in any of its products or manufacturing operations, which noncompliance or remedial action could reasonably be expected to have a Material Adverse Effect.   Section 4.12. ERISA. Each member of the Controlled Group has fulfilled its obligations under the minimum funding standards of ERISA and the IRC with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the IRC with respect to each Plan. No member of the Controlled Group has (a) sought a waiver of the minimum funding standard under Section 412 of the IRC in respect of any Plan, (b) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could reasonably be expected to result in the imposition of a Lien or the posting of a bond or other security under ERISA or the IRC or (c) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.   Section 4.13. Subsidiaries; Capitalization.  Borrowers have no Subsidiaries on the Effective Date other than as set forth on Disclosure Schedule 4.13. Disclosure Schedule 4.13 sets forth the correct legal name and jurisdiction of organization of each of the Borrowers and their Subsidiaries. The authorized Stock of each of the Credit Parties are as set forth on Disclosure Schedule 4.13. All issued and outstanding Stock of each of the Credit Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Agent for the benefit of the Lending Parties, and such Stock was issued in compliance with all Applicable Laws, provided that with respect to the Borrower Representative no representation is made as to Liens on its publicly held shares. The identity of the holders of   63 --------------------------------------------------------------------------------   the Stock of each of the Credit Parties and the percentage of their fully diluted ownership of the Stock of each of the Credit Parties is set forth on Disclosure Schedule 4.13, provided that with respect to the Borrower Representative, no representation is made as to the identity and respective percentage ownership of the holders of its publicly held shares. No Stock of any Credit Party, other than that described above, is issued and outstanding. Except as provided in Disclosure Schedule 4.13, there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit Party of any Stock of any such entity. All outstanding Indebtedness and Guaranteed Obligations of each Credit Party as of the Effective Date (except for the Obligations) is described in Disclosure Schedule 4.13.   Section 4.14. Government Regulations. No Credit Party is an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940. No Credit Party is subject to regulation under the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder.   Section 4.15. Margin Regulations. No Credit Party is engaged, nor will it engage, principally or as one of its activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as “Margin Stock”). No Credit Party owns any Margin Stock and none of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose which might cause any of the loans under this Agreement to be considered a “purpose credit” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve Board. No Credit Party will take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board.   Section 4.16. Taxes. All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Credit Party have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts which are the subject of a Permitted Contest or charges related to certain state and/or local taxes (other than income, gross receipts, sales, franchise or use taxes) in an aggregate amount not to exceed $50,000 at any time. Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all periods in compliance with Applicable Laws and such withholdings have been timely paid to the respective Governmental Authorities.   Section 4.17. Intellectual Property. Each Credit Party owns or has rights to use all Intellectual Property material to the conduct of its business as now or heretofore conducted by it or proposed to be conducted by it, without actual or claimed infringement upon the rights of third parties.   64 --------------------------------------------------------------------------------   Section 4.18.  [Reserved.]   Section 4.19. Insurance. Disclosure Schedule 4.19 lists all insurance policies of any nature maintained, as of the Effective Date, for current occurrences by each Credit Party, as well as a summary of the terms of each such policy.   Section 4.20. Brokers. No broker or finder acting on behalf of any Credit Party brought about the obtaining, making or closing of the Loans, and no Credit Party has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.   Section 4.21. Compliance with HIPAA. To the extent that and for so long as (i) any Credit Party is a “covered entity” as defined in 45 C.F.R. § 160.103, (ii) any Credit Party and/or its business and operations are subject to or covered by the HIPAA Administrative Requirements codified at 45 C.F.R. Parts 160 & 162 (the “Transactions Rule”) and/or the HIPAA Security and Privacy Requirements codified at 45 C.F.R. Parts 160 & 164 (the “Privacy and Security Rules”), or (iii) any Credit Party sponsors any “group health plans” as defined in 45 C.F.R. § 160.103, such Credit Party has:  (x) completed, or will complete on or before any applicable compliance date, surveys, audits, inventories, reviews, analyses and/or assessments, including risk assessments, (collectively “Assessments”) of all areas of its business and operations subject to HIPAA and/or that could reasonably be expected to be adversely affected by the failure of such Credit Party to be HIPAA Compliant (as defined below) to the extent that such Credit Party reasonably believes that these Assessments are appropriate or required for such Credit Party to be HIPAA Compliant; (y) developed, or will develop on or before any applicable compliance date, a detailed plan and time line for becoming HIPAA Compliant (a “HIPAA Compliance Plan”); and (z) implemented, or will implement on or before any applicable compliance date, those provisions of its HIPAA Compliance Plan necessary to ensure that such Credit Party is HIPAA Compliant; provided, however, that subsections (x), (y) and (z) of this Section 4.21 as they relate to the Transactions Rule shall not apply to Medcare for the period beginning on the date of this Agreement and continuing until the later to occur (and including such date) of (1) October 15, 2003 and (2) such other date as may be adopt by the U.S. Department of Health and Human Services (“HHS”) as the compliance deadline for the Transactions Rule (including any extensions of such deadline adopted by HHS). For purposes of this Agreement, “HIPAA Compliant” shall mean that such Credit Party (1) is, or on or before any applicable compliance date, including any extensions of such date adopted by HHS, will be, in full compliance with any and all of the applicable requirements of HIPAA, including all requirements of the Transactions Rule and the Privacy and Security Rules and (2) is not subject to, and could not reasonably be expected to become subject to, any civil or criminal penalty or any investigation, claim or process that could reasonably be expected to have a Material Adverse Effect.   Section 4.22. [Reserved.]   65 --------------------------------------------------------------------------------   ARTICLE V.   REPORTING COVENANTS   So long as any Lending Party has any Commitment hereunder or any Extension of Credit or other Obligation (other than contingent indemnity obligations not then due) remains outstanding, each Credit Party shall comply with each of the provisions in this Article V:   Section 5.1.                                Financial Statements and Reports. The Credit Parties shall deliver the following to each Lending Party at its address specified pursuant to Section 4.5:   (a)                                  [Reserved]   (b)                                 Annual Financials. As soon as available, but in any event within 90 days after the end of each Fiscal Year:   (i)                                     audited consolidated and consolidating balance sheets and the related audited consolidated and consolidating statements of income, retained earnings and cash flows for the Credit Parties, setting forth in comparative form in each case the figures for the previous Fiscal Year, and reported on without a qualification or exception, other than a “going concern” qualification in connection with the Bankruptcy Cases, by an independent certified public accounting firm of national standing acceptable to Agent;   (ii)                                  a management discussion and analysis that includes a comparison to Budget for such Fiscal Year and a comparison of performance for such Fiscal Year to the prior year;   (iii)                               a Compliance Certificate by Borrower Representative in the Form of Exhibit 5.1(b); and   (iv)                              the annual letters collected by such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters.   (c)                                  Annual Budgets. As soon as available following the end of each Fiscal Year, but in any event not later than 30 days after the end of such Fiscal Year, an annual operating plan for the Credit Parties (the “Budget”), on a consolidated and consolidating basis, approved by the Board of Directors of each Borrower, for the following Fiscal Year, which (i) includes a statement of all of the material assumptions on which such plan is based, (ii) includes monthly balance sheets, income statements and statements of cash flows for the following year and (iii) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities.   66 --------------------------------------------------------------------------------   (d)                                 Management Letters. Within five Business Days after receipt thereof by any Credit Party, copies of all final management letters, exception reports or similar letters or reports received by such Person from its independent certified public accountants.   (e)                                  Defaults and other Material Events.   As soon as practicable, and in any event within five (5) Business Days after any executive or financial officer of any Credit Party obtains knowledge of the existence of any event that could reasonably be expected to have a Material Adverse Effect or of any Default, telephonic or telecopied notice specifying the nature of such event or Default, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day.   (f)                                    Litigation.                                          As soon as practicable, and in any event within fifteen (15) days after any executive or financial officer of any Credit Party obtains knowledge that any Litigation commenced or threatened against any Credit Party, individually or in the aggregate, (i) seeks damages in excess of $500,000 (excluding any insured amounts), (ii) seeks injunctive relief against any Credit Party involving property of any Credit Party valued in excess of $500,000 or a transaction in which such Credit Party is a party where the payments to be made or received or the subject matter of such transaction exceeds individually or in the aggregate an amount equal to $500,000 or otherwise could reasonably be expected to have a Material Adverse Effect, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or any member of a Controlled Group in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges material violations of any Healthcare Laws that could reasonably be expected to have a Material Adverse Effect, (vi) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities, which could reasonably be expected to have a Material Adverse Effect, or (vii) if adversely determined against any Credit Party, could reasonably be expected to have a Material Adverse Effect.   (g)                                 Other Securities Reports. Promptly upon their becoming available, copies of (i) all financial statements, reports, notices and proxy statements sent by any Credit Party to its security holders, (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Credit Party.   (h)                                 Supplemental Disclosures. Supplemental disclosures, if any, required by Section 6.7.   (i)                                     Damage to Collateral. Disclosure of any loss, damage, or destruction to the Collateral in the amount of $100,000 or more individually or in the aggregate, whether or not covered by insurance.   (j)                                     Defaults under Material Agreements.                                           Immediately upon receipt, copies of any notice to any Credit Party of claimed default by any third party to any Credit Party with respect to or by any Credit Party of any material lease or agreement to which any Credit Party is a party that involves payments in excess of $500,000 individually or in the aggregate per annum   67 --------------------------------------------------------------------------------   or involves property of any Credit Party having a value in excess of $500,000 individually or in the aggregate.   (k)                                  Litigation Update. To Agent, at the time of delivery of each of the financial statements delivered pursuant to Section 5.1(n) (and in any event promptly upon request by Agent), a written update as to the status of the litigation described on Disclosure Schedule 4.7, including a description of the procedural status, any settlement discussions and any material motions, orders, pleadings or judgments filed or entered.   (l)  [Reserved]   (m)                               Other Documents. Promptly upon request, such other financial and other information respecting any Credit Party’s business or financial condition as Agent or any Lender shall from time to time reasonably request.   (n)                                 Monthly Financials. As soon as available, but in any event (i) for the month of January 2006, not later than April 15, 2006 (ii) within 45 days after the end of each of February, March, and April 2006 as well as the last month of each Fiscal Quarter and (iii) otherwise within 30 days after the end of each month, the Credit Parties will deliver to the Agent an unaudited, internally prepared balance sheet and the related statements of income, retained earnings and cash flows for the Credit Parties as at the end of and for such month and for the year -to -date period then ended, prepared, on a consolidating and consolidated basis to include any affiliates, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance with GAAP, subject to year-end audit adjustments; and accompanied by a Compliance Certificate substantially in the form of Exhibit 5.1(n).   (o)                                 Bankruptcy Reporting. As soon as available but no later than 3 days after the delivery to any Committee constituted in the Bankruptcy Cases, the Credit Parties will provide to the Agent and the Lenders all financial reports, proposals, analyses, projections, not otherwise identified in Section 5.1 hereof, created for or delivered to any Committee, trustee, examiner, or the like in the Bankruptcy Cases.   Section 5.2. Collateral Reports.  Each Credit Party shall deliver to Agent or to Agent and the Lenders, as required, the various Collateral Reports (including Borrowing Base Certificates in the form of Exhibit O) at the times and in the manner set forth below.   (a)                                  To the Agent, on a bi-weekly basis or at such more frequent intervals as Agent may reasonably request from time to time (together with a copy of all or any part of the following reports requested by Agent or any Lender in writing after the Effective Date), each of the following reports, each of which shall be prepared by the Borrowers as of the last day of the immediately preceding two week period:   (i)                                     a Borrowing Base Certificate accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion;   68 --------------------------------------------------------------------------------   (ii)                                  a summary of Inventory by location and type with a supporting perpetual Inventory report, accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion; and   (iii)                               a trial balance showing Accounts outstanding aged from invoice date as follows: one (1) to thirty (30) days; thirty-one (31) to sixty (60) days; sixty-one (61) to ninety (90) days; ninety-one (91) to one hundred twenty (120) days; one hundred twenty-one (121) to one hundred fifty (150) days; and one hundred fifty-one (151) days or more, accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion;   (b)                                 To the Agent, on a monthly basis on the date that is 15 Business Days (or, in the case of any fiscal month ending prior to the first anniversary of the Effective Date, 30 days) after the end of each month or at such more frequent intervals as Agent may reasonably request from time to time in writing (together with a copy of all or any part of such delivery as may be requested by any Lender in writing after the Effective Date), Collateral reports including all additions and reductions (cash and non-cash) with respect to Accounts in each case accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion each of which shall be prepared as of the last day of the immediately preceding month;   (c)                                  To the Agent, at the time of delivery of each of the monthly financial statements delivered pursuant to Section 5.1(n) for the last month in each Fiscal Quarter :   (i)                                     a reconciliation of the Accounts trial balance to the most recent Borrowing Base Certificate, general ledger and monthly financial statements delivered pursuant to Section 5.1(n) for the last month in the previous Fiscal Quarter, in each case accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion; and   (ii)                                  a reconciliation of the perpetual inventory by location to the most recent Borrowing Base Certificate, general ledger and monthly financial statements delivered pursuant to Section 5.1(n) for the last month in the previous Fiscal Quarter, accompanied by such supporting detail and documentation as shall be requested by the Agent in its sole discretion.   (d)                                 To the Agent, at any time that adjustments resulting from physical verifications or cycle counts that any Credit Party may in its discretion have made, or caused any other Person to have made on its behalf, of all or any portion of its Inventory, exceed in the aggregate, $100,000 for the most recently completed twelve (12) month period, a summary in form and substance satisfactory to the Agent describing such adjustments (and, if a Default or Event of Default has occurred and is continuing, the Borrowers shall, upon the request of Agent or the Required Lenders, conduct, and deliver the results of, such physical verifications as Agent or the Required Lenders may require);   (e)                                  To Agent, at the time of delivery of each of the monthly financial statements delivered pursuant to Section 5.1(n) for the last month in the previous Fiscal Quarter,   69 --------------------------------------------------------------------------------   a reconciliation of the outstanding Loans as set forth in the quarterly Loan Account statement provided by Agent to the general ledger and monthly financial statements delivered pursuant to Section 5.1(n) for the last month in the previous Fiscal Quarter, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable credit judgment;   (f)                                    To Agent, at the time of delivery of each of the monthly financial statements delivered pursuant to Section 5.1(n) for the last month in the previous Fiscal Quarter, (i) a listing of government contracts of the Borrowers subject to the Federal Assignment of Claims Act of 1940; and (ii) a list of any applications for the registration of any patent, trademark or copyright filed by any Credit Party with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in the prior Fiscal Quarter;   (g)                                 To the Agent, the results of each physical verification, if any, that the Borrowers or any of their Subsidiaries may in their discretion have made, or caused any other Person to have made on their behalf, of all or any portion of their Inventory (and, if an Event of Default has occurred and is continuing, the Borrowers shall, upon the request of Agent, conduct, and deliver the results of, such physical verifications as Agent may require);   (h)                                 To the Agent, such appraisals of the Borrowers’ assets as Agent may request at any time after the occurrence and during the continuance of a Default or Event of Default, such appraisals to be conducted by an appraiser, and in form and substance reasonably satisfactory to Agent;   (i)                                     To Agent, within 5 Business Days after receipt thereof, copies of (i) any and all default notices received under or with respect to any Senior Unsecured Debt, any Subordinated Debt, any leased location or public warehouse where any Collateral is located, and (ii) such other notices or documents with respect to any owned or leased Real Property of any Credit Party as Agent may reasonably request;   (j)                                     To Agent, within 5 Business Days after receipt thereof, copies of any written offer to purchase, repay or redeem all or any portion of any Senior Unsecured Debt or Subordinated Debt made by any Credit Party to one or more of the holders thereof or any representative of such holders;   (k)                                  To Agent, within 5 Business Days after receipt thereof, copies of any material amendments to any Real Property leases of any Credit Party; and   (l)                                     Such other reports, statements and reconciliations with respect to the Collateral or Obligations of any or all Credit Parties as Agent shall from time to time request in its reasonable discretion.   Section 5.3.                                Accuracy of Financial Statements and Information   (a)                                  Future Financial Statements. All financial statements delivered pursuant to Section 5.1(b) or (n), shall (i) in the case of the financial information set forth therein, present fairly, in all material respects, in accordance with GAAP the consolidated and consolidating   70 --------------------------------------------------------------------------------   financial position of the Credit Parties, as at their respective dates and the consolidated and consolidating income, shareholders’ equity, and consolidated cash flows of the Credit Parties for the respective periods to which such statements relate (subject, in the case of the financial statements delivered pursuant to Section 5.1(n), to the absence of footnotes and normally recurring year-end adjustments) and (ii) in the case of any other information presented, be true, correct and complete in all material respects, and the furnishing of the same to the Lending Parties shall constitute a representation and warranty by the Credit Parties made on the date the same are furnished to the Lending Parties to that effect.   (b)                                 Future Information. All Information furnished to any Lending Party by or on behalf of any Credit Party on and after the Agreement Date in connection with or pursuant to this Agreement or any other Loan Document or in connection with or pursuant to any amendment or modification of, or waiver under, this Agreement or any other Loan Document, shall, at the time the same is so furnished, but in the case of Information dated as of a prior date, as of such date, (i) in the case of any such Information prepared in the ordinary course of business, be complete and correct in all material respects in the light of the purpose prepared, and, in the case of any such Information required by the terms of this Agreement or the preparation of which was requested by any Lending Party pursuant to the terms of this Agreement, be complete and correct in all material respects to the extent necessary to give true and accurate knowledge of the subject matter thereof, and (ii) not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading, and the furnishing of the same to any Lending Party shall constitute a representation and warranty by the Credit Parties made on the date the same are so furnished to the effect specified in clauses (i) and (ii).   Section 5.4  Bankruptcy Pleadings   Copies of all pleadings, motions, applications, judicial information, financial information and other documents filed or submitted by or on behalf of Credit Parties with the Bankruptcy Court or the U.S. Trustee in the Bankruptcy Cases, or distributed by or on behalf of Credit Parties to any official committee, examiner, or trustee in Bankruptcy Cases, shall be distributed by the Credit Parties to the Agent and the Lenders at the same time such information is distributed to such other parties.   71 --------------------------------------------------------------------------------   ARTICLE VI.   AFFIRMATIVE COVENANTS   So long as any Lending Party has any Commitment hereunder or any Extension of Credit or other Obligation (other than contingent indemnity obligations not then due) remains outstanding, each Borrower shall, and shall cause each Credit Party to, comply with each of the covenants in this Article VI unless compliance with such covenants has previously been waived in writing by Agent and/or Lenders, as applicable, in their sole and absolute discretion, in accordance with Section 11.5:   Section 6.1 Payment of Obligations. Each Credit Party (a) shall pay and discharge, at or before maturity, all of its respective obligations and liabilities, including Charges, the non-payment or discharge of which could reasonably be expected to have a Material Adverse Effect except where the same is the subject of a Permitted Contest, (b) shall maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same and (c) shall not breach in any respect, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, the breach of or default under which could reasonably be expected to have a Material Adverse Effect, subject to Permitted Contests.   Section 6.2. Conduct of Business and Maintenance of Existence. Each Credit Party will continue to conduct its business substantially as now conducted by the Credit Parties or as otherwise permitted hereunder, and will preserve, renew and keep in full force and effect its corporate, company or partnership, as applicable, existence, rights, privileges and franchises necessary or desirable in the normal conduct of business except to the extent that such failure results from any merger or consolidation of any Credit Party to the extent such merger or consolidation is expressly permitted under Section 7.8 of this Agreement and provided that Holdings shall at all times be and remain a holding company and shall not conduct any business (other than business activities directly related to the provision of administrative services to the Borrowers, including, but not limited to, accounting, legal, human resources, information systems, business development and certain marketing services) and shall not at any time own or hold any material assets (other than the Stock of its Subsidiaries).   Section 6.3. Maintenance of Assets and Properties.  Each Credit Party will keep all material assets and properties useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, and will cause to be made all appropriate repairs, renewals and replacements thereof.   Section 6.4. Insurance; Damage to or Destruction of Collateral.   (a)  The Credit Parties shall, at their sole cost and expense, maintain the policies of insurance described on Disclosure Schedule 4.19 as in effect on the date hereof or otherwise in form with such deductibles as is customary for similarly situated businesses, and amounts and with insurers reasonably acceptable to Agent. Such policies of insurance (or the loss payable and additional insured endorsements delivered to Agent) shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Agent in the event of any non-renewal,   72 --------------------------------------------------------------------------------   cancellation or amendment of any such insurance policy. If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent deems advisable; provided that Agent shall have no obligation to obtain insurance for any Credit Party or pay any premiums therefor, but to the extent it does obtain such insurance or pay such premiums, Agent shall not be deemed to have waived any Default arising from any Credit Party’s failure to maintain such insurance or pay any premiums therefor. All sums so disbursed by Agent hereunder, including reasonable attorneys’ fees, court costs and other charges related thereto, shall be payable by Borrowers on demand by the Agent and shall constitute additional Obligations hereunder secured by the Collateral.   (b)                                 Agent reserves the right at any time upon any change in any Credit Party’s risk profile (including any change in the product mix maintained by any Credit Party or any laws affecting the potential liability of such Credit Party) to require additional forms and limits of insurance to, in Agent’s opinion, adequately protect both Agent’s and the Lenders’ interests in all or any portion of the Collateral and to ensure that each Credit Party is protected by insurance in amounts and with coverage customary for its industry. If requested by Agent, each Credit Party shall deliver to Agent from time to time a report of a reputable insurance broker, satisfactory to Agent, with respect to its insurance policies.   (c)                                  Each Credit Party shall deliver to Agent, in form and substance satisfactory to Agent, endorsements to (i) all “All Risk” and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Credit Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Event of Default has occurred and is continuing or the anticipated insurance proceeds exceed $250,000, as such Credit Party’s true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such “All Risk” policies of insurance, endorsing the name of such Credit Party on any check or other item of payment for the proceeds of such “All Risk” policies of insurance and for making all determinations and decisions with respect to such “All Risk” policies of insurance; provided that Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, Agent may, at its option, (i) apply such proceeds to the reduction of the Obligations or (ii) permit or require the applicable Credit Party to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral within 180 days of such casualty with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction; provided that if such Credit Party shall not have completed or entered into binding agreements to complete such replacement, restoration, repair or rebuilding within 180 days of such casualty, Agent may apply such insurance proceeds to the Obligations. Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $250,000 in the aggregate, Agent shall permit the applicable Credit Party to replace, restore, repair or rebuild the property; provided that if such Credit Party shall not have completed or entered into binding agreements to complete such replacement, restoration, repair or rebuilding within 180 days of such casualty, Agent may apply such insurance proceeds to the   73 --------------------------------------------------------------------------------   Obligations. All insurance proceeds that are to be made available to any Credit Party to replace, repair, restore or rebuild the Collateral shall be applied by Agent to reduce the outstanding principal balance of the Revolving Loan (which application shall not result in a permanent reduction of the Revolving Credit Commitment) and upon such application, Agent shall establish a Reserve against the Borrowing Base in an amount equal to the amount of such proceeds so applied. Thereafter, such funds shall be made available to that Credit Party to provide funds to replace, repair, restore or rebuild the Collateral as follows: (x) the Borrower Representative shall request a Revolving Credit Advance be made to such Credit Party in the amount requested to be released; (y) so long as the conditions set forth in Section 3.4, as applicable, have been met, Revolving Lenders shall make such Revolving Credit Advance and (z) in the case of insurance proceeds applied against the Revolving Loan, the Reserve established with respect to such insurance proceeds shall be reduced by the amount of such Revolving Credit Advance. To the extent not used to replace, repair, restore or rebuild the Collateral, such insurance proceeds shall be applied to the Obligations.   Section 6.5. Compliance with Laws. Each Credit Party will (a) comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its assets and properties if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect, (b) conform with and duly observe all laws, rules and regulations and all other valid requirements of any regulatory authority with respect to the conduct of its business, including without limitation Titles XVIII and XIX of the Social Security Act, Medicare Regulations, Medicaid Regulations, and all laws, rules and regulations of Governmental Authorities, pertaining to the business of the Credit Parties except where any such failure to comply or observe could not reasonably be expected to have a Material Adverse Effect, and (c) obtain and maintain all licenses, permits, certifications and approvals of all applicable Governmental Authorities as are required for the conduct of its business as currently conducted and herein contemplated, including without limitation professional licenses, CLIA certifications, Medicaid Certifications and Medicare Certifications, if failure to do so could reasonably be expected to have a Material Adverse Effect. Specifically, but without limiting the foregoing, and except where any such failure to comply could not reasonably be expected to have a Material Adverse Effect (i) each Credit Party’s billing policies, arrangements, protocols and instructions will comply with reimbursement requirements under Medicare, Medicaid and other medical reimbursement programs and will be administered by properly trained personnel; and (ii) each Credit Party’s medical director compensation arrangements and other arrangements with referring physicians will comply with applicable state and federal self-referral and anti-kick-back laws, including without limitation 42 U.S.C. Section 1320a-7b(b)(1) – (b)(2) 42 U.S.C. and 42 U.S.C. Section 2395nn.   Section 6.6. Inspection of Property, Books and Records. Each Credit Party will keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities and will permit the Agent, who may be accompanied by the representatives of any Lender upon such Lender’s written request, to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records subject to applicable confidentiality laws relating to patient medical care records (to the extent not waived by the patient), to conduct a collateral audit and analysis of its inventories and accounts receivable and to discuss its affairs, finances and accounts with its   74 --------------------------------------------------------------------------------   officers, employees and independent public accountants, all at such reasonable times during regular business hours and as often as may reasonably be desired; provided that, so long as no Default or Event of Default shall have occurred and be continuing, the Agent shall have provided the appropriate Credit Party with reasonable prior notice and shall conduct such visit in a manner that does not unreasonably interfere with the conduct of such Credit Party’s business; and provided further that Agent agrees that except (a) during the occurrence and continuance of a Default or Event of Default, and (b) for audits of Additional Subsidiaries pursuant to Section 6.14, no Credit Party shall be responsible for any audit fees with respect to more than two (2) audits during any Fiscal Year. Representatives of each Lender will be permitted to accompany representatives of Agent during each visit, inspection and discussion referred to in the immediately preceding sentence. Agent and Lenders agree that to the extent that (x) any documents or records requested for inspection pursuant to this Section 6.6 are, at the time of such request, subject to a legitimate attorney-client privilege in favor of a Credit Party as a result of threatened or potential litigation or adverse action involving such Credit Party and another Person (other than a Lender or Agent) and (y) such disclosure would destroy such attorney-client privilege, such Agent or Lender, as applicable, shall afford Borrower Representative an opportunity to consult with such Agent or Lender, as applicable, prior to disclosure of such documents or records. Without in any way limiting the foregoing, Borrowers will participate and will cause the chief executive officer and the chief financial officer of the Borrowers and such other officers of the Credit Parties as the Agent shall designate to participate in a meeting with Agent and Lenders to discuss the financial results and condition of the Credit Parties at least once during each year, which meeting shall be held at such time during regular business hours and such place as may be reasonably requested by Agent.   Section 6.7. Supplemental Disclosure. From time to time as may be reasonably requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any Loan Document, with respect to any matter hereafter arising that, if existing or occurring as of the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be deemed a waiver of any Default resulting from the matters disclosed therein, except as consented to by Agent and Required Lenders in writing, and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Effective Date or are expressly stated to be made as of an earlier date.   Section 6.8. Use of Proceeds. The proceeds of Revolving Loans made on the Effective Date shall be used by the Borrowers solely to (a) repay on the Effective Date the principal amount of all of the outstanding “Obligations” under and as defined in the Existing Credit Facility owing to GE Capital and any other lenders under the Existing Credit Facility on the Effective Date and (b) to pay on the Effective Date all accrued and unpaid interest and fees, other than the Conditionally Waived Pre-petition Fees, owing to GE Capital and the other Existing Lenders under the Existing Credit Facility, in each case as specified in the Statement of   75 --------------------------------------------------------------------------------   Sources and Uses delivered by Holdings to Agent on or prior to the Effective Date. The proceeds of Revolving Loans and Swingline Loans made on and after the Effective Date shall be used by the Borrowers solely for the purpose of funding working capital and other general corporate purposes of the Borrowers and any of their Subsidiaries that are Credit Parties. Letters of Credit shall be used solely for general corporate purposes of the Borrowers and any of their Subsidiaries that are Credit Parties. No Extension of Credit and none of the proceeds of any Extension of Credit will be used (i) in violation of any Applicable Law or (ii) to repay all or any portion of the principal amount of any Senior Unsecured Debt or Subordinated Debt. GE Capital hereby acknowledges and agrees that the pre-payment fee and the PIK Spread that are due and payable pursuant to the Existing Credit Facility have been conditionally waived pursuant to sections 1(c) and 3(c) of the Forbearance Agreement, and the conditions of such waiver are incorporated herein by reference.   Section 6.9. Further Assurances. Each Credit Party shall, at its own cost and expense, cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances (a) as may from time to time be necessary or as the Agent may from time to time reasonably request to carry out the intent and purposes of the Loan Documents and the transactions contemplated thereby, including all such actions to establish, preserve, protect and perfect the estate, right, title and interest of the Agent to the Collateral (including Collateral acquired after the date hereof), including first priority Liens thereon, subject only to Liens permitted by Section 7.2, and (b) as the Agent may from time to time reasonably request, to establish, preserve, protect and perfect first priority Liens in favor of the Agent on any and all assets of the Credit Parties and the proceeds thereof, now owned or hereafter acquired, that do not constitute Collateral on the date hereof. The Borrower Representative shall promptly give notice to the Agent of the acquisition after the Effective Date by any Credit Party of any Real Property (including leaseholds in respect of Real Property) or any trademark, copyright or patent.   Section 6.10. [Reserved].   Section 6.11. Environmental Matters.  Each Credit Party shall and shall cause each Person within its control to (a) conduct its operations and keep and maintain its Real Property in compliance with all Environmental Laws and Environmental Permits other than noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) implement any and all investigative, remedial, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Property or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real Property of any Credit Party, and (c) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Credit Party in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $250,000, in each case whether or not any Governmental Authority has taken or threatened any action in connection with any violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Credit Party or any Environmental Liability arising thereunder,   76 --------------------------------------------------------------------------------   or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of the Real Property of any Credit Party, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, then each Credit Party shall, upon Agent’s written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at the Borrowers’ expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Property for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater; provided that the Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.   Section 6.12. Landlord and Warehouseman Waivers. The Credit Parties shall deliver to the Agent waivers of contractual and statutory landlord’s, mortgagee’s or warehouseman’s Liens in form and substance reasonably satisfactory to the Agent under each lease, mortgage, warehouse agreement or similar agreement to which any Credit Party is a party; provided that the Credit Parties shall not be required to deliver to Agent a landlord waiver for any leased location if each of the following conditions are met with respect to such leased locations: (a) no books or records related to any of the Credit Parties’ Accounts or other Collateral are located at such location; (b) such leased location is not the chief executive office of any Credit Party; and (c) the aggregate value of all Inventory located at such leased location (valued at the greater of cost or market value) does not exceed $100,000. If at any time, such leased location fails to satisfy any of the foregoing conditions in clauses (a), (b) or (c) then, Holdings shall, or shall cause the applicable Credit Party lessee as the case may be, to use its best efforts to obtain a landlord waiver in form and substance reasonably satisfactory to Agent. So long as Borrowers have used their best efforts to obtain such required landlord waiver agreements, the failure of any Borrower to timely deliver any such landlord waiver agreement pursuant to the immediately preceding sentence shall not constitute a Default or Event of Default, but shall entitle Agent to impose a Reserve against the Borrowing Base for purposes of determining Borrowing Availability in an amount equal to three times the monthly rent under any such lease, and once so Reserved, the Inventory located at such leased location shall not be excluded from Eligible Inventory based on the failure to obtain such landlord waiver agreement, but shall remain subject to any other basis for exclusion hereunder. Without limiting the foregoing, Agent shall establish a Reserve against Eligible Accounts and Eligible Inventory in an amount equal to at least 3 months’ rent for any leased location where a landlord waiver in form and substance reasonably satisfactory to Agent has not been obtained, irrespective of whether or not such landlord waiver is required to be obtained by any of the Credit Parties pursuant to this Section 6.12.   Section 6.13. Mortgages on Real Property; Title Insurance and Survey. Within thirty (30) days after the acquisition of any Real Property having a fair market value in excess of $250,000 by any Credit Party, such Credit Party will furnish the Agent with a Mortgage covering each parcel of Real Property acquired by such Credit Party (the “Mortgaged Property”), together with an ALTA extended coverage lender’s policy of title insurance in a policy amount equal to one hundred percent (100%) of the greater of (x) the purchase price of such acquired property (including any liabilities assumed in connection with the acquisition) or (y) the fair market value of such property, insuring such Mortgage as a valid, enforceable first   77 --------------------------------------------------------------------------------   Lien on the Credit Party’s interest in the Mortgaged Property covered thereby, subject only to Permitted Encumbrances and to such other exceptions as are reasonably satisfactory to the Agent, together with an ALTA survey with respect to each parcel of the Mortgaged Property acquired, in form and substance reasonably satisfactory to the Agent, and legible copies of all documents affecting title, which shall show all recording information. The policy, including each of the exceptions to coverage contained therein, shall be subject to the approval of the Agent, and shall be issued by a title company acceptable to the Agent. Attached to the policy shall be any and all endorsements reasonably required by the Agent, including (a) a comprehensive endorsement (ALTA 100 or equivalent) covering restrictions and other matters, (b) a broad form zoning endorsement, which specifically ensures that applicable parking requirements, if any, have been satisfied, (c) an endorsement ensuring that the lien of each Mortgage is valid against any applicable usury laws or other laws prohibiting the charging of interest on interest in the state(s) where such Mortgaged Property is located, (d) an endorsement ensuring that the Mortgaged Property has access to a dedicated public street, (e) a revolving credit endorsement, (f) a contiguity endorsement, (g) a survey and “same as” endorsement and (h) an endorsement deleting the so-called “doing business” exclusion.   Section 6.14. Additional Subsidiaries.  Within 30 days (or, with respect to clause (iii) below, 60 days) after the creation or acquisition of any Subsidiary by any Credit Party, such Credit Party (other than new Subsidiaries that become Additional Borrowers pursuant to Section 2.16) shall cause to be executed and delivered, (i) by such new Subsidiary, a Subsidiary Guaranty Agreement pursuant to which such Subsidiary shall guarantee the payment and performance of all of the Obligations, (ii) by such new Subsidiary, a Guarantor Security Agreement pursuant to which the Agent (for the benefit of itself and the Lenders) shall be granted a first priority (subject to Permitted Encumbrances) and perfected security interest in all Collateral (as defined in the Security Agreement) of such Subsidiary that is either (x) property in which a security interest can be granted and perfected under the Code or (y) Intellectual Property registered with the United States Patent and Trademark Office or the United States Copyright Office, (iii) by such new Subsidiary if it owns any real property, a Mortgage in form and substance reasonably satisfactory to Agent) pursuant to which the Agent (for the benefit of itself and the Lenders) shall be granted a first priority (subject to Permitted Encumbrances) and perfected Lien in such Mortgaged Properties together with the other documents relating to such Mortgaged Properties described in Section 6.13, (iv) by such Subsidiary if it owns any Intellectual Property that is registered with the United States Patent and Trademark Office or the United States Copyright Office, an Intellectual Property Security Agreement in substantially the form of the Intellectual Property Security Agreement delivered by the other Credit Parties on the Closing Date (or otherwise in form and substance reasonably satisfactory to Agent) and pursuant to which the Agent (for the benefit of itself and the Lenders) shall be granted a first priority (subject to Permitted Encumbrances) and perfected security in all of such Intellectual Property, (v) by the Credit Party that is such Subsidiary’s direct parent company or companies, a Pledge Agreement substantially in the form of the Pledge Agreement delivered by the other Credit Parties on the Closing Date (or otherwise in form and substance reasonably satisfactory to the Agent) and pursuant to which all of the Stock of such new Subsidiary owned by each such parent company shall be pledged to the Collateral Agent (for the benefit of itself and the Lenders) on a first priority and perfected basis to secure the Obligations, and (vi) by the applicable Credit Parties, such other related documents (including closing certificates, legal opinions and other documents of the types described in Exhibit I) as the Agent may reasonably request, all in form   78 --------------------------------------------------------------------------------   and substance reasonably satisfactory to the Agent; provided, however, that clause (i) and (ii) above shall not apply to any newly-formed Subsidiary that becomes an Additional Borrower in accordance with Section 2.16.   Section 6.15.                         Compliance Program. Each Credit Party will maintain, and be operated in accordance with, a compliance program substantially in accordance with the compliance program described in Schedule 6.15.   Section 6.16.                         Cash Management Systems. The Credit Parties will establish and maintain the cash management systems described below (the “Cash Management Systems”):   (a)                                  Commencing on or prior to the Effective Date, (i) the Borrowers will, or cause each of their Subsidiaries to, request in writing and otherwise take reasonable steps to ensure that all Account Debtors in respect of Government Accounts forward payment directly to an account of a Credit Party designated as a Government Receivables Deposit Account on Disclosure Schedule 6.16(a) (each a “Government Receivables Deposit Account”), (ii) the Credit Parties will, or will cause each of their Subsidiaries to, establish lock boxes (“Lock Boxes”) or at Agent’s discretion, blocked accounts at one or more of the banks set forth in Disclosure Schedule 6.16(c) (“Blocked Accounts”), and shall request in writing and otherwise take such reasonable steps to ensure that all Account Debtors with respect to Private Accounts forward payment directly to such Lock Boxes and (iii) the Credit Parties will deposit and cause their Subsidiaries to deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral (whether or not otherwise delivered to a Lock Box) into the Blocked Accounts. Until so deposited, all such payments shall be held in trust by each Credit Party and any of its Subsidiaries for the Agent and shall not be commingled with any other funds or property of any Credit Party. On or before the Effective Date, Borrower Representative shall have established a concentration account in its name (the “Concentration Account”) at the bank that shall be designated as the Concentration Account bank for Borrowers in Disclosure Schedule 6.16(a) (the “Concentration Account Bank”) which bank shall be reasonably satisfactory to Agent.   (b)                                 Any Borrower may maintain, in its name, an account (each a “Disbursement Account” and collectively, the “Disbursement Accounts”) at a bank reasonably acceptable to Agent into which Agent shall, from time to time, deposit proceeds of Revolving Credit Advances and Swingline Advances made to the Borrowers pursuant to Section 2.1 for use by the Borrowers solely in accordance with the provisions of Section 6.8.   (c)                                  On or before the Effective Date (or such later date as Agent shall consent to in writing), each Credit Party shall deliver to Agent (i) for each Government Receivables Deposit Account, a tri-party deposit account agreement between Agent, the bank at which each Government Receivables Deposit Account is maintained and each Credit Party, in form and substance satisfactory to Agent (each a “Government Receivables Deposit Account Agreement”), which Government Receivables Deposit Account Agreement shall become operative on or prior to the Effective Date, and (ii) for the accounts of Credit Parties designated as a Blocked Account on Disclosure Schedule 6.16(c) and for the Concentration Account and any Disbursement Accounts, a tri-party blocked account agreement or lockbox account   79 --------------------------------------------------------------------------------   agreement between Agent, the bank at which each such Blocked Account or Disbursement Account is maintained and Credit Parties, in form and substance satisfactory to Agent (each a “Blocked Account Agreement”), which Blocked Account Agreement shall become operative on or prior to the Effective Date. Each such Blocked Account Agreement shall provide, among other things, that from and after the Effective Date (A) with respect to banks at which any Blocked Accounts or Disbursement Account is maintained, such bank agrees to forward immediately all amounts in each Blocked Account to the Concentration Account and to commence the process of daily sweeps from each of the Concentration Accounts and Disbursement Accounts into the Collection Account. Notwithstanding the foregoing, the Agent hereby acknowledges that the Private Pay Account (Bank One account number: 1571836806) of CCS (the “Bank One Account”) is not currently subject to a Blocked Account Agreement. Subject to (x) the delivery of a Blocked Account Agreement for the Bank One Account or (y) the closing of the Bank One Account, confirmed in writing, on or before the thirtieth day following the Closing Date, the failure to deliver a Blocked Account Agreement for this account shall not constitute a default hereunder.   (d)                                 By 10:00 a.m. (New York time) on each Business Day, each Credit Party will cause the entire available balance in each Government Receivables Deposit Account to be transferred to the Blocked Accounts. The balance from time to time standing to the credit of the Blocked Accounts shall be distributed as directed by the Credit Parties in accordance with the provisions of the Blocked Account Agreement. Borrowers shall not, and shall not cause or permit any Subsidiary thereof to, accumulate or maintain cash in disbursement accounts or payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements.   (e)                                  So long as no Default or Event of Default has occurred and is continuing, Borrowers may amend Disclosure Schedule 6.16(a) and (c) to add or replace a bank, Government Receivables Deposit Account, the Concentration Account, any Blocked Account or any Disbursement Account; provided, that (i) Agent shall have consented in writing in advance to the opening of such account with the relevant bank and (ii) prior to the time of the opening of such account, Borrowers or their Subsidiaries, as applicable, and such bank shall have executed and delivered to Agent a tri-party blocked account agreement, in form and substance satisfactory to Agent in its sole discretion. The Borrowers shall close any of its accounts (and establish replacement accounts in accordance with the foregoing sentence) promptly and in any event within 30 days following notice from Agent to Borrower Representative that the creditworthiness of any bank holding an account is no longer acceptable in Agent’s reasonable credit judgment, or as promptly as practicable and in any event within 60 days following notice from Agent to Borrower Representative that the operating performance, funds transfer or availability procedures or performance with respect to accounts or lockboxes of the bank holding such accounts or Agent’s liability under any tri-party blocked account agreement with such bank is no longer acceptable in Agent’s reasonable credit judgment.   (f)                                    The Government Receivables Deposit Accounts, the Concentration Account, the Blocked Accounts and the Disbursement Accounts shall be cash collateral accounts, with all cash, checks and other similar items of payment in such accounts securing payment of the Loans and all other Obligations, and in which Borrowers and each Subsidiary   80 --------------------------------------------------------------------------------   thereof shall have granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the Security Agreement.   (g)                                 All amounts deposited in the Collection Account shall be deemed received by Agent in accordance with Section 2.14 and shall be applied (and allocated) by Agent in accordance with Section 2.10. In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account.   (h)                                 The Borrowers shall and shall cause its Affiliates, officers, employees, agents, directors or other Persons acting for or in concert with Borrowers (each a “Related Person”) to (i) hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash and other items of payment received by the Borrowers or by a Related Person on behalf of any Borrower, and (ii) within 1 Business Day after receipt by the Borrowers or by a Related Person on behalf of any Borrower of any checks, cash or other items of payment, deposit the same into a Blocked Account or the Concentration Account. Borrowers and each Related Person thereof acknowledges and agrees that all cash, checks or other items of payment constituting proceeds of Collateral are part of the Collateral. All proceeds of the sale or other disposition of any Collateral, shall be deposited directly into a Blocked Account or the Concentration Account (or if proceeds of Government Accounts into a Government Receivables Deposit Account).   Section 6.17.                         Accreditation and Licensing. Each Borrower shall keep itself and its Subsidiaries fully licensed with all licenses required to operate such Person’s business under Applicable Law and maintain its qualification for participation in, and payment under, Medicare, Medicaid, TRICARE, CHAMPVA and any other federal, state or local governmental program or private program providing for payment or reimbursement for services rendered by such Person, except to the extent that the loss or relinquishment of such qualification would not or could not reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Agreement shall require that any Credit Party participate in the TRICARE or CHAMPVA programs if it elects not to accept patients covered by such programs. The Borrowers will promptly furnish the Agent with copies of all reports and correspondence relating to any loss or revocation (or threatened loss or revocation) of any qualification described in this Section.   Section 6.18                            [Reserved].   Section 6.19                            [Reserved.]   ARTICLE VII.   NEGATIVE COVENANTS   So long as any Lender has any Commitment hereunder or any Extension of Credit or other Obligation (other than contingent indemnity obligations not then due) remains   81 --------------------------------------------------------------------------------   outstanding, each Borrower shall, and shall cause each Credit Party to, comply with each of the covenants in this Article VII unless compliance with such covenants has previously been waived in writing by Agent or Lenders, as applicable, in their sole and absolute discretion, in accordance with Section 11.5:   Section 7.1. Indebtedness. No Credit Party will, and no Credit Party will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except for:   (a)                                  Indebtedness outstanding on the Effective Date to the extent set forth in Disclosure Schedule 7.1, and any refinancings, refundings, renewals or extensions thereof; provided, however, that after giving effect to any such refinancings, refundings, renewals or extensions (i) the principal amount of such Indebtedness shall not be increased, (ii) such Indebtedness, if unsecured, shall remain unsecured, (iii) the scheduled maturity date thereof shall not be shortened and (iv) in the case of any such Indebtedness that constitutes subordinated Indebtedness, no refinancing, refunding, renewal or extension thereof shall be permitted without the prior written consent of the Agent and Required Lenders;   (b)                                 Indebtedness under the Loan Documents;   (c)                                  Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring any asset (including through Capital Leases) in an aggregate principal amount outstanding not greater than $500,000 at any time; provided that such Indebtedness is incurred within twenty (20) days following such purchase and does not exceed one hundred percent (100%) of the purchase price of the subject assets;   (d)                                 Indebtedness of a Credit Party to another Credit Party, provided that: (i) upon request of Agent, each Credit Party shall have executed and delivered to each other Credit Party, on the Effective Date, a demand note (collectively, the “Intercompany Notes”) to evidence any such intercompany Indebtedness owing at any time by such Credit Party to such other Credit Parties which Intercompany Notes shall be in form and substance reasonably satisfactory to Agent and shall be pledged and delivered to Agent pursuant to the applicable Pledge Agreement or Security Agreement as additional collateral security for the Obligations; (ii) each Credit Party shall record all intercompany transactions on its books and records in a manner reasonably satisfactory to Agent; (iii) the obligations of each Credit Party under any such Intercompany Notes shall be subordinated to the Obligations of such Credit Party hereunder in a manner reasonably satisfactory to Agent; and (iv) no Default would occur and be continuing after giving effect to any such proposed intercompany loan;   (e)                                  Indebtedness consisting of Guaranteed Obligations to the extent that such Guaranteed Obligations are permitted pursuant to Section 7.3 or   82 --------------------------------------------------------------------------------   to the extent that the underlying Indebtedness being guaranteed is expressly permitted pursuant to this Section 7.1;   (f)                                    Reserved;   (g)                                 reimbursement and indemnity obligations of any Borrower in respect of any performance bonds or similar instrument to the extent that such bond or instrument is required under applicable law to be obtained by such Borrower as a condition such Borrower conducting business in a particular jurisdiction within the United States of America provided that the amount of any such reimbursement and indemnity obligation shall not at any time exceed the maximum amount required under applicable state law to be posted by such Borrower in order conduct business in such jurisdiction;   (h)                                 [Reserved];   (i)                                     Indebtedness of Holdings under the Senior Unsecured High Yield Notes, provided that: (i) the maximum aggregate principal amount of such Indebtedness at any time outstanding shall not exceed $185,000,000 less any principal repayments thereof; (ii) such Indebtedness shall be and at all times remain unsecured; and (iii) the Senior Unsecured High Yield Notes shall not mature prior to the date that is one year after the Commitment Termination Date and shall not be subject to mandatory defeasance or mandatory retirement, or be subject to any mandatory right of redemption, repurchase or put right prior to the date that is one year after the Commitment Termination Date, except that (x) the existence (but not the performance) of Section 4.09 of the Senior Unsecured High Yield Note Indenture as in effect on the Effective Date shall not violate this Section 7.1(i), but the giving of any Change in Control Offer Notice and the occurrence of any Change of Control (in each case as such terms are defined in the Senior Unsecured High Yield Note Indenture) shall constitute an immediate Event of Default hereunder pursuant to Section 8.1(1) of this Agreement and (y) a portion of the principal amount of the Senior Unsecured Notes, together with accrued interest thereon, may be repaid in connection with any Excess Cash Flow Offer or Net Proceeds Offer made in accordance with the terms of the Senior Unsecured High Yield Note Indenture as in effect on the Effective Date to the extent expressly permitted under Section 7.5(h);   (j)                                     other Indebtedness of the Credit Parties in an aggregate principal amount (whether fixed or contingent, drawn or undrawn) not to exceed at any time $500,000; and   (k) Indebtedness of the Credit Parties in respect of the Carve Out, if any.   Section 7.2. Liens; Negative Pledges. No Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired), including but not limited to the   83 --------------------------------------------------------------------------------   Collateral, except for (a) Permitted Encumbrances, (b) Liens in existence on the date hereof and summarized on Disclosure Schedule 7.2 securing the Indebtedness described on Disclosure Schedule 7.1 and permitted refinancings, extensions and renewals thereof, including extensions or renewals of any such Liens; provided that the principal amount of the Indebtedness so secured is not increased and the Lien does not attach to any other property or assets of any Credit Party, (c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with Indebtedness permitted by Section 7.1(c); provided that such Liens attach only to the assets subject to such purchase money debt, (d) encumbrances in the nature of non-exclusive licenses granted by Credit Parties to customers in the ordinary course of business, provided that such licenses do not impair in any respect the presently existing or hereafter created Liens in favor of Agent on any of the Collateral; (e) banker’s liens on Deposit Accounts of Credit Parties to the extent and only to the extent that (i) such Deposit Accounts are not required pursuant to the express terms of this Agreement or any of the other Loan Documents to be subject to a Control Agreement in favor of Agent, or (ii) Agent shall have entered into a Control Agreement which subordinates, waives or otherwise imposes limits upon such Liens on terms satisfactory to Agent in its sole discretion, and (f) other Liens securing Indebtedness not exceeding $500,000 in the aggregate at any time outstanding, so long as such Liens do not attach to any Accounts or Inventory. In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action, that would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, in each case entered into in the ordinary course of business, except operating leases, Capital Leases or Licenses which prohibit Liens upon the assets or properties that are subject to such operating lease, Capital Lease or License.   Section 7.3. Guaranteed Obligations. No Credit Party shall create, incur, assume or permit to exist any Guaranteed Obligations except (a) by endorsement of instruments or items of payment for deposit to the general account of any Credit Party, (b) for Guaranteed Obligations incurred for the benefit of any other Credit Party if the primary obligation is expressly permitted by this Agreement and (c) Guaranteed Obligations in existence on the date hereof and described on Disclosure Schedule 7.1.   Section 7.4. Capital Stock; Nature of Business. No Credit Party shall (a) make any change in its capital structure as described in Disclosure Schedule 7.4, including the issuance or sale of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock; provided that, so long as no Change of Control occurs as a result of such action, Holdings may issue shares of its Stock in connection with the award of Stock or options to its employees, consultants, officers or directors under any employee stock option plan existing on the Closing Date or in connection with the exercise of any options not granted pursuant to a stock option plan but in connection with any Acquisition or granted to new hires; provided that (x) such options and plans shall not provide in the aggregate for the issuance of options to acquire more than 40% of the common Stock of Holdings, on a fully-diluted basis, and (y) Holdings will not in connection with either the exercise of any such options or the reservation of shares of Stock for issuance in connection with the exercise of any such options repurchase any of its Stock unless such repurchase is expressly permitted under Section 7.5 of this Agreement, and (z) Holdings may issue shares of its Stock upon the exercise of any warrants, or (b) amend its Organizational Documents in a manner that would adversely affect Agent or Lenders or such Credit Party’s duty or ability to repay the Obligations. No Credit Party   84 --------------------------------------------------------------------------------   shall engage in any business materially different than the businesses currently engaged in by it on the Closing Date.   Section 7.5. Restricted Payments. No Credit Party shall make any Restricted Payment, except (a) intercompany loans between Credit Parties to the extent permitted by Section 7.1, (b) dividends and distributions by Subsidiaries of any Credit Party paid to such Credit Party, (c) employee loans permitted under Section 7.10(b), (d) payments of principal and interest of Intercompany Notes issued in accordance with Section 7.1, (e) Holdings or any Subsidiary thereof may redeem or repurchase for cash, at fair value, the equity interests of Holdings or a Subsidiary (or options to purchase equity interests) from any director, officer or employee of Holdings or a Subsidiary upon the death, disability, retirement or other termination of such director, officer or employee; provided that all such repurchases under this clause (e) shall not exceed $750,000 in any Fiscal Year, and (f) Holdings may engage in cashless exercises of stock options with its officers, employees and directors provided that no cash or property is paid to or given by any Credit Party to such officer, employee, director or any other Person in connection with such exercise and no Credit Party incurs any Indebtedness in connection with such transaction; provided that, in each case with respect to clauses (d), (e), and (f) above (and both before and after giving effect to any such Restricted Payment) (i) no Default or Event of Default has occurred and is continuing at the time of such proposed Restricted Payment, (ii) the chief financial officer of Holdings shall have delivered to Agent a certificate, in form and substance reasonably satisfactory to Agent, demonstrating on a pro forma basis after giving effect to any such Restricted Payment compliance with the minimum liquidity covenant in Section 6.18 and actual and pro forma compliance with the financial covenants in Sections 7.15, 7.16 and 7.17, and (iii) the Restricted Payments shall be made at such times as will permit the delivery of financial statements necessary to determine current compliance with the financial covenants set forth herein prior to each such Restricted Payment.   Section 7.6. No Restrictions on Subsidiary Distributions to the Borrowers.  Except as provided in this Agreement, the Borrowers will not and will not permit any of their Subsidiaries directly or indirectly to create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (a) pay dividends or make any other distribution on any of such Subsidiary’s Stock owned by any Borrower or any other Subsidiary, (b) pay any Indebtedness owed to the Borrowers or any other Subsidiary, (c) make loans or advances to any Borrower or any other Subsidiary or (d) transfer any of its property or assets to any Borrower or any other Subsidiary.   Section 7.7. ERISA. No Credit Party shall, or shall cause or permit any member of a Controlled Group to, cause or permit to occur an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event could reasonably be expected to have a Material Adverse Effect.   Section 7.8. Consolidations; Mergers; Sales of Assets; Creation of Subsidiaries. No Credit Party will, without the appropriate approval of the Bankruptcy Court in the Bankruptcy Cases: (a) consolidate or merge with or into any other Person other than the merger of a wholly owned Subsidiary of a Borrower with and into a Borrower (provided that   85 --------------------------------------------------------------------------------   such Borrower is the surviving corporation) or another wholly owned Subsidiary of a Borrower, (b) sell, lease or otherwise transfer, or grant any Person an option to acquire, directly or indirectly, any of its properties or assets or consummate any Asset Disposition, other than (i) sales of Inventory and data collection and management services for fair value in the ordinary course of businesses, (ii) dispositions of Temporary Cash Investments, (iii) dispositions of obsolete or worn-out property in the ordinary course of business provided that the aggregate fair market value of all such assets disposed of pursuant to this clause (b)(iii) after the date hereof does not exceed $250,000 in any Fiscal Year.   Section 7.9. Purchase of Assets; Investments. No Credit Party will acquire all or substantially all of the assets of, engage in any joint venture or Partnership with any Person, or make, acquire or own any Investment other than (a) Cash Equivalents or Temporary Cash Investments; (b) Investments in another Credit Party; (c) Investments existing on the Effective Date and described on Disclosure Schedule 7.9; and (d) other Investments not exceeding $100,000 in the aggregate at any time outstanding. Without limiting the generality of the foregoing, no Credit Party will (i) acquire or create any Subsidiary without the consent of the Required Lenders or (ii) engage in any joint venture or partnership with any other Person.   Section 7.10. Transactions with Affiliates  (a) No Credit Party will, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Credit Party on terms that are less favorable to such Credit Party than those which might be obtained at the time from a Person who is not an Affiliate of such Credit Party, except (i) awards of Stock to the extent expressly permitted under Section 7.4(a)(ii), (ii) Restricted Payments to the extent expressly permitted under Sections 7.5(a) and (c), and (iii) mergers and consolidations to the extent expressly permitted under Section 7.8(a) and (iv) other de minimis transactions among the Credit Parties to the extent not otherwise prohibited hereunder.   (b)                                 No Credit Party shall enter into any lending or borrowing transaction with any employees of any Credit Party, except with respect to loans existing on the Effective Date and disclosed on Disclosure Schedule 7.10(b).   Section 7.11. Amendments or Waivers. Without the prior written consent of the Agent and the Required Lenders, except in connection with the Plan of Reorganization, no Credit Party will agree to (a) any amendment to or waiver of or in respect of any Loan Documents, or (b) any other material amendment to or waiver of any material contract constituting a part of the Collateral which could reasonably be expected to have a Material Adverse Effect on the Credit Parties, or (c) any amendment or waiver of any document governing any Subordinated Debt or any Senior Unsecured Debt.   Section 7.12. Fiscal Year. The Borrowers and their Subsidiaries shall not change their Fiscal Year from a Fiscal Year ending December 31.   86 --------------------------------------------------------------------------------   Section 7.13. Capital Expenditures. The Credit Parties will not make or commit to make any Capital Expenditures in excess of (a) $3,500,000 in the aggregate during the Fiscal Year 2006 and (b) thereafter in an amount to be established in the Agent’s discretion.   Section 7.14. Lease Limits. No Credit Party will become or remain liable in any way, whether by assignment, as a guarantor or other surety or otherwise, for the obligations of any lessee (other than any other Credit Party) under any equipment lease, synthetic lease or similar off-balance sheet financing, if the aggregate amount of all rents (or substantially equivalent payments) paid by the Credit Parties under all such leases would exceed $1,000,000 in any Fiscal Year.   Section 7.15. Total Leverage Ratio. The Borrowers shall not permit the Total Leverage Ratio as of the last day of any Fiscal Quarter to be greater than the amount specified in the table below for the corresponding period specified below for each Fiscal Quarter.   Quarterly Period   Maximum Total Leverage Ratio           Fiscal Quarter Ended March 31, 2006   15.75:1.00   Fiscal Quarter Ended June 30, 2006   15.50:1.00   Fiscal Quarter Ended September 30, 2006   14.75:1.00   Fiscal Quarter Ended December 31, 2006   13.50:1.00     Section 7.16. Senior Secured Leverage Ratio. The Borrowers shall not permit the Senior Secured Leverage Ratio as of the last day of any Fiscal Quarter to be greater than the amount specified in the table below for the corresponding period specified below for each Fiscal Quarter.   Quarterly Period   Maximum Senior Secured Leverage Ratio   Fiscal Quarter Ended March 31, 2006   2.25:1.00   Fiscal Quarter Ended June 30, 2006   2.75:1.00   Fiscal Quarter Ended September 30, 2006   2.50:1.00   Fiscal Quarter Ended December 31, 2006   2.50:1.00     Section 7.17. Fixed Charge Coverage Ratio. The Borrowers shall not permit the Fixed Charge Coverage Ratio, determined on a consolidated basis for the Borrowers and their consolidated Subsidiaries, for the twelve (12) months ending as of the last day of any Fiscal Quarter, to be less than the amount specified in the table below for the corresponding period specified below for each Fiscal Quarter.   Quarterly Period   Minimum Fixed Charge Coverage Ratio   Fiscal Quarter Ended March 31, 2006   0.50:1.00   Fiscal Quarter Ended June 30, 2006   1.50:1.00   Fiscal Quarter Ended September 30, 2006   1.50:1.00   Fiscal Quarter Ended December 31, 2006   2.50:1.00     87 --------------------------------------------------------------------------------   Section 7.18. Pro Forma Adjustments. In calculating compliance with the covenants specified in Sections 7.15, 7.16 and 7.17, the following adjustments shall be made to reflect the effect of acquisitions and dispositions occurring after the Effective Date and during the relevant test period:   (a)                                  For the purposes of Sections 7.15, 7.16 and 7.17, the EBITDA attributable to such acquisition, based on the actual EBITDA of such acquired entity for such period, shall be included as if such entity had been acquired on the first day of such period to the extent that the relevant financial information with respect to it for the portion of such period prior to such acquisition can be determined with reasonable accuracy and shall be adjusted to eliminate, as of the first day of such period, any Indebtedness repaid or refinanced in such acquisition and to include any Indebtedness incurred in connection with such acquisition (including any portion thereof used to fund the aforementioned refinancing);   (b)                                 For the purposes of Section 7.17, Fixed Charges shall include, as of the first day of such period and for the entire period, any Fixed Charges associated with any acquired entity, including, any interest attributable to any Indebtedness incurred in connection with such acquisition, but excluding any interest or other Fixed Charges attributable to any Indebtedness refinanced in such acquisition (including any portion thereof used to fund the aforementioned refinancing);   (c)                                  For the purposes of Section 7.17, for any test period which occurs prior to the date when four (4) Fiscal Quarters have ended since the Effective Date, and that requires adjustments pursuant to clauses (i) and (ii) above, the Fixed Charge Coverage Ratio shall be calculated by annualizing the results for the Borrowers and their Subsidiaries before making the adjustments referred to in such clauses and then making the adjustment described in such clauses based on the actual results of the newly acquired entities for the twelve (12) months ended as of the end of the relevant test period; and   (d)                                 For the purposes of Section 7.15 and 7.16, Indebtedness and Senior Funded Debt of the Borrowers and their Subsidiaries shall be adjusted (A) upward to reflect any Indebtedness or Senior Funded Debt incurred or assumed in connection with such acquisition or disposition and (B) adjusted downward to reflect any Indebtedness or Senior Funded Debt repaid, retired or disposed of in connection with such acquisition or disposition to the extent that the Borrowers and/or their Subsidiaries have been released from all liability therefor.   (e)                                  For the purposes of Sections 7.15, 7.16 and 7.17 of the EBITDA attributable to any entity all or substantially all of whose stock, equity interest or assets were disposed of shall be excluded as if such entity had been disposed of on the first day of such period and shall be adjusted to eliminate, as of the first day of such period, any Indebtedness repaid, retired or disposed of in connection with such disposition or termination to the extent that the Borrowers and/or the remaining Subsidiaries have been released from all liability therefor.   88 --------------------------------------------------------------------------------   (f)                                    For the purposes of Section 7.17, Fixed Charges shall exclude, as of the first day of such period and for the entire period, and Fixed Charges associated with any entity disposed of, including, any interest or other Fixed Charges attributable to any Indebtedness repaid, retired or disposed of in such disposition or termination, to the extent that the Borrowers or the remaining Subsidiaries have been released from all liability therefor.   (g)                                 For the purposes of Sections 7.15, the total Indebtedness shall exclude the insurance premium financing arrangement described on Schedules 7.1 and 7.2.   Section 7.19. Accounts Receivable Days Sales Outstanding. Accounts Receivable Days Sales Outstanding shall not at any time exceed 105 days during any three month period commencing with the Fiscal Quarter ended December 31, 2005.   Section 7.20. Sale-Leasebacks. No Credit Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.   Section 7.21. Pre-petition Obligations; Adequate Protection Payments. No Credit Party shall make payments in respect of obligations incurred prior to the filing of the Bankruptcy Cases except in accordance with the Forbearance Agreement, a Bankruptcy Court Order or this Agreement. No Credit Party shall make an adequate protection payment, as provided for in the Bankruptcy Code, without the prior written consent of the Lenders and the Agent, other than payments in connection with Permitted Encumbrances.   Section 7.22 Changes in Management. No Credit Party shall make any direct or indirect change in its Senior Management without giving at least ten days notice to the Agent (or such shorter notices as may be given to the Credit Party by the relevant Member of its Senior Management); provided, that the Agent hereby consents to the departure and replacement of the Borrowers’ chief financial officer as of April 30, 2006. Any notice regarding change in Senior Management shall specify the Borrower’s plan to fill any vacancy in Senior Management.   ARTICLE VIII.   EVENTS OF DEFAULT   Section 8.1. Events of Default. The occurrence of any one or more of the following events for any reason whatsoever (whether voluntary or involuntary, by operation of law or otherwise) shall constitute an event of default hereunder (each, an “Event of Default”):   (a)                                  any Borrower (i) fails to make any payment of principal of, or interest on, or Fees owing in respect of, the Loans or any of the other Obligations when due and payable; provided that in the case of any failure to pay interest or fees, such failure shall have continued for a period of three (3) days or (ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within ten (10) days following Agent’s or any Lender’s demand for such reimbursement or payment of expenses;   89 --------------------------------------------------------------------------------   (b)                                 any Credit Party shall fail to observe or perform any covenant applicable to it contained in Section 5.1(e), Section 5.2(a), Section 6.1, Section 6.2 (so far as it requires each Credit Party to maintain its existence), Section 6.5, Section 6.8, Section 6.16, Section 6.17, Section 6.18 or Article VII hereof;   (c)                                  any Credit Party shall fail to observe or perform any covenant or agreement contained in the Loan Documents (other than those covered by clause (a) or (b) above) and such failure shall have continued for a period of thirty (30) days after notice thereof has been given to the Borrower Representative by the Agent;   (d)                                 any representation, warranty, certification or statement made by any Credit Party in any Loan Documents or in any certificate, disclosure schedule, financial statement or other document delivered by or on behalf of any Credit Party pursuant to the Loan Documents shall prove to have been incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);   (e)                                  any Credit Party shall fail to make any payment when due in respect of any post-petition Indebtedness (other than the Obligations) the aggregate outstanding principal amount of which Indebtedness, either individually or in the aggregate with all other post-petition Indebtedness with respect to which the Credit Parties have failed to make a payment, equals or exceeds $1,000,000;   (f)                                    any event or condition shall occur which (i) results in the acceleration of the maturity of any post-petition Indebtedness of any Credit Party by the holder or holders thereof in an outstanding principal amount in excess of $1,000,000, individually or in the aggregate with all other post-petition Indebtedness of the Credit Parties (other than the Obligations), or (ii) enables (or, with the giving of notice or lapse of time or both, would enable) the holder or holders of any post-petition Indebtedness of any Credit Party in an outstanding principal amount in excess of $1,000,000, individually or in the aggregate with all other post-petition Indebtedness of the Credit Parties (other than the Obligations), or any Person acting on such holder’s behalf to accelerate the maturity of any such post-petition Indebtedness, or (iii) results in a violation of, or a default under, any provision of the Organizational Documents of any Credit Party;   (g)                                 any Credit Party shall from and after the Effective Date (i) have its Bankruptcy Case converted to one under Chapter 7 of the Bankruptcy Code; (ii) in its Bankruptcy Case, seek to liquidate the Credit Parties’ assets; (iii) have a trustee, receiver, liquidator, custodian or other similar official be appointed (consensually or non-consensually) over any substantial part of its properties or assets, (iv) consent to any such relief or to the appointment of or taking possession by any such official in its Bankruptcy Case or other proceeding commenced against it, or (v) fail generally, not be able or admit in writing its   90 --------------------------------------------------------------------------------   inability to pay its post petition debts as they become due, or take any action in furtherance of, or indicating its consent to, or approval of or acquiescence in any of the foregoing;   (h)                                 [Reserved];   (i)                                     (i) institution of any steps by any Borrower or any member of the Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, such Borrower or any member of the Controlled Group could reasonably be expected to be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $1,000,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302 of ERISA, (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that any Borrower and the members of the Controlled Group have incurred on the date of such withdrawal) exceeds $1,000,000, (iv) with respect to any Plan, any Borrower or any member of the Controlled Group shall incur an accumulated funding deficiency or request a funding waiver from the IRS, or (v) there shall occur an ERISA Event or a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or IRC Section 4975; provided, that the events listed in clauses (iv) and (v) hereof shall constitute Events of Default only if the liability, deficiency or waiver request, whether or not assessed, could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect;   (j)                                     (i)                                     Any member of a Controlled Group shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the IRC) involving any Plan, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan (other than a Permitted Encumbrance) shall arise on the assets of any Borrower or any Controlled Group, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Borrower, any of its Subsidiaries or any member of any Controlled Group shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, any Multi-employer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect;   91 --------------------------------------------------------------------------------   (k)                                  a judgment or order for the payment of money (other than any Bankruptcy Court Order) which, individually or when aggregated with other such judgments or orders, equals or exceeds $1,000,000 and is not subject to insurance coverage, shall be rendered against any Credit Party and such judgment or order shall continue unsatisfied and unstayed for a period of ten (10) days or any judgment shall be rendered against any Credit Party that exceeds by more than $1,000,000 any insurance coverage applicable thereto as to which the insurance company has acknowledged coverage and such judgment or order shall continue unsatisfied and unstayed for a period of ten (10) days;   (l)                                     [Reserved.]   (m)                               [Reserved.]   (n)                                 any material provision of any Loan Documents shall for any reason cease to be valid, binding and enforceable against any Credit Party for any reason, or any Credit Party shall so assert in writing or the Lien created by any of the Collateral Documents shall at any time fail to constitute a valid and perfected first priority Lien subject to no prior or equal Lien except Permitted Encumbrances on any portion of the Collateral purported to be secured thereby which is deemed material by the Agent, or any Credit Party shall so assert in writing;   (o)                                 any Credit Party shall be prohibited, enjoined or otherwise materially restrained from conducting the business theretofore conducted by it by virtue of any determination, ruling, decision, decree or order of any Governmental Authority and such determination, ruling, decision, decree or order remains unstayed and in effect for any period of ten (10) days beyond any period for which any business interruption insurance policy of the Credit Parties shall provide full coverage to such Credit Party with respect to any losses and lost profits; or   (p)                                 [Reserved.]   (q)                                 any Credit Party fails to (i) obtain or maintain any operating licenses or Environmental Permits required by environmental authorities, (ii) begin, continue or complete any remediation activities as required by any environmental authorities, (iii) store or dispose of any hazardous materials in accordance with applicable environmental laws and regulations, or (iv) comply with any environmental laws, in each case, if any such failure in clauses (i) through (iv) above, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;   (r)                                    any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of   92 --------------------------------------------------------------------------------   revenue producing activities at any facility of any Credit Party, if any such event or circumstance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;   (s)                                  the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Credit Party, in each case, if such loss, suspension, revocation or failure to renew, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;   (t)                                    any Credit Party shall be suspended or excluded from any Medicaid Provider Agreement, Medicaid Certification, Medicare Provider Agreement, Medicare Certification or any medical reimbursement program, and such exclusion or suspension arises from fraud or other claims or allegations that could reasonably be expected to have a Material Adverse Effect; or   (u)                                 [Reserved.]; or   (v)                                 [Reserved.]   (w)                               the occurrence of the Commitment Termination Date, other than under clause (ii) of the definition thereof.   Section 8.2. Remedies.   (a)                                  If any Default or Event of Default has occurred and is continuing, subject to compliance with any requirements of the applicable Bankruptcy Court Order, Agent may, and at the written request of the Required Lenders shall, without notice or demand, suspend the Revolving Credit Commitment with respect to additional Advances or the incurrence of additional L/C Obligations, whereupon any additional Advances and additional L/C Obligations shall be made or incurred in Agent’s sole discretion (or in the sole discretion of the Required Lenders, if such suspension occurred at their direction) so long as such Default or Event of Default is continuing. If any Default or Event of Default has occurred and is continuing, Agent may (and at the written request of Required Lenders shall), without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loans in accordance with Section 2.4(c) and other outstanding Obligations.   (b)                                       If any Event of Default has occurred and is continuing, subject to compliance with any requirements of the applicable Bankruptcy Court Order, Agent may, and at the written request of the Required Lenders shall, without notice or demand (i) terminate the Revolving Credit Commitment with respect to further Advances or the incurrence of further L/C Obligations (ii) declare all or any portion of the Obligations, including all or any portion of any Loan and the Conditionally Waived Pre-petition Fees, to be forthwith due and payable, and require that the L/C Obligations be either cash collateralized as provided in Section 2.5(k) or fully supported by a back-up letter of credit (other than a Letter of Credit issued under this Agreement) issued for the benefit of   93 --------------------------------------------------------------------------------   Agent, in form and substance satisfactory to Agent, from an issuer satisfactory to Agent, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the Borrowers and each other Credit Party, or (iii) exercise any rights and remedies provided to Agent under the Loan Documents or at law or equity, including all remedies provided under the Code; provided that upon the occurrence of an Event of Default specified in Section 8.1(g), the Revolving Credit Commitment shall be immediately terminated and all of the Obligations, including the outstanding Loans, shall become immediately due and payable without declaration, notice or demand by any Person.   Section 8.3. Waivers by Credit Parties. Except as otherwise provided for in this Agreement, the Applicable Bankruptcy Court Order, or by applicable law, each Credit Party waives (including for purposes of Section 12) (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent’s taking possession or control of, or to Agent’s replevy, attachment or levy upon the Collateral or any bond or security that might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.   ARTICLE IX.   EXPENSES AND INDEMNITIES   Section 9.1. Expenses. Whether or not the transactions contemplated hereby are consummated, the Credit Parties, jointly and severally, agree (a) to pay on demand all fees, costs and expenses (including reasonable attorneys’ fees and expenses and the allocated cost of internal legal staff) incurred by Agent, Lead Arranger and any appraisers, auditors and consultants retained by the Agent or Lead Arranger in connection with (i) the examination, review, due diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated herein and in connection with the continued administration of the Loan Documents including any amendments, modifications, consents and waivers, (ii) creating, perfecting and maintaining Liens pursuant to the Loan Documents, including filing and recording fees and expenses, the costs of any bonds required to be posted in respect of future filing and recording fees and expenses, and title investigations and (iii) any matters contemplated by or arising out of the Loan Documents, including Agent’s customary field audit charges and the reasonable fees, expenses and disbursements of the Agent, Lead Arranger or any accountants or other experts retained by the Agent or Lead Arranger (including any affiliate of Agent or Lead Arranger as shall be engaged for such purpose) in connection with accounting and collateral audits or reviews of the Credit Parties and their affairs, (b) to promptly pay reasonable documentation charges assessed by Agent for amendments, waivers, consents and any of the documentation prepared by Agent’s internal legal staff, and (c) to promptly pay all fees, costs and expenses (including attorneys’ fees and expenses and the allocated cost of internal legal staff)   94 --------------------------------------------------------------------------------   incurred by Agent and Lenders (I) in connection with protecting, preserving or enforcing Agent’s and Lenders’ rights and remedies in the Bankruptcy Cases, (II) in connection with any action to enforce any Loan Document or to collect any payments due from the Borrowers or any other Credit Party or (III) to defend any action brought against Lenders or Agent by the Borrowers, any creditors or creditor’s committee, trustee or the like in connection with the Bankruptcy Cases. All fees, costs and expenses for which any Credit Party is responsible under this Section 9.1 shall be deemed part of the Obligations when incurred, and shall be payable on demand in accordance with Section 2.14.   Section 9.2. Indemnity. Whether or not the transactions contemplated hereby are consummated, the Credit Parties, jointly and severally, agree to indemnify, pay and hold harmless each Lending Party and any subsequent holder of any of the Notes or any other Obligation, and each of such Person’s officers, directors, employees, attorneys, agents and Affiliates (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee and the allocated cost of internal legal staff) in connection with any claim, investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of any Credit Party, and the expenses of investigation by experts, engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by any Lending Party) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby or by the Loan Documents (including, without limitation, (i)(A) as a direct or indirect result of the presence on or under, or Release from, any Real Property now or previously owned, leased or operated by any Credit Party of any Hazardous Materials or any Hazardous Materials contamination, (B) arising out of or relating to the offsite disposal of any Hazardous Materials generated or present on any such Real Property or (C) arising out of or resulting from the environmental condition of any such Real Property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of any Credit Party, and (ii) proposed and actual Extensions of Credit under this Agreement) and the use or intended use of any Extension of Credit or the proceeds thereof, except that the Credit Parties shall have no obligation hereunder to an Indemnitee with respect to any liability resulting solely from the gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, each Credit Party shall contribute the maximum portion which it is permitted to pay and satisfy under Applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. Without limiting the generality of any provision of this Section, to the fullest extent permitted by law, each Credit Party hereby waives all rights for contribution or any other rights of recovery with respect to liabilities, losses, damages, costs and expenses arising under or relating to Environmental Laws that it might have by statute or otherwise against any Indemnitee, except to the extent that such items are finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Indemnitee. An Indemnitee under this Section 9.2 shall endeavor to notify the Borrower Representative of any event requiring indemnification   95 --------------------------------------------------------------------------------   within ten (10) Business Days following such Indemnitee’s receipt of notice of commencement of any action or proceeding, or such Indemnitee’s obtaining knowledge of the occurrence of any event, giving rise to a claim for indemnification hereunder, provided that the failure to give such notice shall not invalidate or otherwise impair the rights of the Indemnitee to indemnification under this Section 9.2 or result in any liability of such Indemnitee, the Agent or any Lender to any Credit Party or any other Person.   Section 9.3. Taxes. The Credit Parties jointly and severally agree to pay each Lending Party, promptly following demand therefore, all Charges (excluding income or other similar taxes imposed on any Lender or any holder of a Note by the jurisdictions under the laws of which such Person seeking payment is organized or conducts business or any political subdivision thereof), including any interest or penalties thereon, at any time payable or ruled to be payable in respect of the existence, execution or delivery of this Agreement or the making of any Extension of Credit, and to indemnify and hold each Lending Party, and each and every holder of the Notes or any other Obligation harmless against liability in connection with any such Charges.   Section 9.4. Capital Adequacy; Increased Costs; Illegality; Funding Losses.   (a)                                  If any Lender shall have determined that the introduction of or any change in after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law) from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), promptly pay to the Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such reduction that, at a minimum, shows the basis of the computation thereof submitted by such Lender to the Borrower Representative and to the Agent shall be conclusive and binding on the Borrowers for all purposes, absent manifest error.   (b)                                 If, as a result of either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), promptly pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower Representative and to the Agent by such Lender, shall be conclusive and binding on the Borrowers for all purposes, absent manifest error.   (c)                                  Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation   96 --------------------------------------------------------------------------------   thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any Loan based on LIBOR, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender’s opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to the Borrower Representative through the Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii) all outstanding LIBOR Loans shall be deemed automatically converted into Base Rate Loans.   (d)                                 To induce Lenders to permit LIBOR Loans on the terms provided herein, if (i) any LIBOR Loan is repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise), (ii) any Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan, (iii) any Borrower shall default in making any borrowing of, Conversion into or Continuation of any LIBOR Loan after the Borrower Representative has given notice requesting the same in accordance herewith, or (iv) any Borrower shall fail to make any prepayment of a LIBOR Loan after the Borrower Representative has given a notice thereof in accordance herewith, then the Borrowers shall indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (but excluding loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. As promptly as practicable under the circumstances, each Lender shall provide the Borrower Representative with its written calculation of all amounts payable pursuant to this Section 9.4(d), and such calculation shall be conclusive and binding on the Borrowers for all purposes, absent manifest error. The Borrowers shall pay to Lenders all amounts required to be paid by it hereunder promptly upon demand therefor.   ARTICLE X.   THE AGENT   Section 10.1. Appointment and Authorization. L/C Issuer and each Lender hereby irrevocably designates and appoints GE Capital as the Agent of L/C Issuer and Lenders under this Agreement, and L/C Issuer and each such Lender irrevocably authorizes GE Capital as the Agent for L/C Issuer and Lenders, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not   97 --------------------------------------------------------------------------------   have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with L/C Issuer or any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement, the other Loan Documents or otherwise exist against the Agent. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and the L/C Issuer and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Credit Party.   Section 10.2. Delegation of Duties. The Agent may execute any of its duties under this Agreement and the other Loan Documents by or 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 for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Without limiting the foregoing, the Agent may appoint one of its affiliates as its agent to perform the functions of the Agent hereunder relating to the advancing of funds to the Borrowers and distribution of funds to L/C Issuer and the Lenders and to perform such other related functions of the Agent hereunder as are reasonably incidental to such functions.   Section 10.3. Agent and Affiliates. Agent shall have the same rights and powers under the Loan Documents as any other Lender and may exercise or refrain from exercising the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include the Agent in its individual capacity. The Agent and its Affiliates may lend money to and generally engage in any kind of business with any Credit Party or Affiliate thereof as if it were not an Agent hereunder.   Section 10.4. Action by Agent. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship to any Lending Party or any other Person. The obligations of the Agent hereunder are only those expressly set forth herein and under the other Loan Documents. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VIII.   Section 10.5. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for any Borrower), accountants and other experts selected by it and shall not be liable for (a) any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts, or (b) any negligence or misconduct of any of its legal counsel, accountants or other experts, provided that Agent has exercised due care in the selection of such Persons.   Section 10.6. Liability of Agent. Neither the Agent nor any of its directors, officers, agents, representatives, employees or Affiliates shall be liable for any action taken or not taken by it in connection with the Loan Documents (a) with the consent or at the request or direction of the Required Lenders, or (b) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents, representatives, employees or Affiliates shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made under or in connection with any Loan Document or any Extension of Credit hereunder, (ii) the performance or observance of any of the   98 --------------------------------------------------------------------------------   covenants or agreements of any Credit Party, (iii) the satisfaction of any condition specified in Article III, except to confirm receipt of items required to be delivered to the Agent, (iv) the validity, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith, or (v) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any of the Loan Documents or for any failure of any Borrower or any other Credit Party to perform its obligations under this Agreement or any other Loan Document. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, other writing (which may be a bank wire, telex, facsimile transmission or similar writing) or conversation believed by it to be genuine or to be signed by the proper party or parties.   Section 10.7. Indemnification. The L/C Issuer and each Lender shall, ratably in accordance with its Revolving Credit Commitment (whether or not such Commitments have been terminated), indemnify the Agent (to the extent not reimbursed by the Credit Parties) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent’s gross negligence or willful misconduct) that the Agent may suffer or incur in connection with the Loan Documents or any action taken or omitted by the Agent under this Agreement or any other Loan Document. The agreements in this Section 10.7 shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder.   Section 10.8. Credit Decision. L/C Issuer and each Lender acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of any Borrower or any other Credit Party, shall be deemed to constitute any representation or warranty by the Agent to L/C Issuer or any Lender. L/C Issuer and each Lender acknowledges that it has, independently and without reliance upon the Agent, L/C Issuer or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to make the Extensions of Credit hereunder. L/C Issuer and each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in connection with its taking or not taking any action under the Loan Documents. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide L/C Issuer or any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Borrower or any other Credit Party which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.   Section 10.9. Successor Agent. The Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to the Lenders and the Borrower Representative. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent which, absent the occurrence and continuance of a Default or Event of Default, must be acceptable to the Borrower Representative (such acceptance not to be unreasonably withheld or delayed). If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Agent gives notice of   99 --------------------------------------------------------------------------------   resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be an institution organized or licensed under the laws of the United States of America or of any State thereof and which, absent the occurrence and continuance of a Default or Event of Default, must be acceptable to the Borrower Representative (such acceptance not to be unreasonably withheld or delayed). Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon 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 hereunder. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.   Section 10.10. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless (a) a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent and (b) the Agent shall have received the written agreement of such assignee to be bound hereby as fully and to the same extent as if such assignee were an original Lender party hereto, in each case in form satisfactory to the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the L/C Issuer and Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Loan Documents in accordance with a request of the Required Lenders or all of the Lenders, as may be required under this Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.   Section 10.11. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrower Representative referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the L/C Issuer and the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the L/C Issuer and Lenders except to the extent that this Agreement expressly requires that such action be taken, or not taken, only with the consent or upon the authorization of the Required Lenders, or all of the Lenders, as the case may be.   100 --------------------------------------------------------------------------------   ARTICLE XI.   MISCELLANEOUS   Section 11.1. Survival. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the other Loan Documents. The provisions of Article IX and the indemnities contained in this Agreement and the other Loan Documents shall survive the termination of this Agreement.   Section 11.2. No Waivers; Remedies Cumulative. No failure or delay by the Agent, the L/C Issuer or any Lender in exercising any right, power or privilege under any Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by law, by other agreement or otherwise.   Section 11.3. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including prepaid overnight courier, facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth in this Section or on the signature pages hereof (or, in the case of any such Lender who becomes a Lender after the date hereof, in a notice delivered to the Borrower Representative and the Agent by the assignee Lender forthwith upon such assignment) or at such other address or facsimile number as such party may hereafter specify in writing for the purpose by notice to the Agent and the Borrower Representative. Each such notice, request or other communication shall be effective (a) if given by facsimile, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received by the sender, (b) if given by mail, upon the earlier of actual receipt and five (5) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, properly addressed and with proper postage prepaid, (c) one (1) Business Day after deposit with a reputable overnight courier property addressed and with all charges prepaid or (d) when received, if by any other means.   Notices shall be addressed as follows:   If to any Borrower or Borrower Representative:   c/o Curative Health Services, Inc.     61 Spit Brook Road, Suite 505     Executive Tower     Nashua, New Hampshire 03060     Attention: Chief Financial Officer     Facsimile No: (603) 966-3345     Telephone No.: (603) 232-7015       With a copy to:   Curative Health Services, Inc.     61 Spit Brook Road, Suite 505     Executive Tower     Nashua, New Hampshire 03060     Attention: General Counsel   101 --------------------------------------------------------------------------------       Facsimile No: (603) 966-3345     Telephone No.: (603) 232-7015           -and- With a copy to:   Linklaters     1345 Avenue of the Americas     New York, New York 10105     Attention: Martin N. Flics     Facsimile No.: (212) 903-9100     Telephone No.:(212) 903-9000       If to Agent, L/C Issuer or GE Capital:   General Electric Capital Corporation     2 Bethesda Metro Center     Suite 600     Bethesda, MD 20814     Attention: Curative Health Services, Inc.       Account Manager     Facsimile No: (301) 347-3175     Telephone No.: (301) 664-9816       With a copy to:   General Electric Capital Corporation     2 Bethesda Metro Center     Suite 600     Bethesda, MD 20814     Attention: Legal Department     Facsimile No: (301) 664-9849     Telephone No.: (301) 664-9866           -and-       With a copy to:   Moritt Hock Hamroff & Horowitz LLP     400 Garden City Plaza     Garden City, NY 11530     Attention: Marc L. Hamroff     Facsimile No: (516) 873-2010     Telephone No.: (516) 873-2000   If to L/C Issuer or a Lender:  To the address set forth on the signature page hereto or in the applicable Assignment Agreement.   Section 11.4. Severability. In case any provision of or obligation under this Agreement or any other Loan Document shall be invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions or   102 --------------------------------------------------------------------------------   obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.   Section 11.5.                         Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived only if such amendment or waiver is in writing and is signed by the Borrowers and the Agent (if authorized by the Required Lenders) or the Required Lenders (and, if the rights or duties of the Agent, the Swingline Lender or the L/C Issuer are affected thereby, by the Agent, Swingline Lender or L/C Issuer as applicable); provided, that no such amendment or waiver shall, unless signed by all the Lenders (i) increase or decrease any Commitment of any Lender (except for a ratable decrease in the Commitments of all Lenders) or subject any Lender to any additional obligation, (ii) reduce the principal of or rate of interest on any Obligation or the amount of any Fees payable hereunder, (iii) postpone the date fixed for any (A) payment of (1) principal of any Loan or Reimbursement Obligation pursuant to Section 2.8, (2) of interest on any Loan or Reimbursement Obligation or (3) any fees hereunder, or (B) termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans and Reimbursement Obligations which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (e) release all or substantially all of the Collateral, (f) release all or substantially all of the Guarantors or (g) amend this Section 11.5 or the definition of “Required Lenders”.   Section 11.6. Successors and Assigns; Registration. (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns (including any transferee of any Note or other Obligation), except that no Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. Notwithstanding the foregoing, in the absence of an Event of Default, each Lender covenants for the benefit of the Borrowers that it will not assign Loans, Obligations or the Commitments (or any combination thereof) except with the prior written consent of the Borrower Representative and the Agent (which consent shall not be unreasonably withheld or delayed), provided, that each Lender retains the unrestricted right to transfer, sell or assign any or all of its interest and obligations in the Loans and the Commitments without respect to this sentence in the following cases: (i) to any Lender or any Affiliate of any Lender; (ii) to any Person to the extent required to comply with any order, directive or request from any Governmental Authority; (iii) to any Person in connection with the sale by any Lender of all or any substantial portion of such Lender’s corporate finance or healthcare capital portfolio; or (iv) to a Qualified Assignee. Any assignment made pursuant to this Section 11.6 shall be made pursuant to an Assignment Agreement substantially in the form of Exhibit L (each such agreement referred to herein as an “Assignment Agreement”).   (b)                                 Any assignment shall be for an equal percentage of such assignor Lender’s Loans and its Commitment, and any such assignee Lender shall, upon its registration in the Note Register referred to below, become a “Lender” for all purposes hereunder. The Agent shall receive a fee of $3,500 in connection with any such assignment (including, without limitation, an assignment to an existing Lender). Upon any such assignment, the assignor Lender shall be released from its Commitments to the extent assigned to and assumed by the assignee Lender.   103 --------------------------------------------------------------------------------   (c)                                  Upon any assignment of any Note(s), the assigning Lender shall surrender its Note(s) to the Borrower Representative for exchange or registration of transfer, and the Borrowers will promptly execute and deliver in exchange therefor a new Note or Note(s) of the same tenor and registered in the name of the assignor Lender (if less than all of such Lender’s Notes are assigned) and the name of the assignee Lender.   (d)                                 Each Lender may sell participations in all or any part of the Loans, its Notes, its Commitments or its L/C Exposure. Any participation by a Lender shall be made with the understanding that all amounts payable by the Borrowers hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder. None of the Borrowers or any other Credit Parties shall have any obligation or duty to any participant. Neither the Agent, L/C Issuer nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred. No Lender shall, as between the Borrowers and that Lender, or Agent and/or L/C Issuer and that Lender, be relieved of any of its obligations hereunder as a result of any participation in all or any part of the Loans, its Note, its Commitments or other Obligations.   (e)                                  The Agent shall maintain a register (the “Note Register”) of the Lenders and all assignee Lenders that are the holders of all the Notes and other Obligations issued pursuant to this Agreement. Upon five (5) Business Days’ prior written notice to the Agent, the Agent will allow any Lender to inspect and copy such list at the Agent’s principal place of business during normal business hours. Prior to the due presentment for registration of transfer of any Note or other Obligation, the Agent may deem and treat the Person in whose name a Note or Other Obligation is registered as the absolute owner of such Note or Obligation for the purpose of receiving payment of principal of and premium and interest on such Note or Obligation and for all other purposes whatsoever, and the Agent shall not be affected by notice to the contrary.   (f)                                    Each Lender (including any assignee Lender at the time of such assignment) represents that it (i) is acquiring its Note(s) or Obligations solely for investment purposes and not with a view toward, or for sale in connection with, any distribution thereof, (ii) has received and reviewed such information as it deems necessary to evaluate the merits and risks of its investment in such Note(s) or Obligations, (iii) is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act and (iv) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Note(s) or Obligations, including a complete loss of its investment.   (g)                                 Each Lender understands that the Notes or Obligations are being offered only in a transaction not involving any public offering within the meaning of the Securities Act, and that, if in the future such Lender decides to resell, pledge or otherwise transfer the Notes or Obligations, the Notes or Obligations may be resold, pledged or transferred only (i) to a person who such Lender reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such resale, pledge or transfer is being made in reliance on Rule 144A under the Securities Act or (ii)  pursuant to an exemption from registration under the Securities Act.   104 --------------------------------------------------------------------------------   (h)                                 Each Lender understands that the Notes will, unless otherwise agreed by the Borrowers and the holder thereof, bear a legend to the following effect:   THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO A BORROWER, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.   (i)                                     If any Note becomes mutilated and is surrendered by the Lender with respect thereto to the Borrower Representative, or if any Lender claims that any of its Notes have been lost, destroyed or wrongfully taken, the applicable Borrower shall execute and deliver to such Lender a replacement Note(s), upon the affidavit of such Lender attesting to such loss, destruction or wrongful taking with respect to such Note(s) and such lost, destroyed, mutilated, surrendered or wrongfully taken Note(s) shall be deemed to be canceled for all purposes hereof. Such affidavit shall be accepted as satisfactory evidence of the loss, wrongful taking or destruction thereof and no indemnity shall be required as a condition of the execution and delivery of a replacement Note. Any costs and expenses of the Borrowers in replacing any Note shall be for the account of such Lender.   Section 11.7. Setoff and Sharing of Payments. Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its Affiliates) 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 any time owing by such Lender (or any of its affiliates) to or for the credit or the account of any Credit Party against any and all of the Obligations held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or any Note or such Obligations and although such Obligations my be unmatured. Each Lender agrees promptly to notify the Borrower Representative and Agent after any such set-off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. If any Lender (a “Benefited Lender”) shall at any time receive any payment of all or part of the Loans or other Obligations or other amounts owing to it hereunder, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or Collateral received by any other Lender, if any, in respect of such other Lender’s Loans, Obligations or other amounts owing to it hereunder, or interest thereon, such Benefited Lender shall purchase for cash from the other Lender(s) a participating interest in such portion of each   105 --------------------------------------------------------------------------------   such other Lender’s Loans and other Obligations owing to it, or shall provide such other Lender(s) with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the Lenders; provided, that if all or any such purchase shall be rescinded, and the purchase price and benefits are thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each Credit Party agrees that any Lender so purchasing a participation from any other Lender pursuant to this Section 11.7 may, to the fullest extent permitted by law, and notwithstanding the provisions of Section 11.6(d), exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such purchasing Lender were the direct creditor of such Credit Party in the amount of such participation.   Section 11.8. Collateral. Each of the Lenders represents to the Agent and each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement.   Section 11.9. Headings. Headings and captions used in the Loan Documents (including all exhibits and schedules thereto) are included herein and therein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.   Section 11.10. Governing Law; Submission To Jurisdiction. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF. EACH OF THE BORROWERS AND THE OTHER CREDIT PARTIES PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE BORROWERS AND THE OTHER CREDIT PARTIES PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.3. 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 11.11. Notice of Breach by Agent or Lender. The Credit Parties party hereto agree to give the Agent and the Lenders notice of any action or inaction by the Agent or any Lender or any agent or attorney of the Agent or any Lender in connection with this Agreement or any other Loan Document or the Obligations of the Credit Parties under this   106 --------------------------------------------------------------------------------   Agreement or any other Loan Document that may be actionable against the Agent or any Lender or any agent or attorney of the Agent or any Lender or a defense to payment of any Obligations of the Credit Parties under this Agreement or any other Loan Document for any reason, including commission of a tort or violation of any contractual duty or duty implied by law. The Credit Parties party hereto agree, to the fullest extent that they may lawfully do so, that unless such notice is given promptly (and in any event within ten (10) days after any Credit Party has knowledge, or with the exercise of reasonable diligence could have had knowledge, of any such action or inaction), no Credit Party shall assert, and each Credit Party shall be deemed to have waived, any claim or defense arising therefrom to the extent that the Agent or any Lender could have mitigated such claim or defense after receipt of such notice.   Section 11.12. Waiver Of Jury Trial. EACH OF THE CREDIT PARTIES PARTY HERETO, AGENT, L/C ISSUER AND LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.   Section 11.13. Counterparts; Entire Agreement. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. This Agreement and the other Loan Documents (including any fee letters between Agent and one or more of the Credit Parties) constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.   Section 11.14. Confidentiality; Press Release. (a)  Any information concerning any Credit Party or its Subsidiaries or business operations or assets delivered prior to the Effective Date and from and after the Effective Date to the Agent or the Lenders by any Borrower or any other Credit Party which is identified as confidential and which is not in the public domain shall be held by the Agent or such Lender as confidential; provided, that the Agent and each Lender may make disclosure of such information (i) to its independent accountants and legal counsel (which Persons shall be likewise bound by the provisions of this Section 11.14), (ii) pursuant to statutory and regulatory requirements, (iii) pursuant to any mandatory court order or subpoena or in connection with any legal process, (iv) pursuant to any written agreement hereafter made between the Agent, any Lender and any Borrower or any other Credit Party to which such information relates, which agreement permits such disclosure, (v) as necessary in connection with the exercise of any remedy by Agent or any Lender under the Loan Documents, (vi) consisting of general portfolio information that does not directly or indirectly identify any Credit Party, (vii) which has heretofore been publicly disclosed or is otherwise available to such Agent or Lender on a non-confidential basis from a source that is not, to its knowledge, subject to a confidentiality agreement with any Credit Party, (viii) in connection with   107 --------------------------------------------------------------------------------   any litigation against any Credit Party or otherwise arising out of or relating to the transactions contemplated under the Loan Documents to which Agent or any Lender or its Affiliates is a party, or (ix) subject to a written agreement containing provisions substantially the same as those set forth in this Section 11.14, to any assignee of or participant in, or prospective assignee of or participant in, any of the Obligations; provided, however, that in the event any assignee of a Lender has an Affiliate which is a Competitor, such assignee may not disclose to such Affiliate any information concerning any Credit Party or its Subsidiaries or business operations or assets which is identified as confidential and which is not in the public domain.   (b)                                 No Credit Party or Affiliate thereof will in the future issue any press releases or other public disclosure using the name of GE Capital or its Affiliates or any other Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with GE Capital before issuing such press release or other public disclosure. Each Credit Party consents to the publication by Agent or any Lender of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement; provided that Borrower Representative has been afforded an opportunity prior to such publication to review and approve the same (which such approval by Borrower Representative shall not be unreasonably withheld). Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.   Section 11.15. Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Credit Party for liquidation or reorganization, subsequent to the date hereof, should any Credit Party make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Credit Party’s assets or properties, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.   Section 11.16. Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement and the other Loan Documents and, specifically, the provisions of Sections 9.2, 11.10 and 11.12, with its counsel.   Section 11.17. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Loan Documents. In the event any ambiguity or question of intent or interpretation arises, this Agreement and the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.   108 --------------------------------------------------------------------------------   Section 11.18. Conflict of Terms. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control.   Section 11.19. [Reserved].   Section 11.20. New Lenders. The parties hereto agree that as of the Effective Date, (i) the Lenders signatory hereto shall become “Lenders” under this Agreement and the other Loan Documents and (ii) each Lender shall have the Commitments as set forth on signature page attached hereto opposite the name of such Lender on the signature pages hereof. Borrowers hereby direct Agent to apply the proceeds of the Loans made on the Effective Date to the repayment of certain outstanding loans and obligations of the Borrowers owing to the “Agent” and “Lenders” under and as defined in the Existing Credit Facility on the Effective Date.   ARTICLE XII   CROSS-GUARANTY   Section 12.1. Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to Agent and Lenders and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to Agent and Lenders by each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 12 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 12 shall be absolute and unconditional, irrespective of, and unaffected by,   (a)                                  the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any other Borrower is or may become a party;   (b)                                 the absence of any action to enforce this Agreement (including this Section 12) or any other Loan Document or the waiver or consent by Agent and Lenders with respect to any of the provisions thereof;   (c)                                  the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Agent and Lenders in respect thereof (including the release of any such security);   (d)                                 the insolvency of any other Credit Party; or   (e)                                  any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor other than the payment and performance, in full, of the Obligations.   109 --------------------------------------------------------------------------------   Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.   Section 12.2. Waivers by Borrowers. Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Agent or Lenders to marshall assets or to proceed in respect of the Obligations guaranteed hereunder against any other Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. It is agreed among each Borrower, Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this Section 12 and such waivers, Agent and Lenders would decline to enter into this Agreement.   Section 12.3. Benefit of Guaranty. Each Borrower agrees that the provisions of this Section 12 are for the benefit of Agent and Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and Agent or Lenders, the obligations of such other Borrower under the Loan Documents.   Section 12.4. Subordination of Subrogation, Etc. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in Section 12.7, each Borrower hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Agent and Lenders and shall not limit or otherwise affect such Borrower’s liability hereunder or the enforceability of this Section 12, and that Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 12.4.   Section 12.5. Election of Remedies. If Agent or any Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents giving Agent or such Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 12. If, in the exercise of any of its rights and remedies, Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Borrower hereby consents to such action by Agent or such Lender and waives any claim based upon such action, even if such action by Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by Agent or such Lender. Any election of remedies that results in the denial or impairment of the right of Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations. In the event Agent or any Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the   110 --------------------------------------------------------------------------------   Loan Documents, Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Agent or such Lender but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Agent, Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 12, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be entitled but for such bidding at any such sale.   Section 12.6. Limitation. Notwithstanding any provision herein contained to the contrary, each Borrower’s liability under this Section 12 (which liability is in any event in addition to amounts for which such Borrower is primarily liable under Section 1) shall be limited to an amount not to exceed as of any date of determination the greater of:   (a)                                  the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and   (b)                                 the amount that could be claimed by Agent and Lenders from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower’s right of contribution and indemnification from each other Borrower under Section 12.7.   Section 12.7. Contribution with Respect to Guaranty Obligations.   (a)                                  To the extent that any Borrower shall make a payment under this Section 12 of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.   (b)                                 As of any date of determination, the “Allocable Amount” of any Borrower shall be equal to the maximum amount of the claim that could then be recovered from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.   111 --------------------------------------------------------------------------------   (c)                                  This Section 12.7 is intended only to define the relative rights of Borrowers and nothing set forth in this Section 12.7 is intended to or shall impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 12.1. Nothing contained in this Section 12.7 shall limit the liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and accrued interest, Fees and expenses with respect thereto for which such Borrower shall be primarily liable.   (d)                                 The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Borrower to which such contribution and indemnification is owing.   (e)                                  The rights of the indemnifying Borrowers against other Credit Parties under this Section 12.7 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of the Commitments.   Section 12.8. Liability Cumulative. The liability of Borrowers under this Section 12 is in addition to and shall be cumulative with all liabilities of each Borrower to Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.   ARTICLE XIII   SPECIAL BANKRUPTCY PROVISIONS   Section 13.1 Post-Petition Security. From and after the filing date of the Bankruptcy Cases (the “Filing Date”), the Liens granted to the Lenders and the Agent and held by the Agent, for the benefit of itself and the Lenders, with respect to the Collateral shall be and are post-petition liens, entitled to priority as set forth in the Bankruptcy Court Order. The Agent, for itself and the Lenders will be entitled to all of the rights, remedies, protections and priorities as provided in the Bankruptcy Court Order.   Section 13.2 Liens Perfected without Filing Or Recording. Upon and after entry of the Bankruptcy Court Order, the post-petition liens and encumbrances granted to the Agent, for itself and the Lenders, with respect to the Collateral by virtue of the Bankruptcy Court Order and this Agreement shall have the priority stated in the Bankruptcy Court Order and shall be valid and perfected as against all third parties, without regard to applicable federal, state or local filing or recording statutes, nunc pro tunc as of the Filing Date, and without further action of any party, including the Lenders; provided, that the Agent, for itself and the Lenders may, but need not, take such steps as it deems desirable and applicable to comply with such statutes, and all financing statements which are filed listing one or more of the Borrowers as debtor and the Agent as secured party, all mortgages or similar instruments which are filed granting to Agent liens upon and security interests in Collateral will be deemed to have been   112 --------------------------------------------------------------------------------   filed and the security interests and liens evidenced thereby will be deemed perfected nunc pro tunc as of the Filing Date.   Section 13.3 Relief from Stay. Upon the entry of the Bankruptcy Court Order, the Agent and the Lenders will have stay relief to the extent provided in, and under the terms of, the Bankruptcy Court Order.   Section 13.4 Extension of Post-Petition Credit and Other Remedies of Lenders. The agreement of the Lenders and the Agent to provide post-petition financing to the Borrowers is conditioned on the proceeds of such financing being used first to satisfy all obligations under the Existing Credit Facility, except for payment of the Conditionally Waived Pre-petition Fees, and will be subject to the following exceptions:   (a)                                  The agreement to provide post-petition financing will not prohibit the Agent or the Lenders from moving in the Bankruptcy Court for any other and further relief which: (i) the Lender and/or Agent believes in good faith to be reasonably and immediately necessary to protect their rights with respect to the Collateral (including, without limitation, a request for Borrower to abandon any part of the Collateral); and as to which (ii) the Lender and/or Agent also reasonably believe in good faith the Bankruptcy Court Order is not sufficient to protect the rights of the Lenders and the Agent with respect to the Collateral under the circumstances existing when the Lenders and the Agent request such other and further relief; provided that the Borrowers reserve their right to assert any defenses they may have with respect to the Agent and/or the Lenders’ motion except as otherwise waived herein or in the Bankruptcy Court Order; and   (b)                                 From and after the termination of this Agreement (whether upon the occurrence of the Commitment Termination Date or an Event of Default), the Lenders will have no obligation to provide financing to or on behalf of any Borrower or its bankruptcy estate; and, except as provided in any Bankruptcy Court Order and the Loan Documents, there will be no restriction of any kind against the exercise by the Agent or any Lender of its rights and remedies under the Loan Documents, including but not limited to, the right of the Agent or the Lenders to exercise all of its remedies with respect to the Collateral.   Section 13.5 Plan of Reorganization. Except with the prior written consent of Agent and the Lenders (which shall not be unreasonably withheld), the Credit Parties will not file or propose any Plan of Reorganization (including, but not limited to, any amendment or modification of a Plan of Reorganization, whether before or after confirmation):  (i) which does not incorporate all of the terms of any Bankruptcy Court Order and this Agreement that pertain to the treatment of the secured claim of Agent and the Lenders and the preservation of Agent’s and the Lenders’ rights in the Collateral, (ii) which does not provide for the payment and performance in full of all of the Obligations upon confirmation of the Plan of Reorganization as provided in the Bankruptcy Court Order, or (iii) which would allow any person to improve its lien priority vis à vis the Lenders and/or the Agent with respect to the Collateral. If there is any inconsistency between any Bankruptcy Court Order and this Agreement, on the one hand, and   113 --------------------------------------------------------------------------------   any Plan of Reorganization filed or proposed by the Credit Parties, on the other hand, the terms of the Agreement and such Bankruptcy Court Order will control, and any such inconsistent provisions of any Plan of Reorganization or any confirmation order thereon will be null and void. Nothing in this Agreement will be construed as a consent by the Agent or the Lenders, or an approval by Agent or the Lenders of, the terms of any Plan of Reorganization or any amendment or modification thereto.   Section 13.6 Disavowal and Waiver of Any Subsequent Relief Based on Changed Circumstances. The Credit Parties and the Agent know and understand that there are rights and remedies provided under the Bankruptcy Code, the Federal Rules of Civil Procedure, and the Bankruptcy Rules, pursuant to which parties otherwise bound by a previously entered order can attempt to obtain relief from such an order by alleging circumstances that may warrant a change or modification in the order, or circumstances such as fraud, mistake, inadvertence, excusable neglect, newly discovered evidence, or similar matters that may justify vacating the order entirely, or otherwise changing or modifying it (collectively, “Changed Circumstances”). Rights and remedies based on Changed Circumstances include, but are not limited to, modification of a plan of reorganization after confirmation of the plan and before its substantial consummation pursuant to section 1127(b) of the Bankruptcy Code, relief from a final order or judgment pursuant to Rule 60(b) of the Federal Rules of Civil procedure and Bankruptcy Rule 9024, and the commencement and prosecution of a serial Chapter 11 case by a debtor which is in default of obligations under a stipulation or plan or reorganization confirmed in an earlier case. With full knowledge and understanding of what are, or may be, its present or future rights and remedies based on allegations of Changed Circumstances, the Credit Parties:  (i) expressly disavow that there are any matters which constitute any kind of Changed Circumstances as of the date of entry of the Bankruptcy Court Order;  (ii) expressly disavow that they are aware of any matters whatsoever that they are assuming, contemplating, or expecting in proceeding with the Bankruptcy Court Order and the transactions contemplated by this Agreement and having the Bankruptcy Court Order entered that would serve as a basis to allege such Changed Circumstances; and (iii) in all events, the Credit Parties expressly waive any and all rights and remedies that they have, or may have, now or in the future, based on any Changed Circumstances. The Credit Parties voluntarily assume the risk of any Changed Circumstances. Without limiting any of the foregoing, the Credit Parties are engaged in the specialty infusion and wound care management business. The Credit Parties enterprises are, and will be, affected by highly volatile and unpredictable local, national, and world trends, including, but not limited to, the local economy, the national economy, that availability or unavailability of financing, interest rate, oil prices and supplies, acts of war, acts of nature, acts of god, act of Congress, work stoppages and other workforce disruptions, political and social issues, and numerous other factors. Any and all such matters may seriously affect the business enterprises of the Credit Parties and the ability of the Credit Parties to pay the Agent and the Lenders as required by the Bankruptcy Court Order and the Loan Documents. The Credit Parties understand and agree that the Agent and the Lenders are not willing to bear any of the risks involved in business enterprises and the Agent and the Lenders are not willing to modify any of their rights if such risks cause actual or alleged Changed Circumstances; the Credit Parties expressly assume all risks of any and all such matters, and the consequences that the Agent and the Lenders will enforce their legal, equitable, and contractual rights if they are not paid and dealt with strictly in   114 --------------------------------------------------------------------------------   accordance with the terms and conditions of the Loan Documents and the Bankruptcy Court Order. Without limiting the foregoing in any way, the Credit Parties’ use of any cash Collateral will be governed exclusively by the terms and conditions of this Agreement and the Bankruptcy Court Order, and, either before or after a termination of this Agreement, the Credit Parties will not seek authority from the Bankruptcy Court to otherwise use any cash collateral that is included in the Collateral for any cash collateral that is included in the Collateral for any purpose whatsoever.   Section 13.7 Exclusive Remedy For Any Alleged Post-Petition Claim. Each Credit Party disavows, waives and releases any and all adverse claims against the Lenders through and including the date on which the Bankruptcy Court enters the Bankruptcy Court Order. If a credit party asserts that it has any adverse claims against any Lender arising after the entry of the Bankruptcy Court Order, such Credit Party agrees that its sole and exclusive remedy for any and all such adverse claims will be an action for monetary damages (the “Damage Lawsuit”). Any such Damage Lawsuit, regardless of the procedural form in which it is alleged (e.g., by complaint, counterclaim, cross-claim, third-party claim or otherwise), will be severed from any enforcement by such Lender of its legal, equitable, and contractual rights (including, but not limited to, collection of the Obligations and foreclosure or other enforcement against the Collateral) pursuant to the Loan Documents, and the Damage Lawsuit (including any and all adverse claims against such Lender therein) cannot be asserted by any Credit Party as a defense, setoff, recoupment, or grounds for delay, stay or injunction against any enforcement by such Lender of its legal, equitable, and contractual rights under the Bankruptcy Court Order, the Loan Documents, and otherwise. Venue for any Damage Lawsuit brought by any Borrower will be in the state or federal courts in the Southern District of New York. Notwithstanding the foregoing, nothing herein shall limit the Borrowers’ right to dispute any claim by the Agent and/or the Lenders that an Event of Default has occurred and/or any enforcement action taken by the Agent and/or the Lenders’ in connection therewith (a “Default Claim”), as provided in the Bankruptcy Court Order.   Section 13.8 Prohibition on Priming of the Liens of Lender on the Collateral. Except as expressly provided in the Bankruptcy Court Order, no person will be permitted to surcharge the Collateral under Bankruptcy Code §506(c) or to obtain a lien, set off right, or other charge or adverse claim of any kind with respect to the Collateral which is equal or senior to the Liens of the Agent on the Collateral.   Section 13.9 Marshalling Obligations. The right of the Lenders and/or Agent to seek the equitable remedy of marshalling is expressly preserved, and the Credit Parties will cooperate fully with any effort by the Lenders and/or Agent to exercise its equitable remedy of marshalling.   [Remainder of page intentionally left blank]   115 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Debtor In Possession Credit Agreement to be duly executed by their respective authorized representatives on the date first above written.       BORROWERS:           CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known as   Curative Holding Co.           By:       Name:       Title:               EBIOCARE.COM, INC.           By:       Name:       Title:               HEMOPHILIA ACCESS, INC.           By:       Name:       Title:         [Signature Page to Debtor In Possession Credit Agreement]   --------------------------------------------------------------------------------     APEX THERAPEUTIC CARE, INC.           By:       Name:       Title:               CHS SERVICES, INC.           By:       Name:       Title:               CURATIVE HEALTH SERVICES OF NEW   YORK, INC.           By:       Name:       Title:               OPTIMAL CARE PLUS, INC.           By:       Name:       Title:               INFINITY INFUSION, LLC       By: Curative Health Services Co., its Sole   Member           By:       Name:       Title:       --------------------------------------------------------------------------------     INFINITY INFUSION II, LLC           By: Curative Health Services Co., its Sole Member           By:       Name:       Title:               INFINITY INFUSION CARE, LTD.       By: Infinity Infusion II, LLC, its Sole General Partner   By: Curative Health Services Co., the Sole Member of Infinity Infusion II, LLC           By:       Name:       Title:               MEDCARE, INC.           By:       Name:       Title:               CURATIVE PHARMACY SERVICES, INC.           By:       Name:       Title:       --------------------------------------------------------------------------------     CRITICAL CARE SYSTEMS, INC.       By:       Name:       Title:           CURATIVE HEALTH SERVICES CO.,   a Minnesota corporation formerly known as Curative Health Services, Inc.       By:       Name:       Title:       --------------------------------------------------------------------------------   AGENT AND LENDERS:     GENERAL ELECTRIC CAPITAL   CORPORATION, as Lender and as Agent     Revolving Credit  Commitment: $45,000,000 By:       Name:       Its Duly Authorized Signatory     Payment Account: Deutsche Bank/Banker’s Trust   New York, NY   ABA No.: 021-001-033   Account No.: 50-271-079   Account Name: GE-HFS Cash Flow Collections   Re: Curative Health Services, Inc.   --------------------------------------------------------------------------------   EXHIBIT A to DEBTOR IN POSSESION CREDIT AGREEMENT   REVOLVING NOTE   March 30,2006   New York, New York           $45,000,000.00   FOR VALUE RECEIVED, the undersigned, CURATIVE HEALTH SERVICES, INC., a Minnesota corporation formerly known as Curative Holding Co., EBIOCARE.COM, INC., a Delaware corporation, HEMOPHILIA ACCESS, INC., a Tennessee corporation, APEX THERAPEUTIC CARE, INC., a California corporation, CHS SERVICES, INC., a Delaware corporation, CURATIVE HEALTH SERVICES CO., a Minnesota corporation formerly known as Curative Health Services, Inc., CURATIVE HEALTH SERVICES OF NEW YORK, INC., New York corporation, OPTIMAL CARE PLUS, INC., a Delaware corporation, INFINITY INFUSION, LLC, a Delaware limited liability company, INFINITY INFUSION II, LLC, a Delaware limited liability company, INFINITY INFUSION CARE, LTD., a Texas limited partnership, MEDCARE, INC., a Delaware corporation, CURATIVE PHARMACY SERVICES, INC., a Delaware corporation, and CRITICAL CARE SYSTEMS, INC., a Delaware corporation hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“Lender”), at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as Agent for Lenders (“Agent”), at its address at 2 Bethesda Metro Center, Suite 600, Bethesda, MD 20814, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of FORTY FIVE MILLION DOLLARS ($45,000,000.00) or, if less, the aggregate unpaid amount of all Revolving Loans made to the undersigned under the Credit Agreement (as hereinafter defined). Borrowers further promise to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to the Revolving Credit Advances as determined in accordance with the Credit Agreement. All capitalized terms used but not otherwise defined herein have the meanings given to them in Section 1.1 of the Credit Agreement.   This Revolving Note is one of the Revolving Notes issued pursuant to that certain Debtor in Possession Credit Agreement dated as of March 30, 2006 by and among Borrowers, the other Persons named therein as Credit Parties, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), and is entitled to the benefit and security of the Credit Agreement, the Borrower Security Agreement and all of the other Loan Documents referred to therein. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid.   --------------------------------------------------------------------------------   The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference. interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement. If any payment on this Revolving Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.   Upon and after the occurrence of any Event of Default, the entire principal amount of this Revolving Note, together with all accrued interest thereon, may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.   Time is of the essence of this Revolving Note. Except as expressly required in the Credit Agreement, demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrowers. Borrowers further agree, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by Agent and Lender in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.   THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. Whenever possible each provision of this Revolving Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provisions of this Revolving Note shall be prohibited by or invalid under applicable law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Revolving Note. Whenever in this Revolving Note reference is made to Agent, Lender or Borrowers, such reference shall be deemed to include, as applicable, a reference to their respective permitted successors and assigns and in the case of Lender, any financial institution to which it has sold or assigned all or any part of its interest in the Revolving Loan or in its commitment to make the Revolving Credit Advances as permitted by the Credit Agreement. The provisions of this Revolving Note shall be binding upon and inure to the benefit of such successors and assigns, except that no Borrower may assign its rights or obligations. Borrowers’ successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for any of the Borrowers.   [Remainder of page intentionally left blank; signature pages follow]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known as   Curative Holding Co.       By:       Name:       Title:       Date:               EBIOCARE.COM, INC.           By:       Name:       Title:       Date:               HEMOPHILIA ACCESS, INC.           By:       Name:       Title:       Date:               APEX THERAPEUTIC CARE, INC.           By:       Name:       Title:       Date:               CHS SERVICES, INC.           By:       Name:       Title:       Date:       [Revolving Note Signature Page]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES OF NEW YORK, INC.           By:       Name:       Title:       Date:               OPTIMAL CARE PLUS, INC.           By:       Name:       Title:       Date:               INFINITY INFUSION, LLC       By: Curative Health Services Co., its Sole Member           By:       Name:       Title:       Date:               INFINITY INFUSION II, LLC       By: Curative Health Services Co., its Sole Member           By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     INFINITY INFUSION CARE, LTD.       By: Infinity Infusion II, LLC, its Sole General Partner       By: Curative Health Services Co., the Sole Member of Infinity Infusion II, LLC           By:       Name:       Title:       Date:               MEDCARE, INC.           By:       Name:       Title:       Date:               CURATIVE PHARMACY SERVICES, INC.           By:       Name:       Title:       Date:               CURATIVE HEALTH SERVICES CO.,   a Minnesota corporation formerly known as Curative Health Services, Inc.           By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     CRITICAL CARE SYSTEMS, INC.           By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     EXHIBIT C to DEBTOR IN POSSESION CREDIT AGREEMENT   SWINGLINE NOTE   March 30, 2006   New York, New York           $5,000,000.00   FOR VALUE RECEIVED, the undersigned, CURATIVE HEALTH SERVICES, INC., a Minnesota corporation formerly known as Curative Holding Co., EBIOCARE.COM, INC., a Delaware corporation, HEMOPHILIA ACCESS, INC., a Tennessee corporation, APEX THERAPEUTIC CARE, INC., a California corporation, CHS SERVICES, INC., a Delaware corporation, CURATIVE HEALTH SERVICES CO., a Minnesota corporation formerly known as Curative Health Services, Inc., CURATIVE HEALTH SERVICES OF NEW YORK, INC., New York corporation, OPTIMAL CARE PLUS, INC., a Delaware corporation, INFINITY INFUSION, LLC, a Delaware limited liability company, INFINITY INFUSION II, LLC, a Delaware limited liability company, INFINITY INFUSION CARE, LTD., a Texas limited partnership, MEDCARE, INC., a Delaware corporation, CURATIVE PHARMACY SERVICES, INC., a Delaware corporation, and CRITICAL CARE SYSTEMS, INC., a Delaware corporation (collectively, the “Borrowers”) HEREBY JOINTLY AND SEVERALLY PROMISE TO PAY to the order of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“Swingline Lender”) at the offices of Swingline Lender at 201 Long Ridge Road, Stamford, Connecticut 06927, or at such other place as Swingline Lender may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of FIVE MILLION Dollars ($5,000,000) or, if less, the aggregate unpaid amount of all Swingline Advances made to the undersigned under the Credit Agreement (as hereinafter defined). Borrowers further promise to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to the Swingline Advances as determined in accordance with the Credit Agreement. All capitalized terms used but not otherwise defined herein have the meanings given to them in Section 1.1 of the Credit Agreement.   This Swingline Note is issued pursuant to that certain Debtor in Possession Credit Agreement dated as of March 30, 2006 by and among Borrowers, the other Persons named therein as Credit Parties, Agent, Swingline Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), and is entitled to the benefit and security of the Credit Agreement, the Borrower Security Agreement and all of the other Loan Documents. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid.   --------------------------------------------------------------------------------   The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference. Interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.   If any payment on this Swingline Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.   Upon and after the occurrence of any Event of Default, the entire principal amount of this Swingline Note, together with an accrued interest thereon, may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.   Time is of the essence of this Swingline Note. Except as expressly required in the Credit Agreement, demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrowers. Borrowers further agree, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by Swingline Lender and Agent in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.   THIS SWINGLINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. Whenever possible each provision of this Swingline Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provisions of this Swingline Note shall be prohibited by or invalid under applicable law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Swingline Note. Whenever in this Swingline Note reference is made to Agent, Swing1ine Lender or Borrowers, such reference shall be deemed to include, as applicable, a reference to their respective permitted successors and assigns and in the case of Swingline Lender, any financial institution to which it has sold or assigned all or any part of its interest in the Swingline Loan or in its commitment to make the Swingline Advances as permitted by the Credit Agreement. The provisions of this Swingline Note shall be binding upon and inure to the benefit of such successors and assigns, except that no Borrower may assign its rights or obligations. Borrowers’ successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for any Borrower.   [Remainder of page intentionally left blank; signature pages follow]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known as Curative Holding Co.       By:       Name:       Title:       Date:               EBIOCARE.COM, INC.           By:       Name:       Title:       Date:               HEMOPHILIA ACCESS, INC.           By:       Name:       Title:       Date:               APEX THERAPEUTIC CARE, INC.           By:       Name:       Title:       Date:               CHS SERVICES, INC.           By:       Name:       Title:       Date:       [Swingline Note Signature Page]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES OF NEW YORK, INC.           By:       Name:       Title:       Date:               OPTIMAL CARE PLUS, INC.       By:       Name:       Title:       Date:               INFINITY INFUSION, LLC       By: Curative Health Services Co., its Sole Member           By:       Name:       Title:       Date:               INFINITY INFUSION II, LLC       By: Curative Health Services Co., its Sole Member       By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     INFINITY INFUSION CARE, LTD.       By: Infinity Infusion II, LLC, its Sole General Partner       By: Curative Health Services Co., the Sole Member of Infinity Infusion II, LLC           By:       Name:       Title:       Date:               MEDCARE, INC.           By:       Name:       Title:       Date:               CURATIVE PHARMACY SERVICES, INC.           By:       Name:       Title:       Date:               CURATIVE HEALTH SERVICES CO.,   a Minnesota corporation formerly known as Curative Health Services, Inc.           By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     CRITICAL CARE SYSTEMS, INC.           By:       Name:       Title:       Date:       --------------------------------------------------------------------------------     EXHIBIT D-1 to DEBTOR IN POSSESSION CREDIT AGREEMENT   NOTICE OF BORROWING   Reference is made to that certain Debtor in Possession Credit Agreement, dated as of March       , 2006, by and among the undersigned (“Borrower Representative”), the other Persons signatory thereto from time to time as Borrowers, General Electric Capital Corporation, a Delaware corporation, as agent (“Agent”), the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”). All capitalized terms used but not otherwise defined herein have the meanings given to them in Section 1.1 of the Credit Agreement.   Borrower Representative hereby gives irrevocable notice, pursuant to Section 2.3(a) of the Credit Agreement, of its request for an Advance to be made on                                     (the “Borrowing Date”) in the aggregate principal amount of $                     , to be made as [a Base Rate Loan] [a LIBOR Loan having LIBOR Period of [          ] month(s)].   In order to induce the Lenders to make the Advance(s) requested hereby, Borrowers hereby represent and warrant as of the date of this Notice of Borrowing that:   (i) all of the conditions precedent contained in Section 3.2 of the Credit Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the Advance(s) requested hereby, before and after giving effect thereto and to the application of the proceeds therefrom;   (ii) all of the representations and warranties contained in Article IV of the Credit Agreement are true on and as of the date of this Notice of Borrowing and will be true in all material respects on and as of the applicable Borrowing Date with the same effect as if such representations and warranties had been made on and as of the date of this Notice of Borrowing or on and as of the applicable Borrowing Date, as the case may be, except to the extent that such representations and warranties are expressly stated to by made as of an earlier date, in which case they shall be true as of such earlier date;   (iii) no Default or Event of Default has occurred and is continuing on the date of this Notice of Borrowing or will have occurred and be continuing on the applicable Borrowing Date, or will result from the Advance(s) requested in this Notice of Borrowing; and   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Borrower Representative has caused this Notice of Borrowing to be executed and delivered by its duly authorized representative as of the date set forth below.   Dated:                                        CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known   as Curative Health Services Co.,   individually and as Borrower   Representative               By:       Name:       Title:       2 --------------------------------------------------------------------------------     EXHIBIT D-2 to   DEBTOR IN POSSESSION CREDIT AGREEMENT   NOTICE OF SWINGLINE BORROWING   Reference is made to that certain Debtor in Possession Credit Agreement, dated as of March    , 2006, by and among the undersigned (“Borrower Representative”), the other Persons signatory thereto from time to time as Borrowers, General Electric Capital Corporation, a Delaware corporation, as agent (“Agent”), the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”). All capitalized terms used but not otherwise defined herein have the meanings given to them in Section 1.1 of the Credit Agreement.   Borrower Representative hereby gives irrevocable notice, pursuant to Section 2.6(b) of the Credit Agreement, of its request for a Swingline Advance to be made on                                  (the “Borrowing Date”) in the aggregate principal amount of $                , to be made as a Base Rate Loan.   In order to induce the Swingline Lenders to make the Swingline Advance(s) requested hereby, Borrower Representative hereby represents and warrants as of the date of this Notice of Borrowing that:   (i) all of the conditions precedent contained in Section 3.4 of the Credit Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the Swingline Advance(s) requested hereby, before and after giving effect thereto and to the application of the proceeds therefrom;   (ii) all of the representations and warranties contained in Article IV of the Credit Agreement are true on and as of the date of this Notice of Swingline Borrowing and will be true in all material respects on and as of the applicable Borrowing Date with the same effect as if such representations and warranties had been made on and as of the date of this Notice of Swingline Borrowing or on and as of the applicable Borrowing Date, as the case may be, except to the extent that such representations and warranties are expressly stated to be made as of an earlier date, in which case they shall be true as of such earlier date; and   (iii) no Default or Event of Default has occurred and is continuing on the date of this Notice of Borrowing or will have occurred and be continuing on the applicable Borrowing Date, or will result from the Advance(s) requested in this Notice of Swingline Borrowing.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Borrower Representative has caused this Notice of Swingline Borrowing to be executed and delivered by its duly authorized representative as of the date set forth below.   Dated:                                     CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known   as Curative Health Services Co.,   individually and as Borrower   Representative               By:       Name:       Title:       --------------------------------------------------------------------------------     EXHIBIT E to CREDIT AGREEMENT   BORROWER SECURITY AGREEMENT   BORROWER SECURITY AGREEMENT (together with all amendments, supplements and modifications, if any, from time to time hereto, this “Security Agreement”), dated as of March 30, 2006, by and among CURATIVE HEALTH SERVICES, INC. a Minnesota corporation, CURATIVE HEALTH SERVICES CO. a Minnesota corporation, EBIOCARE.COM, INC., a Delaware corporation, HEMOPHILIA ACCESS, INC., a Tennessee corporation, APEX THERAPEUTIC CARE, INC., a California corporation, CHS SERVICES, INC., a Delaware corporation, CURATIVE HEALTH SERVICES OF NEW YORK, INC., a New York corporation, OPTIMAL CARE PLUS, INC., a Delaware corporation, INFINITY INFUSION, LLC, a Delaware limited liability company, INFINITY INFUSION II, LLC, a Delaware limited liability company, INFINITY INFUSION CARE, LTD., a Texas limited partnership, MEDCARE, INC., a Delaware corporation, CURATIVE PHARMACY SERVICES, INC., a Delaware corporation, CRITICAL CARE SYSTEMS, INC., a Delaware corporation (collectively, the “Grantors”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and in its capacity as Agent for Lenders (“Agent”).   W I T N E S S T H:   WHEREAS, pursuant to that certain Debtor in Possession Credit Agreement, dated as of the date hereof, by and among Grantors, the other Credit Parties signatory thereto, Agent and Lenders (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), Lenders have, subject to certain terms and conditions, agreed to make the Loans and to incur L/C Obligations on behalf of Grantors;   WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and other Loan Documents and to induce Lenders to make the Loans and to incur L/C Obligations as provided for in the Credit Agreement, Grantors have agreed to grant a continuing Lien on the Collateral (as hereinafter defined) to secure the Obligations;   NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained 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.   CAPITALIZED TERMS USED IN THIS SECURITY AGREEMENT SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THIS SECTION 1 UNLESS THE CONTEXT INDICATES OTHERWISE.  ALL CAPITALIZED TERMS USED BUT NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN SECTION 1.1   --------------------------------------------------------------------------------   OF THE CREDIT AGREEMENT.  ANY OTHER TERMS CONTAINED IN THIS SECURITY AGREEMENT NOT DEFINED IN THIS SECURITY AGREEMENT OR THE CREDIT AGREEMENT HAVE THE MEANINGS PROVIDED FOR BY THE CODE TO THE EXTENT THE SAME ARE USED OR DEFINED THEREIN.   (A)                                  “ACCOUNTS” MEANS ALL “ACCOUNTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, INCLUDING (A) ALL ACCOUNTS RECEIVABLE, OTHER RECEIVABLES, BOOK DEBTS AND OTHER FORMS OF OBLIGATIONS (OTHER THAN FORMS OF OBLIGATIONS EVIDENCED BY CHATTEL PAPER, OR INSTRUMENTS), (INCLUDING ANY SUCH OBLIGATIONS THAT MAY BE CHARACTERIZED AS AN ACCOUNT OR CONTRACT RIGHT UNDER THE CODE), (B) ALL OF EACH GRANTOR’S RIGHTS IN, TO AND UNDER ALL PURCHASE ORDERS OR RECEIPTS FOR GOODS OR SERVICES, (C) ALL OF EACH GRANTOR’S RIGHTS TO ANY GOODS REPRESENTED BY ANY OF THE FOREGOING (INCLUDING UNPAID SELLERS’ RIGHTS OF RESCISSION, REPLEVIN, RECLAMATION AND STOPPAGE IN TRANSIT AND RIGHTS TO RETURNED, RECLAIMED OR REPOSSESSED GOODS), (D) ALL RIGHTS TO PAYMENT DUE TO ANY GRANTOR FOR PROPERTY SOLD, LEASED, LICENSED, ASSIGNED OR OTHERWISE DISPOSED OF, FOR A POLICY OF INSURANCE ISSUED OR TO BE ISSUED, FOR A SECONDARY OBLIGATION INCURRED OR TO BE INCURRED, FOR ENERGY PROVIDED OR TO BE PROVIDED, FOR THE USE OR HIRE OF A VESSEL UNDER A CHARTER OR OTHER CONTRACT, ARISING OUT OF THE USE OF A CREDIT CARD OR CHARGE CARD, OR FOR SERVICES RENDERED OR TO BE RENDERED BY SUCH GRANTOR OR IN CONNECTION WITH ANY OTHER TRANSACTION (WHETHER OR NOT YET EARNED BY PERFORMANCE ON THE PART OF SUCH GRANTOR), (E) ALL HEALTH CARE INSURANCE RECEIVABLES AND (F) ALL COLLATERAL SECURITY OF ANY KIND, GIVEN BY ANY ACCOUNT DEBTOR OR ANY OTHER PERSON WITH RESPECT TO ANY OF THE FOREGOING.   (B)                                 “CHATTEL PAPER” MEANS ANY “CHATTEL PAPER,” AS SUCH TERM IS DEFINED IN THE CODE, INCLUDING ELECTRONIC CHATTEL PAPER, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR.   (C)                                  “CODE” MEANS THE UNIFORM COMMERCIAL CODE AS THE SAME MAY, FROM TIME TO TIME, BE ENACTED AND IN EFFECT IN THE STATE OF NEW YORK; PROVIDED, THAT TO THE EXTENT THAT THE CODE IS USED TO DEFINE ANY TERM HEREIN OR IN ANY LOAN DOCUMENT AND SUCH TERM IS DEFINED DIFFERENTLY IN DIFFERENT ARTICLES OR DIVISIONS OF THE CODE, THE DEFINITION OF SUCH TERM CONTAINED IN ARTICLE OR DIVISION 9 SHALL GOVERN; PROVIDED FURTHER, THAT IN THE EVENT THAT, BY REASON OF MANDATORY PROVISIONS OF LAW, ANY OR ALL OF THE ATTACHMENT, PERFECTION OR PRIORITY OF, OR REMEDIES WITH RESPECT TO, AGENT’S OR ANY LENDER’S LIEN ON ANY COLLATERAL IS GOVERNED BY THE UNIFORM COMMERCIAL CODE AS ENACTED AND IN EFFECT IN A JURISDICTION OTHER THAN THE STATE OF NEW YORK, THE TERM “CODE” SHALL MEAN THE UNIFORM COMMERCIAL CODE AS ENACTED AND IN EFFECT IN SUCH OTHER JURISDICTION SOLELY FOR PURPOSES OF THE PROVISIONS THEREOF RELATING TO SUCH ATTACHMENT, PERFECTION, PRIORITY OR REMEDIES AND FOR PURPOSES OF DEFINITIONS RELATED TO SUCH PROVISIONS.   (D)                                 “CONTRACTS” MEANS ALL “CONTRACTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, IN ANY EVENT, INCLUDING ALL CONTRACTS, UNDERTAKINGS, OR AGREEMENTS (OTHER THAN RIGHTS EVIDENCED BY CHATTEL PAPER, DOCUMENTS OR INSTRUMENTS) IN OR UNDER WHICH ANY GRANTOR MAY NOW OR HEREAFTER HAVE ANY RIGHT, TITLE OR INTEREST, INCLUDING ANY AGREEMENT RELATING TO THE TERMS OF PAYMENT OR THE TERMS OF PERFORMANCE OF ANY ACCOUNT.   2 --------------------------------------------------------------------------------   (E)                                  “CONTROL LETTER” MEANS A LETTER AGREEMENT BETWEEN AGENT AND (I) THE ISSUER OF UNCERTIFICATED SECURITIES WITH RESPECT TO UNCERTIFICATED SECURITIES IN THE NAME OF ANY GRANTOR, (II) A SECURITIES INTERMEDIARY WITH RESPECT TO SECURITIES, WHETHER CERTIFICATED OR UNCERTIFICATED, SECURITIES ENTITLEMENTS AND OTHER FINANCIAL ASSETS HELD IN A SECURITIES ACCOUNT IN THE NAME OF ANY GRANTOR, (III) A FUTURES COMMISSION MERCHANT OR CLEARING HOUSE, AS APPLICABLE, WITH RESPECT TO COMMODITY ACCOUNTS AND COMMODITY CONTRACTS HELD BY ANY GRANTOR, WHEREBY, AMONG OTHER THINGS, THE ISSUER, SECURITIES INTERMEDIARY OR FUTURES COMMISSION MERCHANT DISCLAIMS (OR SUBORDINATES IN A MANNER SATISFACTORY TO AGENT IN ITS SOLE DISCRETION) ANY SECURITY INTEREST IN THE APPLICABLE FINANCIAL ASSETS, ACKNOWLEDGES THE LIEN OF AGENT, ON BEHALF OF ITSELF AND LENDERS, ON SUCH FINANCIAL ASSETS, AND AGREES TO FOLLOW THE INSTRUCTIONS OR ENTITLEMENT ORDERS OF AGENT WITHOUT FURTHER CONSENT BY THE AFFECTED GRANTOR.   (F)                                    “COPYRIGHT LICENSE” MEANS ANY AND ALL RIGHTS NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR UNDER ANY WRITTEN AGREEMENT GRANTING ANY RIGHT TO USE ANY COPYRIGHT OR COPYRIGHT REGISTRATION.   (G)                                 “COPYRIGHTS” MEANS ALL OF THE FOLLOWING NOW OWNED OR HEREAFTER ADOPTED OR ACQUIRED BY ANY GRANTOR: (A) ALL COPYRIGHTS AND GENERAL INTANGIBLES OF LIKE NATURE (WHETHER REGISTERED OR UNREGISTERED), ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS IN CONNECTION THEREWITH, INCLUDING ALL REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES COPYRIGHT OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE OR TERRITORY THEREOF, OR ANY OTHER COUNTRY OR ANY POLITICAL SUBDIVISION THEREOF, AND (B) ALL REISSUES, EXTENSIONS OR RENEWALS THEREOF.   (H)                                 “DEPOSIT ACCOUNTS” MEANS ALL “DEPOSIT ACCOUNTS” AS SUCH TERM IS DEFINED IN THE CODE, NOW OR HEREAFTER HELD IN THE NAME OF ANY GRANTOR.   (I)                                     “DOCUMENTS” MEANS ALL “DOCUMENTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED.   (J)                                     “EQUIPMENT” MEANS ALL “EQUIPMENT,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED AND, IN ANY EVENT, INCLUDING ALL SUCH GRANTOR’S MACHINERY AND EQUIPMENT, INCLUDING PROCESSING EQUIPMENT, CONVEYORS, MACHINE TOOLS, DATA PROCESSING AND COMPUTER EQUIPMENT, INCLUDING EMBEDDED SOFTWARE AND PERIPHERAL EQUIPMENT AND ALL ENGINEERING, PROCESSING AND MANUFACTURING EQUIPMENT, OFFICE MACHINERY, FURNITURE, MATERIALS HANDLING EQUIPMENT, TOOLS, ATTACHMENTS, ACCESSORIES, AUTOMOTIVE EQUIPMENT, TRAILERS, TRUCKS, FORKLIFTS, MOLDS, DIES, STAMPS, MOTOR VEHICLES, ROLLING STOCK AND OTHER EQUIPMENT OF EVERY KIND AND NATURE, TRADE FIXTURES AND FIXTURES NOT FORMING A PART OF REAL PROPERTY, TOGETHER WITH ALL ADDITIONS AND ACCESSIONS THERETO, REPLACEMENTS THEREFOR, ALL PARTS THEREFOR, ALL SUBSTITUTES FOR ANY OF THE FOREGOING, FUEL THEREFOR, AND ALL MANUALS, DRAWINGS, INSTRUCTIONS, WARRANTIES AND RIGHTS WITH RESPECT THERETO, AND ALL PRODUCTS AND PROCEEDS THEREOF AND CONDEMNATION AWARDS AND INSURANCE PROCEEDS WITH RESPECT THERETO.   (K)                                  “FIXTURES” MEANS ALL “FIXTURES” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR.   3 --------------------------------------------------------------------------------   (L)                                     “GENERAL INTANGIBLES” MEANS ALL “GENERAL INTANGIBLES,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, INCLUDING ALL RIGHT, TITLE AND INTEREST THAT SUCH GRANTOR MAY NOW OR HEREAFTER HAVE IN OR UNDER ANY CONTRACT, ALL PAYMENT INTANGIBLES, CUSTOMER LISTS, LICENSES, COPYRIGHTS, TRADEMARKS, PATENTS, AND ALL APPLICATIONS THEREFOR AND REISSUES, EXTENSIONS OR RENEWALS THEREOF, RIGHTS IN INTELLECTUAL PROPERTY, INTERESTS IN PARTNERSHIPS, JOINT VENTURES AND OTHER BUSINESS ASSOCIATIONS, LICENSES, PERMITS, COPYRIGHTS, TRADE SECRETS, PROPRIETARY OR CONFIDENTIAL INFORMATION, INVENTIONS (WHETHER OR NOT PATENTED OR PATENTABLE), TECHNICAL INFORMATION, PROCEDURES, DESIGNS, KNOWLEDGE, KNOW-HOW, SOFTWARE, DATA BASES, DATA, SKILL, EXPERTISE, EXPERIENCE, PROCESSES, MODELS, DRAWINGS, MATERIALS AND RECORDS, GOODWILL (INCLUDING THE GOODWILL ASSOCIATED WITH ANY TRADEMARK OR TRADEMARK LICENSE), ALL RIGHTS AND CLAIMS IN OR UNDER INSURANCE POLICIES (INCLUDING INSURANCE FOR FIRE, DAMAGE, LOSS AND CASUALTY, WHETHER COVERING PERSONAL PROPERTY, REAL PROPERTY, TANGIBLE RIGHTS OR INTANGIBLE RIGHTS, ALL LIABILITY, LIFE, KEY MAN AND BUSINESS INTERRUPTION INSURANCE, AND ALL UNEARNED PREMIUMS), UNCERTIFICATED SECURITIES, CHOSES IN ACTION, DEPOSIT, CHECKING AND OTHER BANK ACCOUNTS, RIGHTS TO RECEIVE TAX REFUNDS AND OTHER PAYMENTS, RIGHTS TO RECEIVE DIVIDENDS, DISTRIBUTIONS, CASH, INSTRUMENTS AND OTHER PROPERTY IN RESPECT OF OR IN EXCHANGE FOR PLEDGED STOCK AND INVESTMENT PROPERTY, RIGHTS OF INDEMNIFICATION, ALL BOOKS AND RECORDS, CORRESPONDENCE, CREDIT FILES, INVOICES AND OTHER PAPERS, INCLUDING WITHOUT LIMITATION ALL TAPES, CARDS, COMPUTER RUNS AND OTHER PAPERS AND DOCUMENTS IN THE POSSESSION OR UNDER THE CONTROL OF SUCH GRANTOR OR ANY COMPUTER BUREAU OR SERVICE COMPANY FROM TIME TO TIME ACTING FOR SUCH GRANTOR.   (M)                               “GOODS” MEANS ALL “GOODS” AS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED, INCLUDING EMBEDDED SOFTWARE TO THE EXTENT INCLUDED  IN “GOODS” AS DEFINED IN THE CODE, MANUFACTURED HOMES, STANDING TIMBER THAT IS CUT AND REMOVED FOR SALE AND UNBORN YOUNG OF ANIMALS.   (N)                                 “INDEMNIFIED PERSON” MEANS EACH OF AGENT, LENDERS AND THEIR RESPECTIVE AFFILIATES, AND EACH SUCH PERSON’S RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS AND REPRESENTATIVES.   (O)                                 “INSTRUMENTS” MEANS ALL “INSTRUMENTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED, AND, IN ANY EVENT, INCLUDING ALL CERTIFICATED SECURITIES, ALL CERTIFICATES OF DEPOSIT, AND ALL PROMISSORY NOTES AND OTHER EVIDENCES OF INDEBTEDNESS, OTHER THAN INSTRUMENTS THAT CONSTITUTE, OR ARE A PART OF A GROUP OF WRITINGS THAT CONSTITUTE, CHATTEL PAPER.   (P)                                 “INTELLECTUAL PROPERTY” MEANS ANY AND ALL LICENSES, PATENTS, COPYRIGHTS, TRADEMARKS, AND THE GOODWILL ASSOCIATED WITH SUCH TRADEMARKS.   (Q)                                 “INVENTORY” MEANS ALL “INVENTORY,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED, AND IN ANY EVENT INCLUDING INVENTORY, MERCHANDISE, GOODS AND OTHER PERSONAL PROPERTY THAT ARE HELD BY OR ON BEHALF OF ANY GRANTOR FOR SALE OR LEASE OR ARE FURNISHED OR ARE TO BE FURNISHED UNDER A CONTRACT OF SERVICE, OR THAT CONSTITUTE RAW MATERIALS, WORK IN PROCESS, FINISHED GOODS, RETURNED GOODS, OR MATERIALS OR SUPPLIES OF ANY KIND, NATURE OR DESCRIPTION USED OR   4 --------------------------------------------------------------------------------   CONSUMED OR TO BE USED OR CONSUMED IN SUCH GRANTOR’S BUSINESS OR IN THE PROCESSING, PRODUCTION, PACKAGING, PROMOTION, DELIVERY OR SHIPPING OF THE SAME, INCLUDING ALL SUPPLIES AND EMBEDDED SOFTWARE.   (R)                                    “INVESTMENT PROPERTY” MEANS ALL “INVESTMENT PROPERTY” AS SUCH TERM IS DEFINED IN THE CODE NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, WHEREVER LOCATED, INCLUDING (I) ALL SECURITIES, WHETHER CERTIFICATED OR UNCERTIFICATED, INCLUDING STOCKS, BONDS, INTERESTS IN LIMITED LIABILITY COMPANIES, PARTNERSHIP INTERESTS, TREASURIES, CERTIFICATES OF DEPOSIT, AND MUTUAL FUND SHARES; (II) ALL SECURITIES ENTITLEMENTS OF ANY GRANTOR, INCLUDING THE RIGHTS OF ANY GRANTOR TO ANY SECURITIES ACCOUNT AND THE FINANCIAL ASSETS HELD BY A SECURITIES INTERMEDIARY IN SUCH SECURITIES ACCOUNT AND ANY FREE CREDIT BALANCE OR OTHER MONEY OWING BY ANY SECURITIES INTERMEDIARY WITH RESPECT TO THAT ACCOUNT; (III) ALL SECURITIES ACCOUNTS OF ANY GRANTOR; (IV) ALL COMMODITY CONTRACTS OF ANY GRANTOR; AND (V) ALL COMMODITY ACCOUNTS HELD BY ANY GRANTOR.   (S)                                  “LETTER-OF-CREDIT RIGHTS” MEANS “LETTER-OF-CREDIT RIGHTS” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, INCLUDING RIGHTS TO PAYMENT OR PERFORMANCE UNDER A LETTER OF CREDIT, WHETHER OR NOT SUCH GRANTOR, AS BENEFICIARY, HAS DEMANDED OR IS ENTITLED TO DEMAND PAYMENT OR PERFORMANCE.   (T)                                    “LICENSE” MEANS ANY COPYRIGHT LICENSE, PATENT LICENSE, TRADEMARK LICENSE OR OTHER LICENSE OF RIGHTS OR INTERESTS NOW HELD OR HEREAFTER ACQUIRED BY ANY GRANTOR.   (U)                                 “PATENT LICENSE” MEANS RIGHTS UNDER ANY WRITTEN AGREEMENT NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR GRANTING ANY RIGHT WITH RESPECT TO ANY INVENTION ON WHICH A PATENT IS IN EXISTENCE.   (V)                                 “PATENTS” MEANS ALL OF THE FOLLOWING IN WHICH ANY GRANTOR NOW HOLDS OR HEREAFTER ACQUIRES ANY INTEREST: (A) ALL LETTERS PATENT OF THE UNITED STATES OR OF ANY OTHER COUNTRY, ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS FOR LETTERS PATENT OF THE UNITED STATES OR OF ANY OTHER COUNTRY, INCLUDING REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES PATENT AND TRADEMARK OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE, OR ANY OTHER COUNTRY, AND (B) ALL REISSUES, CONTINUATIONS, CONTINUATIONS-IN-PART OR EXTENSIONS THEREOF.   (W)                               “PROCEEDS” MEANS “PROCEEDS,” AS SUCH TERM IS DEFINED IN THE CODE, INCLUDING (A) ANY AND ALL PROCEEDS OF ANY INSURANCE, INDEMNITY, WARRANTY OR GUARANTY PAYABLE TO ANY GRANTOR FROM TIME TO TIME WITH RESPECT TO ANY OF THE COLLATERAL, (B) ANY AND ALL PAYMENTS (IN ANY FORM WHATSOEVER) MADE OR DUE AND PAYABLE TO ANY GRANTOR FROM TIME TO TIME IN CONNECTION WITH ANY REQUISITION, CONFISCATION, CONDEMNATION, SEIZURE OR FORFEITURE OF ALL OR ANY PART OF THE COLLATERAL BY ANY GOVERNMENTAL AUTHORITY (OR ANY PERSON ACTING UNDER COLOR OF GOVERNMENTAL AUTHORITY), (C) ANY CLAIM OF ANY GRANTOR AGAINST THIRD PARTIES (I) FOR PAST, PRESENT OR FUTURE INFRINGEMENT OF ANY PATENT OR PATENT LICENSE, OR (II) FOR PAST, PRESENT OR FUTURE INFRINGEMENT OR DILUTION OF ANY COPYRIGHT, COPYRIGHT LICENSE, TRADEMARK OR TRADEMARK LICENSE, OR FOR INJURY TO THE GOODWILL ASSOCIATED WITH ANY TRADEMARK OR TRADEMARK LICENSE, (D) ANY RECOVERIES BY ANY GRANTOR   5 --------------------------------------------------------------------------------   AGAINST THIRD PARTIES WITH RESPECT TO ANY LITIGATION OR DISPUTE CONCERNING ANY OF THE COLLATERAL INCLUDING CLAIMS ARISING OUT OF THE LOSS OR NONCONFORMITY OF, INTERFERENCE WITH THE USE OF, DEFECTS IN, OR INFRINGEMENT OF RIGHTS IN, OR DAMAGE TO, COLLATERAL, (E) ALL AMOUNTS COLLECTED ON, OR DISTRIBUTED ON ACCOUNT OF, OTHER COLLATERAL, INCLUDING DIVIDENDS, INTEREST, DISTRIBUTIONS AND INSTRUMENTS WITH RESPECT TO INVESTMENT PROPERTY AND PLEDGED STOCK, AND (F) ANY AND ALL OTHER AMOUNTS, RIGHTS TO PAYMENT OR OTHER PROPERTY ACQUIRED UPON THE SALE, LEASE, LICENSE, EXCHANGE OR OTHER DISPOSITION OF COLLATERAL AND ALL RIGHTS ARISING OUT OF COLLATERAL.   (X)                                   “SOFTWARE” MEANS ALL “SOFTWARE” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR, OTHER THAN SOFTWARE EMBEDDED IN ANY CATEGORY OF GOODS, INCLUDING ALL COMPUTER PROGRAMS AND ALL SUPPORTING INFORMATION PROVIDED IN CONNECTION WITH A TRANSACTION RELATED TO ANY PROGRAM.   (Y)                                 “SUPPORTING OBLIGATIONS” MEANS ALL “SUPPORTING OBLIGATIONS” AS SUCH TERM IS DEFINED IN THE CODE, INCLUDING LETTERS OF CREDIT AND GUARANTIES ISSUED IN SUPPORT OF ACCOUNTS, CHATTEL PAPER, DOCUMENTS, GENERAL INTANGIBLES, INSTRUMENTS, OR INVESTMENT PROPERTY.   (Z)                                   “TERMINATION DATE” MEANS THE DATE ON WHICH (A) THE LOANS HAVE BEEN INDEFEASIBLY REPAID IN FULL IN CASH, (B) ALL OTHER OBLIGATIONS UNDER THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS HAVE BEEN COMPLETELY DISCHARGED, (C) ALL L/C OBLIGATIONS HAVE BEEN CASH COLLATERALIZED, CANCELED OR BACKED BY STANDBY LETTERS OF CREDIT IN ACCORDANCE WITH SECTION 2.5 OF THE CREDIT AGREEMENT, AND (D) BORROWER SHALL NOT HAVE ANY FURTHER RIGHT TO BORROW ANY MONIES UNDER THE CREDIT AGREEMENT.   (AA)                            “TRADEMARK LICENSE” MEANS RIGHTS UNDER ANY WRITTEN AGREEMENT NOW OWNED OR HEREAFTER ACQUIRED BY ANY GRANTOR GRANTING ANY RIGHT TO USE ANY TRADEMARK.   (BB)                          “TRADEMARKS” MEANS ALL OF THE FOLLOWING NOW OWNED OR HEREAFTER EXISTING OR ADOPTED OR ACQUIRED BY ANY GRANTOR: (A) ALL TRADEMARKS, TRADE NAMES, CORPORATE NAMES, BUSINESS NAMES, TRADE STYLES, SERVICE MARKS, LOGOS, OTHER SOURCE OR BUSINESS IDENTIFIERS, PRINTS AND LABELS ON WHICH ANY OF THE FOREGOING HAVE APPEARED OR APPEAR, DESIGNS AND GENERAL INTANGIBLES OF LIKE NATURE (WHETHER REGISTERED OR UNREGISTERED), ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS IN CONNECTION THEREWITH, INCLUDING REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES PATENT AND TRADEMARK OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE OR TERRITORY THEREOF, OR ANY OTHER COUNTRY OR ANY POLITICAL SUBDIVISION THEREOF; (B) ALL REISSUES, EXTENSIONS OR RENEWALS THEREOF; AND (C) ALL GOODWILL ASSOCIATED WITH OR SYMBOLIZED BY ANY OF THE FOREGOING.   (CC)                            “UNIFORM COMMERCIAL CODE JURISDICTION” MEANS ANY JURISDICTION THAT HAS ADOPTED ALL OR SUBSTANTIALLY ALL OF ARTICLE 9 AS CONTAINED IN THE 2000 OFFICIAL TEXT OF THE UNIFORM COMMERCIAL CODE, AS RECOMMENDED BY THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS AND THE AMERICAN LAW INSTITUTE, TOGETHER WITH ANY SUBSEQUENT AMENDMENTS OR MODIFICATIONS TO THE OFFICIAL TEXT.   6 --------------------------------------------------------------------------------   2.                                       GRANT OF LIEN.   (A)                                  TO SECURE THE PROMPT AND COMPLETE PAYMENT, PERFORMANCE AND OBSERVANCE OF ALL OF THE OBLIGATIONS, EACH GRANTOR HEREBY GRANTS, ASSIGNS, CONVEYS, MORTGAGES, PLEDGES, HYPOTHECATES AND TRANSFERS, TO AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, A LIEN UPON ALL OF THEIR RIGHT, TITLE AND INTEREST IN, TO AND UNDER ALL PERSONAL PROPERTY AND OTHER ASSETS, WHETHER NOW OWNED BY OR OWING TO, OR HEREAFTER ACQUIRED BY OR ARISING IN FAVOR OF GRANTORS (INCLUDING UNDER ANY TRADE NAMES, STYLES OR DERIVATIONS THEREOF), AND WHETHER OWNED OR CONSIGNED BY OR TO, OR LEASED FROM OR TO, GRANTORS, AND REGARDLESS OF WHERE LOCATED (ALL OF WHICH BEING HEREINAFTER COLLECTIVELY REFERRED TO AS THE “COLLATERAL”), INCLUDING:   I.                                          ALL ACCOUNTS;   II.                                       ALL CHATTEL PAPER;   III.                                    ALL DOCUMENTS;   IV.                                   ALL GENERAL INTANGIBLES (INCLUDING PAYMENT INTANGIBLES AND SOFTWARE);   V.                                      ALL GOODS (INCLUDING INVENTORY, EQUIPMENT AND FIXTURES);   VI.                                   ALL INSTRUMENTS;   VII.                                ALL INVESTMENT PROPERTY;   VIII.                             ALL DEPOSIT ACCOUNTS OF SUCH GRANTOR, INCLUDING ALL BLOCKED ACCOUNTS, GOVERNMENT RECEIVABLES DEPOSIT ACCOUNTS, CONCENTRATION ACCOUNTS, DISBURSEMENT ACCOUNTS, AND ALL OTHER BANK ACCOUNTS AND ALL DEPOSITS THEREIN;   IX.                                     ALL MONEY, CASH OR CASH EQUIVALENTS OF SUCH GRANTOR;   X.                                        ALL SUPPORTING OBLIGATIONS AND LETTER-OF-CREDIT RIGHTS OF SUCH GRANTOR;   XI.                                     ALL COMMERCIAL TORT CLAIMS OF SUCH GRANTOR;   XII.                                  ALL BOOKS, RECORDS, LEDGER CARDS, FILES, CORRESPONDENCE, COMPUTER PROGRAMS, TAPES, DISKS AND RELATED DATA PROCESSING SOFTWARE THAT AT ANY TIME EVIDENCE OR CONTAIN INFORMATION RELATING TO ANY OF THE COLLATERAL DESCRIBED IN CLAUSES (I) THROUGH (XI) ABOVE OR ARE OTHERWISE NECESSARY OR HELPFUL IN THE COLLECTION THEREOF OR REALIZATION THEREON; AND   XIII.                               TO THE EXTENT NOT OTHERWISE INCLUDED, ALL PROCEEDS, TORT CLAIMS, INSURANCE CLAIMS AND OTHER RIGHTS TO PAYMENTS NOT OTHERWISE INCLUDED IN THE FOREGOING AND PRODUCTS OF THE FOREGOING AND ALL ACCESSIONS TO, SUBSTITUTIONS AND REPLACEMENTS FOR, AND RENTS AND PROFITS OF, EACH OF THE FOREGOING.   7 --------------------------------------------------------------------------------   Notwithstanding the foregoing, “Collateral” shall not include any Equipment that is (i) leased by any Grantor or any rights of such Grantor under such lease (other than such Grantor’s rights to payment under such lease constituting Accounts or General Intangibles for money due or to become due), or (ii) is subject to a purchase money lien to the extent and only to the extent that such lien is expressly permitted under the Credit Agreement, in each case if and only for so long as the grant of a security interest by such Grantor in such Equipment or lease violates the terms of such lease or, in the case of any purchase money lien on Equipment violates the terms of the financing documents evidencing or securing such purchase money indebtedness; provided that such Grantor shall be deemed to have granted a security interest in such Equipment, and such Equipment shall be included in the Collateral, at such time that such grant no longer violates such lease or, in the case of any purchase money lien on Equipment, the terms of the financing documents evidencing or securing such purchase money indebtedness.   (B)                                 IN ADDITION, TO SECURE THE PROMPT AND COMPLETE PAYMENT, PERFORMANCE AND OBSERVANCE OF THE OBLIGATIONS AND IN ORDER TO INDUCE AGENT AND LENDERS AS AFORESAID, GRANTORS HEREBY GRANT TO AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, A RIGHT OF SETOFF AGAINST THE PROPERTY OF GRANTORS HELD BY AGENT OR ANY LENDER, CONSISTING OF PROPERTY DESCRIBED ABOVE IN SECTION 2(A) NOW OR HEREAFTER IN THE POSSESSION OR CUSTODY OF OR IN TRANSIT TO AGENT OR ANY LENDER, FOR ANY PURPOSE, INCLUDING SAFEKEEPING, COLLECTION OR PLEDGE, FOR THE ACCOUNT OF GRANTORS, OR AS TO WHICH GRANTORS MAY HAVE ANY RIGHT OR POWER.   3.                                       AGENT’S AND LENDERS’ RIGHTS: LIMITATIONS ON AGENT’S AND LENDERS’ OBLIGATIONS.   (A)                                  IT IS EXPRESSLY AGREED BY EACH GRANTOR THAT, ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, SUCH GRANTOR SHALL REMAIN LIABLE UNDER EACH OF ITS CONTRACTS AND EACH OF ITS LICENSES TO OBSERVE AND PERFORM ALL THE CONDITIONS AND OBLIGATIONS TO BE OBSERVED AND PERFORMED BY IT THEREUNDER EXCEPT WHERE SUCH FAILURE COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY OBLIGATION OR LIABILITY UNDER ANY CONTRACT OR LICENSE BY REASON OF OR ARISING OUT OF THIS SECURITY AGREEMENT OR THE GRANTING HEREIN OF A LIEN THEREON OR THE RECEIPT BY AGENT OR ANY LENDER OF ANY PAYMENT RELATING TO ANY CONTRACT OR LICENSE PURSUANT HERETO.  NEITHER AGENT NOR ANY LENDER SHALL BE REQUIRED OR OBLIGATED IN ANY MANNER TO PERFORM OR FULFILL ANY OF THE OBLIGATIONS OF ANY GRANTOR UNDER OR PURSUANT TO ANY CONTRACT OR LICENSE, OR TO MAKE ANY PAYMENT, OR TO MAKE ANY INQUIRY AS TO THE NATURE OR THE SUFFICIENCY OF ANY PAYMENT RECEIVED BY IT OR THE SUFFICIENCY OF ANY PERFORMANCE BY ANY PARTY UNDER ANY CONTRACT OR LICENSE, OR TO PRESENT OR FILE ANY CLAIMS, OR TO TAKE ANY ACTION TO COLLECT OR ENFORCE ANY PERFORMANCE OR THE PAYMENT OF ANY AMOUNTS WHICH MAY HAVE BEEN ASSIGNED TO IT OR TO WHICH IT MAY BE ENTITLED AT ANY TIME OR TIMES.   (B)                                 AGENT MAY AT ANY TIME AFTER AN EVENT OF DEFAULT HAS OCCURRED AND BE CONTINUING (OR IF ANY RIGHTS OF SET-OFF (OTHER THAN SET-OFFS AGAINST AN ACCOUNT ARISING UNDER THE CONTRACT GIVING RISE TO THE SAME ACCOUNT) OR CONTRA ACCOUNTS MAY BE ASSERTED WITH RESPECT TO THE FOLLOWING), WITHOUT PRIOR NOTICE TO THE GRANTORS, NOTIFY ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON THE COLLATERAL THAT AGENT HAS A SECURITY INTEREST THEREIN, AND THAT PAYMENTS SHALL BE MADE DIRECTLY TO AGENT.  UPON THE REQUEST OF AGENT, THE   8 --------------------------------------------------------------------------------   GRANTORS SHALL SO NOTIFY ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL.  ONCE ANY SUCH NOTICE HAS BEEN GIVEN TO ANY ACCOUNT DEBTOR OR OTHER PERSON OBLIGATED ON THE COLLATERAL, THE GRANTORS SHALL NOT GIVE ANY CONTRARY INSTRUCTIONS TO SUCH ACCOUNT DEBTOR OR OTHER PERSON WITHOUT AGENT’S PRIOR WRITTEN CONSENT.   (C)                                  AGENT MAY AT ANY TIME IN AGENT’S OWN NAME, IN THE NAME OF A NOMINEE OF AGENT OR IN THE NAME OF ANY GRANTOR COMMUNICATE (BY MAIL, TELEPHONE, FACSIMILE OR OTHERWISE) WITH ACCOUNT DEBTORS, PARTIES TO CONTRACTS AND OBLIGORS IN RESPECT OF INSTRUMENTS TO VERIFY WITH SUCH PERSONS, TO AGENT’S SATISFACTION, THE EXISTENCE, AMOUNT TERMS OF, AND ANY OTHER MATTER RELATING TO, ACCOUNTS, PAYMENT INTANGIBLES, INSTRUMENTS OR CHATTEL PAPER.  IF A DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE GRANTORS, AT THEIR OWN EXPENSE, SHALL CAUSE THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS THEN ENGAGED BY THEM TO PREPARE AND DELIVER TO AGENT AND EACH LENDER AT ANY TIME AND FROM TIME TO TIME PROMPTLY UPON AGENT’S REQUEST THE FOLLOWING REPORTS WITH RESPECT TO THE GRANTORS: (I) A RECONCILIATION OF ALL ACCOUNTS; (II) AN AGING OF ALL ACCOUNTS; (III) TRIAL BALANCES; AND (IV) A TEST VERIFICATION OF SUCH ACCOUNTS AS AGENT MAY REQUEST.  THE GRANTORS, AT THEIR OWN EXPENSE, SHALL DELIVER TO AGENT THE RESULTS OF EACH PHYSICAL VERIFICATION, IF ANY, WHICH THE GRANTORS MAY IN THEIR DISCRETION HAVE MADE, OR CAUSED ANY OTHER PERSON TO HAVE MADE ON ITS BEHALF, OF ALL OR ANY PORTION OF THEIR INVENTORY.   4.                                       REPRESENTATIONS AND WARRANTIES.  EACH GRANTOR REPRESENTS AND WARRANTS THAT:   (A)                                  SUCH GRANTOR HAS RIGHTS IN AND THE POWER TO TRANSFER EACH ITEM OF THE COLLATERAL UPON WHICH IT PURPORTS TO GRANT A LIEN HEREUNDER FREE AND CLEAR OF ANY AND ALL LIENS OTHER THAN PERMITTED ENCUMBRANCES;   (B)                                 NO EFFECTIVE SECURITY AGREEMENT, FINANCING STATEMENT, EQUIVALENT SECURITY OR LIEN INSTRUMENT OR CONTINUATION STATEMENT COVERING ALL OR ANY PART OF THE COLLATERAL IS ON FILE OR OF RECORD IN ANY PUBLIC OFFICE, EXCEPT SUCH AS MAY HAVE BEEN FILED (I) BY SUCH GRANTOR IN FAVOR OF AGENT PURSUANT TO THIS SECURITY AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND (II) IN CONNECTION WITH ANY OTHER PERMITTED ENCUMBRANCES;   (C)                                  THIS SECURITY AGREEMENT IS EFFECTIVE TO CREATE A VALID AND CONTINUING LIEN ON AND, UPON THE FILING OF THE APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, A PERFECTED LIEN IN FAVOR OF AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, ON THE COLLATERAL WITH RESPECT TO WHICH A LIEN MAY BE PERFECTED BY FILING PURSUANT TO THE CODE.  SUCH LIEN IS PRIOR TO ALL OTHER LIENS, EXCEPT PERMITTED ENCUMBRANCES THAT WOULD BE PRIOR TO LIENS IN FAVOR OF AGENT FOR THE BENEFIT OF AGENT AND LENDERS AS A MATTER OF LAW, AND IS ENFORCEABLE AS SUCH AS AGAINST ANY AND ALL CREDITORS OF AND PURCHASERS FROM SUCH GRANTOR (OTHER THAN PURCHASERS AND LESSEES OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS AND NON-EXCLUSIVE LICENSEES OF GENERAL INTANGIBLES IN THE ORDINARY COURSE OF BUSINESS).  ALL ACTION BY GRANTOR NECESSARY OR DESIRABLE TO PROTECT AND PERFECT SUCH LIEN ON EACH ITEM OF THE COLLATERAL HAS BEEN DULY TAKEN;   (D)                                 SCHEDULE II HERETO LISTS ALL INSTRUMENTS, LETTER OF CREDIT RIGHTS AND CHATTEL PAPER OF SUCH GRANTOR.  ALL ACTION BY SUCH GRANTOR NECESSARY OR DESIRABLE TO PROTECT AND   9 --------------------------------------------------------------------------------   PERFECT THE LIEN OF AGENT ON EACH ITEM SET FORTH ON SCHEDULE II (INCLUDING THE DELIVERY OF ALL ORIGINALS THEREOF TO AGENT AND THE LEGENDING OF ALL CHATTEL PAPER AS REQUIRED BY SECTION 5(B) HEREOF) HAS BEEN DULY TAKEN.  THE LIEN OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, ON THE COLLATERAL LISTED ON SCHEDULE II HERETO IS PRIOR TO ALL OTHER LIENS, EXCEPT PERMITTED ENCUMBRANCES THAT WOULD BE PRIOR TO THE LIENS IN FAVOR OF AGENT AS A MATTER OF LAW, AND IS ENFORCEABLE AS SUCH AGAINST ANY AND ALL CREDITORS OF AND PURCHASERS FROM SUCH GRANTOR;   (E)                                  SUCH GRANTOR’S NAME AS IT APPEARS IN OFFICIAL FILINGS IN SUCH GRANTOR’S STATE OF INCORPORATION OR OTHER ORGANIZATION, THE TYPE OF ENTITY OF SUCH GRANTOR (INCLUDING CORPORATION, PARTNERSHIP, LIMITED PARTNERSHIP OR LIMITED LIABILITY COMPANY), ORGANIZATIONAL IDENTIFICATION NUMBER ISSUED BY SUCH GRANTOR’S STATE OF INCORPORATION OR ORGANIZATION OR A STATEMENT THAT NO SUCH NUMBER HAS BEEN ISSUED, SUCH GRANTOR’S STATE OF ORGANIZATION OR INCORPORATION, THE LOCATION OF SUCH GRANTOR’S CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS, OFFICES, ALL WAREHOUSES AND PREMISES WHERE COLLATERAL IS STORED OR LOCATED, AND THE LOCATIONS OF ITS BOOKS AND RECORDS CONCERNING THE COLLATERAL ARE SET FORTH ON SCHEDULE III-A, SCHEDULE III-B, SCHEDULE III-C, SCHEDULE III-D, SCHEDULE III-E, SCHEDULE III-F, SCHEDULE III-G, SCHEDULE III-H, SCHEDULE III-I, SCHEDULE III-J, SCHEDULE III-K AND SCHEDULE III-L, SCHEDULE III-M, SCHEDULE III-N OR SCHEDULE III-O HERETO, AS APPLICABLE.  SUCH GRANTOR HAS ONLY ONE STATE OF INCORPORATION OR ORGANIZATION;   (F)                                    WITH RESPECT TO THE ACCOUNTS, EXCEPT AS SPECIFICALLY DISCLOSED IN THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT (I) THEY REPRESENT BONA FIDE SALES OF INVENTORY OR RENDERING OF SERVICES TO ACCOUNT DEBTORS IN THE ORDINARY COURSE OF GRANTOR’S BUSINESS AND ARE NOT EVIDENCED BY A JUDGMENT, INSTRUMENT OR CHATTEL PAPER; (II) THERE ARE NO SETOFFS, CLAIMS OR DISPUTES EXISTING OR ASSERTED WITH RESPECT THERETO AND GRANTOR HAS NOT MADE ANY AGREEMENT WITH ANY ACCOUNT DEBTOR FOR ANY EXTENSION OF TIME FOR THE PAYMENT THEREOF, ANY COMPROMISE OR SETTLEMENT FOR LESS THAN THE FULL AMOUNT THEREOF, ANY RELEASE OF ANY ACCOUNT DEBTOR FROM LIABILITY THEREFOR, OR ANY DEDUCTION THEREFROM EXCEPT A DISCOUNT OR ALLOWANCE ALLOWED BY GRANTOR IN THE ORDINARY COURSE OF ITS BUSINESS FOR PROMPT PAYMENT AND DISCLOSED TO AGENT; (III) TO GRANTOR’S KNOWLEDGE, THERE ARE NO FACTS, EVENTS OR OCCURRENCES WHICH IN ANY WAY IMPAIR THE VALIDITY OR ENFORCEABILITY THEREOF OR COULD REASONABLY BE EXPECTED TO REDUCE THE AMOUNT PAYABLE THEREUNDER AS SHOWN ON GRANTOR’S BOOKS AND RECORDS AND ANY INVOICES, STATEMENTS AND COLLATERAL REPORTS DELIVERED TO AGENT AND LENDERS WITH RESPECT THERETO; (IV) GRANTOR HAS NOT RECEIVED ANY NOTICE OF PROCEEDINGS OR ACTIONS WHICH ARE THREATENED OR PENDING AGAINST ANY ACCOUNT DEBTOR WHICH MIGHT RESULT IN ANY ADVERSE CHANGE IN SUCH ACCOUNT DEBTOR’S FINANCIAL CONDITION; AND (V) GRANTOR HAS NO KNOWLEDGE THAT ANY ACCOUNT DEBTOR IS UNABLE GENERALLY TO PAY ITS DEBTS AS THEY BECOME DUE.  FURTHER WITH RESPECT TO THE ACCOUNTS (X) THE AMOUNTS SHOWN ON ALL INVOICES, STATEMENTS AND COLLATERAL REPORTS WHICH MAY BE DELIVERED TO THE AGENT WITH RESPECT THERETO ARE ACTUALLY AND ABSOLUTELY OWING TO GRANTOR AS INDICATED THEREON AND ARE NOT IN ANY WAY CONTINGENT; (Y) NO PAYMENTS HAVE BEEN OR SHALL BE MADE THEREON EXCEPT PAYMENTS IMMEDIATELY DELIVERED TO THE APPLICABLE BLOCKED ACCOUNTS OR THE AGENT AS REQUIRED PURSUANT TO THE TERMS OF SECTION 6.16 OF THE CREDIT AGREEMENT; AND (Z) TO GRANTOR’S KNOWLEDGE, ALL ACCOUNT DEBTORS HAVE THE CAPACITY TO CONTRACT;   10 --------------------------------------------------------------------------------   (G)                                 WITH RESPECT TO ANY INVENTORY SCHEDULED OR LISTED ON THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT OR THE CREDIT AGREEMENT, (I) SUCH INVENTORY IS LOCATED AT ONE OF GRANTOR’S LOCATIONS SET FORTH ON SCHEDULE III HERETO, (II) NO INVENTORY IS NOW, OR SHALL AT ANY TIME OR TIMES HEREAFTER BE STORED AT ANY OTHER LOCATION WITHOUT AGENT’S PRIOR CONSENT, AND IF AGENT GIVES SUCH CONSENT, GRANTOR WILL CONCURRENTLY THEREWITH OBTAIN, TO THE EXTENT REQUIRED BY THE CREDIT AGREEMENT, BAILEE, LANDLORD AND MORTGAGEE AGREEMENTS, (III) GRANTOR HAS GOOD, INDEFEASIBLE AND MERCHANTABLE TITLE TO SUCH INVENTORY AND SUCH INVENTORY IS NOT SUBJECT TO ANY LIEN OR SECURITY INTEREST OR DOCUMENT WHATSOEVER EXCEPT FOR THE LIEN GRANTED TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, AND EXCEPT FOR PERMITTED ENCUMBRANCES, (IV) EXCEPT AS SPECIFICALLY DISCLOSED IN THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT, SUCH INVENTORY IS ELIGIBLE INVENTORY OF GOOD AND MERCHANTABLE QUALITY, FREE FROM ANY DEFECTS, (V) SUCH INVENTORY IS NOT SUBJECT TO ANY LICENSING, PATENT, ROYALTY, TRADEMARK, TRADE NAME OR COPYRIGHT AGREEMENTS WITH ANY THIRD PARTIES WHICH WOULD REQUIRE ANY CONSENT OF ANY THIRD PARTY UPON SALE OR DISPOSITION OF THAT INVENTORY OR THE PAYMENT OF ANY MONIES TO ANY THIRD PARTY UPON SUCH SALE OR OTHER DISPOSITION, AND (VI) THE COMPLETION OF MANUFACTURE, SALE OR OTHER DISPOSITION OF SUCH INVENTORY BY AGENT FOLLOWING AN EVENT OF DEFAULT SHALL NOT REQUIRE THE CONSENT OF ANY PERSON AND SHALL NOT CONSTITUTE A BREACH OR DEFAULT UNDER ANY CONTRACT OR AGREEMENT TO WHICH GRANTOR IS A PARTY OR TO WHICH SUCH PROPERTY IS SUBJECT; AND   (H)                                 SUCH GRANTOR DOES NOT HAVE ANY INTEREST IN, OR TITLE TO, ANY PATENT, TRADEMARK OR COPYRIGHT EXCEPT AS SET FORTH IN SCHEDULE IV HERETO.  THIS SECURITY AGREEMENT IS EFFECTIVE TO CREATE A VALID AND CONTINUING LIEN ON AND, UPON FILING OF THE COPYRIGHT SECURITY AGREEMENTS WITH THE UNITED STATES COPYRIGHT OFFICE, FILING OF THE PATENT SECURITY AGREEMENTS AND THE TRADEMARK SECURITY AGREEMENTS WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE AND THE FILING OF APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, SUCH LIENS IN FAVOR OF AGENT ON SUCH GRANTOR’S PATENTS, TRADEMARKS AND COPYRIGHTS WILL BE ENFORCEABLE AND PERFECTED.  UPON FILING OF THE COPYRIGHT SECURITY AGREEMENTS WITH THE UNITED STATES COPYRIGHT OFFICE, FILING OF THE PATENT SECURITY AGREEMENTS AND THE TRADEMARK SECURITY AGREEMENTS WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE AND THE FILING OF APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, ALL ACTION NECESSARY OR DESIRABLE TO PROTECT AND PERFECT AGENT’S LIEN ON SUCH GRANTOR’S PATENTS, TRADEMARKS OR COPYRIGHTS SHALL HAVE BEEN DULY TAKEN; AND   (I)                                     ALL MOTOR VEHICLES OWNED BY SUCH GRANTOR ARE LISTED ON SCHEDULE V HERETO, BY MODEL, MODEL YEAR AND VEHICLE IDENTIFICATION NUMBER (“VIN”).  AT AGENT’S REQUEST, SUCH GRANTOR SHALL DELIVER TO AGENT MOTOR VEHICLE TITLE CERTIFICATES FOR ALL MOTOR VEHICLES FROM TIME TO TIME OWNED BY IT AND SHALL CAUSE THOSE TITLE CERTIFICATES TO BE FILED (WITH AGENT’S LIEN NOTED THEREON) IN THE APPROPRIATE STATE MOTOR VEHICLE FILING OFFICE.   5.                                       COVENANTS.  EACH GRANTOR COVENANTS AND AGREES WITH AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, THAT FROM AND AFTER THE DATE OF THIS SECURITY AGREEMENT AND UNTIL THE TERMINATION DATE:   (A)                                  FURTHER ASSURANCES: PLEDGE OF INSTRUMENTS; CHATTEL PAPER.   11 --------------------------------------------------------------------------------   I.                                          AT ANY TIME AND FROM TIME TO TIME, UPON THE WRITTEN REQUEST OF AGENT AND AT THE SOLE EXPENSE OF THE GRANTORS, EACH GRANTOR SHALL PROMPTLY AND DULY EXECUTE AND DELIVER ANY AND ALL SUCH FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE SUCH FURTHER ACTIONS AS MAY BE NECESSARY OR AS AGENT MAY REASONABLY REQUEST TO OBTAIN THE FULL BENEFITS OF THIS SECURITY AGREEMENT AND OF THE RIGHTS AND POWERS HEREIN GRANTED, INCLUDING (A) USING ITS BEST EFFORTS TO SECURE ALL CONSENTS AND APPROVALS NECESSARY OR APPROPRIATE FOR THE ASSIGNMENT TO OR FOR THE BENEFIT OF AGENT OF ANY LICENSE OR CONTRACT HELD BY ANY GRANTOR AND TO ENFORCE THE SECURITY INTERESTS GRANTED HEREUNDER AND (B) FILING ANY FINANCING OR CONTINUATION STATEMENTS UNDER THE CODE WITH RESPECT TO THE LIENS GRANTED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT AS TO THOSE JURISDICTIONS THAT ARE NOT UNIFORM COMMERCIAL CODE JURISDICTIONS.   II.                                       UNLESS AGENT SHALL OTHERWISE CONSENT IN WRITING (WHICH CONSENT MAY BE REVOKED), EACH GRANTOR SHALL DELIVER TO AGENT ALL COLLATERAL CONSISTING OF NEGOTIABLE DOCUMENTS, CERTIFICATED SECURITIES, CHATTEL PAPER AND INSTRUMENTS (IN EACH CASE, ACCOMPANIED BY STOCK POWERS, ALLONGES OR OTHER INSTRUMENTS OF TRANSFER EXECUTED IN BLANK) PROMPTLY AFTER SUCH GRANTOR RECEIVES THE SAME.   III.                                    EACH GRANTOR SHALL, TO THE EXTENT REQUIRED BY THE CREDIT AGREEMENT, OBTAIN OR USE ITS BEST EFFORTS TO OBTAIN WAIVERS OR SUBORDINATIONS OF LIENS FROM LANDLORDS AND MORTGAGEES, AND EACH GRANTOR SHALL IN ALL INSTANCES OBTAIN SIGNED ACKNOWLEDGEMENTS OF AGENT’S LIENS FROM BAILEES HAVING POSSESSION OF GRANTOR’S GOODS THAT THEY HOLD FOR THE BENEFIT OF AGENT.   IV.                                   IF REQUIRED BY THE TERMS OF THE CREDIT AGREEMENT AND NOT WAIVED BY AGENT IN WRITING (WHICH WAIVER MAY BE REVOKED), GRANTOR SHALL OBTAIN AUTHENTICATED CONTROL LETTERS FROM EACH ISSUER OF UNCERTIFICATED SECURITIES, SECURITIES INTERMEDIARY, OR COMMODITIES INTERMEDIARY ISSUING OR HOLDING ANY FINANCIAL ASSETS OR COMMODITIES TO OR FOR GRANTOR.   V.                                      IN ACCORDANCE WITH SECTION 6.16 OF THE CREDIT AGREEMENT, GRANTOR SHALL OBTAIN A BLOCKED ACCOUNT, LOCKBOX OR SIMILAR AGREEMENT WITH EACH BANK OR FINANCIAL INSTITUTION HOLDING A DEPOSIT ACCOUNT FOR GRANTOR.   VI.                                   GRANTOR THAT IS OR BECOMES THE BENEFICIARY OF A LETTER OF CREDIT SHALL PROMPTLY AFTER BECOMING A BENEFICIARY, NOTIFY AGENT THEREOF AND ENTER INTO A TRI-PARTY AGREEMENTS WITH AGENT AND THE ISSUER AND/OR CONFIRMATION BANK WITH RESPECT TO LETTER-OF-CREDIT RIGHTS ASSIGNING SUCH LETTER-OF-CREDIT RIGHTS TO AGENT AND DIRECTING ALL PAYMENTS THEREUNDER TO THE COLLECTION ACCOUNT, ALL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO AGENT.   VII.                                EACH GRANTOR SHALL TAKE ALL STEPS NECESSARY TO GRANT THE AGENT CONTROL OF ALL ELECTRONIC CHATTEL PAPER IN ACCORDANCE WITH THE CODE AND ALL “TRANSFERABLE RECORDS” AS DEFINED IN EACH OF THE UNIFORM ELECTRONIC TRANSACTIONS ACT AND THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.   12 --------------------------------------------------------------------------------   VIII.                             EACH GRANTOR HEREBY IRREVOCABLY AUTHORIZES THE AGENT AT ANY TIME AND FROM TIME TO TIME TO FILE IN ANY FILING OFFICE IN ANY UNIFORM COMMERCIAL CODE JURISDICTION ANY INITIAL FINANCING STATEMENTS AND AMENDMENTS THERETO THAT (A) INDICATE THE COLLATERAL (I) AS ALL ASSETS OF SUCH GRANTOR OR WORDS OF SIMILAR EFFECT, REGARDLESS OF WHETHER ANY PARTICULAR ASSET COMPRISED IN THE COLLATERAL FALLS WITHIN THE SCOPE OF ARTICLE 9 OF THE CODE OR SUCH JURISDICTION, OR (II) AS BEING OF AN EQUAL OR LESSER SCOPE OR WITH GREATER DETAIL, AND (B) CONTAIN ANY OTHER INFORMATION REQUIRED BY PART 5 OF ARTICLE 9 OF THE CODE FOR THE SUFFICIENCY OR FILING OFFICE ACCEPTANCE OF ANY FINANCING STATEMENT OR AMENDMENT, INCLUDING (I) WHETHER SUCH GRANTOR IS AN ORGANIZATION, THE TYPE OF ORGANIZATION AND ANY ORGANIZATION IDENTIFICATION NUMBER ISSUED TO SUCH GRANTOR, AND (II) IN THE CASE OF A FINANCING STATEMENT FILED AS A FIXTURE FILING OR INDICATING COLLATERAL AS AS-EXTRACTED COLLATERAL OR TIMBER TO BE CUT, A SUFFICIENT DESCRIPTION OF REAL PROPERTY TO WHICH THE COLLATERAL RELATES.  EACH GRANTOR AGREES TO FURNISH ANY SUCH INFORMATION TO THE AGENT PROMPTLY UPON REQUEST.  GRANTOR ALSO RATIFIES ITS AUTHORIZATION FOR THE AGENT TO HAVE FILED IN ANY UNIFORM COMMERCIAL CODE JURISDICTION ANY INITIAL FINANCING STATEMENTS OR AMENDMENTS THERETO IF FILED PRIOR TO THE DATE HEREOF.   IX.                                     EACH GRANTOR SHALL, PROMPTLY, AND IN ANY EVENT WITHIN TWO (2) BUSINESS DAYS AFTER THE SAME IS ACQUIRED BY IT, NOTIFY AGENT OF ANY COMMERCIAL TORT CLAIM (AS DEFINED IN THE CODE) ACQUIRED BY IT AND UNLESS OTHERWISE CONSENTED BY AGENT, SUCH GRANTOR SHALL ENTER INTO A SUPPLEMENT TO THIS SECURITY AGREEMENT, GRANTING TO AGENT A LIEN IN SUCH COMMERCIAL TORT CLAIM.   (B)                                 MAINTENANCE OF RECORDS.  EACH GRANTOR SHALL KEEP AND MAINTAIN, AT ITS OWN COST AND EXPENSE, SATISFACTORY AND COMPLETE RECORDS OF THE COLLATERAL, INCLUDING A RECORD OF ANY AND ALL PAYMENTS RECEIVED AND ANY AND ALL CREDITS GRANTED WITH RESPECT TO THE COLLATERAL AND ALL OTHER DEALINGS WITH THE COLLATERAL.  EACH GRANTOR SHALL MARK ITS BOOKS AND RECORDS PERTAINING TO THE COLLATERAL TO EVIDENCE THIS SECURITY AGREEMENT AND THE LIENS GRANTED HEREBY.  IF ANY GRANTOR RETAINS POSSESSION OF ANY CHATTEL PAPER OR INSTRUMENTS WITH AGENT’S CONSENT, SUCH CHATTEL PAPER AND INSTRUMENTS SHALL BE MARKED WITH THE FOLLOWING LEGEND: “THIS WRITING AND THE OBLIGATIONS EVIDENCED OR SECURED HEREBY ARE SUBJECT TO THE SECURITY INTEREST OF GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT, FOR THE BENEFIT OF AGENT AND CERTAIN LENDERS.”   (C)                                  COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.   I.                                          EACH GRANTOR SHALL NOTIFY AGENT AS SOON AS POSSIBLE, BUT IN ANY EVENT WITHIN TWO (2) BUSINESS DAYS IF IT KNOWS OR HAS REASON TO KNOW THAT ANY APPLICATION OR REGISTRATION RELATING TO ANY PATENT, TRADEMARK OR COPYRIGHT (NOW OR HEREAFTER EXISTING) MAY BECOME ABANDONED OR DEDICATED, OR OF ANY ADVERSE DETERMINATION OR DEVELOPMENT (INCLUDING THE INSTITUTION OF, OR ANY SUCH DETERMINATION OR DEVELOPMENT IN, ANY PROCEEDING IN THE UNITED STATES PATENT AND TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT OFFICE OR ANY COURT) REGARDING GRANTOR’S OWNERSHIP OF ANY PATENT, TRADEMARK OR COPYRIGHT, ITS RIGHT TO REGISTER THE SAME, OR TO KEEP AND MAINTAIN THE SAME UNLESS SUCH GRANTOR SHALL DETERMINE   13 --------------------------------------------------------------------------------   THAT SUCH PATENT, TRADEMARK OR COPYRIGHT IS NOT MATERIAL TO THE CONDUCT OF ITS BUSINESS.   II.                                       IN NO EVENT SHALL ANY GRANTOR, EITHER ITSELF OR THROUGH ANY AGENT, EMPLOYEE, LICENSEE OR DESIGNEE, FILE AN APPLICATION FOR THE REGISTRATION OF ANY PATENT, TRADEMARK OR COPYRIGHT WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT OFFICE OR ANY SIMILAR OFFICE OR AGENCY WITHOUT GIVING AGENT PRIOR WRITTEN NOTICE THEREOF, AND, UPON REQUEST OF AGENT, SUCH GRANTOR SHALL EXECUTE AND DELIVER ANY AND ALL PATENT SECURITY AGREEMENTS, COPYRIGHT SECURITY AGREEMENTS OR TRADEMARK SECURITY AGREEMENTS AS AGENT MAY REQUEST TO EVIDENCE AGENT’S LIEN ON SUCH PATENT, TRADEMARK OR COPYRIGHT, AND THE GENERAL INTANGIBLES OF GRANTOR RELATING THERETO OR REPRESENTED THEREBY.   III.                                    EACH GRANTOR SHALL TAKE ALL ACTIONS NECESSARY OR REASONABLY REQUESTED BY AGENT TO MAINTAIN AND PURSUE EACH APPLICATION, TO OBTAIN THE RELEVANT REGISTRATION AND TO MAINTAIN THE REGISTRATION OF EACH OF THE PATENTS, TRADEMARKS AND COPYRIGHTS (NOW OR HEREAFTER EXISTING), INCLUDING THE FILING OF APPLICATIONS FOR RENEWAL, AFFIDAVITS OF USE, AFFIDAVITS OF NONCONTESTABILITY AND OPPOSITION AND INTERFERENCE AND CANCELLATION PROCEEDINGS, UNLESS SUCH GRANTOR SHALL REASONABLY DETERMINE THAT SUCH PATENT, TRADEMARK OR COPYRIGHT IS NOT MATERIAL TO THE CONDUCT OF ITS BUSINESS.   IV.                                   IN THE EVENT THAT ANY OF THE PATENT, TRADEMARK OR COPYRIGHT COLLATERAL IS INFRINGED UPON, OR MISAPPROPRIATED OR DILUTED BY A THIRD PARTY, EACH GRANTOR SHALL, UNLESS SUCH GRANTOR SHALL REASONABLY DETERMINE THAT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL IS NOT MATERIAL TO THE CONDUCT OF ITS BUSINESS OR OPERATIONS, PROMPTLY TAKE ACTION TO PROTECT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL (INCLUDING, BUT NOT LIMITED TO, SUING FOR INFRINGEMENT, MISAPPROPRIATION OR DILUTION AND TO RECOVER ANY AND ALL DAMAGES FOR SUCH INFRINGEMENT, MISAPPROPRIATION OR DILUTION), AND SHALL TAKE SUCH OTHER ACTIONS AS AGENT SHALL REASONABLY DEEM APPROPRIATE UNDER THE CIRCUMSTANCES TO PROTECT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL.   (D)                                 INDEMNIFICATION.  IN ANY SUIT, PROCEEDING OR ACTION BROUGHT BY AGENT OR ANY LENDER RELATING TO ANY COLLATERAL FOR ANY SUM OWING WITH RESPECT THERETO OR TO ENFORCE ANY RIGHTS OR CLAIMS WITH RESPECT THERETO, THE GRANTORS WILL SAVE, INDEMNIFY AND KEEP AGENT AND LENDERS HARMLESS FROM AND AGAINST ALL EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES), LOSS OR DAMAGE SUFFERED BY REASON OF ANY DEFENSE, SETOFF, COUNTERCLAIM, RECOUPMENT OR REDUCTION OF LIABILITY WHATSOEVER OF THE ACCOUNT DEBTOR OR OTHER PERSON OBLIGATED ON THE COLLATERAL, ARISING OUT OF A BREACH BY ANY GRANTOR OF ANY OBLIGATION THEREUNDER OR ARISING OUT OF ANY OTHER AGREEMENT, INDEBTEDNESS OR LIABILITY AT ANY TIME OWING TO, OR IN FAVOR OF, SUCH OBLIGOR OR ITS SUCCESSORS FROM ANY GRANTOR, EXCEPT IN THE CASE OF AGENT OR ANY LENDER, TO THE EXTENT SUCH EXPENSE, LOSS, OR DAMAGE IS ATTRIBUTABLE SOLELY TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT OR SUCH LENDER AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.  AN INDEMNITEE UNDER THIS SECTION 5(D) SHALL ENDEAVOR TO NOTIFY THE BORROWER REPRESENTATIVE OF ANY EVENT REQUIRING   14 --------------------------------------------------------------------------------   INDEMNIFICATION WITHIN TEN (10) BUSINESS DAYS FOLLOWING SUCH INDEMNITEE’S RECEIPT OF NOTICE OF COMMENCEMENT OF ANY ACTION OR PROCEEDING, OR SUCH INDEMNITEE’S OBTAINING KNOWLEDGE OF THE OCCURRENCE OF ANY EVENT, GIVING RISE TO A CLAIM FOR INDEMNIFICATION HEREUNDER, PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE SHALL NOT INVALIDATE OR OTHERWISE IMPAIR THE RIGHTS OF THE INDEMNITEE TO INDEMNIFICATION UNDER THIS SECTION 5(D) OR RESULT IN ANY LIABILITY OF SUCH INDEMNITEE, THE AGENT OR ANY LENDER TO ANY CREDIT PARTY OR ANY OTHER PERSON.  ALL SUCH OBLIGATIONS OF THE GRANTORS SHALL BE AND REMAIN ENFORCEABLE AGAINST AND ONLY AGAINST GRANTOR AND SHALL NOT BE ENFORCEABLE AGAINST AGENT OR ANY LENDER.   (E)                                  COMPLIANCE WITH TERMS OF ACCOUNTS, ETC.  IN ALL MATERIAL RESPECTS, GRANTOR WILL PERFORM AND COMPLY WITH ALL OBLIGATIONS IN RESPECT OF THE COLLATERAL AND ALL OTHER AGREEMENTS TO WHICH IT IS A PARTY OR BY WHICH IT IS BOUND RELATING TO THE COLLATERAL.   (F)                                    LIMITATION ON LIENS ON COLLATERAL.  GRANTOR WILL NOT CREATE, PERMIT OR SUFFER TO EXIST, AND EACH GRANTOR WILL DEFEND THE COLLATERAL AGAINST, AND TAKE SUCH OTHER ACTION AS IS NECESSARY TO REMOVE, ANY LIEN ON THE COLLATERAL EXCEPT PERMITTED ENCUMBRANCES, AND WILL DEFEND THE RIGHT, TITLE AND INTEREST OF AGENT AND LENDERS IN AND TO ANY OF SUCH GRANTOR’S RIGHTS UNDER THE COLLATERAL AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS WHOMSOEVER, OTHER THAN HOLDERS OF PERMITTED ENCUMBRANCES.   (G)                                 LIMITATIONS ON DISPOSITION.  NO GRANTOR WILL SELL, LICENSE, LEASE, TRANSFER OR OTHERWISE DISPOSE OF ANY OF THE COLLATERAL, OR ATTEMPT OR CONTRACT TO DO SO, EXCEPT AS PERMITTED BY THE CREDIT AGREEMENT.   (H)                                 FURTHER IDENTIFICATION OF COLLATERAL.  EACH GRANTOR WILL, IF SO REQUESTED BY AGENT, FURNISH TO AGENT, AS OFTEN AS AGENT REASONABLY REQUESTS, STATEMENTS AND SCHEDULES FURTHER IDENTIFYING AND DESCRIBING THE COLLATERAL AND SUCH OTHER REPORTS IN CONNECTION WITH THE COLLATERAL AS AGENT MAY REASONABLY REQUEST, ALL IN SUCH DETAIL AS AGENT MAY REASONABLY SPECIFY.   (I)                                     NOTICES.  EACH GRANTOR WILL ADVISE AGENT PROMPTLY, IN REASONABLE DETAIL, (I) OF ANY LIEN (OTHER THAN PERMITTED ENCUMBRANCES) OR CLAIM MADE OR ASSERTED AGAINST ANY OF THE COLLATERAL, AND (II) OF THE OCCURRENCE OF ANY OTHER EVENT WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE AGGREGATE VALUE OF THE COLLATERAL OR ON THE LIENS CREATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.   (J)                                     GOOD STANDING CERTIFICATES.  NOT MORE FREQUENTLY THAN ONCE DURING EACH CALENDAR QUARTER, GRANTOR SHALL, UNLESS AGENT SHALL OTHERWISE CONSENT, PROVIDE TO AGENT A CERTIFICATE OF GOOD STANDING FROM ITS STATE OF INCORPORATION OR ORGANIZATION.   (K)                                  NO REINCORPORATION.  EXCEPT FOR THE REORGANIZATION EXPRESSLY DESCRIBED IN AND PERMITTED UNDER THE CREDIT AGREEMENT IN CONNECTION WITH THE PERMITTED RESTRUCTURING, GRANTOR SHALL NOT REINCORPORATE OR REORGANIZE ITSELF UNDER THE LAWS OF ANY JURISDICTION OTHER THAN THE JURISDICTION IN WHICH IT IS INCORPORATED OR ORGANIZED AS OF THE DATE HEREOF WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT.   (L)                                     TERMINATIONS; AMENDMENTS NOT AUTHORIZED.  EACH GRANTOR ACKNOWLEDGES THAT IT IS NOT AUTHORIZED TO FILE ANY FINANCING STATEMENT OR AMENDMENT OR TERMINATION STATEMENT   15 --------------------------------------------------------------------------------   WITH RESPECT TO ANY FINANCING STATEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT AND AGREES THAT IT WILL NOT DO SO WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT, SUBJECT TO SUCH GRANTOR’S RIGHTS UNDER SECTION 9-509(D)(2) OF THE CODE.   (M)                               AUTHORIZED TERMINATIONS.  UPON PAYMENT IN FULL IN CASH AND PERFORMANCE OF ALL OF THE OBLIGATIONS (OTHER THAN INDEMNIFICATION OBLIGATIONS), TERMINATION OF THE COMMITMENTS AND A RELEASE OF ALL CLAIMS AGAINST AGENT AND LENDERS, AND SO LONG AS NO SUITS, ACTIONS, PROCEEDINGS OR CLAIMS ARE PENDING OR THREATENED AGAINST ANY INDEMNIFIED PERSON ASSERTING ANY DAMAGES, LOSSES OR LIABILITIES THAT ARE INDEMNIFIED LIABILITIES UNDER SECTION 9.2 OF THE CREDIT AGREEMENT, AGENT SHALL, AT THE GRANTORS’ EXPENSE, PROMPTLY DELIVER TO THE GRANTORS OR AUTHORIZE THE GRANTORS TO PREPARE AND FILE TERMINATION STATEMENTS, MORTGAGE RELEASES AND OTHER DOCUMENTS NECESSARY OR APPROPRIATE TO EVIDENCE THE TERMINATION OF THE LIENS SECURING PAYMENT OF THE OBLIGATIONS.   (N)                                 FEDERAL CLAIMS.  EACH GRANTOR SHALL NOTIFY AGENT OF ANY COLLATERAL (OTHER THAN GOVERNMENT ACCOUNTS) WHICH CONSTITUTES A CLAIM AGAINST THE UNITED STATES GOVERNMENT OR ANY INSTRUMENTALITY OR AGENCY THEREOF, THE ASSIGNMENT OF WHICH CLAIM IS RESTRICTED BY FEDERAL LAW.  UPON THE REQUEST OF AGENT, SUCH GRANTOR SHALL TAKE SUCH STEPS AS MAY BE NECESSARY TO COMPLY WITH ANY APPLICABLE FEDERAL ASSIGNMENT OF CLAIMS LAWS AND OTHER COMPARABLE LAWS.   (O)                                 HOT GOODS.  NONE OF THE INVENTORY OF ANY GRANTOR HAS BEEN OR WILL BE PRODUCED IN VIOLATION OF ANY PROVISION OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, OR IN VIOLATION OF ANY OTHER LAW.   6.                                       AGENT’S APPOINTMENT AS ATTORNEY-IN-FACT.   On the Closing Date, each Grantor shall execute and deliver to Agent a power of attorney (the “Power of Attorney”) substantially in the form attached hereto as Exhibit A.  The power of attorney granted pursuant to the Power of Attorney is a power coupled with an interest and shall be irrevocable until the Termination Date.  The powers conferred on Agent, for the benefit of Agent and Lenders, under the Power of Attorney are solely to protect Agent’s interests (for the benefit of Agent and Lenders) in the Collateral and shall not impose any duty upon Agent or any Lender to exercise any such powers.  Agent agrees that (a) except for the powers granted in clause (h) of the Power of Attorney, it shall not exercise any power or authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing, and (b) Agent shall account for any moneys received by Agent in respect of any foreclosure on or disposition of Collateral pursuant to the Power of Attorney provided that none of Agent or any Lender shall have any duty as to any Collateral, and Agent and Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers.  NONE OF AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A   16 --------------------------------------------------------------------------------   COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.   7.                                       REMEDIES:  RIGHTS UPON DEFAULT.   (A)                                  IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES GRANTED TO IT UNDER THIS SECURITY AGREEMENT, THE CREDIT AGREEMENT, THE OTHER LOAN DOCUMENTS AND UNDER ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING OR RELATING TO ANY OF THE OBLIGATIONS, IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, AGENT MAY EXERCISE ALL RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE CODE.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH GRANTOR EXPRESSLY AGREES THAT IN ANY SUCH EVENT AGENT, WITHOUT DEMAND OF PERFORMANCE OR OTHER DEMAND, ADVERTISEMENT OR NOTICE OF ANY KIND (EXCEPT THE NOTICE SPECIFIED BELOW OF TIME AND PLACE OF PUBLIC OR PRIVATE SALE) TO OR UPON SUCH GRANTOR OR ANY OTHER PERSON (ALL AND EACH OF WHICH DEMANDS, ADVERTISEMENTS AND NOTICES ARE HEREBY EXPRESSLY WAIVED TO THE MAXIMUM EXTENT PERMITTED BY THE CODE AND OTHER APPLICABLE LAW), MAY FORTHWITH ENTER UPON THE PREMISES OF SUCH GRANTOR WHERE ANY COLLATERAL IS LOCATED THROUGH SELF-HELP, WITHOUT JUDICIAL PROCESS, WITHOUT FIRST OBTAINING A FINAL JUDGMENT OR GIVING SUCH GRANTOR OR ANY OTHER PERSON NOTICE AND OPPORTUNITY FOR A HEARING ON AGENT’S CLAIM OR ACTION AND MAY COLLECT, RECEIVE, ASSEMBLE, PROCESS, APPROPRIATE AND REALIZE UPON THE COLLATERAL, OR ANY PART THEREOF, AND MAY FORTHWITH SELL, LEASE, LICENSE, ASSIGN, GIVE AN OPTION OR OPTIONS TO PURCHASE, OR SELL OR OTHERWISE DISPOSE OF AND DELIVER SAID COLLATERAL (OR CONTRACT TO DO SO), OR ANY PART THEREOF, IN ONE OR MORE PARCELS AT A PUBLIC OR PRIVATE SALE OR SALES, AT ANY EXCHANGE AT SUCH PRICES AS IT MAY DEEM ACCEPTABLE, FOR CASH OR ON CREDIT OR FOR FUTURE DELIVERY WITHOUT ASSUMPTION OF ANY CREDIT RISK.  AGENT OR ANY LENDER SHALL HAVE THE RIGHT UPON ANY SUCH PUBLIC SALE OR SALES AND, TO THE EXTENT PERMITTED BY LAW, UPON ANY SUCH PRIVATE SALE OR SALES, TO PURCHASE FOR THE BENEFIT OF AGENT AND LENDERS, THE WHOLE OR ANY PART OF SAID COLLATERAL SO SOLD, FREE OF ANY RIGHT OR EQUITY OF REDEMPTION, WHICH EQUITY OF REDEMPTION SUCH GRANTOR HEREBY RELEASES.  SUCH SALES MAY BE ADJOURNED AND CONTINUED FROM TIME TO TIME WITH OR WITHOUT NOTICE.  AGENT SHALL HAVE THE RIGHT TO CONDUCT SUCH SALES ON SUCH GRANTOR’S PREMISES OR ELSEWHERE AND SHALL HAVE THE RIGHT TO USE SUCH GRANTOR’S PREMISES WITHOUT CHARGE FOR SUCH TIME OR TIMES AS AGENT DEEMS NECESSARY OR ADVISABLE.   IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, EACH GRANTOR FURTHER AGREES, AT AGENT’S REQUEST, TO ASSEMBLE THE COLLATERAL AND MAKE IT AVAILABLE TO AGENT AT A PLACE OR PLACES DESIGNATED BY AGENT WHICH ARE REASONABLY CONVENIENT TO AGENT AND SUCH GRANTOR, WHETHER AT SUCH GRANTOR’S PREMISES OR ELSEWHERE.  UNTIL AGENT IS ABLE TO EFFECT A SALE, LEASE, OR OTHER DISPOSITION OF COLLATERAL, AGENT SHALL HAVE THE RIGHT TO HOLD OR USE COLLATERAL, OR ANY PART THEREOF, TO THE EXTENT THAT IT DEEMS APPROPRIATE FOR THE PURPOSE OF PRESERVING COLLATERAL OR ITS VALUE OR FOR ANY OTHER PURPOSE DEEMED APPROPRIATE BY AGENT.  AGENT SHALL HAVE NO OBLIGATION TO ANY GRANTOR TO MAINTAIN OR PRESERVE THE RIGHTS OF SUCH GRANTOR AS AGAINST THIRD PARTIES WITH RESPECT TO COLLATERAL WHILE COLLATERAL IS IN THE POSSESSION OF AGENT.  AGENT MAY, IF IT SO ELECTS, SEEK THE APPOINTMENT OF A RECEIVER OR KEEPER TO TAKE POSSESSION OF COLLATERAL AND TO ENFORCE ANY OF AGENT’S REMEDIES (FOR THE BENEFIT OF AGENT AND LENDERS), WITH RESPECT TO SUCH APPOINTMENT WITHOUT PRIOR NOTICE OR HEARING AS TO SUCH APPOINTMENT.  AGENT SHALL APPLY THE NET PROCEEDS OF ANY SUCH COLLECTION, RECOVERY, RECEIPT, APPROPRIATION, REALIZATION OR   17 --------------------------------------------------------------------------------   SALE TO THE OBLIGATIONS AS PROVIDED IN THE CREDIT AGREEMENT, AND ONLY AFTER SO PAYING OVER SUCH NET PROCEEDS, AND AFTER THE PAYMENT BY AGENT OF ANY OTHER AMOUNT REQUIRED BY ANY PROVISION OF LAW, NEED AGENT ACCOUNT FOR THE SURPLUS, IF ANY, TO THE RELEVANT GRANTOR.  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR WAIVES ALL CLAIMS, DAMAGES, AND DEMANDS AGAINST AGENT OR ANY LENDER ARISING OUT OF THE REPOSSESSION, RETENTION OR SALE OF THE COLLATERAL EXCEPT SUCH AS ARISE SOLELY OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT OR SUCH LENDER AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.  EACH GRANTOR AGREES THAT TEN (10) DAYS PRIOR NOTICE BY AGENT OF THE TIME AND PLACE OF ANY PUBLIC SALE OR OF THE TIME AFTER WHICH A PRIVATE SALE MAY TAKE PLACE IS REASONABLE NOTIFICATION OF SUCH MATTERS.  EACH GRANTOR SHALL REMAIN LIABLE FOR ANY DEFICIENCY IF THE PROCEEDS OF ANY SALE OR DISPOSITION OF THE COLLATERAL ARE INSUFFICIENT TO PAY ALL OBLIGATIONS, INCLUDING ANY ATTORNEYS’ FEES AND OTHER EXPENSES INCURRED BY AGENT OR ANY LENDER TO COLLECT SUCH DEFICIENCY.   (B)                                 EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN OR IN THE CREDIT AGREEMENT, EACH GRANTOR HEREBY WAIVES PRESENTMENT, DEMAND, PROTEST OR ANY NOTICE (TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW) OF ANY KIND IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY COLLATERAL.   (C)                                  TO THE EXTENT THAT APPLICABLE LAW IMPOSES DUTIES ON THE AGENT TO EXERCISE REMEDIES IN A COMMERCIALLY REASONABLE MANNER, EACH GRANTOR ACKNOWLEDGES AND AGREES THAT IT IS NOT COMMERCIALLY UNREASONABLE FOR THE AGENT (I) TO FAIL TO INCUR EXPENSES REASONABLY DEEMED SIGNIFICANT BY THE AGENT TO PREPARE COLLATERAL FOR DISPOSITION OR OTHERWISE TO COMPLETE RAW MATERIAL OR WORK IN PROCESS INTO FINISHED GOODS OR OTHER FINISHED PRODUCTS FOR DISPOSITION, (II) TO FAIL TO OBTAIN THIRD PARTY CONSENTS FOR ACCESS TO COLLATERAL TO BE DISPOSED OF, OR TO OBTAIN OR, IF NOT REQUIRED BY OTHER LAW, TO FAIL TO OBTAIN GOVERNMENTAL OR THIRD PARTY CONSENTS FOR THE COLLECTION OR DISPOSITION OF COLLATERAL TO BE COLLECTED OR DISPOSED OF, (III) TO FAIL TO EXERCISE COLLECTION REMEDIES AGAINST ACCOUNT DEBTORS OR OTHER PERSONS OBLIGATED ON COLLATERAL OR TO REMOVE LIENS ON OR ANY ADVERSE CLAIMS AGAINST COLLATERAL, (IV) TO EXERCISE COLLECTION REMEDIES AGAINST ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL DIRECTLY OR THROUGH THE USE OF COLLECTION AGENCIES AND OTHER COLLECTION SPECIALISTS, (V) TO ADVERTISE DISPOSITIONS OF COLLATERAL THROUGH PUBLICATIONS OR MEDIA OF GENERAL CIRCULATION, WHETHER OR NOT THE COLLATERAL IS OF A SPECIALIZED NATURE, (VI) TO CONTACT OTHER PERSONS, WHETHER OR NOT IN THE SAME BUSINESS AS SUCH GRANTOR, FOR EXPRESSIONS OF INTEREST IN ACQUIRING ALL OR ANY PORTION OF SUCH COLLATERAL, (VII) TO HIRE ONE OR MORE PROFESSIONAL AUCTIONEERS TO ASSIST IN THE DISPOSITION OF COLLATERAL, WHETHER OR NOT THE COLLATERAL IS OF A SPECIALIZED NATURE, (VIII) TO DISPOSE OF COLLATERAL BY UTILIZING INTERNET SITES THAT PROVIDE FOR THE AUCTION OF ASSETS OF THE TYPES INCLUDED IN THE COLLATERAL OR THAT HAVE THE REASONABLE CAPACITY OF DOING SO, OR THAT MATCH BUYERS AND SELLERS OF ASSETS, (IX) TO DISPOSE OF ASSETS IN WHOLESALE RATHER THAN RETAIL MARKETS, (X) TO DISCLAIM DISPOSITION WARRANTIES, SUCH AS TITLE, POSSESSION OR QUIET ENJOYMENT, (XI) TO PURCHASE INSURANCE OR CREDIT ENHANCEMENTS TO INSURE THE AGENT AGAINST RISKS OF LOSS, COLLECTION OR DISPOSITION OF COLLATERAL OR TO PROVIDE TO THE AGENT A GUARANTEED RETURN FROM THE COLLECTION OR DISPOSITION OF COLLATERAL, OR (XII) TO THE EXTENT DEEMED APPROPRIATE BY THE AGENT, TO OBTAIN THE SERVICES OF OTHER BROKERS, INVESTMENT BANKERS, CONSULTANTS AND OTHER PROFESSIONALS TO ASSIST THE AGENT IN THE COLLECTION OR DISPOSITION OF ANY OF THE COLLATERAL.  EACH GRANTOR ACKNOWLEDGES THAT THE PURPOSE OF THIS SECTION 7(C) IS TO PROVIDE   18 --------------------------------------------------------------------------------   NON-EXHAUSTIVE INDICATIONS OF WHAT ACTIONS OR OMISSIONS BY THE AGENT WOULD NOT BE COMMERCIALLY UNREASONABLE IN THE AGENT’S EXERCISE OF REMEDIES AGAINST THE COLLATERAL AND THAT OTHER ACTIONS OR OMISSIONS BY THE AGENT SHALL NOT BE DEEMED COMMERCIALLY UNREASONABLE SOLELY ON ACCOUNT OF NOT BEING INDICATED IN THIS SECTION 7(C).  WITHOUT LIMITATION UPON THE FOREGOING, NOTHING CONTAINED IN THIS SECTION 7(C) SHALL BE CONSTRUED TO GRANT ANY RIGHTS TO ANY GRANTOR OR TO IMPOSE ANY DUTIES ON AGENT THAT WOULD NOT HAVE BEEN GRANTED OR IMPOSED BY THIS SECURITY AGREEMENT OR BY APPLICABLE LAW IN THE ABSENCE OF THIS SECTION 7(C).   (D)                                 NEITHER THE AGENT NOR THE LENDERS SHALL BE REQUIRED TO MAKE ANY DEMAND UPON, OR PURSUE OR EXHAUST ANY OF THEIR RIGHTS OR REMEDIES AGAINST, ANY GRANTOR, ANY OTHER OBLIGOR, GUARANTOR, PLEDGOR OR ANY OTHER PERSON WITH RESPECT TO THE PAYMENT OF THE OBLIGATIONS OR TO PURSUE OR EXHAUST ANY OF THEIR RIGHTS OR REMEDIES WITH RESPECT TO ANY COLLATERAL THEREFOR OR ANY DIRECT OR INDIRECT GUARANTEE THEREOF.  NEITHER THE AGENT NOR THE LENDERS SHALL BE REQUIRED TO MARSHAL THE COLLATERAL OR ANY GUARANTEE OF THE OBLIGATIONS OR TO RESORT TO THE COLLATERAL OR ANY SUCH GUARANTEE IN ANY PARTICULAR ORDER, AND ALL OF ITS AND THEIR RIGHTS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT SHALL BE CUMULATIVE.  TO THE EXTENT IT MAY LAWFULLY DO SO, EACH GRANTOR ABSOLUTELY AND IRREVOCABLY WAIVES AND RELINQUISHES THE BENEFIT AND ADVANTAGE OF, AND COVENANTS NOT TO ASSERT AGAINST THE AGENT OR ANY LENDER, ANY VALUATION, STAY, APPRAISEMENT, EXTENSION, REDEMPTION OR SIMILAR LAWS AND ANY AND ALL RIGHTS OR DEFENSES IT MAY HAVE AS A SURETY NOW OR HEREAFTER EXISTING WHICH, BUT FOR THIS PROVISION, MIGHT BE APPLICABLE TO THE SALE OF ANY COLLATERAL MADE UNDER THE JUDGMENT, ORDER OR DECREE OF ANY COURT, OR PRIVATELY UNDER THE POWER OF SALE CONFERRED BY THIS SECURITY AGREEMENT, OR OTHERWISE.   8.                                       GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL.  FOR THE PURPOSE OF ENABLING AGENT TO EXERCISE RIGHTS AND REMEDIES UNDER SECTION 7 HEREOF (INCLUDING, WITHOUT LIMITING THE TERMS OF SECTION 7 HEREOF, IN ORDER TO TAKE POSSESSION OF, HOLD, PRESERVE, PROCESS, ASSEMBLE, PREPARE FOR SALE, MARKET FOR SALE, SELL OR OTHERWISE DISPOSE OF COLLATERAL) AT SUCH TIME AS AGENT SHALL BE LAWFULLY ENTITLED TO EXERCISE SUCH RIGHTS AND REMEDIES, EACH GRANTOR HEREBY GRANTS TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, AN IRREVOCABLE, NONEXCLUSIVE LICENSE (EXERCISABLE WITHOUT PAYMENT OF ROYALTY OR OTHER COMPENSATION TO SUCH GRANTOR) TO USE, LICENSE OR SUBLICENSE ANY INTELLECTUAL PROPERTY NOW OWNED OR HEREAFTER ACQUIRED BY SUCH GRANTOR, AND WHEREVER THE SAME MAY BE LOCATED, AND INCLUDING IN SUCH LICENSE ACCESS TO ALL MEDIA IN WHICH ANY OF THE LICENSED ITEMS MAY BE RECORDED OR STORED AND TO ALL COMPUTER SOFTWARE AND PROGRAMS USED FOR THE COMPILATION OR PRINTOUT THEREOF.   9.                                       LIMITATION ON AGENT’S AND LENDERS’ DUTY IN RESPECT OF COLLATERAL.  AGENT AND EACH LENDER SHALL USE REASONABLE CARE WITH RESPECT TO THE COLLATERAL IN ITS POSSESSION OR UNDER ITS CONTROL.  NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY OTHER DUTY AS TO ANY COLLATERAL IN ITS POSSESSION OR CONTROL OR IN THE POSSESSION OR CONTROL OF ANY AGENT OR NOMINEE OF AGENT OR SUCH LENDER, OR ANY INCOME THEREON OR AS TO THE PRESERVATION OF RIGHTS AGAINST PRIOR PARTIES OR ANY OTHER RIGHTS PERTAINING THERETO.   10.                                 REINSTATEMENT.  THIS SECURITY AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD ANY PETITION BE FILED BY OR AGAINST GRANTOR   19 --------------------------------------------------------------------------------   FOR LIQUIDATION OR REORGANIZATION, SHOULD GRANTOR BECOME INSOLVENT OR MAKE AN ASSIGNMENT FOR THE BENEFIT OF ANY CREDITOR OR CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY SIGNIFICANT PART OF GRANTOR’S ASSETS, AND SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND PERFORMANCE OF THE OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED BY ANY OBLIGEE OF THE OBLIGATIONS, WHETHER AS A “VOIDABLE PREFERENCE,” “FRAUDULENT CONVEYANCE,” OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT OR PERFORMANCE HAD NOT BEEN MADE.  IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS RESCINDED, REDUCED, RESTORED OR RETURNED, THE OBLIGATIONS SHALL BE REINSTATED AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED, RESTORED OR RETURNED.   11.                                 NOTICES.  EXCEPT AS OTHERWISE PROVIDED HEREIN, WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED UPON ANY OF THE PARTIES BY ANY OTHER PARTY, OR WHENEVER ANY OF THE PARTIES DESIRES TO GIVE AND SERVE UPON ANY OTHER PARTY ANY COMMUNICATION WITH RESPECT TO THIS SECURITY AGREEMENT, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE GIVEN IN THE MANNER, AND DEEMED RECEIVED, AS PROVIDED FOR IN THE CREDIT AGREEMENT.   12.                                 SEVERABILITY.  WHENEVER POSSIBLE, EACH PROVISION OF THIS SECURITY AGREEMENT SHALL BE INTERPRETED IN A MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SECURITY AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS SECURITY AGREEMENT.  THIS SECURITY AGREEMENT IS TO BE READ, CONSTRUED AND APPLIED TOGETHER WITH THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS WHICH, TAKEN TOGETHER, SET FORTH THE COMPLETE UNDERSTANDING AND AGREEMENT OF AGENT, LENDERS AND EACH GRANTOR WITH RESPECT TO THE MATTERS REFERRED TO HEREIN AND THEREIN.   13.                                 NO WAIVER; CUMULATIVE REMEDIES.  NEITHER AGENT NOR ANY LENDER SHALL BY ANY ACT, DELAY, OMISSION OR OTHERWISE BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS OR REMEDIES HEREUNDER, AND NO WAIVER SHALL BE VALID UNLESS IN WRITING, SIGNED BY AGENT AND THEN ONLY TO THE EXTENT THEREIN SET FORTH.  A WAIVER BY AGENT OF ANY RIGHT OR REMEDY HEREUNDER ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO ANY RIGHT OR REMEDY WHICH AGENT WOULD OTHERWISE HAVE HAD ON ANY FUTURE OCCASION.  NO FAILURE TO EXERCISE NOR ANY DELAY IN EXERCISING ON THE PART OF AGENT OR ANY LENDER, ANY RIGHT, POWER OR PRIVILEGE HEREUNDER, SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FUTURE EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE.  THE RIGHTS AND REMEDIES HEREUNDER PROVIDED ARE CUMULATIVE AND MAY BE EXERCISED SINGLY OR CONCURRENTLY, AND ARE NOT EXCLUSIVE OF ANY RIGHTS AND REMEDIES PROVIDED BY LAW.  NONE OF THE TERMS OR PROVISIONS OF THIS SECURITY AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT BY AN INSTRUMENT IN WRITING, DULY EXECUTED BY AGENT AND THE GRANTORS.   14.                                 LIMITATION BY LAW.  ALL RIGHTS, REMEDIES AND POWERS PROVIDED IN   20 --------------------------------------------------------------------------------   THIS SECURITY AGREEMENT MAY BE EXERCISED ONLY TO THE EXTENT THAT THE EXERCISE THEREOF DOES NOT VIOLATE ANY APPLICABLE PROVISION OF LAW, AND ALL THE PROVISIONS OF THIS SECURITY AGREEMENT ARE INTENDED TO BE SUBJECT TO ALL APPLICABLE MANDATORY PROVISIONS OF LAW THAT MAY BE CONTROLLING AND TO BE LIMITED TO THE EXTENT NECESSARY SO THAT THEY SHALL NOT RENDER THIS SECURITY AGREEMENT INVALID, UNENFORCEABLE, IN WHOLE OR IN PART, OR NOT ENTITLED TO BE RECORDED, REGISTERED OR FILED UNDER THE PROVISIONS OF ANY APPLICABLE LAW.   15.                                 TERMINATION OF THIS SECURITY AGREEMENT.  SUBJECT TO SECTION 10 HEREOF, THIS SECURITY AGREEMENT SHALL TERMINATE UPON THE TERMINATION DATE.   16.                                 SUCCESSORS AND ASSIGNS.  THIS SECURITY AGREEMENT AND ALL OBLIGATIONS OF EACH GRANTOR HEREUNDER SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF SUCH GRANTOR AND SHALL, TOGETHER WITH THE RIGHTS AND REMEDIES OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, HEREUNDER, INURE TO THE BENEFIT OF AGENT AND LENDERS, ALL FUTURE HOLDERS OF ANY INSTRUMENT EVIDENCING ANY OF THE OBLIGATIONS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.  NO SALES OF PARTICIPATIONS, OTHER SALES, ASSIGNMENTS, TRANSFERS OR OTHER DISPOSITIONS OF ANY AGREEMENT GOVERNING OR INSTRUMENT EVIDENCING THE OBLIGATIONS OR ANY PORTION THEREOF OR INTEREST THEREIN SHALL IN ANY MANNER IMPAIR THE LIEN GRANTED TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, HEREUNDER.  NO GRANTOR MAY ASSIGN, SELL, HYPOTHECATE OR OTHERWISE TRANSFER ANY INTEREST IN OR OBLIGATION UNDER THIS SECURITY AGREEMENT EXCEPT FOR SUCH TRANSFERS AND ASSIGNMENTS TO OTHER CREDIT PARTIES TO THE EXTENT EXPRESSLY PERMITTED IN THE CREDIT AGREEMENT IN CONNECTION WITH THE PERMITTED RESTRUCTURING.   17.                                 COUNTERPARTS.  THIS SECURITY AGREEMENT MAY BE AUTHENTICATED IN ANY NUMBER OF SEPARATE COUNTERPARTS, EACH OF WHICH SHALL COLLECTIVELY AND SEPARATELY CONSTITUTE ONE AGREEMENT.  THIS SECURITY AGREEMENT MAY BE AUTHENTICATED BY MANUAL SIGNATURE, FACSIMILE OR, IF APPROVED IN WRITING BY AGENT, ELECTRONIC MEANS, ALL OF WHICH SHALL BE EQUALLY VALID.   18.                                 GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.  GRANTORS AND AGENT HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH GRANTOR AND AGENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.3 OF THE CREDIT AGREEMENT.  NOTHING IN THIS SECURITY AGREEMENT WILL AFFECT THE RIGHT OF   21 --------------------------------------------------------------------------------   ANY PARTY TO THIS SECURITY AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.   19.                                 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.   20.                                 SECTION TITLES.  THE SECTION TITLES CONTAINED IN THIS SECURITY AGREEMENT ARE AND SHALL BE WITHOUT SUBSTANTIVE MEANING OR CONTENT OF ANY KIND WHATSOEVER AND ARE NOT A PART OF THE AGREEMENT BETWEEN THE PARTIES HERETO.   21.                                 NO STRICT CONSTRUCTION.  THE PARTIES HERETO HAVE PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS SECURITY AGREEMENT.  IN THE EVENT AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS SECURITY AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY THE PARTIES HERETO AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY PARTY BY VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS SECURITY AGREEMENT.   22.                                 ADVICE OF COUNSEL.  EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS SECURITY AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF SECTION 18 AND SECTION 19, WITH ITS COUNSEL.   23.                                 BENEFIT OF LENDERS.  ALL LIENS GRANTED OR CONTEMPLATED HEREBY SHALL BE FOR THE BENEFIT OF AGENT, INDIVIDUALLY, AND LENDERS, AND ALL PROCEEDS OR PAYMENTS REALIZED FROM COLLATERAL IN ACCORDANCE HEREWITH SHALL BE APPLIED TO THE OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT.   [Remainder of page intentionally left blank; signature pages follow]   22 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, each of the parties hereto has caused this Borrower Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.     BORROWERS:       CURATIVE HEALTH SERVICES, INC.       By:       Name:       Title:           EBIOCARE.COM, INC.           By:       Name:       Title:           HEMOPHILIA ACCESS, INC.       By:       Name:       Title:           APEX THERAPEUTIC CARE, INC.           By:       Name:       Title:           CHS SERVICES, INC.           By:       Name:       Title:       [Signature Page to Borrower Security Agreement]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES OF NEW YORK, INC.           By:       Name:       Title:               OPTIMAL CARE PLUS, INC.       By:       Name:       Title:               INFINITY INFUSION, LLC       By: Curative Health Services Co., its Sole Member       By:       Name:       Title:           INFINITY INFUSION II, LLC       By: Curative Health Services Co., its Sole Member       By:       Name:       Title:       24 --------------------------------------------------------------------------------     INFINITY INFUSION CARE, LTD.       By: Infinity Infusion  II, LLC, its Sole General Partner       By: Curative Health Services Co., the Sole Member of Infinity Infusion II, LLC           By:       Name:       Title:               MEDCARE, INC.       By:       Name:       Title:               CURATIVE PHARMACY SERVICES, INC.           By:       Name:       Title:           CRITICAL CARE SYSTEMS, INC.           By:       Name:       Title:           CURATIVE HEALTH SERVICES CO.           By:       Name:       Title:       25 --------------------------------------------------------------------------------     GENERAL ELECTRIC CAPITAL CORPORATION, as Agent           By:       Name:       Title:       26 --------------------------------------------------------------------------------   SCHEDULE I to SECURITY AGREEMENT   FILING JURISDICTIONS   I.   CURATIVE HEALTH SERVICES, INC.   MINNESOTA           II.   EBIOCARE.COM, INC.:   DELAWARE           III.   HEMOPHILIA ACCESS, INC.   TENNESSEE           IV.   APEX THERAPEUTIC CARE, INC.   CALIFORNIA           V.   CHS SERVICES, INC.   DELAWARE           VI.   CURATIVE HEALTH SERVICES OF NEW YORK, INC.   NEW YORK           VII.   INFINITY INFUSION, LLC   DELAWARE           VIII.   INFINITY INFUSION II, LLC   DELAWARE           IX.   OPTIMAL CARE PLUS, INC.   DELAWARE           X.   INFINITY INFUSION CARE, LTD.   TEXAS           XI.   MEDCARE, INC.   DELAWARE           XII.   CURATIVE PHARMACY SERVICES, INC.   DELAWARE           XIII.   CRITICAL CARE SYSTEMS, INC   DELAWARE           XIV.   CURATIVE HEALTH SERVICES CO.   MINNESOTA   --------------------------------------------------------------------------------   SCHEDULE II to SECURITY AGREEMENT   INSTRUMENTS CHATTEL PAPER AND LETTER OF CREDIT RIGHTS   [None.]   --------------------------------------------------------------------------------   SCHEDULE III-A to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING BORROWER’S COLLATERAL   I.   Grantor’s official name:                     Curative Health Services, Inc.               II.   Type of entity:                 Corporation               III.   Organizational identification number issued by Grantor’s state of incorporation:                   MN 12S-385               IV.   State or Incorporation of Borrower:            Minnesota               V.   Chief Executive Office/Corporate Office and principal place of business of Borrower:                   61 Spit Brook Road         Nashua, NH 03060               VI.   Warehouses and Other Premises at which Collateral is Stored or Located:                   61 Spit Brook Road         Nashua, NH 03060                   VII.                             Locations of Records Concerning Collateral:                   (see V. and VI. above and Schedule III-O below)       --------------------------------------------------------------------------------   SCHEDULE III-B to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING EBIOCARE.COM, INC.’S COLLATERAL   I.                                         Grantor’s official name:                     eBioCare.com, Inc.   II.                                     Type of entity:                                                                 Corporation   III.                                 Organizational identification number issued by Grantor’s state of incorporation:   DE 2838307   IV.                                 State of Incorporation of eBioCare.com, Inc.:          Delaware   V.                                     Chief Executive Office/Corporate Office and principal place of business of eBioCare.com, Inc.:   61 Spit Brook Road, Suite 505 Nashua, NH 03060   VI.                                 Warehouses and Other Premises at which Collateral is Stored or Located:   31332 Via Colinas, Suite 106 Westlake Village, CA 91362   61 Spit Brook Road, Suite 505 Nashua, NH 03060   VII.                             Locations of Records Concerning Collateral:   (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-C to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING HEMOPHILIA ACCESS, INC.’S COLLATERAL   I.                                         Grantor’s official name:                     Hemophilia Access, Inc.   II.                                     Type of entity:                                                                 Corporation   III.                                 Organizational identification number issued by Grantor’s state of incorporation:   TN 0275344   IV.                                 State of Incorporation of Hemophilia Access, Inc.:                      Tennessee   V.                                     Chief Executive Office/Corporate Office and principal place of business of  Hemophilia Access Inc.:   61 Spit Brook Road, Suite 505 Nashua, NH 03060   VI.                                 Warehouses and Other Premises at which Collateral is Stored or Located:   61 Spit Brook Road, Suite 505 Nashua, NH 03060   VII.                             Locations of Records Concerning Collateral:   (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-D to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING APEX THERAPEUTIC CARE, INC.’S COLLATERAL   I.                                         Grantor’s official name:         Apex Therapeutic Care, Inc.   II.                                     Type of entity:    Corporation   III.                                 Organizational identification number issued by Grantor’s state of incorporation:   CA 2026547   IV.                                 State of Incorporation of Apex Therapeutic Care, Inc.:               California   V.                                     Chief Executive Office/Corporate Office and principal place of business of Apex Therapeutic Care, Inc.:   31332 Via Colinas Suite 106 Westlake Village, CA  91362   VI.                                 Warehouses and Other Premises at which Collateral is Stored or Located:   31332 Via Colinas Suite 106 Westlake Village, CA  91362   623 N. Main Street Unit D6-8 Corona, CA  92880   61 Spit Brook Road, Suite 505 Nashua, NH 03060   Access Family Pharmacy 4062 Hixsow Pike Chattanooga, TN 37415   VII.                             Locations of Records Concerning Collateral:   (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-E to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING CHS SERVICES, INC.’S COLLATERAL   I. Grantor’s official name: CHS Services, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of incorporation:       DE 2578204     IV. State of Incorporation of CHS Services, Inc.:         Delaware     V. Chief Executive Office/Corporate Office and principal place of business of CHS Services, Inc.:       61 Spit Brook Road   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       61 Spit Brook Road   Nashua, NH 03060       103 Foulk Road   Suite 200   Wilmington, DE 19803     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)     --------------------------------------------------------------------------------   SCHEDULE III-F to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING CURATIVE HEALTH SERVICES OF NEW YORK, INC.’S COLLATERAL   I. Grantor’s official name: Curative Health Services of New York, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of incorporation:       Not issued by state of incorporation     IV. State of Incorporation of Curative Health Services of New York, Inc.: New York     V. Chief Executive Office/Corporate Office and principal place of business of Curative Health Services of New York, Inc.:       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       15 Technology Place, Suite 2   East Syracuse, NY 13057       61 Spit Brook Road   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)     --------------------------------------------------------------------------------   SCHEDULE III-G to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING INFINITY INFUSION, LLC’S COLLATERAL   I. Grantor’s official name: Infinity Infusion, LLC     II. Type of entity: Limited Liability Company     III. Organizational identification number issued by Grantor’s state of organization:       DE 3529163     IV. State of organization of Infinity Infusion, LLC: Delaware     V. Chief Executive Office/Corporate Office and principal place of business of Infinity Infusion, LLC:       61 Spit Brook Road   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       61 Spit Brook Road   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)     --------------------------------------------------------------------------------   SCHEDULE III-H to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING INFINITY INFUSION II, LLC’S COLLATERAL   I. Grantor’s official name: Infinity Infusion II, LLC     II. Type of entity: Limited Liability Company     III. Organizational identification number issued by Grantor’s state of organization:       DE 3529166     IV. State of organization of Infinity Infusion II, LLC: Delaware     V. Chief Executive Office/Corporate Office and principal place of business of Infinity Infusion II, LLC       61 Spit Brook Road   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       61 Spit Brook Road   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)     --------------------------------------------------------------------------------   SCHEDULE III-I to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING OPTIMAL CARE PLUS, INC. COLLATERAL   I. Grantor’s official name: Optimal Care Plus, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of incorporation:       DE 3579727     IV. State of Incorporation of Optimal Care Plus, Inc.: Delaware     V. Chief Executive Office/Corporate Office and principal place of business of Optimal Care Plus, Inc.:       12761 Darby Brooke Court   Woodbridge, VA 22192       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       12761 Darby Brooke Court   Woodbridge, VA 22192       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)     --------------------------------------------------------------------------------   SCHEDULE III-J to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING INFINITY INFUSION CARE, LTD. COLLATERAL   I. Grantor’s official name: Infinity Infusion Care, Ltd.     II. Type of entity: Limited Partnership     III. Organizational identification number issued by Grantor’s state of organization:       TX 800037312     IV. State of organization of Infinity Infusion Care, Ltd.: Texas     V. Chief Executive Office/Corporate Office and principal place of business of Infinity Infusion Care, Ltd.:       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       3600 South Gessner, Suite 1000   Houston, TX 77063       25010 Oakhurst Drive   Spring, Texas       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-K to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING CURATIVE PHARMACY SERVICES, INC. COLLATERAL   I. Grantor’s official name: Curative Pharmacy Services, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of incorporation:       DE 3646680     IV. State or Incorporation of Curative Pharmacy Services, Inc.: Delaware     V. Chief Executive Office/Corporate Office and principal place of business of Curative Pharmacy Services, Inc.:       61 Spit Brook Road   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       61 Spit Brook Road   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-L to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING MEDCARE, INC. COLLATERAL   I. Grantor’s official name: MedCare, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of incorporation:       DE 3613625     IV. State or Incorporation of MedCare, Inc.: Delaware     V. Chief Executive Office/Corporate Office and principal place of business of MedCare, Inc.:       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VI. Warehouses and Other Premises at which Collateral is Stored or Located:       4854 Woodbine Road   Pace, FL 32571       61 Spit Brook Road, Suite 505   Nashua, NH 03060     VII. Locations of Records Concerning Collateral:       (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-M to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL   AND RECORDS CONCERNING CRITICAL CARE SYSTEM, INC.’S COLLATERAL   I. Grantor’s official name: Critical Care System, Inc.     II. Type of entity: Corporation     III. Organizational identification number issued by Grantor’s state of organization:   DE 2256955     IV. State of Organization of Grantor: Delaware     V. Chief Executive Office and principal place of business of Grantor:       61 Spit Brook Road   Nashua, NH 03060     VI. Corporate Offices of Grantor:       61 Spit Brook Road   Nashua, NH 03060     VII. Warehouses:   None.     VIII. Other Premises at which Collateral is Stored or Located:       See attached Exhibit A to Schedule III.-M     IX. Locations of Records Concerning Collateral:       (see V., VI. and VIII. above and Schedule III-O below)   --------------------------------------------------------------------------------   Exhibit A to Schedule III - M   South Portland, ME Bedford. NH Harrisburg, PA Burlington, MA Boise, ID Birmingham, AL Urbandale, IA (Des Moines) Braintree, MA (Boston South) Indianapolis, IN Shrewsbury, MA (Boston West) Fort Wayne, IN Redding, CA Sharon Hill, PA (Philadelphia) Mobile, AL State College, PA Pittsburgh, PA East Providence, RI Elk Grove Village, IL (Chicago) St. Louis, MO Wixom, MI (Detroit) Farmers Branch, TX (Dallas) Houston, TX Tustin, CA (Los Angeles) Hayward, CA (San Francisco) Henderson, NV (Las Vegas) Reno, NV Tempe, AZ (Phoenix) Salt Lake City, UT Vernon, CT Norcross, GA Glen Burnie, MD Columbia, SC Greensboro, NC Lenexa, KS Ravenna, OH Dublin, OH Wildwood, MO Richmond, VA Chico, CA Grand Rapids, MI Somerset, NJ Nashua, NH Spring, TX   --------------------------------------------------------------------------------   SCHEDULE III-N to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING BORROWER’S COLLATERAL   I.                                         Grantor’s official name:                     Curative Health Services Co.   II.                                     Type of entity:                                                                 Corporation   III.                                 Organizational identification number issued by Grantor’s state of incorporation:   MN 4T-750   IV.                                 State or Incorporation of Borrower:                                                      Minnesota   V.                                     Chief Executive Office/Corporate Office and principal place of business of Borrower:   61 Spit Brook Road Nashua, NH 03060   VI.                                 Warehouses and Other Premises at which Collateral is Stored or Located:   61 Spit Brook Road Nashua, NH 03060   VII.                             Locations of Records Concerning Collateral:   (see V. and VI. above and Schedule III-O below)   --------------------------------------------------------------------------------   SCHEDULE III-O to SECURITY AGREEMENT   SCHEDULE OF ADDITIONAL STORAGE LOCATIONS OF COLLATERAL AND RECORDS CONCERNING COLLATERAL   Iron Mountain 17 Hydro Plant Rd Milton, NH 03851   Iron Mountain 3000 2nd Ave South Birmingham, AL 35233   Iron Mountain Route 9WS Port Ewen, NY 12466   Hall-Lane 67 Mall Drive Commack, NY 11725   Stowaway 2600 Clyde Ave. State College, PA 16801   Idaho Records Management 970 River St. Boise, ID 83702   Attic Plus - Hwy 280/ I-459 4748 Cahaba River Road, Unit# 308 Birmingham, AL 35243   Access Quality Storage 50 Gorham Road South Portland, ME 04106   The Storage Place 2930 Ferguson Road Fort Wayne, IN 46809   Aspin Storage 1845 Aspin Ave. Redding, CA 96002   --------------------------------------------------------------------------------   Shaw Warehouse 3000 2nd Ave. South Birmingham, AL 35233   Nobo - Area 01 175 Bearfoot Road Northboro, MA 01532   North Billerica Facility 96 High Street N. Billerica, M A 01862   Franklin Facility One Old Forge Hill Road Franklin, MA 02038   Beltline Storage 1268 West I-65 Service Rd South Mobile, AL 36609   --------------------------------------------------------------------------------   SCHEDULE IV to SECURITY AGREEMENT   U.S. PATENTS, TRADEMARKS AND COPYRIGHTS   Patents:       Registration       Owner: Curative Health Services, Inc.   Number:   Issue Date:               Device for Evaluating Protective Sensation   6,234,976   5/22/2001   Folding Card Device for Evaluating Protective Sensation   6,200,272   3/13/2001     Copyrights:   Copyrights on all forms, documents, and materials developed by Curative Health Services, Inc., Apex Therapeutic Care, Inc. and Infinity Infusion Care, Ltd.   Trademarks and Service Marks:       Registration       Owner: CHS Services, Inc.   Number:   Issue Date:               Centro de Cuidado de Herida ®   35,643 (Puerto Rico)   7/19/1996   Curative Health Services (and design) ®   2,114,541   11/18/1997   Curative Pharmacy Services ®   2,951,482   5/17/2005   Curative Pharmacy Services ®   2,985,058   8/16/2005   Footsense ®   2,122,321   12/16/1997   Medilink SM   2,045,270   3/18/1997   Sensachek ™   N/A   N/A   Startlink ®   2,381,075   8/29/2000   Startlink ®   2,474,969   8/7/2001   Wound Care 2000 ™   N/A   N/A   Wound Care Center ®   2,009,399   10/22/1996   Wound Care Center ®   35,642 (Puerto Rico)   7/19/1996   Wound Care Management Program SM   N/A   N/A     --------------------------------------------------------------------------------       Registration       Owner: Apex Therapeutic Care, Inc.   Number:   Issue Date:               Avances ®   2,624,532   9/24/2002         Registration       Owner: Infinity Infusion Care, Ltd.   Number:   Issue Date:               Infinity Infusion Care ™   N/A   N/A   (Ultimate Care Beyond Compare)           (name and logo)                 Registration       Owner: Critical Care Systems, Inc.   Number:   Issue Date:               Chemodirect SM   N/A   N/A   Critical Care Systems ®   2,003,791   9/24/1996   Critical Care Systems ®   2,927,156   2/22/2005   Critical Care Systems ®   2,961,656   6/14/2005   Infusion Care Systems ®   2,826,652   3/23/2004     --------------------------------------------------------------------------------   SCHEDULE V to SECURITY AGREEMENT   Name of Grantor   Motor Vehicle Make/Model   Model Year   VIN                   Critical Care Systems, Inc.   Subaru/Legacy Brighton Wagon   1999   4S3BK4259X7315545   Critical Care Systems, Inc.   Subaru/Legacy   2005   JF1SG63675H704847   Critical Care Systems, Inc.   Subaru/Legacy S/W   2001   4S3BH635X17304487   Critical Care Systems, Inc.   Subaru/Legacy Brighton Wagon   1999   4S3BK4258X7313253   Critical Care Systems, Inc.   Subaru Forrester   2005   JF1SG63635H737182     --------------------------------------------------------------------------------   EXHIBIT A   POWER OF ATTORNEY POWER OF ATTORNEY   This Power of Attorney is executed and delivered by                          (“Grantor”), to General Electric Capital Corporation, a Delaware corporation (hereinafter referred to as “Attorney”), as Agent for the benefit of Agent and Lenders, under a Debtor In Possession Credit Agreement and a Borrower Security Agreement, both dated as of March         , 2006, and other related documents (the “Loan Documents”).  No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shall be required to inquire into or seek confirmation from Grantor as to the authority of Attorney to take any action described below, or as to the existence of or fulfillment of any condition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform the actions contemplated herein, and Grantor irrevocably waives any right to commence any suit or action, in law or equity, against any person or entity which acts in reliance upon or acknowledges the authority granted under this Power of Attorney.  The power of attorney granted hereby is coupled with an interest and, prior to the Termination Date, may not be revoked or canceled by Grantor without Attorney’ s written consent.   Grantor hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents designated by Attorney), with full power of substitution, as Grantor’s true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Grantor and in the name of Grantor or in its own name, from time to time in Attorney’s discretion after an Event of Default has occurred and is continuing, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of the Loan Documents and, without limiting the generality of the foregoing, Grantor hereby grants to Attorney the power and right, on behalf of Grantor, without notice to or assent by Grantor, and at any time after an Event of Default has occurred and is continuing, to do the following: (a) change the mailing address of Grantor, open a post office box on behalf of Grantor, open mail for Grantor, and ask, demand, collect, give acquittances and receipts for, take possession of, endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, and notices in connection with any property of Grantor; (b) effect any repairs to any asset of Grantor, or continue or obtain any insurance and pay all or any part of the premiums therefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and decisions with respect to such policies; (c) pay or discharge any taxes, liens, security interests, or other encumbrances levied or placed on or threatened against Grantor or its property; (d) defend any suit, action or proceeding brought against Grantor if Grantor does not defend such suit, action or proceeding or if Attorney believes that Grantor is not pursuing such defense in a manner that will maximize the recovery to Attorney, and settle, compromise or adjust any suit, action, or proceeding described above and, in connection therewith, give such discharges or releases as Attorney may deem appropriate; (e) file or prosecute any claim, litigation, suit or proceeding in any court of competent jurisdiction or before any arbitrator, or take any other action otherwise deemed appropriate by Attorney for the   --------------------------------------------------------------------------------   purpose of collecting any and all such moneys due to Grantor whenever payable and to enforce any other right in respect of Grantor’s property; (f) cause the certified public accountants then engaged by Grantor to prepare and deliver to Attorney at any time and from time to time, promptly upon Attorney’s request, the following reports: (1) a reconciliation of all accounts, (2) an aging of all accounts, (3) trial balances, (4) test verifications of such accounts as Attorney may request, and (5) the results of each physical verification of inventory; (g) communicate in its own name with any party to any Contract with regard to the assignment of the right, title and interest of Grantor in and under the Contracts and other matters relating thereto; (h) to file such financing statements with respect to the Borrower Security Agreement, with or without Grantor’s signature, or to file a photocopy of the Borrower Security Agreement in substitution for a financing statement, as the Agent may deem appropriate and to execute in Grantor’s name such financing statements and amendments thereto and continuation statements which may require the Grantor’s signature; and (i) execute, in connection with any sale provided for in any Loan Document, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral and to otherwise direct such sale or resale, all as though Attorney were the absolute owner of the property of Grantor for all purposes, and to do, at Attorney’s option and Grantor’s expense, at any time or from time to time, all acts and other things that Attorney reasonably deems necessary to perfect, preserve, or realize upon Grantor’s property or assets and Attorney’s Liens thereon, all as fully and effectively as Grantor might do.  Grantor hereby ratifies, to the extent permitted by law, all that said Attorney shall lawfully do or cause to be done by virtue hereof.   IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor, and Grantor has caused its seal to be affixed pursuant to the authority of its board of directors this           day of March, 2006.     By:       Name:       Title:       NOTARY PUBLIC CERTIFICATE   On this            day of March, 2006,                  who is personally known to me appeared before me in his/her capacity as the            of Curative Health Services, Inc. (“Grantor”) and executed on behalf of Grantor the Power of Attorney in favor of General Electric Capital Corporation to which this Certificate is attached.               Notary Public   --------------------------------------------------------------------------------   EXHIBIT F to CREDIT AGREEMENT   BORROWER PLEDGE AGREEMENT   BORROWER PLEDGE AGREEMENT (together with all amendments, supplements and modifications, if any, from time to time hereto, this “Agreement”), dated as of March 30, 2006, by and among CURATIVE HEALTH SERVICES, INC., a Minnesota corporation, CURATIVE HEALTH SERVICES CO., a Minnesota corporation, EBIOCARE.COM, INC., a Delaware corporation, HEMOPHILIA ACCESS, INC., a Tennessee corporation, APEX THERAPEUTIC CARE, INC., a California corporation, CHS SERVICES, INC., a Delaware corporation, CURATIVE HEALTH SERVICES OF NEW YORK, INC., a New York corporation, OPTIMAL CARE PLUS, INC., a Delaware corporation, INFINITY INFUSION, LLC, a Delaware limited liability company, INFINITY INFUSION II, LLC, a Delaware limited liability company, INFINITY INFUSION CARE, LTD., a Texas limited partnership, MEDCARE, INC., a Delaware corporation, CURATIVE PHARMACY SERVICES, INC., a Delaware corporation, CRITICAL CARE SYSTEMS, INC., a Delaware corporation, (collectively, the “Borrowers”), CURATIVE HEALTH SERVICES III CO., a Minnesota corporation, (the “Guarantor”, and together with the Borrowers, collectively, the “Pledgors”) and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and in its capacity as Agent for Lenders (“Agent”).   W I T N E S S E T H:   WHEREAS, pursuant to that certain Debtor in Possession Credit Agreement, dated as of the date hereof, by and among the Borrowers, the other Persons named therein as Credit Parties, Agent and the Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”) the Lenders have agreed, subject to certain terms and conditions, to make Loans to, and incur L/C Obligations for the benefit of, Pledgors;   WHEREAS, Pledgors are the record and beneficial owner of the shares of Stock listed in Part A of Schedule I hereto and the owner of the promissory notes and instruments listed in Part B of Schedule I hereto;   WHEREAS, Pledgors benefit from the credit facilities made available to them under the Credit Agreement;   WHEREAS, in order to induce Agent and Lenders to make the Loans and to incur the L/C Obligations as provided for in the Credit Agreement, Pledgors have agreed to pledge the Pledged Collateral to Agent in accordance herewith;   NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and to induce Lenders to make Loans and to incur L/C Obligations under the Credit Agreement, it is agreed as follows:   --------------------------------------------------------------------------------   1.             DEFINITIONS. UNLESS OTHERWISE DEFINED HEREIN, TERMS DEFINED IN THE CREDIT AGREEMENT ARE USED HEREIN AS THEREIN DEFINED, AND THE FOLLOWING SHALL HAVE (UNLESS OTHERWISE PROVIDED ELSEWHERE IN THIS AGREEMENT) THE FOLLOWING RESPECTIVE MEANINGS (SUCH MEANINGS BEING EQUALLY APPLICABLE TO BOTH THE SINGULAR AND PLURAL FORM OF THE TERMS DEFINED):   “Bankruptcy Code” means Title 11, United States Code, as amended from time to time, and any successor statute thereto.   “Code” means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.   “Pledged Collateral” has the meaning assigned to such term in Section 2 hereof.   “Pledged Entity” means an issuer of Pledged Shares or Pledged Indebtedness (other than natural persons).   “Pledged Indebtedness” means the Indebtedness evidenced by promissory notes and instruments listed on Part B of Schedule I hereto;   “Pledged Shares” means those shares listed on Part A of Schedule I hereto.   “Secured Obligations” has the meaning assigned to such term in Section 3 hereof.   “Termination Date” means the date on which (a) the Loans have been indefeasibly repaid in full in cash, (b) all other Obligations under the Credit Agreement and the other Loan Documents have been completely discharged, (c) all L/C Obligations have been cash collateralized, canceled or backed by standby letters of credit in accordance with Section 2.5 of the Credit Agreement, and (d) Pledgors shall not have any further right to borrow any monies under the Credit Agreement.   “Unmatured Tax Liens” means Liens for taxes or assessments or other governmental Charges not yet due and payable or which are the subject of a Permitted Contest.   2.             PLEDGE. EACH PLEDGOR HEREBY PLEDGES TO AGENT, AND GRANTS TO AGENT FOR ITSELF AND THE BENEFIT OF LENDERS, A FIRST PRIORITY SECURITY INTEREST IN ALL OF THE FOLLOWING (COLLECTIVELY, THE “PLEDGED COLLATERAL”):   2 --------------------------------------------------------------------------------   (A)           THE PLEDGED SHARES AND THE CERTIFICATES REPRESENTING THE PLEDGED SHARES, AND ALL DIVIDENDS, DISTRIBUTIONS, CASH, INSTRUMENTS AND OTHER PROPERTY OR PROCEEDS FROM TIME TO TIME RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF OR IN EXCHANGE FOR ANY OR ALL OF THE PLEDGED SHARES;   (B)           SUCH PORTION, AS DETERMINED BY AGENT AS PROVIDED IN SECTION 6(D) BELOW, OF ANY ADDITIONAL SHARES OF STOCK OF A PLEDGED ENTITY FROM TIME TO TIME ACQUIRED BY PLEDGORS IN ANY MANNER (WHICH SHARES SHALL BE DEEMED TO BE PART OF THE PLEDGED SHARES), AND THE CERTIFICATES REPRESENTING SUCH ADDITIONAL SHARES, AND ALL DIVIDENDS, DISTRIBUTIONS, CASH, INSTRUMENTS AND OTHER PROPERTY OR PROCEEDS FROM TIME TO TIME RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF OR IN EXCHANGE FOR ANY OR ALL OF SUCH STOCK;   (C)           THE PLEDGED INDEBTEDNESS AND THE PROMISSORY NOTES OR INSTRUMENTS EVIDENCING THE PLEDGED INDEBTEDNESS, AND ALL INTEREST, CASH, INSTRUMENTS AND OTHER PROPERTY AND ASSETS FROM TIME TO TIME RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF THE PLEDGED INDEBTEDNESS; AND   (D)           ALL ADDITIONAL INDEBTEDNESS ARISING AFTER THE DATE HEREOF AND OWING TO ANY PLEDGOR AND EVIDENCED BY PROMISSORY NOTES OR OTHER INSTRUMENTS, TOGETHER WITH SUCH PROMISSORY NOTES AND INSTRUMENTS, AND ALL INTEREST, CASH, INSTRUMENTS AND OTHER PROPERTY AND ASSETS FROM TIME TO TIME RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF THAT PLEDGED INDEBTEDNESS.   3.             SECURITY FOR OBLIGATIONS. THIS AGREEMENT SECURES, AND THE PLEDGED COLLATERAL IS SECURITY FOR, THE PROMPT PAYMENT IN FULL WHEN DUE, WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE, AND PERFORMANCE OF ALL OBLIGATIONS OF ANY KIND UNDER OR IN CONNECTION WITH THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OBLIGATIONS OF PLEDGORS NOW OR HEREAFTER EXISTING UNDER THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ALL FEES, COSTS AND EXPENSES WHETHER IN CONNECTION WITH COLLECTION ACTIONS HEREUNDER OR OTHERWISE (COLLECTIVELY, THE “SECURED OBLIGATIONS”).   4.             DELIVERY OF PLEDGED COLLATERAL. ALL CERTIFICATES AND ALL PROMISSORY NOTES AND INSTRUMENTS EVIDENCING THE PLEDGED COLLATERAL SHALL BE OR HAVE BEEN DELIVERED TO AND HELD BY OR ON BEHALF OF AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, PURSUANT HERETO. ALL PLEDGED SHARES SHALL BE OR WERE ACCOMPANIED BY DULY EXECUTED INSTRUMENTS OF TRANSFER OR ASSIGNMENT IN BLANK, ALL IN FORM AND SUBSTANCE SATISFACTORY TO AGENT AND ALL PROMISSORY NOTES OR OTHER INSTRUMENTS EVIDENCING THE PLEDGED INDEBTEDNESS SHALL BE ENDORSED BY PLEDGORS.   5.             REPRESENTATIONS AND WARRANTIES. EACH PLEDGOR REPRESENTS AND WARRANTS TO AGENT THAT:   (A)           PLEDGOR IS, AND AT THE TIME OF DELIVERY OF THE PLEDGED SHARES TO AGENT WILL BE, THE SOLE HOLDER OF RECORD AND THE SOLE BENEFICIAL OWNER OF SUCH PLEDGED COLLATERAL PLEDGED BY SUCH PLEDGOR FREE AND CLEAR OF ANY LIEN THEREON OR AFFECTING THE TITLE THERETO, EXCEPT FOR UNMATURED TAX LIENS AND ANY LIEN CREATED BY THIS AGREEMENT. SUCH PLEDGOR IS AND AT THE TIME OF DELIVERY OF THE PLEDGED INDEBTEDNESS TO AGENT WILL BE, THE SOLE OWNER OF SUCH PLEDGED   3 --------------------------------------------------------------------------------   COLLATERAL FREE AND CLEAR OF ANY LIEN THEREON OR AFFECTING TITLE THERETO, EXCEPT FOR UNMATURED TAX LIENS AND ANY LIEN CREATED BY THIS AGREEMENT;   (B)           ALL OF THE PLEDGED SHARES HAVE BEEN DULY AUTHORIZED, VALIDLY ISSUED AND ARE FULLY PAID AND NON-ASSESSABLE. THE PLEDGED INDEBTEDNESS HAS BEEN DULY AUTHORIZED, AUTHENTICATED OR ISSUED AND DELIVERED BY, AND IS THE LEGAL, VALID AND BINDING OBLIGATIONS OF, THE PLEDGED ENTITIES, AND NO SUCH PLEDGED ENTITY IS IN DEFAULT THEREUNDER;   (C)           PLEDGOR HAS THE RIGHT AND REQUISITE AUTHORITY TO PLEDGE, ASSIGN, TRANSFER, DELIVER, DEPOSIT AND SET OVER THE PLEDGED COLLATERAL PLEDGED BY SUCH PLEDGOR TO AGENT AS PROVIDED HEREIN;   (D)           NONE OF THE PLEDGED SHARES OR PLEDGED INDEBTEDNESS HAS BEEN ISSUED OR TRANSFERRED IN VIOLATION OF THE SECURITIES REGISTRATION, SECURITIES DISCLOSURE OR SIMILAR LAWS OF ANY JURISDICTION TO WHICH SUCH ISSUANCE OR TRANSFER MAY BE SUBJECT;   (E)           ALL OF THE PLEDGED SHARES ARE PRESENTLY OWNED BY PLEDGOR, AND ARE PRESENTLY REPRESENTED BY THE CERTIFICATES LISTED ON PART A OF SCHEDULE I, HERETO OR ARE UNCERTIFICATED AS SET FORTH ON SCHEDULE I HERETO. AS OF THE DATE HEREOF, THERE ARE NO EXISTING OPTIONS, WARRANTS, CALLS OR COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO THE PLEDGED SHARES;   (F)            NO CONSENT, APPROVAL, AUTHORIZATION OR OTHER ORDER OR OTHER ACTION BY, AND NO NOTICE TO OR FILING WITH, ANY GOVERNMENTAL AUTHORITY OR ANY OTHER PERSON IS REQUIRED (I) FOR THE PLEDGE BY ANY PLEDGOR OF THE PLEDGED COLLATERAL PURSUANT TO THIS AGREEMENT OR FOR THE EXECUTION, DELIVERY OR PERFORMANCE OF THIS AGREEMENT BY ANY PLEDGOR, OR (II) FOR THE EXERCISE BY AGENT OF THE VOTING OR OTHER RIGHTS PROVIDED FOR IN THIS AGREEMENT OR THE REMEDIES IN RESPECT OF THE PLEDGED COLLATERAL PURSUANT TO THIS AGREEMENT, EXCEPT AS MAY BE REQUIRED IN CONNECTION WITH SUCH DISPOSITION BY LAWS AFFECTING THE OFFERING AND SALE OF SECURITIES GENERALLY;   (G)           THE PLEDGE, ASSIGNMENT AND DELIVERY OF THE PLEDGED COLLATERAL PURSUANT TO THIS AGREEMENT WILL CREATE A VALID FIRST PRIORITY LIEN ON AND A FIRST PRIORITY PERFECTED SECURITY INTEREST IN FAVOR OF THE AGENT FOR THE BENEFIT OF AGENT AND LENDERS IN THE PLEDGED COLLATERAL AND THE PROCEEDS THEREOF, SECURING THE PAYMENT OF THE SECURED OBLIGATIONS, SUBJECT TO NO OTHER LIEN OTHER THAN UNMATURED TAX LIENS;   (H)           THIS AGREEMENT HAS BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED BY EACH OF THE PLEDGORS AND CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION OF PLEDGORS ENFORCEABLE AGAINST PLEDGORS IN ACCORDANCE WITH ITS TERMS;   (I)            THE PLEDGED SHARES CONSTITUTE 100% OF THE ISSUED AND OUTSTANDING SHARES OF STOCK OF EACH PLEDGED ENTITY; AND   (J)            EXCEPT AS DISCLOSED ON PART B OF SCHEDULE I, NONE OF THE PLEDGED INDEBTEDNESS IS SUBORDINATED IN RIGHT OF PAYMENT TO OTHER INDEBTEDNESS (EXCEPT FOR THE SECURED   4 --------------------------------------------------------------------------------   OBLIGATIONS) OR SUBJECT TO THE TERMS OF AN INDENTURE.   The representations and warranties set forth in this Section 5 shall survive the execution and delivery of this Agreement.   6.             COVENANTS. EACH PLEDGOR COVENANTS AND AGREES THAT UNTIL THE TERMINATION DATE:   (A)           WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT, NONE OF THE PLEDGORS WILL SELL, ASSIGN, TRANSFER, PLEDGE, OR OTHERWISE ENCUMBER ANY OF ITS RIGHTS IN OR TO THE PLEDGED COLLATERAL, OR ANY UNPAID DIVIDENDS, INTEREST OR OTHER DISTRIBUTIONS OR PAYMENTS WITH RESPECT TO THE PLEDGED COLLATERAL OR GRANT A LIEN IN THE PLEDGED COLLATERAL, UNLESS OTHERWISE EXPRESSLY PERMITTED BY THE CREDIT AGREEMENT;   (B)           EACH OF THE PLEDGORS WILL, AT ITS EXPENSE, PROMPTLY EXECUTE, ACKNOWLEDGE AND DELIVER ALL SUCH INSTRUMENTS AND TAKE ALL SUCH ACTIONS AS AGENT FROM TIME TO TIME MAY REQUEST IN ORDER TO ENSURE TO AGENT AND LENDERS THE BENEFITS OF THE LIENS IN AND TO THE PLEDGED COLLATERAL INTENDED TO BE CREATED BY THIS AGREEMENT, INCLUDING THE FILING OF ANY NECESSARY CODE FINANCING STATEMENTS, WHICH MAY BE FILED BY AGENT WITH OR (TO THE EXTENT PERMITTED BY LAW) WITHOUT THE SIGNATURE OF SUCH PLEDGOR, AND WILL COOPERATE WITH AGENT, AT SUCH PLEDGORS’S EXPENSE, IN OBTAINING ALL NECESSARY APPROVALS AND MAKING ALL NECESSARY FILINGS UNDER FEDERAL, STATE, LOCAL OR FOREIGN LAW IN CONNECTION WITH SUCH LIENS OR ANY SALE OR TRANSFER OF THE PLEDGED COLLATERAL;   (C)           EACH OF THE PLEDGORS HAS AND WILL DEFEND THE TITLE TO THE PLEDGED COLLATERAL AND THE LIENS OF AGENT IN THE PLEDGED COLLATERAL AGAINST THE CLAIM OF ANY PERSON AND WILL MAINTAIN AND PRESERVE SUCH LIENS; AND   (D)           EACH OF THE PLEDGORS WILL, UPON OBTAINING OWNERSHIP OF ANY ADDITIONAL STOCK OR PROMISSORY NOTES OR INSTRUMENTS OF A PLEDGED ENTITY OR STOCK OR PROMISSORY NOTES OR INSTRUMENTS OTHERWISE REQUIRED TO BE PLEDGED TO AGENT PURSUANT TO ANY OF THE LOAN DOCUMENTS, WHICH STOCK, NOTES OR INSTRUMENTS ARE NOT ALREADY PLEDGED COLLATERAL, PROMPTLY (AND IN ANY EVENT WITHIN THREE (3) BUSINESS DAYS) DELIVER TO AGENT A PLEDGE AMENDMENT, DULY EXECUTED BY SUCH PLEDGOR, IN SUBSTANTIALLY THE FORM OF SCHEDULE II HERETO (A “PLEDGE AMENDMENT”) IN RESPECT OF ANY SUCH ADDITIONAL STOCK, NOTES OR INSTRUMENTS, PURSUANT TO WHICH SUCH PLEDGOR SHALL PLEDGE TO AGENT ALL OF SUCH ADDITIONAL STOCK, NOTES AND INSTRUMENTS. EACH OF THE PLEDGORS HEREBY AUTHORIZES AGENT TO ATTACH EACH PLEDGE AMENDMENT TO THIS AGREEMENT AND AGREES THAT ALL PLEDGED SHARES AND PLEDGED INDEBTEDNESS LISTED ON ANY PLEDGE AMENDMENT DELIVERED TO AGENT SHALL FOR ALL PURPOSES HEREUNDER BE CONSIDERED PLEDGED COLLATERAL. IN ADDITION TO THE FOREGOING, TO THE EXTENT A PLEDGOR’S ORGANIZATIONAL DOCUMENTS PERMIT THE ISSUANCE OF CERTIFICATES OF ANY OWNERSHIP INTEREST, BUT WHICH PLEDGOR HAS NOT AS OF YET ISSUED SUCH CERTIFICATES, NO SUCH CERTFICATES SHALL BE ISSUED WITHOUT AGENT’S CONSENT AND THE SUBSEQUENT COMPLIANCE HERWITH.   (E)           EACH PLEDGOR CONSENTS TO EACH PLEDGED ENTITY’S ENTERING INTO A CONTROL AGREEMENT WITH AGENT IN THE FORM OF SCHEDULE III HERETO (A “CONTROL AGREEMENT”) AND AGREES TO BE BOUND BY THE TERMS AND CONDITIONS OF EACH SUCH CONTROL AGREEMENT, EXCEPT THAT THE AGENT   5 --------------------------------------------------------------------------------   SHALL NOT BE ENTITLED TO GIVE INSTRUCTIONS TO ANY PLEDGED ENTITY WITH RESPECT TO THE PLEDGED STOCK ISSUED BY SUCH PLEDGED ENTITY UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.   7.             PLEDGORS’ RIGHTS. AS LONG AS NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING AND UNTIL WRITTEN NOTICE SHALL BE GIVEN TO PLEDGORS IN ACCORDANCE WITH SECTION 8(A) HEREOF:   (A)           PLEDGORS SHALL HAVE THE RIGHT, FROM TIME TO TIME, TO VOTE AND GIVE CONSENTS WITH RESPECT TO THE PLEDGED COLLATERAL, OR ANY PART THEREOF FOR ALL PURPOSES NOT INCONSISTENT WITH THE PROVISIONS OF THIS AGREEMENT, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT; PROVIDED, HOWEVER, THAT NO VOTE SHALL BE CAST, AND NO CONSENT SHALL BE GIVEN OR ACTION TAKEN, WHICH WOULD HAVE THE EFFECT OF IMPAIRING THE POSITION OR INTEREST OF AGENT IN RESPECT OF THE PLEDGED COLLATERAL OR WHICH WOULD AUTHORIZE, EFFECT OR CONSENT TO (UNLESS AND TO THE EXTENT EXPRESSLY PERMITTED BY THE CREDIT AGREEMENT OR CONSENTED TO BY AGENT):   (I)            THE DISSOLUTION OR LIQUIDATION, IN WHOLE OR IN PART, OF A PLEDGED ENTITY;   (II)           THE CONSOLIDATION OR MERGER OF A PLEDGED ENTITY WITH ANY OTHER PERSON;   (III)          THE SALE, DISPOSITION OR ENCUMBRANCE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF A PLEDGED ENTITY, EXCEPT FOR LIENS IN FAVOR OF AGENT;   (IV)          ANY CHANGE IN THE AUTHORIZED NUMBER OF SHARES, THE STATED CAPITAL OR THE AUTHORIZED SHARE CAPITAL OF A PLEDGED ENTITY OR THE ISSUANCE OF ANY ADDITIONAL SHARES OF ITS STOCK; OR   (V)           THE ALTERATION OF THE VOTING RIGHTS WITH RESPECT TO THE STOCK OF A PLEDGED ENTITY;   (B)           PLEDGORS SHALL BE ENTITLED, FROM TIME TO TIME, TO COLLECT AND RECEIVE FOR THEIR OWN USE ALL CASH DIVIDENDS AND INTEREST PAID IN RESPECT OF THE PLEDGED SHARES AND PLEDGED INDEBTEDNESS TO THE EXTENT NOT IN VIOLATION OF THE CREDIT AGREEMENT OTHER THAN ANY AND ALL: (A) DIVIDENDS AND INTEREST PAID OR PAYABLE OTHER THAN IN CASH IN RESPECT OF ANY PLEDGED COLLATERAL, AND INSTRUMENTS AND OTHER PROPERTY RECEIVED, RECEIVABLE OR OTHERWISE DISTRIBUTED IN RESPECT OF, OR IN EXCHANGE FOR, ANY PLEDGED COLLATERAL;  (B) DIVIDENDS AND OTHER DISTRIBUTIONS PAID OR PAYABLE IN CASH IN RESPECT OF ANY PLEDGED SHARES IN CONNECTION WITH A PARTIAL OR TOTAL LIQUIDATION OR DISSOLUTION OR IN CONNECTION WITH A REDUCTION OF CAPITAL, CAPITAL SURPLUS OR PAID-IN CAPITAL OF A PLEDGED ENTITY; AND (C) CASH PAID, PAYABLE OR OTHERWISE DISTRIBUTED, IN RESPECT OF PRINCIPAL OF, OR IN REDEMPTION OF, OR IN EXCHANGE FOR, ANY PLEDGED COLLATERAL; PROVIDED, HOWEVER, THAT UNTIL ACTUALLY PAID ALL RIGHTS TO SUCH DISTRIBUTIONS SHALL REMAIN SUBJECT TO THE LIEN CREATED BY THIS AGREEMENT; AND   6 --------------------------------------------------------------------------------   (C)           ALL DIVIDENDS AND INTEREST (OTHER THAN SUCH CASH DIVIDENDS AND INTEREST AS ARE PERMITTED TO BE PAID TO PLEDGORS IN ACCORDANCE WITH CLAUSE (B) ABOVE) AND ALL OTHER DISTRIBUTIONS IN RESPECT OF ANY OF THE PLEDGED SHARES OR PLEDGED INDEBTEDNESS, WHENEVER PAID OR MADE, SHALL BE DELIVERED TO AGENT TO HOLD AS PLEDGED COLLATERAL AND SHALL, IF RECEIVED BY PLEDGORS, BE RECEIVED IN TRUST FOR THE BENEFIT OF AGENT, BE SEGREGATED FROM THE OTHER PROPERTY OR FUNDS OF PLEDGORS, AND BE FORTHWITH DELIVERED TO AGENT AS PLEDGED COLLATERAL IN THE SAME FORM AS SO RECEIVED (WITH ANY NECESSARY INDORSEMENT).   8.             DEFAULTS AND REMEDIES; PROXY.   (A)           UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND DURING THE CONTINUATION OF SUCH EVENT OF DEFAULT, AND CONCURRENTLY WITH WRITTEN NOTICE TO PLEDGORS, AGENT (PERSONALLY OR THROUGH AN AGENT) IS HEREBY AUTHORIZED AND EMPOWERED TO TRANSFER AND REGISTER IN ITS NAME OR IN THE NAME OF ITS NOMINEE THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL, TO EXCHANGE CERTIFICATES OR INSTRUMENTS REPRESENTING OR EVIDENCING PLEDGED COLLATERAL FOR CERTIFICATES OR INSTRUMENTS OF SMALLER OR LARGER DENOMINATIONS, TO EXERCISE THE VOTING AND ALL OTHER RIGHTS AS A HOLDER WITH RESPECT THERETO, TO COLLECT AND RECEIVE ALL CASH DIVIDENDS, INTEREST, PRINCIPAL AND OTHER DISTRIBUTIONS MADE THEREON, TO SELL IN ONE OR MORE SALES AFTER TEN (10) DAYS’ NOTICE OF THE TIME AND PLACE OF ANY PUBLIC SALE OR OF THE TIME AT WHICH A PRIVATE SALE IS TO TAKE PLACE (WHICH NOTICE PLEDGORS AGREE IS COMMERCIALLY REASONABLE) THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL AND TO OTHERWISE ACT WITH RESPECT TO THE PLEDGED COLLATERAL AS THOUGH AGENT WAS THE OUTRIGHT OWNER THEREOF. ANY SALE SHALL BE MADE AT A PUBLIC OR PRIVATE SALE AT AGENT’S PLACE OF BUSINESS, OR AT ANY PLACE TO BE NAMED IN THE NOTICE OF SALE, EITHER FOR CASH OR UPON CREDIT OR FOR FUTURE DELIVERY AT SUCH PRICE AS AGENT MAY DEEM FAIR, AND AGENT MAY BE THE PURCHASER OF THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL SO SOLD AND HOLD THE SAME THEREAFTER IN ITS OWN RIGHT FREE FROM ANY CLAIM OF PLEDGORS OR ANY RIGHT OF REDEMPTION. EACH SALE SHALL BE MADE TO THE HIGHEST BIDDER, BUT AGENT RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS AT SUCH SALE WHICH, IN ITS DISCRETION, IT SHALL DEEM INADEQUATE. DEMANDS OF PERFORMANCE, EXCEPT AS OTHERWISE HEREIN SPECIFICALLY PROVIDED FOR OR AS SPECIFICALLY PROVIDED FOR IN THE CREDIT AGREEMENT, NOTICES OF SALE, ADVERTISEMENTS AND THE PRESENCE OF PROPERTY AT SALE ARE HEREBY WAIVED AND ANY SALE HEREUNDER MAY BE CONDUCTED BY AN AUCTIONEER OR ANY OFFICER OR AGENT OF AGENT. EACH OF THE PLEDGORS HEREBY IRREVOCABLY CONSTITUTES UNTIL THE TERMINATION DATE AND APPOINTS AGENT AS THE PROXY AND ATTORNEY-IN-FACT OF SUCH PLEDGOR WITH RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE THE PLEDGED SHARES, WITH FULL POWER OF SUBSTITUTION TO DO SO AS PROVIDED IN SECTION 7(A) AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT. THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE. IN ADDITION TO THE RIGHT TO VOTE THE PLEDGED SHARES, THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE PLEDGED SHARES WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS) AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. SUCH PROXY   7 --------------------------------------------------------------------------------   SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED SHARES ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF THE PLEDGED SHARES OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND DURING THE CONTINUANCE THEREOF. NOTWITHSTANDING THE FOREGOING, AGENT SHALL NOT HAVE ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.   (B)           IF, AT THE ORIGINAL TIME OR TIMES APPOINTED FOR THE SALE OF THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL, THE HIGHEST BID, IF THERE BE BUT ONE SALE, SHALL BE INADEQUATE TO DISCHARGE IN FULL ALL THE SECURED OBLIGATIONS, OR IF THE PLEDGED COLLATERAL BE OFFERED FOR SALE IN LOTS, IF AT ANY OF SUCH SALES, THE HIGHEST BID FOR THE LOT OFFERED FOR SALE WOULD INDICATE TO AGENT, IN ITS DISCRETION, THAT THE PROCEEDS OF THE SALES OF THE WHOLE OF THE PLEDGED COLLATERAL WOULD BE UNLIKELY TO BE SUFFICIENT TO DISCHARGE ALL THE SECURED OBLIGATIONS, AGENT MAY, ON ONE OR MORE OCCASIONS AND IN ITS DISCRETION, POSTPONE ANY OF SAID SALES BY PUBLIC ANNOUNCEMENT AT THE TIME OF SALE OR THE TIME OF PREVIOUS POSTPONEMENT OF SALE, AND NO OTHER NOTICE OF SUCH POSTPONEMENT OR POSTPONEMENTS OF SALE NEED BE GIVEN, ANY OTHER NOTICE BEING HEREBY WAIVED; PROVIDED, HOWEVER, THAT ANY SALE OR SALES MADE AFTER SUCH POSTPONEMENT SHALL BE AFTER TEN (10) DAYS’ NOTICE TO PLEDGORS.   (C)           [RESERVED]   (D)           [RESERVED].   (E)           IF, AT ANY TIME WHEN AGENT SHALL DETERMINE TO EXERCISE ITS RIGHT TO SELL THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL HEREUNDER, SUCH PLEDGED COLLATERAL OR THE PART THEREOF TO BE SOLD SHALL NOT, FOR ANY REASON WHATSOEVER, BE EFFECTIVELY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (OR ANY SIMILAR STATUTE THEN IN EFFECT) (THE “ACT”), AGENT MAY, IN ITS DISCRETION (SUBJECT ONLY TO APPLICABLE REQUIREMENTS OF LAW), SELL SUCH PLEDGED COLLATERAL OR PART THEREOF BY PRIVATE SALE IN SUCH MANNER AND UNDER SUCH CIRCUMSTANCES AS AGENT MAY DEEM NECESSARY OR ADVISABLE, BUT SUBJECT TO THE OTHER REQUIREMENTS OF THIS SECTION 8, AND SHALL NOT BE REQUIRED TO EFFECT SUCH REGISTRATION OR TO CAUSE THE SAME TO BE EFFECTED. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN ANY SUCH EVENT, AGENT IN ITS DISCRETION (X) MAY, IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS, PROCEED TO MAKE SUCH PRIVATE SALE NOTWITHSTANDING THAT A REGISTRATION STATEMENT FOR THE PURPOSE OF REGISTERING SUCH PLEDGED COLLATERAL OR PART THEREOF COULD BE OR SHALL HAVE BEEN FILED UNDER SAID ACT (OR SIMILAR STATUTE), (Y) MAY APPROACH AND NEGOTIATE WITH A SINGLE POSSIBLE PURCHASER TO EFFECT SUCH SALE, AND (Z) MAY RESTRICT SUCH SALE TO A PURCHASER WHO IS AN ACCREDITED INVESTOR UNDER THE ACT AND WHO WILL REPRESENT AND AGREE THAT SUCH PURCHASER IS PURCHASING FOR ITS OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR SALE OF SUCH PLEDGED COLLATERAL OR ANY PART THEREOF. IN ADDITION TO A PRIVATE SALE AS PROVIDED ABOVE IN THIS SECTION 8, IF ANY OF THE PLEDGED COLLATERAL SHALL NOT BE FREELY DISTRIBUTABLE TO THE PUBLIC WITHOUT REGISTRATION UNDER THE ACT (OR SIMILAR STATUTE) AT THE TIME OF ANY PROPOSED SALE PURSUANT TO THIS SECTION 8, THEN AGENT SHALL NOT BE REQUIRED TO EFFECT SUCH REGISTRATION OR CAUSE THE SAME TO BE EFFECTED BUT, IN ITS DISCRETION (SUBJECT ONLY TO APPLICABLE REQUIREMENTS OF LAW), MAY REQUIRE THAT   8 --------------------------------------------------------------------------------   ANY SALE HEREUNDER (INCLUDING A SALE AT AUCTION) BE CONDUCTED SUBJECT TO RESTRICTIONS:   (I)            AS TO THE FINANCIAL SOPHISTICATION AND ABILITY OF ANY PERSON PERMITTED TO BID OR PURCHASE AT ANY SUCH SALE;   (II)           AS TO THE CONTENT OF LEGENDS TO BE PLACED UPON ANY CERTIFICATES REPRESENTING THE PLEDGED COLLATERAL SOLD IN SUCH SALE, INCLUDING RESTRICTIONS ON FUTURE TRANSFER THEREOF;   (III)          AS TO THE REPRESENTATIONS REQUIRED TO BE MADE BY EACH PERSON BIDDING OR PURCHASING AT SUCH SALE RELATING TO THAT PERSON’S ACCESS TO FINANCIAL INFORMATION ABOUT PLEDGORS AND SUCH PERSON’S INTENTIONS AS TO THE HOLDING OF THE PLEDGED COLLATERAL SO SOLD FOR INVESTMENT FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF; AND   (IV)          AS TO SUCH OTHER MATTERS AS AGENT MAY, IN ITS DISCRETION, DEEM NECESSARY OR APPROPRIATE IN ORDER THAT SUCH SALE (NOTWITHSTANDING ANY FAILURE SO TO REGISTER) MAY BE EFFECTED IN COMPLIANCE WITH THE BANKRUPTCY CODE AND OTHER LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS AND THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.   (F)            EACH OF THE PLEDGORS RECOGNIZES THAT AGENT MAY BE UNABLE TO EFFECT A PUBLIC SALE OF ANY OR ALL THE PLEDGED COLLATERAL AND MAY BE COMPELLED TO RESORT TO ONE OR MORE PRIVATE SALES THEREOF IN ACCORDANCE WITH CLAUSE (E) ABOVE. EACH OF THE PLEDGORS ALSO ACKNOWLEDGES THAT ANY SUCH PRIVATE SALE MAY RESULT IN PRICES AND OTHER TERMS LESS FAVORABLE TO THE SELLER THAN IF SUCH SALE WERE A PUBLIC SALE AND, NOTWITHSTANDING SUCH CIRCUMSTANCES, AGREES THAT ANY SUCH PRIVATE SALE SHALL NOT BE DEEMED TO HAVE BEEN MADE IN A COMMERCIALLY UNREASONABLE MANNER SOLELY BY VIRTUE OF SUCH SALE BEING PRIVATE. AGENT SHALL BE UNDER NO OBLIGATION TO DELAY A SALE OF ANY OF THE PLEDGED COLLATERAL FOR THE PERIOD OF TIME NECESSARY TO PERMIT THE PLEDGED ENTITY TO REGISTER SUCH SECURITIES FOR PUBLIC SALE UNDER THE ACT, OR UNDER APPLICABLE STATE SECURITIES LAWS, EVEN IF PLEDGORS AND THE PLEDGED ENTITY WOULD AGREE TO DO SO.   (G)           EACH OF THE PLEDGORS AGREES TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW THAT FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT IT WILL NOT AT ANY TIME PLEAD, CLAIM OR TAKE THE BENEFIT OF ANY APPRAISAL, VALUATION, STAY, EXTENSION, MORATORIUM OR REDEMPTION LAW NOW OR HEREAFTER IN FORCE IN ORDER TO PREVENT OR DELAY THE ENFORCEMENT OF THIS AGREEMENT, OR THE ABSOLUTE SALE OF THE WHOLE OR ANY PART OF THE PLEDGED COLLATERAL OR THE POSSESSION THEREOF BY ANY PURCHASER AT ANY SALE HEREUNDER, AND EACH OF THE PLEDGORS WAIVES THE BENEFIT OF ALL SUCH LAWS TO THE EXTENT IT LAWFULLY MAY DO SO. EACH OF THE PLEDGORS AGREES THAT IT WILL NOT INTERFERE WITH ANY RIGHT, POWER AND REMEDY OF AGENT PROVIDED FOR IN THIS AGREEMENT OR NOW OR HEREAFTER EXISTING AT LAW OR IN EQUITY OR BY STATUTE OR OTHERWISE, OR THE EXERCISE OR BEGINNING OF THE EXERCISE BY AGENT OF ANY ONE OR MORE OF SUCH RIGHTS, POWERS OR REMEDIES. NO FAILURE OR DELAY ON THE PART OF AGENT TO EXERCISE ANY SUCH RIGHT, POWER OR REMEDY AND NO NOTICE OR DEMAND WHICH MAY BE GIVEN TO OR MADE UPON PLEDGORS BY AGENT WITH RESPECT TO ANY SUCH REMEDIES SHALL OPERATE AS A WAIVER THEREOF, OR LIMIT OR IMPAIR AGENT’S RIGHT TO TAKE ANY ACTION OR TO EXERCISE ANY POWER OR REMEDY HEREUNDER, WITHOUT NOTICE OR DEMAND, OR PREJUDICE ITS   9 --------------------------------------------------------------------------------   RIGHTS AS AGAINST PLEDGORS IN ANY RESPECT.   (H)           EACH OF THE PLEDGORS FURTHER AGREES THAT A BREACH OF ANY OF THE COVENANTS CONTAINED IN THIS SECTION 8 WILL CAUSE IRREPARABLE INJURY TO AGENT, THAT AGENT SHALL HAVE NO ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH AND, AS A CONSEQUENCE, AGREES THAT EACH AND EVERY COVENANT CONTAINED IN THIS SECTION 8 SHALL BE SPECIFICALLY ENFORCEABLE AGAINST EACH OF THE PLEDGORS, AND EACH OF THE PLEDGORS HEREBY WAIVES AND AGREES NOT TO ASSERT ANY DEFENSES AGAINST AN ACTION FOR SPECIFIC PERFORMANCE OF SUCH COVENANTS EXCEPT FOR A DEFENSE THAT THE SECURED OBLIGATIONS ARE NOT THEN DUE AND PAYABLE IN ACCORDANCE WITH THE AGREEMENTS AND INSTRUMENTS GOVERNING AND EVIDENCING SUCH OBLIGATIONS.   9.             WAIVER. NO DELAY ON AGENT’S PART IN EXERCISING ANY POWER OF SALE, LIEN, OPTION OR OTHER RIGHT HEREUNDER, AND NO NOTICE OR DEMAND WHICH MAY BE GIVEN TO OR MADE UPON ANY OF THE PLEDGORS BY AGENT WITH RESPECT TO ANY POWER OF SALE, LIEN, OPTION OR OTHER RIGHT HEREUNDER, SHALL CONSTITUTE A WAIVER THEREOF, OR LIMIT OR IMPAIR AGENT’S RIGHT TO TAKE ANY ACTION OR TO EXERCISE ANY POWER OF SALE, LIEN, OPTION, OR ANY OTHER RIGHT HEREUNDER, WITHOUT NOTICE OR DEMAND, OR PREJUDICE AGENT’S RIGHTS AS AGAINST ANY PLEDGOR IN ANY RESPECT.   10.           ASSIGNMENT. AGENT MAY ASSIGN, INDORSE OR TRANSFER ANY INSTRUMENT EVIDENCING ALL OR ANY PART OF THE SECURED OBLIGATIONS AS PROVIDED IN, AND IN ACCORDANCE WITH, THE CREDIT AGREEMENT, AND THE HOLDER OF SUCH INSTRUMENT SHALL BE ENTITLED TO THE BENEFITS OF THIS AGREEMENT.   11.           TERMINATION. IMMEDIATELY FOLLOWING THE TERMINATION DATE, AGENT SHALL DELIVER TO PLEDGORS THE PLEDGED COLLATERAL PLEDGED BY PLEDGORS AT THE TIME SUBJECT TO THIS AGREEMENT AND ALL INSTRUMENTS OF ASSIGNMENT EXECUTED IN CONNECTION THEREWITH, FREE AND CLEAR OF THE LIENS HEREOF AND, EXCEPT AS OTHERWISE PROVIDED HEREIN, ALL OF PLEDGORS’ OBLIGATIONS HEREUNDER SHALL AT SUCH TIME TERMINATE.   12.           LIEN ABSOLUTE. ALL RIGHTS OF AGENT HEREUNDER, AND ALL OBLIGATIONS OF PLEDGORS HEREUNDER, SHALL BE ABSOLUTE AND UNCONDITIONAL IRRESPECTIVE OF:   (A)           ANY LACK OF VALIDITY OR ENFORCEABILITY OF THE CREDIT AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER AGREEMENT OR INSTRUMENT GOVERNING OR EVIDENCING ANY SECURED OBLIGATIONS;   (B)           ANY CHANGE IN THE TIME, MANNER OR PLACE OF PAYMENT OF, OR IN ANY OTHER TERM OF, ALL OR ANY PART OF THE SECURED OBLIGATIONS, OR ANY OTHER AMENDMENT OR WAIVER OF OR ANY CONSENT TO ANY DEPARTURE FROM THE CREDIT AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER AGREEMENT OR INSTRUMENT GOVERNING OR EVIDENCING ANY SECURED OBLIGATIONS;   (C)           ANY EXCHANGE, RELEASE OR NON-PERFECTION OF ANY OTHER COLLATERAL, OR ANY RELEASE OR AMENDMENT OR WAIVER OF OR CONSENT TO DEPARTURE FROM ANY GUARANTY, FOR ALL OR ANY OF THE SECURED OBLIGATIONS;   (D)           THE INSOLVENCY OF ANY CREDIT PARTY; OR   10 --------------------------------------------------------------------------------   (E)           ANY OTHER CIRCUMSTANCE WHICH MIGHT OTHERWISE CONSTITUTE A DEFENSE AVAILABLE TO, OR A DISCHARGE OF, PLEDGORS.   13.           RELEASE. EACH OF THE PLEDGORS CONSENTS AND AGREES THAT AGENT MAY AT ANY TIME, OR FROM TIME TO TIME, IN ITS DISCRETION:   (A)           RENEW, EXTEND OR CHANGE THE TIME OF PAYMENT, AND/OR THE MANNER, PLACE OR TERMS OF PAYMENT OF ALL OR ANY PART OF THE SECURED OBLIGATIONS; AND   (B)           EXCHANGE, RELEASE AND/OR SURRENDER ALL OR ANY OF THE COLLATERAL (INCLUDING THE PLEDGED COLLATERAL), OR ANY PART THEREOF, BY WHOMSOEVER DEPOSITED, WHICH IS NOW OR MAY HEREAFTER BE HELD BY AGENT IN CONNECTION WITH ALL OR ANY OF THE SECURED OBLIGATIONS; ALL IN SUCH MANNER AND UPON SUCH TERMS AS AGENT MAY DEEM PROPER, AND WITHOUT NOTICE TO OR FURTHER ASSENT FROM ANY OF THE PLEDGORS, IT BEING HEREBY AGREED THAT EACH OF THE PLEDGORS SHALL BE AND REMAIN BOUND UPON THIS AGREEMENT, IRRESPECTIVE OF THE VALUE OR CONDITION OF ANY OF THE COLLATERAL, AND NOTWITHSTANDING ANY SUCH CHANGE, EXCHANGE, SETTLEMENT, COMPROMISE, SURRENDER, RELEASE, RENEWAL OR EXTENSION, AND NOTWITHSTANDING ALSO THAT THE SECURED OBLIGATIONS MAY, AT ANY TIME, EXCEED THE AGGREGATE PRINCIPAL AMOUNT THEREOF SET FORTH IN THE CREDIT AGREEMENT, OR ANY OTHER AGREEMENT GOVERNING ANY SECURED OBLIGATIONS. EACH OF THE PLEDGORS HEREBY WAIVES NOTICE OF ACCEPTANCE OF THIS AGREEMENT, AND ALSO PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR OF ANY AND ALL OF THE SECURED OBLIGATIONS, EXCEPT AS EXPRESSLY REQUIRED BY THE CREDIT AGREEMENT, AND PROMPTNESS IN COMMENCING SUIT AGAINST ANY PARTY HERETO OR LIABLE HEREON, AND IN GIVING ANY NOTICE TO OR OF MAKING ANY CLAIM OR DEMAND HEREUNDER UPON ANY PLEDGOR. NO ACT OR OMISSION OF ANY KIND ON AGENT’S PART SHALL IN ANY EVENT AFFECT OR IMPAIR THIS AGREEMENT.   14.           REINSTATEMENT. THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD, SUBSEQUENT TO THE EXECUTION HEREOF, ANY PETITION BE FILED BY OR AGAINST EACH OF THE PLEDGORS OR ANY PLEDGED ENTITY FOR LIQUIDATION OR REORGANIZATION, SHOULD ANY OF THE PLEDGORS OR ANY PLEDGED ENTITY MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY SIGNIFICANT PART OF SUCH PLEDGOR’S OR A PLEDGED ENTITY’S ASSETS, AND SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND PERFORMANCE OF THE SECURED OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED BY ANY OBLIGEE OF THE SECURED OBLIGATIONS, WHETHER AS A “VOIDABLE PREFERENCE”, “FRAUDULENT CONVEYANCE”, OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT OR PERFORMANCE HAD NOT BEEN MADE. IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS RESCINDED, REDUCED, RESTORED OR RETURNED, THE SECURED OBLIGATIONS SHALL BE REINSTATED AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED, RESTORED OR RETURNED.   15.           MISCELLANEOUS.   (A)           AGENT MAY EXECUTE ANY OF ITS DUTIES HEREUNDER BY OR THROUGH AGENTS OR EMPLOYEES AND SHALL BE ENTITLED TO ADVICE OF COUNSEL CONCERNING ALL MATTERS PERTAINING TO ITS DUTIES HEREUNDER.   11 --------------------------------------------------------------------------------   (B)           EACH OF THE PLEDGORS AGREES TO PROMPTLY REIMBURSE AGENT FOR ACTUAL OUT-OF-POCKET EXPENSES, INCLUDING, WITHOUT LIMITATION, REASONABLE COUNSEL FEES, INCURRED BY AGENT IN CONNECTION WITH THE ADMINISTRATION AND ENFORCEMENT OF THIS AGREEMENT, EXEPT AND ONLY TO THE EXTENT PROHIBITED BY AN ORDER OF THE BANKRUPTCY COURT.   (C)           NEITHER AGENT, NOR ANY OF ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL SHALL BE LIABLE FOR ANY ACTION LAWFULLY TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM HEREUNDER OR IN CONNECTION HEREWITH, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.   (D)           THIS AGREEMENT SHALL BE BINDING UPON EACH OF THE PLEDGORS AND ITS SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF ANY PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, AGENT AND ITS SUCCESSORS AND ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF AGENT AND PLEDGORS.   16.           SEVERABILITY. IF FOR ANY REASON ANY PROVISION OR PROVISIONS HEREOF ARE DETERMINED TO BE INVALID AND CONTRARY TO ANY EXISTING OR FUTURE LAW, SUCH INVALIDITY SHALL NOT IMPAIR THE OPERATION OF OR EFFECT THOSE PORTIONS OF THIS AGREEMENT WHICH ARE VALID.   17.           NOTICES. EXCEPT AS OTHERWISE PROVIDED HEREIN, WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED UPON ANY OF THE PARTIES BY ANY OTHER PARTY, OR WHENEVER ANY OF THE PARTIES DESIRES TO GIVE AND SERVE UPON ANY OTHER PARTY ANY COMMUNICATION WITH RESPECT TO THIS SECURITY AGREEMENT, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE GIVEN IN THE MANNER, AND DEEMED RECEIVED, AS PROVIDED FOR IN THE CREDIT AGREEMENT.   18.           SECTION TITLES. THE SECTION TITLES CONTAINED IN THIS AGREEMENT ARE AND SHALL BE WITHOUT SUBSTANTIVE MEANING OR CONTENT OF ANY KIND WHATSOEVER AND ARE NOT A PART OF THE AGREEMENT BETWEEN THE PARTIES HERETO.   19.           COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, WHICH SHALL, COLLECTIVELY AND SEPARATELY, CONSTITUTE ONE AGREEMENT.   20.           BENEFIT OF LENDERS. ALL SECURITY INTERESTS GRANTED OR CONTEMPLATED HEREBY SHALL BE FOR THE BENEFIT OF AGENT AND LENDERS, AND ALL PROCEEDS OR PAYMENTS REALIZED FROM THE PLEDGED COLLATERAL IN ACCORDANCE HEREWITH SHALL BE APPLIED TO THE OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT.   12 --------------------------------------------------------------------------------   [Remainder of page intentionally left blank]   13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Borrower Pledge Agreement to be duly executed as of the date first written above.     PLEDGORS:       CURATIVE HEALTH SERVICES, INC.           By:     Name:     Title:           EBIOCARE.COM, INC.           By:     Name:       Title:             HEMOPHILIA ACCESS, INC.           By:     Name:       Title:             APEX THERAPEUTIC CARE, INC.           By:     Name:       Title:             CHS SERVICES, INC.           By:     Name:       Title:       [Signature Page to Borrower Pledge Agreement]   --------------------------------------------------------------------------------     CURATIVE HEALTH SERVICES OF NEW YORK, INC.           By:     Name:       Title:             OPTIMAL CARE PLUS, INC.           By:     Name:       Title:             CURATIVE HEALTH SERVICES CO.           By:     Name:       Title:             INFINITY INFUSION, LLC       By: Curative Health Services Co., its Sole Member           By:     Name:       Title:             INFINITY INFUSION II, LLC       By: Curative Health Services Co., its Sole Member       By:     Name:       Title:     --------------------------------------------------------------------------------     INFINITY INFUSION CARE, LTD.       By: Infinity Infusion II, LLC, its Sole General Partner       By: Curative Health Services Co., the Sole Member of Infinity Infusion II, LLC           By:     Name:       Title:             MEDCARE, INC.           By:     Name:       Title:             CURATIVE PHARMACY SERVICES, INC.           By:     Name:       Title:         CRITICAL CARE SYSTEMS, INC.           By:       Name:       Title:               CURATIVE HEALTH SERVICES III CO       By:       Name:       Title:       --------------------------------------------------------------------------------     GENERAL ELECTRIC CAPITAL CORPORATION, as Agent           By:       Name:       Title:         [Lender Signature Page to Borrower Pledge Agreement] --------------------------------------------------------------------------------   SCHEDULE I   PART A   PLEDGED SHARES   1. Curative Health Services, Inc.   Pledged Entity   Class of Stock   Stock Certificate Number(s)   Number of Shares   Percentage of Outstanding Shares   Curative Health Services of New York, Inc.   Common   2   200   100 % CCurative Health Services Co.   Common   1   100   100 % CCritical Care Systems, Inc.   Common   CC-87   250,000   100 % CCritical Care Systems, Inc.   Series A Preferred   AP-15   15,954.769   100 % CCritical Care Systems, Inc.   Series B Preferred   BP-26   7,099.684   100 %   2. eBioCare.com, Inc.   None.   3. Hemophilia Access, Inc.   None.   4. Apex Therapeutic Care, Inc.   None.   5. Curative Health Services of New York, Inc.   None.   6. CHS Services, Inc.   None.   --------------------------------------------------------------------------------   7. Optimal Care Plus, Inc.   None.   8. Infinity Infusion, LLC   Pledged Entity   Class of Stock   Stock Certificate Number(s)   Number of Shares   Percentage of Outstanding Shares   Infinity Infusion Care, Ltd.   Limited Partnership Interest   G-1   Not Applicable   99.00 %   9. Infinity Infusion II, LLC   Pledged Entity   Class of Stock   Stock Certificate Number(s)   Number of Shares   Percentage of Outstanding Shares   Infinity Infusion Care, Ltd.   Limited Partnership Interest   L-1   Not Applicable   1.00 %   10. MedCare, Inc.   None.   11. Infinity Infusion Care, Ltd.   None.   12. Curative Pharmacy Services Inc.   None.   13. Critical Care Systems, Inc.   None.   --------------------------------------------------------------------------------   14. Curative Health Services Co.   Pledged Entity   Class of Stock   Stock Certificate Number(s)   Number of Shares   Percentage of Outstanding Shares   eBioCare.com, Inc.   Common   40   13,086,666   100 % Hemophilia Access, Inc.   Common   2   100   100 % Apex Therapeutic Care, Inc.   Common   13   120,000   100 % CHS Services, Inc.   Common   2   100   100 % Curative Pharmacy Services, Inc.   Common   1   200   100 % Optimal Care Plus, Inc.   Common   1   200   100 % Infinity Infusion, LLC   Uncertificated shares of limited liability company interests   100 % Infinity Infusion II, LLC   Uncertificated shares of limited liability company interests   100 % MedCare, Inc.   Common   1   200   100 % CCurative Health Services III Co. B   Common   1   100   100 %   15. Curative Health Services III Co.   None.   --------------------------------------------------------------------------------   SCHEDULE II   PLEDGE AMENDMENT   This Pledge Amendment, dated                                 ,        is delivered pursuant to Section 6(d) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 5 of the Pledge Agreement are and continue to be true and correct, both as to the promissory notes, instruments and shares pledged prior to this Pledge Amendment and as to the promissory notes, instruments and shares pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Borrower Pledge Agreement, dated March     , 2006, by and among each of the Persons executing the signature page thereof as a Pledgor and General Electric Capital Corporation, as Agent (as amended, supplemented, restated or modified from time to time, the “Pledge Agreement”) and that the Pledged Shares and Pledged Indebtedness listed on this Pledge Amendment shall be and become a part of the Pledged Collateral referred to in said Pledge Agreement and shall secure all Secured Obligations referred to in said Pledge Agreement. The undersigned acknowledges that any promissory notes, instruments or shares not included in the Pledged Collateral at the discretion of Agent may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Secured Obligations.     [NAME OF PLEDGOR]     By:     Name:     Title:       Name and Address of Pledgor   Pledged Entity   Class of Stock   Certificate Number(s)   Number Of Shares                                                                 Pledged Entity   Initial Principal Amount   Issue Date   Maturity Date   Interest Rate                                                                 --------------------------------------------------------------------------------   SCHEDULE III   CONTROL AGREEMENT   The undersigned                                           , a                                           (“Pledged Entity”), hereby acknowledges receipt of a completed and executed counterpart of the Borrower Pledge Agreement, dated as of March     , 2006, by and among Curative Health Services Co., Curative Health Services, Inc., eBioCare.com, Inc., Hemophilia Access, Inc., Apex Therapeutic Care, Inc., CHS Services, Inc., Curative Health Services of New York, Inc., Optimal Care Plus, Inc., Infinity Infusion, LLC, Infinity Infusion II, LLC, Infinity Infusion Care, Ltd., MedCare, Inc., Curative Pharmacy Services, Inc., Critical Care Systems, Inc., Curative Health Services III Co. (collectively, the “Pledgors”) and General Electric Capital Corporation, as agent (the “Agent”), and agrees to be bound thereby. The Pledged Entity further agrees that it will comply with instructions originated by the Agent (or its successors or assigns) with respect to the Pledged Stock issued by the Pledged Entity without further consent of the Pledgor. The Pledged Entity further agrees to mark its other Stock records to reflect that the Pledged Stock issued by the Pledged Entity is subject to Agent’s security interest.   IN WITNESS WHEREOF, the Pledged Entity has executed this Control Agreement as of the date first above written.                   By:       Name:       Title:       --------------------------------------------------------------------------------   GUARANTY   This GUARANTY (this “Guaranty”), dated as of March       , 2006, by and between CURATIVE HEALTH SERVICES III CO., a Minnesota corporation (the “Guarantor”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and as agent (in such capacity, “Agent”) for itself and the lenders from time to time signatory to the Credit Agreement hereinafter defined (“Lenders”).   W I T N E S S E T H:   WHEREAS, pursuant to that certain Debtor In Possession Credit Agreement, dated as of the date hereof among Curative Health Services, Inc. (“Holdings”), eBioCare.com, Inc., Hemophilia Access, Inc., Apex Therapeutic Care, Inc., CHS Services, Inc., Curative Health Services of New York, Inc., Optimal Care Plus, Inc., Infinity Infusion, LLC, Infinity Infusion II, LLC, Infinity Infusion Care, Ltd., MedCare, Inc., Curative Pharmacy Services, Inc. (each a “Borrower”, and collectively with Holdings, the “Borrowers”), the other Credit Parties signatory thereto, Agent and the Persons designated as Lenders in the Credit Agreement (the “Lenders”) have entered into that certain Credit Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), Lenders have agreed to make the Loans and to incur the Letter of Credit Obligations on behalf of Borrowers;   WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and other Loan Documents and to induce Lenders to make the Loans as provided for in the Credit Agreement, Guarantor has agreed to guarantee payment of the Obligations;   NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce Lenders to provide the Loans and other financial accommodations under the Credit Agreement, it is agreed as follows:   1.                                       DEFINITIONS.   (a)                                  Capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement, unless otherwise defined herein.   (b)                                 References to this “Guaranty” shall mean this Guaranty, including all amendments, modifications and supplements and any annexes, exhibits and schedules to any of the foregoing, and shall refer to this Guaranty as the same may be in effect at the time such reference becomes operative.   (c)                                  References to the “Termination Date” shall mean the date on which (a) the Loans have been indefeasibly repaid in full in cash, (b) all other Obligations under the Credit Agreement and the other Loan Documents have been completely discharged, (c) all of the L/C Obligations have been cash collateralized, cancelled or backed by standby letters of credit in accordance with Section 2.5 of the Credit Agreement, and (d) Borrowers shall not have any further right to borrower any monies under the Credit Agreement.   --------------------------------------------------------------------------------   2.                                       THE GUARANTY.   2.1.                              GUARANTY OF GUARANTEED OBLIGATIONS OF BORROWER. GUARANTOR HEREBY UNCONDITIONALLY GUARANTEES TO AGENT AND LENDERS, AND THEIR RESPECTIVE SUCCESSORS, ENDORSEES, TRANSFEREES AND ASSIGNS, THE PROMPT PAYMENT (WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE) AND PERFORMANCE OF THE OBLIGATIONS OF BORROWER (HEREINAFTER THE “GUARANTEED OBLIGATIONS”). GUARANTOR AGREES THAT THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT OF COLLECTION, AND THAT GUARANTOR’S OBLIGATIONS UNDER THIS GUARANTY SHALL BE PRIMARY, ABSOLUTE AND UNCONDITIONAL, IRRESPECTIVE OF, AND UNAFFECTED BY:   (A)                                  THE GENUINENESS, VALIDITY, REGULARITY, ENFORCEABILITY OR ANY FUTURE AMENDMENT OF, OR CHANGE IN THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT TO WHICH ANY CREDIT PARTY AND/OR GUARANTOR ARE OR MAY BECOME A PARTY;   (B)                                 THE ABSENCE OF ANY ACTION TO ENFORCE THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE WAIVER OR CONSENT BY AGENT AND/OR LENDERS WITH RESPECT TO ANY OF THE PROVISIONS THEREOF;   (C)                                  THE EXISTENCE, VALUE OR CONDITION OF, OR FAILURE TO PERFECT ITS LIEN AGAINST, ANY COLLATERAL FOR THE GUARANTEED OBLIGATIONS OR ANY ACTION, OR THE ABSENCE OF ANY ACTION, BY AGENT IN RESPECT THEREOF (INCLUDING, WITHOUT LIMITATION, THE RELEASE OF ANY SUCH SECURITY);   (D)                                 THE INSOLVENCY OF ANY CREDIT PARTY; OR   (E)                                  ANY OTHER ACTION OR CIRCUMSTANCES WHICH MIGHT OTHERWISE CONSTITUTE A LEGAL OR EQUITABLE DISCHARGE OR DEFENSE OF A SURETY OR GUARANTOR,   it being agreed by Guarantor that its obligations under this Guaranty shall not be discharged until the Termination Date. Guarantor shall be regarded as a primary obligor with respect to the Guaranteed Obligations. Guarantor agrees that any notice or directive given at any time to Agent which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by Agent and Lenders, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless Agent and Lenders have specifically agreed otherwise in writing. It is agreed among Guarantor, Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and that, but for this Guaranty and such waivers, Agent and Lenders would decline to enter into the Credit Agreement.   2 --------------------------------------------------------------------------------   2.2.                              DEMAND BY AGENT OR LENDERS. IN ADDITION TO THE TERMS OF THE GUARANTY SET FORTH IN SECTION 2.1 HEREOF, AND IN NO MANNER IMPOSING ANY LIMITATION ON SUCH TERMS, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT, IF, AT ANY TIME, THE OUTSTANDING PRINCIPAL AMOUNT OF THE GUARANTEED OBLIGATIONS UNDER THE CREDIT AGREEMENT (INCLUDING ALL ACCRUED INTEREST THEREON) IS DECLARED TO BE IMMEDIATELY DUE AND PAYABLE, THEN GUARANTOR SHALL, WITHOUT DEMAND, PAY TO THE HOLDERS OF THE GUARANTEED OBLIGATIONS THE ENTIRE OUTSTANDING GUARANTEED OBLIGATIONS DUE AND OWING TO SUCH HOLDERS. PAYMENT BY GUARANTOR SHALL BE MADE TO AGENT IN IMMEDIATELY AVAILABLE FEDERAL FUNDS TO AN ACCOUNT DESIGNATED BY AGENT OR AT THE ADDRESS SET FORTH HEREIN FOR THE GIVING OF NOTICE TO AGENT OR AT ANY OTHER ADDRESS THAT MAY BE SPECIFIED IN WRITING FROM TIME TO TIME BY AGENT, AND SHALL BE CREDITED AND APPLIED TO THE GUARANTEED OBLIGATIONS.   2.3.                              ENFORCEMENT OF GUARANTY. IN NO EVENT SHALL AGENT HAVE ANY OBLIGATION (ALTHOUGH IT IS ENTITLED, AT ITS OPTION) TO PROCEED AGAINST ANY BORROWER OR ANY OTHER CREDIT PARTY OR ANY COLLATERAL PLEDGED TO SECURE GUARANTEED OBLIGATIONS BEFORE SEEKING SATISFACTION FROM THE GUARANTOR, AND AGENT MAY PROCEED, PRIOR OR SUBSEQUENT TO, OR SIMULTANEOUSLY WITH, THE ENFORCEMENT OF AGENT’S RIGHTS HEREUNDER, TO EXERCISE ANY RIGHT OR REMEDY WHICH IT MAY HAVE AGAINST ANY COLLATERAL, AS A RESULT OF ANY LIEN IT MAY HAVE AS SECURITY FOR ALL OR ANY PORTION OF THE GUARANTEED OBLIGATIONS.   2.4.                              WAIVER. IN ADDITION TO THE WAIVERS CONTAINED IN SECTION 2.1 HEREOF, GUARANTOR WAIVES, AND AGREES THAT IT SHALL NOT AT ANY TIME INSIST UPON, PLEAD OR IN ANY MANNER WHATEVER CLAIM OR TAKE THE BENEFIT OR ADVANTAGE OF, ANY APPRAISAL, VALUATION, STAY, EXTENSION, MARSHALING OF ASSETS OR REDEMPTION LAWS, OR EXEMPTION, WHETHER NOW OR AT ANY TIME HEREAFTER IN FORCE, WHICH MAY DELAY, PREVENT OR OTHERWISE AFFECT THE PERFORMANCE BY GUARANTOR OF ITS GUARANTEED OBLIGATIONS UNDER, OR THE ENFORCEMENT BY AGENT OR LENDERS OF, THIS GUARANTY. GUARANTOR HEREBY WAIVES DILIGENCE, PRESENTMENT AND DEMAND (WHETHER FOR NON-PAYMENT OR PROTEST OR OF ACCEPTANCE, MATURITY, EXTENSION OF TIME, CHANGE IN NATURE OR FORM OF THE GUARANTEED OBLIGATIONS, ACCEPTANCE OF FURTHER SECURITY, RELEASE OF FURTHER SECURITY, COMPOSITION OR AGREEMENT ARRIVED AT AS TO THE AMOUNT OF, OR THE TERMS OF, THE GUARANTEED OBLIGATIONS, NOTICE OF ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION OR ANY OTHER FACT WHICH MIGHT INCREASE THE RISK TO GUARANTOR) WITH RESPECT TO ANY OF THE GUARANTEED OBLIGATIONS OR ALL OTHER DEMANDS WHATSOEVER AND WAIVE THE BENEFIT OF ALL PROVISIONS OF LAW WHICH ARE OR MIGHT BE IN CONFLICT WITH THE TERMS OF THIS GUARANTY. GUARANTOR REPRESENTS, WARRANTS AND AGREES THAT, AS OF THE DATE OF THIS GUARANTY, ITS OBLIGATIONS UNDER THIS GUARANTY ARE NOT SUBJECT TO ANY OFFSETS OR DEFENSES AGAINST AGENT OR LENDERS OR ANY CREDIT PARTY OF ANY KIND. GUARANTOR FURTHER AGREES THAT ITS OBLIGATIONS UNDER THIS GUARANTY SHALL NOT BE SUBJECT TO ANY COUNTERCLAIMS, OFFSETS OR DEFENSES AGAINST AGENT OR ANY LENDER OR AGAINST ANY CREDIT PARTY OF ANY KIND WHICH MAY ARISE IN THE FUTURE.   2.5.                              BENEFIT OF GUARANTY. THE PROVISIONS OF THIS GUARANTY ARE FOR THE BENEFIT OF AGENT AND LENDERS AND THEIR RESPECTIVE SUCCESSORS, TRANSFEREES, ENDORSEES AND ASSIGNS, AND NOTHING HEREIN CONTAINED SHALL IMPAIR, AS BETWEEN ANY CREDIT PARTY AND AGENT OR LENDERS, THE OBLIGATIONS OF ANY CREDIT PARTY UNDER THE LOAN DOCUMENTS. IN THE EVENT ALL OR ANY PART OF THE GUARANTEED OBLIGATIONS ARE TRANSFERRED, INDORSED OR ASSIGNED BY AGENT OR ANY LENDER TO ANY PERSON OR PERSONS, ANY REFERENCE TO “AGENT” OR “LENDER” HEREIN SHALL BE DEEMED TO REFER EQUALLY TO SUCH PERSON OR PERSONS.   3 --------------------------------------------------------------------------------   2.6.                              MODIFICATION OF GUARANTEED OBLIGATIONS, ETC. GUARANTOR HEREBY ACKNOWLEDGES AND AGREES THAT AGENT AND LENDERS MAY AT ANY TIME OR FROM TIME TO TIME, WITH OR WITHOUT THE CONSENT OF, OR NOTICE TO, GUARANTOR:   (A)                                  CHANGE OR EXTEND THE MANNER, PLACE OR TERMS OF PAYMENT OF, OR RENEW OR ALTER ALL OR ANY PORTION OF, THE GUARANTEED OBLIGATIONS;   (B)                                 TAKE ANY ACTION UNDER OR IN RESPECT OF THE LOAN DOCUMENTS IN THE EXERCISE OF ANY REMEDY, POWER OR PRIVILEGE CONTAINED THEREIN OR AVAILABLE TO IT AT LAW, EQUITY OR OTHERWISE, OR WAIVE OR REFRAIN FROM EXERCISING ANY SUCH REMEDIES, POWERS OR PRIVILEGES;   (C)                                  AMEND OR MODIFY, IN ANY MANNER WHATSOEVER, THE LOAN DOCUMENTS;   (D)                                 EXTEND OR WAIVE THE TIME FOR ANY CREDIT PARTY’S PERFORMANCE OF, OR COMPLIANCE WITH, ANY TERM, COVENANT OR AGREEMENT ON ITS PART TO BE PERFORMED OR OBSERVED UNDER THE LOAN DOCUMENTS, OR WAIVE SUCH PERFORMANCE OR COMPLIANCE OR CONSENT TO A FAILURE OF, OR DEPARTURE FROM, SUCH PERFORMANCE OR COMPLIANCE;   (E)                                  TAKE AND HOLD COLLATERAL FOR THE PAYMENT OF THE GUARANTEED OBLIGATIONS GUARANTEED HEREBY OR SELL, EXCHANGE, RELEASE, DISPOSE OF, OR OTHERWISE DEAL WITH, ANY PROPERTY PLEDGED, MORTGAGED OR CONVEYED, OR IN WHICH AGENT OR LENDERS HAVE BEEN GRANTED A LIEN, TO SECURE ANY OBLIGATIONS;   (F)                                    RELEASE ANYONE WHO MAY BE LIABLE IN ANY MANNER FOR THE PAYMENT OF ANY AMOUNTS OWED BY GUARANTOR OR ANY CREDIT PARTY TO AGENT OR ANY LENDER;   (G)                                 MODIFY OR TERMINATE THE TERMS OF ANY INTERCREDITOR OR SUBORDINATION AGREEMENT PURSUANT TO WHICH CLAIMS OF OTHER CREDITORS OF GUARANTOR OR ANY CREDIT PARTY ARE SUBORDINATED TO THE CLAIMS OF AGENT AND LENDERS; AND/OR   (H)                                 APPLY ANY SUMS BY WHOMEVER PAID OR HOWEVER REALIZED TO ANY AMOUNTS OWING BY GUARANTOR OR ANY CREDIT PARTY TO AGENT OR ANY LENDER IN SUCH MANNER AS AGENT OR ANY LENDER SHALL DETERMINE IN ITS DISCRETION;   and Agent and Lenders shall not incur any liability to Guarantor as a result thereof, and no such action shall impair or release the Guaranteed Obligations of Guarantor under this Guaranty.   2.7.                              REINSTATEMENT. THIS GUARANTY SHALL REMAIN IN FULL FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD ANY PETITION BE FILED BY OR AGAINST ANY CREDIT PARTY OR GUARANTOR FOR LIQUIDATION OR REORGANIZATION, SHOULD ANY CREDIT PARTY OR GUARANTOR BECOME INSOLVENT OR MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY SIGNIFICANT PART OF SUCH CREDIT PARTY’S OR GUARANTOR’S ASSETS, AND SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND PERFORMANCE OF THE GUARANTEED OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED BY AGENT OR ANY LENDER, WHETHER AS A “VOIDABLE PREFERENCE,” “FRAUDULENT CONVEYANCE,” OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT OR   4 --------------------------------------------------------------------------------   PERFORMANCE HAD NOT BEEN MADE. IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS RESCINDED, REDUCED, RESTORED OR RETURNED, THE GUARANTEED OBLIGATIONS SHALL BE REINSTATED AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED, RESTORED OR RETURNED.   2.8.                              DEFERRAL OF SUBROGATION, ETC. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS GUARANTY, OR IN ANY OTHER LOAN DOCUMENT, GUARANTOR HEREBY:   (A)                                  EXPRESSLY AND IRREVOCABLY WAIVES, ON BEHALF OF ITSELF AND ITS SUCCESSORS AND ASSIGNS (INCLUDING ANY SURETY) UNTIL THE TERMINATION DATE, ANY AND ALL RIGHTS AT LAW OR IN EQUITY TO SUBROGATION, TO REIMBURSEMENT, TO EXONERATION, TO CONTRIBUTION, TO INDEMNIFICATION, TO SET OFF OR TO ANY OTHER RIGHTS THAT COULD ACCRUE TO A SURETY AGAINST A PRINCIPAL, TO A GUARANTOR AGAINST A PRINCIPAL, TO A GUARANTOR AGAINST A MAKER OR OBLIGOR, TO AN ACCOMMODATION PARTY AGAINST THE PARTY ACCOMMODATED, TO A HOLDER OR TRANSFEREE AGAINST A MAKER, OR TO THE HOLDER OF ANY CLAIM AGAINST ANY PERSON, AND WHICH GUARANTOR MAY HAVE OR HEREAFTER ACQUIRE AGAINST ANY CREDIT PARTY IN CONNECTION WITH OR AS A RESULT OF GUARANTOR’S EXECUTION, DELIVERY AND/OR PERFORMANCE OF THIS GUARANTY, OR ANY OTHER DOCUMENTS TO WHICH GUARANTOR IS A PARTY OR OTHERWISE; AND   (B)                                 ACKNOWLEDGES AND AGREES (I) THAT THIS WAIVER IS INTENDED TO BENEFIT AGENT AND LENDERS AND SHALL NOT LIMIT OR OTHERWISE EFFECT GUARANTOR’S LIABILITY HEREUNDER OR THE ENFORCEABILITY OF THIS GUARANTY, AND (II) THAT AGENT, LENDERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS ARE INTENDED THIRD PARTY BENEFICIARIES OF THE WAIVERS AND AGREEMENTS SET FORTH IN THIS SECTION 2.8 AND THEIR RIGHTS UNDER THIS SECTION 2.8 SHALL SURVIVE PAYMENT IN FULL OF THE GUARANTEED OBLIGATIONS UNTIL THE TERMINATION DATE.   2.9.                              ELECTION OF REMEDIES. IF AGENT MAY, UNDER APPLICABLE LAW, PROCEED TO REALIZE BENEFITS UNDER ANY OF THE LOAN DOCUMENTS GIVING AGENT AND LENDERS A LIEN UPON ANY COLLATERAL OWNED BY ANY CREDIT PARTY, EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR ENFORCEMENT, AGENT MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF SUCH REMEDIES OR RIGHTS IT MAY PURSUE WITHOUT AFFECTING ANY OF SUCH RIGHTS AND REMEDIES UNDER THIS GUARANTY. IF, IN THE EXERCISE OF ANY OF ITS RIGHTS AND REMEDIES, AGENT SHALL FORFEIT ANY OF ITS RIGHTS OR REMEDIES, INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST ANY CREDIT PARTY, WHETHER BECAUSE OF ANY APPLICABLE LAWS PERTAINING TO “ELECTION OF REMEDIES” OR THE LIKE, GUARANTOR HEREBY CONSENTS TO SUCH ACTION BY AGENT AND WAIVE ANY CLAIM BASED UPON SUCH ACTION, EVEN IF SUCH ACTION BY AGENT SHALL RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF SUBROGATION WHICH GUARANTOR MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY AGENT. ANY ELECTION OF REMEDIES WHICH RESULTS IN THE DENIAL OR IMPAIRMENT OF THE RIGHT OF AGENT TO SEEK A DEFICIENCY JUDGMENT AGAINST ANY CREDIT PARTY SHALL NOT IMPAIR GUARANTOR’S OBLIGATION TO PAY THE FULL AMOUNT OF THE GUARANTEED OBLIGATIONS. IN THE EVENT AGENT SHALL BID AT ANY FORECLOSURE OR TRUSTEE’S SALE OR AT ANY PRIVATE SALE PERMITTED BY LAW OR THE LOAN DOCUMENTS, AGENT MAY BID ALL OR LESS THAN THE AMOUNT OF THE GUARANTEED OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED NOT BE PAID BY AGENT BUT SHALL BE CREDITED AGAINST THE GUARANTEED OBLIGATIONS. THE AMOUNT OF THE SUCCESSFUL BID AT ANY SUCH SALE SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF THE COLLATERAL AND THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING BALANCE OF THE GUARANTEED OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE GUARANTEED OBLIGATIONS GUARANTEED UNDER THIS GUARANTY, NOTWITHSTANDING THAT ANY PRESENT OR FUTURE LAW OR COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE AMOUNT OF ANY   5 --------------------------------------------------------------------------------   DEFICIENCY CLAIM TO WHICH AGENT AND LENDERS MIGHT OTHERWISE BE ENTITLED BUT FOR SUCH BIDDING AT ANY SUCH SALE.   2.10.                        FUNDS TRANSFERS. IF GUARANTOR SHALL ENGAGE IN ANY TRANSACTION AS A RESULT OF WHICH ANY BORROWER IS REQUIRED TO MAKE A MANDATORY PREPAYMENT WITH RESPECT TO THE GUARANTEED OBLIGATIONS UNDER THE TERMS OF THE CREDIT AGREEMENT (INCLUDING ANY ISSUANCE OR SALE OF SUCH GUARANTOR’S STOCK OR ANY SALE OF ITS ASSETS), GUARANTOR SHALL DISTRIBUTE TO, OR MAKE A CONTRIBUTION TO THE CAPITAL OF, THE BORROWER AN AMOUNT EQUAL TO THE MANDATORY PREPAYMENT REQUIRED UNDER THE TERMS OF THE CREDIT AGREEMENT.   3.                                       DELIVERIES.   In a form satisfactory to Agent, Guarantor shall deliver to Agent (with sufficient copies for each Lender), concurrently with the execution of this Guaranty and the Credit Agreement, the Loan Documents and other instruments, certificates and documents as are required to be delivered by Guarantor to Agent under the Credit Agreement.   4.                                       REPRESENTATIONS AND WARRANTIES.   To induce Lenders to make the Loans and incur L/C Obligations under the Credit Agreement, Guarantor makes the representations and warranties as Guarantor contained in the Credit Agreement, each of which is incorporated herein by reference, and the following representations and warranties to Agent and each Lender, each and all of which shall survive the execution and delivery of this Guaranty:   4.1.                              CORPORATE EXISTENCE; COMPLIANCE WITH LAW. GUARANTOR (I) IS A CORPORATION, LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF ITS JURISDICTION OF INCORPORATION OR ORGANIZATION; (II) IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING UNDER THE LAWS OF EACH JURISDICTION WHERE ITS OWNERSHIP OR LEASE OF PROPERTY OR THE CONDUCT OF ITS BUSINESS REQUIRES SUCH QUALIFICATION; (III) HAS THE REQUISITE CORPORATE POWER AND AUTHORITY AND THE LEGAL RIGHT TO OWN, PLEDGE, MORTGAGE AND OPERATE ITS PROPERTIES, TO LEASE THE PROPERTY IT OPERATES UNDER LEASE, AND TO CONDUCT ITS BUSINESS AS NOW, HERETOFORE AND PROPOSED TO BE CONDUCTED; (IV) HAS ALL LICENSES, PERMITS, CONSENTS OR APPROVALS FROM OR BY, AND HAS MADE ALL MATERIAL FILINGS WITH, AND HAS GIVEN ALL NOTICES TO, ALL GOVERNMENTAL AUTHORITIES HAVING JURISDICTION, TO THE EXTENT REQUIRED FOR SUCH OWNERSHIP, OPERATION AND CONDUCT EXCEPT WHERE THE FAILURE TO HAVE OR OBTAIN ANY OF THE FOREGOING COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; (V) IS IN COMPLIANCE WITH ITS CHARTER AND BY-LAWS; AND (VI) IS IN COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF LAW, EXCEPT WHERE THE FAILURE TO COMPLY, INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.   4.2.                              EXECUTIVE OFFICES. GUARANTOR’S EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS ARE AS SET FORTH IN SCHEDULE III OF THE GUARANTOR SECURITY AGREEMENT.   6 --------------------------------------------------------------------------------   4.3.                              CORPORATE POWER; AUTHORIZATION; ENFORCEABLE GUARANTEED OBLIGATIONS. THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS GUARANTY AND ALL OTHER LOAN DOCUMENTS AND ALL INSTRUMENTS AND DOCUMENTS TO BE DELIVERED BY GUARANTOR HEREUNDER AND UNDER THE CREDIT AGREEMENT ARE WITHIN GUARANTOR’S CORPORATE POWER, HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY OR PROPER CORPORATE ACTION, INCLUDING THE CONSENT OF STOCKHOLDERS AND INTEREST HOLDERS WHERE REQUIRED, ARE NOT IN CONTRAVENTION OF ANY PROVISION OF GUARANTOR’S CHARTER OR BY-LAWS, DO NOT VIOLATE ANY LAW OR REGULATION, OR ANY ORDER OR DECREE OF ANY GOVERNMENTAL AUTHORITY, DO NOT CONFLICT WITH OR RESULT IN THE BREACH OF, OR CONSTITUTE A DEFAULT UNDER, OR ACCELERATE OR PERMIT THE ACCELERATION OF ANY PERFORMANCE REQUIRED BY, ANY INDENTURE, MORTGAGE, DEED OF TRUST, LEASE, AGREEMENT OR OTHER INSTRUMENT TO WHICH GUARANTOR IS A PARTY OR BY WHICH GUARANTOR OR ANY OF ITS PROPERTY IS BOUND, DO NOT RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN UPON ANY OF THE PROPERTY OF GUARANTOR, OTHER THAN THOSE IN FAVOR OF AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, AND THE SAME DO NOT REQUIRE THE CONSENT OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY OR ANY OTHER PERSON EXCEPT THOSE REFERRED TO IN SECTION 4.2 OF THE CREDIT AGREEMENT, ALL OF WHICH HAVE BEEN DULY OBTAINED, MADE OR COMPLIED WITH PRIOR TO THE CLOSING DATE. ON OR PRIOR TO THE CLOSING DATE, THIS GUARANTY AND EACH OF THE LOAN DOCUMENTS TO WHICH GUARANTOR IS A PARTY SHALL HAVE BEEN DULY EXECUTED AND DELIVERED FOR THE BENEFIT OF OR ON BEHALF OF GUARANTOR, AND EACH SHALL THEN CONSTITUTE A LEGAL, VALID AND BINDING OBLIGATION OF GUARANTOR, ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE WITH ITS TERMS SUBJECT TO (I) THE EFFECT OF ANY APPLICABLE BANKRUPTCY, FRAUDULENT TRANSFER, MORATORIUM, INSOLVENCY, REORGANIZATION OR OTHER SIMILAR LAWS AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND (II) THE EFFECT OF GENERAL PRINCIPALS OF EQUITY WHETHER APPLIED BY A COURT OF LAW OR EQUITY.   5.                                       FURTHER ASSURANCES.   Guarantor agrees, upon the written request of Agent or any Lender, to execute and deliver to Agent or such Lender, from time to time, any additional instruments or documents reasonably considered necessary by Agent or such Lender to cause this Guaranty to be, become or remain valid and effective in accordance with its terms.   6.                                       PAYMENTS FREE AND CLEAR OF TAXES.   All payments required to be made by Guarantor hereunder shall be made to Agent and Lenders free and clear of, and without deduction for, any and all present and future Taxes. If Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder, (a) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (b) Guarantor shall make such deductions, and (c) Guarantor shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Guarantor shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof. Guarantor shall indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 6) paid by Agent or such Lender, as   7 --------------------------------------------------------------------------------   appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.   7.                                       OTHER TERMS.   7.1.                              ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN DOCUMENTS, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS RELATING TO A GUARANTY OF THE LOANS AND ADVANCES UNDER THE LOAN DOCUMENTS AND/OR THE GUARANTEED OBLIGATIONS.   7.2.                              HEADINGS. THE HEADINGS IN THIS GUARANTY ARE FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT PART OF THE SUBSTANCE OF THIS GUARANTY.   7.3.                              SEVERABILITY. WHENEVER POSSIBLE, EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH A MANNER TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY.   7.4.                              NOTICES. WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED UPON ANY OF THE PARTIES BY ANY OTHER PARTY, OR WHENEVER ANY OF THE PARTIES DESIRES TO GIVE OR SERVE UPON ANOTHER ANY SUCH COMMUNICATION WITH RESPECT TO THIS GUARANTY, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE ADDRESSED TO THE PARTY TO BE NOTIFIED AS FOLLOWS:   (A)                                  IF TO AGENT, AT:   General Electric Capital Corporation 2 Bethesda Metro Center Suite 600 Bethesda, MD 20814 Attention:  Curative Health Services, Inc. Account Manager Facsimile No: (301) 347-3175 Telephone No.: (301) 664-9816   With a copy to:                                                             Moritt Hock Hamroff & Horowitz LLP 400 Garden City Plaza Garden City, NY 11530 Attention:  Marc L. Hamroff Facsimile No: (516) 873-2010 Telephone No.: (516) 873-2000   (B)                                 IF TO ANY LENDER, AT THE ADDRESS OF SUCH LENDER SPECIFIED IN THE CREDIT AGREEMENT.   8 --------------------------------------------------------------------------------   (C)                                  IF TO GUARANTOR, AT:   Curative Health Services III Co. c/o Curative Health Services, Inc. 61 Spit Brook Road Nashua, New Hampshire 03060 Attention:  Chief Financial Officer Facsimile No: (603) 966-3345 Telephone No.: (603) 888-1500   With a copy to:                                                                                                                                                             Curative Health Services, Inc. 61 Spit Brook Road Nashua, New Hampshire 03060 Attention: General Counsel Facsimile No: (603) 966-3345 Telephone No.: (603) 888-1500   -and-   With a copy to:                                                                                                                                                             Linklaters 1345 Avenue of the Americas New York, New York 10105 Attention:  Martin N. Flics Facsimile No.: (212) 903-9100 Telephone No.:(212) 903-9000   or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been validly served, given or delivered (i) upon the earlier of actual receipt and three (3) Business Days after the same shall have been deposited with the United States mail, registered or certified mail, return receipt requested, with proper postage prepaid, (ii) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 7.4), (iii) one (1) Business Day after deposit with a reputable overnight carrier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger.   7.5.                              SUCCESSORS AND ASSIGNS. THIS GUARANTY AND ALL OBLIGATIONS OF GUARANTOR HEREUNDER SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF GUARANTOR (INCLUDING A DEBTOR-IN-   9 --------------------------------------------------------------------------------   POSSESSION ON BEHALF OF GUARANTOR) AND SHALL, TOGETHER WITH THE RIGHTS AND REMEDIES OF AGENT, FOR ITSELF AND FOR THE BENEFIT OF LENDERS, HEREUNDER, INURE TO THE BENEFIT OF AGENT AND LENDERS, ALL FUTURE HOLDERS OF ANY INSTRUMENT EVIDENCING ANY OF THE OBLIGATIONS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. NO SALES OF PARTICIPATIONS, OTHER SALES, ASSIGNMENTS, TRANSFERS OR OTHER DISPOSITIONS OF ANY AGREEMENT GOVERNING OR INSTRUMENT EVIDENCING THE OBLIGATIONS OR ANY PORTION THEREOF OR INTEREST THEREIN SHALL IN ANY MANNER AFFECT THE RIGHTS OF AGENT AND LENDERS HEREUNDER. GUARANTOR MAY NOT ASSIGN, SELL, HYPOTHECATE OR OTHERWISE TRANSFER ANY INTEREST IN OR OBLIGATION UNDER THIS GUARANTY.   7.6.                              NO WAIVER; CUMULATIVE REMEDIES; AMENDMENTS. NEITHER AGENT NOR ANY LENDER SHALL BY ANY ACT, DELAY, OMISSION OR OTHERWISE BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS OR REMEDIES HEREUNDER, AND NO WAIVER SHALL BE VALID UNLESS IN WRITING, SIGNED BY AGENT AND THEN ONLY TO THE EXTENT THEREIN SET FORTH. A WAIVER BY AGENT, FOR ITSELF AND THE RATABLE BENEFIT OF LENDERS, OF ANY RIGHT OR REMEDY HEREUNDER ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO ANY RIGHT OR REMEDY WHICH AGENT WOULD OTHERWISE HAVE HAD ON ANY FUTURE OCCASION. NO FAILURE TO EXERCISE NOR ANY DELAY IN EXERCISING ON THE PART OF AGENT OR ANY LENDER, ANY RIGHT, POWER OR PRIVILEGE HEREUNDER, SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FUTURE EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE. THE RIGHTS AND REMEDIES HEREUNDER PROVIDED ARE CUMULATIVE AND MAY BE EXERCISED SINGLY OR CONCURRENTLY, AND ARE NOT EXCLUSIVE OF ANY RIGHTS AND REMEDIES PROVIDED BY LAW. NONE OF THE TERMS OR PROVISIONS OF THIS GUARANTY MAY BE WAIVED, ALTERED, MODIFIED, SUPPLEMENTED OR AMENDED EXCEPT BY AN INSTRUMENT IN WRITING, DULY EXECUTED BY AGENT AND GUARANTOR.   7.7.                              TERMINATION. THIS GUARANTY IS A CONTINUING GUARANTY AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL THE TERMINATION DATE. UPON PAYMENT AND PERFORMANCE IN FULL OF THE GUARANTEED OBLIGATIONS, AGENT SHALL DELIVER TO GUARANTOR SUCH DOCUMENTS AS GUARANTOR MAY REASONABLY REQUEST TO EVIDENCE SUCH TERMINATION.   7.8.                              COUNTERPARTS. THIS GUARANTY MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL COLLECTIVELY AND SEPARATELY CONSTITUTE ONE AND THE SAME AGREEMENT.   7.9.                            GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. AGENT AND GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A   10 --------------------------------------------------------------------------------   COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.4. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.   7.10.                        WAIVER OF JURY TRIAL. AGENT AND GUARANTOR HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.   7.11.                        LIMITATION ON GUARANTEED OBLIGATIONS. NOTWITHSTANDING ANY PROVISION HEREIN CONTAINED TO THE CONTRARY, GUARANTOR’S LIABILITY HEREUNDER SHALL BE LIMITED TO AN AMOUNT NOT TO EXCEED AS OF ANY DATE OF DETERMINATION THE GREATER OF:   (a)                                  the net amount of all Loans advanced under the Credit Agreement and directly or indirectly re-loaned or otherwise transferred to, or incurred for the benefit of, Guarantor, plus interest thereon at the applicable rate specified in the Credit Agreement; or   (b)                                 the amount which could be claimed by the Agent and Lenders from Guarantor under this Guaranty without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.   8.                                       SECURITY.   To secure payment of Guarantor’s obligations under this Guaranty, concurrently with the execution of this Guaranty, Guarantor has entered into a Guarantor Security Agreement pursuant to which Guarantor has granted to Agent for the benefit of Lenders a security interest in substantially all of its personal property and has entered into a Pledge Agreement pursuant to which Guarantor has pledged all of the Stock of each of its Subsidiaries to Agent for the benefit of Lenders.   9.                                       CREDIT AGREEMENT.   Guarantor agrees to perform, comply with and be bound by the covenants contained in Sections 5 and 6 of the Credit Agreement (which provisions are incorporated herein by reference) as if Guarantor were a Credit Party signatory to the Credit Agreement.     [Remainder of page left intentionally blank; signature pages follow]   11 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed and delivered this Holdings Guaranty as of the date first above written.     CURATIVE HEALTH SERVICES III CO       By:         Name:       Title:             GENERAL ELECTRIC CAPITAL CORPORATION, as Agent       By:         Name:       Title:           --------------------------------------------------------------------------------     GUARANTY   This GUARANTY (this “Guaranty”), dated as of March 30, 2006, by and between CURATIVE HEALTH SERVICES III CO., a Minnesota corporation (the “Guarantor”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and as agent (in such capacity, “Agent”) for itself and the lenders from time to time signatory to the Credit Agreement hereinafter defined (“Lenders”).   W I T N E S S E T H:   WHEREAS, pursuant to that certain Debtor In Possession Credit Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Curative Health Services, Inc. (“Holdings”), Curative Health Services Co., Critical Care Systems, Inc., eBioCare.com, Inc., Hemophilia Access, Inc., Apex Therapeutic Care, Inc., CHS Services, Inc., Curative Health Services of New York, Inc., Optimal Care Plus, Inc., Infinity Infusion, LLC, Infinity Infusion II, LLC, Infinity Infusion Care, Ltd., MedCare, Inc., Curative Pharmacy Services, Inc. (each a “Borrower”, and collectively with Holdings, “Borrowers”), the other Credit Parties signatory thereto, Agent and the Lenders , Lenders have agreed to make the Loans and to incur the L/C Obligations on behalf of Borrowers;   WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and other Loan Documents and to induce Lenders to make the Loans as provided for in the Credit Agreement, Guarantor has agreed to guarantee payment of the Guaranteed Obligations (as defined below);   NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce Lenders to provide the Loans and other financial accommodations under the Credit Agreement, it is agreed as follows:   1.                                       DEFINITIONS.   (a)                                  Capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement, unless otherwise defined herein.   (b)                                 References to this “Guaranty” shall mean this Guaranty, including all amendments, modifications and supplements and any annexes, exhibits and schedules to any of the foregoing, and shall refer to this Guaranty as the same may be in effect at the time such reference becomes operative.   (c)                                  References to the “Termination Date” shall mean the date on which (a) the Loans have been indefeasibly repaid in full in cash, (b) all other Obligations under the Credit Agreement and the other Loan Documents have been completely discharged, (c) all of the L/C Obligations have been cash collateralized, cancelled or backed by standby letters of credit in accordance with Section 2.5 of the Credit Agreement, and (d) Borrowers shall not have any further right to borrow any monies under the Credit Agreement.   --------------------------------------------------------------------------------   2.                                       THE GUARANTY.   2.1.                              GUARANTY OF GUARANTEED OBLIGATIONS OF BORROWERS. GUARANTOR HEREBY UNCONDITIONALLY GUARANTEES TO AGENT AND LENDERS, AND THEIR RESPECTIVE SUCCESSORS, ENDORSEES, TRANSFEREES AND ASSIGNS, THE PROMPT PAYMENT (WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE) AND PERFORMANCE OF THE OBLIGATIONS OF BORROWERS (HEREINAFTER THE “GUARANTEED OBLIGATIONS”). GUARANTOR AGREES THAT THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT OF COLLECTION, AND THAT GUARANTOR’S OBLIGATIONS UNDER THIS GUARANTY SHALL BE PRIMARY, ABSOLUTE AND UNCONDITIONAL, IRRESPECTIVE OF, AND UNAFFECTED BY:   (A)                                  THE GENUINENESS, VALIDITY, REGULARITY, ENFORCEABILITY OR ANY FUTURE AMENDMENT OF, OR CHANGE IN THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT TO WHICH ANY CREDIT PARTY AND/OR GUARANTOR ARE OR MAY BECOME A PARTY;   (B)                                 THE ABSENCE OF ANY ACTION TO ENFORCE THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE WAIVER OR CONSENT BY AGENT AND/OR LENDERS WITH RESPECT TO ANY OF THE PROVISIONS THEREOF;   (C)                                  THE EXISTENCE, VALUE OR CONDITION OF, OR FAILURE TO PERFECT ITS LIEN AGAINST, ANY COLLATERAL FOR THE GUARANTEED OBLIGATIONS OR ANY ACTION, OR THE ABSENCE OF ANY ACTION, BY AGENT IN RESPECT THEREOF (INCLUDING, WITHOUT LIMITATION, THE RELEASE OF ANY SUCH SECURITY);   (D)                                 THE INSOLVENCY OF ANY CREDIT PARTY; OR   (E)                                  ANY OTHER ACTION OR CIRCUMSTANCES WHICH MIGHT OTHERWISE CONSTITUTE A LEGAL OR EQUITABLE DISCHARGE OR DEFENSE OF A SURETY OR GUARANTOR,   it being agreed by Guarantor that its obligations under this Guaranty shall not be discharged until the Termination Date. Guarantor shall be regarded as a primary obligor with respect to the Guaranteed Obligations. Guarantor agrees that any notice or directive given at any time to Agent which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by Agent and Lenders, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless Agent and Lenders have specifically agreed otherwise in writing. It is agreed among Guarantor, Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and that, but for this Guaranty and such waivers, Agent and Lenders would decline to enter into the Credit Agreement.   2 --------------------------------------------------------------------------------   2.2.                              DEMAND BY AGENT OR LENDERS. IN ADDITION TO THE TERMS OF THE GUARANTY SET FORTH IN SECTION 2.1 HEREOF, AND IN NO MANNER IMPOSING ANY LIMITATION ON SUCH TERMS, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT, IF, AT ANY TIME, THE OUTSTANDING PRINCIPAL AMOUNT OF THE GUARANTEED OBLIGATIONS UNDER THE CREDIT AGREEMENT (INCLUDING ALL ACCRUED INTEREST THEREON) IS DECLARED TO BE IMMEDIATELY DUE AND PAYABLE, THEN GUARANTOR SHALL, WITHOUT DEMAND, PAY TO THE HOLDERS OF THE GUARANTEED OBLIGATIONS THE ENTIRE OUTSTANDING GUARANTEED OBLIGATIONS DUE AND OWING TO SUCH HOLDERS. PAYMENT BY GUARANTOR SHALL BE MADE TO AGENT IN IMMEDIATELY AVAILABLE FEDERAL FUNDS TO AN ACCOUNT DESIGNATED BY AGENT OR AT THE ADDRESS SET FORTH HEREIN FOR THE GIVING OF NOTICE TO AGENT OR AT ANY OTHER ADDRESS THAT MAY BE SPECIFIED IN WRITING FROM TIME TO TIME BY AGENT, AND SHALL BE CREDITED AND APPLIED TO THE GUARANTEED OBLIGATIONS.   2.3.                              ENFORCEMENT OF GUARANTY. IN NO EVENT SHALL AGENT HAVE ANY OBLIGATION (ALTHOUGH IT IS ENTITLED, AT ITS OPTION) TO PROCEED AGAINST ANY BORROWER OR ANY OTHER CREDIT PARTY OR ANY COLLATERAL PLEDGED TO SECURE GUARANTEED OBLIGATIONS BEFORE SEEKING SATISFACTION FROM THE GUARANTOR, AND AGENT MAY PROCEED, PRIOR OR SUBSEQUENT TO, OR SIMULTANEOUSLY WITH, THE ENFORCEMENT OF AGENT’S RIGHTS HEREUNDER, TO EXERCISE ANY RIGHT OR REMEDY WHICH IT MAY HAVE AGAINST ANY COLLATERAL, AS A RESULT OF ANY LIEN IT MAY HAVE AS SECURITY FOR ALL OR ANY PORTION OF THE GUARANTEED OBLIGATIONS.   2.4.                              WAIVER. IN ADDITION TO THE WAIVERS CONTAINED IN SECTION 2.1 HEREOF, GUARANTOR WAIVES, AND AGREES THAT IT SHALL NOT AT ANY TIME INSIST UPON, PLEAD OR IN ANY MANNER WHATEVER CLAIM OR TAKE THE BENEFIT OR ADVANTAGE OF, ANY APPRAISAL, VALUATION, STAY, EXTENSION, MARSHALING OF ASSETS OR REDEMPTION LAWS, OR EXEMPTION, WHETHER NOW OR AT ANY TIME HEREAFTER IN FORCE, WHICH MAY DELAY, PREVENT OR OTHERWISE AFFECT THE PERFORMANCE BY GUARANTOR OF ITS GUARANTEED OBLIGATIONS UNDER, OR THE ENFORCEMENT BY AGENT OR LENDERS OF, THIS GUARANTY. GUARANTOR HEREBY WAIVES DILIGENCE, PRESENTMENT AND DEMAND (WHETHER FOR NON-PAYMENT OR PROTEST OR OF ACCEPTANCE, MATURITY, EXTENSION OF TIME, CHANGE IN NATURE OR FORM OF THE GUARANTEED OBLIGATIONS, ACCEPTANCE OF FURTHER SECURITY, RELEASE OF FURTHER SECURITY, COMPOSITION OR AGREEMENT ARRIVED AT AS TO THE AMOUNT OF, OR THE TERMS OF, THE GUARANTEED OBLIGATIONS, NOTICE OF ADVERSE CHANGE IN ANY BORROWER’S FINANCIAL CONDITION OR ANY OTHER FACT WHICH MIGHT INCREASE THE RISK TO GUARANTOR) WITH RESPECT TO ANY OF THE GUARANTEED OBLIGATIONS OR ALL OTHER DEMANDS WHATSOEVER AND WAIVE THE BENEFIT OF ALL PROVISIONS OF LAW WHICH ARE OR MIGHT BE IN CONFLICT WITH THE TERMS OF THIS GUARANTY. GUARANTOR REPRESENTS, WARRANTS AND AGREES THAT, AS OF THE DATE OF THIS GUARANTY, ITS OBLIGATIONS UNDER THIS GUARANTY ARE NOT SUBJECT TO ANY OFFSETS OR DEFENSES AGAINST AGENT OR LENDERS OR ANY CREDIT PARTY OF ANY KIND. GUARANTOR FURTHER AGREES THAT ITS OBLIGATIONS UNDER THIS GUARANTY SHALL NOT BE SUBJECT TO ANY COUNTERCLAIMS, OFFSETS OR DEFENSES AGAINST AGENT OR ANY LENDER OR AGAINST ANY CREDIT PARTY OF ANY KIND WHICH MAY ARISE IN THE FUTURE.   2.5.                              BENEFIT OF GUARANTY. THE PROVISIONS OF THIS GUARANTY ARE FOR THE BENEFIT OF AGENT AND LENDERS AND THEIR RESPECTIVE PERMITTED SUCCESSORS, TRANSFEREES, ENDORSEES AND ASSIGNS, AND NOTHING HEREIN CONTAINED SHALL IMPAIR, AS BETWEEN ANY CREDIT PARTY AND AGENT OR LENDERS, THE OBLIGATIONS OF ANY CREDIT PARTY UNDER THE LOAN DOCUMENTS. IN THE EVENT ALL OR ANY PART OF THE GUARANTEED OBLIGATIONS ARE TRANSFERRED, INDORSED OR ASSIGNED BY AGENT OR ANY LENDER TO ANY PERSON OR PERSONS, AS PERMITTED UNDER THE LOAN DOCUMENTS, ANY REFERENCE TO “AGENT” OR “LENDER” HEREIN SHALL BE DEEMED TO REFER EQUALLY TO SUCH PERSON OR PERSONS.   3 --------------------------------------------------------------------------------   2.6.                              MODIFICATION OF GUARANTEED OBLIGATIONS, ETC. GUARANTOR HEREBY ACKNOWLEDGES AND AGREES THAT AGENT AND LENDERS MAY AT ANY TIME OR FROM TIME TO TIME, WITH OR WITHOUT THE CONSENT OF, OR NOTICE TO, GUARANTOR:   (A)                                  CHANGE OR EXTEND THE MANNER, PLACE OR TERMS OF PAYMENT OF, OR RENEW OR ALTER ALL OR ANY PORTION OF, THE GUARANTEED OBLIGATIONS;   (B)                                 TAKE ANY ACTION UNDER OR IN RESPECT OF THE LOAN DOCUMENTS IN THE EXERCISE OF ANY REMEDY, POWER OR PRIVILEGE CONTAINED THEREIN OR AVAILABLE TO IT AT LAW, EQUITY OR OTHERWISE, OR WAIVE OR REFRAIN FROM EXERCISING ANY SUCH REMEDIES, POWERS OR PRIVILEGES;   (C)                                  AMEND OR MODIFY, IN ANY MANNER WHATSOEVER, THE LOAN DOCUMENTS;   (D)                                 EXTEND OR WAIVE THE TIME FOR ANY CREDIT PARTY’S PERFORMANCE OF, OR COMPLIANCE WITH, ANY TERM, COVENANT OR AGREEMENT ON ITS PART TO BE PERFORMED OR OBSERVED UNDER THE LOAN DOCUMENTS, OR WAIVE SUCH PERFORMANCE OR COMPLIANCE OR CONSENT TO A FAILURE OF, OR DEPARTURE FROM, SUCH PERFORMANCE OR COMPLIANCE;   (E)                                  TAKE AND HOLD COLLATERAL FOR THE PAYMENT OF THE GUARANTEED OBLIGATIONS GUARANTEED HEREBY OR SELL, EXCHANGE, RELEASE, DISPOSE OF, OR OTHERWISE DEAL WITH, ANY PROPERTY PLEDGED, MORTGAGED OR CONVEYED, OR IN WHICH AGENT OR LENDERS HAVE BEEN GRANTED A LIEN, TO SECURE ANY OBLIGATIONS;   (F)                                    RELEASE ANYONE WHO MAY BE LIABLE IN ANY MANNER FOR THE PAYMENT OF ANY AMOUNTS OWED BY GUARANTOR OR ANY CREDIT PARTY TO AGENT OR ANY LENDER;   (G)                                 MODIFY OR TERMINATE THE TERMS OF ANY INTERCREDITOR OR SUBORDINATION AGREEMENT PURSUANT TO WHICH CLAIMS OF OTHER CREDITORS OF GUARANTOR OR ANY CREDIT PARTY ARE SUBORDINATED TO THE CLAIMS OF AGENT AND LENDERS; AND/OR   (H)                                 APPLY ANY SUMS BY WHOMEVER PAID OR HOWEVER REALIZED TO ANY AMOUNTS OWING BY GUARANTOR OR ANY CREDIT PARTY TO AGENT OR ANY LENDER IN SUCH MANNER AS AGENT OR ANY LENDER SHALL DETERMINE IN ITS DISCRETION;   and Agent and Lenders shall not incur any liability to Guarantor as a result thereof, and no such action shall impair or release the Guaranteed Obligations of Guarantor under this Guaranty.   2.7.                              REINSTATEMENT. THIS GUARANTY SHALL REMAIN IN FULL FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD ANY PETITION BE FILED, SUBSEQUENT TO THE EXECUTION HEREOF, BY OR AGAINST ANY CREDIT PARTY OR GUARANTOR FOR LIQUIDATION OR REORGANIZATION, SHOULD ANY CREDIT PARTY OR GUARANTOR MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY SIGNIFICANT PART OF SUCH CREDIT PARTY’S OR GUARANTOR’S ASSETS, AND SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND PERFORMANCE OF THE GUARANTEED OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED BY AGENT OR ANY LENDER, WHETHER AS A “VOIDABLE PREFERENCE,” “FRAUDULENT CONVEYANCE,” OR OTHERWISE, ALL AS THOUGH   4 --------------------------------------------------------------------------------   SUCH PAYMENT OR PERFORMANCE HAD NOT BEEN MADE. IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS RESCINDED, REDUCED, RESTORED OR RETURNED, THE GUARANTEED OBLIGATIONS SHALL BE REINSTATED AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED, RESTORED OR RETURNED.   2.8.                              DEFERRAL OF SUBROGATION, ETC. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS GUARANTY, OR IN ANY OTHER LOAN DOCUMENT, GUARANTOR HEREBY:   (A)                                  EXPRESSLY AND IRREVOCABLY WAIVES, ON BEHALF OF ITSELF AND ITS SUCCESSORS AND ASSIGNS (INCLUDING ANY SURETY) UNTIL THE TERMINATION DATE, ANY AND ALL RIGHTS AT LAW OR IN EQUITY TO SUBROGATION, TO REIMBURSEMENT, TO EXONERATION, TO CONTRIBUTION, TO INDEMNIFICATION, TO SET OFF OR TO ANY OTHER RIGHTS THAT COULD ACCRUE TO A SURETY AGAINST A PRINCIPAL, TO A GUARANTOR AGAINST A PRINCIPAL, TO A GUARANTOR AGAINST A MAKER OR OBLIGOR, TO AN ACCOMMODATION PARTY AGAINST THE PARTY ACCOMMODATED, TO A HOLDER OR TRANSFEREE AGAINST A MAKER, OR TO THE HOLDER OF ANY CLAIM AGAINST ANY PERSON, AND WHICH GUARANTOR MAY HAVE OR HEREAFTER ACQUIRE AGAINST ANY CREDIT PARTY IN CONNECTION WITH OR AS A RESULT OF GUARANTOR’S EXECUTION, DELIVERY AND/OR PERFORMANCE OF THIS GUARANTY, OR ANY OTHER DOCUMENTS TO WHICH GUARANTOR IS A PARTY OR OTHERWISE; AND   (B)                                 ACKNOWLEDGES AND AGREES (I) THAT THIS WAIVER IS INTENDED TO BENEFIT AGENT AND LENDERS AND SHALL NOT LIMIT OR OTHERWISE EFFECT GUARANTOR’S LIABILITY HEREUNDER OR THE ENFORCEABILITY OF THIS GUARANTY, AND (II) THAT AGENT, LENDERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS ARE INTENDED THIRD PARTY BENEFICIARIES OF THE WAIVERS AND AGREEMENTS SET FORTH IN THIS SECTION 2.8 AND THEIR RIGHTS UNDER THIS SECTION 2.8 SHALL SURVIVE PAYMENT IN FULL OF THE GUARANTEED OBLIGATIONS UNTIL THE TERMINATION DATE.   2.9.                              ELECTION OF REMEDIES.  IF AGENT MAY, UNDER APPLICABLE LAW, PROCEED TO REALIZE BENEFITS UNDER ANY OF THE LOAN DOCUMENTS GIVING AGENT AND LENDERS A LIEN UPON ANY COLLATERAL OWNED BY ANY CREDIT PARTY, EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR ENFORCEMENT, AGENT MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF SUCH REMEDIES OR RIGHTS IT MAY PURSUE WITHOUT AFFECTING ANY OF SUCH RIGHTS AND REMEDIES UNDER THIS GUARANTY. IF, IN THE EXERCISE OF ANY OF ITS RIGHTS AND REMEDIES, AGENT SHALL FORFEIT ANY OF ITS RIGHTS OR REMEDIES, INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST ANY CREDIT PARTY, WHETHER BECAUSE OF ANY APPLICABLE LAWS PERTAINING TO “ELECTION OF REMEDIES” OR THE LIKE, GUARANTOR HEREBY CONSENTS TO SUCH ACTION BY AGENT AND WAIVE ANY CLAIM BASED UPON SUCH ACTION, EVEN IF SUCH ACTION BY AGENT SHALL RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF SUBROGATION WHICH GUARANTOR MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY AGENT. ANY ELECTION OF REMEDIES WHICH RESULTS IN THE DENIAL OR IMPAIRMENT OF THE RIGHT OF AGENT TO SEEK A DEFICIENCY JUDGMENT AGAINST ANY CREDIT PARTY SHALL NOT IMPAIR GUARANTOR’S OBLIGATION TO PAY THE FULL AMOUNT OF THE GUARANTEED OBLIGATIONS. IN THE EVENT AGENT SHALL BID AT ANY FORECLOSURE OR TRUSTEE’S SALE OR AT ANY PRIVATE SALE PERMITTED BY LAW OR THE LOAN DOCUMENTS, AGENT MAY BID ALL OR LESS THAN THE AMOUNT OF THE GUARANTEED OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED NOT BE PAID BY AGENT BUT SHALL BE CREDITED AGAINST THE GUARANTEED OBLIGATIONS. THE AMOUNT OF THE SUCCESSFUL BID AT ANY SUCH SALE SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF THE COLLATERAL AND THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING BALANCE OF THE GUARANTEED OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE GUARANTEED OBLIGATIONS GUARANTEED UNDER THIS GUARANTY, NOTWITHSTANDING THAT ANY PRESENT   5 --------------------------------------------------------------------------------   OR FUTURE LAW OR COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE AMOUNT OF ANY DEFICIENCY CLAIM TO WHICH AGENT AND LENDERS MIGHT OTHERWISE BE ENTITLED BUT FOR SUCH BIDDING AT ANY SUCH SALE.   2.10.                        FUNDS TRANSFERS. IF GUARANTOR SHALL ENGAGE IN ANY TRANSACTION AS A RESULT OF WHICH ANY BORROWER IS REQUIRED TO MAKE A MANDATORY PREPAYMENT WITH RESPECT TO THE GUARANTEED OBLIGATIONS UNDER THE TERMS OF THE CREDIT AGREEMENT (INCLUDING ANY ISSUANCE OR SALE OF SUCH GUARANTOR’S STOCK OR ANY SALE OF ITS ASSETS), GUARANTOR SHALL DISTRIBUTE TO, OR MAKE A CONTRIBUTION TO THE CAPITAL OF, SUCH BORROWER AN AMOUNT EQUAL TO THE MANDATORY PREPAYMENT REQUIRED UNDER THE TERMS OF THE CREDIT AGREEMENT.   3.                                       DELIVERIES.   In a form satisfactory to Agent, Guarantor shall deliver to Agent (with sufficient copies for each Lender), concurrently with the execution of this Guaranty and the Credit Agreement, the Loan Documents and other instruments, certificates and documents as are required to be delivered by Guarantor to Agent under the Credit Agreement.   4.                                       REPRESENTATIONS AND WARRANTIES.   To induce Lenders to make the Loans and incur L/C Obligations under the Credit Agreement, Guarantor makes the representations and warranties as Guarantor contained in the Credit Agreement, each of which is incorporated herein by reference, and the following representations and warranties to Agent and each Lender, each and all of which shall survive the execution and delivery of this Guaranty:   4.1.                              CORPORATE EXISTENCE; COMPLIANCE WITH LAW. GUARANTOR (I) IS A CORPORATION, LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF ITS JURISDICTION OF INCORPORATION OR ORGANIZATION; (II) IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING UNDER THE LAWS OF EACH JURISDICTION WHERE ITS OWNERSHIP OR LEASE OF PROPERTY OR THE CONDUCT OF ITS BUSINESS REQUIRES SUCH QUALIFICATION; (III) HAS THE REQUISITE CORPORATE POWER AND AUTHORITY AND THE LEGAL RIGHT TO OWN, PLEDGE, MORTGAGE AND OPERATE ITS PROPERTIES, TO LEASE THE PROPERTY IT OPERATES UNDER LEASE, AND TO CONDUCT ITS BUSINESS AS NOW, HERETOFORE AND PROPOSED TO BE CONDUCTED; (IV) HAS ALL LICENSES, PERMITS, CONSENTS OR APPROVALS FROM OR BY, AND HAS MADE ALL MATERIAL FILINGS WITH, AND HAS GIVEN ALL NOTICES TO, ALL GOVERNMENTAL AUTHORITIES HAVING JURISDICTION, TO THE EXTENT REQUIRED FOR SUCH OWNERSHIP, OPERATION AND CONDUCT EXCEPT WHERE THE FAILURE TO HAVE OR OBTAIN ANY OF THE FOREGOING COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; (V) IS IN COMPLIANCE WITH ITS CHARTER AND BY-LAWS; AND (VI) IS IN COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF LAW, EXCEPT WHERE THE FAILURE TO COMPLY, INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.   4.2.                              EXECUTIVE OFFICES. GUARANTOR’S EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS ARE AS SET FORTH IN SCHEDULE III OF THE GUARANTOR SECURITY AGREEMENT.   6 --------------------------------------------------------------------------------   4.3.                              CORPORATE POWER; AUTHORIZATION; ENFORCEABLE GUARANTEED OBLIGATIONS. THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS GUARANTY AND ALL OTHER LOAN DOCUMENTS AND ALL INSTRUMENTS AND DOCUMENTS TO BE DELIVERED BY GUARANTOR HEREUNDER AND UNDER THE CREDIT AGREEMENT ARE WITHIN GUARANTOR’S CORPORATE POWER, HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY OR PROPER CORPORATE ACTION, INCLUDING THE CONSENT OF STOCKHOLDERS AND INTEREST HOLDERS WHERE REQUIRED, ARE NOT IN CONTRAVENTION OF ANY PROVISION OF GUARANTOR’S CHARTER OR BY-LAWS, DO NOT VIOLATE ANY LAW OR REGULATION, OR ANY ORDER OR DECREE OF ANY GOVERNMENTAL AUTHORITY, DO NOT CONFLICT WITH OR RESULT IN THE BREACH OF, OR CONSTITUTE A DEFAULT UNDER, OR ACCELERATE OR PERMIT THE ACCELERATION OF ANY PERFORMANCE REQUIRED BY, ANY INDENTURE, MORTGAGE, DEED OF TRUST, LEASE, AGREEMENT OR OTHER INSTRUMENT TO WHICH GUARANTOR IS A PARTY OR BY WHICH GUARANTOR OR ANY OF ITS PROPERTY IS BOUND, DO NOT RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN UPON ANY OF THE PROPERTY OF GUARANTOR, OTHER THAN THOSE IN FAVOR OF AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, AND THE SAME DO NOT REQUIRE THE CONSENT OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY (OTHER THAN THE INTERIM ORDER OR THE FINAL ORDER) OR ANY OTHER PERSON EXCEPT THOSE REFERRED TO IN SECTIONS 4.2 AND 4.3 OF THE CREDIT AGREEMENT, ALL OF WHICH HAVE BEEN DULY OBTAINED, MADE OR COMPLIED WITH PRIOR TO THE CLOSING DATE. ON OR PRIOR TO THE CLOSING DATE, THIS GUARANTY AND EACH OF THE LOAN DOCUMENTS TO WHICH GUARANTOR IS A PARTY SHALL HAVE BEEN DULY EXECUTED AND DELIVERED FOR THE BENEFIT OF OR ON BEHALF OF GUARANTOR, AND EACH SHALL THEN CONSTITUTE A LEGAL, VALID AND BINDING OBLIGATION OF GUARANTOR, ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE WITH ITS TERMS SUBJECT TO (I) THE EFFECT OF ANY APPLICABLE BANKRUPTCY, FRAUDULENT TRANSFER, MORATORIUM, INSOLVENCY, REORGANIZATION OR OTHER SIMILAR LAWS AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND (II) THE EFFECT OF GENERAL PRINCIPALS OF EQUITY WHETHER APPLIED BY A COURT OF LAW OR EQUITY.   5.                                       FURTHER ASSURANCES.   Guarantor agrees, upon the written request of Agent or any Lender, to execute and deliver to Agent or such Lender, from time to time, any additional instruments or documents reasonably considered necessary by Agent or such Lender to cause this Guaranty to be, become or remain valid and effective in accordance with its terms.   6.                                       PAYMENTS FREE AND CLEAR OF TAXES.   All payments required to be made by Guarantor hereunder shall be made to Agent and Lenders free and clear of, and without deduction for, any and all present and future Taxes. If Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder, (a) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (b) Guarantor shall make such deductions, and (c) Guarantor shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Guarantor shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof. Guarantor shall indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 6) paid by Agent or such Lender, as   7 --------------------------------------------------------------------------------   appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.   7.                                       OTHER TERMS.   7.1.                              ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN DOCUMENTS, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS RELATING TO A GUARANTY OF THE LOANS AND ADVANCES UNDER THE LOAN DOCUMENTS AND/OR THE GUARANTEED OBLIGATIONS.   7.2.                              HEADINGS. THE HEADINGS IN THIS GUARANTY ARE FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT PART OF THE SUBSTANCE OF THIS GUARANTY.   7.3.                              SEVERABILITY. WHENEVER POSSIBLE, EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH A MANNER TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY.   7.4.                              NOTICES. WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED UPON ANY OF THE PARTIES BY ANY OTHER PARTY, OR WHENEVER ANY OF THE PARTIES DESIRES TO GIVE OR SERVE UPON ANOTHER ANY SUCH COMMUNICATION WITH RESPECT TO THIS GUARANTY, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE ADDRESSED TO THE PARTY TO BE NOTIFIED AS FOLLOWS:   (A)                                  IF TO AGENT, AT:   General Electric Capital Corporation 2 Bethesda Metro Center Suite 600 Bethesda, MD 20814 Attention:  Curative Health Services, Inc. Account Manager Facsimile No: (301) 347-3175 Telephone No.: (301) 664-9816   With a copy to:                                                             Moritt Hock Hamroff & Horowitz LLP 400 Garden City Plaza Garden City, NY 11530 Attention:  Marc L. Hamroff Facsimile No: (516) 873-2010 Telephone No.: (516) 873-2000   (B)                                 IF TO ANY LENDER, AT THE ADDRESS OF SUCH LENDER SPECIFIED IN THE CREDIT AGREEMENT.   8 --------------------------------------------------------------------------------   (C)                                  IF TO GUARANTOR, AT:   Curative Health Services III Co. c/o Curative Health Services, Inc. 61 Spit Brook Road Nashua, New Hampshire 03060 Attention:  Chief Financial Officer Facsimile No: (603) 966-3345 Telephone No.: (603) 888-1500   With a copy to:                                                                                                                                                             Curative Health Services, Inc. 61 Spit Brook Road Nashua, New Hampshire 03060 Attention: General Counsel Facsimile No: (603) 966-3345 Telephone No.: (603) 888-1500   -and- With a copy to:                                                                                                                                                             Linklaters 1345 Avenue of the Americas New York, New York 10105 Attention:  Martin N. Flics Facsimile No.: (212) 903-9100 Telephone No.:(212) 903-9000   or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been validly served, given or delivered (i) upon the earlier of actual receipt and three (3) Business Days after the same shall have been deposited with the United States mail, registered or certified mail, return receipt requested, with proper postage prepaid, (ii) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 7.4), (iii) one (1) Business Day after deposit with a reputable overnight carrier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger.   7.5.                              SUCCESSORS AND ASSIGNS. THIS GUARANTY AND ALL OBLIGATIONS OF GUARANTOR HEREUNDER SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF GUARANTOR AND SHALL, TOGETHER WITH   9 --------------------------------------------------------------------------------   THE RIGHTS AND REMEDIES OF AGENT, FOR ITSELF AND FOR THE BENEFIT OF LENDERS, HEREUNDER, INURE TO THE BENEFIT OF AGENT AND LENDERS, ALL FUTURE HOLDERS OF ANY INSTRUMENT EVIDENCING ANY OF THE OBLIGATIONS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. NO SALES OF PARTICIPATIONS, OTHER SALES, ASSIGNMENTS, TRANSFERS OR OTHER DISPOSITIONS OF ANY AGREEMENT GOVERNING OR INSTRUMENT EVIDENCING THE OBLIGATIONS OR ANY PORTION THEREOF OR INTEREST THEREIN SHALL IN ANY MANNER AFFECT THE RIGHTS OF AGENT AND LENDERS HEREUNDER. GUARANTOR MAY NOT ASSIGN, SELL, HYPOTHECATE OR OTHERWISE TRANSFER ANY INTEREST IN OR OBLIGATION UNDER THIS GUARANTY.   7.6.                              NO WAIVER; CUMULATIVE REMEDIES; AMENDMENTS. NEITHER AGENT NOR ANY LENDER SHALL BY ANY ACT, DELAY, OMISSION OR OTHERWISE BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS OR REMEDIES HEREUNDER, AND NO WAIVER SHALL BE VALID UNLESS IN WRITING, SIGNED BY AGENT AND THEN ONLY TO THE EXTENT THEREIN SET FORTH. A WAIVER BY AGENT, FOR ITSELF AND THE RATABLE BENEFIT OF LENDERS, OF ANY RIGHT OR REMEDY HEREUNDER ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO ANY RIGHT OR REMEDY WHICH AGENT WOULD OTHERWISE HAVE HAD ON ANY FUTURE OCCASION. NO FAILURE TO EXERCISE NOR ANY DELAY IN EXERCISING ON THE PART OF AGENT OR ANY LENDER, ANY RIGHT, POWER OR PRIVILEGE HEREUNDER, SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FUTURE EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE. THE RIGHTS AND REMEDIES HEREUNDER PROVIDED ARE CUMULATIVE AND MAY BE EXERCISED SINGLY OR CONCURRENTLY, AND ARE NOT EXCLUSIVE OF ANY RIGHTS AND REMEDIES PROVIDED BY LAW. NONE OF THE TERMS OR PROVISIONS OF THIS GUARANTY MAY BE WAIVED, ALTERED, MODIFIED, SUPPLEMENTED OR AMENDED EXCEPT BY AN INSTRUMENT IN WRITING, DULY EXECUTED BY AGENT AND GUARANTOR.   7.7.                              TERMINATION. THIS GUARANTY IS A CONTINUING GUARANTY AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL THE TERMINATION DATE. UPON PAYMENT AND PERFORMANCE IN FULL OF THE GUARANTEED OBLIGATIONS, AGENT SHALL DELIVER TO GUARANTOR SUCH DOCUMENTS AS GUARANTOR MAY REASONABLY REQUEST TO EVIDENCE SUCH TERMINATION.   7.8.                              COUNTERPARTS. THIS GUARANTY MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL COLLECTIVELY AND SEPARATELY CONSTITUTE ONE AND THE SAME AGREEMENT.   7.9.                            GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. AGENT AND GUARANTOR HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE   10 --------------------------------------------------------------------------------   PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.4. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.   7.10.                        WAIVER OF JURY TRIAL. AGENT AND GUARANTOR HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.   7.11.                        LIMITATION ON GUARANTEED OBLIGATIONS. NOTWITHSTANDING ANY PROVISION HEREIN CONTAINED TO THE CONTRARY, GUARANTOR’S LIABILITY HEREUNDER SHALL BE LIMITED TO AN AMOUNT NOT TO EXCEED AS OF ANY DATE OF DETERMINATION THE GREATER OF:   (a)                                  the net amount of all Loans advanced under the Credit Agreement and directly or indirectly re-loaned or otherwise transferred to, or incurred for the benefit of, Guarantor, plus interest thereon at the applicable rate specified in the Credit Agreement; or   (b)                                 the amount which could be claimed by the Agent and Lenders from Guarantor under this Guaranty without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.   8.                                       SECURITY.   To secure payment of Guarantor’s obligations under this Guaranty, concurrently with the execution of this Guaranty, Guarantor has entered into a Guarantor Security Agreement pursuant to which Guarantor has granted to Agent for the benefit of Lenders a security interest in substantially all of its personal property and has entered into a Pledge Agreement pursuant to which Guarantor has pledged all of the Stock of each of its Subsidiaries to Agent for the benefit of Lenders.   9.                                       CREDIT AGREEMENT.   Guarantor agrees to perform, comply with and be bound by the covenants contained in Sections 5 and 6 of the Credit Agreement (which provisions are incorporated herein by reference) as if Guarantor were a Credit Party signatory to the Credit Agreement.     [Remainder of page left intentionally blank; signature pages follow]   11 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed and delivered this Guaranty as of the date first above written.     CURATIVE HEALTH SERVICES III CO       By:         Name:       Title:           GENERAL ELECTRIC CAPITAL CORPORATION, as Agent       By:         Name:       Title:         [Signature Page to Guaranty Agreement]   --------------------------------------------------------------------------------     EXHIBIT H to CREDIT AGREEMENT   GUARANTOR SECURITY AGREEMENT   GUARANTOR SECURITY AGREEMENT (this “Security Agreement”), dated as of March 30, 2006, among the Grantors signatory hereto (sometimes collectively referred to herein as “Grantors” and individually as a “Grantor”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, individually and in its capacity as Agent for Lenders (“Agent”).   W I T N E S S T H:   WHEREAS, pursuant to that certain Debtor in Possession Credit Agreement dated as of the date hereof by and among Borrowers (the “Borrower”), the Persons named therein as Credit Parties, Agent and Lenders (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), Lenders have agreed, subject to certain terms and conditions, to make the Loans and to incur L/C Obligations on behalf of the Borrower;   WHEREAS, Grantors are either direct or indirect subsidiaries of Borrower and as such will derive direct and indirect economic benefits from the making of the Loans and other financial accommodations provided to the Borrower pursuant to the Credit Agreement; and   WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and other Loan Documents and to induce Lenders to make the Loans and to incur L/C Obligations as provided for in the Credit Agreement, Grantors have entered into that certain Guaranty Agreement dated as the date hereof (the “Guaranty Agreement”) in favor of Agent and Lenders, pursuant to which Grantors have unconditionally guarantied all of the Obligations;   WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and other Loan Documents and to induce Lenders to make the Loans and to incur L/C Obligations as provided for in the Credit Agreement, Grantors have agreed to grant a continuing Lien on the Collateral (as hereinafter defined) to secure the Obligations;   NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained 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.   CAPITALIZED TERMS USED IN THIS AGREEMENT SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THIS SECTION 1 UNLESS THE CONTEXT INDICATES OTHERWISE. ALL CAPITALIZED TERMS USED   --------------------------------------------------------------------------------   BUT NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN SECTION 1.1 OF THE CREDIT AGREEMENT. ANY OTHER TERMS CONTAINED IN THIS SECURITY AGREEMENT NOT DEFINED IN THIS AGREEMENT OR IN THE CREDIT AGREEMENT HAVE THE MEANINGS PROVIDED FOR BY THE CODE TO THE EXTENT THE SAME ARE USED OR DEFINED THEREIN.   (A)           “ACCOUNTS” MEANS ALL “ACCOUNTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, INCLUDING (A) ALL ACCOUNTS RECEIVABLE, OTHER RECEIVABLES, BOOK DEBTS AND OTHER FORMS OF OBLIGATIONS (OTHER THAN FORMS OF OBLIGATIONS EVIDENCED BY CHATTEL PAPER, OR INSTRUMENTS), (INCLUDING ANY SUCH OBLIGATIONS THAT MAY BE CHARACTERIZED AS AN ACCOUNT OR CONTRACT RIGHT UNDER THE CODE), (B) ALL OF EACH CREDIT PARTY’S RIGHTS IN, TO AND UNDER ALL PURCHASE ORDERS OR RECEIPTS FOR GOODS OR SERVICES, (C) ALL OF EACH CREDIT PARTY’S RIGHTS TO ANY GOODS REPRESENTED BY ANY OF THE FOREGOING (INCLUDING UNPAID SELLERS’ RIGHTS OF RESCISSION, REPLEVIN, RECLAMATION AND STOPPAGE IN TRANSIT AND RIGHTS TO RETURNED, RECLAIMED OR REPOSSESSED GOODS), (D) ALL RIGHTS TO PAYMENT DUE TO ANY CREDIT PARTY FOR PROPERTY SOLD, LEASED, LICENSED, ASSIGNED OR OTHERWISE DISPOSED OF, FOR A POLICY OF INSURANCE ISSUED OR TO BE ISSUED, FOR A SECONDARY OBLIGATION INCURRED OR TO BE INCURRED, FOR ENERGY PROVIDED OR TO BE PROVIDED, FOR THE USE OR HIRE OF A VESSEL UNDER A CHARTER OR OTHER CONTRACT, ARISING OUT OF THE USE OF A CREDIT CARD OR CHARGE CARD, OR FOR SERVICES RENDERED OR TO BE RENDERED BY SUCH CREDIT PARTY OR IN CONNECTION WITH ANY OTHER TRANSACTION (WHETHER OR NOT YET EARNED BY PERFORMANCE ON THE PART OF SUCH CREDIT PARTY), (E) ALL HEALTH CARE INSURANCE RECEIVABLES AND (F) ALL COLLATERAL SECURITY OF ANY KIND, GIVEN BY ANY ACCOUNT DEBTOR OR ANY OTHER PERSON WITH RESPECT TO ANY OF THE FOREGOING.   (B)           “CHATTEL PAPER” MEANS ANY “CHATTEL PAPER,” AS SUCH TERM IS DEFINED IN THE CODE, INCLUDING ELECTRONIC CHATTEL PAPER, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY.   (C)           “CODE” MEANS THE UNIFORM COMMERCIAL CODE AS THE SAME MAY, FROM TIME TO TIME, BE ENACTED AND IN EFFECT IN THE STATE OF NEW YORK; PROVIDED, THAT TO THE EXTENT THAT THE CODE IS USED TO DEFINE ANY TERM HEREIN OR IN ANY LOAN DOCUMENT AND SUCH TERM IS DEFINED DIFFERENTLY IN DIFFERENT ARTICLES OR DIVISIONS OF THE CODE, THE DEFINITION OF SUCH TERM CONTAINED IN ARTICLE OR DIVISION 9 SHALL GOVERN; PROVIDED FURTHER, THAT IN THE EVENT THAT, BY REASON OF MANDATORY PROVISIONS OF LAW, ANY OR ALL OF THE ATTACHMENT, PERFECTION OR PRIORITY OF, OR REMEDIES WITH RESPECT TO, AGENT’S OR ANY LENDER’S LIEN ON ANY COLLATERAL IS GOVERNED BY THE UNIFORM COMMERCIAL CODE AS ENACTED AND IN EFFECT IN A JURISDICTION OTHER THAN THE STATE OF NEW YORK, THE TERM “CODE” SHALL MEAN THE UNIFORM COMMERCIAL CODE AS ENACTED AND IN EFFECT IN SUCH OTHER JURISDICTION SOLELY FOR PURPOSES OF THE PROVISIONS THEREOF RELATING TO SUCH ATTACHMENT, PERFECTION, PRIORITY OR REMEDIES AND FOR PURPOSES OF DEFINITIONS RELATED TO SUCH PROVISIONS.   (D)           “CONTRACTS” MEANS ALL “CONTRACTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, IN ANY EVENT, INCLUDING ALL CONTRACTS, UNDERTAKINGS, OR AGREEMENTS (OTHER THAN RIGHTS EVIDENCED BY CHATTEL PAPER, DOCUMENTS OR INSTRUMENTS) IN OR UNDER WHICH ANY CREDIT PARTY MAY NOW OR HEREAFTER HAVE ANY RIGHT, TITLE OR INTEREST, INCLUDING ANY AGREEMENT RELATING TO THE TERMS OF PAYMENT OR THE TERMS OF PERFORMANCE OF ANY ACCOUNT.   2 --------------------------------------------------------------------------------   (E)           “CONTROL LETTER” MEANS A LETTER AGREEMENT BETWEEN AGENT AND (I) THE ISSUER OF UNCERTIFICATED SECURITIES WITH RESPECT TO UNCERTIFICATED SECURITIES IN THE NAME OF ANY CREDIT PARTY, (II) A SECURITIES INTERMEDIARY WITH RESPECT TO SECURITIES, WHETHER CERTIFICATED OR UNCERTIFICATED, SECURITIES ENTITLEMENTS AND OTHER FINANCIAL ASSETS HELD IN A SECURITIES ACCOUNT IN THE NAME OF ANY CREDIT PARTY, (III) A FUTURES COMMISSION MERCHANT OR CLEARING HOUSE, AS APPLICABLE, WITH RESPECT TO COMMODITY ACCOUNTS AND COMMODITY CONTRACTS HELD BY ANY CREDIT PARTY, WHEREBY, AMONG OTHER THINGS, THE ISSUER, SECURITIES INTERMEDIARY OR FUTURES COMMISSION MERCHANT DISCLAIMS ANY SECURITY INTEREST IN THE APPLICABLE FINANCIAL ASSETS, ACKNOWLEDGES THE LIEN OF AGENT, ON BEHALF OF ITSELF AND LENDERS, ON SUCH FINANCIAL ASSETS, AND AGREES TO FOLLOW THE INSTRUCTIONS OR ENTITLEMENT ORDERS OF AGENT WITHOUT FURTHER CONSENT BY THE AFFECTED CREDIT PARTY.   (F)            “COPYRIGHT LICENSE” MEANS ANY AND ALL RIGHTS NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY UNDER ANY WRITTEN AGREEMENT GRANTING ANY RIGHT TO USE ANY COPYRIGHT OR COPYRIGHT REGISTRATION.   (G)           “COPYRIGHTS” MEANS ALL OF THE FOLLOWING NOW OWNED OR HEREAFTER ADOPTED OR ACQUIRED BY ANY CREDIT PARTY: (A) ALL COPYRIGHTS AND GENERAL INTANGIBLES OF LIKE NATURE (WHETHER REGISTERED OR UNREGISTERED), ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS IN CONNECTION THEREWITH, INCLUDING ALL REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES COPYRIGHT OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE OR TERRITORY THEREOF, OR ANY OTHER COUNTRY OR ANY POLITICAL SUBDIVISION THEREOF, AND (B) ALL REISSUES, EXTENSIONS OR RENEWALS THEREOF.   (H)           “DEPOSIT ACCOUNTS” MEANS ALL “DEPOSIT ACCOUNTS” AS SUCH TERM IS DEFINED IN THE CODE, NOW OR HEREAFTER HELD IN THE NAME OF ANY CREDIT PARTY.   (I)            “DOCUMENTS” MEANS ALL “DOCUMENTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED.   (J)            “EQUIPMENT” MEANS ALL “EQUIPMENT,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED AND, IN ANY EVENT, INCLUDING ALL SUCH CREDIT PARTY’S MACHINERY AND EQUIPMENT, INCLUDING PROCESSING EQUIPMENT, CONVEYORS, MACHINE TOOLS, DATA PROCESSING AND COMPUTER EQUIPMENT, INCLUDING EMBEDDED SOFTWARE AND PERIPHERAL EQUIPMENT AND ALL ENGINEERING, PROCESSING AND MANUFACTURING EQUIPMENT, OFFICE MACHINERY, FURNITURE, MATERIALS HANDLING EQUIPMENT, TOOLS, ATTACHMENTS, ACCESSORIES, AUTOMOTIVE EQUIPMENT, TRAILERS, TRUCKS, FORKLIFTS, MOLDS, DIES, STAMPS, MOTOR VEHICLES, ROLLING STOCK AND OTHER EQUIPMENT OF EVERY KIND AND NATURE, TRADE FIXTURES AND FIXTURES NOT FORMING A PART OF REAL PROPERTY, TOGETHER WITH ALL ADDITIONS AND ACCESSIONS THERETO, REPLACEMENTS THEREFOR, ALL PARTS THEREFOR, ALL SUBSTITUTES FOR ANY OF THE FOREGOING, FUEL THEREFOR, AND ALL MANUALS, DRAWINGS, INSTRUCTIONS, WARRANTIES AND RIGHTS WITH RESPECT THERETO, AND ALL PRODUCTS AND PROCEEDS THEREOF AND CONDEMNATION AWARDS AND INSURANCE PROCEEDS WITH RESPECT THERETO.   (K)           “FIXTURES” MEANS ALL “FIXTURES” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY.   3 --------------------------------------------------------------------------------   (L)            “GENERAL INTANGIBLES” MEANS ALL “GENERAL INTANGIBLES,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, INCLUDING ALL RIGHT, TITLE AND INTEREST THAT SUCH CREDIT PARTY MAY NOW OR HEREAFTER HAVE IN OR UNDER ANY CONTRACT, ALL PAYMENT INTANGIBLES, CUSTOMER LISTS, LICENSES, COPYRIGHTS, TRADEMARKS, PATENTS, AND ALL APPLICATIONS THEREFOR AND REISSUES, EXTENSIONS OR RENEWALS THEREOF, RIGHTS IN INTELLECTUAL PROPERTY, INTERESTS IN PARTNERSHIPS, JOINT VENTURES AND OTHER BUSINESS ASSOCIATIONS, LICENSES, PERMITS, COPYRIGHTS, TRADE SECRETS, PROPRIETARY OR CONFIDENTIAL INFORMATION, INVENTIONS (WHETHER OR NOT PATENTED OR PATENTABLE), TECHNICAL INFORMATION, PROCEDURES, DESIGNS, KNOWLEDGE, KNOW-HOW, SOFTWARE, DATA BASES, DATA, SKILL, EXPERTISE, EXPERIENCE, PROCESSES, MODELS, DRAWINGS, MATERIALS AND RECORDS, GOODWILL (INCLUDING THE GOODWILL ASSOCIATED WITH ANY TRADEMARK OR TRADEMARK LICENSE), ALL RIGHTS AND CLAIMS IN OR UNDER INSURANCE POLICIES (INCLUDING INSURANCE FOR FIRE, DAMAGE, LOSS AND CASUALTY, WHETHER COVERING PERSONAL PROPERTY, REAL PROPERTY, TANGIBLE RIGHTS OR INTANGIBLE RIGHTS, ALL LIABILITY, LIFE, KEY MAN AND BUSINESS INTERRUPTION INSURANCE, AND ALL UNEARNED PREMIUMS), UNCERTIFICATED SECURITIES, CHOSES IN ACTION, DEPOSIT, CHECKING AND OTHER BANK ACCOUNTS, RIGHTS TO RECEIVE TAX REFUNDS AND OTHER PAYMENTS, RIGHTS TO RECEIVE DIVIDENDS, DISTRIBUTIONS, CASH, INSTRUMENTS AND OTHER PROPERTY IN RESPECT OF OR IN EXCHANGE FOR PLEDGED STOCK AND INVESTMENT PROPERTY, RIGHTS OF INDEMNIFICATION, ALL BOOKS AND RECORDS, CORRESPONDENCE, CREDIT FILES, INVOICES AND OTHER PAPERS, INCLUDING WITHOUT LIMITATION ALL TAPES, CARDS, COMPUTER RUNS AND OTHER PAPERS AND DOCUMENTS IN THE POSSESSION OR UNDER THE CONTROL OF SUCH CREDIT PARTY OR ANY COMPUTER BUREAU OR SERVICE COMPANY FROM TIME TO TIME ACTING FOR SUCH CREDIT PARTY.   (M)          “GOODS” MEANS ALL “GOODS” AS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED, INCLUDING EMBEDDED SOFTWARE TO THE EXTENT INCLUDED IN “GOODS” AS DEFINED IN THE CODE, MANUFACTURED HOMES, STANDING TIMBER THAT IS CUT AND REMOVED FOR SALE AND UNBORN YOUNG OF ANIMALS.   (N)           “INDEMNIFIED PERSON” MEANS EACH OF AGENT, LENDERS AND THEIR RESPECTIVE AFFILIATES, AND EACH SUCH PERSON’S RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS AND REPRESENTATIVES.   (O)           “INSTRUMENTS” MEANS ALL “INSTRUMENTS,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED, AND, IN ANY EVENT, INCLUDING ALL CERTIFICATED SECURITIES, ALL CERTIFICATES OF DEPOSIT, AND ALL PROMISSORY NOTES AND OTHER EVIDENCES OF INDEBTEDNESS, OTHER THAN INSTRUMENTS THAT CONSTITUTE, OR ARE A PART OF A GROUP OF WRITINGS THAT CONSTITUTE, CHATTEL PAPER.   (P)           “INTELLECTUAL PROPERTY” MEANS ANY AND ALL LICENSES, PATENTS, COPYRIGHTS, TRADEMARKS, AND THE GOODWILL ASSOCIATED WITH SUCH TRADEMARKS.   (Q)           “INVENTORY” MEANS ALL “INVENTORY,” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED, AND IN ANY EVENT INCLUDING INVENTORY, MERCHANDISE, GOODS AND OTHER PERSONAL PROPERTY THAT ARE HELD BY OR ON BEHALF OF ANY CREDIT PARTY FOR SALE OR LEASE OR ARE FURNISHED OR ARE TO BE FURNISHED UNDER A CONTRACT OF SERVICE, OR THAT CONSTITUTE RAW MATERIALS, WORK IN PROCESS, FINISHED GOODS, RETURNED GOODS, OR MATERIALS OR SUPPLIES OF ANY KIND, NATURE OR DESCRIPTION USED OR   4 --------------------------------------------------------------------------------   CONSUMED OR TO BE USED OR CONSUMED IN SUCH CREDIT PARTY’S BUSINESS OR IN THE PROCESSING, PRODUCTION, PACKAGING, PROMOTION, DELIVERY OR SHIPPING OF THE SAME, INCLUDING ALL SUPPLIES AND EMBEDDED SOFTWARE.   (R)            “INVESTMENT PROPERTY” MEANS ALL “INVESTMENT PROPERTY” AS SUCH TERM IS DEFINED IN THE CODE NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, WHEREVER LOCATED, INCLUDING (I) ALL SECURITIES, WHETHER CERTIFICATED OR UNCERTIFICATED, INCLUDING STOCKS, BONDS, INTERESTS IN LIMITED LIABILITY COMPANIES, PARTNERSHIP INTERESTS, TREASURIES, CERTIFICATES OF DEPOSIT, AND MUTUAL FUND SHARES; (II) ALL SECURITIES ENTITLEMENTS OF ANY CREDIT PARTY, INCLUDING THE RIGHTS OF ANY CREDIT PARTY TO ANY SECURITIES ACCOUNT AND THE FINANCIAL ASSETS HELD BY A SECURITIES INTERMEDIARY IN SUCH SECURITIES ACCOUNT AND ANY FREE CREDIT BALANCE OR OTHER MONEY OWING BY ANY SECURITIES INTERMEDIARY WITH RESPECT TO THAT ACCOUNT; (III) ALL SECURITIES ACCOUNTS OF ANY CREDIT PARTY; (IV) ALL COMMODITY CONTRACTS OF ANY CREDIT PARTY; AND (V) ALL COMMODITY ACCOUNTS HELD BY ANY CREDIT PARTY.   (S)           “LETTER-OF-CREDIT RIGHTS” MEANS “LETTER-OF-CREDIT RIGHTS” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, INCLUDING RIGHTS TO PAYMENT OR PERFORMANCE UNDER A LETTER OF CREDIT, WHETHER OR NOT SUCH CREDIT PARTY, AS BENEFICIARY, HAS DEMANDED OR IS ENTITLED TO DEMAND PAYMENT OR PERFORMANCE.   (T)            “LICENSE” MEANS ANY COPYRIGHT LICENSE, PATENT LICENSE, TRADEMARK LICENSE OR OTHER LICENSE OF RIGHTS OR INTERESTS NOW HELD OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY.   (U)           “PATENT LICENSE” MEANS RIGHTS UNDER ANY WRITTEN AGREEMENT NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY GRANTING ANY RIGHT WITH RESPECT TO ANY INVENTION ON WHICH A PATENT IS IN EXISTENCE.   (V)           “PATENTS” MEANS ALL OF THE FOLLOWING IN WHICH ANY CREDIT PARTY NOW HOLDS OR HEREAFTER ACQUIRES ANY INTEREST: (A) ALL LETTERS PATENT OF THE UNITED STATES OR OF ANY OTHER COUNTRY, ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS FOR LETTERS PATENT OF THE UNITED STATES OR OF ANY OTHER COUNTRY, INCLUDING REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES PATENT AND TRADEMARK OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE, OR ANY OTHER COUNTRY, AND (B) ALL REISSUES, CONTINUATIONS, CONTINUATIONS-IN-PART OR EXTENSIONS THEREOF.   (W)          “SOFTWARE” MEANS ALL “SOFTWARE” AS SUCH TERM IS DEFINED IN THE CODE, NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY, OTHER THAN SOFTWARE EMBEDDED IN ANY CATEGORY OF GOODS, INCLUDING ALL COMPUTER PROGRAMS AND ALL SUPPORTING INFORMATION PROVIDED IN CONNECTION WITH A TRANSACTION RELATED TO ANY PROGRAM.   (X)            “SUPPORTING OBLIGATIONS” MEANS ALL “SUPPORTING OBLIGATIONS” AS SUCH TERM IS DEFINED IN THE CODE, INCLUDING LETTERS OF CREDIT AND GUARANTIES ISSUED IN SUPPORT OF ACCOUNTS, CHATTEL PAPER, DOCUMENTS, GENERAL INTANGIBLES, INSTRUMENTS, OR INVESTMENT PROPERTY.   (Y)           “TERMINATION DATE” MEANS THE DATE ON WHICH (A) THE LOANS HAVE BEEN INDEFEASIBLY REPAID IN FULL IN CASH, (B) ALL OTHER OBLIGATIONS UNDER THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS HAVE BEEN COMPLETELY DISCHARGED (C) ALL L/C OBLIGATIONS   5 --------------------------------------------------------------------------------   HAVE BEEN CASH COLLATERALIZED, CANCELED OR BACKED BY STANDBY LETTERS OF CREDIT IN ACCORDANCE WITH SECTION 2.5 OF THE CREDIT AGREEMENT, AND (D) THE BORROWER SHALL NOT HAVE ANY FURTHER RIGHT TO BORROW ANY MONIES UNDER THE CREDIT AGREEMENT.   (Z)            “TRADEMARK LICENSE” MEANS RIGHTS UNDER ANY WRITTEN AGREEMENT NOW OWNED OR HEREAFTER ACQUIRED BY ANY CREDIT PARTY GRANTING ANY RIGHT TO USE ANY TRADEMARK.   (AA)         “TRADEMARKS” MEANS ALL OF THE FOLLOWING NOW OWNED OR HEREAFTER EXISTING OR ADOPTED OR ACQUIRED BY ANY CREDIT PARTY: (A) ALL TRADEMARKS, TRADE NAMES, CORPORATE NAMES, BUSINESS NAMES, TRADE STYLES, SERVICE MARKS, LOGOS, OTHER SOURCE OR BUSINESS IDENTIFIERS, PRINTS AND LABELS ON WHICH ANY OF THE FOREGOING HAVE APPEARED OR APPEAR, DESIGNS AND GENERAL INTANGIBLES OF LIKE NATURE (WHETHER REGISTERED OR UNREGISTERED), ALL REGISTRATIONS AND RECORDINGS THEREOF, AND ALL APPLICATIONS IN CONNECTION THEREWITH, INCLUDING REGISTRATIONS, RECORDINGS AND APPLICATIONS IN THE UNITED STATES PATENT AND TRADEMARK OFFICE OR IN ANY SIMILAR OFFICE OR AGENCY OF THE UNITED STATES, ANY STATE OR TERRITORY THEREOF, OR ANY OTHER COUNTRY OR ANY POLITICAL SUBDIVISION THEREOF; (B) ALL REISSUES, EXTENSIONS OR RENEWALS THEREOF; AND (C) ALL GOODWILL ASSOCIATED WITH OR SYMBOLIZED BY ANY OF THE FOREGOING.   (BB)         “UNIFORM COMMERCIAL CODE JURISDICTION” MEANS ANY JURISDICTION THAT HAS ADOPTED ALL OR SUBSTANTIALLY ALL OF ARTICLE 9 AS CONTAINED IN THE 2000 OFFICIAL TEXT OF THE UNIFORM COMMERCIAL CODE, AS RECOMMENDED BY THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS AND THE AMERICAN LAW INSTITUTE, TOGETHER WITH ANY SUBSEQUENT AMENDMENTS OR MODIFICATIONS TO THE OFFICIAL TEXT.   2.             GRANT OF LIEN.   (A)           TO SECURE THE PROMPT AND COMPLETE PAYMENT, PERFORMANCE AND OBSERVANCE OF ALL OF THE OBLIGATIONS (SPECIFICALLY INCLUDING, WITHOUT LIMITATION, EACH GRANTOR’S OBLIGATIONS ARISING UNDER THE GUARANTY AGREEMENT), EACH GRANTOR HEREBY GRANTS, ASSIGNS, CONVEYS, MORTGAGES, PLEDGES, HYPOTHECATES AND TRANSFERS TO AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, A LIEN UPON ALL OF ITS RIGHT, TITLE AND INTEREST IN, TO AND UNDER ALL PERSONAL PROPERTY AND OTHER ASSETS, WHETHER NOW OWNED BY OR OWING TO, OR HEREAFTER ACQUIRED BY OR ARISING IN FAVOR OF SUCH GRANTOR (INCLUDING UNDER ANY TRADE NAMES, STYLES OR DERIVATIONS THEREOF), AND WHETHER OWNED OR CONSIGNED BY OR TO, OR LEASED FROM OR TO, SUCH GRANTOR, AND REGARDLESS OF WHERE LOCATED (ALL OF WHICH BEING HEREINAFTER COLLECTIVELY REFERRED TO AS THE “COLLATERAL”), INCLUDING:   I.              ALL ACCOUNTS;   II.             ALL CHATTEL PAPER;   III.            ALL DOCUMENTS;   IV.            ALL GENERAL INTANGIBLES (INCLUDING PAYMENT INTANGIBLES AND SOFTWARE);   V.             ALL GOODS (INCLUDING INVENTORY, EQUIPMENT AND FIXTURES);   6 --------------------------------------------------------------------------------   VI.            ALL INSTRUMENTS;   VII.           ALL INVESTMENT PROPERTY;   VIII.          ALL DEPOSIT ACCOUNTS, OF ANY GRANTOR, INCLUDING ALL BLOCKED ACCOUNTS, GOVERNMENT RECEIVABLES DEPOSIT ACCOUNTS, CONCENTRATION ACCOUNTS, DISBURSEMENT ACCOUNTS, AND ALL OTHER BANK ACCOUNTS AND ALL DEPOSITS THEREIN;   IX.            ALL MONEY, CASH OR CASH EQUIVALENTS OF ANY GRANTOR;   X.             ALL SUPPORTING OBLIGATIONS AND LETTER-OF-CREDIT RIGHTS OF ANY GRANTOR;   XI.            ALL FOLLOWING COMMERCIAL TORT CLAIMS;   XII.           ALL BOOKS, RECORDS, LEDGER CARDS, FILES, CORRESPONDENCE, COMPUTER PROGRAMS, TAPES, DISKS AND RELATED DATA PROCESSING SOFTWARE THAT AT ANY TIME EVIDENCE OR CONTAIN INFORMATION RELATING TO ANY OF THE COLLATERAL DESCRIBED IN CLAUSES (I) THROUGH (XI) ABOVE OR ARE OTHERWISE NECESSARY OR HELPFUL IN THE COLLECTION THEREOF OR REALIZATION THEREON; AND   XIII.          TO THE EXTENT NOT OTHERWISE INCLUDED, ALL PROCEEDS, TORT CLAIMS, INSURANCE CLAIMS AND OTHER RIGHTS TO PAYMENTS NOT OTHERWISE INCLUDED IN THE FOREGOING AND PRODUCTS OF THE FOREGOING AND ALL ACCESSIONS TO, SUBSTITUTIONS AND REPLACEMENTS FOR, AND RENTS AND PROFITS OF, EACH OF THE FOREGOING.   (B)           IN ADDITION, TO SECURE THE PROMPT AND COMPLETE PAYMENT, PERFORMANCE AND OBSERVANCE OF THE OBLIGATIONS AND IN ORDER TO INDUCE AGENT AND LENDERS AS AFORESAID, EACH GRANTOR HEREBY GRANTS TO AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, A RIGHT OF SETOFF AGAINST THE PROPERTY OF SUCH GRANTOR HELD BY AGENT OR ANY LENDER, CONSISTING OF PROPERTY DESCRIBED ABOVE IN SECTION 2(A) NOW OR HEREAFTER IN THE POSSESSION OR CUSTODY OF OR IN TRANSIT TO AGENT OR ANY LENDER, FOR ANY PURPOSE, INCLUDING SAFEKEEPING, COLLECTION OR PLEDGE, FOR THE ACCOUNT OF SUCH GRANTOR, OR AS TO WHICH SUCH GRANTOR MAY HAVE ANY RIGHT OR POWER.   3.             AGENT’S AND LENDERS’ RIGHTS: LIMITATIONS ON AGENT’S AND LENDERS’ OBLIGATIONS.   (A)           IT IS EXPRESSLY AGREED BY GRANTORS THAT, ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, EACH GRANTOR SHALL REMAIN LIABLE UNDER EACH OF ITS CONTRACTS AND EACH OF ITS LICENSES TO OBSERVE AND PERFORM ALL THE CONDITIONS AND OBLIGATIONS TO BE OBSERVED AND PERFORMED BY IT THEREUNDER. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY OBLIGATION OR LIABILITY UNDER ANY CONTRACT OR LICENSE BY REASON OF OR ARISING OUT OF THIS SECURITY AGREEMENT OR THE GRANTING HEREIN OF A LIEN THEREON OR THE RECEIPT BY AGENT OR ANY LENDER OF ANY PAYMENT RELATING TO ANY CONTRACT OR LICENSE PURSUANT HERETO. NEITHER AGENT NOR ANY LENDER SHALL BE REQUIRED OR OBLIGATED IN ANY MANNER TO PERFORM OR FULFILL ANY OF THE OBLIGATIONS OF ANY GRANTOR UNDER OR PURSUANT TO ANY CONTRACT OR LICENSE, OR TO MAKE ANY PAYMENT, OR TO MAKE ANY INQUIRY AS TO THE NATURE OR THE SUFFICIENCY OF ANY PAYMENT   7 --------------------------------------------------------------------------------   RECEIVED BY IT OR THE SUFFICIENCY OF ANY PERFORMANCE BY ANY PARTY UNDER ANY CONTRACT OR LICENSE, OR TO PRESENT OR FILE ANY CLAIMS, OR TO TAKE ANY ACTION TO COLLECT OR ENFORCE ANY PERFORMANCE OR THE PAYMENT OF ANY AMOUNTS WHICH MAY HAVE BEEN ASSIGNED TO IT OR TO WHICH IT MAY BE ENTITLED AT ANY TIME OR TIMES.   (B)           AGENT MAY AT ANY TIME AFTER AN EVENT OF DEFAULT HAS OCCURRED AND BE CONTINUING (OR IF ANY RIGHTS OF SET-OFF (OTHER THAN SET-OFFS AGAINST AN ACCOUNT ARISING UNDER THE CONTRACT GIVING RISE TO THE SAME ACCOUNT) OR CONTRA ACCOUNTS MAY BE ASSERTED WITH RESPECT TO THE FOLLOWING), WITHOUT PRIOR NOTICE TO ANY GRANTOR, NOTIFY ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON THE COLLATERAL THAT AGENT HAS A SECURITY INTEREST THEREIN, AND THAT PAYMENTS SHALL BE MADE DIRECTLY TO AGENT. UPON THE REQUEST OF AGENT, EACH GRANTOR SHALL SO NOTIFY ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL. ONCE ANY SUCH NOTICE HAS BEEN GIVEN TO ANY ACCOUNT DEBTOR OR OTHER PERSON OBLIGATED ON THE COLLATERAL, THE AFFECTED GRANTOR SHALL NOT GIVE ANY CONTRARY INSTRUCTIONS TO SUCH ACCOUNT DEBTOR OR OTHER PERSON WITHOUT AGENT’S PRIOR WRITTEN CONSENT.   (C)           AGENT MAY AT ANY TIME IN AGENT’S OWN NAME, IN THE NAME OF A NOMINEE OF AGENT OR IN THE NAME OF ANY GRANTOR COMMUNICATE (BY MAIL, TELEPHONE, FACSIMILE OR OTHERWISE) WITH ACCOUNT DEBTORS, PARTIES TO CONTRACTS AND OBLIGORS IN RESPECT OF INSTRUMENTS TO VERIFY WITH SUCH PERSONS, TO AGENT’S SATISFACTION, THE EXISTENCE, AMOUNT TERMS OF, AND ANY OTHER MATTER RELATING TO, ACCOUNTS, PAYMENT INTANGIBLES, INSTRUMENTS OR CHATTEL PAPER. IF A DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, EACH GRANTOR, AT ITS OWN EXPENSE, SHALL CAUSE THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS THEN ENGAGED BY SUCH GRANTOR TO PREPARE AND DELIVER TO AGENT AND EACH LENDER AT ANY TIME AND FROM TIME TO TIME PROMPTLY UPON AGENT’S REQUEST THE FOLLOWING REPORTS WITH RESPECT TO EACH GRANTOR: (I) A RECONCILIATION OF ALL ACCOUNTS; (II) AN AGING OF ALL ACCOUNTS; (III) TRIAL BALANCES; AND (IV) A TEST VERIFICATION OF SUCH ACCOUNTS AS AGENT MAY REQUEST. EACH GRANTOR, AT ITS OWN EXPENSE, SHALL DELIVER TO AGENT THE RESULTS OF EACH PHYSICAL VERIFICATION, IF ANY, WHICH SUCH GRANTOR MAY IN ITS DISCRETION HAVE MADE, OR CAUSED ANY OTHER PERSON TO HAVE MADE ON ITS BEHALF, OF ALL OR ANY PORTION OF ITS INVENTORY.   4.             REPRESENTATIONS AND WARRANTIES. EACH GRANTOR REPRESENTS AND WARRANTS THAT:   (A)           EACH GRANTOR HAS RIGHTS IN AND THE POWER TO TRANSFER EACH ITEM OF THE COLLATERAL UPON WHICH IT PURPORTS TO GRANT A LIEN HEREUNDER FREE AND CLEAR OF ANY AND ALL LIENS OTHER THAN PERMITTED ENCUMBRANCES;   (B)           NO EFFECTIVE SECURITY AGREEMENT, FINANCING STATEMENT, EQUIVALENT SECURITY OR LIEN INSTRUMENT OR CONTINUATION STATEMENT COVERING ALL OR ANY PART OF THE COLLATERAL IS ON FILE OR OF RECORD IN ANY PUBLIC OFFICE, EXCEPT SUCH AS MAY HAVE BEEN FILED (I) BY ANY GRANTOR IN FAVOR OF AGENT PURSUANT TO THIS SECURITY AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND (II) IN CONNECTION WITH ANY OTHER PERMITTED ENCUMBRANCES;   (C)           THIS SECURITY AGREEMENT IS EFFECTIVE TO CREATE A VALID AND CONTINUING LIEN ON AND, UPON THE FILING OF THE APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, A PERFECTED LIEN IN FAVOR OF AGENT, FOR ITSELF AND THE BENEFIT OF LENDERS, ON THE COLLATERAL   8 --------------------------------------------------------------------------------   WITH RESPECT TO WHICH A LIEN MAY BE PERFECTED BY FILING PURSUANT TO THE CODE. SUCH LIEN IS PRIOR TO ALL OTHER LIENS, EXCEPT PERMITTED ENCUMBRANCES THAT WOULD BE PRIOR TO LIENS IN FAVOR OF AGENT FOR THE BENEFIT OF AGENT AND LENDERS AS A MATTER OF LAW, AND IS ENFORCEABLE AS SUCH AS AGAINST ANY AND ALL CREDITORS OF AND PURCHASERS FROM ANY GRANTOR (OTHER THAN PURCHASERS AND LESSEES OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS AND NON-EXCLUSIVE LICENSEES OF GENERAL INTANGIBLES IN THE ORDINARY COURSE OF BUSINESS). ALL ACTION BY ANY GRANTOR NECESSARY OR DESIRABLE TO PROTECT AND PERFECT SUCH LIEN ON EACH ITEM OF THE COLLATERAL HAS BEEN DULY TAKEN;   (D)           SCHEDULE II HERETO LISTS ALL INSTRUMENTS, LETTER OF CREDIT RIGHTS AND CHATTEL PAPER OF EACH GRANTOR. ALL ACTION BY ANY GRANTOR NECESSARY OR DESIRABLE TO PROTECT AND PERFECT THE LIEN OF AGENT ON EACH ITEM SET FORTH ON SCHEDULE II (INCLUDING THE DELIVERY OF ALL ORIGINALS THEREOF TO AGENT AND THE LEGENDING OF ALL CHATTEL PAPER AS REQUIRED BY SECTION 5(B) HEREOF) HAS BEEN DULY TAKEN. THE LIEN OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, ON THE COLLATERAL LISTED ON SCHEDULE II HERETO IS PRIOR TO ALL OTHER LIENS, EXCEPT PERMITTED ENCUMBRANCES THAT WOULD BE PRIOR TO THE LIENS IN FAVOR OF AGENT AS A MATTER OF LAW, AND IS ENFORCEABLE AS SUCH AGAINST ANY AND ALL CREDITORS OF AND PURCHASERS FROM ANY GRANTOR;   (E)           EACH GRANTOR’S NAME AS IT APPEARS IN OFFICIAL FILINGS IN THE STATE OF ITS INCORPORATION OR OTHER ORGANIZATION, THE TYPE OF ENTITY OF EACH GRANTOR (INCLUDING CORPORATION, PARTNERSHIP, LIMITED PARTNERSHIP OR LIMITED LIABILITY COMPANY), ORGANIZATIONAL IDENTIFICATION NUMBER ISSUED BY EACH GRANTOR’S STATE OF INCORPORATION OR ORGANIZATION OR A STATEMENT THAT NO SUCH NUMBER HAS BEEN ISSUED, EACH GRANTOR’S STATE OF ORGANIZATION OR INCORPORATION, THE LOCATION OF EACH GRANTOR’S CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS, OFFICES, ALL WAREHOUSES AND PREMISES WHERE COLLATERAL IS STORED OR LOCATED, AND THE LOCATIONS OF ITS BOOKS AND RECORDS CONCERNING THE COLLATERAL ARE SET FORTH ON SCHEDULE III. EACH GRANTOR HAS ONLY ONE STATE OF INCORPORATION OR ORGANIZATION;   (F)            WITH RESPECT TO THE ACCOUNTS, EXCEPT AS SPECIFICALLY DISCLOSED IN THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT (I) THEY REPRESENT BONA FIDE SALES OF INVENTORY OR RENDERING OF SERVICES TO ACCOUNT DEBTORS IN THE ORDINARY COURSE OF EACH GRANTOR’S BUSINESS AND ARE NOT EVIDENCED BY A JUDGMENT, INSTRUMENT OR CHATTEL PAPER; (II) THERE ARE NO SETOFFS, CLAIMS OR DISPUTES EXISTING OR ASSERTED WITH RESPECT THERETO AND NO GRANTOR HAS MADE ANY AGREEMENT WITH ANY ACCOUNT DEBTOR FOR ANY EXTENSION OF TIME FOR THE PAYMENT THEREOF, ANY COMPROMISE OR SETTLEMENT FOR LESS THAN THE FULL AMOUNT THEREOF, ANY RELEASE OF ANY ACCOUNT DEBTOR FROM LIABILITY THEREFOR, OR ANY DEDUCTION THEREFROM EXCEPT A DISCOUNT OR ALLOWANCE ALLOWED BY SUCH GRANTOR IN THE ORDINARY COURSE OF ITS BUSINESS FOR PROMPT PAYMENT AND DISCLOSED TO AGENT; (III) TO EACH GRANTOR’S KNOWLEDGE, THERE ARE NO FACTS, EVENTS OR OCCURRENCES WHICH IN ANY WAY IMPAIR THE VALIDITY OR ENFORCEABILITY THEREOF OR COULD REASONABLY BE EXPECTED TO REDUCE THE AMOUNT PAYABLE THEREUNDER AS SHOWN ON ANY GRANTOR’S BOOKS AND RECORDS AND ANY INVOICES, STATEMENTS AND COLLATERAL REPORTS DELIVERED TO AGENT AND LENDERS WITH RESPECT THERETO; (IV) NO GRANTOR HAS RECEIVED ANY NOTICE OF PROCEEDINGS OR ACTIONS WHICH ARE THREATENED OR PENDING AGAINST ANY ACCOUNT DEBTOR WHICH MIGHT RESULT IN ANY ADVERSE CHANGE IN SUCH ACCOUNT DEBTOR’S FINANCIAL CONDITION; AND (V) NO GRANTOR HAS KNOWLEDGE THAT ANY ACCOUNT DEBTOR IS UNABLE GENERALLY TO PAY ITS DEBTS AS THEY BECOME DUE. FURTHER WITH RESPECT TO THE ACCOUNTS (X) THE AMOUNTS   9 --------------------------------------------------------------------------------   SHOWN ON ALL INVOICES, STATEMENTS AND COLLATERAL REPORTS WHICH MAY BE DELIVERED TO THE AGENT WITH RESPECT THERETO ARE ACTUALLY AND ABSOLUTELY OWING TO SUCH GRANTOR AS INDICATED THEREON AND ARE NOT IN ANY WAY CONTINGENT; (Y) NO PAYMENTS HAVE BEEN OR SHALL BE MADE THEREON EXCEPT PAYMENTS IMMEDIATELY DELIVERED TO THE APPLICABLE BLOCKED ACCOUNTS OR THE AGENT AS REQUIRED PURSUANT TO THE TERMS OF SECTION 6.16 OF THE CREDIT AGREEMENT; AND (Z) TO EACH GRANTOR’S KNOWLEDGE, ALL ACCOUNT DEBTORS HAVE THE CAPACITY TO CONTRACT;   (G)           WITH RESPECT TO ANY INVENTORY SCHEDULED OR LISTED ON THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT OR THE CREDIT AGREEMENT, (I) SUCH INVENTORY IS LOCATED AT ONE OF THE APPLICABLE GRANTOR’S LOCATIONS SET FORTH ON SCHEDULE III HERETO, AS APPLICABLE, (II) NO INVENTORY IS NOW, OR SHALL AT ANY TIME OR TIMES HEREAFTER BE STORED AT ANY OTHER LOCATION WITHOUT AGENT’S PRIOR CONSENT, AND IF AGENT GIVES SUCH CONSENT, EACH APPLICABLE GRANTOR WILL CONCURRENTLY THEREWITH OBTAIN, TO THE EXTENT REQUIRED BY THE CREDIT AGREEMENT, BAILEE, LANDLORD AND MORTGAGEE AGREEMENTS, (III) THE APPLICABLE GRANTOR HAS GOOD, INDEFEASIBLE AND MERCHANTABLE TITLE TO SUCH INVENTORY AND SUCH INVENTORY IS NOT SUBJECT TO ANY LIEN OR SECURITY INTEREST OR DOCUMENT WHATSOEVER EXCEPT FOR THE LIEN GRANTED TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, AND EXCEPT FOR PERMITTED ENCUMBRANCES, (IV) EXCEPT AS SPECIFICALLY DISCLOSED IN THE MOST RECENT COLLATERAL REPORT DELIVERED TO AGENT, SUCH INVENTORY IS ELIGIBLE INVENTORY OF GOOD AND MERCHANTABLE QUALITY, FREE FROM ANY DEFECTS, (V) SUCH INVENTORY IS NOT SUBJECT TO ANY LICENSING, PATENT, ROYALTY, TRADEMARK, TRADE NAME OR COPYRIGHT AGREEMENTS WITH ANY THIRD PARTIES WHICH WOULD REQUIRE ANY CONSENT OF ANY THIRD PARTY UPON SALE OR DISPOSITION OF THAT INVENTORY OR THE PAYMENT OF ANY MONIES TO ANY THIRD PARTY UPON SUCH SALE OR OTHER DISPOSITION, AND (VI) THE COMPLETION OF MANUFACTURE, SALE OR OTHER DISPOSITION OF SUCH INVENTORY BY AGENT FOLLOWING AN EVENT OF DEFAULT SHALL NOT REQUIRE THE CONSENT OF ANY PERSON AND SHALL NOT CONSTITUTE A BREACH OR DEFAULT UNDER ANY CONTRACT OR AGREEMENT TO WHICH ANY GRANTOR IS A PARTY OR TO WHICH SUCH PROPERTY IS SUBJECT.   (H)           NO GRANTOR HAS ANY INTEREST IN, OR TITLE TO, ANY PATENT, TRADEMARK OR COPYRIGHT EXCEPT AS SET FORTH IN SCHEDULE IV HERETO. THIS SECURITY AGREEMENT IS EFFECTIVE TO CREATE A VALID AND CONTINUING LIEN ON AND, UPON FILING OF THE COPYRIGHT SECURITY AGREEMENTS WITH THE UNITED STATES COPYRIGHT OFFICE, FILING OF THE PATENT SECURITY AGREEMENTS AND THE TRADEMARK SECURITY AGREEMENTS WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE AND THE FILING OF APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, SUCH LIENS IN FAVOR OF AGENT ON SUCH GRANTOR’S PATENTS, TRADEMARKS AND COPYRIGHTS WILL BE ENFORCEABLE AND PERFECTED. UPON FILING OF THE COPYRIGHT SECURITY AGREEMENTS WITH THE UNITED STATES COPYRIGHT OFFICE, FILING OF THE PATENT SECURITY AGREEMENTS AND THE TRADEMARK SECURITY AGREEMENTS WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE AND THE FILING OF APPROPRIATE FINANCING STATEMENTS LISTED ON SCHEDULE I HERETO, ALL ACTION NECESSARY OR DESIRABLE TO PROTECT AND PERFECT AGENT’S LIEN ON EACH GRANTOR’S PATENTS, TRADEMARKS OR COPYRIGHTS SHALL HAVE BEEN DULY TAKEN.   (I)            ALL MOTOR VEHICLES OWNED BY GRANTORS ARE LISTED ON SCHEDULE V HERETO, BY MODEL, MODEL YEAR AND VEHICLE IDENTIFICATION NUMBER (“VIN”). AT AGENT’S REQUEST, GRANTORS SHALL DELIVER TO AGENT MOTOR VEHICLE TITLE CERTIFICATES FOR ALL MOTOR VEHICLES FROM TIME TO TIME OWNED BY IT AND SHALL CAUSE THOSE TITLE CERTIFICATES TO BE FILED (WITH AGENT’S LIEN NOTED THEREON) IN THE APPROPRIATE STATE MOTOR VEHICLE FILING OFFICE.]   10 --------------------------------------------------------------------------------   5.             COVENANTS. EACH GRANTOR COVENANTS AND AGREES WITH AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, THAT FROM AND AFTER THE DATE OF THIS SECURITY AGREEMENT AND UNTIL THE TERMINATION DATE:   (A)           FURTHER ASSURANCES: PLEDGE OF INSTRUMENTS; CHATTEL PAPER.   I.              AT ANY TIME AND FROM TIME TO TIME, UPON THE WRITTEN REQUEST OF AGENT AND AT THE SOLE EXPENSE OF GRANTORS, EACH GRANTOR SHALL PROMPTLY AND DULY EXECUTE AND DELIVER ANY AND ALL SUCH FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE SUCH FURTHER ACTIONS AS AGENT MAY DEEM DESIRABLE TO OBTAIN THE FULL BENEFITS OF THIS SECURITY AGREEMENT AND OF THE RIGHTS AND POWERS HEREIN GRANTED, INCLUDING (A) USING ITS BEST EFFORTS TO SECURE ALL CONSENTS AND APPROVALS NECESSARY OR APPROPRIATE FOR THE ASSIGNMENT TO OR FOR THE BENEFIT OF AGENT OF ANY LICENSE OR CONTRACT HELD BY SUCH GRANTOR AND TO ENFORCE THE SECURITY INTERESTS GRANTED HEREUNDER; AND (B) FILING ANY FINANCING OR CONTINUATION STATEMENTS UNDER THE CODE WITH RESPECT TO THE LIENS GRANTED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT AS TO THOSE JURISDICTIONS THAT ARE NOT UNIFORM COMMERCIAL CODE JURISDICTIONS.   II.             UNLESS AGENT SHALL OTHERWISE CONSENT IN WRITING (WHICH CONSENT MAY BE REVOKED), EACH GRANTOR SHALL DELIVER TO AGENT ALL COLLATERAL CONSISTING OF NEGOTIABLE DOCUMENTS, CERTIFICATED SECURITIES, CHATTEL PAPER AND INSTRUMENTS (IN EACH CASE, ACCOMPANIED BY STOCK POWERS, ALLONGES OR OTHER INSTRUMENTS OF TRANSFER EXECUTED IN BLANK) PROMPTLY AFTER SUCH CREDIT PARTY RECEIVES THE SAME.   III.            EACH GRANTOR SHALL, IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT, OBTAIN OR USE ITS BEST EFFORTS TO OBTAIN WAIVERS OR SUBORDINATIONS OF LIENS FROM LANDLORDS AND MORTGAGEES, AND EACH CREDIT PARTY SHALL IN ALL INSTANCES OBTAIN SIGNED ACKNOWLEDGEMENTS OF AGENT’S LIENS FROM BAILEES HAVING POSSESSION OF ANY GRANTOR’S GOODS THAT THEY HOLD FOR THE BENEFIT OF AGENT.   IV.            IF REQUIRED BY THE TERMS OF THE CREDIT AGREEMENT AND NOT WAIVED BY AGENT IN WRITING (WHICH WAIVER MAY BE REVOKED), EACH GRANTOR SHALL OBTAIN AUTHENTICATED CONTROL LETTERS FROM EACH ISSUER OF UNCERTIFICATED SECURITIES, SECURITIES INTERMEDIARY, OR COMMODITIES INTERMEDIARY ISSUING OR HOLDING ANY FINANCIAL ASSETS OR COMMODITIES TO OR FOR ANY GRANTOR.   V.             TO THE EXTENT REQUIRED BY SECTION 6.16 OF THE CREDIT AGREEMENT, EACH GRANTOR SHALL OBTAIN A BLOCKED ACCOUNT, LOCKBOX OR SIMILAR AGREEMENT WITH EACH BANK OR FINANCIAL INSTITUTION HOLDING A DEPOSIT ACCOUNT FOR SUCH GRANTOR.   VI.            EACH GRANTOR THAT IS OR BECOMES THE BENEFICIARY OF A LETTER OF CREDIT SHALL PROMPTLY AFTER BECOMING A BENEFICIARY, NOTIFY AGENT THEREOF AND ENTER INTO TRI-PARTY AGREEMENTS WITH AGENT AND THE ISSUER AND/OR CONFIRMATION BANK WITH RESPECT TO LETTER-OF-CREDIT RIGHTS ASSIGNING SUCH LETTER-OF-CREDIT RIGHTS TO AGENT AND DIRECTING ALL PAYMENTS THEREUNDER TO THE COLLECTION ACCOUNT, ALL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO AGENT.   VII.           EACH GRANTOR SHALL TAKE ALL STEPS NECESSARY TO GRANT THE AGENT CONTROL OF ALL ELECTRONIC CHATTEL PAPER IN ACCORDANCE WITH THE CODE AND ALL “TRANSFERABLE RECORDS” AS DEFINED IN EACH OF THE UNIFORM ELECTRONIC TRANSACTIONS ACT AND THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.   11 --------------------------------------------------------------------------------   VIII.          EACH GRANTOR HEREBY IRREVOCABLY AUTHORIZES THE AGENT AT ANY TIME AND FROM TIME TO TIME TO FILE IN ANY FILING OFFICE IN ANY UNIFORM COMMERCIAL CODE JURISDICTION ANY INITIAL FINANCING STATEMENTS AND AMENDMENTS THERETO THAT (A) INDICATE THE COLLATERAL (I) AS ALL ASSETS OF SUCH GRANTOR OR WORDS OF SIMILAR EFFECT, REGARDLESS OF WHETHER ANY PARTICULAR ASSET COMPRISED IN THE COLLATERAL FALLS WITHIN THE SCOPE OF ARTICLE 9 OF THE CODE OR SUCH JURISDICTION, OR (II) AS BEING OF AN EQUAL OR LESSER SCOPE OR WITH GREATER DETAIL, AND (B) CONTAIN ANY OTHER INFORMATION REQUIRED BY PART 5 OF ARTICLE 9 OF THE CODE FOR THE SUFFICIENCY OR FILING OFFICE ACCEPTANCE OF ANY FINANCING STATEMENT OR AMENDMENT, INCLUDING (I) WHETHER SUCH GRANTOR IS AN ORGANIZATION, THE TYPE OF ORGANIZATION AND ANY ORGANIZATION IDENTIFICATION NUMBER ISSUED TO SUCH GRANTOR, AND (II) IN THE CASE OF A FINANCING STATEMENT FILED AS A FIXTURE FILING OR INDICATING COLLATERAL AS AS-EXTRACTED COLLATERAL OR TIMBER TO BE CUT, A SUFFICIENT DESCRIPTION OF REAL PROPERTY TO WHICH THE COLLATERAL RELATES. EACH GRANTOR AGREES TO FURNISH ANY SUCH INFORMATION TO THE AGENT PROMPTLY UPON REQUEST. EACH GRANTOR ALSO RATIFIES ITS AUTHORIZATION FOR THE AGENT TO HAVE FILED IN ANY UNIFORM COMMERCIAL CODE JURISDICTION ANY INITIAL FINANCING STATEMENTS OR AMENDMENTS THERETO IF FILED PRIOR TO THE DATE HEREOF.   IX.            EACH GRANTOR SHALL PROMPTLY, AND IN ANY EVENT WITHIN TWO (2) BUSINESS DAYS AFTER THE SAME IS ACQUIRED BY IT, NOTIFY AGENT OF ANY COMMERCIAL TORT CLAIM (AS DEFINED IN THE CODE) ACQUIRED BY IT AND UNLESS OTHERWISE CONSENTED BY AGENT, SUCH GRANTOR SHALL ENTER INTO A SUPPLEMENT TO THIS SECURITY AGREEMENT, GRANTING TO AGENT A LIEN IN SUCH COMMERCIAL TORT CLAIM.   (B)           MAINTENANCE OF RECORDS. GRANTORS SHALL KEEP AND MAINTAIN, AT THEIR OWN COST AND EXPENSE, SATISFACTORY AND COMPLETE RECORDS OF THE COLLATERAL, INCLUDING A RECORD OF ANY AND ALL PAYMENTS RECEIVED AND ANY AND ALL CREDITS GRANTED WITH RESPECT TO THE COLLATERAL AND ALL OTHER DEALINGS WITH THE COLLATERAL. GRANTORS SHALL MARK THEIR BOOKS AND RECORDS PERTAINING TO THE COLLATERAL TO EVIDENCE THIS SECURITY AGREEMENT AND THE LIENS GRANTED HEREBY. IF ANY GRANTOR RETAINS POSSESSION OF ANY CHATTEL PAPER OR INSTRUMENTS WITH AGENT’S CONSENT, SUCH CHATTEL PAPER AND INSTRUMENTS SHALL BE MARKED WITH THE FOLLOWING LEGEND: “THIS WRITING AND THE OBLIGATIONS EVIDENCED OR SECURED HEREBY ARE SUBJECT TO THE SECURITY INTEREST OF GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT, FOR THE BENEFIT OF AGENT AND CERTAIN LENDERS.”   (C)           COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.   I.              GRANTORS SHALL NOTIFY AGENT AS SOON AS POSSIBLE, BUT IN ANY EVENT WITHIN TWO (2) BUSINESS DAYS, IF THEY KNOW OR HAVE REASON TO KNOW THAT ANY APPLICATION OR REGISTRATION RELATING TO ANY PATENT, TRADEMARK OR COPYRIGHT (NOW OR HEREAFTER EXISTING) MAY BECOME ABANDONED OR DEDICATED, OR OF ANY ADVERSE DETERMINATION OR DEVELOPMENT (INCLUDING THE INSTITUTION OF, OR ANY SUCH   12 --------------------------------------------------------------------------------   DETERMINATION OR DEVELOPMENT IN, ANY PROCEEDING IN THE UNITED STATES PATENT AND TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT OFFICE OR ANY COURT) REGARDING ANY GRANTOR’S OWNERSHIP OF ANY PATENT, TRADEMARK OR COPYRIGHT, ITS RIGHT TO REGISTER THE SAME, OR TO KEEP AND MAINTAIN THE SAME.   II.             IN NO EVENT SHALL GRANTOR, EITHER ITSELF OR THROUGH ANY AGENT, EMPLOYEE, LICENSEE OR DESIGNEE, FILE AN APPLICATION FOR THE REGISTRATION OF ANY PATENT, TRADEMARK OR COPYRIGHT WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE, THE UNITED STATES COPYRIGHT OFFICE OR ANY SIMILAR OFFICE OR AGENCY WITHOUT GIVING AGENT PRIOR WRITTEN NOTICE THEREOF, AND, UPON REQUEST OF AGENT, GRANTOR SHALL EXECUTE AND DELIVER ANY AND ALL PATENT SECURITY AGREEMENTS, COPYRIGHT SECURITY AGREEMENTS OR TRADEMARK SECURITY AGREEMENTS AS AGENT MAY REQUEST TO EVIDENCE AGENT’S LIEN ON SUCH PATENT, TRADEMARK OR COPYRIGHT, AND THE GENERAL INTANGIBLES OF GRANTOR RELATING THERETO OR REPRESENTED THEREBY.   III.            GRANTORS SHALL TAKE ALL ACTIONS NECESSARY OR REQUESTED BY AGENT TO MAINTAIN AND PURSUE EACH APPLICATION, TO OBTAIN THE RELEVANT REGISTRATION AND TO MAINTAIN THE REGISTRATION OF EACH OF THE PATENTS, TRADEMARKS AND COPYRIGHTS (NOW OR HEREAFTER EXISTING), INCLUDING THE FILING OF APPLICATIONS FOR RENEWAL, AFFIDAVITS OF USE, AFFIDAVITS OF NONCONTESTABILITY AND OPPOSITION AND INTERFERENCE AND CANCELLATION PROCEEDINGS, UNLESS THE APPLICABLE GRANTOR SHALL REASONABLY DETERMINE THAT SUCH PATENT, TRADEMARK OR COPYRIGHT IS NOT MATERIAL TO THE CONDUCT OF ITS BUSINESS.   IV.            IN THE EVENT THAT ANY OF THE PATENT, TRADEMARK OR COPYRIGHT COLLATERAL IS INFRINGED UPON, OR MISAPPROPRIATED OR DILUTED BY A THIRD PARTY, SUCH GRANTOR SHALL COMPLY WITH SECTION 5(A)(IX) OF THIS SECURITY AGREEMENT. SUCH GRANTOR SHALL, UNLESS SUCH GRANTOR SHALL REASONABLY DETERMINE THAT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL IS IN NO WAY MATERIAL TO THE CONDUCT OF ITS BUSINESS OR OPERATIONS, PROMPTLY TAKE ACTION TO PROTECT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL (INCLUDING, BUT NOT LIMITED TO, SUING FOR INFRINGEMENT, MISAPPROPRIATION OR DILUTION AND TO RECOVER ANY AND ALL DAMAGES FOR SUCH INFRINGEMENT, MISAPPROPRIATION OR DILUTION), AND SHALL TAKE SUCH OTHER ACTIONS AS AGENT SHALL REASONABLY DEEM APPROPRIATE UNDER THE CIRCUMSTANCES TO PROTECT SUCH PATENT, TRADEMARK OR COPYRIGHT COLLATERAL.   V.             INDEMNIFICATION. IN ANY SUIT, PROCEEDING OR ACTION BROUGHT BY AGENT OR ANY LENDER RELATING TO ANY COLLATERAL FOR ANY SUM OWING WITH RESPECT THERETO OR TO ENFORCE ANY RIGHTS OR CLAIMS WITH RESPECT THERETO, EACH GRANTOR WILL SAVE, INDEMNIFY AND KEEP AGENT AND LENDERS HARMLESS FROM AND AGAINST ALL EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES), LOSS OR DAMAGE SUFFERED BY REASON OF ANY DEFENSE, SETOFF, COUNTERCLAIM, RECOUPMENT OR REDUCTION OF LIABILITY WHATSOEVER OF THE ACCOUNT DEBTOR OR OTHER PERSON OBLIGATED ON THE COLLATERAL, ARISING OUT OF A BREACH BY ANY GRANTOR OF ANY OBLIGATION THEREUNDER OR ARISING OUT OF ANY OTHER AGREEMENT, INDEBTEDNESS OR LIABILITY AT ANY TIME OWING TO, OR IN FAVOR OF, SUCH OBLIGOR OR ITS SUCCESSORS   13 --------------------------------------------------------------------------------   FROM SUCH GRANTOR, EXCEPT IN THE CASE OF AGENT OR ANY LENDER, TO THE EXTENT SUCH EXPENSE, LOSS, OR DAMAGE IS ATTRIBUTABLE SOLELY TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT OR SUCH LENDER AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION. ALL SUCH OBLIGATIONS OF GRANTORS SHALL BE AND REMAIN ENFORCEABLE AGAINST AND ONLY AGAINST GRANTORS AND SHALL NOT BE ENFORCEABLE AGAINST AGENT OR ANY LENDER.   (D)           COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. IN ALL MATERIAL RESPECTS, EACH GRANTOR WILL PERFORM AND COMPLY WITH ALL OBLIGATIONS IN RESPECT OF THE COLLATERAL AND ALL OTHER AGREEMENTS TO WHICH IT IS A PARTY OR BY WHICH IT IS BOUND RELATING TO THE COLLATERAL.   (E)           LIMITATION ON LIENS ON COLLATERAL. NO GRANTOR WILL CREATE, PERMIT OR SUFFER TO EXIST, AND EACH GRANTOR WILL DEFEND THE COLLATERAL AGAINST, AND TAKE SUCH OTHER ACTION AS IS NECESSARY TO REMOVE, ANY LIEN ON THE COLLATERAL EXCEPT PERMITTED ENCUMBRANCES, AND WILL DEFEND THE RIGHT, TITLE AND INTEREST OF AGENT AND LENDERS IN AND TO ANY OF SUCH GRANTOR’S RIGHTS UNDER THE COLLATERAL AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS WHOMSOEVER.   (F)            LIMITATIONS ON DISPOSITION. NO GRANTOR WILL SELL, LICENSE, LEASE, TRANSFER OR OTHERWISE DISPOSE OF ANY OF THE COLLATERAL, OR ATTEMPT OR CONTRACT TO DO SO EXCEPT AS PERMITTED BY THE CREDIT AGREEMENT.   (G)           FURTHER IDENTIFICATION OF COLLATERAL. GRANTORS WILL, IF SO REQUESTED BY AGENT, FURNISH TO AGENT, AS OFTEN AS AGENT REQUESTS, STATEMENTS AND SCHEDULES FURTHER IDENTIFYING AND DESCRIBING THE COLLATERAL AND SUCH OTHER REPORTS IN CONNECTION WITH THE COLLATERAL AS AGENT MAY REASONABLY REQUEST, ALL IN SUCH DETAIL AS AGENT MAY SPECIFY.   (H)           NOTICES. GRANTORS WILL ADVISE AGENT PROMPTLY, IN REASONABLE DETAIL, (I) OF ANY LIEN (OTHER THAN PERMITTED ENCUMBRANCES) OR CLAIM MADE OR ASSERTED AGAINST ANY OF THE COLLATERAL, AND (II) OF THE OCCURRENCE OF ANY OTHER EVENT WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE AGGREGATE VALUE OF THE COLLATERAL OR ON THE LIENS CREATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.   (I)            GOOD STANDING CERTIFICATES. NOT LESS FREQUENTLY THAN ONCE DURING EACH CALENDAR QUARTER, EACH GRANTOR SHALL, UNLESS AGENT SHALL OTHERWISE CONSENT, PROVIDE TO AGENT A CERTIFICATE OF GOOD STANDING FROM ITS STATE OF INCORPORATION OR ORGANIZATION.   (J)            NO REINCORPORATION. WITHOUT LIMITING THE PROHIBITIONS ON MERGERS INVOLVING THE GRANTORS CONTAINED IN THE CREDIT AGREEMENT, NO GRANTOR SHALL REINCORPORATE OR REORGANIZE ITSELF UNDER THE LAWS OF ANY JURISDICTION OTHER THAN THE JURISDICTION IN WHICH IT IS INCORPORATED OR ORGANIZED AS OF THE DATE HEREOF WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT.   (K)           TERMINATIONS; AMENDMENTS NOT AUTHORIZED. EACH GRANTOR ACKNOWLEDGES THAT IT IS NOT AUTHORIZED TO FILE ANY FINANCING STATEMENT OR AMENDMENT OR TERMINATION STATEMENT WITH RESPECT TO ANY FINANCING STATEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT AND AGREES THAT IT WILL NOT DO SO WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT, SUBJECT TO SUCH GRANTOR’S RIGHTS UNDER SECTION 9-509(D)(2) OF THE CODE.   14 --------------------------------------------------------------------------------   (L)            AUTHORIZED TERMINATIONS. UPON PAYMENT IN FULL IN CASH AND PERFORMANCE OF ALL OF THE OBLIGATIONS (OTHER THAN INDEMNIFICATION OBLIGATIONS), TERMINATION OF THE COMMITMENTS AND A RELEASE OF ALL CLAIMS AGAINST AGENT AND LENDERS, AND SO LONG AS NO SUITS, ACTIONS, PROCEEDINGS OR CLAIMS ARE PENDING OR THREATENED AGAINST ANY INDEMNIFIED PERSON ASSERTING ANY DAMAGES, LOSSES OR LIABILITIES THAT ARE INDEMNIFIED LIABILITIES UNDER SECTION 9.2 OF THE CREDIT AGREEMENT, AGENT SHALL, AT GRANTOR’S EXPENSE, PROMPTLY DELIVER TO GRANTOR OR AUTHORIZE GRANTOR TO PREPARE AND FILE TERMINATION STATEMENTS, MORTGAGE RELEASES AND OTHER DOCUMENTS NECESSARY OR APPROPRIATE TO EVIDENCE THE TERMINATION OF THE LIENS SECURING PAYMENT OF THE OBLIGATIONS.   (M)          FEDERAL CLAIMS. GRANTOR SHALL NOTIFY AGENT OF ANY COLLATERAL WHICH CONSTITUTES A CLAIM AGAINST THE UNITED STATES GOVERNMENT OR ANY INSTRUMENTALITY OR AGENCY THEREOF, THE ASSIGNMENT OF WHICH CLAIM IS RESTRICTED BY FEDERAL LAW. UPON THE REQUEST OF AGENT, GRANTOR SHALL TAKE SUCH STEPS AS MAY BE NECESSARY TO COMPLY WITH ANY APPLICABLE FEDERAL ASSIGNMENT OF CLAIMS LAWS AND OTHER COMPARABLE LAWS.   (N)           HOT GOODS. NONE OF THE INVENTORY OF GRANTOR HAS BEEN OR WILL BE PRODUCED IN VIOLATION OF ANY PROVISION OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, OR IN VIOLATION OF ANY OTHER LAW.   6.             AGENT’S APPOINTMENT AS ATTORNEY-IN-FACT.   On the Closing Date each Grantor shall execute and deliver to Agent a power of attorney (the “Power of Attorney”) substantially in the form attached hereto as Exhibit A. The power of attorney granted pursuant to the Power of Attorney is a power coupled with an interest and shall be irrevocable until the Termination Date. The powers conferred on Agent, for the benefit of Agent and Lenders, under the Power of Attorney are solely to protect Agent’s interests (for the benefit of Agent and Lenders) in the Collateral and shall not impose any duty upon Agent or any Lender to exercise any such powers. Agent agrees that (a) except for the powers granted in clause (h) of the Power of Attorney, it shall not exercise any power or authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing, and (b) Agent shall account for any moneys received by Agent in respect of any foreclosure on or disposition of Collateral pursuant to the Power of Attorney provided that none of Agent or any Lender shall have any duty as to any Collateral, and Agent and Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers. NONE OF AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.   15 --------------------------------------------------------------------------------   7.             REMEDIES:  RIGHTS UPON DEFAULT.   (A)           IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES GRANTED TO IT UNDER THIS SECURITY AGREEMENT, THE CREDIT AGREEMENT, THE OTHER LOAN DOCUMENTS AND UNDER ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING OR RELATING TO ANY OF THE OBLIGATIONS, IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, AGENT MAY EXERCISE ALL RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE CODE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH GRANTOR EXPRESSLY AGREES THAT IN ANY SUCH EVENT AGENT, WITHOUT DEMAND OF PERFORMANCE OR OTHER DEMAND, ADVERTISEMENT OR NOTICE OF ANY KIND (EXCEPT THE NOTICE SPECIFIED BELOW OF TIME AND PLACE OF PUBLIC OR PRIVATE SALE) TO OR UPON SUCH GRANTOR OR ANY OTHER PERSON (ALL AND EACH OF WHICH DEMANDS, ADVERTISEMENTS AND NOTICES ARE HEREBY EXPRESSLY WAIVED TO THE MAXIMUM EXTENT PERMITTED BY THE CODE AND OTHER APPLICABLE LAW), MAY FORTHWITH ENTER UPON THE PREMISES OF SUCH GRANTOR WHERE ANY COLLATERAL IS LOCATED THROUGH SELF-HELP, WITHOUT JUDICIAL PROCESS, WITHOUT FIRST OBTAINING A FINAL JUDGMENT OR GIVING SUCH GRANTOR OR ANY OTHER PERSON NOTICE AND OPPORTUNITY FOR A HEARING ON AGENT’S CLAIM OR ACTION AND MAY COLLECT, RECEIVE, ASSEMBLE, PROCESS, APPROPRIATE AND REALIZE UPON THE COLLATERAL, OR ANY PART THEREOF, AND MAY FORTHWITH SELL, LEASE, LICENSE, ASSIGN, GIVE AN OPTION OR OPTIONS TO PURCHASE, OR SELL OR OTHERWISE DISPOSE OF AND DELIVER SAID COLLATERAL (OR CONTRACT TO DO SO), OR ANY PART THEREOF, IN ONE OR MORE PARCELS AT A PUBLIC OR PRIVATE SALE OR SALES, AT ANY EXCHANGE AT SUCH PRICES AS IT MAY DEEM ACCEPTABLE, FOR CASH OR ON CREDIT OR FOR FUTURE DELIVERY WITHOUT ASSUMPTION OF ANY CREDIT RISK. AGENT OR ANY LENDER SHALL HAVE THE RIGHT UPON ANY SUCH PUBLIC SALE OR SALES AND, TO THE EXTENT PERMITTED BY LAW, UPON ANY SUCH PRIVATE SALE OR SALES, TO PURCHASE FOR THE BENEFIT OF AGENT AND LENDERS, THE WHOLE OR ANY PART OF SAID COLLATERAL SO SOLD, FREE OF ANY RIGHT OR EQUITY OF REDEMPTION, WHICH EQUITY OF REDEMPTION EACH GRANTOR HEREBY RELEASES. SUCH SALES MAY BE ADJOURNED AND CONTINUED FROM TIME TO TIME WITH OR WITHOUT NOTICE. AGENT SHALL HAVE THE RIGHT TO CONDUCT SUCH SALES ON ANY GRANTOR’S PREMISES OR ELSEWHERE AND SHALL HAVE THE RIGHT TO USE ANY GRANTOR’S PREMISES WITHOUT CHARGE FOR SUCH TIME OR TIMES AS AGENT DEEMS NECESSARY OR ADVISABLE.   If any Event of Default shall have occurred and be continuing, each Grantor further agrees, at Agent’s request, to assemble the Collateral and make it available to Agent at a place or places designated by Agent which are reasonably convenient to Agent and such Grantor, , whether at such Grantor’s premises or elsewhere. Until Agent is able to effect a sale, lease, or other disposition of Collateral, Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by Agent. Agent shall have no obligation to any Grantor to maintain or preserve the rights of such Grantor as against third parties with respect to Collateral while Collateral is in the possession of Agent. Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of Agent’s remedies (for the benefit of Agent and Lenders), with respect to such appointment without prior notice or hearing as to such appointment. Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the Obligations as provided in the Credit Agreement, and only after so paying over such net proceeds, and after the payment by Agent of any other amount required by any provision of law, need Agent account for the surplus, if any, to any Grantor. To the   16 --------------------------------------------------------------------------------   maximum extent permitted by applicable law, each Grantor waives all claims, damages, and demands against Agent or any Lender arising out of the repossession, retention or sale of the Collateral except such as arise solely out of the gross negligence or willful misconduct of Agent or such Lender as finally determined by a court of competent jurisdiction. Each Grantor agrees that ten (10) days prior notice by Agent of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Grantors shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any attorneys’ fees and other expenses incurred by Agent or any Lender to collect such deficiency.   (B)           EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, EACH GRANTOR HEREBY WAIVES PRESENTMENT, DEMAND, PROTEST OR ANY NOTICE (TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW) OF ANY KIND IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY COLLATERAL.   (C)           TO THE EXTENT THAT APPLICABLE LAW IMPOSES DUTIES ON THE AGENT TO EXERCISE REMEDIES IN A COMMERCIALLY REASONABLE MANNER, EACH GRANTOR ACKNOWLEDGES AND AGREES THAT IT IS NOT COMMERCIALLY UNREASONABLE FOR THE AGENT (I) TO FAIL TO INCUR EXPENSES REASONABLY DEEMED SIGNIFICANT BY THE AGENT TO PREPARE COLLATERAL FOR DISPOSITION OR OTHERWISE TO COMPLETE RAW MATERIAL OR WORK IN PROCESS INTO FINISHED GOODS OR OTHER FINISHED PRODUCTS FOR DISPOSITION, (II) TO FAIL TO OBTAIN THIRD PARTY CONSENTS FOR ACCESS TO COLLATERAL TO BE DISPOSED OF, OR TO OBTAIN OR, IF NOT REQUIRED BY OTHER LAW, TO FAIL TO OBTAIN GOVERNMENTAL OR THIRD PARTY CONSENTS FOR THE COLLECTION OR DISPOSITION OF COLLATERAL TO BE COLLECTED OR DISPOSED OF, (III) TO FAIL TO EXERCISE COLLECTION REMEDIES AGAINST ACCOUNT DEBTORS OR OTHER PERSONS OBLIGATED ON COLLATERAL OR TO REMOVE LIENS ON OR ANY ADVERSE CLAIMS AGAINST COLLATERAL, (IV) TO EXERCISE COLLECTION REMEDIES AGAINST ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL DIRECTLY OR THROUGH THE USE OF COLLECTION AGENCIES AND OTHER COLLECTION SPECIALISTS, (V) TO ADVERTISE DISPOSITIONS OF COLLATERAL THROUGH PUBLICATIONS OR MEDIA OF GENERAL CIRCULATION, WHETHER OR NOT THE COLLATERAL IS OF A SPECIALIZED NATURE, (VI) TO CONTACT OTHER PERSONS, WHETHER OR NOT IN THE SAME BUSINESS AS THE GRANTOR, FOR EXPRESSIONS OF INTEREST IN ACQUIRING ALL OR ANY PORTION OF SUCH COLLATERAL, (VII) TO HIRE ONE OR MORE PROFESSIONAL AUCTIONEERS TO ASSIST IN THE DISPOSITION OF COLLATERAL, WHETHER OR NOT THE COLLATERAL IS OF A SPECIALIZED NATURE, (VIII) TO DISPOSE OF COLLATERAL BY UTILIZING INTERNET SITES THAT PROVIDE FOR THE AUCTION OF ASSETS OF THE TYPES INCLUDED IN THE COLLATERAL OR THAT HAVE THE REASONABLE CAPACITY OF DOING SO, OR THAT MATCH BUYERS AND SELLERS OF ASSETS, (IX) TO DISPOSE OF ASSETS IN WHOLESALE RATHER THAN RETAIL MARKETS, (X) TO DISCLAIM DISPOSITION WARRANTIES, SUCH AS TITLE, POSSESSION OR QUIET ENJOYMENT, (XI) TO PURCHASE INSURANCE OR CREDIT ENHANCEMENTS TO INSURE THE AGENT AGAINST RISKS OF LOSS, COLLECTION OR DISPOSITION OF COLLATERAL OR TO PROVIDE TO THE AGENT A GUARANTEED RETURN FROM THE COLLECTION OR DISPOSITION OF COLLATERAL, OR (XII) TO THE EXTENT DEEMED APPROPRIATE BY THE AGENT, TO OBTAIN THE SERVICES OF OTHER BROKERS, INVESTMENT BANKERS, CONSULTANTS AND OTHER PROFESSIONALS TO ASSIST THE AGENT IN THE COLLECTION OR DISPOSITION OF ANY OF THE COLLATERAL. EACH GRANTOR ACKNOWLEDGES THAT THE PURPOSE OF THIS SECTION 7(C) IS TO PROVIDE NON-EXHAUSTIVE INDICATIONS OF WHAT ACTIONS OR OMISSIONS BY THE AGENT WOULD NOT BE COMMERCIALLY UNREASONABLE IN THE AGENT’S EXERCISE OF REMEDIES AGAINST THE COLLATERAL AND THAT OTHER ACTIONS OR OMISSIONS BY THE AGENT SHALL NOT BE DEEMED COMMERCIALLY UNREASONABLE SOLELY ON ACCOUNT OF NOT BEING INDICATED IN THIS SECTION 7(C). WITHOUT   17 --------------------------------------------------------------------------------   LIMITATION UPON THE FOREGOING, NOTHING CONTAINED IN THIS SECTION 7(C) SHALL BE CONSTRUED TO GRANT ANY RIGHTS TO ANY GRANTOR OR TO IMPOSE ANY DUTIES ON AGENT THAT WOULD NOT HAVE BEEN GRANTED OR IMPOSED BY THIS SECURITY AGREEMENT OR BY APPLICABLE LAW IN THE ABSENCE OF THIS SECTION 7(C).   (D)           NEITHER THE AGENT NOR THE LENDERS SHALL BE REQUIRED TO MAKE ANY DEMAND UPON, OR PURSUE OR EXHAUST ANY OF THEIR RIGHTS OR REMEDIES AGAINST, ANY GRANTOR, ANY OTHER OBLIGOR, GUARANTOR, PLEDGOR OR ANY OTHER PERSON WITH RESPECT TO THE PAYMENT OF THE OBLIGATIONS OR TO PURSUE OR EXHAUST ANY OF THEIR RIGHTS OR REMEDIES WITH RESPECT TO ANY COLLATERAL THEREFOR OR ANY DIRECT OR INDIRECT GUARANTEE THEREOF. NEITHER THE AGENT NOR THE LENDERS SHALL BE REQUIRED TO MARSHAL THE COLLATERAL OR ANY GUARANTEE OF THE OBLIGATIONS OR TO RESORT TO THE COLLATERAL OR ANY SUCH GUARANTEE IN ANY PARTICULAR ORDER, AND ALL OF ITS AND THEIR RIGHTS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT SHALL BE CUMULATIVE. TO THE EXTENT IT MAY LAWFULLY DO SO, EACH GRANTOR ABSOLUTELY AND IRREVOCABLY WAIVES AND RELINQUISHES THE BENEFIT AND ADVANTAGE OF, AND COVENANTS NOT TO ASSERT AGAINST THE AGENT OR ANY LENDER, ANY VALUATION, STAY, APPRAISEMENT, EXTENSION, REDEMPTION OR SIMILAR LAWS AND ANY AND ALL RIGHTS OR DEFENSES IT MAY HAVE AS A SURETY NOW OR HEREAFTER EXISTING WHICH, BUT FOR THIS PROVISION, MIGHT BE APPLICABLE TO THE SALE OF ANY COLLATERAL MADE UNDER THE JUDGMENT, ORDER OR DECREE OF ANY COURT, OR PRIVATELY UNDER THE POWER OF SALE CONFERRED BY THIS SECURITY AGREEMENT, OR OTHERWISE.   18 --------------------------------------------------------------------------------   8.             GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. FOR THE PURPOSE OF ENABLING AGENT TO EXERCISE RIGHTS AND REMEDIES UNDER SECTION 7 HEREOF (INCLUDING, WITHOUT LIMITING THE TERMS OF SECTION 7 HEREOF, IN ORDER TO TAKE POSSESSION OF, HOLD, PRESERVE, PROCESS, ASSEMBLE, PREPARE FOR SALE, MARKET FOR SALE, SELL OR OTHERWISE DISPOSE OF COLLATERAL) AT SUCH TIME AS AGENT SHALL BE LAWFULLY ENTITLED TO EXERCISE SUCH RIGHTS AND REMEDIES, EACH GRANTOR HEREBY GRANTS TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, AN IRREVOCABLE, NONEXCLUSIVE LICENSE (EXERCISABLE WITHOUT PAYMENT OF ROYALTY OR OTHER COMPENSATION TO SUCH GRANTOR) TO USE, LICENSE OR SUBLICENSE ANY INTELLECTUAL PROPERTY NOW OWNED OR HEREAFTER ACQUIRED BY SUCH GRANTOR, AND WHEREVER THE SAME MAY BE LOCATED, AND INCLUDING IN SUCH LICENSE ACCESS TO ALL MEDIA IN WHICH ANY OF THE LICENSED ITEMS MAY BE RECORDED OR STORED AND TO ALL COMPUTER SOFTWARE AND PROGRAMS USED FOR THE COMPILATION OR PRINTOUT THEREOF.   9.             LIMITATION ON AGENT’S AND LENDERS’ DUTY IN RESPECT OF COLLATERAL. AGENT AND EACH LENDER SHALL USE REASONABLE CARE WITH RESPECT TO THE COLLATERAL IN ITS POSSESSION OR UNDER ITS CONTROL. NEITHER AGENT NOR ANY LENDER SHALL HAVE ANY OTHER DUTY AS TO ANY COLLATERAL IN ITS POSSESSION OR CONTROL OR IN THE POSSESSION OR CONTROL OF ANY AGENT OR NOMINEE OF AGENT OR SUCH LENDER, OR ANY INCOME THEREON OR AS TO THE PRESERVATION OF RIGHTS AGAINST PRIOR PARTIES OR ANY OTHER RIGHTS PERTAINING THERETO.   10.           REINSTATEMENT. THIS SECURITY AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD ANY PETITION BE FILED, SUBSEQUENT TO THE DATE HEREOF,  BY OR AGAINST ANY GRANTOR FOR LIQUIDATION OR REORGANIZATION, SHOULD ANY GRANTOR MAKE AN ASSIGNMENT FOR THE BENEFIT OF ANY CREDITOR OR CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY SIGNIFICANT PART OF ANY GRANTOR’S ASSETS, AND SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND PERFORMANCE OF THE OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED BY ANY OBLIGEE OF THE OBLIGATIONS, WHETHER AS A “VOIDABLE PREFERENCE,” “FRAUDULENT CONVEYANCE,” OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT OR PERFORMANCE HAD NOT BEEN MADE. IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS RESCINDED, REDUCED, RESTORED OR RETURNED, THE OBLIGATIONS SHALL BE REINSTATED AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED, RESTORED OR RETURNED.   11.           NOTICES. EXCEPT AS OTHERWISE PROVIDED HEREIN, WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED UPON ANY OF THE PARTIES BY ANY OTHER PARTY, OR WHENEVER ANY OF THE PARTIES DESIRES TO GIVE AND SERVE UPON ANY OTHER PARTY ANY COMMUNICATION WITH RESPECT TO THIS SECURITY AGREEMENT, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE GIVEN IN THE MANNER, AND DEEMED RECEIVED, AS PROVIDED FOR IN THE CREDIT AGREEMENT.   19 --------------------------------------------------------------------------------   12.           SEVERABILITY. WHENEVER POSSIBLE, EACH PROVISION OF THIS SECURITY AGREEMENT SHALL BE INTERPRETED IN A MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SECURITY AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS SECURITY AGREEMENT. THIS SECURITY AGREEMENT IS TO BE READ, CONSTRUED AND APPLIED TOGETHER WITH THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS WHICH, TAKEN TOGETHER, SET FORTH THE COMPLETE UNDERSTANDING AND AGREEMENT OF AGENT, LENDERS AND GRANTORS WITH RESPECT TO THE MATTERS REFERRED TO HEREIN AND THEREIN.   13.           NO WAIVER; CUMULATIVE REMEDIES. NEITHER AGENT NOR ANY LENDER SHALL BY ANY ACT, DELAY, OMISSION OR OTHERWISE BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS OR REMEDIES HEREUNDER, AND NO WAIVER SHALL BE VALID UNLESS IN WRITING, SIGNED BY AGENT AND THEN ONLY TO THE EXTENT THEREIN SET FORTH. A WAIVER BY AGENT OF ANY RIGHT OR REMEDY HEREUNDER ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO ANY RIGHT OR REMEDY WHICH AGENT WOULD OTHERWISE HAVE HAD ON ANY FUTURE OCCASION. NO FAILURE TO EXERCISE NOR ANY DELAY IN EXERCISING ON THE PART OF AGENT OR ANY LENDER, ANY RIGHT, POWER OR PRIVILEGE HEREUNDER, SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FUTURE EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE. THE RIGHTS AND REMEDIES HEREUNDER PROVIDED ARE CUMULATIVE AND MAY BE EXERCISED SINGLY OR CONCURRENTLY, AND ARE NOT EXCLUSIVE OF ANY RIGHTS AND REMEDIES PROVIDED BY LAW. NONE OF THE TERMS OR PROVISIONS OF THIS SECURITY AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT BY AN INSTRUMENT IN WRITING, DULY EXECUTED BY AGENT AND GRANTORS.   14.           LIMITATION BY LAW. ALL RIGHTS, REMEDIES AND POWERS PROVIDED IN THIS SECURITY AGREEMENT MAY BE EXERCISED ONLY TO THE EXTENT THAT THE EXERCISE THEREOF DOES NOT VIOLATE ANY APPLICABLE PROVISION OF LAW, AND ALL THE PROVISIONS OF THIS SECURITY AGREEMENT ARE INTENDED TO BE SUBJECT TO ALL APPLICABLE MANDATORY PROVISIONS OF LAW THAT MAY BE CONTROLLING AND TO BE LIMITED TO THE EXTENT NECESSARY SO THAT THEY SHALL NOT RENDER THIS SECURITY AGREEMENT INVALID, UNENFORCEABLE, IN WHOLE OR IN PART, OR NOT ENTITLED TO BE RECORDED, REGISTERED OR FILED UNDER THE PROVISIONS OF ANY APPLICABLE LAW.   15.           TERMINATION OF THIS SECURITY AGREEMENT. SUBJECT TO SECTION 10 HEREOF, THIS SECURITY AGREEMENT SHALL TERMINATE UPON THE TERMINATION DATE.   16.           SUCCESSORS AND ASSIGNS. THIS SECURITY AGREEMENT AND ALL OBLIGATIONS OF GRANTORS HEREUNDER SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF EACH GRANTOR AND SHALL, TOGETHER WITH THE RIGHTS AND REMEDIES OF AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, HEREUNDER, INURE TO THE BENEFIT OF AGENT AND LENDERS, ALL FUTURE HOLDERS OF ANY INSTRUMENT EVIDENCING ANY OF THE OBLIGATIONS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. NO SALES OF PARTICIPATIONS, OTHER SALES, ASSIGNMENTS, TRANSFERS OR OTHER DISPOSITIONS OF ANY AGREEMENT GOVERNING OR INSTRUMENT EVIDENCING THE OBLIGATIONS OR ANY PORTION THEREOF OR INTEREST THEREIN SHALL IN ANY MANNER IMPAIR THE LIEN GRANTED TO AGENT, FOR THE BENEFIT OF AGENT AND LENDERS, HEREUNDER. NO GRANTOR MAY ASSIGN, SELL, HYPOTHECATE OR OTHERWISE TRANSFER ANY INTEREST IN OR OBLIGATION UNDER THIS SECURITY AGREEMENT.   20 --------------------------------------------------------------------------------   17.           COUNTERPARTS. THIS SECURITY AGREEMENT MAY BE AUTHENTICATED IN ANY NUMBER OF SEPARATE COUNTERPARTS, EACH OF WHICH SHALL COLLECTIVELY AND SEPARATELY CONSTITUTE ONE AGREEMENT. THIS SECURITY AGREEMENT MAY BE AUTHENTICATED BY MANUAL SIGNATURE, FACSIMILE OR, IF APPROVED IN WRITING BY AGENT, ELECTRONIC MEANS, ALL OF WHICH SHALL BE EQUALLY VALID.   18.                           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. GRANTORS AND AGENT HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH GRANTOR AND THE AGENT IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.3 OF THE CREDIT AGREEMENT. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.   19.           WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.   20.           SECTION TITLES. THE SECTION TITLES CONTAINED IN THIS SECURITY AGREEMENT ARE AND SHALL BE WITHOUT SUBSTANTIVE MEANING OR CONTENT OF ANY KIND WHATSOEVER AND ARE NOT A PART OF THE AGREEMENT BETWEEN THE PARTIES HERETO.   21.           NO STRICT CONSTRUCTION. THE PARTIES HERETO HAVE PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS SECURITY AGREEMENT. IN THE EVENT AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS SECURITY AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY THE PARTIES HERETO AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY PARTY BY VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS SECURITY AGREEMENT.   21 --------------------------------------------------------------------------------   22.           ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS SECURITY AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF SECTION 18 AND SECTION 19, WITH ITS COUNSEL.   23.           BENEFIT OF LENDERS. ALL LIENS GRANTED OR CONTEMPLATED HEREBY SHALL BE FOR THE BENEFIT OF AGENT, INDIVIDUALLY, AND LENDERS, AND ALL PROCEEDS OR PAYMENTS REALIZED FROM COLLATERAL IN ACCORDANCE HEREWITH SHALL BE APPLIED TO THE OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT.   [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW]   22 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, EACH OF THE PARTIES HERETO HAS CAUSED THIS GUARANTOR SECURITY AGREEMENT TO BE EXECUTED AND DELIVERED BY ITS DULY AUTHORIZED OFFICER AS OF THE DATE FIRST SET FORTH ABOVE.     GRANTOR(S):           By:       Name:       Title:         GENERAL ELECTRIC CAPITAL CORPORATION, as Agent     By:       Name:     Its Duly Authorized Signatory     [Signature Page to Guarantor Security Agreement]   --------------------------------------------------------------------------------   SCHEDULE I to SECURITY AGREEMENT   FILING JURISDICTIONS   Curative Health Services III Co.   Minnesota   --------------------------------------------------------------------------------   SCHEDULE II to SECURITY AGREEMENT   INSTRUMENTS CHATTEL PAPER AND   LETTER OF CREDIT RIGHTS     [None.]   --------------------------------------------------------------------------------   SCHEDULE III to SECURITY AGREEMENT   SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL AND RECORDS CONCERNING CURATIVE HEALTH SERVICES III CO.’S COLLATERAL   I.              Grantor’s official name:       Curative Health Services III Co.   II.            Type of entity:  Corporation   III.           Organizational identification number issued by Grantor’s state of incorporation or organization or a statement that no such number has been issued:   IV.           State or Incorporation or Organization of Grantor: Minnesota   V.            Chief Executive Office and principal place of business of Grantor:   61 Spit Brook Road, Suite 505, Nashua, NH 03060   VI.           Corporate Offices of Grantor:  Curative Health Services III Co.:   61 Spit Brook Road, Suite 505 Nashua, NH 03060   VII.          Warehouses:  None.   VIII.        Other Premises at which Collateral is Stored or Located:   61 Spit Brook Road, Suite 505 Nashua, NH 03060   IX.           Locations of Records Concerning Collateral:  (see V., VI. and VIII. above)   --------------------------------------------------------------------------------   SCHEDULE IV to SECURITY AGREEMENT   PATENTS, TRADEMARKS AND COPYRIGHTS     [None.]   --------------------------------------------------------------------------------   EXHIBIT A   POWER OF ATTORNEY   This Power of Attorney is executed and delivered by the Grantor signatory hereto (“Grantor”) to General Electric Capital Corporation, a Delaware corporation (hereinafter referred to as “Attorney”), as Agent for the benefit of Agent and Lenders, under a Credit Agreement, dated as of              , 20  , and a Guarantor Security Agreement, dated as of              , 20  , and other related documents (the “Loan Documents”). No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shall be required to inquire into or seek confirmation from Grantor as to the authority of Attorney to take any action described below, or as to the existence of or fulfillment of any condition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform the actions contemplated herein, and Grantor irrevocably waives any right to commence any suit or action, in law or equity, against any person or entity which acts in reliance upon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted hereby is coupled with an interest, and may not be revoked or canceled by Grantor without Attorney’ s written consent.   Grantor hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents designated by Attorney), with full power of substitution, as Grantor’s true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Grantor and in the name of Grantor or in its own name, from time to time in Attorney’s discretion, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of the Loan Documents and, without limiting the generality of the foregoing, Grantor hereby grants to Attorney the power and right, on behalf of Grantor, without notice to or assent by Grantors, and at any time, to do the following: (a) change the mailing address of Grantor, open a post office box on behalf of Grantor, open mail for Grantor, and ask, demand, collect, give acquittances and receipts for, take possession of, endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, and notices in connection with any property of Grantor; (b) effect any repairs to any asset of Grantor, or continue or obtain any insurance and pay all or any part of the premiums therefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and decisions with respect to such policies; (c) pay or discharge any taxes, liens, security interests, or other encumbrances levied or placed on or threatened against Grantor or its property; (d) defend any suit, action or proceeding brought against Grantor if Grantor do not defend such suit, action or proceeding or if Attorney believes that Grantor are not pursuing such defense in a manner that will maximize the recovery to Attorney, and settle, compromise or adjust any suit, action, or proceeding described above and, in connection therewith, give such discharges or releases as Attorney may deem appropriate; (e) file or prosecute any claim, litigation, suit or proceeding in any court of competent jurisdiction or before any arbitrator, or take any other action otherwise deemed appropriate by Attorney for the purpose of collecting any and all such moneys due to Grantor whenever payable and to enforce any other right in respect of Grantor’s property; (f) cause the certified public accountants then engaged by Grantor to   --------------------------------------------------------------------------------   prepare and deliver to Attorney at any time and from time to time, promptly upon Attorney’s request, the following reports: (1) a reconciliation of all accounts, (2) an aging of all accounts, (3) trial balances, (4) test verifications of such accounts as Attorney may request, and (5) the results of each physical verification of inventory; (g) communicate in its own name with any party to any Contract with regard to the assignment of the right, title and interest of such Grantor in and under the Contracts and other matters relating thereto; (h) to file such financing statements with respect to the Security Agreement, with or without Grantor’s signature, or to file a photocopy of the Security Agreement in substitution for a financing statement, as the Agent may deem appropriate and to execute in Grantor’s name such financing statements and amendments thereto and continuation statements which may require the Grantor’s signature; and (i) execute, in connection with any sale provided for in any Loan Document, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral and to otherwise direct such sale or resale, all as though Attorney were the absolute owner of the property of Grantor for all purposes, and to do, at Attorney’s option and Grantor’s expense, at any time or from time to time, all acts and other things that Attorney reasonably deems necessary to perfect, preserve, or realize upon Grantor’s property or assets and Attorney’s Liens thereon, all as fully and effectively as Grantor might do. Grantor hereby ratifies, to the extent permitted by law, all that said Attorney shall lawfully do or cause to be done by virtue hereof.   IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor, and Grantor has caused its seal to be affixed pursuant to the authority of its board of directors this      day of           , 20  .     GRANTOR:           CURATIVE HEALTH SERVICES III CO.       By:       Name:       Title:       NOTARY PUBLIC CERTIFICATE   On this       day of            , 20  , [             ] who is personally known to me appeared before me in his/her capacity as the [             ] of Grantor (“Grantor”) and executed on behalf of Grantor the Power of Attorney in favor of General Electric Capital Corporation to which this Certificate is attached.           Notary Public   --------------------------------------------------------------------------------     EXHIBIT K DEBTOR IN POSSESSION CREDIT AGREEMENT   CLOSING CHECKLIST   DEBTOR IN POSSESSION CREDIT FACILITY   for   CURATIVE HEALTH SERVICES, INC. AND CERTAIN OF ITS SUBSIDIARIES Closing Date: March     , 2006   Parties and Counsel   Agent: General Electric Capital Corporation (“GE Capital”)     Lead Arranger: GECC Capital Markets Group, Inc. (“GECMG”)     Holdings: Curative Health Services, Inc., a Minnesota corporation formerly named Curative Holding Co.     Co-Borrowers: Certain direct and indirect subsidiaries of Holdings as follows (collectively, with Holdings, “Borrowers”):       1. eBioCare.com, Inc.   2. Hemophilia Access, Inc.   3. Apex Therapeutic Care, Inc.   4. Curative Health Services of New York, Inc.   5. CHS Services, Inc.   6. Curative Pharmacy Services, Inc.   7. Infinity Infusion, LLC   8. Infinity Infusion II, LLC   9. Optimal Care Plus, Inc.   10. Infinity Infusion Care, Ltd.   11. MedCare, Inc.   12. Curative Health Services Co., a Minnesota corporation formerly named Curative Health Services, Inc.   13. Critical Care Systems, Inc.     Guarantors: Curative Health Services III Co.     Credit Parties Borrowers and Guarantors   --------------------------------------------------------------------------------   Agent’s Counsel: Moritt Hock Hamroff & Horowitz LLP (“MHH&H”)     Borrowers’ Counsel Linklaters (“Linklaters”)   --------------------------------------------------------------------------------   Action/Document   Party   Status l. Credit Agreement (“Credit Agreement”), executed by Borrowers, Agent and Lenders                     2. Exhibits to Credit Agreement           A Revolving Note           B [Omitted]           C Swingline Note           D-1 Notice of Borrowing           D-2 Notice of Swingline Borrowing           E Borrower Security Agreement           F Borrower Pledge Agreement           G Subsidiary Guaranty Agreement           H Guarantor Security Agreement           I Opinion of Counsel to the Credit Parties           J Authorized Signatory Letter           K Closing Checklist           L Assignment Agreement           M HIPPA Business Associate Agreement                         5.1(b) Compliance Certificate (Annual)           5.1(n) Compliance Certificate (Monthly)           --------------------------------------------------------------------------------   Action/Document   Party   Status 3. Disclosure Schedules to Credit Agreement           1.1 [Reserved]           2.5(l) Existing L/Cs           4.5(a) Financial Statements           4.5(b) Borrowers’ Financial Budget           4.7 Litigation           4.13 Subsidiaries, Other Equity Investments           4.19 Insurance Policies           6.15 Compliance Program           6.16(a) Government Receivables Deposit Accounts and Concentration Account           6.16(c) Blocked Accounts           7.1 Indebtedness           7.2 Effective Date Liens           7.4 Capital Structure           7.9 Existing Investments           7.10(b) Existing Loans to Employees                       4. Revolving Note, executed by Borrowers                     5. Swingline Note, executed by Borrowers           --------------------------------------------------------------------------------   Action/Document   Party   Status 6. Borrower Security Agreement, executed by Borrowers           Schedule I Filing Jurisdictions           Schedule II Instruments, Chattel Paper and Letter of Credit Rights           Schedule III Schedule of Offices, Locations of Collateral and Records Concerning Collateral           Schedule IV Patents, Trademarks and Copyrights           Schedule V Motor Vehicles           Exhibit A Power of Attorney                     7. Intellectual Property Security Agreement and schedules             Critical Care Systems, Inc.             Apex Therapeutic Care, Inc.             Curative Health Services, Inc.             Infinity Infusion Care, Ltd.                       8. Power of Attorney by each Borrower                     9. Borrower Pledge Agreement, executed by each Borrower           Schedule I Pledged Securities           Schedule II Pledge Amendment           Schedule III Related Control Agreement                       10. Stock Certificates to be pledged [These should continue from the existing Facility]                     11. Stock Powers [These should continue from the existing Facility]                     12. Legal Opinion from Linklaters, as counsel to Credit Parties (New York & Delaware)                     13. California Legal Opinion           --------------------------------------------------------------------------------   Action/Document   Party   Status 14. Texas Legal Opinion                     15. Minnesota Legal Opinion                     16. Tennessee Legal Opinion                     17. Senior Officer’s Certificate, executed by Borrowers                     18. Good Standing Certificates of Borrowers                     19. Secretary Certificates for Borrowers, together with the following attachments:           a) Certificate of Incorporation/Formation, certified by applicable Secretary of State           b) Bylaws/Operating Agreement           c) Resolutions of Board/Managers/Members, as applicable                       20. Certificate of Secretary of Borrowers, attaching and certifying as to true, correct and complete copies of the subordinated notes and related subordinated debt documents.                     21. Blocked Account Agreements, executed by Agent, Wells Fargo, Borrowers, as applicable                     22. Government Receivables Deposit Account Agreements, executed by Agent, Wells Fargo, Borrowers, as applicable                     23. UCC, tax, lien and judgment searches for Borrowers, in the jurisdictions and debtor names specified on Schedule I attached hereto   N/A                 24. UCC Pre-Filing Authorization Letter, executed by Borrowers                     25. UCC-l Financing Statements for Borrowers, to be filed in the jurisdictions specified in Schedule 2 attached hereto                     26. HIPAA Business Associate Agreements between one or more of the Credit Parties that are covered entities and GE Capital                     27. Bankruptcy Court Order           --------------------------------------------------------------------------------   Action/Document   Party   Status 28. Certificate Regarding Confusing or Similar Names                     29. Payoff Letter                     30. Insurance Certificates                     31. Reaffirmation Agreement                     32. Payment of Closing Fee                     33. Payment of fees and expenses of MHH&H and internal legal costs of GE Capital                     34. Guaranty: Curative Health Services III Co.           Schedule I Filing Jurisdictions           Schedule II Instruments, Chattel Paper and Letter of Credit Rights           Schedule III Schedule of Offices, Locations of Collateral and Records Concerning Collateral           Schedule IV Patents, Trademarks and Copyrights           Exhibit A Power of Attorney                       35. Guarantor Pledge Agreement: Curative Health Services III Co.                     36. Tennessee Tax Affidavit                     37. Utility Escrow Blocked Account Agreements, executed by Agent, Wells Fargo, Borrowers, as applicable           --------------------------------------------------------------------------------   EXHIBIT L to DEBTOR IN POSSESSION CREDIT AGREEMENT   ASSIGNMENT AGREEMENT   [To be prepared if as and when required by the Agent ]   --------------------------------------------------------------------------------   EXHIBIT M to DEBTOR IN POSSESSION CREDIT AGREEMENT   HIPAA BUSINESS ASSOCIATE AGREEMENT   [Existing Agreements Between the Parties Reaffirmed]   --------------------------------------------------------------------------------     EXHIBIT 5.1(n)   [FORM OF COMPLIANCE CERTIFICATE (MONTHLY)]                               , 20         General Electric Capital Corporation, as Agent 2 Bethesda Metro Center, Suite 600 Bethesda, Maryland  20814   Re:                               Compliance Certificate (Monthly)   Ladies and Gentlemen:   This certificate is given in accordance with that certain Debtor in Possession Credit Agreement, dated as of March       , 2006 (as the same may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Curative Health Services, Inc., a Minnesota corporation formerly known as Curative Holding Co. (“Borrower Representative”), , eBioCare.com, Inc., Hemophilia Access, Inc., Apex Therapeutic Care, Inc., CHS Services, Inc., Curative Health Services of New York, Inc., Optimal Care Plus, Inc., Infinity Infusion, LLC, Infinity Infusion II, LLC, Infinity Infusion Care, Ltd., MedCare, Inc., Curative Pharmacy Services, Inc., Curative Health Services Co., a Minnesota corporation formerly known as Curative Health Services, Inc., and Critical Care Systems, Inc. (each a “Borrower” and collectively with Borrower Representative and Curative Health Services III Co., a Minnesota corporation, the “Borrowers”), any Additional Borrowers that become party thereto, the Lenders listed on the signature pages thereof, and General Electric Capital Corporation, as lender and agent. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Credit Agreement. I hereby certify that:   (a)                                  I am the Chief Financial Officer of Borrower Representative;   (b)                                 The enclosed unaudited, internally prepared balance sheet and the related statements of income, retained earnings and cash flows for the Credit Parties as at the end of and for the month indicated  and for the year -to -date period then ended, fairly present the financial condition of the Credit Parties as for the month indicated, and I have reviewed such statements in preparing this certificate   (c)                                  I have reviewed the terms of the Credit Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and financial condition of Credit Parties during the accounting period covered by the enclosed financial statements.   --------------------------------------------------------------------------------   (d)                                 The examination in paragraph (c) did not disclose and I have no knowledge of the existence of any condition or event that constitutes a Default or an Event of Default as of the date of this certificate except as set forth below.   Described below (or in a separate attachment hereto) are the exceptions, if any, to paragraph (d), listing in detail the nature of the conditions or event, the period during which it has existed and the action which Credit Parties have taken, are taking or propose to take with respect to each such condition or event.     (e)                                  Except as disclosed in paragraph (d) above, Credit Parties are in compliance with the financial covenants contained in Article 7 of the Credit Agreement, as detailed in the attached work sheet.   The foregoing certifications and the financial statements delivered with this Compliance Certificate in support hereof are made and delivered this                day of                           , 20        .     BORROWER REPRESENTATIVE:       CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known as Curative Holding Co., individually and as Borrower Representative       By:       Name:       Title: Chief Financial Officer   --------------------------------------------------------------------------------   Worksheet Regarding Financial Covenant Compliance   [to be attached by Borrower Representative]   --------------------------------------------------------------------------------   EXHIBIT 5.1(b)   [FORM OF COMPLIANCE CERTIFICATE (ANNUAL)]                               , 20         General Electric Capital Corporation, as Agent 2 Bethesda Metro Center, Suite 600 Bethesda, Maryland  20814   Re:                               Compliance Certificate (Annual)   Ladies and Gentlemen:   This certificate is given in accordance with that certain Debtor in Possession Credit Agreement, dated as of March       , 2006 (as the same may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Curative Health Services, Inc., a Minnesota corporation formerly known as Curative Holding Co. (“Borrower Representative”), eBioCare.com, Inc., Hemophilia Access, Inc., Apex Therapeutic Care, Inc., CHS Services, Inc., Curative Health Services of New York, Inc., Optimal Care Plus, Inc., Infinity Infusion, LLC, Infinity Infusion II, LLC, Infinity Infusion Care, Ltd., MedCare, Inc., Curative Pharmacy Services, Inc., Curative Health Services Co., a Minnesota corporation formerly known as Curative Health Services, Inc., and Critical Care Systems, Inc. (each a “Borrower” and collectively with Borrower Representative and Curative Health Services III Co., a Minnesota corporation, the “Borrowers”), any Additional Borrowers that become party thereto, the Lenders listed on the signature pages thereof, and General Electric Capital Corporation, as lender and agent.  Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Credit Agreement. I hereby certify that:   (a)                                  I am the Chief Financial Officer of Borrower Representative;   (b)                                 The enclosed audited consolidated and consolidating balance sheets, and related audited consolidated and consolidating statements of income, retained earnings and cash flows fairly present the financial condition of Credit Parties as for the Fiscal Year indicated, such statements have no qualification or exception, other than a “going concern” exception relating to the Bankruptcy Cases, by an accounting firm, and I have reviewed such statements in preparing this certificate;   (c)                                  I have reviewed the terms of the Credit Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and financial condition of Credit Parties during the accounting period covered by the enclosed financial statements.   --------------------------------------------------------------------------------   (d)                                 The examination in paragraph (c) did not disclose and I have no knowledge of the existence of any condition or event that constitutes a Default or an Event of Default as of the date of this certificate except as set forth below.   Described below (or in a separate attachment hereto) are the exceptions, if any, to paragraph (d), listing in detail the nature of the conditions or event, the period during which it has existed and the action which Credit Parties have taken, are taking or propose to take with respect to each such condition or event.     (e)                                  Except as disclosed in paragraph (d) above, Credit Parties are in compliance with the financial covenants contained in Article 7 of the Credit Agreement, as detailed in the attached work sheet.   The foregoing certifications and the financial statements delivered with this Compliance Certificate in support hereof are made and delivered this                day of                           , 20        .     BORROWER REPRESENTATIVE:       CURATIVE HEALTH SERVICES, INC.,   a Minnesota corporation formerly known as Curative Holding Co., individually and as Borrower Representative       By:       Name:       Title: Chief Financial Officer   --------------------------------------------------------------------------------   Worksheet Regarding Financial Covenant Compliance   [to be attached by Borrower Representative]   --------------------------------------------------------------------------------

THE MARCUS CORPORATION 2004 EQUITY INCENTIVE PLAN RESTRICTED STOCK AGREEMENT         THIS RESTRICTED STOCK AGREEMENT (“Agreement”) is made and entered into as of the grant date specified on the attached cover page (the “Grant Date”) by and between THE MARCUS CORPORATION, a Wisconsin corporation (the “Company”), and the Participant named on the attached cover page (the “Participant”). W I T N E S S E T H :         WHEREAS, the terms of The Marcus Corporation 2004 Equity Incentive Plan (the “Plan”), to the extent not stated herein, are specifically incorporated by reference in this Agreement and defined terms used herein which are not otherwise defined shall have the meaning set forth in the Plan;         WHEREAS, the purpose of the Plan is to permit the grant of various equity-based incentive awards, including grants of restricted shares of the Company’s Common Stock, $1 par value (“Common Stock”), to be granted to certain key employees of the Company or a subsidiary thereof;         WHEREAS, the Participant is now employed by the Company or a subsidiary thereof in a key capacity and has exhibited judgment, initiative and efforts which have contributed materially to the successful performance of the Company; and         WHEREAS, the Company desires to grant the Participant the Restricted Stock (as defined below) in recognition of Participant’s past and expected future efforts as an employee of the Company or a subsidiary thereof and to provide the Participant with the opportunity to increase his stock ownership in the Company.         NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein set forth, the parties hereby mutually covenant and agree as follows:         1.    Grant of Restricted Stock. Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants the Participant the number of shares of Common Stock set forth on the attached cover page (the “Restricted Stock”).         2.    Restrictions. The Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. Notwithstanding the foregoing, except as otherwise provided in Section 3, such restrictions shall lapse and the Restricted Stock shall vest with respect to the following amounts of Restricted Stock in accordance with the following schedule provided that the Participant is then still employed by the Company or a subsidiary on the relevant date below: Elapsed Period of Time after the Grant Date Cumulative Percentage of Restricted Stock no Longer Subject to Restrictions Prior to the third anniversary of the Grant Date 0% From and after the third anniversary of the Grant Date 50% From and after the fifth anniversary of the Grant Date or 100% the date referred to in paragraph 3(a) -------------------------------------------------------------------------------- The period during which any of the Restricted Stock is subject to the restrictions in this Section 2 shall hereinafter be referred to as the “Restriction Period” with respect to the portion of the shares of Restricted Stock still subject to restriction. The Committee, as the administrator of the Plan, may, at any time or from time to time, accelerate all or any part of the Restriction Period with respect to all or any portion of the Restricted Stock.         3.    Termination of Employment; Change in Control.             (a)     If the Participant dies while he is in the employ of the Company or any subsidiary, or if his employment is terminated by reason of his retirement in accordance with the then effective retirement plan or policy of the Company or any subsidiary, or his permanent disability, the Restriction Period shall automatically terminate and all of the shares of the Restricted Stock shall be free of all restrictions imposed by Section 2.             (b)     If the Participant’s employment is terminated by the Company or any subsidiary for any reason or if the Participant terminates his employment with the Company or any subsidiary for any reason (other than, in each case, one of the reasons set forth in Section 3(a)), then any shares of Restricted Stock which then remain subject to the restrictions of Section 2 at the date of such termination shall automatically be forfeited and returned to the Company.         4.    Deposit of Restricted Shares. One or more certificates evidencing the Restricted Shares shall be issued by the Company in the Participant’s name. The Company shall cause the issued certificate(s) to be delivered to the Secretary of the Company (or his designee) as a depository for safekeeping until a forfeiture occurs or the restrictions imposed by Section 2 hereof terminate. Promptly after the restrictions imposed by Section 2 hereof terminate with respect to some or all of the Restricted Shares, the Company shall deliver stock certificates representing such shares to Participant. Upon request of the Company, Participant shall deliver to the Company a stock power, endorsed in blank, relating to the Restricted Stock then subject to the restrictions of Section 2.         5.    Securities Law Restrictions. In addition to the restrictions set forth above, the shares of Restricted Stock granted hereunder may not be sold or offered for sale except pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Act”), or in a transaction which, in the opinion of legal counsel for the Company, is exempt from the registration provisions of the Act.         6.    Voting Rights; Dividends and Other Distributions. During the Restricted Period and prior to any forfeiture of the Restricted Stock, the Participant will, subject to the restrictions set forth in Section 2, have all rights as a shareholder with respect to the shares of Restricted Stock which then remain subject to such restrictions (including voting rights and the right to receive dividends or other distributions); provided, however, that if any such dividends or distributions are paid in stock of the Company, such shares shall be subject to the same restrictions as the Restricted Stock with respect to which they were paid.         7.    Tax Withholding.             (a)     The Company may require as a condition precedent to the release from custody of the Restricted Stock to the Participant that the Participant pay to the Company, or otherwise make arrangements satisfactory to the Company for payment of, such amount as may be requested by the Company for the purpose of satisfying the Company’s tax withholding requirement. If the amount so requested is not so paid or if such arrangements are not made, the Company may refuse to transfer the certificates representing the Restricted Stock. -2- --------------------------------------------------------------------------------             (b)     The Participant shall be permitted to satisfy the Company’s tax withholding requirements by delivering shares of previously owned Common Stock having a fair market value (as determined by the Committee) on the date income is recognized by the Participant (the “Tax Date”) equal to the minimum amount required to be withheld. If the number of shares of Common Stock determined pursuant to the preceding sentence shall include a fractional share, the number of shares delivered shall be reduced to the next lower whole number and the Participant shall deliver to the Company cash in lieu of such fractional share, in an amount equal to the Common Stock’s then fair market value as determined by the Committee, or otherwise make arrangements satisfactory to the Company for payment of such amount.         8.    No Right to Employment. It is fully understood that nothing contained in this Agreement or the Plan shall be deemed to confer upon the Participant any right to continue in the employ of the Company or any subsidiary, nor to interfere in any way with the right of the Company or any subsidiary to terminate the employment of the Participant at any time for any reason.         9.    Interpretation by Committee. As a condition of the granting of the Restricted Shares, the Participant agrees, for himself and his legal representatives, that the Plan and this Agreement shall be subject to discretionary interpretation by the Committee and that any interpretation by the Committee of the terms of the Plan and this Agreement shall be final, binding and conclusive on the Participant and his legal representatives in all respects and shall not be subject to challenge or dispute by the Participant or his legal representatives.         10.    Modification. At any time and from time to time the Committee may direct execution of an instrument providing for the modification, extension or renewal of this Agreement; provided, however, that no such modification, extension or renewal shall (a) confer on the Participant any right or benefit which could not be conferred on him by a grant of restricted shares of Common Stock under the Plan at such time or (b) alter, impair or adversely affect this Agreement without the written consent of the Participant. -3-

EXHIBIT 10.1 MODIFICATION TO SECURITIES PURCHASE AGREEMENT DATED JUNE 30, 2005 This MODIFICATION, dated September 20, 2006, relates to the SECURITIES PURCHASE AGREEMENT, dated as of June 30, 2005 (the "SPA"), by and among Terra Insight Corporation, a Delaware corporation (the "Company"), CompuPrint, Inc., a North Carolina corporation ("CPPT"), and Enficon Establishment, a Liechtenstein company ("Buyer"), and the $4 million of the principal amount of the 6% Debentures of CPPT issued pursuant to the SPA, represented by Debenture No. 1 in the principal amount of $2 million issued July 5, 2005, Debenture No. 2 in the principal amount of $1 million issued September 8, 2005, and Debenture No. 3 in the principal amount of $1 million issued April 12, 2006 (collectively, the "Debentures"). It is hereby agreed that: The conversion price be adjusted from $1.00 per share to $0.50 per share, such that the Debentures shall be convertible into an aggregate of eight million shares of CPPT common stock. No interest, therefore, will be payable on the Debentures. IN WITNESS WHEREOF, the parties have caused this Modification to be duly executed as of the date first above written. ENFICON ESTABLISHMENT By: /s/ Alexander Fediaev --------------------------------------------- Alexander Fediaev, Beneficiary Owner TERRA INSIGHT CORPORATION By: /s/ Roman Rozenberg ---------------------------------------------- Roman Rozenberg, Chief Executive Officer COMPUPRINT, INC. By: /s/ Roman Rozenberg ---------------------------------------------- Roman Rozenberg, Chief Executive

Exhibit 10(h)(i) First Amendment to the McDonald’s Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan The McDonald’s Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan (the “Plan”), is amended, effective as of February 14, 2006, as set forth below. Section 2(l) of the Plan is amended to read as follows: (l) “Disability” as it regards employees, shall mean (a) a mental or physical condition for which the employee is receiving or is eligible to receive benefits under the McDonald’s Corporation Long-Term Disability Plan or other long-term disability plan maintained by the employee’s employer or (b) a mental or physical condition which, with or without reasonable accommodations, renders an employee permanently unable or incompetent to carry out the job responsibilities he held or tasks to which he was assigned at the time the condition was incurred, with such determination to be made by the Committee on the basis of such medical and other competent evidence as the Committee in its sole discretion shall deem relevant. “Disability” as it regards non-employee directors and senior directors means a physical or mental condition that prevents the director from performing his or her duties as a member of the Board or a senior director, as applicable, and that is expected to be permanent or for an indefinite duration exceeding one year. Except as amended above, the Plan shall remain in full force and effect.   29

Exhibit 10.2 CombinatoRx, Incorporated -------------------------------------------------------------------------------- Mr. Robert Forrester Chief Financial Officer CombinatoRx, Incorporated 650 Albany Street Boston, MA 02118 Dear Mr. Forrester: Pursuant to your request, General Electric Capital Corporation (“GE Capital”) is pleased to submit the following revised loan proposal for your consideration: Transaction:   Loan       Borrower:   CombinatoRx, Incorporated       Lender:   General Electric Capital Corporation its affiliates or its assignee (“GE Capital”)       Loan Amount:   $3,310,000.00       Anticipated Funding Period:   March 2006 through March 2007       Term:   48 months – new lab and scientific equipment 38 months – all other equipment       Payment Factor and Interval (all arrears):   48 months: 2.542024%, monthly 36 months: 3.232354%, monthly       Interest Rate:   48 months: 10.12% 36 months: 10.12%       Equipment (Collateral):   New lab and lab support equipment (22%), computer hardware (22%), general office equipment and furniture (23%), tenant improvements (30%) and software (3%) for the internal use of the Borrower. All such Equipment must be acceptable to GE Capital and located within the continental United States at Borrower owned or leased properties.       Other Consideration:   All other terms and conditions that presently exists shall continue to apply. GENERAL TERMS AND CONDITIONS Our proposal contains the following provisions and the Loan Payments we propose are specifically based upon these provisions and our assumptions. 1.      MAINTENANCE AND INSURANCE: All maintenance and insurance (fire and theft, extended coverage and liability are the responsibility of the Borrower. Borrower will be responsible for maintaining in force, all risk damage, and liability insurance in amounts and coverages satisfactory to GE Capital. 2.      DOCUMENTATION: GE Capital’s current standard loan documentation for this type of collateralized loan will be used. 3.      INDEXING: The interest Rate(s) and Payment Factor(s) will be adjusted at the time of funding to reflect any increase in the Lender’s cost of funds, which shall be tied to the Federal Reserve’s three (3) and average four (4) year Treasury Constant Maturities Rate(s). The rate(s), and therefore the payment factor(s), assume an index of 4.62% and 4.62% respectively. CONFIDENTIAL   GE Capital Corporation   LifeScience and Technology Finance 3/21/2006 -------------------------------------------------------------------------------- 4.      TRANSACTION COSTS: The Borrower shall be responsible for all closing and transaction costs including any legal fees and inspection and/or appraisals costs. 5.      PROPOSAL FEE: $16,550.00, which shall be retained by GE Capital for application processing underwriting and documentation. All or a portion of the proposal fee will be forfeited if this transaction is approved by GE capital and not executed by Borrower as called for in this proposal. If investment approval is not obtained, the fee will be promptly returned to Borrower (less the cost of credit verification and investigation and any out of pocket expenses incurred such as appraisal fees, legal fees, etc.). 6.      ACCEPTANCE: By signing below, the Borrower acknowledges the terms and conditions of this proposal. Upon receipt of the executed proposal letter and accompanying fee, GE Capital shall commence its investment approval process. 7.      EXPIRATION: This proposal shall expire on April 3, 2006, if GE Capital has not received your acceptance hereof by such date. This proposal expresses GE Capital’s willingness to seek internal approval for the transaction contemplated herein. By signing and returning this letter both parties acknowledge that: The above proposed terms and conditions do not constitute a commitment by GE Capital, (ii) GE Capital’s senior management may seek changes to the above terms and conditions, and (iii) GE Capital may decline further consideration of this transaction at any point in the approval process. GE Capital’s agreement to fund the proposed transaction remains subject to and would be preceded by completion of a legal and business due diligence, as well as collateral and credit review and analysis, all with results satisfactory to GE Capital and the closing of an initial funding under such transaction would be conditioned upon the prior execution and delivery of final legal documentation and all conditions precedent acceptable to GE Capital and its counsel and no material adverse change in the business condition or prospects of the Company (“Material Adverse Change”). For transactions that contemplate more than one funding, GE Capital’s obligation to make each such subsequent funding would be subject to confirmation that no Material Adverse Change has occurred. I look forward to your early review and response. If there are any questions, I would appreciate the opportunity to discuss this proposal in more detail at your earliest convenience. Please do not hesitate to contact me directly at (203)-205-5216. Sincerely, /s/ William B. Stichle PROPOSAL ACCEPTED BY: CombinatoRx, Incorporated Name:   /s/ R. Forrester     Title:   CFO     Date:   4/19/06       Federal Tax ID#: --------------------------------------------------------------------------------

  EXHIBIT 10.9 Amendment to Argo-Tech Corporation Trust Agreement and Michael S. Lipscomb Stay Pay Agreement      This Amendment (the “Amendment”) to the Argo-Tech Corporation Trust Agreement dated October 28, 1994, as amended November 22, 2002 (the “Rabbi Trust”), and to the Stay Pay Agreement dated February 13, 1989 (the “Stay Pay Agreement”) between Argo-Tech Corporation (HBP), formerly known as Argo-Tech Corporation (“Argo-Tech”), and Michael S. Lipscomb (the “Beneficiary”) is by and between Argo-Tech and the Beneficiary.      WHEREAS, the Beneficiary and Argo-Tech entered into the Stay Pay Agreement;      WHEREAS, Argo-Tech executed the Rabbi Trust which trust was intended to secure amounts due under the Stay Pay Agreement;      WHEREAS, AT Holdings Corporation (“Holdings”), the parent of Argo-Tech, has entered into an Agreement and Plan of Merger dated as of September 13, 2005 (the “Merger Agreement”) by and among Holdings, Argo-Tech Corporation, GreatBanc Trust Company, in its capacity as trustee for the Argo-Tech Corporation Employee Stock Ownership Plan, V.G.A.T. Investors, LLC (“Parent”), and Vaughn Merger Sub, Inc. (“Acquisition Sub”), as amended, whereby Parent is to acquire Holdings through the merger of Acquisition Sub with and into Holdings; and      WHEREAS, Argo-Tech and the Beneficiary wish to amend the Rabbi Trust and the Stay Pay Agreement so that the amount of assets held under the Rabbi Trust shall be paid to Beneficiary at the Closing under the Merger Agreement and, upon such payment, the Rabbi Trust shall immediately terminate.           NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:   1.1   Amendment. The Stay Pay Agreement and the Rabbi Trust are hereby amended to provide for a payment to the Beneficiary or Successor from the assets of the Trust in an amount equal to the amount of assets then held under the Trust upon the occurrence of the Closing under the Merger Agreement. Such payment shall be made as soon as reasonably possible after the Trustee’s receipt of an affidavit executed by an officer of Argo-Tech other than the Beneficiary stating that such Closing has occurred. Immediately upon Beneficiary’s receipt of such payment,   --------------------------------------------------------------------------------         the Rabbi Trust and the Stay Pay Agreement shall be terminated without any further action of the parties.     1.2   Effective Date. This Amendment shall be effective October 25, 2005.     1.3   Cancellation. If the Trustee shall not have made the payment described in Section 1.2 above prior to December 20, 2005, this Amendment shall be of no further force and effect whatsoever.     1.4   Force and Effect. Except as provided for herein, the Stay Pay Agreement and the Rabbi Trust shall remain in full force and effect in accordance with their terms until their termination in accordance with the last sentence of Section 1.1 above.                   ARGO-TECH CORPORATION (HBP)                       By:   /s/ Paul R. Keen                        Its:   Vice President                                      ARGO-TECH CORPORATION                       By:   /s/ Frances S. St.Clair                        Its:   Vice President                                      NATIONAL CITY BANK, N.A.                       By:   /s/ Christian Brown                        Its:   Vice President                                      BENEFICIARY                       /s/ Michael S. Lipscomb                     Michael S. Lipscomb      

Exhibit 10.54   FIRST AMENDMENT AGREEMENT (FCC Acceptance Corp. Fee Letter)   FIRST AMENDMENT AGREEMENT, dated as of January 20, 2006 (the “First Amendment”), to the Fee Letter, dated as of February 11, 2003, among FCC Acceptance Corp., as Borrower (the “Borrower”), First Consumer Credit, Inc., as Servicer (the “Servicer”), Autobahn Funding Company LLC, as Lender (the “Lender”) and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, as agent (the “Agent”) (as the same may be amended, supplemented, modified and/or restated in accordance with its terms, the “Fee Letter”). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed thereto in the Fee Letter or RLSA (as such term is defined in the Fee Letter).   WHEREAS, the parties hereto have agreed to amend the Fee Letter on the terms and subject to the conditions herein set forth;   NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree as follows:   1 SECTION. AMENDMENTS TO THE FEE LETTER   1.1 Section 5 of the Fee Letter is hereby amended by deleting such section in its entirety and substituting in lieu thereof the following:   5. For all purposes under the RLSA:   (a) “CP Margin” shall mean, on any date, a percentage equal to:   CPM1 + CPM2 + CPM3   where:   CPM1    =    1.0% multiplied by a fraction, (i) the numerator of which is equal to the Outstanding Balances of all Eligible Receivables owed by Obligors with FICO Scores which, at the time of the origination of the Contracts relating to such Receivables, were equal to, or higher than, 680, and (ii) the denominator of which is equal to the Outstanding Balances of all Eligible Receivables on the date of calculation; -------------------------------------------------------------------------------- [First Amendment to Fee Letter]   CPM2    =    1.5% multiplied by a fraction, (i) the numerator of which is equal to the Outstanding Balances of all Eligible Receivables owed by Obligors with FICO Scores which, at the time of the origination of the Contracts relating to such Receivables, were equal to at least 640 but less than 680, and (ii) the denominator of which is equal to the Outstanding Balances of all Eligible Receivables on the date of calculation; and CPM3    =    2.0% multiplied by a fraction, (i) the numerator of which is equal to the aggregate Outstanding Balances of all Eligible Receivables (x) owed by Obligors with FICO Scores which, at the time of the origination of the Contracts relating to such Receivables, were less than 640, and (y) owed by Obligors without FICO Scores at the time of origination of the Contracts relating to such Receivables, and (ii) the denominator of which is equal to the Outstanding Balances of all Eligible Receivables on the date of calculation; and   (b) “Adjusted Eurodollar Rate Margin” shall mean 4.00% per annum.   1.2 Section 6 of the Fee Letter is hereby amended by deleting the definition of “Fourth Non-Utilization Period” set forth therein and substituting, in lieu thereof, the following:   “Fourth Non-Utilization Period” means the period commencing on the day immediately following the last day of the Third Non-Utilization Period and ending on August 31, 2006.   2 SECTION. CONDITIONS TO EFFECTIVENESS   This First Amendment shall be effective upon the delivery to the Agent of (i) counterparts hereof executed by each of the parties hereto and (ii) counterparts of an amendment to the RLSA (in form and substance satisfactory to the Agent) executed by each of the parties thereto.   2 -------------------------------------------------------------------------------- [First Amendment to Fee Letter]   3 SECTION. MISCELLANEOUS   3.1 The Borrower and the Servicer each hereby certifies that the representations and warranties set forth in Article IV of the RLSA (and any other representations and warranties made by the Borrower or the Servicer in the RLSA) are true and correct on the date hereof with the same force and effect as if made on the date hereof, except to the extent that such representations and warranties speak specifically to an earlier date in which case they shall have been true and correct on such date. In addition, the Borrower and the Servicer each represents and warrants (which representations and warranties shall survive the execution and delivery hereof) that (a) no unwaived Early Amortization Event or Event of Default (nor any event that but for notice or lapse of time or both would constitute an unwaived Early Amortization Event or Event of Default) shall have occurred and be continuing as of the date hereof nor shall any unwaived Early Amortization Event or Event of Default (nor any event that but for notice or lapse of time or both would constitute an unwaived Early Amortization Event or Event of Default) occur due to this First Amendment becoming effective, (b) the Borrower and the Servicer each has the corporate power and authority to execute and deliver this First Amendment and has taken or caused to be taken all necessary corporate actions to authorize the execution and delivery of this First Amendment and (c) no consent of any other person (including, without limitation, shareholders or creditors of the Borrower or the Servicer), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution and performance of this First Amendment other than such that have been obtained.   3.2 The Fee Letter, as amended hereby, is hereby ratified and confirmed in all respects and remains in full force and effect in accordance with its terms.   3.3 All references in the Fee Letter to “this Agreement” and “herein” and all references to the Fee Letter in the documents executed in connection with the Fee Letter shall mean the Fee Letter as amended hereby and as it may in the future be amended, restated, supplemented or modified from time to time.   3.4 This First 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. Delivery of an executed counterpart of a signature page to this First Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this First Amendment.   3.5 The Borrower hereby agrees to pay all costs and expenses incurred by the Lender and the Agent in connection with this First Amendment including, without limitation, the fees and expenses of Kaye Scholer LLP, counsel to the Lender and the Agent.   3 -------------------------------------------------------------------------------- [First Amendment to Fee Letter]   3.6 THIS FIRST AMENDMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.   [Signature pages to follow.]   4 -------------------------------------------------------------------------------- [First Amendment to Fee Letter]   IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first above written.   THE BORROWER:    FCC ACCEPTANCE CORP.      By:      --------------------------------------------------------------------------------           Name:      --------------------------------------------------------------------------------           Title:      -------------------------------------------------------------------------------- THE SERVICER:    FIRST CONSUMER CREDIT, INC.      By:      --------------------------------------------------------------------------------           Name:      --------------------------------------------------------------------------------           Title:      -------------------------------------------------------------------------------- THE AGENT:    DZ BANK AG DEUTSCHE      ZENTRAL-GENOSSENSCHAFTSBANK      By:      --------------------------------------------------------------------------------           Name:      --------------------------------------------------------------------------------           Title:      --------------------------------------------------------------------------------      By:      --------------------------------------------------------------------------------           Name:      --------------------------------------------------------------------------------           Title:      --------------------------------------------------------------------------------   5 -------------------------------------------------------------------------------- THE LENDER:    AUTOBAHN FUNDING COMPANY LLC      By:    DZ Bank AG Deutsche Zentral-     Genossenschaftsbank, its attorney-in-fact           By:      --------------------------------------------------------------------------------                Name:      --------------------------------------------------------------------------------                Title:      --------------------------------------------------------------------------------           By:      --------------------------------------------------------------------------------                Name:      --------------------------------------------------------------------------------                Title:      --------------------------------------------------------------------------------

EMPLOYMENT AGREEMENT AGREEMENT entered into this 14th day of November, 2006, by and between JUMA TECHNOLOGY, CORP., a New York Corporation with offices located at 154 Toledo Street, Farmingdale, New York 11735 (hereinafter, the “Company”) and JOSEPH CASSANO, c/o Juma Technology, Corp., 154 Toledo Street, Farmingdale, New York 11735 (hereinafter, “Executive”). W I T N E S S E T H: WHEREAS, the Company is engaged in a business that includes the installation and wiring of Digital Video Surveillance and Recording Systems, Access Control Security Systems, Network Data Security, Phone Systems, Information Technology (IT) Services and Related Equipment, that is provided to its corporate, commercial, retail, business and educational customers; and WHEREAS, the Company desires to employ the Executive as Executive Vice President of Sales, and desires to provide him with compensation and other benefits on the terms and conditions set forth in this Agreement; and WHEREAS, the Executive wishes to accept such employment and perform services for the Company on the terms and conditions hereinafter set forth;   NOW THEREFORE, it is hereby agreed by and between 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 hereof as its Executive Vice President of Sales. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment as Executive Vice President of Sales of the Company 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. 2. Term of Employment. Executive’s term of employment under this Agreement (the “Term”) commenced on November 14, 2006 and, subject to the terms hereof, shall continue for three (3) years until November 15, 2009. Thereafter, this Agreement shall automatically renew, annually, upon the terms and conditions set forth herein; however, the parties have the right, at the election of the Company, to change the terms of this Agreement by the execution of an Addendum Agreement by each party.   1 --------------------------------------------------------------------------------   3. Compensation. 3.1 Salary. During the Term, the Company shall pay Executive a Base Salary at the rate of One Hundred Sixty-Five Thousand ($165,000.00) Dollars per annum. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company, but no less frequently than semi-monthly. Unless this Agreement is terminated, extended or a new Agreement is negotiated, at the end of the initial Term hereof, the Executive’s Base Salary shall increase at the rate of fifteen (15%) percent, per annum, thereafter, and, as so increased, shall constitute “Base Salary” hereunder. 3.2 Bonus. As an inducement to the Executive, during the Term of this Agreement and any renewal or extension period thereafter, the Executive shall be entitled to receive an annual Bonus of up to: (i) One Hundred (100%) percent of his then Base Salary in cash and, (ii) Two Hundred (200%) of his then Base Salary in Company Common Stock, which may include Stock Options, Restricted Stock and/or Deferred Compensation, pursuant to the terms of the Executive Bonus Plan, which is a weighted Formula based upon the approved Budget by the Company’s Board of Directors and/or its Compensation Committee. Under the terms of said Executive Bonus Plan, there are three (3) equal components to the Budget, to wit: (a) Sales; (b) Gross Profit Percentage; and (c) Net Income. In the event that the Company successfully achieves 100% to 149% of the approved Budget Target (whether for a, b or c, above), then the Executive shall be entitled 50% of his Base Salary, times one-third (representing equal weight for each category, a, b or c, above). In the event that the Company successfully achieves 150% to 199% of the approved Budget Target (whether for a, b or c, above), then the Executive shall be entitled 75% of his Base Salary, times one-third (representing equal weight for each category, a, b or c, above). Likewise, in the event that the Company successfully achieves 200% or more of the approved Budget Target (whether for a, b or c, above), then the Executive shall be entitled 100% of his Base Salary, times one-third (representing equal weight for each category, a, b or c, above). In no event shall the three (3) Bonus components identified above, when combined, exceed 100% of the Executive’s Base Salary, then in effect for the cash component of the Bonus. The Executive shall exclusively determine whether said cash component of the Bonus, if any, shall be paid in the form of Cash or the issuance of Company Stock, or a combination thereof. 3.3 Compensation Plans and Programs. Executive shall be eligible to participate in any Compensation Plan or Program [401(k) Stock Option Plan] maintained by the Company in which other Executives or employees of the Company participate, on similar terms. 3.4 Loans. Under no circumstances may the Executive receive a Loan from the Company, of any kind or fashion, or of any duration, whatsoever. 4. Employee Benefits. 4.1 Medical, Dental and Vision Benefit Plans. The Company shall provide to the Executive and his Family, during the Term of his employment, or any renewal or extension thereafter, with coverage under all Employee medical, dental and vision benefit programs, plans or practices adopted by the Company and made available to all employees of the Company. 2 -------------------------------------------------------------------------------- 4.2 Life and Disability Insurance Benefit Plans. The Company shall provide Executive during the Term of his employment, or any renewal or extension thereafter, with coverage under all Employee life insurance and disability insurance plans as may be adopted and in effect by the Company and made available to all employees of the Company. 4.3 Vacation Benefit. The Executive shall be entitled to four (4) weeks paid vacation in each calendar year (but no more than ten [10] consecutive business days at any given time), which shall be taken at such times as are consistent with Executive’s responsibilities hereunder. The Executive’s vacation schedule shall be submitted and approved by the Company. The Executive agrees and understands that vacation days shall not be taken during any period upon which the Company is undergoing a financial audit by its approved Financial Auditors. Unless otherwise approved by the Company, any vacation days not taken in any calendar year shall be forfeited without payment therefore. 4.4 Expenses. The Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, including expenses for travel, automobile (mileage reimbursement calculated at IRS prevailing rates) and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive on a monthly basis of appropriately itemized and approved (consistent with the Company’s policy) accounts of such expenditures. In addition, the Executive shall be entitled to an annual Ten Thousand ($10,000.00) Dollar automobile allowance. Any increase in the automobile allowance, at the end of the initial Term hereof, shall be in the sole and reasonable discretion of the Company and its Board of Directors. 5. Termination of Employment. The Company may terminate Executive’s employment at any time for any reason. 5.1 Termination Not for Cause. If Executive’s employment is terminated by the Company other than for Cause (as defined in Section 5.2, below) or due to a Change in Control, Executive shall receive a severance payment equal to one (1) year’s Base Salary and benefits, including any earned and/or accrued Bonus, as in effect immediately prior to such termination, payable in accordance with the ordinary payroll practices of the Company, but not less frequently than semi-monthly following such termination of employment. For purposes of this Agreement, “Change in Control” shall mean greater than 50% of the Company’s presently existing Management Team has been replaced. 5.2 Termination for Cause; Voluntary Termination by Executive; Death or Disability.   A) For purposes of this Agreement, “Cause” shall mean any of the following: (i) Willful malfeasance or willful misconduct by Executive in connection with his employment; 3 -------------------------------------------------------------------------------- (ii) Continual refusal by Executive to perform his duties hereunder or any lawful direction of the Board of Directors of the Company within ten (10) days after notice of such refusal to perform such duties or direction was given to the Executive; (iii) Any breach of the provisions of Section 7 of this Agreement by Executive or any other material breach of this Agreement by Executive; or (iv) The commission and conviction by Executive of (a) any felony, or (b) a misdemeanor involving moral turpitude, including but not limited to the Executive’s abuse of drugs or alcohol. B) For purposes of this Agreement, “Permanent Disability” shall mean a disability that would entitle Executive to receive benefits under the Company’s long-term disability plan as in effect from time to time or which prevents the Executive from performing his duties hereunder for one hundred eighty (180) consecutive days or more. C) In the event that Executive’s employment is terminated (i) by the Company for Cause; (ii) by the Executive on a voluntary basis; (iii) as a result of the Executive’s permanent disability; or (iv) by the Executive’s death, then Executive or his Estate shall only be entitled to receive Base Salary and Bonuses already earned and accrued through the date of termination. In the event of termination by the Executive’s death or permanent disability, all such benefits identified herein shall be maintained and in effect for six (6) additional months by the Company. Any and all such unvested benefits (i.e. 401K, restricted stock or stock options) shall immediately vest. After the termination of Executive’s employment under this Section 5.2 and payment of all amounts due to Executive under the terms of this Agreement, the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein (other than benefits required to be provided by applicable law or under the terms of any employee benefit of the Company in which the Executive was a participant) to Executive shall thereupon cease and terminate. Termination of the Executive pursuant to this Section 5.2 shall be made by delivery to Executive of a Notice from the Board of Directors of the Company.   6. No Conflicts of Interest. The Executive shall not, directly or indirectly, engage or become interested in any other business, whether or not such business is competitive with the business of the Company, during the period of the Executive’s employment hereunder, or any renewals or extensions thereof. 4 -------------------------------------------------------------------------------- 7. Nondisclosure of Confidential Information. The Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation, competitor or other entity, any Confidential Information pertaining to the business or affairs of the Company, 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 the Executive to divulge, disclose or make accessible such information. For purposes of this Section 7, “Confidential Information” shall mean non-public information concerning financial data, strategic business plans, sales or marketing plans, or other proprietary marketing data, proprietary information, contracts or agreements with customers, vendors or consultants, and other non-public, proprietary and confidential information of the Company that is not otherwise available to the public (other than by the Executive’s breach of the terms hereof). 8. Specific Performance. Since the Company will be irreparably damaged if the provisions of Sections 6 and 7 hereof are not specifically enforced, the Company shall be entitled to an injunction restraining any violation of this Agreement by the Executive (without any bond or other security being required), or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which the Company may have. 9. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company:            Juma Technology, Corp.                                            Attn: David Giangano, President                                            154 Toledo Street                                            Farmingdale, NY 11735 To the Executive:            Joseph Cassano                                            c/o Juma Technology, Corp.                                            154 Toledo Street                                            Farmingdale, NY  11735 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. 5 -------------------------------------------------------------------------------- 10. Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a Waiver of the right to insist upon strict adherence to that term or any other term of this Agreement or any other occasion. Any Waiver must be in writing with proper notice given as per Section 9, above. 11. Separability. 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. 12. 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 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) of all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 13. Amendment. This Agreement may only be changed, modified or amended by written agreement of the parties hereto. Any alleged oral modifications or amendments shall be deemed null and void. 14. Beneficiaries; References. The Executive shall be entitled to select (and change to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive’s death, and may change such election, in either case by giving the Company written notice thereof. In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive 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. 15. Survival. Notwithstanding the termination of the Executive’s employment hereunder, the provisions hereof shall, unless the context otherwise requires, survive such termination. 6 -------------------------------------------------------------------------------- 16. Complete Agreement. This Agreement contains the entire understanding between the parties and is intended to be the complete and exclusive statement of the terms and conditions of the agreement between the parties and supersedes in all respects any prior agreement or understanding between the Company and the Executive as to employment matters. 17. Withholding. The Company shall be entitled to withhold from payment to the Executive, any amount of withholding required by law. 18. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the State of New York, without reference to rules relating to conflicts of law. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. JUMA TECHNOLOGY, CORP. EXECUTIVE             /s/   David Giangano                            /s/   Joseph Cassano                           By:  David Giangano By: Joseph Cassano         President & CEO        Executive V.P. of Sales     7 --------------------------------------------------------------------------------

  EXHIBIT 10.8 MidSouth Bancorp, Inc. Incentive Compensation Plan The Incentive Compensation Plan for executive officers is based on phantom shares of stock of MidSouth Bancorp. The award of the shares is made by the Board of Directors for Rusty Cloutier and Karen Hail. The determination of the phantom shares for all other officers is made by Rusty Cloutier. The participants in the Plan are: Rusty Cloutier, President and CEO Karen Hail, Sr. Executive Vice President Donnie Landry, Sr. Lending Officer Dwight Utz, Sr. Retail Officer Jennifer Fontenot, Information Technology Officer Teri Stelly, Chief Financial Officer Sally Gary, Stock Coordinator Chris Levanti, Sr. Loan Administration Officer At the beginning of each year, each eligible officer is awarded a number of phantom shares of MidSouth stock. The officer receives a quarterly incentive equal to the number of shares awarded times the basic earnings per share of MidSouth stock for each quarter. The officer receives 60% of the quarterly incentives, and 40% is held until after year end earnings have been determined. The 40% portion of the incentive that is held will not be paid if MidSouth is not profitable for the full year, but is paid for every profitable quarter regardless whether there is a loss in any other quarter. Karen Hail authorizes the payment of the incentive compensation at the end of each quarter. A worksheet for the individual payments is given to Human Resources for payment in a “special payroll” from the accounting department. The signature of Karen Hail is required to process the compensation. The expense for the incentive is accrued monthly to a general ledger account titled Incentive Compensation # 507018. The payment of the incentive quarterly is taken from Incentive Compensation #507018. The accrual is adjusted if needed in the 4th quarter of each year to correctly reflect the expense in total salaries for the year.  

Exhibit 10.60 Building Materials Holding Corporation EXECUTIVES' SUPPLEMENTAL RETIREMENT INCOME PLAN (Revised and restated effective December 31, 2002) ARTICLE I - Definitions: 1.1 “Plan” means the Executives' Supplemental Retirement Income Plan of Building Materials Holding Corporation (formerly known as the Executives' Supplemental Retirement Income Plan of BMC West Corporation), as described in this instrument, effective January 1, 1993 and thereafter. 1.2 “Company” means Building Materials Holding Corporation of San Francisco, California, a Delaware Corporation, or a successor corporation thereafter. 1.3 “Executive” means an Executive or highly compensated individual of the Company or of any division, subsidiary or affiliate of the Company who is eligible to become a participant in the Plan under Paragraph 3.1 hereof. 1.4 “Fiscal Year” means the fiscal year of the Company as established from time to time. 1.5 “Participant” means a person who is selected to participate in the Plan and has executed the Adoption Agreement as required by Paragraph 3.1 hereof. 1.6 “Deferred Compensation” means the portion of a participant's compensation for any fiscal year, or part thereof, that has been deferred pursuant to the Plan. 1.7 “Termination of Service” or similar expression means the termination of the Participant as an Executive or eligible employee of the Company or any division, subsidiary or affiliate thereof, and includes termination by way of resignation, removal, disability, or change in position prior to his Normal Retirement Date.  A Participant who is on temporary leave of absence, whether with or without pay, shall not be deemed to have terminated his service. 1.8 “Normal Retirement Date” as used herein means the date on which the Participant attains age sixty-five (65) or the date specified in Paragraph E of the Adoption Agreement, if later. 1.9 “Early Retirement” as used herein refers to an election available to a terminated Participant upon attaining age sixty (60) with at least fifteen (15) years of service at the time of termination or upon attaining age fifty-five (55) with at least twenty-five years of service at the time of termination.  Such Participant may begin receiving benefits by notifying the Plan Administrator at least six months prior to the requested benefit start date.     --------------------------------------------------------------------------------   1.10 “Interest Credit” is a fixed percentage rate to be applied to the existing Retirement Account Balance as of January 1st each year. The rates will be reviewed by the Compensation Committee each February.  Any changes will be effective for the January 1st balance of the same year.  The rates to be effective for January 1, 2003 are as follows: Active Employees 6.0% Inactive Employees:   Less than 5 years of service 0.0% With 5 - 9 years of service 1.5% With 10 - 14 years of service 3.0% With 15 - 19 years of service 4.0% With 20 - 24 years of service 5.0% With 25 or more years of service 6.0% 1.11 “Retirement Account Balance” is the balance in an account maintained by the Company for each participant comprised of contributions to the plan by the Company plus Interest Credit applied each January 1st.  The Interest credits are applied to the account balance before adding the contributions of the Company for the current year. 1.12 “Computation Convention” the computations of future values, present values, or periodic payments (annuity) use the "end of period" assumption for the first payment. 1.13 “Trust” means the grantor trust established by the Company pursuant to Section 6.2 of the Plan hereof, and evidenced by the Supplemental Retirement Income Plans Trust Agreement effective on January 1, 1993, as such Agreement is amended from time to time. 1.14 “Change of Control” The purchase or other acquisition by any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (“Act”), or any comparable successor provisions, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Act, of 30 percent or more of either the outstanding shares of common stock or the combined voting power of Company’s then outstanding voting securities entitled to vote generally, or the approval by the stockholders of Company of a reorganization, merger, or consolidation (in each case, with respect to which persons who were stockholders of Company immediately prior to such reorganization, merger or consolidation) do not immediately thereafter own more than 50 percent of the consolidated Company’s then outstanding securities, or a liquidation or dissolution of Company or of the sale of all or substantially all of Company’s assets. ARTICLE II - CONTRIBUTIONS 2.1 Contributions. The Company shall allocate five and one half percent (5.5%) of the Company's net income for SERP Benefits.  Sixty-five percent (65%) of the amount allocated will be directed to this plan.     --------------------------------------------------------------------------------   2.2 Allocation Among Participants. The funds allocated will be distributed among the active participants in accordance with the following method:   1. The base salaries less $40,000 for each active participant will be summed to provide the total benefit salary base.   2. The salaries for each individual in excess of $40,000 are divided by the total benefit salary base producing the participant's percentage share, to five decimals, of the current funds allocated.   3. The percentage in step two above is applied to the total funds allocated to establish the value of the contribution to the participant. If the contribution exceeds twenty percent (20%) of base salary, twenty percent (20%) of base salary will be used. 2.3 Equivalent Base Pay. For participants whose pay is composed of a base salary plus commissions and whose base salary is less than fifty thousand dollars ($50,000) the base pay that will be used in these calculations will be fifty thousand dollars ($50,000). 2.4 Changes In Contributions. The amounts to be allocated to this plan may be changed by the Board of Directors at any time.  The methods for allocating the funds among participants may be changed as deemed necessary to maintain equity by the Compensation Committee with the approval of the Board of Directors.  Participants will be notified of changes as soon as practicable after such change is adopted. ARTICLE III - REQUIREMENTS FOR PARTICIPATION 3.1 Requirements for Participants. In order to participate herein, the Executives of the Company selected to participate by the Company must   (a) Fit within the definition of highly compensated or select group of executives as that definition may be changed from time to time by ERISA or the IRS;   (b) Execute an Adoption Agreement in the form attached hereto as Exhibit “I”;   (c) If the Company desires to purchase key man life insurance on the Participant’s life for its sole benefit, cooperate so that the Company may obtain a valid insurance contract. 3.2 Continued Service. Each Participant in the Plan shall continue as an employee of the Company under terms mutually agreed upon between the Company and the Participant, from time to time, until the Participant reaches his Normal Retirement Date or until such date as may be mutually agreed upon, or until his Termination of Service, as herein defined.  Any payments under this Plan shall be independent of, and in addition to, those under any other plan, program or agreement in effect between the Company and the Participant.  This Plan and the Adoption Agreement attached hereto as Exhibit "I" shall not be construed as a contract of employment, nor does it restrict the right of the shareholders or Directors of the Company to remove the Participant as an Executive, or the right of the Participant to resign as an Executive.     --------------------------------------------------------------------------------   3.3 Early Termination. If the Participant's service as an Executive of the Company is terminated for reasons other than death prior to his Normal Retirement Date, with or without cause or voluntarily or involuntarily, and if the Participant's termination was not due to fraudulent or dishonest conduct by the Participant, and Participant has not violated the Non Compete provision herein, the Company will disburse benefits in accordance with ARTICLE IV herein, or, at the sole discretion of the Company, the Company may fulfill its total obligations under the plan by making a Lump Sum Benefit distribution equal to Retirement Account Balance at the date of termination.  In the event of a lump sum settlement, such distribution must be made within forty-five (45) days of the date of termination.  Not withstanding this article, the company shall distribute participant balances of less than ten thousand dollars ($10,000) following termination. If the termination is for fraudulent or dishonest conduct by the Participant, the benefit shall be paid in a lump sum equal to the lesser of the Retirement Account Balance or the sum of the company's contribution attributable to the participant without interest or other appreciation. 3.4 Non-Compete. If a participant terminates employment with Company and accepts employment with a competitor of Company within twelve months of termination the benefits under this Plan will be paid as a lump sum equal to the lesser of the Retirement Account Balance at the date of termination or the sum of the company's contribution attributable to the participant without interest or other appreciation, unless the participant receives permission in writing from the Company before accepting such position.  If in the opinion of the Compensation Committee, conditions warrant, such permission may be granted as a general waiver rather than applied to a specific position. ARTICLE IV - BENEFITS   4.1 Pre-Retirement Death Benefits.   (a) If a Participant who dies before his Normal Retirement Date had not Terminated Service or had served for at least twenty-five (25) years before terminating service and no settlement has been made under any other provision herein, the Company will pay to the Participant's beneficiary(ies) a monthly benefit for a total of sixty (60) months. The Pre-Retirement Death Benefit will be derived by using the Retirement Account Balance to solve for 60 monthly payments using an interest factor of 0.75% (9% annual rate).   (b) If a Participant dies before the Normal Retirement Date but after terminating service, for any reason, with less than twenty-five (25) years of service and no settlement has been made under any other provision herein, the Company will pay the Participant's beneficiary(ies) a monthly benefit for a total of sixty(60) months.  The Pre-Retirement Death Benefit will be derived by using the Retirement Account Balance to solve for sixty (60) monthly payments using an interest factor of 0.50% (6% annual rate). All monthly payments to be made pursuant to this Paragraph 4.1 shall commence within forty-five (45) days following the death of the Participant or when the beneficiary is properly identified, if later.     --------------------------------------------------------------------------------   4.2 Post-Retirement Income and Death Benefits.   (a) For Participants with continuous service who retire on or after their Normal Retirement Date, or Participants eligible for Early Retirement who had at least twenty-five (25) years of service, or participants who terminated service with at least twenty-five (25) years of service, the Company will pay a monthly benefit for 180 months.  The benefit due will be calculated using the Retirement Account Balance to solve for 180 monthly payments using an interest factor of 0.75% (9% annual rate).   (b) For Participants who have terminated service with less than twenty-five (25) years of service and no settlement has been made under any other provision herein and who have attained their Normal Retirement Date, the Company will pay a monthly benefit for 180 months.  The benefit due will be calculated using the Retirement Account Balance to solve for 180 monthly payments using an interest factor of 0.50% (6% annual rate).   (c) Following are optional retirement benefit pay out options available to the participants if elected in writing at least twelve months prior to the retirement date:   1. A lump sum payment equal to the balance in the Retirement Income Account maintained for the participant at the time benefit payments are due to commence.  This option requires approval by the compensation committee of the board.   2. Monthly payments for 120 months with interest at 0.667% monthly (8% annual rate) with at least 25 years of service and 0.417% monthly (5% annual rate) with less than 25 years of service.   3. Monthly payments for 60 months with interest at 0.583% monthly (7% annual rate) with at least 25 years of service and 0.333% monthly (4% annual rate) with less than 25 years of service. If the Participant dies prior to receiving all of the monthly payments scheduled under the option elected, the Participant's beneficiary(ies) shall continue to receive such monthly payments in a like amount until the benefits provided for therein have been paid in full.  If such Participant has received at least all of the scheduled monthly payments prior to such Participant's death, no further benefits shall be due hereunder. 4.3 Hardship Provision.  A participant may apply at any time to have the unpaid portion of the scheduled monthly benefits paid in a lump sum equal to the participants Retirement Account Balance (which will be the present value of the unpaid benefits at the interest rate applicable to the participant’s retirement schedule).  To make application for this provision the participant must make the request in writing to the compensation committee stating the nature of the hardship and the need for commuting the payments.  The committee will either approve or disallow the request and will notify the participant of its decision as soon as practicable after the request is received.     --------------------------------------------------------------------------------     4.4 Facility of Payment. Payment hereunder to the Participant or his or her beneficiary pursuant to this Plan shall fully discharge the Company from all claims or liabilities with respect to such payments unless, before such payment is made, the Company has received, at its principal place of business, written notice by or on behalf of some other persons who claim to be entitled to such payments or some part thereof.  In the event the Participant is deceased and a Court of competent jurisdiction has entered a final order with respect to his or her estate, payment of such money, or portions thereof, if any be due, pursuant to the terms of the judgment shall likewise fully protect the Company making such payment unless, before such payment is made, written notice of a claim or adverse claim is received in the manner provided above. 4.5 Change of Control Benefits.   (a) Benefits Following an Approved Change of Control.   (i) In the event a Participant's employment with the Company is terminated for any reason within a five-year period following a Change of Control, and the transaction constituting the Change of Control was approved in writing prior to its consummation by a majority vote of the members of the Company's incumbent Board of Directors (an "Approved Change of Control"), then the Participant shall be entitled to receive payment of his or her Retirement Account Balance over a period of sixty (60) months using a 9% interest factor compounded annually.  The installment payments shall begin within forty-five (45) days of the termination of employment.   (ii) Following an Approved Change of Control, any participant (or beneficiary thereof) already receiving benefit payments under the Plan shall continue to receive benefit payments under the Plan for the lesser of (1) the remainder of the current pay out schedule, or (2) a sixty (60) month period commencing upon the consummation of the Approved Change of Control.   (b) Benefits Following a Non-approved Change of Control.   (i) In the event a Participant's employment with the Company is terminated for any reason within a five-year period following a Change of Control, and the Change of Control was not approved in writing prior to its consummation by a majority vote of the members of the Company's incumbent Board of Directors (a "Non-approved Change of Control"), then the Participant shall be entitled to receive payment of his or her Retirement Account Balance in a lump sum.  The lump sum payment shall be made within forty-five (45) days of the date of termination of employment.   (ii) Following a Non-approved Change of Control, any participant (or beneficiary thereof) already receiving payments under the Plan shall receive the remainder of his or her benefit under the Plan in the form of a lump sum.  Such lump sum payment shall be made within forty-five (45) days of the consummation of the Non-approved Change of Control.     --------------------------------------------------------------------------------     ARTICLE V - RIGHTS OF PARTICIPANT   5.1 Beneficiary. Each Participant shall have the right to designate a Primary and Contingent Beneficiary entitled to receive the benefits payable upon death on behalf of such Participant under the provisions of this Plan.  The Participant may change or revoke such designation in writing.  A change of beneficiary notice received after the death of a deceased participant but bearing a postmark prior to the date of death will be deemed to be in force at time of death. If the beneficiary is the spouse of the insured, the spouse must also sign any change of beneficiary that would remove or subordinate the spouse as beneficiary. 5.2 Non-Assignability. Neither the Participant nor the Participant's spouse, nor their heirs or legatees shall have any right to commute, encumber or dispose of the right to receive payments hereunder, which payments and the right thereto are expressly declared to be non-assignable and non-transferable. 5.3 Bound by Plan Provisions. Each Participant, whether active or terminated, surviving spouse or other beneficiary, as a condition to receiving any benefits under the Plan shall be conclusively deemed for all purposes to have assented to the Plan and shall be bound hereby with the same force and effect as if he had executed a consent to all the terms and provisions of the Plan. 5.4 Claim Procedure. If any former employee or any Beneficiary has not received a benefit under the Plan to which he thinks he is entitled, he or his authorized representative, within 180 days after the event that he thinks entitled him to the benefit, may file with the Compensation Committee a written claim for the benefit with sufficient detail to bring the nature of the claim to the attention of the Committee. The Committee will notify the claimant of its decision in writing within 180 days of receipt of the claim.  If the claim is denied wholly or in part the notice will set forth in a manner calculated to be understood by the claimant the specific reasons for the denial. In the case of a denial the claimant may request a review of his claim by making a written request to the Committee within 90 days of receiving notice of the denial.  The request may include issues and comments that the claimant feels the Committee should consider. Within 90 days after receipt of the request for review, the Committee will notify the claimant of its final decision setting forth specific reasons.  Subject to any rights to remedies accorded by applicable law the decision of the Committee shall be conclusive and binding upon Company, the claimant and all other persons interested in the claim.     --------------------------------------------------------------------------------   ARTICLE VI - FUNDING 6.1 Un-funded Plan.  No Participant or any other person shall have any interest in any fund or in any specific asset or assets of the Company by reason of any amounts due him hereunder, nor any right to receive any distribution under the Plan except as and to the extent expressly provided in the Plan.  Nothing in the Plan shall be deemed to give any subsidiary or affiliate of the Company rights to participate in the Plan, except in accordance with the provisions of the Plan.  All benefits provided for hereunder and all other amounts deferred, if any, hereunder are completely unsecured and are payable only out of the general assets of the Company.  The Company shall be under no obligation whatsoever to purchase or maintain any life insurance policy or annuity contract or in any other manner segregate assets to provide the benefits or fund its obligations under this Plan. 6.2 Funds In Trust. The Company will establish a Trust to hold such funds as the Company has allocated to the plan.  The establishment of said Trust does not assign any rights of ownership to the assets in the Trust.  The assets of the Trust are part of Company's general assets and are subject to the claims of the Company's creditors.  The Company is under no obligation to assure that the assets in the Trust are adequate to provide the benefits promised under the Plan.  The sole security of the benefits due under the plan is the Company's assurance under the provisions of this plan, which is specifically defined to be un-funded. ARTICLE VII - OTHER PROVISIONS 7.1 Relation to Other Plans. Any benefits payable under this Plan shall not be deemed salary or compensation to any Participant for the purpose of computing benefits to which he may be entitled under any pension or profit sharing plan or other similar plan or arrangement of the Company for the benefit of its Participants. 7.2 Administration. The Compensation Committee of the Company shall have full power and authority to administer this Plan.  No member of the Compensation Committee or 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 own willful misconduct or lack of good faith.  The Directors shall, from time to time, establish eligibility requirements for participation in the Plan and rules for the Administration of the Plan that are not inconsistent with the provisions of the Plan. 7.3 Amendment. The Board of Directors of the Company reserves the right to amend this Plan in such manner as it, in its sole discretion, may deem necessary and proper.  Such amendments will apply to terminated and retired Participants to the same extent that they apply to active Participants. 7.4 Rights of Company to Terminate the Plan. The Company shall have the right to terminate this Plan at any time.  Each Participant in the Plan shall receive future benefits in the same manner and amount as he would have received had his service as an Executive terminated with twenty-five (25) years of service on the date the Plan is terminated.  Anything herein to the contrary notwithstanding, should the Company elect to terminate the Plan it shall be obligated to continue to pay all benefits provided for hereunder to all Participants or their beneficiaries, as the case may be, who have died or retired and who have become entitled to receive same in accordance with the terms of the Plan.     --------------------------------------------------------------------------------   7.5 Rights of Offset. If the Participant has any indebtedness to the Company at the time benefits become due by virtue of retirement, death, or termination, the Company may apply the amounts due, less the minimum Federal Backup Withholding Tax required on such amounts, to reduce such indebtedness. 7.6 Law Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Idaho.     --------------------------------------------------------------------------------    

Exhibit 10.1 KANBAY INTERNATIONAL, INC. SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT (this “Agreement”) is made and entered into by and among Kanbay International, Inc., a Delaware corporation (the “Company”), Kanbay Incorporated, an Illinois corporation (“Kanbay”) and Robert A. Williams (“Executive”) as of September 26, 2006 (the “Effective Date”). WHEREAS, it is in the best interests of Kanbay, the Company, and the Company’s stockholders to assure Executive’s continued dedication to Kanbay and the Company; and WHEREAS, any consideration by Kanbay and the Company of strategic transactions such as mergers and acquisitions would inevitably create personal uncertainties for Executive, and therefore distract Executive from the business of Kanbay and the Company; and WHEREAS, it is in the best interests of Kanbay, the Company and the Company’s stockholders to retain Executive’s dedication and reduce distractions by providing Executive with compensation arrangements in the event of certain terminations of Executive’s employment, including terminations in connection with a strategic transaction, as more fully provided herein. NOW, THEREFORE, in consideration of and reliance upon the foregoing background statement and the covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Kanbay, the Company and Executive agree as follows: 1.                                       DEFINITIONS 1.1           “AFFILIATE” SHALL MEAN ANY CORPORATION OR OTHER BUSINESS ENTITY THAT IS A PARENT OR SUBSIDIARY OF THE COMPANY, INCLUDING OWNERSHIP OF 50% OR MORE OF THE VOTING OR PROFITS INTERESTS OF THE CORPORATION OR OTHER BUSINESS ENTITY. 1.2           “BASE SALARY” SHALL MEAN THE ANNUAL BASE SALARY PAYABLE TO EXECUTIVE SO LONG AS THE COMPANY OR AN AFFILIATE EMPLOYS EXECUTIVE. 1.3           “BOARD” SHALL MEAN THE BOARD OF DIRECTORS OF THE COMPANY. 1.4           “CAUSE” SHALL MEAN ANY OF THE FOLLOWING: (I) EXECUTIVE’S COMMISSION OF A WILLFUL ACT (INCLUDING, WITHOUT LIMITATION, A DISHONEST OR FRAUDULENT ACT) OR A GROSSLY NEGLIGENT ACT, OR THE WILLFUL OR GROSSLY NEGLIGENT OMISSION TO ACT BY EXECUTIVE, WHICH IS INTENDED TO CAUSE, CAUSES OR IS REASONABLY LIKELY TO CAUSE MATERIAL HARM TO THE COMPANY OR AN AFFILIATE, MONETARILY, REPUTATIONALLY OR OTHERWISE; (II) EXECUTIVE’S COMMISSION OR CONVICTION OF, OR PLEA OF NOLO CONTENDERE TO, ANY FELONY OR ANY CRIME OR OFFENSE INVOLVING DISHONESTY OR FRAUD OR THAT IS SIGNIFICANTLY INJURIOUS TO THE COMPANY OR AN AFFILIATE, MONETARILY, REPUTATIONALLY OR OTHERWISE; (III) EXECUTIVE’S WILLFUL NEGLECT OF OR CONTINUED FAILURE TO SUBSTANTIALLY PERFORM, IN ANY MATERIAL RESPECT, HIS DUTIES (AS ASSIGNED TO EXECUTIVE FROM TIME TO TIME) OR OBLIGATIONS (INCLUDING A VIOLATION OF POLICY) TO THE COMPANY OR AN AFFILIATE OTHER THAN ANY SUCH FAILURE RESULTING FROM HIS INCAPACITY DUE TO PHYSICAL OR MENTAL ILLNESS; OR (IV) EXECUTIVE’S ABUSE OF ILLEGAL DRUGS OR OTHER CONTROLLED SUBSTANCES OR HABITUAL INTOXICATION.  FOR PURPOSES OF THIS SECTION, AN ACT OR OMISSION IS “WILLFUL” IF IT WAS KNOWINGLY DONE, OR KNOWINGLY 1 --------------------------------------------------------------------------------   OMITTED TO BE DONE, BY EXECUTIVE NOT IN GOOD FAITH AND WITHOUT REASONABLE BELIEF THAT THE ACT OR OMISSION WAS IN THE BEST INTEREST 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, IN GOOD FAITH AND IN THE BEST INTERESTS OF THE COMPANY.  THE COMPANY HAS THE DISCRETION, IN OTHER CIRCUMSTANCES, TO DETERMINE IN GOOD FAITH, FROM ALL THE FACTS AND CIRCUMSTANCES REASONABLY AVAILABLE TO IT, WHETHER EXECUTIVE WHO IS UNDER INVESTIGATION FOR, OR HAS BEEN CHARGED WITH, A CRIME WILL BE DEEMED TO HAVE COMMITTED IT FOR PURPOSES OF THIS AGREEMENT. 1.5           “Change in Control” shall mean the occurrence of any one or more of the following: (a)           Any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), including a “group” (as defined in Section 13(d)(3) of the Exchange Act), other than (i) the Company, (ii) any wholly-owned subsidiary of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company having fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business) (the “Company Voting Securities”); provided, however, that the event described in this Section 1.5(a) shall not be deemed to be a Change in Control by virtue of any underwriter temporarily holding securities pursuant to an offering of such securities; (b)           During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, unless the election, or the nomination for election by the stockholders of the Company, of each new director of the Company during such period was approved by a vote of at least two-thirds of the Incumbent Directors then still in office; (c)           As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of all or substantially all of the assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction is held in the aggregate by the holders of the securities of the Company entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or (d)           The stockholders of the Company approve a plan of complete liquidation of the Company. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than fifty percent (50%) of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company that reduces the number of Company Voting Securities outstanding; provided, however, that if after 2 --------------------------------------------------------------------------------   such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control transaction shall then occur. Further notwithstanding the foregoing, unless a majority of the Incumbent Directors determines otherwise, no Change in Control shall be deemed to have occurred with respect to a particular Executive if the Change in Control results from actions or events in which such Executive is a participant in a capacity other than solely as an officer, employee or director of the Company or an Affiliate. 1.6           “Good Reason” shall mean any one of the following events, without Executive’s written consent: (i) the assignment to Executive of duties materially inconsistent with Executive’s then-current level of authority or responsibilities, or any other action by the Company or an Affiliate that results in a material diminution in Executive’s position, compensation, authority, duties or responsibilities; (ii) a breach by the Company or an Affiliate of any material term or covenant of any agreement with Executive; (iii) a requirement that Executive be based at any office or location that is more than thirty-five (35) miles from the Executive’s principal office location immediately preceding a Change in Control; or (iv) a failure by any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or the Affiliate employing Executive to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company or an Affiliate would be required to perform it if no such succession had taken place.  Executive must provide the Company written notice of any claim of Good Reason within ninety (90) days after the occurrence of any action/inaction giving rise to such claim, and the Company or its Affiliate will have thirty (30) days to cure such claim. 2.                                      TERMINATIONS OF EMPLOYMENT TRIGGERING SEVERANCE BENEFITS 2.1           Subject to Section 2.2, and provided that Executive has executed a full and complete release of the Company and its Affiliates (and their related parties) from any and all claims, in a form prepared by the Company, the Company or an Affiliate will provide Executive with the benefits set forth in Section 3 if Executive’s employment is terminated for the following reasons (“Qualifying Terminations”): (i) by the Company or an Affiliate without Cause at any time; or (ii) by Executive for Good Reason within eighteen (18) months after the effective date of a Change in Control. 2.2           In no event will benefits be payable to Executive under this Agreement in the event of termination due to Executive’s death, disability, retirement, termination by the Company or an Affiliate for Cause, or voluntary termination by Executive without Good Reason. 2.3           Notwithstanding the foregoing, the following payments will be made upon Executive’s termination of employment for any reason or no reason:  (i) earned but unpaid Base Salary through the date of termination; (ii) any accrued but unpaid vacation; (iii) any amounts payable under any employee pension or welfare benefit plans of the Company or an Affiliate in accordance with the terms of those plans; and (iv) unreimbursed business expenses incurred by Executive on behalf of the Company or an Affiliate (in accordance with existing expense reimbursement policies of the Company or an Affiliate). 3 --------------------------------------------------------------------------------   3.                                      TERMINATION BENEFITS 3.1           Subject to the conditions set forth in Section 2, and so long as Executive has not violated and does not violate any of the terms of this Agreement, the following benefits shall be paid or provided to Executive in the event Executive’s employment is terminated in a Qualifying Termination: (A)           SALARY CONTINUATION.  THE COMPANY OR AN AFFILIATE WILL PAY EXECUTIVE SEVERANCE PAY CONSISTING OF BI-WEEKLY PAY CHECKS IN AN AMOUNT BASED ON EXECUTIVE’S BASE SALARY ON THE DATE OF TERMINATION (LESS APPLICABLE DEDUCTIONS FOR FEDERAL AND STATE TAXES AND FICA) FOR A PERIOD OF SIX (6) MONTHS FOLLOWING THE DATE OF TERMINATION.  THE SEVERANCE PAY WILL BE PAID ON REGULARLY SCHEDULED PAY DATES.  NOTWITHSTANDING THE FOREGOING, NO PAYMENTS UNDER THIS SECTION 3.1(A) SHALL COMMENCE PRIOR TO THE EFFECTIVE DATE OF THE RELEASE OF CLAIMS BEING PROVIDED TO THE COMPANY AND ITS AFFILIATES BY EXECUTIVE UNDER SECTION 2.1 (INCLUDING THE EXPIRATION OF ANY REVOCATION PERIOD REQUIRED BY LAW IN CONNECTION WITH SUCH RELEASE). (B)           INCENTIVE PLAN VESTING.  ALL AWARDS UNDER THE KANBAY INTERNATIONAL, INC. STOCK INCENTIVE PLAN, OR ANY SIMILAR OR SUCCESSOR PLAN, HELD BY EXECUTIVE SHALL IMMEDIATELY BECOME EXERCISABLE IN FULL, ALL RESTRICTIONS APPLICABLE TO SUCH AWARDS SHALL LAPSE, AND ALL PERFORMANCE MEASURES WITH RESPECT TO SUCH AWARDS SHALL BE DEEMED SATISFIED IN FULL.  EXECUTIVE WILL HAVE A PERIOD OF TIME FOLLOWING THE DATE OF TERMINATION, AS STATED IN KANBAY INTERNATIONAL, INC. STOCK INCENTIVE PLAN OR THE APPLICABLE AWARD AGREEMENT ISSUED THEREUNDER, DURING WHICH EXECUTIVE MAY EXERCISE HIS AWARDS, IF ANY.  EXCEPT AS SPECIFICALLY STATED IN THIS SECTION 3.1(B), THIS AGREEMENT SHALL NOT BE CONSTRUED TO AMEND, MODIFY OR SUPERSEDE ANY OF THE PROVISIONS OF THE KANBAY INTERNATIONAL, INC. STOCK INCENTIVE PLAN, OR ANY SIMILAR OR SUCCESSOR PLAN, OR ANY APPLICABLE AWARD AGREEMENT ISSUED THEREUNDER. (C)           HEALTH BENEFITS.  TO THE EXTENT PERMISSIBLE UNDER APPLICABLE LAW, THE COMPANY OR AN AFFILIATE SHALL CONTINUE TO PROVIDE COVERAGE TO EXECUTIVE (AND TO EXECUTIVE’S SPOUSE AND DEPENDENTS) UNDER THE HEALTH AND WELFARE BENEFIT PLANS THE COMPANY OR AN AFFILIATE MAINTAINS FOR ACTIVE EMPLOYEES FOLLOWING EXECUTIVE’S QUALIFYING TERMINATION, AT THE SAME COST TO EXECUTIVE AND UNDER THE SAME TERMS APPLICABLE TO ACTIVE EMPLOYEES (AND THEIR DEPENDENTS), FOR A PERIOD OF EIGHTEEN (18) MONTHS AFTER EXECUTIVE’S QUALIFYING TERMINATION.  NOTWITHSTANDING THE FOREGOING, IF EXECUTIVE BECOMES EMPLOYED WITH ANOTHER EMPLOYER DURING SUCH EIGHTEEN (18) MONTH PERIOD AND IS ELIGIBLE TO RECEIVE SUBSTANTIALLY COMPARABLE HEALTH AND WELFARE BENEFITS FROM SUCH EMPLOYER, THE OBLIGATION OF THE COMPANY AND ITS AFFILIATES TO PROVIDE THE BENEFITS DESCRIBED IN THIS SECTION 3.1(C) SHALL CEASE. 3.2           TAXATION AND WITHHOLDING.  NEITHER THE COMPANY NOR ANY AFFILIATE MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO, AND HAS NO RESPONSIBILITY OR LIABILITY FOR, THE PERSONAL TAX CONSEQUENCES OF THIS AGREEMENT TO EXECUTIVE.  THE COMPANY AND ITS AFFILIATES MAY MAKE SUCH PROVISIONS AND TAKE SUCH STEPS AS THEY MAY DEEM NECESSARY OR APPROPRIATE FOR THE WITHHOLDING OF ANY TAXES THAT THE COMPANY OR ANY AFFILIATE IS REQUIRED BY ANY LAW OR REGULATION OF ANY GOVERNMENTAL AUTHORITY, WHETHER FEDERAL, STATE OR LOCAL, DOMESTIC OR FOREIGN, TO WITHHOLD IN CONNECTION WITH THIS AGREEMENT. 4 --------------------------------------------------------------------------------   3.3           EXECUTIVE’S DEATH.  IF EXECUTIVE DIES BEFORE THE COMPLETION OF ANY PAYMENTS OR BENEFITS REQUIRED UNDER THIS SECTION 3, THE COMPANY OR AN AFFILIATE WILL MAKE OR CONTINUE PAYMENTS AND BENEFITS TO EXECUTIVE’S SURVIVING SPOUSE, IF ANY, OR EXECUTIVE’S ESTATE IN ACCORDANCE WITH THIS SECTION. 4.                                      RESTRICTIVE COVENANTS 4.1           Trade Secrets.  Executive acknowledges that he has had and/or will have access to confidential information of the Company and its Affiliates (including, but not limited to, current and prospective confidential know-how, specialized training, customer lists, marketing plans, business plans, financial and pricing information, and information regarding acquisitions, mergers and/or joint ventures) concerning the business, customers, clients, contacts, prospects, and assets of the Company and its Affiliates that is unique, valuable and not generally known outside the Company and its Affiliates, and that was obtained from the Company or an Affiliate or which was learned as a result of the performance of services by Executive on behalf of the Company or an Affiliate (“Trade Secrets”).  Trade Secrets shall not include any information that: (i) is now, or hereafter becomes, through no act or failure to act on the part of Executive that constitutes a breach of this Section 4, generally known or available to the public; (ii) is known to Executive at the time such information was obtained from the Company or an Affiliate; (iii) is hereafter furnished without restriction on disclosure to Executive by a third party, other than an employee or agent of the Company or an Affiliate, who is not under any obligation of confidentiality to the Company or an Affiliate; (iv) is disclosed with the written approval of the Company or an Affiliate; or (v) is required to be disclosed or provided by law, court order, or similar compulsion, including pursuant to or in connection with any legal proceeding involving the parties hereto; provided however, that such disclosure shall be limited to the extent so required or compelled; and provided further, however, that if Executive is required to disclose such confidential information, he shall give the Company notice of such disclosure and cooperate in seeking suitable protections.  Other than in the course of performing services for the Company and its Affiliates, Executive will not, at any time, directly or indirectly use, divulge, furnish or make accessible to any person any Trade Secrets, but instead will keep all Trade Secrets strictly and absolutely confidential.  Executive will deliver promptly to the Company or the Affiliate that employed Executive, at the termination of his employment or at any other time at the request of the Company or an Affiliate, without retaining any copies, all documents and other materials in his possession relating, directly or indirectly, to any Trade Secrets. 4.2           Non-competition.  Beginning on the Effective Date and for a period continuing through the later of (i) six (6) months following termination of Executive’s employment with the Company and all Affiliates and (ii) the period the Company or an Affiliate is making severance payments to Executive under Section 3.1(a) (the “Restricted Period”), Executive shall not directly or indirectly own any interest in, operate, control or participate as a partner, director, principal, officer, or agent of, enter into the employment of, act as a consultant to, or perform any services for, any company, person, or entity engaged in a “Competitive Business” (as defined herein).  A Competitive Business shall include any company, person or entity that is involved in or seeks to become involved in providing information technology services and solutions to the financial services industry, including business process and technology advice, software package selection and integration, application development, maintenance and support, network and system security and specialized services, in any country in which the Company or an Affiliate is doing business at the time of termination of Executive’s employment. 5 --------------------------------------------------------------------------------   4.3.          Employee Agreements.  As a condition of this Agreement and as a condition of Executive’s employment with the Company or an Affiliate, Executive is required to sign a separate Employee Non-Disclosure, Development and Non-Solicitation Agreement and/or other similar agreement(s) (collectively, “Employee Agreements”).  Executive hereby reaffirms his commitment to abide by all obligations set forth in all such Employee Agreements.  Executive further agrees that any breach by Executive of any Employee Agreement shall be considered a breach by Executive of this Agreement.  This Agreement shall not be construed to amend, modify or terminate any of Executive’s obligations under any Employee Agreement to the extent this Agreement and the Employee Agreement are not inconsistent.  However, in the event of any direct conflict between the terms of any Employee Agreement and the terms of this Agreement, the terms of this Agreement shall govern and supersede any Employee Agreement. 4.4           Irreparable Harm.  Executive acknowledges that: (i) Executive’s compliance with this Agreement is necessary to preserve and protect the proprietary rights, Trade Secrets, and the goodwill of the Company or an Affiliate as going concerns, and (ii) any failure by Executive to comply with the provisions of this Agreement will result in irreparable and continuing injury for which there will be no adequate remedy at law.  In the event that Executive fails to comply with the terms and conditions of this Agreement, the obligations of the Company and its Affiliates to pay the severance benefits set forth in Section 3 shall cease, and the Company or an Affiliate will be entitled, in addition to other relief that may be proper, to all types of equitable relief (including, but not limited to, the issuance of an injunction and/or temporary restraining order) that may be necessary to cause Executive to comply with this Agreement, to restore to the Company and its Affiliates their property, and to make the Company and its Affiliates whole. 4.5           Survival.  The provisions set forth in this Section 4 shall survive termination of this Agreement. 4.6           Scope Limitations.  If the scope, period of time or area of restriction specified in this Section 4 are or would be judged to be unreasonable in any court proceeding, then the period of time, scope or area of restriction will be reduced or limited in the manner and to the extent necessary to make the restriction reasonable, so that the restriction may be enforced in those areas, during the period of time and in the scope that are or would be judged to be reasonable. 5.             MISCELLANEOUS 5.1           EMPLOYMENT STATUS.  NOTHING HEREIN SHALL BE DEEMED TO CREATE ANY TERM OF EMPLOYMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BETWEEN THE PARTIES THAT EXECUTIVE’S EMPLOYMENT IS AT WILL AND THAT EITHER PARTY MAY TERMINATE SUCH EMPLOYMENT AT ANY TIME. 5.2           GOVERNING LAW.  ALL PROVISIONS OF THIS AGREEMENT WILL BE CONSTRUED AND GOVERNED BY ILLINOIS LAW WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES OR THE LAWS OF ANY OTHER JURISDICTION.  ANY SUIT, CLAIM OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO EXECUTIVE’S EMPLOYMENT, HIS TERMINATION FROM EMPLOYMENT, OR THIS AGREEMENT SHALL BE BROUGHT EXCLUSIVELY IN THE FEDERAL OR STATE COURTS LOCATED IN COOK COUNTY, ILLINOIS, AND EXECUTIVE AND THE COMPANY AND ITS AFFILIATES HEREBY SUBMIT TO PERSONAL JURISDICTION IN THE STATE OF ILLINOIS AND TO VENUE IN SUCH COURTS.  NOTWITHSTANDING THE FOREGOING, THE COMPANY OR AN AFFILIATE MAY SEEK AND OBTAIN INJUNCTIVE RELIEF AGAINST EXECUTIVE IN ANY COURT HAVING JURISDICTION OVER EXECUTIVE. 6 --------------------------------------------------------------------------------   5.3           SEVERABILITY.  EVERY PROVISION OF THIS AGREEMENT IS INTENDED TO BE SEVERABLE. IF ANY PROVISION OR PORTION OF A PROVISION IS ILLEGAL OR INVALID, THEN THE REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED. MOREOVER, ANY PROVISION OF THIS AGREEMENT WHICH IS DETERMINED TO BE UNREASONABLE, ARBITRARY OR AGAINST PUBLIC POLICY SHALL BE MODIFIED AS NECESSARY SO THAT IT IS NOT UNREASONABLE, ARBITRARY OR AGAINST PUBLIC POLICY WHILE MAXIMIZING THE INTENT OF THE PARTIES. 5.4           ENTIRE AGREEMENT.  EXCEPT AS PROVIDED IN ANY NON-DISCLOSURE, NON-SOLICITATION, INTELLECTUAL PROPERTY OR SIMILAR AGREEMENT SIGNED BY EXECUTIVE, WITH RESPECT TO ITS SUBJECT MATTER, THIS AGREEMENT CONSTITUTES THE ENTIRE UNDERSTANDING OF THE PARTIES SUPERSEDING ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS AND DISCUSSIONS BETWEEN THEM, WHETHER WRITTEN OR ORAL, AND THERE ARE NO OTHER UNDERSTANDINGS, REPRESENTATIONS, WARRANTIES OR COMMITMENTS WITH RESPECT THERETO.  NOTWITHSTANDING ANY TERMS CONTAINED HEREIN TO THE CONTRARY, THE COMPANY OR ITS AFFILIATES, IN ADDITION TO ANY RIGHTS SET FORTH HEREIN, SHALL HAVE THE RIGHT TO SEEK ENFORCEMENT OF ANY OTHER PENALTIES OR RESTRICTIONS THAT MAY APPLY UNDER ANY OTHER NON-DISCLOSURE, NON-SOLICITATION, INTELLECTUAL PROPERTY OR SIMILAR AGREEMENT BETWEEN EXECUTIVE AND THE COMPANY OR ITS AFFILIATES. 5.5           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT MAY NOT BE ASSIGNED BY EXECUTIVE.  THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ALL SUCCESSORS AND ASSIGNS (WHETHER BY OPERATION OF LAW OR OTHERWISE) OF THE COMPANY AND ITS AFFILIATES. 5.6           AMENDMENT. THIS AGREEMENT MAY ONLY BE AMENDED OR TERMINATED BY MUTUAL WRITTEN AGREEMENT BETWEEN THE COMPANY AND EXECUTIVE. 5.7.          No Waiver.  No failure or delay by the Company or an Affiliate or Executive in enforcing or exercising any right or remedy hereunder shall operate as a waiver thereof.  No modification, amendment or waiver of this Agreement nor consent to any departure by Executive from any of the terms or conditions thereof, shall be effective unless in writing and signed by the Chairman of the Board.  Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. 5.8.          Counterparts.  The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement. IN WITNESS WHEREOF, each party has executed this Severance Agreement or caused this Severance Agreement to be duly executed as of the Effective Date. KANBAY INTERNATIONAL, INC.     ROBERT A. WILLIAMS            By: /s/ William F. Weissman     /s/ Robert A. Williams Its:  CFO   By:  Robert A. Williams                                 KANBAY INCORPORATED                 By: /s/ William F. Weissman       Its: CFO/Director           7 --------------------------------------------------------------------------------

Exhibit 10.3 TUPPERWARE BRANDS CORPORATION DIRECTOR STOCK PLAN RESTRICTED STOCK AGREEMENT Recipient: Number of Shares: Date of Award: Restricted Period Ends: 1. Restricted Stock Award. Tupperware Brands Corporation, a Delaware corporation (“Tupperware”), pursuant to the Tupperware Brands Corporation Director Stock Plan (the “Plan”), a copy of which is attached, hereby awards to the Recipient as of the Date of Award an award of a number of shares of common stock of Tupperware, $0.01 par value (“Shares”), all as specifically indicated above. The award is subject to the terms, conditions and restrictions of this Agreement and the Plan. The Recipient shall execute and return to Tupperware this Agreement and the stock power described in Paragraph 4 of this Agreement. All determinations and interpretations made by Tupperware in connection with any question arising under this Agreement or the Plan are binding and conclusive upon the Recipient or his or her legal representative. 2. Restrictions on Shares. The Restricted Period (as defined in Section 9(d)(iii)(A) of the Plan) applicable to any Shares begins on the Date of Award and ends on the date the Restricted Period Ends, as set forth above, except as otherwise provided in Section 9(d)(iii)(A) of the Plan. In the event of a Change of Control (as defined in Section 2 of the Plan), all restrictions shall lapse immediately in accordance with Section 13 of the Plan. If the Recipient dies or retires while a member of the Tupperware Board, the restrictions shall lapse on the date of death or retirement, whichever date is earlier. 3. Stockholder Rights. During the Restricted Period, the Recipient shall have all of the rights of a stockholder of Tupperware, including the right to receive dividends and the right to vote, except as otherwise set forth in this Agreement or in Section 9(d)(iii)(D) of the Plan. 4. Issuance and Possession of Stock Certificates During Restricted Period. Shares will be issued and registered in certificate form or, if Tupperware so permits, book entry form, in the name of the Recipient in the stockholder records of Tupperware. The Recipient shall deliver to Tupperware the Recipient’s blank endorsement of a stock power. Such certificates will be held by Tupperware or its agent until the restrictions lapse or such Shares are forfeited in accordance with the Plan. -------------------------------------------------------------------------------- 5. Adjustments to Shares. Recipient agrees to deliver to Tupperware any new or additional certificates representing stock or other securities, which he or she may receive during the Restricted Period with respect to the Shares (“Other Certificates”), together with a blank endorsement of a stock power. All such Shares or other securities will be subject to the same restrictions during the Restricted Period as the Shares. Other Certificates will be held by Tupperware or its agent. 6. Delivery of Certificates. Tupperware will deliver or cause to be delivered Shares evidenced by Certificates, or, if Tupperware so permits, in book entry form, and any Other Certificates at the end of the Restricted Period, and will deliver them to the Recipient or Recipient’s transferee free of the restrictions imposed by the Plan or this Agreement. 7. Notices. All notices hereunder to Tupperware shall be delivered or mailed to the Corporate Secretary of Tupperware at its headquarters office. All notices hereunder to the Recipient shall be delivered personally or mailed to the Recipient’s address indicated below, unless the Recipient notifies Tupperware in writing of a change of address. 8. Data Transfer and Privacy. To administer this Plan, you must provide us with personal data to identify you, including name and address. Your personal data will be transferred to our U.S. headquarters in Orlando, and processed there. We may transfer your personal data to an outside vendor (such as a bank) for further processing. By signing below, you explicitly consent to this collection, transfer and processing, as necessary for operation of this Plan. During each of these steps, we treat your personal data with care to ensure its privacy, and ensure that any outside vendors do the same. If you are an EU resident, your data is treated in accordance with our EU Data Transfer Policy. The parties confirm this Agreement effective as of the Date of Award and have executed it on                     , 20    .   Tupperware Brands Corporation   Recipient (Please sign and date form. Type or print address.)       Signature Thomas M. Roehlk Executive Vice President, Chief Legal Officer & Secretary         Street Address (Home)       City                    State/Province                     Zip Code

Exhibit 10.5 ENTRUST, INC. Restricted Stock Unit Award Agreement Granted Under the 2006 Stock Incentive Plan 1) Grant of Restricted Stock Unit. This agreement evidences the grant by Entrust, Inc., a Maryland corporation (the “Company”), on <DATE> (“Grant Date”) to <NAME>, (the “Participant”), of a restricted stock unit (”Restricted Stock Unit”), on the terms provided herein and in the Company’s 2006 Stock Incentive Plan (the “Plan”), for a total of <NUMBER OF RSUs> shares of common stock, $0.01 par value, of the Company (“Common Stock”) (the “Shares”) at $0.00 per Share. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Award Agreement. 2) Vesting Schedule. This Restricted Stock Unit shall vest, in whole or in part, as to one-third of the Shares subject to the agreement shall vest on each of the first, second and third anniversaries of the Grant Date, subject to the Participant continuing to be a Service Provider through each such dates. Accelerated vesting. Upon the occurrence of an Acquisition Event (as defined in the Plan), then the vesting schedule of this Restricted Stock Unit shall be accelerated so that all of the number of shares which would otherwise have first become exercisable on any vesting date scheduled to occur on or after the date of such Acquisition Event shall become vested immediately prior to such Acquisition Event. 3) Earning of Restricted Stock Units. Each Restricted Stock Unit has a value equal to the Fair Market Value of a Share on the date it becomes vested. Unless and until the Restricted Stock Units will have vested, the Participant will have no right to payment of any such Restricted Stock Units. Prior to actual payment of any vested Restricted Stock Units, such Restricted Stock Units will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. Notwithstanding any contrary provision of this Agreement, if Participant ceases to be a Service Provider for any or no reason, the then-unvested Restricted Stock Units (after taking into any accelerated vesting that may occur as the result of any such termination) awarded by this Agreement will thereupon be forfeited at no cost to the Company and the Participant will have no further rights thereunder. Any Restricted Stock Units that vest in accordance with Section 2 will be paid to the Participant (or in the event of the Participant’s death, to his or her estate) in whole Shares, provided that to the extent determined appropriate by the Company in its discretion, any federal, state and local withholding taxes with respect to such Restricted Stock Units will be paid by reducing the number of Shares actually paid to the Participant. Any distribution or delivery to be made to the Participant under this Agreement will, if the Participant is then deceased, be made to the Participant’s designated beneficiary, or if no beneficiary survives the Participant, the administrator or executor of the Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer. 4) Non-Transferability of Restricted Stock Units. Except to the limited extent provided in paragraph 5, this Restricted Stock Unit may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. Notwithstanding the foregoing sentence, Participant may, in a manner and in accordance with terms specified by the Board, transfer this Restricted Stock Unit to Participant’s spouse, former spouse or dependent pursuant to a court-approved domestic relations order which relates to the provision of child support, alimony payments or marital property rights. Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto. 5) Withholding of Taxes. Notwithstanding any contrary provision of this Award Agreement, no certificate representing the Shares will be issued to the Participant, unless and until satisfactory arrangements (as determined by the Board) will have been made by the Participant with respect to the payment of income, employment and other taxes which the Company determines must be withheld with respect to such shares so issuable. The Board, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit the Participant to satisfy such tax withholding obligation, in whole or in part (without limitation) by one or more of the following: (a) paying cash, (b) electing to have the Company withhold otherwise deliverable shares of Common Stock having a Fair Market Value equal to the minimum amount required to be withheld, (c) delivering to the Company already vested and owned shares of Common Stock having a Fair Market Value equal to the amount required to be withheld, or (d) selling a sufficient number of such shares of Common Stock otherwise deliverable to Participant through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. If the Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder at the time any applicable Shares otherwise are scheduled to vest pursuant to Section 2, the Participant will permanently forfeit such Shares and the Shares will be returned to the Company at no cost to the Company. 6) Rights as Stockholder. Neither the Participant nor any person claiming under or through the Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant. 7) No Effect on Employment or Service. Participant acknowledges and agrees that the vesting of shares pursuant to the vesting schedule hereof is earned only by continuing as an employee, consultant or non-employee director at the will of the company (and not through the act of being hired, being granted an option or purchasing shares hereunder). Participant further acknowledges -------------------------------------------------------------------------------- and agrees that this agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee, consultant or non-employee director for the vesting period, for any period, or at all, and will not interfere with Participant’s right or the company’s right to terminate Participant’s relationship as an employee, consultant or non-employee director at any time, with or without cause. 8) Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s exercise hereunder. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. 9) Address for Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company at Entrust, Inc., One Hanover Park, Suite 800, 16633 Dallas Parkway, Addison, Texas 75001 or at such other address as the Company may hereafter designate in writing. 10) Board Authority. The Board will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Board in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Board or its Committee administering the Plan will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement. 11) Agreement Severable. In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement. 12) Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Award 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 Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Award Agreement is governed by Maryland law except for that body of law pertaining to conflict of laws. By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Restricted Stock Unit is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Participant has reviewed the Plan and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understands all provisions of the Plan and Award Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions relating to the Plan and Award Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.   ENTRUST, INC.       PARTICIPANT     Signature     Print Name DATED:            Residence Address   -2-

EXHIBIT 10.2 WARRANT TO PURCHASE COMMON STOCK THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. Issuer: Material Technologies, Inc. Class of Stock: Common Issue Date: May 30, 2006 Expiration Date: December 31, 2007           Material Technologies, Inc., a Delaware corporation (the “Company”) hereby grants to La Jolla Cove Investors, Inc., a California corporation (the “Holder”) the right to purchase up to 20,000,000 shares of the Company’s Class A Common Stock (the “Warrant Shares”).  This warrant (the "Warrant") shall expire and Holder shall no longer be able to purchase the Warrant Shares on the Expiration Date. ARTICLE 1 EXERCISE           1.1        Method of Exercise.  Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company, along with a check payable to the Company for the aggregate Exercise Price for the Warrant Shares being purchased.  Holder agrees that, beginning on the date that a Registration Statement filed by the Company with the Securities and Exchange Commission becomes effective that registers the Warrant Shares, Holder will exercise the Warrant, pay the Exercise Price to the Company, and acquire the Warrant Shares, at a rate of at least One Million Two Hundred Fifty Thousand (1,250,000) of the Warrant Shares per week, to continue for sixteen (16) consecutive weeks until all of the Warrant Shares have been purchased by Holder.            1.2        Delivery of Certificate and New Warrant Delivery of Certificate and New Warrant.  As promptly as practicable after the receipt of the Notice of Exercise, but in any event not more than three (3) Business Days  after the Company’s receipt of the Notice of Exercise, the Company shall issue the Warrant Shares being purchased and cause to be mailed for delivery by overnight courier, or if a Registration Statement covering the Shares has been declared effective by the SEC, cause to be electronically transferred, to Holder a certificate representing the Warrant Shares acquired and, if this Warrant has not been fully exercised and has not expired, a new Warrant substantially in the form of this Warrant representing the right to acquire the portion of the Warrant Shares not so acquired.           1.3        Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the -------------------------------------------------------------------------------- Company or, in the case of mutilation, or surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.           1.4        Exercise Price.  The Exercise Price for the Warrant Shares shall be $0.01 per share, provided, however, in no event shall the Exercise Price be lower or higher than the lowest price at which the Company sold any Common Stock (through direct stock issuances, conversions of debentures, etc, but not including stock issued for services) during the thirty days prior to the exercise date. Upon the exercise of the Warrant Shares, the Exercise Price shall be reduced pro rata to permit the Holder to recapture the amount paid to the Company upon acquisition of this Warrant (the "Premium").. ARTICLE 2 ADJUSTMENT TO THE WARRANT SHARES           The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment form time to time upon the occurrence of certain events, as follows:           2.1        Reclassification.  In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant then, and in any such case, the Holder, upon the exercise hereof at any time after the consummation of such reclassification or change, shall be entitled to receive in lieu of each Warrant Share theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and/or property received upon such reclassification or change by a holder of one share.  The provisions of this Section 2.1 shall similarly apply to successive reclassifications or changes.           2.2        Subdivision or Combination of Shares.  If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its shares, the Exercise Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination.           2.3        Stock Dividends.  If the Company, at any time while this Warrant is outstanding shall pay a dividend with respect to its shares payable in shares, or make any other distribution of shares with respect to shares (except any distribution provided for in Section 2.1 and Section 2.2 above), then the Exercise Price shall be adjusted, effective from and after the date of determination of shareholders entitled to received such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction, (a) the numerator of which shall be the total number of shares outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares outstanding immediately after such dividend or distribution.           2.4        Non-Cash Dividends.  If the Company at any time while this Warrant is outstanding shall pay a dividend with respect to shares payable in securities other than shares or other non-cash property, or make any other distribution of such securities or property with respect to shares (except any distribution specifically provided for in Section 2.1 and Section 2.2 above), then this Warrant shall represent the right to acquire upon exercise of this Warrant such securities or property which a holder of shares would have been entitled to receive upon such dividend or distribution, without the payment by Holder of any additional consideration for such securities or property.           2.5        Effect of Reorganization and Asset Sales.  If any (i) reorganization or reclassification of the Common Stock (ii) consolidation or merger of the Company with or into another corporation, or (iii) sale or all or substantially all of the Company’s operating assets to another corporation followed by a liquidation of the Company (any such transaction shall be referred to herein as an “Event”), is effected in such a way that holders of Common Stock are entitled to receive securities and/or assets as a result of 2 -------------------------------------------------------------------------------- their Common Stock ownership, Holder, upon exercise of this Warrant, shall be entitled to receive such shares of stock, securities or assets which Holder would have received had it fully exercised this Warrant on or prior the record date for such Event.  The Company shall not merge into or consolidate with another corporation or sell all of its assets to another corporation for a consideration consisting primarily of securities or such corporation, unless the successor or acquiring corporation, as the case may be, shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed or observed by the Company and all of the obligations and liabilities hereunder, subject to such modification as shall be necessary to provide for adjustments which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 2.  The foregoing provisions shall similarly apply to successive mergers, consolidations or sales of assets.           2.6        Adjustment of Number of Shares.  Upon each adjustment in the Exercise Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment by a fraction (a) the numerator of which shall be the Exercise Price prior to the adjustment and (b) the denominator of which shall be the Exercise Price immediately thereafter.           2.7        No Impairment.  The Company shall not, by amendment of its charter documents or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all of the provisions of this Warrant and in taking all such action as may be reasonably necessary or appropriate to protect Holder’s rights hereunder against impairment.  If the Company takes any action affecting its Common Stock other than as described above that adversely affects Holder’s rights under this Warrant, the Exercise Price shall be adjusted downward and the number of Warrant Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Exercise Price of this Warrant is unchanged.           2.8        Fractional Shares.  No fractional Warrant Shares shall be issuable upon the exercise of this Warrant, and the number of Warrant Shares to be issued shall be rounded down to the nearest whole share.           2.9        Certificate as to Adjustments.  Upon any adjustment of the Exercise Price, the Company, at its expense, shall compute such adjustment and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request, furnish Holder a certificate setting forth the Exercise Price in effect upon the date thereof and the series of adjustments leading to such Exercise Price.           2.10      No Rights of Shareholders.  This Warrant does not entitle Holder to any voting rights or any other rights as a shareholder of the Company prior to the exercise of Holder’s right to purchase Warrant Shares as provided herein. ARTICLE 3 REPRESENTATIONS AND COVENANTS OF THE COMPANY           3.1        Representations and Warranties.  The Company hereby represents and warrants to Holder that all Warrant Shares which may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonasessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. 3 --------------------------------------------------------------------------------           3.2        Notice of Certain Events.  If the Company proposes at any time (a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other fights; (c) to effect any reclassification or recapitalization of Common Stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of Common Stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of Common Stock will be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.           3.3        Information Rights.  So long as Holder holds this Warrant, the Company shall deliver to Holder (a) promptly after mailing, copies of all notices or other written communications to the shareholders of the Company, (b) promptly upon their availability, the annual audited financial statements of the Company certified by independent public accountants of recognized standing, and (c) within forty-five (45) days after the end of each fiscal quarter, the Company’s quarterly, unaudited financial statements.           3.4        Reservation of Warrant Shares.  The Company has reserved and will keep available, out of the authorized and unissued shares of Common Stock, the full number of shares sufficient to provide for the exercise of the rights of purchase represented by this Warrant. ARTICLE 4 REPRESENTATIONS AND COVENANTS OF THE HOLDER           4.1        Private Issue.  Holder understands (i) that the Shares issuable upon exercise of Holder’s rights contained in the Warrant are not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by the Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on Holder’s representations set forth in this Article 4.           4.2        Financial Risk.  Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of its investment.           4.3        Accredited Investor.  Holder is an “accredited investor,” as such term is defined in Regulation D promulgated pursuant to the Securities Act of 1933, as amended. ARTICLE 5 MISCELLANEOUS           5.1        Transfer Procedure.  Holder shall have the right without the consent of the Company to transfer or assign in whole or in part this Warrant or the Warrant Shares issuable upon exercise of this Warrant. Holder agrees that unless there is in effect a registration statement under the Securities Act covering the proposed transfer of all or part of this Warrant, prior to any such proposed transfer the 4 -------------------------------------------------------------------------------- Holder shall give written notice thereof to the Company (a “Transfer Notice”).  Each Transfer Notice shall describe the manner and circumstances of the proposed transfer in reasonable detail and, if the company so requests, shall be accompanied by an opinion of legal counsel, in a form reasonably satisfactory to the Company, to the effect that the proposed transfer may be effected without registration under the Act; provided that the Company will not require opinions of counsel for transactions involving transfers to affiliates or pursuant to Rule 144 promulgated by the Securities and Exchange Commission under the act, except in unusual circumstances.           5.2        Notices, etc.  All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally, or sent by facsimile or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally, or by facsimile or overnight courier service as follows: To the Company: Material Technologies, Inc. 11611 San Vicente Boulevard, Suite 707 Los Angeles, CA 90049 Telephone: 310-208-5589 Facsimile: 310-473-3177 To the Holder: La Jolla Cove Investors, Inc. 7817 Herschel Avenue, Suite 200 La Jolla, CA 92037 Telephone: 858-551-8789 Facsimile: 858-551-8779 The Company or the Holder may change the foregoing address by notice given pursuant to this Section.           5.3        Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.           5.4        Attorneys Fees.  In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys fees.           5.5        Governing Law; Jurisdiction.  This warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of San Diego or the state courts of the State of California sitting in the City of San Diego in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.           5.6        Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transactions hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a breach or threatened breach by the Company of 5 -------------------------------------------------------------------------------- the provisions of this Warrant, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Warrant and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required. Material Technologies, Inc.                                                        La Jolla Cove Investors, Inc. By:  /s/ Robert M. Bernstein                                                      By:   /s/ Travis Huff                              Title:  President                                                                         Title:  Portfolio Manager                        6 -------------------------------------------------------------------------------- APPENDIX 1 NOTICE OF EXERCISE           1.       The undersigned hereby elects to purchase _____ shares of the Common Stock of Material Technologies, Inc. pursuant to the terms of the Warrant to Purchase Common Stock issued on May 30, 2006 in favor of La Jolla Cove Investors, Inc., and tenders herewith payment of the purchase price of such shares in full.           2.       Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: _________________________________ _________________________________ _________________________________ (Name and Address)           3.       The undersigned makes the representations and covenants set forth in Article 4 of the Warrant to Purchase Common Stock.                                                                                                                                                                                                                                                                             (Signature) ___________________________                     (Date) 7 --------------------------------------------------------------------------------

  Exhibit 10.1 BOOKHAM, INC. 2004 STOCK INCENTIVE PLAN 1. Purpose      The purpose of this 2004 Stock Incentive Plan (the “Plan”) of Bookham, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Bookham, Inc’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which Bookham, Inc. has a controlling interest, as determined by the Board of Directors of the Company (the “Board”). 2. Eligibility      All of the Company’s employees, officers, directors, consultants and advisors are eligible to receive options, stock appreciation rights, restricted stock and other stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the Plan is deemed a “Participant”. 3. Administration and Delegation      (a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.      (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall   --------------------------------------------------------------------------------   mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.      (c) Delegation to Officers. To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Awards to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act). 4. Stock Available for Awards      (a) Number of Shares. Subject to adjustment under Section 10, Awards may be made under the Plan for up to 4,000,000 shares of common stock, $.01 par value per share, of the Company (the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.      (b) Sub-limits. Subject to adjustment under Section 10, the following sub-limits on the number of shares subject to Awards shall apply: (1) Section 162(m) Per-Participant Limit. The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 1,000,000 per calendar year. For purposes of the foregoing limit, the combination of an Option in tandem with an SAR (as each is hereafter defined) shall be treated as a single Award. The per-Participant limit described in this Section 4(b)(1) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”). -2- --------------------------------------------------------------------------------   (2) Limit on Awards other than Options and SARS. The maximum number of shares with respect to which Awards other than Options and SARs may be granted shall be one-half of the number of shares of Common Stock covered by this Plan. 5. Stock Options      (a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.      (b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of Bookham, Inc., any of Bookham, Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board pursuant to Section 11(f), including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.      (c) Exercise Price. The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement; provided, however, that the exercise price shall not be less than 100% of the Fair Market Value (as defined below) at the time that the Option is granted.      (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted for a term in excess of 10 years.      (e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board). -3- --------------------------------------------------------------------------------        (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows: (1) in cash or by check, payable to the order of the Company; (2) except as the Board may otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding; (3) when the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), by delivery of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements; (4) to the extent permitted by applicable law and by the Board, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or (5) by any combination of the above permitted forms of payment.      (g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2. 6. Director Options      (a) Annual Grant. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each member of the Board of Directors of the Company who is both serving as a director of the Company immediately prior to and immediately following such annual meeting and who is not then an employee of the Company or any of its subsidiaries, a Nonstatutory Stock Option to purchase 5,000 shares of Common Stock (subject to adjustment under Section 10).      (b) Terms of Director Options. Options granted under this Section 6 shall (i) have an exercise price equal to the closing sale price (for the primary trading session) of the Common -4- --------------------------------------------------------------------------------   Stock on The Nasdaq Stock Market or the national securities exchange on which the Common Stock is then traded on the trading date immediately prior to the date of grant (and if the Common Stock is not then traded on The Nasdaq Stock Market or a national securities exchange, the fair market value of the Common Stock on such date as determined by the Board), (ii) be immediately exercisable at the time of grant, (iii) expire on the earlier of 10 years from the date of grant or one year following cessation of service on the Board and (iv) contain such other terms and conditions as the Board shall determine.      (c) Board Discretion. Notwithstanding anything herein to the contrary, the Board retains the specific authority to from time to time (i) increase or decrease the number of shares subject to options granted under Section 6(a), (ii) to make additional grants of Nonstatutory Stock Options to members of the Board who are not employees of the Company or any subsidiary of the Company; and (iii) provide conditions or limitations (such as vesting limitations) applicable to the exercise of options granted under this Section 6. 7. Stock Appreciation Rights      (a) General. A Stock Appreciation Right, or SAR, is an Award entitling the holder, upon exercise, to receive an amount in cash or Common Stock or a combination thereof (such form to be determined by the Board) determined in whole or in part by reference to appreciation, from and after the date of grant, in the fair market value of a share of Common Stock. SARs may be based solely on appreciation in the fair market value of Common Stock or on a comparison of such appreciation with some other measure of market growth such as (but not limited to) appreciation in a recognized market index. The date as of which such appreciation or other measure is determined shall be the exercise date unless another date is specified by the Board in the SAR Award.      (b) Grants. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. (1) Tandem Award. When Stock Appreciation Rights are expressly granted in tandem with Options, (i) the Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with a Reorganization Event) and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except to the extent designated by the Board in connection with a Reorganization Event and except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right; and (iv) the Stock Appreciation Right will be transferable only with the related Option. -5- --------------------------------------------------------------------------------   (2) Independent SARs. A Stock Appreciation Right not expressly granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Board may specify in the SAR Award.      (c) Exercise. Stock Appreciation Rights may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with any other documents required by the Board. 8. Restricted Stock      (a) General. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).      (b) Terms and Conditions. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.      (c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.      (d) Deferred Delivery of Shares. The Board may, at the time any Restricted Stock Award is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant shall instead receive an instrument evidencing the right to future delivery of Common Stock at such time or times, and on such conditions, as the Board shall specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock shall take place. The Board may also permit an exchange of unvested shares of Common Stock that have already been delivered to a Participant for an instrument evidencing the right to future delivery of Common Stock at such time or times, and on such conditions, as the Board shall specify. -6- --------------------------------------------------------------------------------   9. Other Stock-Based Awards.      Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock Unit Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock Unit Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the conditions of each Other Stock Unit Awards, including any purchase price applicable thereto. At the time any Award is granted, the Board may provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the Participant’s right to future delivery of the Common Stock. 10. Adjustments for Changes in Common Stock and Certain Other Events.      (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the sub-limits set forth in Section 4(b), (iii) the number and class of securities and exercise price per share of each outstanding Option and each Option issuable under Section 6, (iv) the share- and per-share related provisions of each Stock Appreciation Right, (v) the repurchase price per share subject to each outstanding Restricted Stock Award and (vi) the share- and per-share-related provisions of each outstanding Other Stock Unit Award, shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent determined by the Board.      (b) Reorganization Events. (1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction or (c) any liquidation or dissolution of the Company. (2) Consequences of a Reorganization Event on Awards Other than Restricted Stock Awards. In connection with a Reorganization Event, the Board shall take any one or more of the following actions as to all or any outstanding Awards on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that the Participant’s unexercised Options or other unexercised Awards shall -7- --------------------------------------------------------------------------------   become exercisable in full and will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become realizable or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to a Participant equal to (A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the Acquisition Price) minus (B) the aggregate exercise price of all such outstanding Options or other Awards, in exchange for the termination of such Options or other Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof) and (vi) any combination of the foregoing.           For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.           To the extent all or any portion of an Option becomes exercisable solely as a result of clause (ii) above, the Board may provide that upon exercise of such Option the Participant shall receive shares subject to a right of repurchase by the Company or its successor at the Option exercise price; such repurchase right (x) shall lapse at the same rate as the Option would have become exercisable under its terms and (y) shall not apply to any shares subject to the Option that were exercisable under its terms without regard to clause (ii) above. (3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon the occurrence of a Reorganization Event -8- --------------------------------------------------------------------------------   involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied. 11. General Provisions Applicable to Awards      (a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.      (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.      (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.      (d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.      (e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with an Award to such Participant. Except as the Board may otherwise provide in an Award, for so long as the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. -9- --------------------------------------------------------------------------------        (f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.      (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.      (h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. 12. Miscellaneous      (a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.      (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.      (c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award may be granted unless and until the Plan has been approved by the Company’s stockholders. No Awards shall be granted under the Plan after -10- --------------------------------------------------------------------------------   the completion of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.      (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided that, to the extent determined by the Board, no amendment requiring stockholder approval under any applicable legal, regulatory or listing requirement shall become effective until such stockholder approval is obtained. No Award shall be made that is conditioned upon stockholder approval of any amendment to the Plan.      (e) Provisions for Foreign Participants. The Board may modify Awards or Options granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefits or other matters.      (f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. -11- --------------------------------------------------------------------------------   BOOKHAM, INC. Amendment No. 1 to 2004 Stock Incentive Plan      The 2004 Stock Incentive Plan of Bookham, Inc., pursuant to Section 12(d) thereof, is hereby amended as follows:      Section 4(a) is hereby amended by deleting the first sentence thereof and inserting the following new first sentence to read in its entirety as follows:      “Subject to adjustment under Section 10, Awards may be made under the Plan for up to 9,000,000 shares of common stock, $.01 par value per share, of the Company (the “Common Stock”).”      Section 4(b)(2) is hereby amended by deleting such section and inserting the following new section to read in its entirety as follows:    “(2) Limit on Awards other than Options and SARS. The maximum number of shares with respect to which Awards other than Options and SARs may be granted shall be 7,000,000.”      Approved by the Board of Directors on September 8, 2005.      Approved by the Stockholders on October 26, 2005.   --------------------------------------------------------------------------------   BOOKHAM, INC. Incentive Stock Option Agreement Granted Under 2004 Stock Incentive Plan 1. Grant of Option.      This agreement evidences the grant by Bookham, Inc., a Delaware corporation (the “Company”), on [            ], 20[ ] (the “Grant Date”) to [            ], an employee of [insert name of entity which employs the employee] (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2004 Stock Incentive Plan (the “Plan”), a total of [            ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Pacific time, on [      ], 20[ ] (the “Final Exercise Date”).      It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms. 2. Vesting Schedule.      (a) This option will become exercisable (“vest”) as to 25% of the original number of Shares on the first anniversary of the Grant Date and as to an additional 6.25% of the original number of Shares at the end of each successive three-month period following the first anniversary of the Grant Date until the fourth anniversary of the Grant Date.      (b) The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan. 3. Exercise of Option.      (a) Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.   --------------------------------------------------------------------------------        (b) Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company, as defined in Section 424(e) or (f) of the Code, and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest (an “Eligible Participant”).      (c) Termination of Relationship with the Company. (1) If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation. (2) The Plan and this option shall not form any part of any contract for services or contract of employment between the Company or any past or present subsidiary and neither the Plan nor this agreement shall confer any legal or equitable rights (other than those constituting this option) on the Participant against the Company or any past or present subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against the Company or any past or present subsidiary; (3) In no circumstances shall the Participant on ceasing to hold the consultancy, office or employment by virtue of which he is or may be eligible to participate in the Plan be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan or this option which he might otherwise have enjoyed (including, without limitation, the lapse of this options or part thereof by reason of his ceasing to hold a consultancy position, office or ceasing to be employed by the Company or any past or present subsidiary) whether such compensation is claimed by way of damages for wrongful dismissal or other lawful or unlawful breach of contract or by way of compensation for loss of office or otherwise.      (d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date. -2- --------------------------------------------------------------------------------        (e) Discharge for Cause. If the Participant, prior to the Final Exercise Date, is discharged by the Company for Cause, the right to exercise this option shall terminate immediately upon the effective date of such discharge. For the purpose of this “cause” shall mean any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willful misconduct by the Participant which materially and adversely affects the business reputation of the Company. The Participant shall be considered to have been discharged for “cause” if the Company determines in good faith, within 30 days after the Participant’s resignation, that discharge for Cause was warranted.      (f) National Insurance. As a condition of exercising this option, the Participant agrees to complete a joint election (in such form as the Company shall determine) with the Company or any subsidiary of the Company (as is nominated for this purpose by the Company) for the whole of any secondary class 1 national insurance contributions which is payable in respect of that part of the Participant’s relevant employment income which relates to the holding, exercise, cancellation or release of this option or the holding or sale of Shares in either case as permitted by paragraph 3A of Schedule 1 to the Social Security and Benefits Act of 1992, as amended. [UK EMPLOYEES ONLY]      (g) Restricted Shares Election. As a condition of exercising this option, the Participant agrees to complete an election under Section 431(1) of the Income Tax (Earnings and Pensions) Act 2003 for the full disapplication of Chapter 2 of Part 7 of such Act in relation to all of the Shares. [UK EMPLOYEES ONLY] 4. Tax Matters.      (a) Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any [income tax, national insurance contributions — FOR UK EMPLOYEES ONLY] federal, state or local withholding taxes agreed to be or required by law to be withheld in respect of this option.      (b) Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition. 5. Nontransferability of Option.      This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant. -3- --------------------------------------------------------------------------------   6. Data Protection.      The Participant agrees to the receipt, holding, and processing of information in connection with the grant, vesting, exercise, taxation and general administration of the Plan and this option by the Company or any subsidiary of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose. [FOR UK EMPLOYEES ONLY] 7. Provisions of the Plan.      This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option.      IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.                                   BOOKHAM, INC.                       Dated:           By:                                                                                       Name:                                           Title:                                                 -4- --------------------------------------------------------------------------------   PARTICIPANT’S ACCEPTANCE      The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2004 Stock Incentive Plan.                   PARTICIPANT:                                               Address:                                                                 -5- --------------------------------------------------------------------------------   BOOKHAM, INC. Incentive Stock Option Agreement Granted Under 2004 Stock Incentive Plan 8. Grant of Option.      This agreement evidences the grant by Bookham, Inc., a Delaware corporation (the “Company”), on [          ], 20[ ] (the “Grant Date”) to [                    ], an employee of [insert name of entity which employs the exec. officer] (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2004 Stock Incentive Plan (the “Plan”), a total of [                    ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Pacific time, on [      ], 20[ ] (the “Final Exercise Date”).      It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms. 9. Vesting Schedule.      (a) This option will become exercisable (“vest”) as to 25% of the original number of Shares on the first anniversary of the Grant Date and as to an additional 6.25% of the original number of Shares at the end of each successive three-month period following the first anniversary of the Grant Date until the fourth anniversary of the Grant Date.      (b) The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.      (c) Acceleration Upon a Change in Control Event           (1) Definitions   (a)   A “Change in Control Event” shall mean:   (i)   the acquisition by an 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 of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) more than 50% of either (x) the then-outstanding shares of common stock of the Company (the “Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (iii) of this definition; or   (ii)   such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of the Company (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board of Directors of the Company (x) who was a member of such Board as of September 22, 2004 or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to such Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other -2- --------------------------------------------------------------------------------         actual or threatened solicitation of proxies or consents, by or on behalf of a person other than such Board; or   (iii)   the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, more than 50% of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination).   (b)   “Good Reason” shall mean any significant diminution in the Participant’s title, authority, or responsibilities from and after the Change in Control Event, any reduction in the annual cash compensation payable to the Participant from and after such Change in Control Event or the relocation of the place of business -3- --------------------------------------------------------------------------------         at which the Participant is principally located to a location that is greater than 50 miles from its location immediately prior to such Change in Control Event.   (c)   “Cause” shall mean any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willful misconduct by the Participant which materially and adversely affects the business reputation of the Company. The Participant shall be considered to have been discharged for “Cause” if the Company determines in good faith, within 30 days after the Participant’s resignation, that discharge for Cause was warranted.           (2) Acceleration of Vesting Schedule. Upon the occurrence of a Change in Control Event, the Option shall become immediately exercisable in full if, on or prior to the one-year anniversary of the date of the Change in Control Event, the Participant’s employment with the Company is terminated for Good Reason by the Participant or is terminated without Cause by the Company. 10. Exercise of Option.      (a) Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.      (b) Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company, as defined in Section 424(e) or (f) of the Code, and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest (an “Eligible Participant”).      (c) Termination of Relationship with the Company. (1) If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d), (e) and (f) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between -4- --------------------------------------------------------------------------------   the Participant and the Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation. (2) The Plan and this option shall not form any part of any contract for services or contract of employment between the Company or any past or present subsidiary and neither the Plan nor this agreement shall confer any legal or equitable rights (other than those constituting this option) on the Participant against the Company or any past or present subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against the Company or any past or present subsidiary; (3) In no circumstances shall the Participant on ceasing to hold the consultancy, office or employment by virtue of which he is or may be eligible to participate in the Plan be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan or this option which he might otherwise have enjoyed (including, without limitation, the lapse of this options or part thereof by reason of his ceasing to hold a consultancy position, office or ceasing to be employed by the Company or any past or present subsidiary) whether such compensation is claimed by way of damages for wrongful dismissal or other lawful or unlawful breach of contract or by way of compensation for loss of office or otherwise.      (d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for Cause, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.      (e) Discharge for Cause. If the Participant, prior to the Final Exercise Date, is discharged by the Company for Cause, the right to exercise this option shall terminate immediately upon the effective date of such discharge.      (f) Exercise Period Upon a Change of Control. If the Participant, prior to the Final Exercise Date, is discharged by the Company, other than for Cause, on or after a Change in Control, the Participant shall have the right to exercise this option up to and including the date which is the later of (i) that date otherwise provided in this Section 3 or (ii) 18 months following the Change in Control (but in no event after the Final Exercise Date).      (g) National Insurance. As a condition of exercising this option, the Participant agrees to complete a joint election (in such form as the Company shall determine) with the Company or any subsidiary of the Company (as is nominated for this purpose by the Company) for the whole of any secondary class 1 national insurance contributions which is payable in respect of that part of the Participant’s relevant employment income which relates to the holding, exercise, cancellation or release of this option or the holding or sale of Shares in either case as permitted -5- --------------------------------------------------------------------------------   by paragraph 3A of Schedule 1 to the Social Security and Benefits Act of 1992, as amended. [UK EMPLOYEES ONLY]      (h) Restricted Shares Election. As a condition of exercising this option, the Participant agrees to complete an election under Section 431(1) of the Income Tax (Earnings and Pensions) Act 2003 for the full disapplication of Chapter 2 of Part 7 of such Act in relation to all of the Shares. [UK EMPLOYEES ONLY] 11. Tax Matters.      (a) Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any [income tax, national insurance contributions – FOR UK EMPLOYEES ONLY] federal, state or local withholding taxes agreed to be or required by law to be withheld in respect of this option.      (b) Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition. 12. Nontransferability of Option.      This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant. 13. Data Protection.      The Participant agrees to the receipt, holding, and processing of information in connection with the grant, vesting, exercise, taxation and general administration of the Plan and this option by the Company or any subsidiary of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose. [FOR UK EMPLOYEES ONLY] 14. Provisions of the Plan.      This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option. -6- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.                                       BOOKHAM, INC.                               Dated:           By:                                                                                                       Name:                         Title:                                   -7- --------------------------------------------------------------------------------   PARTICIPANT’S ACCEPTANCE      The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2004 Stock Incentive Plan.                   PARTICIPANT:                                           Address:                                                   -8- --------------------------------------------------------------------------------   BOOKHAM, INC. Incentive Stock Option Agreement Granted Under 2004 Stock Incentive Plan 1. Grant of Option.      This agreement evidences the grant by Bookham, Inc., a Delaware corporation (the “Company”), on [     ], 20[ ] (the “Grant Date”) to[                     ], an employee of [insert name of entity which employs the exec. officer] (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2004 Stock Incentive Plan (the “Plan”), a total of[                     ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Pacific time, on [     ], 20[ ] (the “Final Exercise Date”).      It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms. 2. Vesting Schedule.      (a) This option will become exercisable (“vest”) as to 25% of the original number of Shares on the first anniversary of the Grant Date and as to an additional 6.25% of the original number of Shares at the end of each successive three-month period following the first anniversary of the Grant Date until the fourth anniversary of the Grant Date.      (b) The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.      (c) Acceleration Upon a Change in Control Event           (1) Definitions   (a)   A “Change in Control Event” shall mean:   (i)   the sale of all or substantially all of the assets of the Company;   --------------------------------------------------------------------------------     (ii)   a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;     (iii)   the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or     (iv)   any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board.   (b)   “Good Reason” shall mean any significant diminution in the Participant’s title, authority, or responsibilities from and after the Change in Control Event, any reduction in the annual cash compensation payable to the Participant from and after such Change in Control Event or the relocation of the place of business at which the Participant is principally located to a location that is -2- --------------------------------------------------------------------------------         greater than 50 miles from its location immediately prior to such Change in Control Event.   (c)   “Cause” shall mean any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willful misconduct by the Participant which materially and adversely affects the business reputation of the Company. The Participant shall be considered to have been discharged for “Cause” if the Company determines in good faith, within 30 days after the Participant’s resignation, that discharge for Cause was warranted.           (2) Acceleration of Vesting Schedule. Upon the occurrence of a Change in Control Event, the Option shall become immediately exercisable in full if, on or prior to the one-year anniversary of the date of the Change in Control Event, the Participant’s employment with the Company is terminated for Good Reason by the Participant or is terminated without Cause by the Company. 3. Exercise of Option.      (a) Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.      (b) Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company, as defined in Section 424(e) or (f) of the Code, and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest (an “Eligible Participant”).      (c) Termination of Relationship with the Company. (1) If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d), (e) and (f) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between -3- --------------------------------------------------------------------------------   the Participant and the Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation. (2) The Plan and this option shall not form any part of any contract for services or contract of employment between the Company or any past or present subsidiary and neither the Plan nor this agreement shall confer any legal or equitable rights (other than those constituting this option) on the Participant against the Company or any past or present subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against the Company or any past or present subsidiary; (3) In no circumstances shall the Participant on ceasing to hold the consultancy, office or employment by virtue of which he is or may be eligible to participate in the Plan be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan or this option which he might otherwise have enjoyed (including, without limitation, the lapse of this options or part thereof by reason of his ceasing to hold a consultancy position, office or ceasing to be employed by the Company or any past or present subsidiary) whether such compensation is claimed by way of damages for wrongful dismissal or other lawful or unlawful breach of contract or by way of compensation for loss of office or otherwise.      (d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for Cause, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.      (e) Discharge for Cause. If the Participant, prior to the Final Exercise Date, is discharged by the Company for Cause, the right to exercise this option shall terminate immediately upon the effective date of such discharge.      (f) Exercise Period Upon a Change of Control. If the Participant, prior to the Final Exercise Date, is discharged by the Company, other than for Cause, on or after a Change in Control, the Participant shall have the right to exercise this option up to and including the date which is the later of (i) that date otherwise provided in this Section 3 or (ii) 18 months following the Change in Control (but in no event after the Final Exercise Date).      (g) National Insurance. As a condition of exercising this option, the Participant agrees to complete a joint election (in such form as the Company shall determine) with the Company or any subsidiary of the Company (as is nominated for this purpose by the Company) for the whole of any secondary class 1 national insurance contributions which is payable in respect of that part of the Participant’s relevant employment income which relates to the holding, exercise, cancellation or release of this option or the holding or sale of Shares in either case as permitted -4- --------------------------------------------------------------------------------   by paragraph 3A of Schedule 1 to the Social Security and Benefits Act of 1992, as amended. [UK EMPLOYEES ONLY]      (h) Restricted Shares Election. As a condition of exercising this option, the Participant agrees to complete an election under Section 431(1) of the Income Tax (Earnings and Pensions) Act 2003 for the full disapplication of Chapter 2 of Part 7 of such Act in relation to all of the Shares. [UK EMPLOYEES ONLY] 4. Tax Matters.      (a) Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any [income tax, national insurance contributions – FOR UK EMPLOYEES ONLY] federal, state or local withholding taxes agreed to be or required by law to be withheld in respect of this option.      (b) Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition. 5. Nontransferability of Option.      This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant. 6. Data Protection.      The Participant agrees to the receipt, holding, and processing of information in connection with the grant, vesting, exercise, taxation and general administration of the Plan and this option by the Company or any subsidiary of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose. [FOR UK EMPLOYEES ONLY] 7. Provisions of the Plan.      This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option. -5- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.                                       BOOKHAM, INC.                               Dated:           By:                                                                                                       Name:                         Title:                                   -6- --------------------------------------------------------------------------------   PARTICIPANT’S ACCEPTANCE      The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2004 Stock Incentive Plan.                   PARTICIPANT:                                           Address:                                                   -7- --------------------------------------------------------------------------------   BOOKHAM, INC. Nonstatutory Stock Option Agreement Granted Under 2004 Stock Incentive Plan 1. Grant of Option.      This agreement evidences the grant by Bookham, Inc., a Delaware corporation (the “Company”), on                     , 200[      ] (the “Grant Date”) to [                    ], an [employee], [consultant], [director] of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2004 Stock Incentive Plan (the “Plan”), a total of [                    ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[                    ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on [                    ] (the “Final Exercise Date”).      It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms. 2. Vesting Schedule.      This option will become exercisable (“vest”) as to                     % of the original number of Shares on the [first] anniversary of the Grant Date and as to an additional                      % of the original number of Shares at the end of each successive [three-month] period following the first anniversary of the Grant Date until the [fourth] anniversary of the Grant Date.      The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan. 3. Exercise of Option.      (a) Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.      (b) Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she   --------------------------------------------------------------------------------   exercises this option, is, and has been at all times since the Grant Date, an [employee or officer of], or consultant or advisor to, the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).      (c) Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate [three] months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation.      (d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of [one year] following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.      (e) Discharge for Cause. If the Participant, prior to the Final Exercise Date, is discharged by the Company for “cause” (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such discharge. “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that discharge for cause was warranted. 4. Withholding.      No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option. -2- --------------------------------------------------------------------------------   5. Nontransferability of Option.      This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant. 6. Provisions of the Plan.      This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option.      IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.                                   BOOKHAM, INC.                       Dated:           By:                                                                           Name:                                                     Title:                           -3- --------------------------------------------------------------------------------   PARTICIPANT’S ACCEPTANCE      The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2004 Stock Incentive Plan.                   PARTICIPANT:                                               Address:                                                   -4- --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [                    ], 20[                    ], between Bookham, Inc., a Delaware corporation (the “Company”), and [                    ] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of Shares. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [                    shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement. 2. Vesting. [One-half] of the Shares shall vest in accordance with the provisions of Section 2(a) of this Agreement, [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(b) of this Agreement and [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(c) of this Agreement. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the Shares shall automatically be forfeited to the Company.      (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[                    ], any Unvested Shares (as defined below) shall be automatically forfeited to the Company.      “Unvested Shares” means [one-half] of the total number of Shares multiplied by the Applicable Percentage at the time such Shares are forfeited. The “Applicable Percentage” shall be [(i) 100% during the period ending [                    ], 20[                    ], (ii) 75% less 2.083% for each month of employment completed by the Participant with the Company from and after [                    ], 20[                    ], and (iii) zero on or after [                    ], 20[                    ]].      (b) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[                    ] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than zero for two successive quarters; provided, however, the Participant must be continuously employed by the Company from the   --------------------------------------------------------------------------------   date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[                    ] that the Company has generated the earnings contemplated by this Section 2(b) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[                    ], such Shares shall be automatically forfeited to the Company.]      (c) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[                    ] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than eight percent (8%) of revenues for two successive quarters after the date hereof; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[                    ] that the Company has generated the earnings contemplated by this Section 2(c) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[                    ], such Shares shall be automatically forfeited to the Company.]      (d) In the event that the Participant’s employment with the Company is terminated by reason of the Participant’s death or disability prior to any of the Shares vesting in accordance with the provisions of Sections 2(a), (b) and (c), all of the unvested Shares shall be forfeited immediately and automatically. For this purpose, “disability” shall mean the inability of the Participant, due to a medical reason, to carry out his duties as an employee of the Company for a period of six consecutive months.      (e) Notwithstanding anything herein to the contrary, upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the Shares subject to vesting in accordance with Section 2(a) shall accelerate and vest in full and the performance conditions contained in Sections 2(b) and 2(c) shall be deemed to be satisfied.      (f) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company, or any successor to the Company. 3. Automatic Sale Upon Vesting.      (a) Upon any vesting of Shares pursuant to Section 2 hereof, the Company shall sell, or arrange for the sale of, such number of the Shares no longer subject to forfeiture under Section 2 as is sufficient to generate net proceeds sufficient to satisfy the Company’s minimum statutory withholding obligations with respect to the income recognized by the Participant upon the lapse of the forfeiture provisions (based on minimum statutory withholding rates for all tax purposes, including payroll and social security taxes, that are applicable to such income), and the Company shall retain such net proceeds in satisfaction of such tax withholding obligations. -2- --------------------------------------------------------------------------------        (b) The Participant hereby appoints the General Counsel his attorney in fact to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.      (c) The Participant represents to the Company that, as of the date hereof, he is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act. 4. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (a) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement. 5. Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit B. The Joint Escrow Instructions shall be delivered to the Assistant Secretary of the Company, as escrow agent thereunder. The Participant shall deliver to such escrow agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit C, and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by such escrow agent pursuant to the terms of such Joint Escrow Instructions. -3- --------------------------------------------------------------------------------   6. Restrictive Legends.      All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other restrictions that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.” 7. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 8. Withholding Taxes; Section 83(b) Election.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or other taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and other tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.           THE PARTICIPANT AGREES NOT TO FILE AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE WITH RESPECT TO THE ISSUANCE OF THE SHARES. 9. Miscellaneous.      (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by satisfaction of the performance conditions and continuing service as an employee at the will of the Company (not through the act of being hired or being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee for the vesting period, for any period, or at all. -4- --------------------------------------------------------------------------------        (b) 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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.      (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.      (j) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (k) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of -5- --------------------------------------------------------------------------------   Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (l) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.      (m) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. -6- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                       BOOKHAM, INC.                           By:                                   Name:                 Title:                                         [Participant Name]                           Address:                                                               -7- --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. -8- --------------------------------------------------------------------------------   EXHIBIT B Bookham, Inc. Joint Escrow Instructions [                    ], 20[                    ] [                    ] Bookham, Inc. 2584 Junction Avenue San Jose, CA 95134 Dear [                    ]:      As Escrow Agent for Bookham, Inc., a Delaware corporation, and its successors in interest under the Restricted Stock Agreement (the “Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached (the “Company”), and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions: (a) Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you. (b) Forfeiture of Shares. Upon any forfeiture of Shares to the Company pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company. (c) Sale of Shares upon Vesting. Upon vesting of any Shares pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of such number of vested Shares as may be required to be sold to satisfy the Company’s minimum statutory withholding obligations as further described in Section 3(a) of the Agreement, (ii) to fill in on such form or forms the number of Shares being sold, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be sold, to the Company. -9- --------------------------------------------------------------------------------   (d) Withdrawal. The Holder shall have the right to withdraw from this escrow any Shares which have vested pursuant to the terms of the Agreement. (e) Duties of Escrow Agent. (i) Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. (ii) 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 of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. (iii) You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, 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. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, 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. (iv) You shall not be liable in any respect on account of the identity, authority 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. (v) 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 and may rely upon the advice of such counsel. (vi) Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be [                    ] of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as [                    ] shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder. (vii) 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. -10- --------------------------------------------------------------------------------   (viii) It is understood and agreed that if you believe a dispute has arisen 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 dispute 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. (ix) These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you. (x) The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 5(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct. (f) Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, 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:   Notices to the Company shall be sent to the address set forth in the salutation hereto, Attn: Company Secretary                       HOLDER:   Notices to Holder shall be sent to the address set forth below Holder’s signature below.                       ESCROW AGENT:   Notices to the Escrow Agent shall be sent to the address set forth in the salutation hereto.     (g) Miscellaneous. (i) By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement. (ii) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. -11- --------------------------------------------------------------------------------                         Very truly yours,                       BOOKHAM, INC.                       By:                         Title:                                       HOLDER:                                 (Signature)                                 Print Name                       Address:                                                                     Date Signed:               ESCROW AGENT:                                         -12- --------------------------------------------------------------------------------   EXHIBIT C (STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)      FOR VALUE RECEIVED, I hereby sell, assign and transfer unto                                          (                    ) shares of Common Stock, $0.01 par value per share, of Bookham, Inc. (the “Corporation”) standing in my name on the books of the Corporation represented by Certificate(s) Number                      herewith, and do hereby irrevocably constitute and appoint                                          attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.                   Dated:                                                    IN PRESENCE OF                                                                                                                                                        NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration, enlargement, or any change whatever and must be guaranteed by a commercial bank, trust company or member firm of the Boston, New York or Midwest Stock Exchange. -13- --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date], between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of Shares. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of shares issued] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Company will pay the purchase price of $0.01 per Share on behalf of the Participant. The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement. 2. Vesting. Subject always to Section 2(h) of this Agreement, [one-half] of the Shares shall vest in accordance with the provisions of Section 2(a) of this Agreement, [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(b) of this Agreement and [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(c) of this Agreement. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the Shares shall automatically be forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) fair market value per Share, as determined by the Company’s Board of Directors (the “Fair Market Value per Share”). The aggregate amount to be paid for by the Company to the Participant upon forfeiture of the Shares shall be referred to herein as the “Forfeiture Amount”.      (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], any Unvested Shares (as defined below) shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.      “Unvested Shares” means [one-half] of the total number of Shares multiplied by the Applicable Percentage at the time such Shares are forfeited. The “Applicable Percentage” shall be [(i) 100% during the period ending [                    ], 20[___], (ii) 75% less 2.083% for each month   --------------------------------------------------------------------------------   of employment completed by the Participant with the Company from and after [                    ], 20[___], and (iii) zero on or after [                    ], 20[___]].      (b) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than zero for two successive quarters; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[___] that the Company has generated the earnings contemplated by this Section 2(b) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], such Shares shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.]      (c) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than eight percent (8%) of revenues for two successive quarters after the date hereof; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[___] that the Company has generated the earnings contemplated by this Section 2(c) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], such Shares shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.]      (d) In the event that the Participant’s employment with the Company is terminated by reason of the Participant’s death or disability prior to any of the Shares vesting in accordance with the provisions of Sections 2(a), (b) and (c), all of the unvested Shares shall be forfeited immediately and automatically in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share. For this purpose, “disability” shall mean the inability of the Participant, due to a medical reason, to carry out his duties as an employee of the Company for a period of six consecutive months.      (e) Notwithstanding anything herein to the contrary apart from Section 2(h), upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the -2- --------------------------------------------------------------------------------   Shares subject to vesting in accordance with Section 2(a) shall accelerate and vest in full and the performance conditions contained in Sections 2(b) and 2(c) shall be deemed to be satisfied.      (f) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company, or any successor to the Company.      (g) The Forfeiture Amount shall be payable in cash (by check).      (h) Notwithstanding anything to the contrary herein, no vesting shall occur with respect to the Shares unless and until the Participant has executed a Joint Election with the Company (or an affiliate thereof), which Joint Election shall be made available to the Participant for execution as soon as practicable following the approval of the Joint Election by HM Revenue & Customs. Once a Joint Election has been validly executed by the Participant and the Company, vesting shall be in accordance with the other provisions of this Agreement and as from the relevant dates. The Joint Election shall be delivered to the Secretary of the Company. As used herein, “Joint Election” means an election (in the form set out in Exhibit D) to the effect that the Participant will become liable, so far as permissible by law, for the whole of any secondary Class 1 national insurance contributions which may arise in connection with the Shares. 3. Automatic Sale Upon Vesting.      (a) Upon any reduction in the Applicable Percentage, the Company shall sell, or arrange for the sale of, such number of the Shares no longer subject to forfeiture under Section 2 as a result of such reduction in the Applicable Percentage as is sufficient to generate net proceeds sufficient to satisfy any federal, national, foreign, state or local taxes of any kind (including national insurance and other social security contributions) required by law to be withheld by the Company or any affiliate, or which the Participant has elected or agreed to bear, as a result of the reduction in the Applicable Percentage, and the Company shall retain such net proceeds in satisfaction of such tax and social security obligations.      (b) The Participant hereby appoints the General Counsel his attorney in fact to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.      (c) The Participant represents to the Company that, as of the date hereof, he is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act. -3- --------------------------------------------------------------------------------   4. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement. 5. Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit B. The Joint Escrow Instructions shall be delivered to the Assistant Secretary of the Company, as escrow agent thereunder. The Participant shall deliver to such escrow agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit C, and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by such escrow agent pursuant to the terms of such Joint Escrow Instructions. 6. Restrictive Legends.      All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other restrictions that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.” -4- --------------------------------------------------------------------------------   7. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 8. Withholding Taxes.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, national, foreign, state or local taxes of any kind (including national insurance and other social security contributions) required by law to be withheld, or which the Participant has elected or agreed to bear, with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, national, foreign, state and local and social security tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax and national insurance liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 9. Miscellaneous.      (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by satisfaction of the performance conditions and continuing service as an employee at the will of the Company (not through the act of being hired or being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee for the vesting period, for any period, or at all.      (b) No Rights to Further Issuance, etc. The issuance of shares under the Plan is made at the discretion of the Board and the Plan may be suspended or terminated by the Company at any time. The issuance of shares in one year or at one time does not in any way entitle the Participant to an issuance of shares in the future. The Plan is wholly discretionary and is not to be considered part of the Participant’s normal or expected compensation subject to severance, resignation, redundancy or similar compensation. The value of the Shares is an extraordinary item of compensation which is outside the scope of the Participant’s employment contract and/or terms of office. The rights and obligations of the Participant under the terms of his office or employment with the Company or any affiliate of the Company shall not be affected by his participation in the Plan or any right which he may have to participate therein or the issuance of the Shares, and the Participant hereby waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any such company for any reasons whatsoever (whether lawful or unlawful and including, without prejudice to the generality of the foregoing, in circumstances giving rise to a claim for wrongful dismissal) -5- --------------------------------------------------------------------------------   insofar as those rights arise or may arise from his ceasing to have rights under this Agreement or the Plan as a result of such termination, or from the loss or diminution in value of such rights or entitlements.      (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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (d) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.      (f) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (g) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (h) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (i) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (j) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.      (k) Data Protection. The Participant agrees to the receipt, holding and processing of information in connection with the issuance, vesting and taxation of the Shares and the general administration of this Agreement and the Plan by the Company or any affiliate of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose. -6- --------------------------------------------------------------------------------        (l) Third Party Rights. The UK Contracts (Rights of Third Parties) Act 1999 shall not apply to this Agreement and no person other than parties hereto shall have any rights under it nor shall it be enforceable under that Act by any person other than the parties to it.      (m) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (n) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (o) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.      (p) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. -7- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.             BOOKHAM, INC.       By:           Name:           Title:                                     [Participant Name]                       Address:                                                   -8- --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. -9- --------------------------------------------------------------------------------   EXHIBIT B Bookham, Inc. Joint Escrow Instructions [                    ], 200[_] [                    ] Bookham, Inc. 2584 Junction Avenue San Jose, CA 95134 Dear [                    ]:      As Escrow Agent for Bookham, Inc., a Delaware corporation, and its successors in interest under the Restricted Stock Agreement (the “Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached (the “Company”), and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions: (a) Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you. (b) Forfeiture of Shares. Upon any forfeiture of Shares to the Company pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company. (c) Sale of Shares upon Vesting. Upon vesting of any Shares pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of such number of vested Shares as may be required to be sold to satisfy the Company’s minimum statutory withholding obligations as further described in Section 3(a) of the Agreement, (ii) to fill in on such form or forms the number of Shares being sold, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be sold, to the Company. -10- --------------------------------------------------------------------------------   (d) Withdrawal. The Holder shall have the right to withdraw from this escrow any Shares which have vested pursuant to the terms of the Agreement. (e) Duties of Escrow Agent. (i) Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. (ii) 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 of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. (iii) You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, 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. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, 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. (iv) You shall not be liable in any respect on account of the identity, authority 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. (v) 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 and may rely upon the advice of such counsel. (vi) Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be Assistant Secretary of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as Assistant Secretary shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder. (vii) 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. -11- --------------------------------------------------------------------------------   (viii) It is understood and agreed that if you believe a dispute has arisen 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 dispute 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. (ix) These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you. (x) The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 5(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct. (f) Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, 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:   Notices to the Company shall be sent to the address set forth in the salutation hereto, Attn: Company Secretary                       HOLDER:   Notices to Holder shall be sent to the address set forth below Holder’s signature below.                       ESCROW AGENT:   Notices to the Escrow Agent shall be sent to the address set forth in the salutation hereto.     (g) Miscellaneous. (i) By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement. (ii) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. -12- --------------------------------------------------------------------------------                     Very truly yours,                   BOOKHAM, INC.                   By:             Title:                           HOLDER:                                 (Signature)                                     Print Name                   Address:                                                             Date Signed:                           ESCROW AGENT:                                                     -13- --------------------------------------------------------------------------------   EXHIBIT C (STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)      FOR VALUE RECEIVED, I hereby sell, assign and transfer unto                                          (                     ) shares of Common Stock, $0.01 par value per share, of Bookham, Inc. (the “Corporation”) standing in my name on the books of the Corporation represented by Certificate(s) Number                      herewith, and do hereby irrevocably constitute and appoint                                          attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.               Dated:                                                        IN PRESENCE OF                                            NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration, enlargement, or any change whatever and must be guaranteed by a commercial bank, trust company or member firm of the Boston, New York or Midwest Stock Exchange. - 14 - --------------------------------------------------------------------------------   EXHIBIT D (NATIONAL INSURANCE JOINT ELECTION) - 15 - --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date], between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of Shares. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of shares issued] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Company will pay the purchase price of $0.01 per Share on behalf of the Participant. The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement. 2. Vesting. Subject always to Section 2(h) of this Agreement, [one-half] of the Shares shall vest in accordance with the provisions of Section 2(a) of this Agreement, [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(b) of this Agreement and [one quarter] of the Shares shall vest in accordance with the provisions of Section 2(c) of this Agreement. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the Shares shall automatically be forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) fair market value per Share, as determined by the Company’s Board of Directors (the “Fair Market Value per Share”). The aggregate amount to be paid for by the Company to the Participant upon forfeiture of the Shares shall be referred to herein as the “Forfeiture Amount”.      (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], any Unvested Shares (as defined below) shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.      “Unvested Shares” means [one-half] of the total number of Shares multiplied by the Applicable Percentage at the time such Shares are forfeited. The “Applicable Percentage” shall be [(i) 100% during the period ending [                    ], 20[___], (ii) 75% less 2.083% for each month of employment completed by the Participant with the Company from and after [                    ], 20[___], and (iii) zero on or after [                    ], 20[___]].   --------------------------------------------------------------------------------        (b) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than zero for two successive quarters; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[___] that the Company has generated the earnings contemplated by this Section 2(b) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], such Shares shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.]      (c) [One-quarter of the Shares shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than eight percent (8%) of revenues for two successive quarters after the date hereof; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the date of such determination. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[___] that the Company has generated the earnings contemplated by this Section 2(c) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], such Shares shall be automatically forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share.]      (d) In the event that the Participant’s employment with the Company is terminated by reason of the Participant’s death or disability prior to any of the Shares vesting in accordance with the provisions of Sections 2(a), (b) and (c), all of the unvested Shares shall be forfeited immediately and automatically in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share. For this purpose, “disability” shall mean the inability of the Participant, due to a medical reason, to carry out his duties as an employee of the Company for a period of six consecutive months.      (e) Notwithstanding anything herein to the contrary apart from Section 2(h), upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the Shares subject to vesting in accordance with Section 2(a) shall accelerate and vest in full and the performance conditions contained in Sections 2(b) and 2(c) shall be deemed to be satisfied. - 2 - --------------------------------------------------------------------------------        (f) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company, or any successor to the Company.      (g) The Forfeiture Amount shall be payable in cash (by check).                (a) Notwithstanding anything to the contrary herein, no vesting shall occur with respect to the Shares unless and until the Participant has executed a Joint Election with the Company (or an affiliate thereof), which Joint Election shall be made available to the Participant for execution as soon as practicable following the approval of the Joint Election by HM Revenue & Customs. Once a Joint Election has been validly executed by the Participant and the Company, vesting shall be in accordance with the other provisions of this Agreement and as from the relevant dates. The Joint Election shall be delivered to the Secretary of the Company. As used herein, “Joint Election” means an election (in the form set out in Exhibit D) to the effect that the Participant will become liable, so far as permissible by law, for the whole of any secondary Class 1 national insurance contributions which may arise in connection with the Shares. 3. Automatic Sale Upon Vesting.      (a) Upon any reduction in the Applicable Percentage, the Company shall sell, or arrange for the sale of, such number of the Shares no longer subject to forfeiture under Section 2 as a result of such reduction in the Applicable Percentage as is sufficient to generate net proceeds sufficient to satisfy any federal, national, foreign, state or local taxes of any kind (including national insurance and other social security contributions) required by law to be withheld by the Company or any affiliate, or which the Participant has elected or agreed to bear, as a result of the reduction in the Applicable Percentage, and the Company shall retain such net proceeds in satisfaction of such tax and social security obligations.      (b) The Participant hereby appoints the General Counsel his attorney in fact to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.      (c) The Participant represents to the Company that, as of the date hereof, he is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act. 4. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to - 3 - --------------------------------------------------------------------------------   or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement. 5. Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit B. The Joint Escrow Instructions shall be delivered to the Assistant Secretary of the Company, as escrow agent thereunder. The Participant shall deliver to such escrow agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit C, and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by such escrow agent pursuant to the terms of such Joint Escrow Instructions. 6. Restrictive Legends.      All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other restrictions that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.” 7. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. - 4 - --------------------------------------------------------------------------------   8. Withholding Taxes; Section 83(b) Election.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, national, foreign, state or local taxes of any kind (including national insurance and other social security contributions) required by law to be withheld, or which the Participant has elected or agreed to bear, with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, national, foreign, state and local tax and social security consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax and national insurance liability that may arise as a result of this investment or the transactions contemplated by this Agreement.                THE PARTICIPANT AGREES NOT TO FILE AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE WITH RESPECT TO THE ISSUANCE OF THE SHARES. 9. Miscellaneous.      (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by satisfaction of the performance conditions and continuing service as an employee at the will of the Company (not through the act of being hired or being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee for the vesting period, for any period, or at all.      (b) No Rights to Further Issuance, etc. The issuance of shares under the Plan is made at the discretion of the Board and the Plan may be suspended or terminated by the Company at any time. The issuance of shares in one year or at one time does not in any way entitle the Participant to an issuance of shares in the future. The Plan is wholly discretionary and is not to be considered part of the Participant’s normal or expected compensation subject to severance, resignation, redundancy or similar compensation. The value of the Shares is an extraordinary item of compensation which is outside the scope of the Participant’s employment contract and/or terms of office. The rights and obligations of the Participant under the terms of his office or employment with the Company or any affiliate of the Company shall not be affected by his participation in the Plan or any right which he may have to participate therein or the issuance of the Shares, and the Participant hereby waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any such company for any reasons whatsoever (whether lawful or unlawful and including, without prejudice to the generality of the foregoing, in circumstances giving rise to a claim for wrongful dismissal) insofar as those rights arise or may arise from his ceasing to have rights under this Agreement or - 5 - --------------------------------------------------------------------------------   the Plan as a result of such termination, or from the loss or diminution in value of such rights or entitlements.      (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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (d) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.      (f) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (g) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (h) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (i) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (j) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.      (k) Data Protection. The Participant agrees to the receipt, holding and processing of information in connection with the issuance, vesting and taxation of the Shares and the general administration of this Agreement and the Plan by the Company or any affiliate of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose. - 6 - --------------------------------------------------------------------------------        (l) Third Party Rights. The UK Contracts (Rights of Third Parties) Act 1999 shall not apply to this Agreement and no person other than parties hereto shall have any rights under it nor shall it be enforceable under that Act by any person other than the parties to it.      (m) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (n) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (o) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.      (p) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. - 7 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                   BOOKHAM, INC.                       By:                   Name: Title:                                 [Participant Name]                       Address:                                     - 8 - --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. - 9 - --------------------------------------------------------------------------------   EXHIBIT B Bookham, Inc. Joint Escrow Instructions [                    ], 20[___] [                    ] Bookham, Inc. 2584 Junction Avenue San Jose, CA 95134 Dear [                    ]:      As Escrow Agent for Bookham, Inc., a Delaware corporation, and its successors in interest under the Restricted Stock Agreement (the “Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached (the “Company”), and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions: (a) Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you. (b) Forfeiture of Shares. Upon any forfeiture of Shares to the Company pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company. (c) Sale of Shares upon Vesting. Upon vesting of any Shares pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of such number of vested Shares as may be required to be sold to satisfy the Company’s minimum statutory withholding obligations as further described in Section 3(a) of the Agreement, (ii) to fill in on such form or forms the number of Shares being sold, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be sold, to the Company. - 10 - --------------------------------------------------------------------------------   (d) Withdrawal. The Holder shall have the right to withdraw from this escrow any Shares which have vested pursuant to the terms of the Agreement. (e) Duties of Escrow Agent. (i) Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. (ii) 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 of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. (iii) You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, 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. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, 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. (iv) You shall not be liable in any respect on account of the identity, authority 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. (v) 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 and may rely upon the advice of such counsel. (vi) Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be Assistant Secretary of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as Assistant Secretary shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder. (vii) 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. - 11 - --------------------------------------------------------------------------------   (viii) It is understood and agreed that if you believe a dispute has arisen 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 dispute 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. (ix) These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you. (x) The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 5(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct. (f) Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, 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:   Notices to the Company shall be sent to the address set forth in the salutation hereto, Attn: Company Secretary               HOLDER:   Notices to Holder shall be sent to the address set forth below Holder’s signature below.               ESCROW AGENT:   Notices to the Escrow Agent shall be sent to the address set forth in the salutation hereto. (g) Miscellaneous. (i) By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement. (ii) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. - 12 - --------------------------------------------------------------------------------                     Very truly yours,                       BOOKHAM, INC.                       By:             Title:                                         HOLDER:                                     (Signature)                                 Print Name                     Address:                                           Date Signed:                       ESCROW AGENT:                                                              - 13 - --------------------------------------------------------------------------------   EXHIBIT C (STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)      FOR VALUE RECEIVED , I hereby sell, assign and transfer unto                                          (                    ) shares of Common Stock, $0.01 par value per share, of Bookham, Inc. (the “Corporation”) standing in my name on the books of the Corporation represented by Certificate(s) Number                      herewith, and do hereby irrevocably constitute and appoint                                          attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.                   Dated:                                     IN PRESENCE OF                                            NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration, enlargement, or any change whatever and must be guaranteed by a commercial bank, trust company or member firm of the Boston, New York or Midwest Stock Exchange. -14- --------------------------------------------------------------------------------   EXHIBIT D (NATIONAL INSURANCE JOINT ELECTION) -15- --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Unit Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date], between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of RSUs. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of units issued] restricted stock units (the “RSUs”), each representing the right to receive one share of common stock, $0.01 par value, of the Company (“Common Stock”). The shares of Common Stock that are issuable upon vesting of the RSUs are referred to in this Agreement as “Shares”. The Participant agrees that the RSUs shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement. 2. Vesting. [One-half] of the RSUs shall vest in accordance with the provisions of Section 2(a) of this Agreement, [one quarter] of the RSUs shall vest in accordance with the provisions of Section 2(b) of this Agreement and [one quarter] of the RSUs shall vest in accordance with the provisions of Section 2(c) of this Agreement. Notwithstanding anything herein to the contrary, if the RSUs do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the RSUs shall automatically be forfeited to the Company.      (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], any Unvested RSUs (as defined below) shall be automatically forfeited to the Company.      “Unvested RSUs” means [one-half] of the total number of RSUs multiplied by the Applicable Percentage at the time such RSUs are forfeited. The “Applicable Percentage” shall be [(i) 100% during the period ending [                    ], 20[___], (ii) 75% less 2.083% for each month of employment completed by the Participant with the Company from and after [                    ], 20[___], and (iii) zero on or after [                    ], 20[___]].      (b) [One-quarter of the RSUs shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from   --------------------------------------------------------------------------------   stock compensation) that are cumulatively greater than zero for two successive quarters; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the last day of such second consecutive quarter. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[    ] that the Company has generated the earnings contemplated by this Section 2(b) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[    ], such RSUs shall be automatically forfeited to the Company.]      (c) [One-quarter of the RSUs shall vest immediately if prior to [                    ], 20[___] the Compensation Committee of the Board of Directors of the Company determines that, after the date hereof the Company generated earnings (as such amount is reported on the Company’s consolidated statement of operations) before interest, taxes, depreciation and amortization (excluding restructuring charges, one-time items and the non-cash compensation expense from stock compensation) that are cumulatively greater than eight percent (8%) of revenues for two successive quarters after the date hereof; provided, however, the Participant must be continuously employed by the Company from the date hereof up to and including the last day of such second consecutive quarter. In the event that the Compensation Committee of the Board of Directors of the Company does not make the determination prior to [                    ], 20[___] that the Company has generated the earnings contemplated by this Section 2(c) or the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to [                    ], 20[___], such RSUs shall be automatically forfeited to the Company.]      (d) In the event that the Participant’s employment with the Company is terminated by reason of the Participant’s death or disability prior to any of the RSUs vesting in accordance with the provisions of Sections 2(a), (b) and (c), all of the unvested RSUs shall be forfeited immediately and automatically. For this purpose, “disability” shall mean the inability of the Participant, due to a medical reason, to carry out his duties as an employee of the Company for a period of six consecutive months.      (e) Notwithstanding anything herein to the contrary, upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the RSUs subject to vesting in accordance with Section 2(a) shall accelerate and vest in full and the performance conditions contained in Sections 2(b) and 2(c) shall be deemed to be satisfied.      (f) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company, or any successor to the Company. 3. Automatic Sale Upon Vesting.      (a) Upon any vesting of RSUs pursuant to Section 2 hereof, the Company shall sell, or arrange for the sale of, such number of the Shares underlying the RSUs no longer subject to forfeiture under Section 2 as is sufficient to generate net proceeds sufficient to satisfy the Company’s minimum statutory withholding obligations with respect to the income recognized by the Participant upon the lapse of the forfeiture provisions (based on minimum statutory -2- --------------------------------------------------------------------------------   withholding rates for all tax purposes, including payroll and social security taxes, that are applicable to such income), and the Company shall retain such net proceeds in satisfaction of such tax withholding obligations.      (b) The Participant hereby appoints the General Counsel his attorney in fact to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.      (c) The Participant represents to the Company that, as of the date hereof, he is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act. 4. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any RSUs, or any interest therein, until such RSUs have vested, except that the Participant may transfer such RSUs (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such RSUs shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (b) The Company shall not be required (i) to transfer on its books any of the RSUs which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such RSUs or to pay dividends to any transferee to whom such RSUs have been transferred in violation of any of the provisions of this Agreement. 5. Distribution of Shares.      (a) Subject to Section 3 of this Agreement, the Company will distribute to the Participant (or to the Participant’s estate in the event that his or her death occurs after a vesting date but before distribution of the corresponding Shares), as soon as administratively practicable after each vesting date, the Shares represented by RSUs that vested on such vesting date. -3- --------------------------------------------------------------------------------        (b) The Company shall not be obligated to issue to the Participant the Shares upon the vesting of any RSU (or otherwise) unless the issuance and delivery of such Shares shall comply with all relevant provisions of law and other legal requirements including, without limitation, any applicable federal or state securities laws and the requirements of any stock exchange upon which shares of Common Stock may then be listed. 6. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 7. Withholding Taxes.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local, provincial or other taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local, provincial and other tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 8. Miscellaneous.      (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the RSUs pursuant to Section 2 hereof is earned only by satisfaction of the performance conditions and continuing service as an employee at the will of the Company (not through the act of being hired or being granted the RSUs hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee for the vesting period, for any period, or at all.      (b) 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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company. -4- --------------------------------------------------------------------------------        (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.      (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.      (j) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (k) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (l) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares underlying RSUs that have ceased to be vested pursuant to Section 2. -5- --------------------------------------------------------------------------------        (m) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. -6- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                       BOOKHAM, INC.                           By:                                   Name:                 Title:                                         [Participant Name]                           Address:                                                               -7- --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. -8- --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date], between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of Shares. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of shares issued] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 3 of this Agreement. 2. Vesting.      (a) In the event that the Participant ceases to be a director of the Company, for any reason or no reason, with or without cause, prior to the applicable Vesting Date (as defined below), any Unvested Shares (as defined below) shall be forfeited immediately and automatically to the Company. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the Shares shall automatically be forfeited to the Company.      (b) “Unvested Shares” means the total number of Shares multiplied by the Applicable Percentage at the time the Shares are forfeited. Except as provided in the Plan or in paragraph (c) of this Section 2, the “Applicable Percentage” shall be (i) 100% during the period ending on the date immediately preceding the one-year anniversary of the Grant Date, (ii) 50% during the period beginning on the one-year anniversary of the Grant Date and ending on the date immediately preceding the two-year anniversary of the Grant Date, and (iii) 0% on or after the two-year anniversary of the Grant Date (each, a “Vesting Date”), provided that the Participant is serving as a director of the Company on the applicable Vesting Date.      (c) Notwithstanding anything herein to the contrary, upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the Shares subject to vesting in accordance with Section 2(a) shall accelerate and vest in full.   --------------------------------------------------------------------------------   3. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (a) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement. 4. Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit B. The Joint Escrow Instructions shall be delivered to the Assistant Secretary of the Company, as escrow agent thereunder. The Participant shall deliver to such escrow agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit C, and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by such escrow agent pursuant to the terms of such Joint Escrow Instructions. 5. Restrictive Legends.      All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other restrictions that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.” -2- --------------------------------------------------------------------------------   6. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 7. Withholding Taxes; Section 83(b) Election.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or other taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and other tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.           THE PARTICIPANT AGREES NOT TO FILE AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE WITH RESPECT TO THE ISSUANCE OF THE SHARES. 8. Miscellaneous.      (a) No Rights to Service. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as a director of the Company (not through the act of being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a director for the vesting period, for any period, or at all.      (b) 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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement. -3- --------------------------------------------------------------------------------        (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.      (j) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (k) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (l) Delivery of Certificates. The Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.      (m) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. -4- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                       BOOKHAM, INC.                           By:                                   Name:                 Title:                                         [Participant Name]                           Address:                                                               -5- --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. -6- --------------------------------------------------------------------------------   EXHIBIT B Bookham, Inc. Joint Escrow Instructions [                    ], 20[___] [                                        ] Bookham, Inc. 2584 Junction Avenue San Jose, CA 95134 Dear [                    ]:      As Escrow Agent for Bookham, Inc., a Delaware corporation, and its successors in interest under the Restricted Stock Agreement (the “Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached (the “Company”), and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions: (a) Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his or her attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you. (b) Forfeiture of Shares. Upon any forfeiture of Shares to the Company pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company. (c) Withdrawal. The Holder shall have the right to withdraw from this escrow any Shares which have vested pursuant to the terms of the Agreement. (d) Duties of Escrow Agent. (i) Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. -7- --------------------------------------------------------------------------------   (ii) 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 of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. (iii) You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, 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. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, 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. (iv) You shall not be liable in any respect on account of the identity, authority 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. (v) 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 and may rely upon the advice of such counsel. (vi) Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be Assistant Secretary of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as Assistant Secretary shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder. (vii) 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. (viii) It is understood and agreed that if you believe a dispute has arisen 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 dispute 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. -8- --------------------------------------------------------------------------------   (ix) These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you. (x) The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 4(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct. (e) Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, 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:   Notices to the Company shall be sent to             the address set forth in the salutation             hereto, Attn: Company Secretary                       HOLDER:   Notices to Holder shall be sent to the             address set forth below Holder’s             signature below.                       ESCROW AGENT:   Notices to the Escrow Agent shall be sent             to the address set forth in the salutation             hereto.     (f) Miscellaneous. (i) By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement. (ii) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. -9- --------------------------------------------------------------------------------                     Very truly yours,                   BOOKHAM, INC.                   By:                         Title:                                       HOLDER:                                 (Signature)                                 Print Name                                             Address:                                                                                         Date Signed:                                 ESCROW AGENT:                                                                                                      -10- --------------------------------------------------------------------------------   EXHIBIT C (STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)      FOR VALUE RECEIVED , I hereby sell, assign and transfer unto                                          (                    ) shares of Common Stock, $0.01 par value per share, of Bookham, Inc. (the “Corporation”) standing in my name on the books of the Corporation represented by Certificate(s) Number                      herewith, and do hereby irrevocably constitute and appoint                                          attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.                   Dated:                                     IN PRESENCE OF                                            NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration, enlargement, or any change whatever and must be guaranteed by a commercial bank, trust company or member firm of the Boston, New York or Midwest Stock Exchange. -11- --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date] (the “Grant Date”), between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of Shares. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of shares issued] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Company will pay the purchase price of $0.01 per Share on behalf of the Participant. The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 3 of this Agreement. 2. Vesting.      (a) In the event that the Participant ceases to be a director of the Company, for any reason or no reason, with or without cause, prior to the applicable Vesting Date (as defined below), any Unvested Shares (as defined below) shall be forfeited immediately and automatically to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) fair market value per Share, as determined by the Company’s Board of Directors (the “Fair Market Value per Share”). Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the Shares shall automatically be forfeited to the Company in exchange for the lower of: (i) $0.01 per Share, or (ii) Fair Market Value per Share. The aggregate amount to be paid for by the Company to the Participant upon forfeiture of the Shares shall be referred to herein as the “Forfeiture Amount”.      (b) “Unvested Shares” means the total number of Shares multiplied by the Applicable Percentage at the time the Shares are forfeited. Except as provided in the Plan or in paragraph (c) of this Section 2, the “Applicable Percentage” shall be (i) 100% during the period ending on the date immediately preceding the one-year anniversary of the Grant Date, (ii) 50% during the period beginning on the one-year anniversary of the Grant Date and ending on the date immediately preceding the two-year anniversary of the Grant Date, and (iii) 0% on or after the two-year anniversary of the Grant Date (each, a “Vesting Date”), provided that the Participant is serving as a director of the Company on the applicable Vesting Date.      (c) Notwithstanding anything herein to the contrary, upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the Shares subject to vesting in accordance with Section 2(a) shall accelerate and vest in full. --------------------------------------------------------------------------------        (d) The Forfeiture Amount shall be payable in cash (by check).      (e) Notwithstanding anything to the contrary herein, no vesting shall occur with respect to the Shares unless and until the Participant has executed a Joint Election with the Company (or an affiliate thereof), which Joint Election shall be made available to the Participant for execution as soon as practicable following the approval of the Joint Election by HM Revenue & Customs. Once a Joint Election has been validly executed by the Participant and the Company, vesting shall be in accordance with the other provisions of this Agreement and as from the relevant dates. The Joint Election shall be delivered to the Secretary of the Company. As used herein, “Joint Election” means an election (in the form set out in Exhibit D) to the effect that the Participant will become liable, so far as permissible by law, for the whole of any secondary Class 1 national insurance contributions which may arise in connection with the Shares. 3. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement. 4. Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit B. The Joint Escrow Instructions shall be delivered to the Assistant Secretary of the Company, as escrow agent thereunder. The Participant shall deliver to such escrow agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit C, and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by such escrow agent pursuant to the terms of such Joint Escrow Instructions. - 2 - --------------------------------------------------------------------------------   5. Restrictive Legends.      All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other restrictions that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.” 6. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 7. Withholding Taxes.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, national, foreign, state or local taxes of any kind (including national insurance and other social security contributions) required by law to be withheld, or which the Participant has elected or agreed to bear, with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, national, foreign, state and local tax and social security consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax and national insurance liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 8. Miscellaneous.      (a) No Rights to Service. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as a director of the Company (not through the act of being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a director for the vesting period, for any period, or at all.      (b) No Rights to Further Issuance, etc. The issuance of shares under the Plan is made at the discretion of the Board and the Plan may be suspended or terminated by the Company at any time. The issuance of shares in one year or at one time does not in any way entitle the Participant to an issuance of shares in the future. The Plan is wholly discretionary and is not to be considered part of the Participant’s normal or expected compensation subject to severance, resignation, redundancy or similar compensation. The value of the Shares is an extraordinary - 3 - --------------------------------------------------------------------------------   item of compensation which is outside the scope of the Participant’s employment contract and/or terms of office. The rights and obligations of the Participant under the terms of his office or employment with the Company or any affiliate of the Company shall not be affected by his participation in the Plan or any right which he may have to participate therein or the issuance of the Shares, and the Participant hereby waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any such company for any reasons whatsoever (whether lawful or unlawful and including, without prejudice to the generality of the foregoing, in circumstances giving rise to a claim for wrongful dismissal) insofar as those rights arise or may arise from his ceasing to have rights under this Agreement or the Plan as a result of such termination, or from the loss or diminution in value of such rights or entitlements.      (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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (d) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement.      (f) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (g) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (h) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (i) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (j) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws. - 4 - --------------------------------------------------------------------------------        (k) Data Protection. The Participant agrees to the receipt, holding and processing of information in connection with the issuance, vesting and taxation of the Shares and the general administration of this Agreement and the Plan by the Company or any affiliate of the Company and any of their advisers or agents and to the transmission of such information outside of the European Economic Area for this purpose.      (l) Third Party Rights. The UK Contracts (Rights of Third Parties) Act 1999 shall not apply to this Agreement and no person other than parties hereto shall have any rights under it nor shall it be enforceable under that Act by any person other than the parties to it.      (m) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (n) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (o) Delivery of Certificates. The Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.      (p) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. - 5 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.               BOOKHAM, INC.               By:                     Name:         Title:                     [Participant Name]               Address:                                 - 6 - --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. - 7 - --------------------------------------------------------------------------------   EXHIBIT B Bookham, Inc. Joint Escrow Instructions [                    ], 20[___] [                                        ] Bookham, Inc. 2584 Junction Avenue San Jose, CA 95134 Dear [                    ]:      As Escrow Agent for Bookham, Inc., a Delaware corporation, and its successors in interest under the Restricted Stock Agreement (the “Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached (the “Company”), and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions: (a) Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his or her attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you. (b) Forfeiture of Shares. Upon any forfeiture of Shares to the Company pursuant to the terms of the Agreement, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company. (c) Withdrawal. The Holder shall have the right to withdraw from this escrow any Shares which have vested pursuant to the terms of the Agreement. (d) Duties of Escrow Agent. (i) Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. (ii) 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 - 8 - --------------------------------------------------------------------------------   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 of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. (iii) You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, 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. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, 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. (iv) You shall not be liable in any respect on account of the identity, authority 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. (v) 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 and may rely upon the advice of such counsel. (vi) Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be Assistant Secretary of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as Assistant Secretary shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder. (vii) 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. (viii) It is understood and agreed that if you believe a dispute has arisen 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 dispute 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. (ix) These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you. - 9 - --------------------------------------------------------------------------------        (x) The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 4(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct.      (e) Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, 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:   Notices to the Company shall be sent to the address set forth in the salutation hereto, Attn: Company Secretary               HOLDER:   Notices to Holder shall be sent to the address set forth below Holder’s signature below.               ESCROW AGENT:   Notices to the Escrow Agent shall be sent to the address set forth in the salutation hereto.     (f) Miscellaneous. (i) By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement. (ii) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.               Very truly yours,               BOOKHAM, INC.               By:                 Title:                         HOLDER:                           (Signature)                         Print Name - 10 - --------------------------------------------------------------------------------                 Address:                                                 Date Signed:               ESCROW AGENT:                   - 11 - --------------------------------------------------------------------------------   EXHIBIT C (STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)      FOR VALUE RECEIVED, I hereby sell, assign and transfer unto                                          (                    ) shares of Common Stock, $0.01 par value per share, of Bookham, Inc. (the “Corporation”) standing in my name on the books of the Corporation represented by Certificate(s) Number                      herewith, and do hereby irrevocably constitute and appoint                                          attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.               Dated:                         IN PRESENCE OF                                    NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration, enlargement, or any change whatever and must be guaranteed by a commercial bank, trust company or member firm of the Boston, New York or Midwest Stock Exchange. - 12 - --------------------------------------------------------------------------------   EXHIBIT D (NATIONAL INSURANCE JOINT ELECTION) - 13 - --------------------------------------------------------------------------------   Bookham, Inc. Restricted Stock Unit Agreement Granted Under 2004 Stock Incentive Plan      AGREEMENT made [insert date], between Bookham, Inc., a Delaware corporation (the “Company”), and [insert recipient’s name] (the “Participant”).      For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Issuance of RSUs. In consideration of services rendered to the Company by the Participant, the Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Stock Incentive Plan (the “Plan”), [insert number of units issued] restricted stock units (the “RSUs”), each representing the right to receive one share of common stock, $0.01 par value, of the Company (“Common Stock”). The shares of Common Stock that are issuable upon vesting of the RSUs are referred to in this Agreement as “Shares.” The Participant agrees that the RSUs shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 3 of this Agreement. 2. Vesting.      (a) In the event that the Participant ceases to be a director of the Company, for any reason or no reason, with or without cause, prior to the applicable Vesting Date (as defined below), any Unvested RSUs (as defined below) shall be forfeited immediately and automatically to the Company. Notwithstanding anything herein to the contrary, if the RSUs do not vest on or before the occurrence of one or more of the events set forth in this Section 2 or as otherwise provided in any other agreement with the Company or any parent or subsidiary of the Company, the RSUs shall automatically be forfeited to the Company.      (b) “Unvested RSUs” means the total number of RSUs multiplied by the Applicable Percentage at the time the RSUs are forfeited. Except as provided in the Plan or in paragraph (c) of this Section 2, the “Applicable Percentage” shall be (i) 100% during the period ending on the date immediately preceding the one-year anniversary of the Grant Date, (ii) 50% during the period beginning on the one-year anniversary of the Grant Date and ending on the date immediately preceding the two-year anniversary of the Grant Date, and (iii) 0% on or after the two-year anniversary of the Grant Date (each, a “Vesting Date”), provided that the Participant is serving as a director of the Company on the applicable Vesting Date.      (c) Notwithstanding anything herein to the contrary, upon the consummation of a Change in Control of the Company (as defined in Exhibit A), all of the RSUs subject to vesting in accordance with Section 2(a) shall accelerate and vest in full. 3. Restrictions on Transfer.      (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any RSUs, or any interest --------------------------------------------------------------------------------   therein, until such RSUs have vested, except that the Participant may transfer such RSUs (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such RSUs shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.      (b) The Company shall not be required (i) to transfer on its books any of the RSUs which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such RSUs or to pay dividends to any transferee to whom such RSUs have been transferred in violation of any of the provisions of this Agreement. 4. Distribution of Shares.      (a) The Company will distribute to the Participant (or to the Participant’s estate in the event that his or her death occurs after a vesting date but before distribution of the corresponding Shares), as soon as administratively practicable after each vesting date, the Shares represented by RSUs that vested on such vesting date.      (b) The Company shall not be obligated to issue to the Participant the Shares upon the vesting of any RSU (or otherwise) unless the issuance and delivery of such Shares shall comply with all relevant provisions of law and other legal requirements including, without limitation, any applicable federal or state securities laws and the requirements of any stock exchange upon which shares of Common Stock may then be listed. 5. Provisions of the Plan.      This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. 6. Withholding Taxes.      (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or other taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.      (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and other tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the - 2 - --------------------------------------------------------------------------------   Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 7. Miscellaneous.      (a) No Rights to Service. The Participant acknowledges and agrees that the vesting of the RSUs pursuant to Section 2 hereof is earned only by continuing service as a director of the Company (not through the act of being granted the RSUs hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a director for the vesting period, for any period, or at all.      (b) 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, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.      (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.      (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement.      (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its office at 2584 Junction Avenue, San Jose, CA 95134 (Attention: Company Secretary). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.      (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.      (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.      (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.      (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws. - 3 - --------------------------------------------------------------------------------        (j) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.      (k) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.      (l) Delivery of Certificates. The Participant may request that the Company deliver the Shares in certificated form with respect to any Shares underlying RSUs that have ceased to be vested pursuant to Section 2.      (m) No Deferral. Notwithstanding anything herein to the contrary, neither the Company nor the Participant may defer the delivery of the Shares. - 4 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.               BOOKHAM, INC.               By:                     Name:         Title:                     [Participant Name]               Address:                                 - 5 - --------------------------------------------------------------------------------   EXHIBIT A      As used herein, “Change in Control” shall mean:      (i) the sale of all or substantially all of the assets of the Company;      (ii) a merger, consolidation, reorganization, recapitalization or share exchange involving the Company with any corporation where, as a result of the transaction, the voting securities of the Company outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity including the holding company of such entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately after such transaction;      (iii) the sale, transfer or disposition of any then outstanding shares of the Company’s stock where, as a result of such sale, transfer or disposition, the existing shareholders do not continue to hold as a group stock representing more than fifty percent (50%) of the Company’s total voting securities, either directly, or indirectly; or      (iv) any change in the composition of the Board of Directors of the Company such that the Continuing Directors (as defined below) cease to constitute a majority of the Board. “Continuing Directors” shall mean those directors appointed to the Board who (a) are members of the Board of Directors on the date hereof or (b) are nominated or elected subsequent to the date hereof by at least a majority of the directors who were Continuing Directors at the time of any such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided that a director shall not be a Continuing Director where the director’s initial assumption of office occurred 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 contests by or on behalf of a person other than the Board. - 6 -

Exhibit 10.2 AMENDED AND RESTATED AGREEMENT This Amended and Restated Agreement (this “Agreement”) is entered into effective as of December 11, 2006, by and among Eastbourne Capital Management, L.L.C. (“ECM”), Black Bear Offshore Master Fund, L.P., a Cayman Islands limited partnership (“BBOM”), Black Bear Fund I, L.P., a California limited partnership (“BB I”), Black Bear Fund II, L.L.C., a California limited liability company (“BB II”), and Richard J. Barry (“Barry,” and together with ECM, BBOM, BB I and BB II, “Eastbourne”) and Telik, Inc., a Delaware corporation (the “Company”). Capitalized terms not defined herein will have the meaning given in the Rights Agreement, dated November 2, 2001, by and between the Company and Wells Fargo Bank Minnesota, N.A., replaced by Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agreement”). A. The Company and Eastbourne previously entered into that certain “standstill” Agreement dated as of May 18, 2006 (the “Prior Agreement”), and now desire to amend and restate the Prior Agreement and to accept the rights and obligations created pursuant hereto in lieu of the rights and obligations of the Prior Agreement. B. Pursuant to Section 1 of the Rights Agreement, a Person who or which, together with all Affiliates and Associates (each as defined in the Rights Agreement), becomes the Beneficial Owner of 20% or more of the issued and outstanding Common Stock of the Company is an “Acquiring Person” for purposes of the Rights Agreement. C. On May 18, 2006, the Board of Directors of the Company amended the Rights Agreement to exclude Eastbourne from the definition of an “Acquiring Person”, but only so long as Eastbourne, together with their respective Affiliates or Associates, either individually or collectively, is not the beneficial owner of 25% or more of the Common Stock of the Company then outstanding. D. As of December 11, 2006, Eastbourne had Beneficial Ownership, in the aggregate, of approximately 13,079,474 shares of the Common Stock of the Company, $0.01 par value per share (the “Common Stock”). E. Except as otherwise disclosed in the most recent Schedule 13G filed by Eastbourne, Eastbourne’s Beneficial Ownership of the Common Stock is primarily attributable to investment power exercisable by ECM with respect to shares of the Common Stock managed for its clients. F. Eastbourne has indicated to the Company that it desires to purchase additional shares of the Common Stock on behalf of its clients and itself in amounts likely to cause Eastbourne’s Beneficial Ownership to exceed 25% of the issued and outstanding shares of the Common Stock. G. The Company has determined that purchases of a limited number of additional shares of the Common Stock by Eastbourne pursuant to the terms of this Agreement would not currently be adverse or hostile to the Company or inconsistent with the purpose and intent of the Board of Directors of the Company in adopting the Rights Agreement. -------------------------------------------------------------------------------- Accordingly, in consideration of the foregoing premises and the mutual covenants, representations and warranties contained in this Agreement, Eastbourne and the Company hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows: 1. Representations and Warranties of Eastbourne. ECM, BBOM, BB I, BB II and Barry jointly and severally represent and warrant to, and agree with, the Company as follows: (a) Assuming that a report pursuant to Section 13(g) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “Exchange Act”) were required to have been filed as of December 11, 2006, Eastbourne would have reported Beneficial Ownership of an aggregate of 13,079,474 shares of the Common Stock (the “Original Shares”) consisting of approximately 24.98% of the issued and outstanding shares of the Common Stock as of such date (assuming that 52,359,329 shares of Common Stock are issued and outstanding), subject to such disclaimers of Beneficial Ownership by Eastbourne that may have been made pursuant to such Section and the rules and regulations thereunder. (b) As of the date hereof, Eastbourne’s Beneficial Ownership of the Common Stock does not exceed 25% of the issued and outstanding Common Stock, assuming that 52,359,329 shares of Common Stock are issued and outstanding. (c) Each Eastbourne entity has been provided with access to, or has received, a copy of, and is familiar with the terms of, the Rights Agreement and the Amendment to the Rights Agreement effective as of May 18, 2006 (the “First Amendment”). (d) The Original Shares were acquired (i) in the ordinary course of business solely for investment purposes, (ii) not for the purpose of, and do not have the effect of, changing or influencing the control of the Company and (iii) not in connection with or as a participant in any transaction having such purposes or effect. (e) With the exception of ECM’s other clients, and their fiduciaries, to the knowledge of ECM, BBOM, BB I, BB II and Barry, no Person other than Eastbourne is a Beneficial Owner of any of the Original Shares. (f) Any additional shares of the Common Stock purchased by ECM, BBOM, BB I, BB II or Barry or their affiliates after the date hereof (the “Additional Shares,” and together with the Original Shares, the “Eastbourne Shares”) will be acquired (i) in the ordinary course of business solely for investment purposes, (ii) not for the purpose of, or with the effect of, changing or influencing the control of the Company and (iii) not in connection with or as a participant in any transaction having such purpose or effect. (g) The Company has not induced, and is not inducing, Eastbourne or their affiliates, or the clients of ECM, to purchase any additional shares of the Common Stock and has not made and is not making any representation to Eastbourne or the clients of ECM as to the value of the Common Stock, the suitability of the Common Stock for investment by Eastbourne or the clients of ECM, or the past or future results of the Company’s business and operations. -------------------------------------------------------------------------------- (h) ECM has sole voting and investment control over all of the Original Shares and will have sole voting and investment control over any Additional Shares. 2. Voting of Shares. ECM shall vote the Original Shares in the manner in which the Board of Directors of the Company has recommended generally in any proxy or consent solicitation to the stockholders of the Company, subject to ECM’s fiduciary duty to its clients. ECM shall vote the Additional Shares in the manner in which the Board of Directors of the Company has recommended generally in any proxy or consent solicitation to the stockholders of the Company. 3. Sale of Shares. In the event that, within five (5) years after the date hereof, any of ECM, BBOM, BB I, BB II or Barry proposes to sell in a bona fide transaction any shares of the Common Stock (other than (i) a sale in a “broker’s transaction” or in a transaction directly with a “market maker,” in either case as defined in and in a manner of sale consistent with paragraphs (f) and (g) of Rule 144 promulgated under the Securities Act of 1933, as amended (the “1933 Act”), or (ii) in a sale from one ECM client to another ECM client), then Eastbourne shall provide to the Company not less than ten (10) days prior written notice of such proposed transaction, specifying the number of shares of the Common Stock proposed to be sold, the price at which such shares are to be sold and the proposed purchaser of such shares, and shall only complete such sale with the written consent of the Company (the “Consent”), such Consent to be provided or withheld at the Company’s sole discretion and without regard to the economic consequences of providing or withholding such Consent. ECM, BBOM, BB I, BB II and Barry shall jointly and severally indemnify and hold harmless the Company and its representatives and employees from and against any liability, demand, cost of judgment or claim to which the Company may become subject (regardless of whether or not such liability, demand, cost or claim relates to any third party claim) that arises out of or relates to the providing or withholding of any Consent. The obligations of ECM, BBOM, BB I, BB II and Barry in the preceding sentence shall be in effect regardless of whether this Section 3 is otherwise in effect and survive the expiration or termination of this Agreement. The parties acknowledge that nothing in this Agreement, including, without limitation, this section 3, implies that Eastbourne is an affiliate of the Company as that term is defined in Rule 144 under the 1933 Act. 4. Standstill. ECM, BBOM, BB I, BB II and Barry jointly and severally agree with the Company that none of them shall: (a) make, offer or propose (whether publicly or otherwise) to effect, initiate, cause or participate in (i) any acquisition of Beneficial Ownership of the Common Stock resulting in an increase in its aggregate Beneficial Ownership of the Common Stock to a number of shares representing 30% or more of the outstanding shares of the Common Stock (the “Eastbourne Percentage”) at any time without the prior written consent of the Company; provided, however, that effective at 11:59 pm Eastern Time on the date (the “Measurement Date”) on which the Company publicly announces that it has received approval from the U.S. Food and Drug Administration to market the Company’s product candidate that is known as Telcyta as of the date of this Agreement, the Eastbourne Percentage would be automatically, and without further action or approval of the Company or Eastbourne, or any of their respective Affiliates or Associates, amended to be the greater of (a) 25% or (b) the percentage (not to exceed 30%) of the Beneficial Ownership of the Common Stock outstanding held by Eastbourne, together with -------------------------------------------------------------------------------- any of their respective Affiliates or Associates, either individually or collectively, as of the Measurement Date, (ii) any acquisition of any assets, indebtedness or businesses of the Company or any assets, indebtedness or businesses of any subsidiary or other affiliate of the Company, (iii) any tender offer, exchange offer, merger, business combination, recapitalization, restructuring, liquidation, dissolution or extraordinary transaction involving the Company or any subsidiary or other affiliate of the Company, or involving any securities, assets, indebtedness or businesses of the Company or any securities, assets, indebtedness or businesses of any subsidiary or other affiliate of the Company (it being understood that “participate” does not preclude Eastbourne and its clients from tendering shares in any transaction described in this clause (iii) as long as Eastbourne is passive in such transaction and otherwise has complied with this section 4 with respect to such transaction), (iv) any “solicitation” of “proxies” or stockholder consents (as such terms are defined under Regulation 14A of the Exchange Act) with respect to any securities of the Company or any of its subsidiaries or other affiliates of the Company or (v) any stockholder proposals or recommendations or nominations for election to the Board of Directors of the Company that would require disclosure in the Company’s proxy statement prepared in connection with its annual meetings of stockholders; (b) form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities of the Company or any of its subsidiaries, or otherwise act in concert with any person in respect to any such securities, except that the ECM clients may be considered to be a “group”; (c) otherwise act, whether alone or in concert with others, to seek to propose to the Company, any subsidiary of the Company or any of their stockholders any merger, business combination, restructuring, recapitalization or similar transaction to or with the Company or any of its subsidiaries or otherwise seek or propose to influence or control the Company’s management, Board of Directors or policies or to obtain representation on the Company’s Board of Directors; (d) take any action that might require the Company to make a public announcement regarding any of the types of matters set forth in clause “(a)” of this sentence; (e) agree or offer to take, or encourage or propose (publicly or otherwise) the taking of, any action referred to in clause “(a)”, “(b)”, “(c)” or “(d)” of this sentence; (f) assist, induce or encourage any other Person to take any action of the type referred to in clause “(a)”, “(b)”, “(c)”, “(d)” or “(e)” of this sentence; (g) enter into any discussions, negotiations, arrangement or agreement with any other Person relating to any of the foregoing; or (h) request or propose that the Company or any of the Company’s representatives amend, waive or consider the amendment or waiver of any provision set forth in this section 4. ECM, BBOM, BB I, BB II and Barry jointly and severally agree that, if any of them or its representatives are approached by any third party concerning any of their participation in a transaction involving any assets, indebtedness or business of, or securities issued by, the Company or any of its subsidiaries or other affiliates, Eastbourne will promptly inform the Company of the nature of such transaction and the parties involved. -------------------------------------------------------------------------------- Notwithstanding anything in this section 4 to the contrary, ECM, BBOM, BB I, BB II or Barry may take any action or enter into any agreement, if recommended or approved by the Board of Directors of the Company. 5. Amendment to Rights Agreement. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of ECM, BBOM, BB I, BB II and Barry contained in this Agreement, the Company agrees to amend the definition of Acquiring Person in the Rights Agreement to provide that the percentage Beneficial Ownership of the outstanding Common Stock used to determine whether a Person constitutes an “Acquiring Person” will be 30% or more in the case of Eastbourne; provided however, that on the Measurement Date the Eastbourne Percentage would be automatically, and without further action or approval of the Company or Eastbourne, or any of their respective Affiliates or Associates, amended to be the greater of (a) 25% or (b) the percentage (not to exceed 30%) of the Beneficial Ownership of the Common Stock outstanding held by Eastbourne, together with any of their respective Affiliates or Associates, either individually or collectively, as of the Measurement Date. Promptly following the effective date of this Agreement and approval by the Board of Directors of the Company, appropriate officers of the Company will execute a second amendment to the Rights Agreement in substantially the form attached hereto as Exhibit A (the “Second Amendment”), instruct the Rights Agent to execute the Second Amendment and notify Eastbourne when the Second Amendment has been fully executed. ECM, BBOM, BB I, BB II and Barry hereby covenant and agree not to effect any purchases or sales of the Common Stock before the first business day after the date of filing by the Company of a Form 8-K with the Securities and Exchange Commission reporting such Second Amendment. Notwithstanding any other provision hereof or of such Second Amendment, the Second Amendment will have no effect on the definition of “Acquiring Person” with respect to any client of ECM other than BBOM, BB I and BB II. 6. Certain Provisions Unaffected. It is expressly understood and agreed that, notwithstanding the terms of this Agreement or the Amendment, the Company shall not be precluded from a determination that ECM, BBOM, BB I, BB II or Barry or any client of ECM, is a Person causing the occurrence of a Section 11(a)(ii) event under Section 11(a)(ii) of the Rights Agreement. 7. Certain Statutory Matters. ECM, BBOM, BB I, BB II and Barry understand and agree that the provisions of Section 203 of the Delaware General Corporation Law, as amended, will continue to apply to Eastbourne entities, as well as the clients of ECM, and that execution and delivery of this Agreement and the Amendment on behalf of the Company do not constitute approval of any acquisition of shares of the Common Stock by ECM, BBOM, BB I, BB II, Barry or the clients of ECM, or any other transaction, for the purposes of such Section 203 and do not result in Eastbourne entities or the clients of ECM, not being, collectively or individually, an “interested stockholder” or “associate” as defined therein. ECM, BBOM, BB I, BB II and Barry acknowledge and agree that, except with respect to the matters contemplated by this Agreement, the Company has not disclosed material nonpublic information to Eastbourne or any of ECM’s clients and that the Company is under no obligation to disclose such information to Eastbourne or any of ECM’s clients. -------------------------------------------------------------------------------- 8. Entire Agreement and Amendment. This Agreement contains the entire agreement among the parties with respect to the subject matter of this Agreement. All prior and contemporaneous agreements, discussions or understandings, whether oral or written, including the Prior Agreement, are expressly superseded by this Agreement and are null and void. This Agreement may not be modified, waived, discharged or amended, in whole or in part, except in writing signed by the parties. 9. Termination and Effect Thereof. (a) Except to the extent provided by Section 3 of this Agreement, Sections 2, 3 and 4 of this Agreement will not be in effect at any time that Eastbourne Beneficially Owns less than 25% of the outstanding shares of the Common Stock, and, from and after the second anniversary hereof, the Company shall have the right to terminate this Agreement and reverse the First Amendment and the Second Amendment, in its sole discretion, from and after the date on which Eastbourne has not Beneficially Owned 25% or more of the outstanding shares of the Common Stock for a period of at least 20 trading days. (b) If any of ECM, BBOM, BB I, BB II or Barry breaches its covenants, representations or agreements in this Agreement, the Company will have the right to terminate this Agreement and to reverse the First Amendment and the Second Amendment; provided, however, that any such termination will not prejudice any claim that the Company may have with respect to any breach of any representation, warranty or covenant hereunder occurring prior to such termination. 10. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not intended to confer upon any other person any rights or remedies hereunder. 11. Governing Law and Venue. This Agreement and the legal relations among the parties hereto will be governed by, construed and enforced according to the internal laws of the State of Delaware (without regard to the laws of conflict of any jurisdiction) as to all matters, including, without limitation, matters of validity, interpretation, construction, effect, performance and remedies. The parties to this Agreement hereby consent to the personal jurisdiction of the state and federal courts located in the State of Delaware in connection with any controversy related to this Agreement. 12. Counterparts; Facsimile. This Agreement may be executed in one or more counterparts, and each such counterpart will be deemed an original, but all such counterparts together will constitute one and the same instrument. Facsimile signatures shall be treated the same as originals. -------------------------------------------------------------------------------- The parties have caused this Agreement to be duly executed as of the date and year first above written.   EASTBOURNE CAPITAL MANAGEMENT, L.L.C.    TELIK, INC. By:   /s/ Eric M. Sippel    By:   /s/ Dr. Michael M. Wick   Eric M. Sippel      Dr. Michael M. Wick Its:   Chief Operating Officer    Its:   Chairman, President and Chief Executive Officer   /s/ Richard J. Barry    BLACK BEAR OFFSHORE MASTER FUND, L.P.   Richard J. Barry           By Eastbourne Capital Management, L.L.C., its general partner      By:   /s/ Eric M. Sippel        Eric M. Sippel      Its:   Chief Operating Officer -------------------------------------------------------------------------------- BLACK BEAR FUND I, L.P. By Eastbourne Capital Management, L.L.C., its general partner By:   /s/ Eric M. Sippel   Eric M. Sippel Its:   Chief Operating Officer BLACK BEAR FUND II, L.L.C. By Eastbourne Capital Management, L.L.C., its managing member By:   /s/ Eric M. Sippel   Eric M. Sippel Its:   Chief Operating Officer -------------------------------------------------------------------------------- Exhibit A SECOND AMENDMENT TO RIGHTS AGREEMENT BETWEEN TELIK, INC. AND COMPUTERSHARE SHAREHOLDER SERVICES, INC. AND COMPUTERSHARE TRUST COMPANY, N.A. THIS SECOND AMENDMENT TO RIGHTS AGREEMENT (the “Amendment”) is made this 11th day of December, 2006, by and between TELIK, INC., a Delaware corporation (the “Company”), and COMPUTERSHARE SHAREHOLDER SERVICES, INC. AND COMPUTERSHARE TRUST COMPANY, N.A. (the “Rights Agent”) to amend the Rights Agreement, dated November 2, 2001, by and between the Company and Wells Fargo Bank Minnesota, N.A., replaced by Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agreement”). WHEREAS, pursuant to the Rights Agreement, certain rights to purchase shares of the Company’s Series A Junior Participating Preferred Stock, par value $0.01 per share, become exercisable, subject to the terms and conditions set forth in the Rights Agreement, if there is a public announcement that a person, entity or group of affiliated or associated persons have acquired beneficial ownership of 20% or more of the outstanding Common Shares of the Company (an “Acquiring Person”) or 10 business days following the commencement of, or announcement of an intention to commence, a tender offer or exchange offer, the consummation of which would result in any person or entity becoming an Acquiring Person; WHEREAS, on May 18, 2006, pursuant to Section 27 of the Rights Agreement, the Rights Agreement was amended to exclude Eastbourne Capital Management, L.L.C. (“ECM”), Black Bear Offshore Master Fund, L.P., a Cayman Islands limited partnership (“BBOM”), and Richard J. Barry (“Barry,” and together with ECM, BBOM, Black Bear Fund I, L.P., a California limited partnership, and Black Bear Fund II, L.L.C., a California limited liability company, the “Eastbourne Entities”) from the definition of an “Acquiring Person”, but only so long as none of the Eastbourne Entities, together with any of their respective affiliates or associates, either individually or collectively, is the beneficial owner of 25% or more of the Common Shares then outstanding; WHEREAS, the Eastbourne Entities have reported that they beneficially owned in the aggregate 23.6% of the Common Shares of the Company; WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors of the Company has determined that it is in the best interest of the Company and its stockholders to amend the Rights Agreement to exclude the Eastbourne Entities from the definition of an “Acquiring Person”, but only so long as none of the Eastbourne Entities, together with any of their respective affiliates or associates, either individually or collectively, is the beneficial owner of 30% or more of the Common Shares then outstanding (the “Eastbourne Percentage”); provided, however, that effective at 11:59 pm Eastern Time on the date (the “Measurement Date”) on which the Company publicly announces that it has received approval from the U.S. Food and Drug Administration to market the Company’s product candidate that is known as Telcyta as of the date of this Agreement, the Eastbourne Percentage would be automatically, and without further action or approval of the Company or any of the Eastbourne Entities or their respective Affiliates or Associates, amended to be the greater of (a) 25% or (b) the percentage (not to exceed 30%) of the Beneficial Ownership of the Common Shares outstanding collectively held by the Eastbourne Entities together with any of their respective Affiliates or Associates, either individually or collectively, as of the Measurement Date; and -------------------------------------------------------------------------------- WHEREAS, the Board of Directors of the Company has approved this Second Amendment and authorized its appropriate officers to execute and deliver the same to the Rights Agent. NOW, THEREFORE, in accordance with the procedures for amendment of the Rights Agreement set forth in Section 27 thereof, and in consideration of the foregoing and the mutual agreements herein set forth, the parties hereby agree as follows: 1.  Capitalized terms that are not otherwise defined herein shall have the meanings ascribed to them in the Rights Agreement. 2.  The definition of “Acquiring Person” set forth in Section 1(a) of the Rights Agreement is amended in its entirety to read as follows: “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 20% or more of the Common Shares then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person shall not include (i) the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the Company, (iii) any employee benefit or compensation plan of the Company or any Subsidiary of the Company, (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan, or (v) any of Eastbourne Capital Management, L.L.C. (solely in connection with investment power exercisable by Eastbourne Capital Management, L.L.C. with respect to Common Shares managed for Black Bear Offshore Master Fund, L.P., a Cayman Islands limited partnership, Black Bear Fund I, L.P., a California limited partnership, and Black Bear Fund II, L.L.C., a California limited liability company), Black Bear Offshore Master Fund, L.P., a Cayman Islands limited partnership, Black Bear Fund I, L.P., a California limited partnership, Black Bear Fund II, L.L.C., a California limited liability company, and Richard J. Barry (collectively the “Eastbourne Entities”), but only so long as none of the Persons described in this clause (v), together with any of their respective Affiliates or Associates, either individually or collectively, is the Beneficial Owner of 30% or more of the Common Shares then outstanding (the “Eastbourne Percentage”); provided, however, that effective at 11:59 pm Eastern Time on the date (the “Measurement Date”) on which the Company publicly announces that it has received approval from the U.S. Food and Drug Administration to market the Company’s product candidate that is known as Telcyta as of the date of this Agreement, the Eastbourne Percentage would be automatically, and without further action or approval of the Company or any of the Eastbourne Entities or their respective Affiliates or Associates, amended to be the greater of (a) 25% or (b) the percentage (not to exceed 30%) of the Beneficial Ownership of the Common Shares outstanding collectively held by the Eastbourne Entities, together with any of their respective Affiliates or Associates, either individually or collectively, as of the Measurement Date, and (B) no Person shall become an “Acquiring Person” either (x) as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% (or the Eastbourne Percentage then in effect with respect to the Eastbourne Entities) or more of the Common Shares then outstanding by reason of share purchases by the Company and shall, following written notice from, or public disclosure by the Company of such share purchases by the Company, become the Beneficial Owner of any additional Common Shares without the prior consent of the Company and shall then Beneficially Own more than 20% (or the Eastbourne Percentage then in effect with respect to the Eastbourne -------------------------------------------------------------------------------- Entities) of the Common Shares then outstanding, then such Person shall be deemed to be an “Acquiring Person,” (y) as the result of the acquisition of Common Shares directly from the Company, provided, however that if a Person shall become the Beneficial Owner of 20% (or the Eastbourne Percentage then in effect with respect to the Eastbourne Entities) or more of the Common Shares then outstanding by reason of share purchases directly from the Company and shall, after that date, become Beneficial Owner of any additional Common Shares without the prior written consent of the Company and shall then Beneficially Own more than 20% (or the Eastbourne Percentage then in effect with respect to the Eastbourne Entities) of the Common Shares then outstanding, then such Person shall be deemed to be an “Acquiring Person” or (z) if the Board of Directors determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests, as promptly as practicable (as determined in good faith by the Board of Directors), but in any event within five Business Days, following receipt of written notice from the Company of such event, of Beneficial Ownership of a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement; provided, however, that if such Person shall again become the Beneficial Owner of 20% (or the Eastbourne Percentage then in effect with respect to the Eastbourne Entities) or more of the Common Shares then outstanding, such Person shall be deemed an “Acquiring Person,” subject to the exceptions set forth in this Section 1(a).” 3.  All references in the Rights Agreement to “20%” shall be followed by “(or the Eastbourne Percentage then in effect with respect to the Eastbourne Entities)”, other than in the definition of “Acquiring Person” set forth in Section 1(a), which is amended as provided above. 4.  Except as expressly set forth herein, this Second Amendment shall not alter, modify, amend or in any affect any of the terms, conditions, covenants, obligations or agreements contained in the Rights Agreement, all of which are ratified and affirmed in all respects and shall continue to be in full force and effect. 5.  If any term, provision, covenant or restriction of this Second Amendment is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Second Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 6.  This Second Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. 7.  This Second Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [SIGNATURE PAGE TO FOLLOW] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties herein have caused this Second Amendment to be duly executed and attested, all as of the date and year first above written.   TELIK, INC. By:     Name:   Title:   COMPUTERSHARE SHAREHOLDER SERVICES, INC. By:     Name:   Title:   COMPUTERSHARE TRUST COMPANY, N.A. By:     Name:   Title:  

  EXHIBIT 10.22 SUMMARY OF ANNUAL NON-MANAGEMENT DIRECTOR COMPENSATION I.   Board Members (Other than the Chairman)   A.   Annual Cash Compensation (effective November 9, 2006)           Annual Cash Retainer:   $ 70,000             Additional Cash Retainer for Presiding Director:   $ 3,000             Additional Cash Retainer for Chairman of Audit Committee:   $ 20,000             Additional Cash Retainer for Chairman of Compensation Committee:   $ 10,000             Additional Cash Retainer for Chairs of Nominating and Corporate Governance Committee and Strategy Committee:   $ 5,000   B.   Meeting Fees       If a Board Committee meets more than six times during a calendar year, then the members thereof shall receive the following fees for attending meetings that exceed six in number:       Committee Meeting Fees:   $1,500 per meeting attended in person, on a day other than a day on which the Board meets           $1,000 per meeting attended in person, on the same day as a Board meeting       Telephone Committee Meeting Fees:   $750 per meeting attended by conference telephone     Directors are also reimbursed for reasonable out-of-pocket expenses incurred in attending meetings. C. Stock Options     Annual grant of options for 10,500 shares, vesting 1/3 on each of the first three anniversaries of the grant date, expiring seven years from the grant date, except in May 2007.   --------------------------------------------------------------------------------   II. Chairman of the Board A. Annual Cash Compensation     Annual Cash Compensation (in lieu of annual retainer and meeting fees): $250,000 B. Stock Options     Annual grant of options for 10,500 shares, vesting 1/3 on each of the first three anniversaries of the grant date, expiring seven years from the grant date, except in May 2007.  

  EXHIBIT 10.2 PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS      THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Agreement”) is made and effective as of the date Seller executes this Agreement (“Effective Date”), by and between NNN 3500 Maple VF 2003, LLC, a Delaware limited liability company (“Seller”), and NNN 3500 Maple, LLC, a Delaware limited liability company (“Buyer”), with reference to the facts set forth below. All terms with initial capital letters not otherwise defined herein shall have the meanings set forth in the Defined Terms attached hereto as Exhibit “B” and incorporated herein. RECITALS      A. Seller purchased an undivided tenant in common interest in that certain real property, commonly known as 3500 Maple located in Dallas, Texas, as more particularly described in Exhibit “A” attached hereto and incorporated herein and all the improvements situated thereon (“Property”).      B. Seller desires to sell an undivided interest in the Property to Buyer, and Buyer desires to buy an undivided interest in the Property from Seller, on the terms and conditions set forth in this Agreement.      C. The Property is subject to the Deed of Trust and the other Loan Documents. Buyer shall assume or acquire the Property subject to the Deed of Trust and the other Loan Documents.      NOW, THEREFORE, in consideration of the mutual agreements set forth herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below.      1. Agreement of Purchase and Sale.           1.1 Purchase, Sale and Purchase Price. In consideration of the covenants herein contained, Seller hereby agrees to sell, and Buyer hereby agrees to purchase, a 9.75% undivided tenancy in common interest in the Property (the “Interest”) at a purchase price (“Purchase Price”) equal to $6,532,500, of which $1,950,000 shall be Cash paid into Escrow and $4,582,500 shall be assumption of the Loan on a joint and several basis (based on a total Purchase Price of $670,000, being $200,000 of equity and $470,000 of assumed debt for each one percent (1%) undivided interest in the Property to be acquired).           /s/ RH       /s/ LR           Seller’s Initials       Buyer’s Initials           1.2 Payment. Buyer shall pay the Purchase Price as follows:                1.2.1 Buyer’s Deposit. Buyer will be required, within five (5) days of executing and returning the Purchase Agreement and Escrow Instructions, to submit $1.00 of Buyer’s equity investment (“Buyers Deposit”). Upon Opening of Escrow, Buyer’s Deposit shall be placed by Escrow Agent in a non-interest bearing account. However, Buyer’s Deposit may be retained by the Manager (together with interest accrued thereon) as liquidated damages in accordance with Section 6.1. Buyer shall not receive any interest on Buyer’s Deposit unless and until Seller accepts Buyer’s offer and the Opening of Escrow occurs.                1.2.2 Cash Portion of the Purchase Price. Buyer shall deposit into Escrow the cash portion of the Purchase Price (“Cash Portion”), plus the amount, if any, required of Buyer under Section 4 or any other provision of this Agreement, at least five (5) Business Days before the Close of Escrow.                1.2.3 Note and Deed of Trust. With respect to the remaining balance of the Purchase Price (“Loan Portion”), Buyer shall assume or take the Interest subject to the Deed of Trust and the other Loan Documents pursuant to the Loan Assumption Documents. In the event Buyer takes title subject to the loan, Buyer and Seller are aware that terms and conditions contained in said existing loan of record may provide for payment in   --------------------------------------------------------------------------------   full and/or modification of terms and conditions therein in the event of sale or transfer of subject property to another entity, and therefore the parties do jointly and individually, hold escrow holder free of any and all liability whatsoever with respect to these instructions if any controversy regarding same should arise at any future date. Within five (5) days after Seller’s request, Buyer shall submit applications, financial information and other items required by the Lender in connection with Buyer’s assumption of the Loan Documents.           1.3 Buyer’s Deliveries. Concurrently with delivery of Buyer’s Deposit or as soon thereafter as requested by Seller, Buyer shall execute, acknowledge (where appropriate) and deposit into Escrow such other documents as may be required by the Transaction Documents or requested by the Lender or Escrow Agent.      2. Opening and Close of Escrow.           2.1 Opening of Escrow. Upon execution of this Agreement by Seller, Buyer and Seller shall open Escrow by depositing with Escrow Agent a fully executed original of this Agreement for use as escrow instructions. Escrow Agent shall execute the Consent of Escrow Agent at the end of this Agreement and deliver a fully executed consent to Buyer and Seller. If there is any inconsistency between the provisions of the General Conditions and this Agreement, the provisions of this Agreement shall control. Buyer and Seller agree to execute additional escrow instructions not inconsistent with the terms of this Agreement if reasonably required by Escrow Agent.           2.2 Seller’s Deliveries. Prior to the Close of Escrow, Seller shall execute, acknowledge (where appropriate) and deposit into Escrow applicable certificates regarding federal and state withholding taxes, a grant deed (“Grant Deed”) in the appropriate form conveying the Interest to Buyer, a general assignment (the “General Assignment”) of all leases, contracts and intangibles in the form attached hereto as Exhibit “C”, and a bill of sale, conveying Seller’s personal property in the form attached hereto as Exhibit “D.”           2.3 Close of Escrow. Escrow shall close on or before October 31, 2006 by: (i) filing for record the Grant Deed, the Loan Assumption Documents and such other documents as may be necessary to procure Buyer’s Title Policy (as defined below) and (ii) delivering funds, the General Assignment and other documents as set forth in Section 5 IF AND ONLY IF (a) all funds and instruments required pursuant to Sections 1 and 2 have been delivered to Escrow Agent; and (b) each of the conditions precedent set forth in Section 3 has been, or upon such closing shall be, satisfied or waived as provided in Section 3. Escrow Agent is instructed to insert the Closing Date as the date of the Grant Deed and the other Transaction Documents.           2.4 Latest Closing. If Escrow has not closed by 5:00 p.m. on the Business Day after the Closing Date, for any reason other than the default of either Buyer or Seller under this Agreement, either party who is not then in default may terminate Escrow and this Agreement by written notice to the other party and to Escrow Agent. If this Agreement is so terminated for any reason other than the default of Buyer or Seller hereunder, (i) Buyer and Seller shall promptly execute and deliver any cancellation instructions reasonably requested by Escrow Agent; (ii) Escrow Agent shall return Buyer’s Deposit (and all interest accrued thereon) to Buyer; and (iii) Buyer and Seller shall be released from their obligations under this Agreement, other than any obligations of Buyer that survive termination of this Agreement. If all conditions to the Close of Escrow have been satisfied or waived by the Closing Date and Buyer fails to close Escrow, Seller shall, in addition to any other rights or remedies which Seller may have, be entitled to retain Buyer’s Deposit pursuant to Section 6 and to terminate this Agreement and, upon such termination, Seller shall be released from all obligations under this Agreement.      3. Conditions to Closing.           3.1 Closing Conditions. This Agreement and the obligations of the parties hereunder are subject to satisfaction or waiver (by the party in whose favor the condition precedent has been established) of all the conditions precedent set forth below.                3.1.1 Review of Preliminary Report. Prior to the date hereof, Seller has reviewed on behalf of the Buyer and approved the Preliminary Report, the Permitted Exceptions and copies of all recorded documents described in the Preliminary Report. If any new exceptions to title appear of record prior to the Closing   --------------------------------------------------------------------------------   Date, Escrow Agent shall deliver to Seller and Buyer a supplemental preliminary report (“Supplemental Report”) issued by Title Company, together with legible copies of all recorded documents. Buyer shall have three (3) Business Days to review and deliver to Seller and Escrow Agent notice of approval or disapproval of any Supplemental Report; provided, however, that Buyer shall not unreasonably withhold its approval of any items, including, without limitation, easements, rights-of-way and other matters which do not have a material and adverse impact on the value of the Interest. Buyer’s failure to deliver notice of disapproval shall be deemed to be Buyer’s approval of any Supplemental Report. If Buyer delivers notice of disapproval and Seller elects in its sole discretion to do so, within five (5) Business Days of the delivery of Buyer’s notice, Seller may elect by written notice to Buyer to remove (or otherwise cure in a manner reasonably satisfactory to Buyer) any disapproved items at or prior to the Closing Date. If Seller does not deliver such written notice to Buyer, Seller shall be deemed to have elected not to remove (or otherwise cure) the disapproved items. If Seller elects not to remove any such item(s), Buyer may either waive its prior disapproval or terminate this Agreement by delivering a written notice of termination to Seller within three (3) Business Days after Seller’s election. If Buyer does not elect to terminate this Agreement as provided above, Buyer shall be deemed to have waived its disapproval. If Buyer so delivers notice of its election to terminate this Agreement, then this Agreement shall terminate as provided in Section 2.4 above.                3.1.2 Title Insurance. The Title Company shall be unconditionally committed to issue, immediately following recording of the Grant Deed, a customary policy of title insurance (“Title Policy”), with liability in the amount of the Purchase Price and insuring fee title to the Interest vested in Buyer. Buyer shall take title to the Interest subject to the Permitted Exceptions.                3.1.3 Intentionally deleted.           3.2 Failure of Conditions Precedent. Sections 3.1.1 and 3.1.2 are for Buyer’s benefit and may only be waived by Buyer. Section 3.1.3 is for the mutual benefit of the parties and may only be waived by both Seller and Buyer. If any of the foregoing conditions precedent are neither satisfied nor waived by the Closing Date, then either party, if not then in default hereunder, may terminate the Escrow and this Agreement in accordance with Section 2.4.           3.3 Rescission Rights. Buyer may terminate this Agreement and obtain a return of Buyer’s Deposit if he receives from the Manager, subsequent to the date hereof, an environmental assessment, an engineering report, or Loan Documents for the Property or modifications or amendments of any of the Transaction Documents that, in Buyer’s sole reasonable discretion, contains information that shows that the purchase of Interests is not appropriate for Buyer. Any such termination notice shall be given within three (3) days after receipt of the applicable document or will be deemed waived.      4. Prorations, Fees and Costs.           4.1 Prorations. All prorations of taxes, rental payments, other expenses or reserves between Seller and Buyer shall be made subsequent to the sale.           4.2 Buyer’s Fees and Costs. Buyer will pay: (a) Escrow Agent’s Escrow fee for the sale of the Interest, (b) all document-drafting and recording charges, (c) a loan fee in the amount of one percent (1%) of the Loan Portion of the Purchase Price (the “Loan Fee”) and other lender related charges, including processing and legal fees, if any, (d) the cost of the Title Policy and any title endorsements Buyer requests from the Title Company, and (e) City/County Documentary Transfer Tax or similar charges in the amount Escrow Agent determines to be required by law. In addition, Buyer will credit Seller for other costs incurred by Seller. The total fees, costs and credit from Buyer will be approximately $200,000 and are to be determined on the Closing Date. Any final True Up between Buyer and Seller will take place after the Closing Date and outside of escrow.           4.3 Escrow Cancellation and Title Charges. If Escrow fails to close due to Buyer’s default under this Agreement, Buyer shall pay all escrow cancellation and title charges. If Escrow fails to close for any other reason other than the foregoing, Seller shall pay any escrow cancellation and title charges.   --------------------------------------------------------------------------------        5. Distribution of Funds and Documents.           5.1 Deposit of Funds. After the Opening of Escrow, all cash, if any, received hereunder by Escrow Agent shall, until the Close of Escrow, be kept on deposit with other escrow funds in Escrow Agent’s general escrow account(s), in any state or national bank, and may be transferred to any other such general escrow account(s).           5.2 Disbursements. Escrow Agent at the Close of Escrow will hold for personal pickup, or if requested, wire transfer to an account designated by the party receiving such funds, the following: (i) to Seller, or order, the Cash Portion of the Purchase Price, plus any proration or other credits to which Seller will be entitled less any appropriate proration or other charges due Buyer, (ii) to Seller or Lender, the Loan Fee and (iii) to Buyer, or order, Buyer’s Deposit and any excess funds previously delivered to Escrow Agent by Buyer. All other disbursements by Escrow Agent shall be made by checks of Escrow Agent.           5.3 Recorded Documents. Escrow Agent will cause the County or City Recorder to mail the Grant Deed (and each other document which is herein expressed to be, or by general usage is, recorded) after recordation, to the grantee, beneficiary or person (i) acquiring rights under said document or (ii) for whose benefit the document was acquired. At the Close of Escrow, Escrow Agent will deliver to Seller a copy (conformed to show recording date) of the Grant Deed and each document recorded to place title in the condition required by this Agreement.           5.4 Unrecorded Documents. At the Close of Escrow, Escrow Agent will deliver by United States mail (or will hold for personal pickup, if requested) each nonrecorded document received hereunder by Escrow Agent to the payee or person acquiring rights under said document or for whose benefit said document was acquired.      6. Default.           6.1 LIQUIDATED DAMAGES. IF ESCROW FAILS TO CLOSE DUE TO BUYER’S DEFAULT, IT IS AGREED THAT THE AMOUNT OF BUYER’S DEPOSIT (TOGETHER WITH INTEREST THEREON) SHALL BE RETAINED AND ACCEPTED BY MANAGER AS LIQUIDATED DAMAGES AND NOT AS A PENALTY AND SELLER SHALL BE RELEASED FROM ITS OBLIGATION OF SELLING THE INTEREST TO BUYER. IT IS AGREED THAT SAID AMOUNT CONSTITUTES A REASONABLE ESTIMATE OF THE DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671 ET SEQ. THE PARTIES FURTHER ACKNOWLEDGE AND AGREE THAT THE AMOUNT OF LIQUIDATED DAMAGES IS FAIR AND REASONABLE CONSIDERING ALL OF THE FACTS AND CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING THE RELATIONSHIP OF SUCH AMOUNT TO THE RANGE OF HARM TO SELLER THAT COULD BE ANTICIPATED, AND THE ANTICIPATION THAT PROOF OF CAUSATION, FORESEEABILITY AND ACTUAL DAMAGES WOULD BE COSTLY AND/OR IMPRACTICAL. BUYER AND SELLER AGREE THAT IT IS IMPOSSIBLE OR IMPRACTICAL TO PRESENTLY PREDICT WHAT MONETARY DAMAGES WOULD BE SUFFERED IN SUCH EVENT. BUYER DESIRES TO LIMIT THE MONETARY DAMAGES FOR WHICH BUYER MIGHT BE LIABLE HEREUNDER AND BUYER AND SELLER AND MANAGER DESIRE TO AVOID THE COSTS AND DELAYS THEY WOULD INCUR IF A LAWSUIT WERE COMMENCED TO COLLECT DAMAGES AND THEREFORE AGREE THAT SUCH LIQUIDATED DAMAGES SHALL CONSTITUTE THEIR SOLE AND EXCLUSIVE REMEDY IF ESCROW FAILS TO CLOSE DUE TO BUYER’S DEFAULT. BY INITIALING THIS PROVISION BELOW, THE PARTIES SPECIFICALLY CONFIRM THE ACCURACY OF SUCH FACTS, THE FACT THAT THEY POSSESS APPROXIMATELY EQUAL BARGAINING STRENGTH AND SOPHISTICATION AND THE FACT THAT EACH OF THEM WAS REPRESENTED BY COUNSEL WHEN ENTERING INTO THIS AGREEMENT, WHICH COUNSEL EXPLAINED THE CONSEQUENCES OF THIS SECTION TO THEM AT THE TIME THIS AGREEMENT WAS MADE. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT ANY OBLIGATIONS OF BUYER OTHER THAN A DEFAULT CAUSING ESCROW TO FAIL TO CLOSE THAT SURVIVE THE CLOSE OF ESCROW OR EARLY TERMINATION OF THIS AGREEMENT AND SELLER SHALL HAVE THE RIGHT TO PURSUE ANY CAUSE OF ACTION IT MAY HAVE AGAINST BUYER FOR BUYER’S FAILURE TO PERFORM ANY OTHER COVENANT UNDER THE TRANSACTION DOCUMENTS OR UNDER THIS AGREEMENT AFTER THE CLOSE OF ESCROW   --------------------------------------------------------------------------------   OR EARLIER TERMINATION OF THIS AGREEMENT. BY THE ACT OF AN AUTHORIZED REPRESENTATIVE OF EACH PARTY AFFIXING HIS OR HER INITIALS HEREIN, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE ABOVE STATEMENTS AND ITS AGREEMENT WITH THEM.           /s/ RH       /s/ LR           Seller’s Initials       Buyer’s Initials      7. Buyer Representations and Warranties.           7.1 No Concern of Escrow Agent. Escrow Agent shall have no concern with, or liability or responsibility for, this Section.           7.2 PURCHASE AS-IS. AS FURTHER PROVIDED IN THE MEMORANDUM, BUYER REPRESENTS AND WARRANTS THAT IT IS RELYING SOLELY UPON ITS OWN INSPECTIONS, INVESTIGATIONS AND ANALYSES OF THE PROPERTY IN ENTERING INTO THIS AGREEMENT AND BUYER IS NOT RELYING IN ANY WAY UPON ANY REPRESENTATIONS, STATEMENTS, AGREEMENTS, WARRANTIES, STUDIES, REPORTS, DESCRIPTIONS, GUIDELINES OR OTHER INFORMATION OR MATERIAL FURNISHED BY SELLER OR ITS REPRESENTATIVES, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER REGARDING ANY SUCH MATTERS AND IS PURCHASING THE INTEREST AND ALL PERSONAL PROPERTY IN AN “AS-IS” CONDITION. BUYER IS A SOPHISTICATED AND EXPERIENCED REAL ESTATE INVESTOR AND WILL RELY ENTIRELY UPON ITS OWN INDEPENDENT INVESTIGATION AND REVIEW OF THE PROPERTY. BUYER ACKNOWLEDGES THAT, PRIOR TO THE DATE OF THIS AGREEMENT, BUYER HAS HAD THE OPPORTUNITY TO CONDUCT ANY AND ALL PHYSICAL INSPECTIONS OF THE PROPERTY AS BUYER DEEMS NECESSARY, TO REVIEW AND APPROVE EACH OF THE TRANSACTION DOCUMENTS, TO REVIEW AND APPROVE (I) THE OPERATING STATEMENTS FOR THE PROPERTY FOR THE MOST RECENT 12 MONTHS, (II) A CURRENT TENANT RENT ROLL, AND (III) THE MOST RECENT PROPERTY TAX BILLS, AND TO CONDUCT SUCH OTHER TESTS, INVESTIGATIONS AND REVIEW AS BUYER DEEMS NECESSARY. BUYER ACKNOWLEDGES THAT SELLER ONLY RECENTLY ACQUIRED THE PROPERTY AND HAS LIMITED KNOWLEDGE REGARDING THE CONDITION OF THE PROPERTY.           7.3 NO TAX REPRESENTATIONS. AS FURTHER PROVIDED IN THE ADDENDUM, BUYER REPRESENTS AND WARRANTS THAT IT IS NOT RELYING UPON ANY ADVICE OR ANY INFORMATION OR MATERIAL FURNISHED BY SELLER OR ITS REPRESENTATIVES, WHETHER ORAL OR WRITTEN, EXPRESSED OR IMPLIED, OF ANY NATURE WHATSOEVER REGARDING ANY TAX MATTERS, INCLUDING WITHOUT LIMITATION, A DECISION BY BUYER TO EFFECT A TAX-DEFERRED EXCHANGE UNDER INTERNAL REVENUE CODE SECTION 1031, AS AMENDED. BUYER FURTHER REPRESENTS AND WARRANTS THAT IT HAS INDEPENDENTLY OBTAINED ADVICE FROM ITS OWN INDEPENDENT LEGAL COUNSEL AND/OR TAX ACCOUNTANT REGARDING ANY SUCH TAX-DEFERRED EXCHANGE, INCLUDING, WITHOUT LIMITATION, WHETHER THE ACQUISITION OF THE INTEREST PURSUANT TO THIS AGREEMENT MAY QUALIFY AS PART OF A TAX-DEFERRED EXCHANGE, AND BUYER IS RELYING SOLELY ON SUCH ADVICE.           7.4 Commissions. The parties mutually warrant and covenant that Seller will be responsible for paying any commission or finder’s fees on account of this transaction.           7.5 Intentionally deleted.      8. General Provisions.           8.1 Interpretation. The use herein of (i) one gender includes the masculine and the feminine, (ii) the singular number includes the plural, whenever the context so requires and (iii) the words I and me include we and us if Buyer is more than one person. Captions in this Agreement are inserted for convenience of reference only   --------------------------------------------------------------------------------   and do not define, describe or limit the scope or the intent of this Agreement or any of the terms hereof. All exhibits referred to herein and attached hereto are incorporated by reference. This Agreement together with the other Transaction Documents contain the entire agreement between the parties relating to the transactions contemplated hereby, and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged herein.           8.2 Modification. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement thereof is or may be sought.           8.3 Cooperation. Buyer and Seller acknowledge that it may be necessary to execute documents other than those specifically referred to herein to complete the acquisition of the Interest as provided herein. Buyer and Seller agree to cooperate with each other in good faith by executing such other documents or taking such other action as may be reasonably necessary to complete this transaction in accordance with the parties’ intent evidenced in this Agreement.           8.4 Assignment. Buyer shall not assign its rights under this Agreement except for Accommodator without first obtaining Seller’s written consent, which consent may be withheld in Seller’s sole and absolute discretion. No such assignment shall operate to release the assignor from the obligation to perform all obligations of Buyer hereunder. Seller shall have the absolute right to assign its rights and obligations under this Agreement.           8.5 Notices. Unless otherwise specifically provided herein, all notices, demands or other communications given hereunder shall be in writing and shall be addressed as follows: If to Seller, to: Triple Net Properties, LLC, Manager 1551 N. Tustin Avenue, Suite 200 Santa Ana, California 92705 Attn: Anthony W. Thompson, Chairman and Chief Executive Officer If to Buyer, to Buyer’s Address. Either party may change such address by written notice to Escrow Agent and the other party. Unless otherwise specifically provided for herein, all notices, payments, demands or other communications given hereunder shall be deemed to have been duly given and received: (i) upon personal delivery, or (ii) as of the third business day after mailing by United States registered or certified mail, return receipt requested, postage prepaid, addressed as set forth above, or (iii) the immediately succeeding Business Day after deposit with Federal Express or other similar overnight delivery system.           8.6 Eminent Domain. If, prior to the Close of Escrow, all of the Property is taken or appropriated by any public or quasi-public authority under the power of eminent domain or Seller receives actual notice of any pending or threatened condemnation proceedings affecting all of the Property, then Buyer may terminate this Agreement without further liability hereunder and the parties shall proceed in accordance with Section 2.4. In the event of a partial taking of the Property or the threatened partial taking of the Property with respect to which Seller has received actual notice that materially and adversely affects the ability to operate the Property for the purposes it is currently operated, then Buyer can elect to either (a) terminate this Agreement in accordance with Section 2.4, or (b) purchase the Interest with a reduction in the Purchase Price in an amount equal to condemnation award received from the condemning authority with respect to the Interest. In the event of a threatened taking or a lack of finality of any proceedings to determine the award in an actual taking, Escrow shall close and Seller shall assign to Buyer its interest in any condemnation award with respect to the Interest made by the governmental entity.           8.7 Loss or Damage. Buyer shall have no right to terminate this Agreement in the event of any loss or damage to the Property, provided that Buyer shall have the right to receive an assignment of any insurance proceeds received by Seller with respect to such loss upon the Close of Escrow. The parties acknowledge and agree in no event shall the Close of Escrow be extended due to any such loss or damage. Notwithstanding the foregoing, the assignment of any insurance proceeds as provided herein shall not include any proceeds received for items not related to the physical condition of the Property, such as proceeds from Seller’s business interruption insurance, if any.   --------------------------------------------------------------------------------             8.8 Periods of Time. All time periods referred to in this Agreement include all Saturdays, Sundays and state or United States holidays, unless Business Days are specified, provided that if the date or last date to perform any act or give any notice with respect to this Agreement falls on a Saturday, Sunday or state or national holiday, such act or notice may be timely performed or given on the next succeeding Business Day.           8.9 Counterparts. This Agreement may be executed in counterparts, all of which when taken together shall be deemed fully executed originals.           8.10 Attorneys’ Fees. If either party commences litigation for the judicial interpretation, enforcement, termination, cancellation or rescission hereof, or for damages (including liquidated damages) for the breach hereof against the other party, then, in addition to any or all other relief awarded in such litigation, the substantially prevailing party therein shall be entitled to a judgment against the other for an amount equal to reasonable attorneys’ fees and court and other costs incurred.           8.11 Joint and Several Liability. If any party consists of more than one person or entity, the liability of each such person or entity signing this Agreement shall be joint and several.           8.12 Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the State where the Property is located, without regard to its conflicts of laws principles.           8.13 Time. Time is of the essence with respect to all dates set forth in this Agreement.           8.14 Third Party Beneficiaries. Buyer and Seller do not intend to benefit any party (including any other Tenants in Common) that is not a party to this Agreement and no such party shall be deemed to be a third party beneficiary of this Agreement or any provision hereof.           8.15 Severability. If any term, covenant, condition, provision or agreement herein contained is held to be invalid, void or otherwise unenforceable by any court of competent jurisdiction, such fact shall in no way affect the validity or enforceability of the other portions of this Agreement.           8.16 Election to Effect an Internal Revenue Code Section 1031 Exchange. In the event Buyer so elects, Seller agrees to accommodate Buyer in effecting a tax-deferred exchange under Internal Revenue Code Section 1031, as amended. Buyer shall have the right to elect a tax-deferred exchange at any time prior to the Closing Date. If Buyer elects to effect a tax-deferred exchange, Seller agrees to execute revised or additional escrow instructions, documents, agreements, or instruments to effect the exchange, provided that Seller shall incur no additional costs, expenses, fees or liabilities, nor shall the closing be delayed, as a result of the exchange. Buyer may assign this Agreement to an accommodator in order to effect such exchange and, thereafter, such assignee will perform Buyer’s obligations under this Agreement.           8.17 Binding Agreement. Subject to any limitation on assignment set forth herein, all terms of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective legal representatives, successors and assigns.           8.18 ARBITRATION OF DISPUTES.                8.18.1 ALL CLAIMS SUBJECT TO ARBITRATION. ANY DISPUTE, CONTROVERSY OR OTHER CLAIM ARISING UNDER, OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY AMENDMENT THEREOF, OR THE BREACH OR INTERPRETATION HEREOF OR THEREOF, SHALL BE DETERMINED AND SETTLED BY BINDING ARBITRATION IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, IN ACCORDANCE WITH TITLE 9 OF THE CALIFORNIA CIVIL CODE AND THE CODE OF CIVIL PROCEDURE, INCLUDING SPECIFICALLY CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 1283.05 AND 1283.1, AND THE RULES AND PROCEDURES OF THE AMERICAN ARBITRATION   --------------------------------------------------------------------------------   ASSOCIATION. THE SUBSTANTIALLY PREVAILING PARTY SHALL BE ENTITLED TO AN AWARD OF ITS REASONABLE COSTS AND EXPENSES INCLUDING BUT NOT LIMITED TO ATTORNEY’S FEES AND COSTS. ANY AWARD RENDERED THEREIN SHALL BE FINAL AND BINDING ON EACH AND ALL OF THE PARTIES THERETO AND THEIR PERSONAL REPRESENTATIVES, AND JUDGMENT MAY BE ENTERED THEREON IN ANY COURT OF COMPETENT JURISDICTION.                8.18.2 WAIVER OF LEGAL RIGHTS. BY INITIALING IN THE SPACE BELOW, THE PARTIES ACKNOWLEDGE AND AGREE TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS ARTICLE DECIDED BY NEUTRAL ARBITRATION AS PROVIDED UNDER CALIFORNIA LAW AND THAT THEY ARE WAIVING ANY RIGHTS THEY MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR BY JURY TRIAL. THE PARTIES FURTHER ACKNOWLEDGE AND AGREE THAT THEY ARE WAIVING THEIR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL EXCEPT TO THE EXTENT SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THIS ARTICLE. IF EITHER PARTY REFUSES TO SUBMIT TO ARBITRATION AFTER EXECUTION OF THIS AGREEMENT AND INITIALING BELOW, SUCH PARTY MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. EACH PARTY’S AGREEMENT TO THIS ARTICLE IS VOLUNTARY. THE PARTIES HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS ARTICLE TO NEUTRAL ARBITRATION.           /s/ RH       /s/ LR           Seller’s Initials       Buyer’s Initials           8.19 ACCEPTANCE OR REJECTION OF BUYER’S OFFER. THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OF ANY KIND BY SELLER AND SHALL NOT BIND SELLER UNLESS DULY EXECUTED AND DELIVERED BY SELLER. TO SUBMIT AN OFFER, BUYER SHALL DELIVER TO ESCROW AGENT (1) THREE COMPLETED AND EXECUTED ORIGINALS OF THIS AGREEMENT (2) CASH IN THE AMOUNT OF BUYER’S DEPOSIT AND (3) THE PURCHASER QUESTIONNAIRE. SELLER SHALL HAVE 15 DAYS TO EITHER ACCEPT OR REJECT BUYER’S OFFER. IF SELLER DOES NOT ACCEPT BUYER’S OFFER WITHIN SUCH 15-DAY PERIOD, THE OFFER SHALL BE DEEMED REJECTED. IN THE EVENT THE OFFER IS REJECTED, BUYER’S DEPOSIT SHALL BE RETURNED TO BUYER WITHOUT INTEREST AND THIS AGREEMENT SHALL NOT BECOME EFFECTIVE. [BALANCE OF PAGE INTENTIONALLY BLANK]   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, this Agreement has been executed as of the Effective Date. SELLER: NNN 3500 Maple VF 2003, LLC, a Delaware limited liability company,               By:   Triple Net Properties, LLC, a Virginia limited liability company, Manager                       By:   /s/ Richard T. Hutton, Jr.                       Name:   Richard T. Hutton, Jr                       Title:   Executive Vice President                   Dated: 10/20, 2006 BUYER: NNN 3500 Maple, LLC, a Delaware limited liability company,               By:   Triple Net Properties, LLC, a Virginia limited liability company, Manager                       By:   /s/ Louis Rogers                       Name:   Louis Rogers                       Title:   President                   Dated: 10/20, 2006 PARTIES MUST ALSO INITIAL SECTIONS 6.1 AND 8.18.2 BUYER MUST ALSO INITIAL FRONT PAGE  

  Exhibit 10.4 AMENDED AND RESTATED PLEDGE AGREEMENT      THIS AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of April 26, 2006 (together with all amendments, if any, from time to time hereto, this “Agreement”), among each of the parties named as a Pledgor on the signature pages hereto (each individually, a “Pledgor” and collectively, the “Pledgors”) and BANK OF AMERICA, N.A., a national banking association, in its capacity as collateral and administrative agent (together with its successors in such capacity, the “Agent”) for the Secured Parties (as defined in the Loan Agreement (defined below)). WITNESSETH:      WHEREAS, pursuant to that certain Credit Agreement dated as of May 16, 2002 by and among Coltec Industries Inc, a Pennsylvania corporation (“Coltec”), Coltec Industrial Products LLC, a Delaware limited liability company (“CIP”), Garlock Sealing Technologies LLC, a Delaware limited liability company (“Garlock Sealing”), GGB LLC (formerly Garlock Bearings LLC), a Delaware limited liability company (“GGB LLC”), HTCI, Inc. (formerly Haber Tool Company, Inc.) a Michigan corporation (“HTCI”), Corrosion Control Corporation, a Colorado corporation (“CCC”), and Stemco LP, a Texas limited partnership (“Stemco LP (TX)”; Coltec, CIP, Garlock Sealing, GGB LLC, HTCI, CCC and Stemco LP (TX) each individually referred to herein as an “Original Borrower” and collectively as “Original Borrowers”), the Agent, and the various financial institutions party thereto from time to time (the “Original Lenders”) (including all annexes, exhibits and schedules thereto, as at any time amended, restated, modified, or supplemented prior to the date hereof, including by means of any joinder agreements, the “Original Loan Agreement”), the Original Lenders agreed to make loans to, and issue letters of credit on behalf of, Original Borrowers;      WHEREAS, in connection with the Original Loan Agreement, (i) EnPro Industries, Inc., a North Carolina corporation (“Parent”), executed and delivered that certain Parent Guarantee dated as of May 31, 2002 in favor of the Agent and the Original Lenders (as at any time amended, restated, modified, or supplemented prior to the date hereof, the “Original Parent Guarantee”), pursuant to which Parent unconditionally guaranteed to the Agent and the Original Lenders the payment and performance of all of the “Guaranteed Obligations” (as defined therein); (ii) QFM Sales and Services, Inc., a Delaware corporation (“QFM”), Coltec International Services Co, a Delaware corporation (“Coltec International”), Garrison Litigation Management Group, Ltd., a Delaware corporation (“Garrison”), GGB, Inc. (formerly Glacier Garlock Bearings Inc.), a Delaware corporation (“GGB Inc.”), Garlock International Inc, a Delaware corporation (“Garlock International”), Stemco Delaware LP, a Delaware limited partnership (successor to Stemco LLC, a Delaware limited liability company) (“Stemco LP (DE)”), Garlock Overseas Corporation, a Delaware corporation (“Garlock Overseas”), Stemco Holdings, Inc., a Delaware corporation (“Stemco Holdings”), and Stemco Holdings Delaware, Inc., a Delaware corporation (“Stemco Holdings Delaware”; QFM, Coltec International, Garrison, GGB Inc., Garlock International, Stemco LP (DE), Garlock Overseas, Stemco Holdings and Stemco Holdings Delaware each individually referred to herein as a “Subsidiary Guarantor” and collectively as “Subsidiary Guarantors”) executed and delivered that certain Subsidiary Guarantee dated as of May 31, 2002 in favor of the Agent and the Original Lenders (as at any time amended, restated, modified, or supplemented prior to the date hereof, including by means of any joinder agreements, the “Original Subsidiary Guarantee”), pursuant to which the Subsidiary Guarantors jointly and severally unconditionally guaranteed to the Agent and the Original Lenders the payment and performance of all of the “Guaranteed Obligations” (as defined therein); and (iii) Original Borrowers, Parent, and the Subsidiary Guarantors executed   --------------------------------------------------------------------------------   and delivered that certain Security Agreement dated as of May 16, 2002 in favor of the Agent for the benefit of itself and the Original Lenders (as at any time amended, restated, modified, or supplemented prior to the date hereof, including by means of any joinder agreements, the “Original Security Agreement”), pursuant to which Original Borrowers, Parent and the Subsidiary Guarantors granted to the Agent for the benefit of itself and the Original Lenders a security interest in all of the collateral described therein as security for all of the “Obligations” (as defined therein);      WHEREAS, in order to induce the Agent and the Original Lenders to enter into the Original Loan Agreement and the other Loan Documents (as defined therein), and to induce the Original Lenders to make loans and issue letters of credit as provided for in the Original Loan Agreement, Parent, Coltec, GGB Inc., Garlock Sealing, Garlock International, Garlock Overseas, Stemco Holdings and Stemco Holdings Delaware (each an “Original Pledgor” and collectively, the “Original Pledgors”) entered into a Pledge Agreement dated as of May 31, 2002 in favor of the Agent (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified prior to the date hereof, the “Original Pledge Agreement”), and pursuant thereto agreed to pledge to the Agent for the benefit of itself and the Original Lenders all of the Pledged Collateral (as defined in the Original Pledge Agreement) in order to secure the Secured Obligations (as defined in the Original Pledge Agreement);      WHEREAS, Coltec, CIP, Garlock Sealing, GGB LLC, CCC and Stemco LP (TX) (each individually referred to herein as a “Borrower” and collectively as “Borrowers”), Parent and Subsidiary Guarantors, the Agent and the various financial institutions party thereto from time to time (the “Lenders”) have entered into that certain Amended and Restated Loan and Security Agreement dated as of even date herewith (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), which Loan Agreement amends and restates both the Original Loan Agreement and the Original Security Agreement;      WHEREAS, in connection with the Loan Agreement, (i) Parent has executed and delivered that certain Amended and Restated Parent Guarantee dated as of the date hereof in favor of the Agent and the Lenders (as at any time amended, restated, modified, or supplemented prior to the date hereof, the “Parent Guarantee”), which amends and restates the Original Parent Guarantee; and (ii) Subsidiary Guarantors have executed and delivered that certain Amended and Restated Subsidiary Guarantee dated as of the date hereof in favor of the Agent and the Lenders (as at any time amended, restated, modified, or supplemented prior to the date hereof, including by means of any joinder agreements, the “Subsidiary Guarantee”), which amends and restates the Original Subsidiary Guarantee;      WHEREAS, it is a condition to the Agent’s and the Lenders’ willingness to make loans and other financial accommodations to or for the benefit of the Borrowers under the Loan Agreement that Original Pledgors agree to amend and restate the Original Pledge Agreement in its entirety as hereinafter set forth and that the other Pledgors enter into this Agreement on the terms set forth herein; and      WHEREAS, each Pledgor is the record and beneficial owner of the shares of capital stock, limited liability company equity interests and/or the promissory notes and instruments listed on Schedule I hereto; and      WHEREAS, in consideration for, among other things, the execution and delivery of the Loan Agreement by the Agent and the Lenders, and to secure the full and prompt payment and 2 --------------------------------------------------------------------------------   performance of all of the Obligations (as defined in the Loan Agreement), the parties hereto agree that the Original Pledge Agreement is hereby amended and restated in its entirety by this Agreement, and each Pledgor agrees to pledge and grant a first priority security interest to the Agent, for the benefit of the Secured Parties (as defined in the Loan Agreement), in and to the Pledged Collateral described herein, and to ratify, renew and continue the prior pledge and grant of a security interest in and to such Pledged Collateral, in order to ensure and secure the prompt payment and performance of the Secured Obligations (as defined herein) all on the terms set forth herein.      NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Pledge Agreement as follows:      1. Definitions. Unless otherwise defined herein, terms defined in the Loan Agreement are used herein as therein defined, and the following shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):      “Bankruptcy Code” means Title 11, United States Code, as amended from time to time, and any successor statute thereto.      “Domestic Pledged Entity” means an issuer of Pledged Shares or Pledged Indebtedness having a jurisdiction of organization inside the United States.      “Foreign Pledged Entity” means an issuer of Pledged Shares or Pledged Indebtedness having a jurisdiction of organization outside the United States.      “Pledged Collateral” has the meaning assigned to such term in Section 2 hereof.      “Pledged Entity” means either a Domestic Pledged Entity or a Foreign Pledged Entity.      “Pledged Indebtedness” means the indebtedness evidenced by the promissory notes and instruments listed on Part B of Schedule I hereto.      “Pledged Shares” means those Equity Interests listed on Part A of Schedule I hereto.      “Secured Obligations” has the meaning assigned to such term in Section 3 hereof.      “Termination Date” means the date on which the Borrowers’ Obligations and the Secured Obligations (in each case other than Contingent Obligations that survive termination of the Loan Documents) are paid and performed in full and the Lenders’ Commitments are terminated.      2. Pledge. Each Pledgor hereby pledges to the Agent, and grants to the Agent, for the benefit of the Secured Parties, a first priority security interest in all of the following 3 --------------------------------------------------------------------------------   (collectively, the “Pledged Collateral”):      (a) the Pledged Shares and any and all certificates representing the Pledged Shares, and, subject to Section 7(b) hereof, all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; and      (b) subject to the terms of this Agreement, all rights, privileges, authority or power of such Pledgor as owner or holder of the Pledged Shares, including, but not limited to, all rights under any by-laws, shareholder agreement, operating agreement or similar agreement related thereto; and      (c) the Pledged Indebtedness and the promissory notes or instruments evidencing the Pledged Indebtedness, and all interest, cash, instruments and other property and assets from time to time received, receivable or otherwise distributed in respect of the Pledged Indebtedness; and      (d) all additional indebtedness arising after the date hereof and owing to such Pledgor from any Person and evidenced by promissory notes or other instruments, together with such promissory notes and instruments, and all interest, cash, instruments and other property and assets from time to time received, receivable or otherwise distributed in respect of that Pledged Indebtedness. In addition to the foregoing, each Original Pledgor hereby ratifies, reaffirms, renews and continues its prior pledge and grant of a security interest in favor of Agent, for the benefit of the Secured Parties, in all of the Pledged Collateral described in the Original Pledge Agreement. Notwithstanding anything set forth in this Section 2 to the contrary, if one or more Pledgors individually or collectively own more than 65% of the Equity Interests issued by a Foreign Pledged Entity, only an amount of Equity Interests held by such Pledgor(s) equal to 65% of the Equity Interests issued by such Foreign Pledged Entity shall constitute Pledged Collateral.        3. Security for Obligations. This Agreement secures, and the Pledged Collateral is security for, the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise), and performance of all of the Pledgors’ obligations and liabilities under the Loan Agreement, the Parent Guarantee, the Subsidiary Guarantee, and the other Loan Documents, as applicable, and all obligations of each Pledgor now or hereafter existing under this Agreement including, without limitation, all fees, costs and expenses whether in connection with collection actions hereunder or otherwise (collectively, the “Secured Obligations”).        4. Delivery of Pledged Collateral. All certificates and all promissory notes and instruments evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Agent, pursuant hereto, for the benefit of the Secured Parties; provided, that, those certificates, promissory notes and instruments evidencing the Pledged Collateral marked with an “*” on Part A and Part B of Schedule I hereto may be delivered by Pledgors to Agent within 30 days after the date hereof. All Pledged Shares evidenced by certificates shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Agent and all promissory notes or other instruments evidencing the Pledged Indebtedness shall be endorsed by each applicable Pledgor. 4 --------------------------------------------------------------------------------          5. Representations and Warranties. Each Pledgor represents and warrants to the Agent that:      (a) Each Pledgor is, and at the time of delivery of the Pledged Shares to the Agent will be, the sole holder of record and the sole beneficial owner of such Pledged Collateral pledged by such Pledgor free and clear of any Lien thereon or affecting the title thereto, except for any Lien created by this Agreement or otherwise permitted under the Loan Agreement. Each Pledgor is, and at the time of delivery of the Pledged Indebtedness to the Agent will be, the sole owner of such Pledged Collateral free and clear of any Lien thereon or affecting title thereto, except for any Lien created by this Agreement or otherwise permitted under the Loan Agreement;      (b) All of the Pledged Shares representing shares of capital stock or other Equity Interests have been duly authorized, validly issued and, if shares issued by a corporation, are fully paid and non-assessable, and the Pledged Indebtedness has been duly authorized, authenticated or issued and delivered by, and is the legal, valid and binding obligation of, the Pledged Entities, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally, by general equitable principles or by principles of good faith and fair dealing, and no Pledged Entity is in default thereunder except for defaults which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect;      (c) Each Pledgor has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral pledged by such Pledgor to the Agent as provided herein;      (d) None of the Pledged Shares or Pledged Indebtedness has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;      (e) All of the Pledged Shares of corporations, limited liability companies and limited partnerships are presently owned by each applicable Pledgor, and are presently represented by the certificates, if any, listed on Part A of Schedule I hereto. As of the date hereof, there are no existing options, warrants, calls or commitments of any character whatsoever relating to the Pledged Shares;      (f) No consent, approval, authorization or other order or other action by, and no notice to or filing with, any governmental authority or any other Person, except for the filing of UCC financing statements, is required (i) for the pledge by any Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by any Pledgor, or (ii) for the exercise by the Agent of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement, except, in the case of each of clauses (i) and (ii) above, as may be required in connection with the disposition by the Agent of Pledged Collateral (A) under laws affecting the offering and sale of securities generally, (B) under antitrust and similar laws or (C) under foreign laws with respect to the Pledged Collateral issued by a Foreign Pledged Entity;      (g) The pledge, assignment and delivery of the Pledged Collateral pursuant to 5 --------------------------------------------------------------------------------   this Agreement will create a valid first priority lien on and a first priority perfected security interest in favor of the Agent, for the benefit of the Secured Parties, in the Pledged Collateral and the proceeds thereof, securing the payment of the Secured Obligations, subject to no other Lien (except as permitted under the Loan Agreement); provided, that, Pledgors make no representation or warranty herein regarding the perfection of the Agent’s security interest in the Pledged Collateral under foreign law;      (h) This Agreement has been duly authorized, executed and delivered by each Pledgor and constitutes a legal, valid and binding obligation of each Pledgor enforceable against each Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally, by general equitable principles or by principles of good faith and fair dealing;      (i) Except as disclosed on Part A of Schedule I, the Pledged Shares constitute one hundred percent (100%) of the issued and outstanding shares of capital stock or other Equity Interests, as applicable, of each Domestic Pledged Entity, and sixty-five percent (65%) of the issued and outstanding shares of capital stock or other Equity Interests, as applicable, of each Foreign Pledged Entity;      (j) Except as disclosed on Part B of Schedule I, none of the Pledged Indebtedness is subordinated in right of payment to other indebtedness (except for the Secured Obligations) or subject to the terms of an indenture; and      (k) Except as disclosed on Part A of Schedule 1, none of the Pledged Collateral is held or maintained in the form of a securities entitlement or credited to any securities account, and none of the Pledged Collateral constituting (i) general or limited partnership interests in a Domestic Pledged Entity that is a limited partnership or (ii) membership interests in a Domestic Pledged Entity that is a limited liability company, is, nor has the applicable Domestic Pledged Entity elected to designate any of the Pledged Collateral as, a “security” under (and as defined in) Article 8 of the UCC, and none of the Pledged Collateral constituting (i) general or limited partnership interests in a Domestic Pledged Entity that is a limited partnership or (ii) membership interests in a Domestic Pledged Entity that is a limited liability company, is evidenced by a certificate or other writing.           The representations and warranties set forth in this Section 5 shall survive the execution and delivery of this Agreement.        6. Covenants. Each Pledgor covenants and agrees that until the Termination Date:      (a) No Pledgor will sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to the Pledged Collateral, or any unpaid dividends, interest, or other distributions or payments with respect to the Pledged Collateral or grant a Lien in the Pledged Collateral, unless otherwise permitted by the Loan Agreement or consented to by the Required Lenders;      (b) Each Pledgor will, at its expense, promptly execute, acknowledge and deliver all such instruments and take all such actions as the Agent from time to time may reasonably request in order to ensure to the Agent the benefits of the Liens in and to the Pledged Collateral intended to be created by this Agreement, including the filing of any necessary Uniform 6 --------------------------------------------------------------------------------   Commercial Code financing statements, which may be filed by the Agent with or (to the extent permitted by law) without the signature of any Pledgor, and will cooperate with the Agent, at each Pledgor’s expense, in obtaining all necessary approvals and making all necessary filings under federal, state, local or foreign law in connection with such Liens or any sale or transfer of the Pledged Collateral;      (c) Each Pledgor has, and will take all commercially reasonable actions to defend, the title to the Pledged Collateral and the Liens of the Agent in the Pledged Collateral against the claim of any Person and will maintain and preserve such Liens;      (d) Each Pledgor will, upon obtaining ownership of any Equity Interests, promissory notes or instruments of a Pledged Entity otherwise required to be pledged to the Agent pursuant to any of the Loan Documents, which Equity Interests, notes or instruments are not already Pledged Collateral, promptly (and in any event within ten (10) Business Days after obtaining ownership) deliver to the Agent an amendment to this Agreement, duly executed by such Pledgor, in substantially the form of Schedule II hereto (a “Pledge Amendment”) in respect of any such additional Equity Interests, notes or instruments pursuant to which such Pledgor shall pledge to the Agent all of such additional Equity Interests, notes or instruments. Each Pledgor hereby authorizes the Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Indebtedness listed on any Pledge Amendment delivered to the Agent shall for all purposes hereunder be considered Pledged Collateral; and      (e) No Pledgor shall (i) cause or permit any of the Pledged Collateral to be held or maintained in the form of a security entitlement or credited to any securities account, (ii) designate, or cause any Pledged Entity whose Equity Interests constitute part of the Pledged Collateral to designate, any of the Pledged Collateral constituting (A) general or limited partnership interests in a limited partnership or limited liability partnership or (B) membership interests in a limited liability company as a “security” under Article 8 of the UCC, or (iii) evidence, or permit any Pledged Entity that is a limited partnership or limited liability company whose Equity Interests constitute part of the Pledged Collateral to evidence, any of the Pledged Collateral with any certificates, instruments or other writings (other than any such Equity Interests that constitute part of the Pledged Collateral that as of the date hereof are evidenced by a certificate, instrument or other writing).      (f) To the extent that any portion of the Pledged Collateral may now or hereafter consist of uncertificated securities within the meaning of Article 8 of the UCC, each Pledgor irrevocably authorizes and instructs each Pledged Entity whose Equity Interests constitute a part of the Pledged Collateral to comply with any instruction received by such Pledged Entity from Agent with respect to such Pledged Collateral without any other or further instructions from or consent of any Pledgor, and each Pledgor agrees that each such Pledged Entity shall be fully protected in so complying; provided, however, that Agent agrees that it will not issue or deliver any such instructions except upon the occurrence and during the continuance of an Event of Default.      (g) Within thirty (30) days after the request therefor by Agent, each Pledgor shall cause each of the Foreign Pledged Entities whose Equity Interests constitute a part of the Pledged Collateral of such Pledgor to sign an Acknowledgment and Consent by Issuers of Pledged Shares in substantially similar form to that attached to this Agreement and otherwise in form and substance satisfactory to Agent.             7. Pledgor’s Rights. As long as no Event of Default shall have occurred and be continuing and until written notice shall be given to such Pledgor in accordance with Section 17 hereof: 7 --------------------------------------------------------------------------------        (a) Each Pledgor shall have the right, from time to time, to vote and give consents with respect to the Pledged Collateral, or any part thereof for all purposes not inconsistent with the provisions of this Agreement, the Loan Agreement or any Loan Documents; provided, however that no vote shall be cast, and no consent shall be given or action taken, which would have the effect of impairing the position or interest of the Agent in respect of the Pledged Collateral (unless and to the extent permitted by the Loan Agreement or any other Loan Document or consented to by the Required Lenders) or which would authorize, effect or consent to any of the following (unless and to the extent permitted by the Loan Agreement or any other Loan Document or consented to by the Required Lenders):      (i) the dissolution or liquidation, in whole or in part, of a Pledged Entity;      (ii) the consolidation or merger of a Pledged Entity with any other Person;        (iii) the sale, disposition or encumbrance of all or substantially all of the assets of a Pledged Entity, except for Liens in favor of the Agent;        (iv) any change in the authorized number of shares, the stated capital or the authorized share capital of a Pledged Entity or the issuance of any additional shares of its capital stock, or other Equity Interests, as applicable; or        (v) the alteration of the voting rights with respect to the capital stock, or other Equity Interests, as applicable, of a Pledged Entity; and      (b) (i) Each Pledgor shall be entitled, from time to time, to collect, receive and retain for its own use all dividends, distributions and interest paid in respect of the Pledged Shares and Pledged Indebtedness to the extent not in violation of the Loan Agreement or any other Loan Document other than any and all: (A) dividends, distributions and interest paid or payable in Pledged Shares, Pledged Indebtedness or other securities or instruments distributed in respect of, or in exchange for, any Pledged Collateral; (B) dividends and other distributions paid or payable in Pledged Shares, Pledged Indebtedness or other securities or instruments distributed in respect of any Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in capital of a Pledged Entity; and (C) Pledged Shares, Pledged Indebtedness or other securities or instruments paid, payable or otherwise distributed, in respect of principal of, or in redemption of, or in exchange for, any Pledged Collateral; provided, however, that until actually paid, all rights to such distributions shall remain subject to the Lien created by this Agreement; and      (ii) All dividends, distributions and interest (other than such dividends, distributions and interest as are permitted to be paid to any Pledgor in accordance with Section 7(b)(i) hereof), whenever paid or made, shall be delivered to the Agent to hold as Pledged Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). 8 --------------------------------------------------------------------------------        8. Defaults and Remedies.      (a) Upon the occurrence and during the continuation of any Event of Default, and concurrently with written notice to each applicable Pledgor, the Agent (personally or through an agent) is hereby authorized and empowered to transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon, to sell in one or more sales after ten (10) days’ notice of the time and place of any public sale or of the time at which a private sale is to take place (which notice each Pledgor agrees is commercially reasonable) the whole or any part of the Pledged Collateral and to otherwise act with respect to the Pledged Collateral as though the Agent were the outright owner thereof, each Pledgor hereby irrevocably constituting and appointing the Agent as the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so, and which appointment shall remain in effect until the Termination Date; provided, however, the Agent shall not have any duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so. Any sale shall be made at a public or private sale at the Agent’s place of business, or at any place to be named in the notice of sale, either for cash or upon credit or for future delivery at such price as the Agent may deem fair, and the Agent may be the purchaser of the whole or any part of the Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of each Pledgor or any right of redemption. Each sale shall be made to the highest bidder, but the Agent reserves the right to reject any and all bids at such sale which, in its discretion, it shall deem inadequate. Demands of performance and, except as otherwise herein specifically provided for, notices of sale, advertisements and the presence of property at sale are hereby waived and any sale hereunder may be conducted by an auctioneer or any officer or agent of the Agent.      (b) If, at the original time or times appointed for the sale of the whole or any part of the Pledged Collateral, the highest bid, if there be but one sale, shall be inadequate to discharge in full all the Secured Obligations, or if the Pledged Collateral be offered for sale in lots, if at any of such sales, the highest bid for the lot offered for sale would indicate to the Agent, in its discretion, that the proceeds of the sales of the whole of the Pledged Collateral would be unlikely to be sufficient to discharge all the Secured Obligations, the Agent may, on one or more occasions and in its discretion, postpone any of said sales by public announcement at the time of sale or the time of previous postponement of sale, and no other notice of such postponement or postponements of sale need be given, any other notice being hereby waived; provided, however that any sale or sales made after such postponement shall be after ten (10) days’ notice to each applicable Pledgor.      (c) If, at any time when the Agent shall determine to exercise its right to sell the whole or any part of the Pledged Collateral hereunder, such Pledged Collateral or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as amended (or any similar statute then in effect) (the “Act”), the Agent may, in its discretion (subject only to applicable requirements of law), sell such Pledged Collateral or part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable, but subject to the other requirements of this Section 8, and shall not be required to effect such registration or to cause the same to be 9 --------------------------------------------------------------------------------   effected. Without limiting the generality of the foregoing, in any such event, the Agent in its discretion (x) may, in accordance with applicable securities laws, proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or part thereof could be or shall have been filed under said Act (or similar statute), (y) may approach and negotiate with a single possible purchaser to effect such sale, and (z) may restrict such sale to a purchaser who is an accredited investor under the Act and who will represent and agree that such purchaser is purchasing for its own account, for investment and not with a view to the distribution or sale of such Pledged Collateral or any part thereof. In addition to a private sale as provided above in this Section 8, if any of the Pledged Collateral shall not be freely distributable to the public without registration under the Act (or similar statute) at the time of any proposed sale pursuant to this Section 8, then the Agent shall not be required to effect such registration or cause the same to be effected but, in its discretion (subject only to applicable requirements of law), may require that any sale hereunder (including a sale at auction) be conducted subject to restrictions:        (i) as to the financial sophistication and ability of any Person permitted to bid or purchase at any such sale;        (ii) as to the content of legends to be placed upon any certificates representing the Pledged Collateral sold in such sale, including restrictions on future transfer thereof;        (iii) as to the representations required to be made by each Person bidding or purchasing at such sale relating to that Person’s access to financial information about each applicable Pledged Entity and such Person’s intentions as to the holding of the Pledged Collateral so sold for investment for its own account and not with a view to the distribution thereof; and        (iv) as to such other matters as the Agent may, in its discretion, deem necessary or appropriate in order that such sale (notwithstanding any failure so to register) may be effected in compliance with the Bankruptcy Code and other laws affecting the enforcement of creditors’ rights and the Act and all applicable state securities laws.      (d) Each Pledgor recognizes that the Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof in accordance with Section 8(c) hereof. Each Pledgor also acknowledges that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, each Pledgor agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private. The Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Pledged Entity to register such securities for public sale under the Act, or under applicable state securities laws, even if each applicable Pledgor and the Pledged Entity would agree to do so.      (e) Each Pledgor agrees to the maximum extent permitted by applicable law that, following the occurrence and during the continuance of an Event of Default, it will not at any time plead, claim or take the benefit of any appraisal, valuation, stay, 10 --------------------------------------------------------------------------------   extension, moratorium or redemption law now or hereafter in force in order to prevent or delay the enforcement of this Agreement, or the absolute sale of the whole or any part of the Pledged Collateral or the possession thereof by any purchaser at any sale hereunder, and each Pledgor waives the benefit of all such laws to the extent it lawfully may do so. Each Pledgor agrees that it will not interfere with any right, power or remedy of the Agent provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Agent of any one or more of such rights, powers or remedies. No failure or delay on the part of the Agent to exercise any such right, power or remedy and no notice or demand which may be given to or made upon any Pledgor by the Agent with respect to any such remedies shall operate as a waiver thereof, or limit or impair the Agent’s right to take any action or to exercise any power or remedy hereunder, without notice or demand, or prejudice its rights as against such Pledgor in any respect.      (f) Each Pledgor further agrees that a breach of any of the covenants contained in this Section 8 will cause irreparable injury to the Agent and the other Secured Parties, that the Agent and the other Secured Parties shall have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 8 shall be specifically enforceable against each Pledgor, and each Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that the Secured Obligations are not then due and payable in accordance with the agreements and instruments governing and evidencing such obligations or that the Secured Obligations have been paid in full in cash.      9. Waiver. No delay on the Agent’s part in exercising any power of sale, Lien, option or other right hereunder, and no notice or demand which may be given to or made upon any Pledgor by the Agent with respect to any power of sale, Lien, option or other right hereunder, shall constitute a waiver thereof, or limit or impair the Agent’s right to take any action or to exercise any power of sale, Lien, option, or any other right hereunder, without notice or demand, or prejudice the Agent’s rights as against any Pledgor in any respect.      10. Assignment. The Agent may assign, indorse or transfer any instrument evidencing all or any part of the Secured Obligations as provided in, and in accordance with, the Loan Agreement, and the holder of such instrument shall be entitled to the benefits of this Agreement.      11. Termination. Upon the occurrence of the Termination Date, the Agent shall deliver to each Pledgor the Pledged Collateral pledged by such Pledgor at the time subject to this Agreement and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof and, except as otherwise provided herein, all of such Pledgor’s obligations hereunder shall at such time terminate.      12. Lien Absolute. All rights of the Agent hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of:        (a) any lack of validity or enforceability of the Loan Agreement, any Loan Documents or any other agreement or instrument governing or evidencing any Secured Obligations;        (b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Secured Obligations, or any other amendment or waiver of or any 11 --------------------------------------------------------------------------------   consent to any departure from the Loan Agreement, any other Loan Documents or any other agreement or instrument governing or evidencing any Secured Obligations;        (c) any exchange, release or non-perfection of any other Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations;        (d) the insolvency of any Borrower or any Pledgor, or        (e) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Pledgor (other than the payment in full of the Borrowers’ Obligations and the Secured Obligations and the expiration of the Lenders’ Commitments to make advances under the Loan Agreement).      13. Release. Each Pledgor consents and agrees that the Agent and the other Secured Parties may at any time, or from time to time, in their discretion:        (a) renew, extend or change the time of payment, and/or the manner, place or terms of payment of all or any part of the Secured Obligations; and        (b) exchange, release and/or surrender all or any of the Collateral, or any part thereof, by whomsoever deposited, which is now or may hereafter be held by the Agent in connection with all or any of the Secured Obligations, all in such manner and upon such terms as the Agent may deem proper, and without notice to or further assent from any Pledgor, it being hereby agreed that each Pledgor shall be and remain bound upon this Agreement, irrespective of the value or condition of any of the Collateral, and notwithstanding any such change, exchange, settlement, compromise, surrender, release, renewal or extension, and notwithstanding also that the Secured Obligations may, at any time, exceed the aggregate principal amount thereof set forth in the Loan Agreement, or any other agreement governing any Secured Obligations. Each Pledgor hereby waives notice of acceptance of this Agreement, and also presentment, demand, protest and notice of dishonor of any and all of the Secured Obligations, and promptness in commencing suit against any party hereto or liable hereon, and in giving any notice to or of making any claim or demand hereunder upon such Pledgor. No act or omission of any kind on the Agent’s part shall in any event affect or impair this Agreement.      14. Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Pledgor or any Pledged Entity for liquidation or reorganization, should any Pledgor or any Pledged Entity become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of any Pledgor’s or a Pledged Entity’s assets, and this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.      15. Miscellaneous. 12 --------------------------------------------------------------------------------        (a) The Agent may execute any of its duties hereunder by or through agents or employees and shall be entitled to advice of counsel concerning all matters pertaining to its duties hereunder.      (b) Each Pledgor agrees to promptly reimburse the Agent for actual out-of-pocket expenses, including, without limitation, reasonable counsel fees, incurred by the Agent in connection with the administration and enforcement of this Agreement.      (c) Neither the Agent, nor any of its respective officers, directors, employees, agents or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct.      (d) THIS AGREEMENT SHALL BE BINDING UPON EACH PLEDGOR AND ITS SUCCESSORS AND ASSIGNS (INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF OF SUCH PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, THE AGENT AND ITS SUCCESSORS AND ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (BUT WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES), BUT GIVING EFFECT TO FEDERAL LAW RELATING TO NATIONAL BANKS, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF THE AGENT AND THE APPLICABLE PLEDGOR.      (e) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY UNITED STATES FEDERAL COURT SITTING IN OR WITH DIRECT OR INDIRECT JURISDICTION OVER THE WESTERN DISTRICT OF NORTH CAROLINA OR IN ANY NORTH CAROLINA STATE COURT SITTING IN MECKLENBURG COUNTY, NORTH CAROLINA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PLEDGORS AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PLEDGORS AND THE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING: (1) THE AGENT SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY PLEDGOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.      (f) EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY 13 --------------------------------------------------------------------------------   AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH PLEDGOR AT ITS ADDRESS SET FORTH HEREIN AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.        (g) EACH PLEDGOR AND THE AGENT IRREVOCABLY WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PLEDGOR AND THE AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.      16. Severability. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or effect those portions of this Agreement which are valid.      17. Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon any other a communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be given in accordance with Section 15.9 of the Loan Agreement.      18. Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.      19. Counterparts. This Agreement may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement.      20. Benefit of the Agent. All security interests granted or contemplated hereby shall be for the benefit of the Agent, for the benefit of the Secured Parties, and all proceeds or payments 14 --------------------------------------------------------------------------------   realized from the Pledged Collateral in accordance herewith shall be applied to the Secured Obligations.      21. Amendment and Restatement.           (a) This Agreement amends and restates the Original Pledge Agreement. All rights, benefits, indebtedness, interests, liabilities and obligations of the parties to the Original Pledge Agreement and the agreements, documents and instruments executed and delivered in connection with the Original Pledge Agreement (collectively, the “Original Pledge Documents”) are hereby renewed, amended, restated and superseded in their entirety according to the terms and provisions set forth in this Agreement and the other Loan Documents. This Agreement does not constitute, nor shall it result in, a waiver of, or release, discharge or forgiveness of, any amount payable pursuant to the Original Pledge Documents or any indebtedness, liabilities or obligations of any Pledgor thereunder, all of which are renewed and continued and are hereafter payable and to be performed in accordance with this Agreement and the other Loan Documents. Neither this Agreement nor any of the other Loan Documents extinguishes the indebtedness or liabilities outstanding in connection with the Original Pledge Documents, nor do they constitute a novation with respect thereto.           (b) All security interests, pledges, assignments, and other Liens previously granted by each Pledgor pursuant to the Original Pledge Documents are hereby renewed and continued, and all such security interests, pledges, assignments and other Liens shall remain in full force and effect as security for the Secured Obligations. [Signature Pages Follows] 15 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.             PLEDGORS: ENPRO INDUSTRIES, INC.       By:   /s/ Robert D. Rehley         Name:   Robert D. Rehley        Title:  Vice President and Treasurer      Address for Notices: 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7587                           COLTEC INDUSTRIES INC       By:   /s/ Robert D. Rehley         Name:   Robert D. Rehley        Title:  Treasurer      Address for Notices: 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7259                           GARLOCK INTERNATIONAL INC.       By:   /s/ John R. Mayo         Name:   John R. Mayo        Title:  Vice President and Secretary      Address for Notices: c/o Coltec Industries Inc 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7059                         --------------------------------------------------------------------------------                         GARLOCK OVERSEAS CORPORATION       By:   /s/ John R. Mayo         Name:   John R. Mayo        Title:  Vice President and Secretary      Address for Notices: c/o Coltec Industries Inc 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7059                           GGB, INC.       By:   /s/ Robert D. Rehley         Name:   Robert D. Rehley        Title:  Treasurer      Address for Notices: 700 Mid Atlantic Pkwy Thorofare, New Jersey 08086 Fax: 704-423-7059                           GARLOCK SEALING TECHNOLOGIES LLC       By:   /s/ John R. Mayo         Name:   John R. Mayo        Title:   Vice President and Secretary      Address for Notices: 1666 Division Street Palmyra, New York 14522 Fax: 704-423-7587                         --------------------------------------------------------------------------------                         COLTEC INTERNATIONAL SERVICES CO.       By:   /s/ Robert D. Rehley         Name:   Robert D. Rehley        Title:  Treasurer      Address for Notices: c/o Coltec Industries Inc 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7059                           STEMCO HOLDINGS, INC.       By:   /s/ Robert P. McKinney         Name:   Robert P. McKinney        Title:  Vice President      Address for Notices: c/o Coltec Industries Inc 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7059                           STEMCO HOLDINGS DELAWARE, INC.       By:   /s/ Nathaniel E. Standing         Name:   Nathaniel E. Standing        Title:  Vice President and Treasurer      Address for Notices: c/o Coltec Industries Inc 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7059                         --------------------------------------------------------------------------------                         GARRISON LITIGATION MANAGEMENT GROUP, LTD.       By:   /s/ Paul L. Grant         Name:   Paul L. Grant          Title:   President        Address for Notices: 5605 Carnegie Blvd. Charlotte, North Carolina 28209-4674 Fax: 704-423-7587                         --------------------------------------------------------------------------------                         AGENT: BANK OF AMERICA, N.A., as Agent       By:   /s/ Andrew Doherty         Name: Andrew Doherty        Title:   Senior Vice President        Address for Notices: 300 Galleria Parkway, Suite 800 Atlanta, Georgia 30339 Fax: (770) 857-2947 Attention: Loan Administration                          

  SEVENTH AMENDMENT TO SECOND RESTATED AND AMENDED AGREEMENT OF LIMITED PARTNERSHIP OF LIBERTY PROPERTY LIMITED PARTNERSHIP      This Seventh Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of December 15, 2006 (this “Amendment”), is entered into by LIBERTY PROPERTY TRUST, a Maryland real estate investment trust, as general partner (the “General Partner”) of LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership (the “Partnership”), for itself and on behalf of the limited partners of the Partnership, and GSEP 2006 REALTY CORP., a Delaware corporation (“Goldman”).      Whereas, Section 4.2(a) of the Second Restated and Amended Agreement of Limited Partnership of the Partnership, as amended by that certain First Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of July 28, 1999, that certain Second Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of April 18, 2000, that certain Third Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of June 10, 2002, that certain Fourth Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of September 1, 2004, that certain Fifth Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of June 16, 2005, and that certain Sixth Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of June 30, 2005 (as amended) (collectively, as amended, the “Partnership Agreement”), authorizes the General Partner to cause the Partnership to issue additional Partnership Units in one or more classes or series, with such designations, preferences and relative, participating, optional or other special rights, powers and duties as shall be determined by the General Partner, subject to the provisions of such section; and      Whereas, pursuant to the authority granted to the General Partner pursuant to Sections 4.2(a) and 14.1(b) of the Partnership Agreement, the General Partner desires to amend the Partnership Agreement (i) to establish a new class of Partnership Units, the “Series G Preferred Units” (as hereinafter defined), and to set forth the designations, rights, powers, preferences and duties of such Series G Preferred Units, (ii) to issue the Series G Preferred Units to Goldman and admit Goldman as an Additional Limited Partner and (iii) to make certain other changes to the Partnership Agreement.      Now, therefore, in consideration of good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the General Partner hereby amends the Partnership Agreement as follows:      Section 1. Definitions. For purposes of this Amendment, the term “Parity Preferred Units” shall be used to refer to any class or series of Partnership Interests of the Partnership now or hereafter authorized, issued or outstanding expressly designated by the Partnership to rank on a parity with Series G Preferred Units with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Partnership including, without   --------------------------------------------------------------------------------   limitation, the “7.45% Series B Cumulative Redeemable Preferred Partnership Interests,” the “7.625% Series D Cumulative Redeemable Preferred Partnership Interests,” the “7.00% Series E Cumulative Redeemable Preferred Partnership Interests”, and the “6.65% Series F Cumulative Redeemable Preferred Partnership Interests.” The term “Priority Return” shall mean an amount equal to 6.70% per annum, as the same may be adjusted pursuant to Section 3(a) below, determined on the basis of a 360 day year of twelve (12) 30-day months (and for any period shorter than a full quarterly period for which distributions are computed, the amount of the distribution payable will be computed based on the ratio of the actual number of days elapsed in such period to ninety (90) days), cumulative to the extent not distributed for any given distribution period pursuant to Section 6.2 of the Partnership Agreement, of the stated value of $50 per Series G Preferred Unit, commencing on the date of issuance of such Series G Preferred Unit. The term “Subsidiary” shall mean with respect to any person, any corporation, partnership, limited liability company, joint venture or other entity of which a majority of (i) voting power of the voting equity securities or (ii) the outstanding equity interests, is owned, directly or indirectly, by such person. The term “PTP” shall mean a “publicly traded partnership” within the meaning of Section 7704 of the Internal Revenue Code (the “Code”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Partnership Agreement.      Section 2. Designation and Number. A series of Partnership Interests in the Partnership designated as the “6.70% Series G Cumulative Redeemable Preferred Partnership Interests” (the “Series G Preferred Units”) is hereby established. The maximum number of Series G Preferred Units shall be 540,000.      Section 3.      (a) Payment of Distributions. Subject to the rights of holders of Parity Preferred Units and holders of Partnership Interests ranking senior to the Series G Preferred Units as to payment of distributions, pursuant to Section 6.2 of the Partnership Agreement, holders of Series G Preferred Units will be entitled to receive, when, as and if declared by the Partnership acting through the General Partner, out of Net Operating Cash Flow, cumulative preferential cash distributions at the rate per annum of 6.70% of the original Capital Contribution per Series G Preferred Unit (the “Issuance Rate”). All distributions shall be cumulative, shall accrue from the original date of issuance and will be payable (i) quarterly in arrears, on or before March 31, June 30, September 30 and December 31 of each year commencing on the first such date to occur after the original date of issuance, and, (ii), in the event of (A) an exchange of Series G Preferred Units into Series G Preferred Shares, or (B) a redemption of Series G Preferred Units, on the exchange date or redemption date, as applicable (each a “Preferred Unit Distribution Payment Date”). The amount of the distribution payable for any period will be computed on the basis of a 360-day year of twelve (12) 30-day months and for any period shorter than a full quarterly period for which distributions are computed, the amount of the distribution payable will be computed based on the ratio of the actual number of days elapsed in such period to ninety (90) days. If any date on which distributions are to be made on the Series G Preferred Units is not a Business Day (as such term is defined herein), then payment of the distribution to be made on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any   --------------------------------------------------------------------------------   such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Distributions on the Series G Preferred Units will be made to the holders of record of the Series G Preferred Units on the relevant record dates to be fixed by the Partnership acting through the General Partner, which record dates shall in no event exceed fifteen (15) Business Days prior to the relevant Preferred Unit Distribution Payment Date (the “Preferred Unit Partnership Record Date”).      (b) Distributions Cumulative. Distributions on the Series G Preferred Units will accrue whether or not the terms and provisions of any agreement of the Partnership, including any agreement relating to its indebtedness at any time prohibit the declaration, setting aside for payment or current payment of distributions, 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. Accrued but unpaid distributions on the Series G Preferred Units will accumulate as of the Preferred Unit Distribution Payment Date on which they first become payable. Distributions on account of arrears for any past distribution periods may be declared and paid at any time, without reference to a regular Preferred Unit Distribution Payment Date to holders of record of the Series G Preferred Units on the record date fixed by the Partnership acting through the General Partner, which date shall not exceed fifteen (15) Business Days prior to the payment date. Accumulated and unpaid distributions will not bear interest.      (c) Priority as to Distributions.      (i) So long as any Series G Preferred Units are outstanding, no distribution of cash or other property shall be authorized, declared, paid or set apart for payment on or with respect to any class or series of Partnership Interest of the Partnership ranking junior as to the payment of distributions or rights upon a voluntary or involuntary liquidation, dissolution or winding-up of the Partnership to the Series G Preferred Units (collectively, “Junior Units”), nor shall any cash or other property be set aside for or applied to the purchase, redemption or other acquisition for consideration of any Series G Preferred Units, any Parity Preferred Units or any Junior Units, unless, in each case, all distributions accumulated on all Series G Preferred Units and all classes and series of outstanding Parity Preferred Units have been paid in full or a sum sufficient for such full payment has been irrevocably deposited in trust for immediate payment. The foregoing sentence will not prohibit (a) distributions payable solely in Junior Units, (b) the conversion of Junior Units or Parity Preferred Units into Partnership Interests of the Partnership ranking junior to the Series G Preferred Units as to distributions and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the Partnership, (c) the redemption of Partnership Interests corresponding to any Series G Preferred Shares, Parity Preferred Shares or Junior Shares to be purchased by the General Partner pursuant to Article VII of the Amended and Restated Declaration of Trust of the General Partner (as amended and modified through the date hereof, the “Charter”) to preserve the General Partner’s status as a real estate investment   --------------------------------------------------------------------------------   trust, provided that such redemption shall be upon the same terms as the corresponding purchase pursuant to Article VII of the Charter or (d) the foreclosure by the Partnership on the Partnership Interests constituting the Indemnity Collateral and/or the Special Indemnity Collateral (as such term is defined in Section 13.3 of the Partnership Agreement).      (ii) So long as distributions have not been paid in full (or a sum sufficient for such full payment is not irrevocably deposited in trust for immediate payment) upon the Series G Preferred Units, all distributions authorized and declared on the Series G Preferred Units and all classes or series of outstanding Parity Preferred Units shall be authorized and declared so that the amount of distributions authorized and declared per Series G Preferred Unit and such other classes or series of Parity Preferred Units shall in all cases bear to each other the same ratio that accrued distributions per Series G Preferred Unit and such other classes or series of Parity Preferred Units (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such class or series of Parity Preferred Units do not have cumulative distribution rights) bear to each other. No interest or any sum of money in lieu of interest shall be payable in respect of any distribution, payment or payments on Series G Preferred Units which may be in arrears.      (d) No Further Rights. Holders of Series G Preferred Units shall not be entitled to any distributions, whether payable in cash, other property or otherwise, in excess of the full cumulative distributions described herein.      Section 4. Allocations. Section 1 of Exhibit C to the Partnership Agreement is hereby deleted and replaced by the following:      (a) Net Income. Except as otherwise provided herein, Net Income for any fiscal year or other applicable period shall be allocated in the following order and priority:      (i) first, to the General Partner to the extent of Net Loss previously allocated to the General Partner pursuant to Section 1(b)(iii) below for all prior fiscal years or other applicable periods exceed Net Income previously allocated to the General Partner pursuant to this Section 1(a)(i) for all prior fiscal years or other applicable periods;      (ii) second, to Partners holding any Partnership Interests that are entitled to any preference in distribution to the extent that Net Loss previously allocated to such holders pursuant to Section l(b)(ii) below for all prior fiscal years or other applicable periods exceeds Net Income previously allocated to such Partners pursuant to this Section 1(a)(ii) for all prior fiscal years or other applicable periods;      (iii) third, to Partners holding Partnership Interests of a class not entitled to preference in distribution to the extent that Net Loss previously allocated to such holders pursuant to Section 1(b)(i) below for all prior fiscal   --------------------------------------------------------------------------------   years or other applicable periods exceeds Net Income previously allocated to such holders pursuant to this Section 1(a)(iii) for all prior fiscal years or other applicable periods;      (iv) fourth, to Partners holding any Partnership Interests that are entitled to any preference in distribution in accordance with the rights of any such class of Partnership Interests until each such Partnership Interest has been allocated, Net Income equal to the excess of (A) the cumulative amount of preferred distributions such Partners are entitled to receive to the last day of the current fiscal year or other applicable period or to the date of redemption, to the extent such Partnership Interests are redeemed during such period, over (B) the cumulative Net Income allocated to such Partners, pursuant to this Section 1(a)(iv) for all prior fiscal years or other applicable periods (and, within each such class, pro rata in proportion to the respective share of such Partnership Interests each Partner holds as of the last day of the period for which such allocation is being made); and      (v) fifth, with respect to Partnership Interests that are not entitled to any preference in the allocation of Net Income, pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to each Partner’s respective share of such Partnership Interests as of the last day of the period for which such allocation is being made). Provided, further, that the holders of the Series E Preferred Units, Series F Preferred Units and Series G Preferred Units shall be allocated an amount of the net “rents from real property” (within the meaning of Sec. 856(d) of the Code) of the Partnership equal to all amounts paid or accrued with respect to the Series E Preferred Units, Series F Preferred Units and Series G Preferred Units, respectively, pursuant to Section 3.(a) of the Fifth Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of June 16, 2005, Section 3.(a) of the Sixth Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of June 30, 2005 (as amended) and Section 3.(a) of the Seventh Amendment to the Second Restated and Amended Agreement of Limited Partnership, dated as of December 12, 2006, respectively, with respect to such fiscal year or other period in lieu of any allocation of Net Income or Net Loss under this Section 1 and the amount of Net Income and Net Loss of the Partnership for any fiscal year or other period shall be computed after taking into account the special allocation of such net income to the holders of the Series E Preferred Units, Series F Preferred Units and Series G Preferred Units, provided that the amount of net “rents from real property” that are allocated to the holders of the Series F Preferred Units and Series G Preferred Units with respect to any fiscal year or other period shall not exceed the amount of Net Income that would have been allocated to such holders under this Section 1 had the foregoing allocations of net “rents from real property” not been included in the Partnership Agreement.      (b) Net Loss. Except as otherwise provided herein, Net Loss for any fiscal year or other applicable period shall be allocated in the following order and priority:      (i) first, with respect to classes of Partnership Interests that are not entitled to any preference in distribution (including the General Partner Interest),   --------------------------------------------------------------------------------   pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to each Partner’s respective share of such Partnership Interests as of the last day of the period for which such allocation is being made) until the Adjusted Capital Account (ignoring for this purpose any amounts a Partner is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of each Partner with respect to such Partnership Interests is reduced to zero;      (ii) second, to the Partners holding any Partnership Interests that are entitled to any preference in distribution in accordance with the rights of any such class of Partnership Interests (and, if there is more than one class of such Partnership Interests, then in the reverse order of their preference in distribution), until the Adjusted Capital Account (modified in the same manner as in clause (i)) of each such Partner with respect to such Partnership Interests is reduced to zero; and      (iii) third, to the General Partner.      To the extent permitted under Section 704 of the Code, solely for purposes of allocating Net Income or Net Loss in any taxable year (or a portion thereof) to Partners holding Series B Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units or Series G Preferred Units pursuant to this Section 1, items of Net Income or Net Loss, as the case may be, shall not include Depreciation with respect to properties that are “ceiling limited” in respect of holders of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units or Series G Preferred Units. For purposes of the preceding sentence, Partnership property shall be considered “ceiling limited” in respect of a holder of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units or Series G Preferred Units if Depreciation attributable to such Partnership property which would otherwise be allocable to such Partner, without regard to this paragraph, exceeds depreciation determined for federal income tax purposes attributable to such Partnership property which would otherwise be allocable to such holder by more than 5%. Notwithstanding the foregoing sentences in this paragraph, in applying this paragraph, the General Partner may, in its discretion for administrative ease and convenience, calculate Net Income or Net Loss in any taxable year (or a portion thereof) allocable to the Partners holding Series B Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units or Series G Preferred Units by excluding Depreciation with respect to all properties of the Partnership. The parties intend hereunder that the aggregate Capital Account balance of the holders of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units or Series G Preferred Units at any date shall not exceed the amount of the original Capital Contribution of such holder plus the cumulative Priority Return, whether or not declared, to the extent not previously distributed.   --------------------------------------------------------------------------------        Section 5. Liquidation Proceeds.      (a) Upon any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Partnership, distributions on the Series G Preferred Units shall be made in accordance with Section 8.2 of the Partnership Agreement.      (b) Notice. Written notice of any such voluntary or involuntary liquidation, dissolution or winding-up of the Partnership, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by (i) fax and (ii) by first class mail, postage prepaid, not less than twenty (20) and not more than sixty (60) days prior to the payment date stated therein, to each record holder of the Series G Preferred Units at the respective addresses of such holders as the same shall appear on the transfer records of the Partnership.      (c) No Further Rights. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series G Preferred Units will have no right or claim to any of the remaining assets of the Partnership.      (d) Consolidation, Merger or Certain Other Transactions. The consolidation or merger of the Partnership with or into any other corporation, trust, partnership, limited liability company or other entity (or of any other corporation, trust, partnership, limited liability company or other entity with or into the Partnership), or the sale, lease, exchange, transfer or conveyance of all or substantially all of the property or business of the Partnership shall not be deemed to constitute a liquidation, dissolution or winding-up of the Partnership.      Section 6. Optional Redemption.      (a) Right of Optional Redemption. The Series G Preferred Units may not be redeemed prior to December 12, 2011. On or after such date, the Partnership at its sole option shall have the right to redeem the Series G Preferred Units, in whole or in part, at any time or from time to time, upon not less than thirty (30) nor more than sixty (60) days written notice, at a redemption price, payable in cash, equal to the Capital Account balance of the holders of Series G Preferred Units (the “Series G Redemption Price”); provided, however, that no redemption pursuant to this Section 6 will be permitted if the Redemption Price does not equal or exceed the original Capital Contribution of such holder plus the cumulative Priority Return, whether or not declared, to the redemption date to the extent not previously distributed. If fewer than all of the outstanding Series G Preferred Units are to be redeemed, the Series G Preferred Units to be redeemed shall be selected pro rata (as nearly as practicable without creating fractional units).      (b) Limitation on Redemption.      (i) The Redemption Price of the Series G Preferred Units (other than the portion thereof consisting of accumulated but unpaid distributions) will be payable solely out of the sale proceeds of capital stock of the General Partner, which will be contributed by the General Partner to the Partnership as additional capital contribution, or out of the sale of limited partner interests in the   --------------------------------------------------------------------------------   Partnership and from no other source. For purposes of the preceding sentence, “capital stock” means any equity securities (including Common Shares and Preferred Shares (as such terms are defined in the Charter)), shares, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.      (ii) The Partnership may not redeem fewer than all of the outstanding Series G Preferred Units unless all accumulated and unpaid distributions have been paid or contemporaneously are authorized and paid (or authorized and a sum sufficient for the full payment thereof is irrevocably deposited in trust for immediate payment) on all Series G Preferred Units for all quarterly distribution periods terminating on or prior to the date of redemption.      (c) Procedures for Redemption.      (i) Notice of redemption will be (A) faxed, and (B) mailed by the Partnership, by certified mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the redemption date, addressed to the respective holders of record of the Series G Preferred Units at their respective addresses as they appear on the records of the Partnership. No failure to give or defect in such notice or in the transmission thereof shall affect the validity of the proceedings for the redemption of any Series G Preferred Units except as to the holder to whom such notice was defective or not given or received. In addition to any information required by law, each such notice shall state: (1) the redemption date; (2) the Redemption Price; (3) the aggregate number of Series G Preferred Units to be redeemed and if fewer than all of the outstanding Series G Preferred Units are to be redeemed, the number of Series G Preferred Units to be redeemed held by such holder, which number shall equal such holder’s pro rata share (based on the percentage of the aggregate number of outstanding Series G Preferred Units the total number of Series G Preferred Units held by such holder represents) of the aggregate number of Series G Preferred Units to be redeemed; (4) the place or places where the Series G Preferred Units are to be surrendered for payment of the Redemption Price; (5) that distributions on the Series G Preferred Units to be redeemed will cease to accumulate on such redemption date; and (6) that payment of the Redemption Price will be made upon presentation and surrender of such Series G Preferred Units.      (ii) If the Partnership gives a notice of redemption in respect of Series G Preferred Units (which notice will be irrevocable) then, by 12:00 noon, New York City time, on the redemption date, the Partnership will deposit irrevocably in trust for the benefit of the Series G Preferred Units being redeemed funds sufficient to pay the applicable Redemption Price and will give irrevocable instructions and authority to pay such Redemption Price to the holders of the Series G Preferred Units upon surrender of the Series G Preferred Units by such holders at the place designated in the notice of redemption. If the Series G Preferred Units are evidenced by a certificate and if fewer than all Series G   --------------------------------------------------------------------------------   Preferred Units evidenced by any certificate are being redeemed, a new certificate shall be issued, upon surrender of the certificate evidencing all Series G Preferred Units, evidencing the unredeemed Series G Preferred Units without cost to the holder thereof. On and after the date of such redemption, distributions will cease to accumulate on the Series G Preferred Units or portions thereof called for redemption, unless the Partnership defaults in the payment thereof. If any date fixed for redemption of Series G Preferred Units is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price is improperly withheld or refused and not paid by the Partnership, distributions on such Series G Preferred Units will continue to accumulate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the applicable Redemption Price.      Section 7. Voting Rights.      (a) General. Holders of the Series G Preferred Units will not have any voting rights or right to consent to any matter requiring the consent or approval of the Limited Partners, except as set forth below.      (b) Certain Voting Rights. So long as any Series G Preferred Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of at least two-thirds of the Series G Preferred Units outstanding at the time (i) (A) authorize or create, or increase the authorized or issued amount of, any class or series of Partnership Interests senior to the Series G Preferred Units with respect to payment of distributions or rights upon liquidation, dissolution or winding-up, (B) reclassify any Partnership Interests of the Partnership into any such senior Partnership Interest, or (C) create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any such senior Partnership Interests, (ii) (A) authorize or create, or increase the authorized or issued amount of any Parity Preferred Units, (B) reclassify any Partnership Interest into a Parity Preferred Unit, or (C) create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any Parity Preferred Unit; provided, however, that restrictions contained in this clause (ii) of this paragraph (b) shall apply only to Parity Preferred Units that are issued to an Affiliate of the Partnership other than on arms’ length terms, and to no other issuance, including, without limitation, an issuance to the General Partner, the purpose of which is to allow the General Partner to issue corresponding preferred Shares to persons who are not Affiliates or the Partnership, or (iii) either (A) consolidate or merge into or with any corporation or other entity or (B) amend, alter or repeal the provisions of the Partnership Agreement, whether by merger or consolidation or otherwise, in such a way that would materially and adversely affect the powers, special rights, preferences, privileges or voting power of the Series G Preferred Units or the holders thereof; provided, however, that with respect to the occurrence of a merger or consolidation, so long as (1) the   --------------------------------------------------------------------------------   Partnership is the surviving entity and the Series G Preferred Units remain outstanding with the terms thereof unchanged, or (2) the resulting, surviving or transferee entity is a partnership, limited liability company or other pass-through entity organized under the laws of any state, and such entity substitutes for the Series G Preferred Units other interests in such entity having substantially the same terms and rights as the Series G Preferred Units, including with respect to distributions, voting rights and rights upon liquidation, dissolution or winding-up, then the occurrence of any such event shall not be deemed to materially and adversely affect the rights, privileges or voting powers of the holders of the Series G Preferred Units; provided, further, that any increase in the amount of Partnership Interests or the creation or issuance of any other class or series of Partnership Interests, shall not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series G Preferred Units, if such Partnership Units rank (y) junior to the Series G Preferred Units with respect to payment of distributions or the distribution of assets upon liquidation, dissolution or winding up, or (z) on a parity with the Series G Preferred Units with respect to payment of distributions or the distribution of assets upon liquidation, dissolution or winding-up; provided, however, that any Preferred Units issued in reliance on the preceding clause (z) shall have been issued to an Affiliate of the Partnership on arms’ length terms, or to the General Partner in order to allow the General Partner to issue corresponding preferred Shares to persons who are not Affiliates of the Partnership. In the event of any conflict or inconsistency between this Section 7 and Article XIV of the Partnership Agreement, this Section 7 shall control.      Section 8. Transfer Restrictions. The Series G Preferred Units shall be subject to the provisions of Article IX of the Partnership Agreement; provided, however, that (a) the General Partner shall act reasonably in exercising its discretion pursuant to the provisions of Sections 9.2(a) and 9.2(c) of the Partnership Agreement and shall not withhold its consent to any transfer to any Person, and the admission of such Person as a Substituted Limited Partner, which Person does not violate the requirements of Section 9.3 of the Partnership Agreement and such transfers do not cause the total number of holders of Series G Preferred Units which would be considered partners under Treasury Regulation Section 1.7704-1(h)(3), at any time the Partnership is satisfying the private placement safe harbor of Treasury Regulation Section 1.7704-1(h) to exceed the lesser of (i) six (6) and (ii) the maximum number that would permit the Partnership to continue to satisfy such safe harbor (but in assessing the status of such safe harbor, (1) substituting “90” for “100”; and (2) taking into account any number of partners that the General Partner reasonably anticipates becoming partners within the meaning of the Treasury Regulations Section 1.7704-1(h)(3) within six months of the date of such transfer by the Series G Preferred Unit holders) and (b) the term “transfer” when used in Article IX shall not be deemed to include any exchange pursuant to Section 9 below.      Section 9. Exchange Rights.      (a) Right to Exchange.      (i) Series G Preferred Units will be exchangeable in whole or in part at anytime on or after December 12, 2016, at the option of the holders thereof, for authorized but previously unissued shares of 6.70% Series G Cumulative   --------------------------------------------------------------------------------   Redeemable Preferred Shares of the General Partner (the “Series G Preferred Shares”) at an exchange rate of one Series G Preferred Share for one Series G Preferred Unit, subject to adjustment as described below (the “Exchange Price”), provided that the Series G Preferred Units will become exchangeable at any time, in whole or in part, at the option of the holders of Series G Preferred Units for Series G Preferred Shares if (x) at any time full distributions shall not have been timely made on any Series G Preferred Unit with respect to six (6) prior quarterly distribution periods, whether or not consecutive, provided, however, that a distribution in respect of Series G Preferred Units shall be considered timely made if made within two (2) Business Days after the applicable Preferred Unit Distribution Payment Date if at the time of such late payment there shall not be any prior quarterly distribution periods in respect of which full distributions were not timely made. Furthermore, the Series G Preferred Units may be exchanged in whole but not in part by any holder thereof which is a real estate investment trust within the meaning of Sections 856 through 859 of the Code for Series G Preferred Shares (but only if the exchange in whole may be accomplished consistently with the ownership limitations set forth under Article VII of the Charter (taking into account exceptions thereto and exemptions therefrom)) if at any time, (i) a holder of Series G Preferred Units determines (in the reasonable judgment of such holder) that based upon the assets and income of the Partnership for a taxable year after 2006, it is imminent that the Partnership will not or likely will not satisfy the income and assets tests of Section 856 of the Code if the Partnership were a real estate investment trust within the meaning of the Code, (ii) such holder of Series G Preferred Units delivers to the Partnership and the General Partner an opinion of nationally recognized independent counsel reasonably acceptable to the General Partner to the effect that, based on the assets and income of the Partnership for a taxable year after 2006, it is imminent that the Partnership will not or likely will not satisfy the income and assets tests of Section 856 of the Code if the Partnership were a real estate investment trust within the meaning of the Code and (iii) that such failure would create a meaningful risk that a holder of the Series G Preferred Units would fail to maintain qualification as a real estate investment trust. In addition, the Series G Preferred Units may be exchanged for Series G Preferred Shares, in whole or in part, at the option of any holder that is not a corporation (a “non-corporate holder”) if (a) such non-corporate holder concludes based on results or projected results that there exists (in the reasonable judgment of the holder) an imminent and substantial risk that the holder’s interest in the Partnership will represent more than 19.9% of the total profits or capital interests in the Partnership (determined in accordance with Treasury regulations Section 1.731-2(e)(4)) for a taxable year (or portion thereof), (b) the non-corporate holder delivers to the General Partner an opinion of nationally recognized independent counsel to the effect that there is an imminent and substantial risk that the holder’s interest in the Partnership will represent more than 19.9% of the total profits or capital interests in the Partnership (determined in accordance with Treasury regulations Section 1.731-2(e)(4)) for a taxable year, and (c) the General Partner agrees with the conclusions referred to in clauses (a) and (b) of this sentence, such agreement not to be unreasonably withheld.   --------------------------------------------------------------------------------        (ii) Notwithstanding anything to the contrary set forth in Section 9(a)(i) hereof, if an Exchange Notice (as such term is defined herein) has been delivered to the General Partner, then the General Partner may, at its option, elect to redeem or cause the Partnership to redeem all or a portion of the outstanding Series G Preferred Units for cash in an amount equal to the original Capital Contribution per Series G Preferred Unit plus all accrued and unpaid distributions thereon to the date of redemption. The General Partner may exercise its option to redeem the Series G Preferred Units for cash pursuant to this Section 9(a)(ii) hereof by giving each holder of record of Series G Preferred Units notice of its election to redeem for cash, within ten (10) Business Days after receipt of the Exchange Notice, by (1) fax, and (2) registered mail, postage paid, at the address of each holder as it may appear on the records of the Partnership stating (A) the redemption date, which shall be no later than sixty (60) days following the receipt of the Exchange Notice, (B) the redemption price, (C) the place or places where the Series G Preferred Units are to be surrendered for payment of the redemption price, (D) that distributions on the Series G Preferred Units will cease to accrue on such redemption date, (E) that payment of the redemption price will be made upon presentation and surrender of the Series G Preferred Units and (F) the aggregate number of Series G Preferred Units to be redeemed, and if fewer than all of the outstanding Series G Preferred Units are to be redeemed, the number of Series G Preferred Units to be redeemed held by such holder, which number shall equal such holder’s pro rata share (based on the percentage of the aggregate number of outstanding Series G Preferred Units the total number of Series G Preferred Units held by such holder represents) of the aggregate number of Series G Preferred Units being redeemed.      (iii) In the event an exchange of all or a portion of Series G Preferred Units pursuant to Section 9(a)(i) hereof would violate the provisions on ownership limitation of the General Partner set forth in Article VII of the Charter with respect to the Series G Preferred Shares, the General Partner shall give written notice thereof to each holder of record of Series G Preferred Units, within five (5) Business Days following receipt of the Exchange Notice, by (1) fax, and (2) registered mail, postage prepaid, at the address of each such holder set forth in the records of the Partnership. In such event, each holder of Series G Preferred Units shall be entitled to exchange, pursuant to the provision of Section 9(b) a number of Series G Preferred Units which would comply with the provisions on the ownership limitation of the General Partner set forth in Article VII of the Charter and any Series G Preferred Units not so exchanged (the “Excess Units”) shall be redeemed by the Partnership for cash in an amount equal to the original Capital Contribution per Excess Unit, plus any accrued and unpaid distributions thereon, whether or not declared, to the date of redemption. The written notice of the General Partner shall state (A) the number of Excess Units held by such holder, (B) the redemption price of the Excess Units, (C) the date on which such Excess Units shall be redeemed, which date shall be no later than sixty (60) days following the receipt of the Exchange Notice, (D) the place or places where such Excess Units are to be surrendered for payment of the Redemption Price, (E) that distributions on the Excess Units will cease to accrue on such redemption date   --------------------------------------------------------------------------------   and (F) that payment of the redemption price will be made upon presentation and surrender of such Excess Units. In the event an exchange would result in Excess Units, as a condition to such exchange, each holder of such Excess Units agrees to provide representations and covenants reasonably requested by the General Partner relating to: (x) the widely held nature of the interests in such holder, sufficient to assure the General Partner that the holder’s ownership of shares of beneficial interest of the General Partner (without regard to the limits described above) will not cause any individual to Beneficially Own in excess of the Aggregate Share Ownership Limit (all as such term is defined in the Charter); and (y) to the extent such holder can so represent and covenant without obtaining information from its owners, the holder’s ownership of tenants of the Partnership and its affiliates.      (iv) The redemption of Series G Preferred Units described in Sections 9(a)(ii) and (iii) hereof shall be subject to the provisions of Section 6(b)(i) hereof; provided, however, that the term “Redemption Price” in such Section shall be read to mean the original Capital Contribution per Series G Preferred Unit being redeemed plus all accrued and unpaid distributions to the redemption date.      (b) Procedure for Exchange.      (i) Any exchange shall be exercised pursuant to a notice of exchange (the “Exchange Notice”) delivered to the General Partner by the holder who is exercising such exchange right, by (A) fax and (B) by certified mail postage prepaid. The exchange of Series G Preferred Units, or a specified portion thereof, may be effected after the fifth (5th) Business Day following receipt by the General Partner of the Exchange Notice by delivering certificates, if any, representing such Series G Preferred Units to be exchanged together with, if applicable, written notice of exchange and a proper assignment of such Series G Preferred Units to the office of the General Partner maintained for such purpose. Currently, such office is: 500 Chesterfield Parkway Malvern, Pennsylvania 19355 Each exchange will be deemed to have been effected immediately prior to the close of business on the date on which such Series G Preferred Units to be exchanged (together with all required documentation) shall have been surrendered and notice shall have been received by the General Partner as aforesaid and the Exchange Price shall have been paid. Any Series G Preferred Shares issued pursuant to this Section 9 shall be delivered as shares which are duly authorized, validly issued, fully paid and nonassessable, free of pledge, lien, encumbrance or restriction other than those provided in the Charter, the Bylaws of the General Partner, the Securities Act and relevant state securities or blue sky laws.      (ii) If the event of an exchange of Series G Preferred Units for shares of Series G Preferred Shares, an amount equal to the accrued and unpaid   --------------------------------------------------------------------------------   distributions, whether or not declared, to the date of exchange on any Series G Preferred Units tendered for exchange shall (A) accrue on the Series G Preferred Shares into which such Series G Preferred Units are exchanged, and (B) continue to accrue on such Series G Preferred Units, which shall remain outstanding following such exchange, with the General Partner as the holder of such Series G Preferred Units. Notwithstanding anything to the contrary set forth herein, in no event shall a holder of a Series G Preferred Unit that was validly exchanged into Series G Preferred Shares pursuant to this Section 9 (other than the General Partner now holding such Series G Preferred Unit), receive a cash distribution out of Available Cash of the Partnership, if such holder, after exchange, is entitled to receive a distribution out of Available Cash with respect to the Series G Preferred Shares for which such Series G Preferred Unit was exchanged or redeemed.      (iii) Fractional shares of Series G Preferred Shares are not to be issued upon exchange but, in lieu thereof, the General Partner will pay a cash adjustment based upon the fair market value of the Series G Preferred Shares on the day prior to the exchange date as determined in good faith by the Board of Directors of the General Partner.      (c) Adjustment of Exchange Price.      (i) The Exchange Price is subject to adjustment upon certain events, including, (A) subdivisions, combinations and reclassification of the Series G Preferred Shares, and (B) distributions to all holders of Series G Preferred Shares of evidence of indebtedness of the General Partner or assets (including securities, but excluding dividends and distributions paid in cash out of equity applicable to Series G Preferred Shares).      (ii) In case the General Partner shall be a party to any transaction (including, without limitation, a merger, consolidation, statutory share exchange, tender offer for all or substantially all of the General Partner’s capital stock or sale of all or substantially all of the General Partner’s assets), in each case as a result of which the Series G Preferred Shares will be converted into the right to receive shares of capital stock, other securities or other property (including cash or any combination thereof), each Series G Preferred Unit will thereafter be exchangeable into the kind and amount of shares of capital stock and other securities and property receivable (including cash or any combination thereof) upon the consummation of such transaction by a holder of that number of Series G Preferred Shares or fraction thereof into which one Series G Preferred Unit was exchangeable immediately prior to such transaction. The General Partner may not become a party to any such transaction unless the terms thereof are consistent with the foregoing.      (d) No Rights Under Article XI. Holders of Series G Preferred Units shall not be entitled to any “Rights” provided to Limited Partners pursuant to Article XI of the Partnership Agreement.   --------------------------------------------------------------------------------        Section 10. No Conversion Rights. Except as set forth in this Amendment, the holders of the Series G Preferred Units shall not have any rights, in their sole election, to convert, redeem or exchange their Series G Preferred Units for any other property (including cash) of the Partnership or the General Partner, including for units of any other class or series of units or into any other securities of, or interest in, the Partnership or the General Partner.      Section 11. No Sinking Fund. No sinking fund shall be established for the retirement or redemption of Series G Preferred Units.      Section 12. Admission of Limited Partners: Exhibits to Partnership. In accordance with Section 4.1 of the Partnership Agreement, Goldman is hereby admitted as an Additional Limited Partner. Schedule A to the Partnership Agreement is hereby amended to reflect the issuance of the Series G Preferred Units provided for herein.      Section 13. Miscellaneous.      (a) The parties hereto agree that the holders of Series G Preferred Units shall not be deemed “Limited Partners” for the purpose of calculating the ownership level of limited partners as contemplated by Section 7.2 of the Partnership Agreement.      (b) For greater clarity, Article XIII of the Partnership Agreement shall not apply to Goldman or to its affiliates, successors and assigns or to their interests in the Partnership.      Section 14. Reaffirmation. Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and affirms.   --------------------------------------------------------------------------------        In Witness Whereof, this Amendment has been executed as of the date first above written.             GENERAL PARTNER LIBERTY PROPERTY TRUST       By:   William Hankowsky       Name:   William Hankowsky       Title:   Chairman, President and Chief Executive Officer       ADDITIONAL LIMITED PARTNER GSEP 2006 REALTY CORP.       By:   Kristin Olson       Name:   Kristin Olson       Title:   Authorized Person     SIGNATURE PAGE TO SEVENTH AMENDMENT  

Exhibit 10.8 RETENTION AGREEMENT DATE:   October 9, 2006               PARTIES:   Golf Galaxy, Inc. (“Company”)       7275 Flying Cloud Drive         Eden Prairie, MN 55344                   Richard C. Nordvold   (“Employee”)     2960 Fairway Drive         Chaska, MN 55318       RECITALS A.           Employee is employed by the Company; B.             The Board of Directors wishes to plan for the possibility of a change in control and to ensure Employee’s continued dedication and efforts in such event without undue concern for personal financial and employment security; and C.             The parties hereto desire to fulfill the above purpose according to the terms set forth in this Agreement. AGREEMENT In consideration for the mutual covenants set forth in this Agreement and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties to this Agreement agree as follows: 1.                                       Definitions. The following words and phrases as used in this Agreement shall have the following respective meanings. a)                                      a termination of employment for Cause is a termination precipitated by Employee’s: i)                                         The Employee shall commit any breach or violation of any of the Employee’s representations or covenants under this Agreement or under any employment agreement with the Company, which breach continues for a period of ten (10) days following notice thereof from the Company (except in the event of a breach of any provisions of this Agreement or of any employment agreement or other agreement relating to confidentiality, loyalty, noncompetition or noninducement, which shall require no notice to Employee prior to termination; 1 -------------------------------------------------------------------------------- ii)                                      The Employee shall willfully and continually fail to substantially perform Employee’s duties with the Company (other than due to incapacity resulting from physical or mental illness) which failure has continued for at least 30 days following receipt by Employee of written notice specifying the failure to substantially perform; iii)                                   The Employee shall willfully engage in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, which injurious conduct has continued for at least 30 days following Employee’s receipt of written notice specifying the injurious conduct and offering Employee the opportunity to explain the conduct to the Board. iv)                                  The Employee shall, in the performance of the Employee’s duties under any employment agreement, engage in any act of misconduct, including misconduct involving moral turpitude, which is injurious to the Company; v)                                     The Employee shall violate or willfully refuse to obey the lawful and reasonable instructions of the Board of the Company, provided that such instructions are not in violation of this Agreement or any employment agreement between the Employee and the Company. vi)                                  The Employee shall become disabled during the Term (the Employee shall be deemed to be disabled if the Employee is unable to perform the material functions of Employee’s position with the Company, with or without reasonable accommodation, by reason of a physical or mental infirmity, for a period of ninety (90) consecutive days within any 180-day period). vii)                               The Employee shall die during the Term of this Agreement. b)            A Change in Control shall be deemed to occur: i)                                         if any person other than persons owning more than five percent of the Company’s securities on July 28, 2005 is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities; ii)                                      upon the approval by the Company’s stockholders and the consummation of a Transaction; or iii)                                   if, during any period, members of the Incumbent Board cease for any reason to constitute at least a majority of the Board. 2 -------------------------------------------------------------------------------- Notwithstanding the foregoing, a Change in Control pursuant to subparagraphs (ii) and (iii) above shall not be deemed to occur if immediately following the consummation of a Transaction or other event approved by the Incumbent Board, holders of the Company’s voting securities immediately prior to a Transaction either continue to own at least 50% of the combined voting power of the Company’s then outstanding voting securities representing at least 50% of the combined voting power of each surviving entity after a Transaction. c)                                      Code means the Internal Revenue Code of 1986, as amended. d)                                     Termination of employment by Employee for Good Reason is a termination of employment due to the occurrence of any one of the following events or conditions: i)                                         a material change in Employee’s title, position or responsibilities which represents a substantial reduction of the title, position or responsibilities in effect immediately prior to the change; the assignment of Employee to a position which requires Employee to relocate permanently to a site outside of the Minneapolis-St. Paul metropolitan area; the assignment to Employee of any duties or responsibilities (other than due to a promotion) which are inconsistent with such title, position or responsibilities; or any removal of Employee from or failure to reappoint or reelect Employee to any of such positions, except in connection with the termination of employment for Cause, as a result of permanent disability (as determined by Employee’s eligibility to receive disability benefits under any long-term disability plan the Company may then have in effect), as a result of Employee’s death, or by Employee other than for Good Reason; or ii)                                      any material breach by the Company of any provision of this Agreement. e)                                      The Incumbent Board consists of the members of the Board of Directors of the Company as of the date of this Agreement, to the extent they continue to serve as Board members and any individual who becomes a Board member after the date of this Agreement if (i) his or her election or nomination as a director was approved by a vote of at least two thirds of the then incumbent Board and such person does not own more than 20% of the Company’s securities, or (ii) such individual is a representative of an institutional investor that either owns less than 20% of the Company’s securities or was represented on the Board as of the date of this Agreement. f)                                        The Severance Period is the twelve (12) - month period beginning on the date of termination of Employee’s employment. g)                                     A Transaction means a merger or consolidation, reorganization, distribution of assets to stockholders by spin-off, split-up or otherwise, a sale or disposition of all 3 -------------------------------------------------------------------------------- or substantially all of the Company’s assets or a liquidation or dissolution of the Company. 2.                                       Severance. a)                                      Employee shall be entitled to receive from the Company severance benefits in the amount provided in subsection (b) below, if (x) in connection with a Change in Control, (y) within 90 days prior to a Change in Control, or (z) within one year after a Change in Control, Employee’s employment with the Company is terminated; provided, however, that Employee will not be entitled to any severance benefit if Employee’s termination of employment is (i) for Cause, or (ii) initiated by Employee for other than Good Reason. Notwithstanding any other provision of this Agreement, the consummation of a Transaction in itself shall not be deemed a termination of employment entitling Employee to severance benefits hereunder even if such event results in Employee being employed by a different entity which assumes the Company’s obligations under this Agreement. b)                                     If Employee’s services are terminated, entitling Employee to severance benefits pursuant to subsection a. above, Employee shall be entitled to the following benefits: i)                                         During the Severance Period, the Company shall continue to pay to Employee the annual base salary payable to Employee at the rate and according to the payment schedule in place immediately prior to the termination of employment, subject to federal and state withholding, FICA, FUTA and withholding for all other applicable taxes; ii)                                      During the Severance Period, the Company shall continue on behalf of Employee (and Employee’s dependents and beneficiaries), life insurance, disability insurance, medical and dental benefits and any/all other benefits which were being provided to Employee at the time of termination of employment and the expense shall be allocated between the Company and Employee on the same basis as prior to the date of termination of employment. The benefits provided pursuant to this subsection (ii) shall be no less favorable to Employee than the coverage provided to Employee under the plans providing such benefits at the time notice of termination was given to Employee. The obligation of the Company under this subsection (ii) shall be limited to the extent that Employee obtains any such benefits pursuant to a subsequent employee’s benefit plans, in which case the Company may reduce the coverage of any benefit it is required to provide Employee under this subsection (ii) as long as the aggregate coverage of the combined benefit plans is no less favorable to Employee, in terms of amounts and deductibles and costs to Employee, than the coverage required to be provided under this subsection (ii) as long as the aggregate coverage of the combined benefit plans is no less favorable to Employee, in terms of amounts and deductibles and costs to Employee, 4 -------------------------------------------------------------------------------- than the coverage required to be provided under this subsection (ii). This subsection (ii) shall not be interpreted so as to limit any benefits to which Employee (or Employee’s dependents or beneficiaries) are entitled under any of the Company’s employee benefit plans, programs or practices following Employee’s date of termination of employment. The provision of continued benefits to Employee under this subsection (ii) shall not deprive Employee of any independent statutory right to continue benefits coverage pursuant to Sections 601 through 606 of the Employee Retirement Income Security Act of 1974, as amended; and iii)                                   For the Company’s fiscal year in which Employee’s employment is terminated, the Company shall pay Employee such bonus, if any, equal to the amount found by multiplying (x) the lesser of (i) such amounts as Employee would have received based on the Company’s actual results pursuant to any bonus plan in effect during such fiscal year and (ii) such amounts as Employee would have received based on the Company’s achieving 100% of its financial targets as reflected in such bonus plan (in each case as though Employee had been employed the full fiscal year) by (y) a fraction, the numerator of which is the number of days in the applicable fiscal year through the date of Employee’s termination and the denominator of which is 365.  All bonuses payable pursuant to this subsection (iii) shall be payable to Employee at such time as bonuses for such period are paid to Company employees under such bonus plan generally. iv)                                  In the event the Employee is employed under any employment agreement with the Company which also provides for severance payments upon termination of Employee’s employment under certain circumstances, and if Employee is entitled to receive severance payments and/or benefits thereunder, then the severance payments and/or benefits provided hereunder shall be reduced on a dollar-for-dollar basis by the severance payments and/or benefits provided under the employment agreement; it being the intention of the parties hereto that the Employee shall only be entitled to receive “one” set of severance payments and benefits under any circumstances. (c)                                  Notwithstanding anything in this Agreement or elsewhere to the contrary: (a)           If payment or provision of any amount or other benefit that is “deferred compensation” subject to Section 409A of the Code at the time otherwise specified in this Agreement or elsewhere would subject such amount or benefit to additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment or provision thereof at a later date would avoid any such additional tax, then the payment or provision thereof shall be postponed to the earliest date on which such amount or benefit can be paid or provided without incurring any such additional tax.  In the event this Section 2 requires a deferral of any payment, such payment shall be accumulated and paid in a single lump sum on 5 -------------------------------------------------------------------------------- such earliest date together with interest for the period of delay, compounded annually, equal to the prime rate (as published in The Wall Street Journal), and in effect as of the date the payment should otherwise have been provided. (b)           If any payment or benefit permitted or required under this Agreement, or otherwise, is reasonably determined by either party to be subject for any reason to a material risk of additional tax pursuant to Section 409A(a)(1)(B) of the Code, then the parties shall promptly agree in good faith on appropriate provisions to avoid such risk without materially changing the economic value of this Agreement to either party. 3.                                       Acceleration of Options. In the event the Employee is entitled to severance benefits following the occurrence of a Change in Control, all of Employee’s rights to exercise option(s) granted under Company’s stock option plan and held by Employee at the time of the Change in Control shall immediately vest resulting in these option(s) becoming immediately exerciseable for the period specified in the section of the respective option(s) relating to vesting of options in the event of termination of employment, or, if no period is so specified, then for six (6) months, after which time the option(s) shall expire. 4.                                       Term of Agreement (the “Term”). This Agreement shall continue in full force and effect until terminated as provided in this section. This Agreement shall terminate on the earlier of: a)                                      the April 1st of any year after 2007, if the Board by the affirmative vote of a majority of its members prior to January 1 of such year and prior to the occurrence or active consideration of a specific Change in Control has voted to terminate this Agreement; or b)                                     if Employee’s services are terminated more than 90 days prior to the occurrence of a Change in Control or after the first anniversary of a Change in Control, the date of such termination of services; or c)                                      if Employee’s services are terminated upon or within the first year following a Change in Control under circumstances where Employee would not be entitled to severance benefits pursuant to this Agreement, the date of such termination of services; or d)                                     after a Change in Control, the date on which any successor to the Company has performed all of its obligations under Section 2 of this Agreement and Employee has performed all of Employee’s obligations under Section 5 of this Agreement. 5.                                       Agreement not to Compete and not to Solicit. a)              In further consideration of the compensation to be paid to Employee hereunder, Executive acknowledges that during the course of his employment with the Company he has become familiar with the Company’s trade secrets and with other Confidential 6 -------------------------------------------------------------------------------- Information (as defined herein) concerning the Company and that his services have been and shall be of special, unique and extraordinary value to the Company, and therefore, Employee agrees that, during the period of his employment with the Company and for a period of twelve (12) months thereafter (the “Noncompete Period”), he shall not, without the Company’s prior written consent, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, any business or organization in the United States, Canada or Mexico that sells or markets golf equipment, apparel, accessories or services directly to consumers, whether through retail or direct marketing channels, including, but not limited to catalogs and the internet (a “Competitive Business”); provided, however, that nothing herein shall prohibit Employee from (i) being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation; or (ii) becoming involved with a business or organization for which activities comprising a Competitive Business do not represent  more than $10 million in revenues or more than 10% of such business or organization’s total revenues. If, at the time of enforcement of this paragraph 5, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law.  Employee acknowledges that the restrictions contained in this paragraph 5 are reasonable and that he has reviewed the provisions of this Agreement with his legal counsel. B)             DURING THE PERIOD OF EMPLOYEE’S EMPLOYMENT WITH THE COMPANY AND FOR A PERIOD OF TWO (2) YEARS THEREAFTER (THE “NON-SOLICIT PERIOD”), EMPLOYEE SHALL NOT DIRECTLY OR INDIRECTLY THROUGH ANOTHER PERSON OR ENTITY (I) INDUCE OR ATTEMPT TO INDUCE ANY EMPLOYEE OF THE COMPANY TO LEAVE THE EMPLOY OF THE COMPANY, OR IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN THE COMPANY AND ANY EMPLOYEE THEREOF, (II) HIRE ANY PERSON WHO WAS AN EMPLOYEE OF THE COMPANY AT ANY TIME DURING THE PERIOD OF EMPLOYEE’S EMPLOYMENT WITH THE COMPANY OR (III) INDUCE OR ATTEMPT TO INDUCE ANY CUSTOMER, SUPPLIER, LICENSEE, LICENSOR, FRANCHISEE OR OTHER BUSINESS RELATION OF THE COMPANY TO CEASE DOING BUSINESS WITH THE COMPANY, OR IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN ANY SUCH CUSTOMER, SUPPLIER, LICENSEE OR BUSINESS RELATION AND THE COMPANY (INCLUDING, WITHOUT LIMITATION, MAKING ANY NEGATIVE OR DISPARAGING STATEMENTS OR COMMUNICATIONS REGARDING THE COMPANY). C)              IN THE EVENT OF THE BREACH OR A THREATENED BREACH BY EMPLOYEE OF ANY OF THE PROVISIONS OF THIS PARAGRAPH 5, THE COMPANY WOULD SUFFER IRREPARABLE HARM, AND IN ADDITION AND SUPPLEMENTARY TO OTHER RIGHTS AND REMEDIES EXISTING IN ITS FAVOR, THE COMPANY SHALL BE ENTITLED TO SPECIFIC PERFORMANCE AND/OR INJUNCTIVE OR OTHER EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION IN ORDER TO ENFORCE OR PREVENT ANY VIOLATIONS OF THE PROVISIONS HEREOF (WITHOUT POSTING A BOND OR OTHER SECURITY).  IN ADDITION, IN THE EVENT OF AN ALLEGED BREACH OR VIOLATION BY EMPLOYEE OF THIS PARAGRAPH 7 -------------------------------------------------------------------------------- 5, THE NONCOMPETE PERIOD AND THE NON-SOLICIT PERIOD SHALL BE TOLLED UNTIL SUCH BREACH OR VIOLATION HAS BEEN DULY CURED. 6.                                       Confidentiality and Loyalty. Employee acknowledges that, during the course of Employee’s employment Employee will produce and have access to materials, records, data and information not generally available to the public regarding the Company, its customers and affiliates (collectively “Confidential Information”). Accordingly, during and subsequent to the termination of this Agreement, Employee shall hold in confidence and not directly or indirectly disclose, use, copy or make lists of any Confidential Information, except to the extent authorized in writing by the Company, or as required by law or any competent administrative agency or as otherwise is reasonably necessary or appropriate in connection with the performance by Employee of his duties pursuant to this Agreement. Upon termination of Employee’s employment under this Agreement, Employee shall promptly deliver to the Company (i) all records, manuals, books, documents, client lists, letters, reports, data, tables, calculations and all copies of any of the foregoing which are the property of the Company or which relate in any way to the business or practices of the Company, and (ii) all other property of the Company and Confidential Information which in any of these cases are in his possession or under his control. 7.                                       Remedies. Employee agrees and understands that any breach of any of the covenants or agreements set forth in Sections 5 or 6 of this Agreement will cause the Company irreparable harm for which there is no adequate remedy at law, and, without limiting whatever other rights and remedies the Company may have under this Agreement, Employee consents to the issuance of an injunction in favor of the Company enjoining the breach of any of the aforesaid covenants or agreements by any court of competent jurisdiction. If any or all of the aforesaid covenants or agreements are held to be unenforceable because of the scope or duration of such covenant or agreement, the parties agree that the court making such determination shall have the power to reduce or modify the scope and/or duration of such covenant to the extent that allows the maximum scope and/or duration permitted by applicable law. 8.                                       Successors. This Agreement shall bind, and may be enforced by, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, in the same manner and to the same extent that the Company would be obligated under or entitled to enforce this Agreement if no succession had taken place. In the case of any Transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Agreement, the Company shall use its best efforts to require such successor expressly and unconditionally 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 would be required to perform if no such succession had taken place unless the Company previously arranged to establish an escrow to satisfy its obligations hereunder. 9.                                       Entire Agreement. This Agreement contains the entire understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior agreements and 8 -------------------------------------------------------------------------------- understandings between the parties with respect to such subject matter; provided, that the parties acknowledge that they have also entered into an employment agreement of even date herewith which also provides for severance payments and/or benefits upon termination of Employee’s employment for certain circumstances and that pursuant to Section 2.(b)(iv) of this Agreement, the severance payments and/or benefits provided hereunder shall be reduced on a dollar for dollar basis by the severance payments and/or benefits provided under such Employment Agreement, it being the intention of the parties hereto that they Employee shall only be entitled to receive “one” set of severance payments and benefits under any circumstances. 10.                                 Assignment. This Agreement shall not be assignable by Employee. Any and all assignments of this Agreement or any interest therein not made in accordance with this paragraph shall be void. 11.                                 No Waiver. Any waiver of any term or condition of this Agreement by either party shall not operate as a waiver of any continued breach of such term or condition, or any other term or condition, nor shall any failure to enforce a provision of this Agreement operate as a waiver of such provision or of any other provision of this Agreement. 12.                                 Captions. The captions and headings of this Agreement are for convenience only and shall in no way limit or otherwise effect any of the terms or provisions contained herein. 13.                                 Severability. Should any provision of this Agreement, or its application, to any extent by held invalid or unenforceable, the remainder of this Agreement and its application, excluding such invalid or unenforceable provisions shall not be affected by such exclusion and shall continue valid and enforceable to the fullest extent permitted by law or equity. 14.                                 Governing Law. This Agreement shall for all purposes be governed and interpreted in accordance with the laws of the State of Minnesota, without regard to its principles of conflicts of laws. 15.                                 Arbitration. The Company and Employee agree that any claim or controversy that arises out of or relates to this Agreement, or the breach of it by either party, will be settled by arbitration in the City of Minneapolis, Minnesota, in accordance with the rules then obtaining of the American Arbitration Association, and the award rendered pursuant to such arbitration shall be final, binding and conclusive as to the Company and Employee, and judgment upon such award may be entered without notice and enforced in any court having jurisdiction. Costs of arbitration (excluding the costs of each party’s own counsel or advisors) shall be borne equally by the Company and Employee. Notwithstanding the foregoing, the Company shall have the right to submit any claim against Employee arising out of any provision of Section 5 and 6 hereof to any court of competent jurisdiction in Hennepin County, Minnesota, in lieu of seeking arbitration pursuant to this Section. 9 -------------------------------------------------------------------------------- Each of the parties hereto have executed this Agreement in the manner appropriate to each, all as of the date first above written. GOLF GALAXY, INC.   EMPLOYEE             By: /s/ RANDALL K. ZANATTA   /s/ RICHARD C. NORDVOLD Its: President and Chief Executive Officer   Richard C. Nordvold   10 --------------------------------------------------------------------------------

  Exhibit 10.8 Execution Copy PARTIALLY SUBORDINATE SECURITY AGREEMENT      THIS PARTIALLY SUBORDINATE SECURITY AGREEMENT, dated as of September 15, 2006 (as amended, supplemented or modified from time to time, this “Agreement”), is made by Trade Source International, Inc., a Delaware corporation (“TSI”), MARKETING IMPRESSIONS, INC., a Georgia corporation (“MI”), Prime/Home Impressions, LLC, a North Carolina limited liability company (“PHI” and together with MI and TSI, the “Pledgors”), in favor of Robert W. Lackey (“Lackey”), as collateral agent (in such capacity, the “Agent”) for Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC, RWL Corporation and R.L. Products Corporation (together with Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC and RWL Corporation, the “Secured Parties”), for the benefit of the Secured Parties. Except as otherwise provided herein, capitalized terms used herein without definition shall have the meanings given to them in the Stock Purchase Agreement referred to below. BACKGROUND STATEMENT      A. TSI, Lackey and Craftmade International, Inc., a Delaware corporation and parent of TSI (“Craftmade”), are parties to a Stock Purchase Agreement, dated as of even date herewith (as amended, modified or supplemented from time to time, the “Stock Purchase Agreement”), pursuant to which TSI is (i) purchasing all of Lackey’s interest in MI, (ii) purchasing certain intellectual property from Lackey, RWL Corporation and R. L. Products Corporation, (iii) entering into a non-competition agreement with, and purchasing the goodwill of, each of Lackey and Robert W. Lackey, Jr. and (iv) entering into a consulting agreement with Imagine One Resources, LLC, all upon the terms and conditions set forth therein. The Stock Purchase Agreement provides that the purchase price for the assets listed in clauses (i) through (iv) above will be paid partially at the closing, with the remainder to be paid over the following 62 months through an earnout.      B. TSI and MI each owns a 50% membership interest in PHI and, subsequent to the acquisition of MI, TSI will directly or indirectly own all of the membership interests in the PHI.      C. It is a condition to the closing of the Stock Purchase Agreement that the Pledgors shall have agreed, by executing and delivering this Agreement, to secure the payment in full of TSI’s and Craftmade’s, respective obligations under the Stock Purchase Agreement. Lackey is relying on this Agreement in his decision to enter into the Stock Purchase Agreement, and would not enter into the Stock Purchase Agreement without the execution and delivery of this Agreement by the Pledgors.      D. The Pledgors will obtain benefits as a result of the transactions contemplated by the Stock Purchase Agreement, which benefits are hereby acknowledged, and, accordingly, desire to execute and deliver this Agreement. STATEMENT OF AGREEMENT      NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Agent hereby agree as follows: 1 --------------------------------------------------------------------------------   Execution Copy ARTICLE I DEFINITIONS      1.1 Defined Terms. The following terms that are defined in the Uniform Commercial Code (as hereinafter defined) are used in this Agreement as so defined (and, in the event any such term is defined differently for purposes of Article 9 of the Uniform Commercial Code than for any other purpose or purposes of the Uniform Commercial Code, the Article 9 definition shall govern): Account, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights and Records; provided, however, that, for the purposes of this Agreement, the definition of each such term is hereby amended to require that the applicable property arise out of, relate to or be used in the Business as conducted by any of the Pledgors. In addition, the following terms have the meanings set forth below:      “Collateral” means and includes, to the extent and only to the extent that the same arise out of, relate to or are used in the Business as conducted by any of the Pledgors, all of the Pledgors’ Accounts, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory, Intellectual Property, Letter-of-Credit Rights, Records, membership interest in PHI and all other similar articles of personal property of any of the Pledgors now or hereafter held or received by, in transit to, or in the possession or control of any of the Pledgors or the Agent, and any substitutions or replacements thereof and any products and proceeds thereof, including without limitation, insurance proceeds.      “Default” means the occurrence of any the following:      (i) a Stock Purchase Agreement Default;      (ii) any Pledgor fails to keep and perform any covenant or agreement contained in this Agreement and such failure is not cured within thirty days after notice thereof is provided by Agent to the Pledgors;      (iii) any Pledgor shall (a) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of themselves or of all or a substantial part of their assets, (b) file a voluntary petition in bankruptcy or admit in writing that it is unable to pay its debts as they become due, (c) make a general assignment for the benefit of creditors, (d) file a petition or answer seeking reorganization of an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws, (e) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or (f) take corporate action for the purpose of effecting any of the foregoing; or      (iv) an involuntary petition or complaint shall be filed against any Pledgor seeking its bankruptcy or reorganization or the appointment of a receiver, custodian, trustee, intervenor or liquidator of it, or all or substantially all of its assets, and such petition or complaint shall not have been dismissed within 60 days of the filing thereof; or an order, order for relief, judgment or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of it or appointing a receiver, custodian, 2 --------------------------------------------------------------------------------   Execution Copy trustee, intervenor or liquidator of it, or of all or substantially all of their assets, and such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30) days.      “Intellectual Property” means, to the extent and only to the extent that the same are used in any Fan Accessories that were, are or have been conceived to be manufactured, marketed or sold in the Business as conducted by any of the Pledgors, (i) all inventions (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissues, continuations, continuations-in-part, divisions, revisions, extensions, and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (iii) all copyrightable works and all copyrights (registered and unregistered), (iv) all trade secrets and confidential information (including, without limitation, financial, business and marketing plans and customer and supplier lists and related information), (v) all computer software and software systems (including, without limitation, data, databases and related documentation), (vi) all Internet web sites and domain names, (vii) all technology, know-how, processes and other proprietary rights, and (viii) all licenses or other agreements to or from third parties regarding any of the foregoing.      “Secured Obligations “ means the payment obligations of TSI and Craftmade under Sections 2.03, 2.04, 2.05 and 2.06 of the Stock Purchase Agreement.      “Senior Lender” means The Frost National Bank, a national banking association.      “Senior Loan Agreement” means the that certain Amended and Restated Loan Agreement dated October 31, 2005, executed by Senior Lender and Craftmade, as such loan agreement may have been, or hereafter may be, amended, restated, modified, supplemented or otherwise modified from time to time.      “Senior Loan Documents” means the Senior Notes, the Senior Loan Agreement and all other documents and instruments executed by Pledgors in favor of Senior Lender to secure payment and performance of the Senior Loan Obligations, and all other documents and agreements evidencing or governing the indebtedness, liabilities and obligations evidenced by the Senior Notes.      “Senior Loan Obligations” means indebtedness, liabilities, and obligations incurred under, or in connection with, the Senior Loan Agreement, the Senior Notes or any other present or future indebtedness, liabilities or obligations of Craftmade payable to the Senior Lender whether direct, indirect or contingent.      “Senior Notes” means, collectively: (i) that certain Revolving Promissory Note dated November 6, 2001 (as such Revolving Promissory Note has been, or may hereafter be, increased, modified, restated, renewed or extended from time to time), executed by Craftmade payable to the order of Senior Lender in the original principal amount of $20,000,000; (ii) that certain Promissory Note dated February 25, 2005(as such Promissory Note has been, or may hereafter be, increased, modified, restated, renewed or extended from time to time), executed by Craftmade payable to the order of Senior Lender in the original principal amount of $3,000,000 3 --------------------------------------------------------------------------------   Execution Copy and (iii) any other present or future promissory note or notes payable by Craftmade to Senior Lender including, but not limited to, any increase, modification, renewal or extension thereof.      “Senior Security Interests” means (i) the security interest and liens in TSI’s Accounts and Inventory in favor of the Senior Lender and all products and proceeds thereof (including, without limitation, insurance payable by reason of loss or damage to the foregoing collateral) and any property, securities, guaranties or monies of TSI which may at any time come into the possession of the Senior Lender, and (ii) any security interest or lien now existing or hereafter created in PHI’s Accounts or Inventory in favor of the Senior Lender and all products and proceeds thereof (including, without limitation, insurance payable by reason of loss or damage to the foregoing collateral) and any property, securities, guaranties or monies of PHI which may at any time come into the possession of the Senior Lender.      “Stock Purchase Agreement Default” means the occurrence of each of the following:      (i) the occurrence of a Triggering Event under the Stock Purchase Agreement;      (ii) the election by the Shareholder to accelerate amounts due under the Stock Purchase Agreement pursuant to Section 2.06(a) thereof; and      (iii) TSI and/or Craftmade, or their successors and assigns, fail to pay the Estimated Acceleration Amount or the True-up Amount in accordance with, and in the time provided in, Section 2.06 of the Stock Purchase Agreement.      “Subordination Agreement” means the Subordination Agreement of even date herewith between the Agent, the Senior Lender, the Pledgors and Craftmade.      “Uniform Commercial Code” means the Uniform Commercial Code as the same may be in effect from time to time in the State of Delaware; provided that if, by reason of applicable law, the validity or perfection of any security interest in any Collateral granted under this Agreement is governed by the Uniform Commercial Code as in effect in another jurisdiction, then as to the validity or perfection, as the case may be, of such security interest, “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction. ARTICLE II CREATION OF SECURITY INTEREST      2.1 Pledge and Grant of Security Interest. Each Pledgor hereby pledges, assigns and delivers to the Agent, for the ratable benefit of the Secured Parties, and grants to the Agent, for the ratable benefit of the Secured Parties, a lien upon and security interest in all of its right, title and interest in and to the Collateral.      2.2 Security for Secured Obligations. This Agreement and the Collateral secure the full and prompt payment, at any time and from time to time as and when due (whether at the stated maturity, by acceleration or otherwise), of the Secured Obligations. 4 --------------------------------------------------------------------------------   Execution Copy      2.3 Security Interests Absolute. Subject to the rights of the Senior Lender under the Senior Security Interests, all rights of the Agent and security interests hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:      (i) any extension, renewal, settlement, compromise, waiver or release in respect of any Secured Obligation or any other document evidencing or securing such Secured Obligation, by operation of law or otherwise;      (ii) any modification or amendment or supplement to the Stock Purchase Agreement or any other document evidencing or securing any Secured Obligation;      (iii) any release, non-perfection or invalidity of any direct or indirect security for any Secured Obligation;      (iv) any insolvency, bankruptcy, reorganization or other similar proceeding affecting TSI and/or Craftmade or their assets or any resulting disallowance, release or discharge of all or any portion of the Secured Obligations;      (v) the existence of any claim, set-off or other right which any Pledgor may have at any time against TSI, Craftmade, the Agent or any other corporation or person, whether in connection herewith or any unrelated transactions; provided, that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;      (vi) any invalidity or unenforceability relating to or against any Pledgor for any reason of any Secured Obligation, or any provision of applicable law or regulation purporting to prohibit the payment by any Pledgor of the Secured Obligations;      (vii) any failure by the Agent (A) to file or enforce a claim against any Pledgor (in a bankruptcy or other proceeding), (B) to give notice of the existence, creation or incurrence by TSI and/or Craftmade of any new or additional indebtedness or obligation under or with respect to the Secured Obligations, (C) to commence any action against any Pledgor or (D) to proceed with due diligence in the collection, protection or realization upon any collateral securing the Secured Obligations; or      (viii) any other act or omission to act or delay of any kind by any Pledgor or the Agent or any other corporation or person or any other circumstance whatsoever which might, but for the provisions of this clause, constitute a legal or equitable discharge of each Pledgor’s obligations hereunder. ARTICLE III REPRESENTATIONS AND WARRANTIES      Each Pledgor hereby represents and warrants as follows: 5 --------------------------------------------------------------------------------   Execution Copy      3.1 Security Interests; Filings. This Agreement, together with (i) the filing, with respect to each Pledgor, of duly completed Uniform Commercial Code financing statements naming such Pledgor as debtor, the Agent as secured party, and describing the Collateral, in the jurisdictions set forth with respect to such Pledgor on Schedule 3.1 hereto, and (ii) to the extent required by applicable law, the filing, with respect to each relevant Pledgor, of duly completed and executed assignments in the forms required by the U.S. Copyright Office or the U.S. Patent and Trademark Office, creates, and at all times shall constitute, a valid and perfected security interest in and lien upon the Collateral in favor of the Agent, for the benefit of the Secured Parties, to the extent a security interest therein can be perfected by such filings.      3.2 Authorization; Consent. The execution, delivery and performance by each Pledgor of this Agreement require no action by or in respect of, or filing with, any governmental authority and do not contravene, or constitute (with or without the giving of notice or lapse of time or both) a default under, any provision of applicable law or of any agreement, judgment, injunction, order, decree or other instrument binding upon or affecting each Pledgor.      3.3 Intellectual Property. The information listed in Schedules 3.3A, 3.3B and 3.3C is true and correct in all material respects for the registered copyrights, patents and trademarks and applications for the same owned by any Pledgor as of the date hereof (after giving effect to the Intellectual Property Assignment and assuming the accuracy of the representation given by Lackey in the first sentence of Section 4.01.07 of the Stock Purchase Agreement and in Section 3(b) of the Intellectual Property Assignment) and used in any Fan Accessories that were, are or have been conceived to be manufactured, marketed or sold in the Business as conducted by any of the Pledgors. ARTICLE IV COVENANTS      Each Pledgor agrees that so long as any Secured Obligation remains unpaid; subject, however, to the rights of the Senior Lender under the Senior Security Interests as more fully set forth in the Subordination Agreement:      4.1 Use and Disposition of Collateral. So long as no Default shall have occurred and be continuing, each Pledgor may, in any lawful manner not inconsistent with the provisions of this Agreement, use, control and manage the Collateral in the operation of its businesses, and receive and use the income, revenue and profits arising therefrom and the proceeds thereof, in the same manner and with the same effect as if this Agreement had not been made.      4.2 Change of Name, Locations, etc. No Pledgor will (i) change its name, identity or corporate structure or (ii) change the jurisdiction of its incorporation or organization from the jurisdiction listed on Schedule 3.1 (whether by merger or otherwise), unless in each case such Pledgor has given twenty (20) days’ prior written notice to the Agent of its intention to do so, together with such information in connection with such proposed action as the Agent may reasonably request. 6 --------------------------------------------------------------------------------   Execution Copy      4.3 Equipment. Each Pledgor will, in accordance with sound business practices, maintain all Equipment used by it in the Business (other than obsolete Equipment) in good repair, working order and condition (normal wear and tear excepted) and make all necessary repairs and replacements thereof so that the value and operating efficiency thereof shall at all times be maintained and preserved. No Pledgor shall knowingly permit any Equipment to become a fixture to any real property.      4.4 Inventory. Each Pledgor will, in accordance with sound business practices, maintain all Inventory held by it or on its behalf in good saleable or useable condition. Unless a Default has occurred and is continuing, each Pledgor may, in any lawful manner not inconsistent with the provisions of this Agreement, process, use and, in the ordinary course of business but not otherwise, sell its Inventory.      4.5 Intellectual Property. Each applicable Pledgor will execute and deliver to the Agent, upon request, fully completed security agreements consistent with the terms set forth in this Agreement in the forms reasonably requested by the Agent for recordation in the U.S. Copyright Office or the U.S. Patent and Trademark Office with regard to any registered Intellectual Property owned by such Pledgor. In the event that after the date hereof any Pledgor shall acquire any or effect any registration of any registered Intellectual Property, whether within the United States or any other country or jurisdiction, such Pledgor shall promptly furnish written notice to the Agent and such Pledgor shall, upon request, execute and deliver to the Agent amended security agreements consistent with the terms set forth in this Agreement in the forms reasonably requested by the Agent for recordation in the U.S. Copyright Office or the U.S. Patent and Trademark Office, together with any other amendments, agreements, instruments and documents that the Agent may reasonably request. Each Pledgor hereby appoints the Agent its attorney-in-fact to execute, deliver and record any and all such amendments, agreements, instruments and documents for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power, being coupled with an interest, shall be irrevocable for so long as this Agreement shall be in effect with respect to such Pledgor.      4.6 Protection of Security Interest; Further Assurances. Each Pledgor will, at its own cost and expense, take any and all actions reasonably necessary to warrant and defend the right, title and interest of the Secured Parties in and to the Collateral against the claims and demand of all other persons. Each Pledgor agrees that it will do such further acts and things (including, without limitation, making any notice filings with state tax or revenue authorities required to be made by account creditors in order to enforce any Accounts in such state) and to execute and deliver to the Agent such additional conveyances, assignments, agreements and instruments as the Agent may reasonably require or deem advisable to perfect, establish, confirm and maintain the security interest and lien provided for herein, to carry out the purposes of this Agreement or to further assure and confirm unto the Agent his rights, powers and remedies hereunder. 7 --------------------------------------------------------------------------------   Execution Copy ARTICLE V GENERAL AUTHORITY; REMEDIES      5.1 General Authority. Each Pledgor hereby irrevocably appoints the Agent, with full power of substitution, as its true and lawful attorney-in-fact, in the name of each such Pledgor or the Agent, for the sole use and benefit of the Agent, but at each Pledgor’s expense, from time to time in the Agent’s discretion after the occurrence and during the continuation of a Default, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Agreement and, without limiting the foregoing, each Pledgor hereby gives the Agent the power and right on its behalf, without notice to or further assent by any Pledgor to do the following, from time to time in the Agent’s discretion after the occurrence and during the continuation of a Default, subject, however, to the rights of the Senior Lender under the Senior Security Interests as more fully set forth in the Subordination Agreement:      (i) to receive, take, endorse, assign and deliver any and all checks, notes, drafts, acceptances, documents and other negotiable and nonnegotiable instruments taken or received by any Pledgor as, or in connection with, the Collateral;      (ii) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or in connection with the Collateral;      (iii) to commence, settle, compromise, compound, prosecute, defend or adjust any claim, suit, action or proceeding with respect to, or in connection with, the Collateral;      (iv) to sell, transfer, assign or otherwise deal in or with the Collateral or any part thereof, as fully and effectually as if the Agent were the absolute owner thereof; and      (v) to do, at its option, but at the expense of the Pledgors, at any time or from time to time, all acts and things which the Agent deems necessary to protect or preserve the Collateral and to realize upon the Collateral.      5.2 Rights and Remedies. Subject to the rights of the Senior Lender under the Senior Security Interests, if a Default shall have occurred and be continuing, the Agent shall be entitled to exercise in respect of the Collateral all of its rights, powers and remedies provided for herein or otherwise available to him under the Stock Purchase Agreement, by law, in equity or otherwise, including all rights and remedies of a secured party under the Uniform Commercial Code, and shall be entitled in particular, but without limitation of the foregoing, to exercise the following rights, which each Pledgor agrees to be commercially reasonable:      (a) To notify any or all account debtors or obligors under any Accounts or other Collateral of the security interest in favor of the Agent created hereby and to direct all such persons to make payments of all amounts due thereon or thereunder directly to the Agent or to an account designated by the Agent; and in such instance and from and after such notice, all amounts and proceeds received by any Pledgor in respect of any Accounts or other Collateral shall be received in trust for the benefit of the Agent hereunder, shall be segregated from the other funds of such Pledgor and shall be forthwith deposited into such account or paid over or 8 --------------------------------------------------------------------------------   Execution Copy delivered to the Agent in the same form as so received (with any necessary endorsements or assignments), to be held as Collateral and applied to the Secured Obligations as provided herein;      (b) To take possession of, receive, endorse, assign and deliver, in its own name or in the name of any Pledgor, all checks, notes, drafts and other instruments relating to any Collateral, including receiving, opening and properly disposing of all mail addressed to any Pledgor concerning Accounts and other Collateral; to verify with account debtors or other contract parties the validity, amount or any other matter relating to any Accounts or other Collateral, in his own name or in the name of any Pledgor; to accelerate any indebtedness or other obligation constituting Collateral that may be accelerated in accordance with its terms; to take or bring all actions and suits deemed necessary or appropriate to effect collections and to enforce payment of any Accounts or other Collateral; to settle, compromise or release in whole or in part any amounts owing on Accounts or other Collateral; and to extend the time of payment of any and all Accounts or other amounts owing under any Collateral and to make allowances and adjustments with respect thereto, all in the same manner and to the same extent as any Pledgor might have done;      (c) To transfer to or register in his name or the name of any of his agents or nominees all or any part of the Collateral, without notice to any Pledgor and with or without disclosing that such Collateral is subject to the security interest created hereunder;      (d) To require any Pledgor to, and each Pledgor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or any part of the Collateral as directed by the Agent and make it available to the Agent at a place designated by the Agent;      (e) To enter and remain upon the premises of any Pledgor and take possession of all or any part of the Collateral, with or without judicial process; to use the materials, services, books and records of any Pledgor for the purpose of liquidating or collecting the Collateral, whether by foreclosure, auction or otherwise; and to remove the same to the premises of the Agent or any designated agent for such time as the Agent may desire, in order to effectively collect or liquidate the Collateral; and      (f) To sell, resell, assign and deliver, in its sole discretion, all or any of the Collateral, in one or more parcels, at public or private sale, at any of the Agent’s offices or elsewhere, for cash, upon credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Agent may deem satisfactory. If any of the Collateral is sold by the Agent upon credit or for future delivery, the Agent shall not be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any such failure, the Agent may resell such Collateral. In no event shall any Pledgor be credited with any part of the proceeds of sale of any Collateral until and to the extent cash payment in respect thereof has actually been received by the Agent. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right of whatsoever kind, including any equity or right of redemption of any Pledgor, and each Pledgor hereby expressly waives all rights of redemption, stay or appraisal, and all rights to require the Agent to marshal any assets in favor of such Pledgor or any other party or against or in payment of any or all of the Secured Obligations, that it has or may have under any rule of law or statute now existing or hereafter adopted. If any notice of a proposed sale or other disposition of any part of the Collateral shall be required under applicable 9 --------------------------------------------------------------------------------   Execution Copy law, the Agent shall give the applicable Pledgor at least ten (10) days’ prior notice of the time and place of any public sale and of the time after which any private sale or other disposition is to be made, which notice each Pledgor agrees is commercially reasonable. The Agent shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale may have been given. the Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Upon each public sale and, to the extent permitted by applicable law, upon each private sale, the Agent may purchase all or any of the Collateral being sold, free from any equity, right of redemption or other claim or demand, and may make payment therefor by endorsement and application (without recourse) of the Secured Obligations in lieu of cash as a credit on account of the purchase price for such Collateral.      5.3 Application of Proceeds.      (a) All proceeds collected by the Agent upon any sale, other disposition of or realization upon any of the Collateral, together with all other moneys received by the Agent hereunder, shall be applied as follows:      (i) first, to payment of the expenses of such sale or other realization, including reasonable compensation to the Agent and his agents and counsel, and all expenses, liabilities and advances incurred or made by the Agent, his agents and counsel in connection therewith or in connection with the care, safekeeping or otherwise of any or all of the Collateral, and any other unreimbursed expenses for which the Agent is to be reimbursed pursuant to Section 6.1;      (ii) second, after payment in full of the amounts specified in clause (i) above, to payment of the Secured Obligations; and      (iii) finally, after payment in full of the amounts specified in clauses (i) and (ii) above, any surplus then remaining shall be paid to the Pledgors, or their successors or assigns, or to whomever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.      (b) Each Pledgor shall remain liable to the extent of any deficiency between the amount of all proceeds realized upon sale or other disposition of the Collateral pursuant to this Agreement. Upon any sale of any Collateral hereunder by the Agent (whether by virtue of the power of sale herein granted, pursuant to judicial proceeding, or otherwise), the receipt of the Agent or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Agent or such officer or be answerable in any way for the misapplication thereof.      5.4 Collateral Accounts. Upon the occurrence and during the continuance of a Default, subject, however, to the rights of the Senior Lender under the Senior Security Interests as more fully set forth in the Subordination Agreement, the Agent shall have the right to cause to be established and maintained, at its principal office or such other location or locations as it may 10 --------------------------------------------------------------------------------   Execution Copy establish from time to time in its discretion, one or more accounts (collectively, “Collateral Accounts”) for the collection of cash proceeds of the Collateral. Such proceeds, when deposited, shall continue to constitute Collateral for the Secured Obligations and shall not constitute payment thereof until applied as herein provided. the Agent shall have sole dominion and control over all funds deposited in any Collateral Account, and such funds may be withdrawn therefrom only by the Agent. Upon the occurrence and during the continuance of a Default, the Agent shall have the right to apply amounts held in the Collateral Accounts in payment of the Secured Obligations in the manner provided for in Section 5.3.      5.5 Grant of License. Each Pledgor hereby grants to the Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Pledgor) to use, license or sublicense any Intellectual Property now owned or licensed or hereafter acquired or licensed by such Pledgor, wherever the same may be located throughout the world, for such term or terms, on such conditions and in such manner as the Agent shall determine, whether general, special or otherwise, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license or sublicense by the Agent shall be exercised, at the option of the Agent, only upon the occurrence and during the continuation of a Default; provided that any license, sublicense or other transaction entered into by the Agent in accordance herewith shall be binding upon each applicable Pledgor notwithstanding any subsequent cure of a Default.      5.6 Waivers. Each Pledgor, to the greatest extent not prohibited by applicable law, hereby waives all rights that it has or may have under any rule of law or statute now existing or hereafter adopted to require the Agent to marshal any Collateral or other assets in favor of such Pledgor or any other party or against or in payment of any or all of the Secured Obligations.. ARTICLE VI MISCELLANEOUS      6.1 Indemnity and Expenses. The Pledgors shall jointly and severally pay and reimburse the Agent upon demand for all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) that the Agent may incur in connection with (i) the custody, use or preservation of, or the sale of, collection from or other realization upon, any of the Collateral, including the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, (ii) the exercise or enforcement of any rights or remedies granted hereunder (including, without limitation, under Article V), or otherwise available to him (whether at law, in equity or otherwise), or (iii) the failure by any Pledgor to perform or observe any of the provisions hereof. The provisions of this Section 6.1 shall survive the execution and delivery of this Agreement, the repayment of any of the Secured Obligations and the termination of this Agreement.      6.2 No Waiver. The Agent’s failure at any time or times hereafter to require strict performance by any Pledgor of any of the provisions of this Agreement shall not waive, affect or diminish any right of the Agent at any time or times hereafter to demand strict performance 11 --------------------------------------------------------------------------------   Execution Copy therewith and with respect to any other provision of this Agreement, and any waiver of any Default shall not waive or affect any other Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the provisions of this Agreement shall be deemed to have been waived by any act or knowledge of the Agent or his agents, except by an instrument in writing signed by the Agent and directed to the Pledgors specifying such waiver.      6.3 Binding Effect. This Agreement and all other instruments and documents executed and delivered pursuant hereto or in connection herewith shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto.      6.4 Governing Law. This Agreement shall be construed and interpreted in accordance with the internal laws and judicial decisions of the State of Delaware without giving effect to the conflict of laws principles thereof, except to the extent that matters of perfection and validity of the security interests hereunder, or remedies hereunder, are governed by the laws of a jurisdiction other than the State of Delaware.      6.5 Survival of Agreement. All representations and warranties of each Pledgor and all obligations of each Pledgor contained herein shall survive the execution and delivery of this Agreement.      6.6 Continuing Security Interest; Term; Successors and Assigns; Assignment; Termination and Release; Survival. This Agreement shall create a continuing security interest in the Collateral and shall secure the payment and performance of all of the Secured Obligations as the same may arise and be outstanding at any time and from time to time from and after the date hereof, and shall (i) remain in full force and effect until all of the Secured Obligations have been paid and finally discharged in full (the “Termination Requirement”), (ii) be binding upon and enforceable against each Pledgor and its successors and assigns; provided, however, that no Pledgor may sell, assign or transfer any of its rights, interests, duties or obligations hereunder without the prior written consent of the Agent, and (iii) inure to the benefit of and be enforceable by the Agent and its successors and assigns. Upon the occurrence of the Termination Requirement, this Agreement and the lien and security interest created hereby shall terminate; and in connection with any such release or termination, the Agent, promptly at the request of the applicable Pledgor, will execute and deliver to such Pledgor such documents and instruments evidencing such release or termination as such Pledgor may reasonably request and will assign, transfer and deliver to such Pledgor, without recourse and without representation or warranty, such of the Collateral as may then be in the possession of the Agent (or, in the case of any partial release of Collateral, such of the Collateral so being released as may be in its possession).      6.7 Notice. Except as otherwise provided herein, notice to the Pledgors or to the Agent shall be given or delivered in the manner set forth in Section 7.01 of the Stock Purchase Agreement.      6.8 Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 12 --------------------------------------------------------------------------------   Execution Copy      6.9 Captions. The captions to the sections of this Agreement have been inserted for convenience only and shall not limit or modify any of the terms hereof.      6.10 Counterparts. This Agreement may be executed in two or more counterparts, which when assembled shall constitute one and the same agreement. Execution and delivery of this Agreement by facsimile or as an attachment to an electronic mail shall constitute a valid and binding execution and delivery of this Agreement by such party. Such facsimile copies or electronic mail attachments shall constitute enforceable original documents.      6.11 Amendments and Waivers. Any provision of this Agreement may be amended or waived, if, but only if, such amendment or waiver is in writing and is signed by each Pledgor and the Agent.      6.12 Conflict of Terms. The terms of this Agreement and the terms of the Stock Purchase Agreement shall be construed and interpreted to the full extent possible to give effect to all such terms. In the event of any conflict between the terms of this Agreement and the Stock Purchase Agreement, the terms of the Stock Purchase Agreement shall control.      6.13 Subordination. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS UNDER THIS AGREEMENT, ALL RIGHTS AND REMEDIES OF THE AGENT AND SECURED PARTIES, AND ALL COVENANTS, OBLIGATIONS, AND RESPONSIBILITIES OF PLEDGORS, ARE SUBJECT TO THE RIGHTS AND REMEDIES OF THE SENIOR LENDER IN AND UNDER THE SENIOR SECURITY INTERESTS AND/OR THE SENIOR LOAN DOCUMENTS AS MORE FULLY SET FORTH IN THE SUBORDINATION AGREEMENT.      6.14 Permitted Transactions. No Pledgor shall merge, consolidate, liquidate or dissolve prior to the termination of this Agreement pursuant to Section 6.6; provided, however, that one or more Pledgors may be merged, consolidated, liquidated or dissolved after the date hereof if (i) in the case of a merger or consolidation, the surviving entity is a Pledgor; or (ii) in the case of a liquidation or dissolution, the assets of the entity or entities being liquidated or dissolved that are included in the Collateral are assigned or transferred to another Pledgor. [The remainder of this page is left blank intentionally; signature page follows] 13 --------------------------------------------------------------------------------   Execution Copy      IN WITNESS WHEREOF, this Partially Subordinated Security Agreement has been executed as of the day and year first above written by the parties hereto.                   TRADE SOURCE INTERNATIONAL, INC.                       By: Name:   /s/ Brad Dale Heimann   Brad Dale Heimann         Title:   President and Chief Operating Officer                       MARKETING IMPRESSIONS, INC.                       By: Name:   /s/ Brad Dale Heimann   Brad Dale Heimann         Title:   President and Chief Operating Officer                       PRIME/HOME IMPRESSIONS, LLC                       By: Name:   /s/ Brad Dale Heimann   Brad Dale Heimann         Title:   President and Chief Operating Officer                           /s/ Robert W. Lackey   Robert W. Lackey, as Agent     Signature Page to Partially Subordinated Security Agreement 14

Exhibit 10.20   EMPLOYMENT AGREEMENT   AGREEMENT dated as of August 31, 2004 between Alison Gregg Corcoran of 70 Morton Road, Milton, Massachusetts (“Executive”), and BJ’ s Wholesale Club, Inc., a Delaware corporation, whose principal office is in Natick, Massachusetts (“Employer” or “Company”).   W I T N E S S E T H   WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company;   NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the sufficiency of which is acknowledged by each party, and intending to be legally bound hereby, the Company and Executive agree as follows:   1. Employment and Duties.   1.1 Employment.   (a) Commencing on December 30, 2003 (the “Effective Date”), the Company agrees to employ Executive and the Executive agrees to be employed by the Company for a period of five (5) years, ending on December 29, 2008 (“Initial Term”).   (b) The Initial Term of this Agreement, and the employment of Executive hereunder by the Company, may be renewed or extended for such period or periods as may mutually be agreed upon by the Company and the Executive in writing. If this Agreement is not renewed and extended prior to the expiration of the Initial Term, this Agreement automatically shall terminate at the expiration of the Initial Term.   1.2 Duties. As of the Effective Date, Executive shall serve the Company as its Senior Vice President, Member Insight, to serve in such capacity or other capacities as designated by the Board of Directors, the Chief Executive Officer (“CEO”) or his designee from time to time. During the term of this Agreement, the Executive shall serve the Company faithfully, diligently and to the best of her ability and shall devote substantially all of her business time, energy and skill to the affairs of the Company as necessary to perform the duties of her position, and she shall not assume a position in any other business without the express written permission of the CEO; provided that the Executive may upon disclosure to the CEO (i) serve in any capacity with charitable or not-for-profit enterprises so long as there is no material interference with the Executive’s duties to the Company and (ii) make any passive investments where Executive is not obligated or required to, and shall not in fact, devote any managerial efforts. The Company shall have the right to limit Executive’s participation in any of the foregoing endeavors if the CEO believes, in his sole and exclusive discretion, that the time being spent on such activities infringes upon, or is incompatible with, the Executive’s ability to perform the duties under this Agreement.   2. Compensation and Benefits.   2.1 Base Salary. Executive shall receive a Base Salary at the rate of $225,000 per year. Such Base Salary shall be subject to periodic adjustment from time to time as determined by the Board of Directors in its sole discretion. Base Salary shall be payable in such manner and at such times as the Company shall pay base salary to other similarly situated executive employees.   2.2 Policies and Fringe Benefits. The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. The Executive shall be eligible to participate in all benefit programs that the Company establishes and makes available to all of its executives on such terms as the Board of Directors -------------------------------------------------------------------------------- shall determine, if any, to the extent that the Executive meets the eligibility requirements to participate as set forth in the applicable plan or policy. Nothing herein limits the Company’s right to modify, change, limit eligibility or discontinue any plan or policy at any time, with or without prior notice.   2.3 Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable and appropriate travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of her responsibilities or services under this Agreement, in accordance with policies and procedures, and subject to limitations, adopted by the Company from time to time.   2.4 Withholding. All salary and other compensation payable to the Executive pursuant to this Agreement shall be subject to applicable taxes and withholdings.   3. Termination of Employment and Benefits Upon Termination.   3.1 General. Executive’s employment pursuant to this Agreement shall terminate upon the earliest to occur of (i) the Executive’s death, (ii) a termination by reason of disability, (iii) a termination by the Company with or without Cause, (iv) a termination by the Executive, or (v) expiration of the Initial Term and any renewals or extensions thereof, unless at the expiration of such Initial Term, renewals or extensions thereof the Company determines that Executive’s employment will continue under separate terms and conditions. Whenever the Executive’s employment shall terminate, and regardless of the reason for such termination, effective that same date she shall resign all offices, appointments and/or other positions Executive may hold with the Company including, but not limited to, any parent corporation, subsidiaries or divisions of the Company or any such parent.   3.2 Termination Due to Death. Executive’s employment shall automatically terminate upon the date of Executive’s death. No compensation or other benefits shall be payable to or accrue to Executive hereunder except as follows:   (a) (i) all amounts earned but unpaid hereunder through the date of termination with respect to salary, automobile allowance and vested but unused vacation; (ii) to the extent not already paid, any amounts to which Executive is entitled under the Company’s annual incentive compensation plan for the fiscal year ended immediately prior to the date of termination; (iii) her vested account balance under the BJ’s Wholesale Club, Inc. 401(k) Savings Plan for Salaried Employees; and (iv) any unreimbursed expenses incurred in accordance with Company policy (collectively, “Earned Obligations”);   (b) any amounts the Executive would have been entitled to receive under the Company’s annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid to the Executive’s estate at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and   (c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following Executive’s death.   3.3 Termination Due to Disability. Executive’s employment may be terminated by reason of Executive’s disability, upon notice to Executive, in the event of the inability of Executive to perform her duties hereunder by reason of disability, whether by reason of injury (physical or mental), illness (physical or mental) or otherwise, incapacitating Executive for a continuous period exceeding one hundred twenty (120) days, as certified by a physician selected by Executive and the Company in good faith. No compensation or other benefits shall be payable to or accrue to Executive hereunder except as follows:   (a) all Earned Obligations;   (b) any amounts the Executive would have been entitled to receive under the Company’s annual incentive compensation plan had the Executive remained employed by the Company until the end of   2 -------------------------------------------------------------------------------- the fiscal year during which the termination of employment occurs (prorated for the period of active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and   (c) any payments or benefits under other plans of the Company to the extent such plans provide for benefits following a termination of employment due to disability.   3.4 Termination by the Company for Cause or by the Executive. The Company may terminate the Executive’s employment at any time for Cause by providing Executive notice of such termination. For the purpose of this Agreement, termination by the Company for Cause shall refer to the Company’s termination of the Executive’s employment because it has determined, in its sole and exclusive discretion, that she has: (i) refused or failed to devote her full normal working time, skills, knowledge, and abilities to the business of the Company and in promotion of its interests or she has failed to fulfill directives of the CEO, the CEO’s designee or the Board of Directors; (ii) engaged in activities involving dishonesty, willful misconduct, willful violation of any law, rule, regulation or policy of the Company or breach of fiduciary duty; (iii) committed larceny, embezzlement, conversion or any other act involving the misappropriation of the Company’s funds or property; (iv) been convicted of any crime which reasonably could affect in an adverse manner the reputation of the Company or Executive’s ability to perform her duties hereunder; (v) been grossly negligent in the performance of her duties; or (vi) materially breached this Agreement including, but not limited to, her obligations set forth in Sections 4 and 5 below. If Executive’s employment terminates pursuant to this Section 3.4 by the Company for Cause or by reason of the Executive’s resignation at any time, Executive shall only receive the Earned Obligations, if any, through her termination date. Nothing herein waives any rights the Company may have for damages or equitable relief.   3.5 Termination by the Company Without Cause. The Company may terminate Executive’s employment without Cause at any time effective upon Executive’s receipt of notice of such termination. No compensation or other benefits shall be payable to or accrue to Executive in the event of her termination without cause except as follows:   (a) all Earned Obligations;   (b) Subject to receipt by the Company of a binding and irrevocable release of claims and separation agreement prepared by the Company (the “Release”), executed by the Executive and delivered to the Company within thirty (30) days of the date that the Company presents the Release to the Executive, the Executive shall be eligible to receive:   (1) continuation of Base Salary for a period of twelve (12) months (the “Severance Period”), payable in such manner and at such times as Executive’s Base Salary was being paid immediately prior to such termination;   (2) if the Executive elects to continue to participate in the Company’s medical and/or dental plans for team members pursuant to a valid COBRA election (and if and only if such participation is legally and contractually permissible), an amount equal to the difference between the Executive’s actual COBRA premium costs and the amount the Executive would have paid had Executive continued coverage as an employee under the Company’s applicable health plans without regard to the pre-tax benefits the Executive would have received under the BJ’s Wholesale Club, Inc. Flexible Benefits Plan provided, however, that the Company’s obligations under this clause 3.5(b)(2) shall (A) not extend beyond the Severance Period, (B) be eliminated if the Executive discontinues COBRA benefits or (C) be reduced or eliminated to the extent that Executive receives similar coverage and benefits under the plans and programs of a subsequent employer or entity or becomes eligible for similar coverage under a spouse’s employer;   (3) any amounts Executive would have been entitled to receive under the Company’s annual incentive compensation plan had the Executive remained employed by the Company until the end of the fiscal year during which the termination of employment occurs (prorated for the period of   3 -------------------------------------------------------------------------------- active employment during such fiscal year). All such amounts, if any, will be paid at the same time as other incentive compensation plan payments for the year in which the termination occurs are paid; and   (c) payments or benefits under other plans of the Company to the extent that the plans provide for benefits following a termination of employment.   Notwithstanding the foregoing, the payments and benefits described in Section 3.5(b) above shall immediately terminate, and the Company shall have no further obligations to Executive with respect thereto, in the event that Executive (i) becomes employed by Wal-Mart Stores, Inc., Costco Wholesale Corporation, Sam’s Clubs, or any of their respective subsidiaries or affiliates; or (ii) breaches any provision of Sections 4 or 5 of this Agreement.   4. Non-Competition and Non-Solicitation.   4.1 Restricted Activities. While the Executive is employed by the Company and for a period of twelve (12) months after the termination or cessation of such employment for any reason, the Executive will not directly or indirectly:   (a) Engage in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business. A business or enterprise shall be deemed competitive if it shall operate a chain of membership warehouse clubs (by way of example, but not limitation, Sam’s Club or Costco), warehouse stores selling food and/or general merchandise that includes a warehouse store located within 10 miles of any “then existing” BJ’s Wholesale Club warehouse store, or any other business that competes with the Company. Competitive business or enterprise also includes any store or business operated or owned by Wal-Mart Stores, Inc., Costco Wholesale Corporation, or any of the respective affiliates thereof. The term “then existing” shall refer to any such warehouse store that is, at the time of termination of the Executive’s employment, operated by the Company or any of its subsidiaries or divisions or under lease for operation as aforesaid; or   (b) Either alone or in association with others (i) solicit, or permit any organization directly or indirectly controlled by the Executive to solicit, any employee of the Company to leave the employ of the Company, or (ii) solicit for employment, hire or engage as an independent contractor, or permit any organization directly or indirectly controlled by the Executive to solicit for employment, hire or engage as an independent contractor, any person who was employed by the Company at the time of the termination or cessation of the Executive’s employment with the Company; provided that this clause (ii) shall not apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminated for a period of six months or longer at the time of such solicitation, hiring or employment.   4.2 Extension of Restrictions. If the Executive violates the provisions of Section 4.1, the twelve (12) month period referred to in Section 4.1 shall recommence and the Executive shall continue to be bound by the restrictions set forth in Section 4.1 until a period of twelve (12) months has expired without any violation of such provisions.   4.3 Interpretation. If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.   4.4 Equitable Remedies. The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 4 is likely to cause the Company substantial   4 -------------------------------------------------------------------------------- and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 4, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.   5. Proprietary Information.   5.1 Proprietary Information.   (a) The Executive agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business, business relationships or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, financial data, personnel data, computer programs, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of the Company. The Executive will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval by an executive officer of the Company, either during or after her employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Executive.   (b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into her custody or possession, shall be and are the exclusive property of the Company to be used by the Executive only in the performance of her duties for the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Executive shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) termination of her employment. After such delivery, the Executive shall not retain any such materials or copies thereof or any such tangible property.   (c) The Executive agrees that her obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and her obligation to return materials and tangible property set forth in paragraph (b) above also extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive.   5.2 Equitable Remedies. The restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered by the Executive to be reasonable for such purpose. The Executive agrees that any breach of this Section 5 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Section 5, and the Executive hereby waives the adequacy of a remedy at law as a defense to such relief.   6. Other Agreements. The Executive represents that her performance of all the terms of this Agreement and the performance of his duties as an employee of the Company do not and will not breach any agreement with any prior employer or other party to which the Executive is a party (including without limitation any nondisclosure or non-competition agreement). Any agreement to which the Executive is a party relating to nondisclosure, non-competition or non-solicitation of employees or customers is listed on Schedule A attached hereto.   5 -------------------------------------------------------------------------------- 7. Miscellaneous.   7.1 Notices. Any notice delivered under this Agreement shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 7.1.   7.2 Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.   7.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.   7.4 Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.   7.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof), except as may be preempted by ERISA. Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within Massachusetts), and the Company and the Executive each consents to the jurisdiction of such a court. The Company and the Executive each hereby irrevocably waives any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.   7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Company’s assets or business; provided, however, that the obligations of the Executive are personal and shall not be assigned by him.   7.7 Waivers. No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. Notwithstanding the foregoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a third party engaged in multiple lines of business succeeds to the Company’s assets or business, then for purposes of Section 4.1(a), the term “Company” shall mean and refer to the business of the Company as it existed immediately prior to such event and as it subsequently develops and not to the third party’s other businesses.   7.8 Captions. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.   7.9 Severability. In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.   *    *    *    *    *   6 -------------------------------------------------------------------------------- THE EXECUTIVE ACKNOWLEDGES THAT SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.   BJ’S WHOLESALE CLUB, INC.         By:   /s/    Michael Wedge --------------------------------------------------------------------------------       /s/    Alison Gregg Corcoran --------------------------------------------------------------------------------     Michael T. Wedge       Alison Gregg Corcoran     Chief Executive Officer       Executive   ATTEST:   /s/    Kellye L. Walker --------------------------------------------------------------------------------         WITNESS:   /s/    Eileen P. Codyer --------------------------------------------------------------------------------   7 -------------------------------------------------------------------------------- SCHEDULE A   Agreements containing Restrictive Covenants   None         Schedule A   Executive initials /s/    AGC

Exhibit 10.4 SECOND AMENDMENT TO PURCHASE AGREEMENT AND RELEASE OF CLAIMS THIS SECOND AMENDMENT TO PURCHASE AGREEMENT AND RELEASE OF CLAIMS (the “Amendment”) dated as of August 7, 2006 is made and entered into by and among PNGI Pocono, Inc., a Delaware corporation (“PNGI Pocono”), successor to PNGI Pocono, Corp. and PNGI, LLC (together, the “Sellers”), and the Mohegan Tribal Gaming Authority, an instrumentality of The Mohegan Tribe of Indians of Connecticut (the “Buyer”), and is joined in by Penn National Gaming, Inc., a Pennsylvania corporation (the “Parent”) for the limited purposes described below. WHEREAS, Sellers and Buyer entered into that certain Purchase Agreement dated as of October 14, 2004 (as amended through the date hereof, the “Purchase Agreement”) with respect to the purchase and sale of certain entities owning, among other assets, the assets comprising the harness racing track formerly known as Pocono Downs Race Track and now known as Mohegan Sun at Pocono Downs; WHEREAS, on January 25, 2005, pursuant to the Purchase Agreement, Buyer and its subsidiary, Mohegan Commercial Ventures PA LLC, acquired all of the LP Interests and GP Interests in the Partnership Subsidiaries and Pocono Downs (as each such term is defined in the Purchase Agreement); WHEREAS, subsequent to the Closing, Buyer has raised potential claims against Sellers relating to real estate taxes and environmental matters; WHEREAS, subsequent to the Closing, Sellers were each liquidated and dissolved and their assets, subject to all unpaid liabilities (including, without limitation, all liabilities and obligations arising under the Purchase Agreement), were transferred to PNGI Pocono; and WHEREAS, PNGI Pocono and Buyer now desire to amend certain provisions of the Purchase Agreement as described herein. NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are acknowledged hereby, and intending to be legally bound hereby, PNGI Pocono and Buyer agree as follows: 1. Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Purchase Agreement. 2. Environmental Matters. (a) Section 10.1.1(iv) of the Purchase Agreement hereby is deleted in its entirety. -------------------------------------------------------------------------------- (b) Section 10.9.2 of the Purchase Agreement hereby is deleted in its entirety and the following is substituted in its place: 10.9.2 Environmental Costs Cap. The aggregate amount of costs to be borne by Sellers as a result of corrective actions undertaken pursuant to Section 7.5.1, Remediation required in accordance with Section 7.5 hereof, claims for indemnification by Buyer for breach of Sellers’ representations under Section 5.24 hereof, or Environmental Claims shall not exceed One Million Dollars ($1,000,000), all of which previously has been paid. (c) It is acknowledged and agreed that Buyer is now managing, and shall hereafter continue to manage, all Remediation and corrective actions which are ongoing pursuant to Section 7.5 of the Purchase Agreement and any remaining Remediation or corrective actions pursued by Buyer shall be at Buyer’s sole cost and expense. From and after the date hereof, neither PNGI Pocono nor Buyer shall have any further obligations to the other of any kind with respect to such corrective actions or Remediation (whether currently ongoing or undertaken in the future) pursuant to Section 7.5 of the Purchase Agreement or otherwise, and if any governmental agency or instrumentality requires completion of such Remediation or other corrective action, Buyer agrees that it shall have no claim against PNGI Pocono under the Purchase Agreement with respect thereto. (d) Section 10.2.1(iv) of the Purchase Agreement hereby is deleted in its entirety and the following is substituted in its place: (iv) Hazardous Materials arising from or relating to any activity occurring, omission to act or other matter initiated after the Closing. 3. Put Option. (a) Buyer acknowledges that Buyer never exercised any rights provided by Section 11.5 of the Purchase Agreement. (b) Section 11.5 of the Purchase Agreement hereby is deleted in its entirety. 4. Release of Claims. (a) Except as described in Section 4(b) hereof, claims relating to the indemnification obligations of Sellers described in Section 10.1.1(iii) of the Purchase Agreement and the representations and warranties relating to Taxes and Tax Returns (as defined in Section 5.15 of the Purchase Agreement) shall continue to survive the Closing for the periods described in Sections 10.1.1(iii) and 10.4(a) of the Purchase Agreement, respectively (collectively, the “Reserved Claims”). Except for the Reserved Claims, Buyer hereby releases any and all other claims against Parent and all of its direct and indirect subsidiaries and affiliates, including without limitation PNGI Pocono, for Losses arising out of or relating to the Purchase Agreement. As of the date hereof, Buyer has no actual current knowledge of any facts which may give rise to a Reserved Claim. (b) Notwithstanding the reservation by Buyer of the right to pursue Reserved Claims as described in Section 4(a), Buyer hereby withdraws its claim for indemnification described in   2 -------------------------------------------------------------------------------- Buyer’s letter to Sellers dated February 6, 2006 pursuant to Section 10.7 of the Purchase Agreement in connection with the litigation styled as Wilkes-Barre Area School District v. Luzerne County Board of Assessments Appeals and Pocono Downs, Inc. No. 7793-C of 2001 (the “Tax Appeal Litigation”). Buyer hereby releases Parent and all of its direct and indirect subsidiaries and affiliates, including without limitation PNGI Pocono, from any and all claims under the Purchase Agreement which it may have previously asserted or may now or hereafter have arising out of or in any way related to the Tax Appeal Litigation. 5. Claims Payment. In consideration of the release of claims pursuant to Sections 2 and 4 of this Amendment and the termination of Buyer’s rights under Section 11.5 of the Purchase Agreement pursuant to Section 3 of this Amendment, PNGI Pocono shall refund to Buyer an aggregate of Thirty Million Dollars ($30,000,000) (the “Claims Payment”) of the Purchase Price in installments on the following payment dates: Seven Million Dollars ($7,000,000) on the first (1st) anniversary of the date upon which slot machine operations are opened to the public at Mohegan Sun at Pocono Downs (the “Initial Payment Date”); Seven Million Dollars ($7,000,000) on the first (1st) anniversary of the Initial Payment Date; Six Million Five Hundred Thousand Dollars ($6,500,000) on the second (2nd) anniversary of the Initial Payment Date; Six Million Dollars ($6,000,000) on the third (3rd) anniversary of the Initial Payment Date; and Three Million Five Hundred Thousand Dollars ($3,500,000) on the fourth (4th) anniversary of the Initial Payment Date. Buyer or Pocono Downs shall notify PNGI Pocono and Parent (in accordance with the notice provisions of the Purchase Agreement) of the date upon which slot machine operations are opened to the public at Mohegan Sun at Pocono Downs and thereafter each installment of the Claims Payment shall be made on the dates set forth above without the necessity of any further notice of any kind. 6. Confirmation of Termination of Transition Services. Buyer hereby acknowledges that the transition services (“Transition Services”) contemplated by Section 7.7 of the Purchase Agreement and that separate Transition Services Agreement by and between the Parent and Downs Racing, L.P. dated January 25, 2005 have been completed and there exists no further obligation on the part of the Parent or any of its subsidiaries to perform Transition Services. 7. Governing Law. This Amendment shall be governed by and interpreted and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania. 8. Counterparts. This Amendment may be executed in any number of counterparts and any Party hereto may execute any such counterpart, each of which when 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 Amendment shall become binding when one or more counterparts taken together shall have been executed and delivered by the Parties. It shall not be necessary in making proof of this Amendment or any counterpart hereof to produce or account for any of the other counterparts. Any facsimile signature shall be deemed to be an original signature. [SIGNATURE PAGE TO FOLLOW]   3 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment on the date first written.   PNGI POCONO, INC., as successor to PNGI Pocono, Corp. and PNGI, LLC By:   /s/ Robert S. Ippolito Name:   Robert S. Ippolito Title:   V.P. / SEC / Treasurer MOHEGAN TRIBAL GAMING AUTHORITY By:   /s/ Mitchell Grossinger Etess Name:   Mitchell Grossinger Etess Title:   CEO -------------------------------------------------------------------------------- CONFIRMATION OF GUARANTY AND JOINDER For value received and to induce Buyer to enter into the Amendment set forth above, Parent hereby confirms the continuing validity of its guarantee to and for the benefit of Buyer of the prompt payment and performance of each of the Sellers’ financial obligations under the Purchase Agreement, as amended (including, without limitation, any obligations arising pursuant to Section 11.4 thereof) (as such financial obligations were transferred to PNGI Pocono), in accordance with the terms and conditions thereof and hereof. To such end, Parent agrees it will either (a) cause PNGI Pocono to make all such payments to Buyer as and when the PNGI Pocono is required to do so under the Purchase Agreement, as amended, or (b) make or cause to be made directly to Buyer all such payments as and when required under the Purchase Agreement, as amended.   PENN NATIONAL GAMING, INC. By:   /s/ Robert S. Ippolito Name:   Robert S. Ippolito Title:   V.P. / SEC / Treasurer

  Exhibit 10.1   AMENDED AND RESTATED TERM LOAN AGREEMENT Dated as of April 28, 2006 among VENOCO, INC., as Borrower, and BMC, LTD., WHITTIER PIPELINE CORPORATION, TEXCAL ENERGY (LP) LLC, TEXCAL ENERGY (GP) LLC, TEXCAL ENERGY NORTH CAL L.P., TEXCAL ENERGY SOUTH CAL L.P. and TEXCAL ENERGY SOUTH TEXAS L.P., as Guarantors,   The Several Lenders from Time to Time Parties Hereto, CREDIT SUISSE, CAYMAN ISLANDS BRANCH as Administrative Agent, CREDIT SUISSE SECURITIES (USA) LLC and LEHMAN BROTHERS INC., as Joint Lead Arrangers, HARRIS NESBITT CORP., as Co-Arranger, and LEHMAN BROTHERS INC., as Syndication Agent     --------------------------------------------------------------------------------   TABLE OF CONTENTS     Page ARTICLE I DEFINITIONS 2 1.1 Certain Defined Terms 2 1.2 Other Interpretive Provisions 25 1.3 Accounting Principles 26       ARTICLE II THE CREDIT 26 2.1 Amounts and Terms of the Loans 26 2.2 Maturity Date 27 2.3 Conversion and Continuation Elections 27 2.4 Optional Prepayments 28 2.5 Mandatory Prepayments 29 2.6 Repayment 30 2.7 Interest 30 2.8 Fees 31 2.9 Computation of Fees and Interest 31 2.10 Payments by the Company; Loans Pro Rata 31 2.11 [Intentionally Omitted] 33 2.12 Sharing of Payments, Etc. 33       ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 34 3.1 Taxes 34 3.2 Illegality 35 3.3 Increased Costs and Reduction of Return 35 3.4 Funding Losses 36 3.5 Inability to Determine Rates 36 3.6 Certificates of Lenders 37 3.7 Substitution of Lenders 37 3.8 Survival 37       ARTICLE IV SECURITY 37 4.1 The Security 37 4.2 Agreement to Deliver Security Documents 37 4.3 Perfection and Protection of Security Interests and Liens 38 4.4 Offset 38 4.5 Guaranty 38 4.6 Production Proceeds 39       ARTICLE V CONDITIONS PRECEDENT 40 5.1 Conditions of the Effective Date 40 5.2 Conditions to All Credit Extensions 43 5.3 Conditions to the Restatement Effective Time 44       ARTICLE VI REPRESENTATIONS AND WARRANTIES 44   i --------------------------------------------------------------------------------     6.1 Organization, Existence and Power 45 6.2 Corporate Authorization; No Contravention 45 6.3 Governmental Authorization 45 6.4 Binding Effect 45 6.5 Litigation 45 6.6 No Default 46 6.7 ERISA Compliance 46 6.8 Use of Proceeds; Margin Regulations 47 6.9 Title to Properties 47 6.10 Oil and Gas Reserves 47 6.11 Reserve Report 47 6.12 Gas Imbalances 48 6.13 Taxes 48 6.14 Financial Statements and Condition 48 6.15 Environmental Matters 49 6.16 Regulated Entities 49 6.17 No Burdensome Restrictions 49 6.18 Copyrights, Patents, Trademarks and Licenses, etc. 49 6.19 Subsidiaries 50 6.20 Insurance 50 6.21 Full Disclosure 50 6.22 Solvency 50 6.23 Labor Matters 50 6.24 Downstream Contracts 51 6.25 Derivative Contracts 51 6.26 Ellwood Subsidiary 51 6.27 Senior Notes Indenture 51 6.28 Existing Indebtedness 51 6.29 TexCal Acquisition Documents 51 6.30 Security Documents 51       ARTICLE VII AFFIRMATIVE COVENANTS 52 7.1 Financial Statements 52 7.2 Certificates; Other Production and Reserve Information 53 7.3 Notices 54 7.4 Preservation of Company Existence, Etc. 55 7.5 Maintenance of Property 55 7.6 Insurance 55 7.7 Payment of Obligations 56 7.8 Compliance with Laws 56 7.9 Compliance with ERISA 56 7.10 Inspection of Property and Books and Records 56 7.11 Environmental Laws 56 7.12 New Subsidiary Guarantors 57 7.13 Use of Proceeds 57 7.14 Further Assurances 57 7.15 Hedging Program 58   ii --------------------------------------------------------------------------------   7.16 TexCal Acquisition 59       ARTICLE VIII NEGATIVE COVENANTS 59 8.1 Limitation on Liens 59 8.2 Disposition of Assets 60 8.3 Consolidations and Mergers 61 8.4 Loans and Investments 61 8.5 Limitation on Indebtedness 62 8.6 Transactions with Affiliates 63 8.7 Margin Stock 63 8.8 Contingent Obligations 63 8.9 Restricted Payments 64 8.10 Derivative Contracts 65 8.11 Sale Leasebacks 66 8.12 Consolidated Leverage Ratio 66 8.13 Current Ratio 67 8.14 Minimum Interest Coverage Ratio 67 8.15 Minimum PV 10 to Consolidated Total Debt Ratio 67 8.16 Change in Business 67 8.17 Accounting Changes 67 8.18 Certain Contracts; Amendments; Multiemployer ERISA Plans 67 8.19 Senior Notes 68 8.20 Limitation on Amendments to TexCal Acquisition Documents 68 8.21 First Lien Credit Documents 68 8.22 Forward Sales, Production Payments, Etc. 69 8.23 Use of Proceeds 69       ARTICLE IX EVENTS OF DEFAULT 69 9.1 Event of Default 69 9.2 Remedies 72 9.3 Rights Not Exclusive 73       ARTICLE X THE ADMINISTRATIVE AGENT 73 10.1 Appointment and Authorization; Limitation of Agency 73 10.2 Delegation of Duties 73 10.3 Liability of Administrative Agent 73 10.4 Reliance by Administrative Agent 74 10.5 Notice of Default 74 10.6 Credit Decision 74 10.7 Indemnification 75 10.8 Administrative Agent in Individual Capacity 75 10.9 Successor Administrative Agent 76 10.10 Withholding Tax 76 10.11 Arrangers; Syndication Agents 77 10.12 Release of Collateral 78 ARTICLE XI MISCELLANEOUS 78   iii --------------------------------------------------------------------------------   11.1 Amendments and Waivers 78 11.2 Notices 78 11.3 No Waiver; Cumulative Remedies 79 11.4 Costs and Expenses 79 11.5 Indemnity 80 11.6 Payments Set Aside 80 11.7 Successors and Assigns 81 11.8 Assignments, Participations, etc. 81 11.9 Interest 85 11.10 Indemnity and Subrogation 86 11.11 Automatic Debits of Fees 86 11.12 Notification of Addresses, Lending Offices, Etc. 86 11.13 Counterparts 86 11.14 Severability 87 11.15 No Third Parties Benefited 87 11.16 Governing Law, Jurisdiction 87 11.17 Submission To Jurisdiction; Waivers 87 11.18 Entire Agreement 88 11.19 NO ORAL AGREEMENTS 88 11.20 Accounting Changes 88 11.21 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. 88 11.22 Intercreditor Agreement; Collateral Trust Agreement 89 11.23 USA PATRIOT Act 89 11.24 Acknowledgments 89 11.25 Survival of Representations and Warranties 89 11.26 Release of Collateral and Guarantee Obligations. 89 11.27 Amendment and Restatement 90 11.28 Amendment and Restatement of the First Lien Credit Agreement 91     SCHEDULES Schedule 1.1(a)   Commitments and Pro Rata Shares Schedule 1.1(b)   TexCal Subsidiaries Schedule 6.5   Litigation Schedule 6.7   ERISA Compliance Schedule 6.14(a)   Material Indebtedness Schedule 6.15   Environmental Matters Schedule 6.17   Burdensome Restrictions Schedule 6.19   Subsidiaries and Minority Interests Schedule 6.24   Downstream Contracts Schedule 6.25   Existing Derivative Contracts Schedule 6.29   Material TexCal Acquisition Documents   iv --------------------------------------------------------------------------------   Schedule 6.30(a)-1   Security Agreement UCC Filing Jurisdictions Schedule 6.30(a)-2   UCC Financing Statements to Remain on File Schedule 6.30(a)-3   UCC Financing Statements to be Terminated Schedule 6.30(b)   Mortgage Filing Jurisdictions Schedule 8.1   Permitted Liens Schedule 8.2   TexCal Dispositions Schedule 8.6   Transactions with Affiliates   EXHIBITS Exhibit A   Form of Notice of Borrowing Exhibit B   Form of Notice of Conversion/Continuation Exhibit C   Form of Compliance Certificate Exhibit D   Form of Security Agreement Exhibit E   Form of Assignment and Acceptance Exhibit F   Form of Note Exhibit G   Form of Guaranty Agreement Exhibit H   Form of Intercreditor Agreement Exhibit I   Form of Collateral Trust Agreement   v --------------------------------------------------------------------------------   AMENDED AND RESTATED TERM LOAN AGREEMENT This AMENDED AND RESTATED TERM LOAN AGREEMENT is entered into as of April 28, 2006, among VENOCO, INC., a Delaware corporation (the “Company”); BMC, LTD., a California limited partnership (“BMC”), WHITTIER PIPELINE CORPORATION, a Delaware corporation (“Whittier”), and each of the TexCal Subsidiaries (defined below), as Guarantors; each of the financial institutions which is or which may from time to time become a signatory to this Agreement (individually, a “Lender” and collectively, the “Lenders”); CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”); CREDIT SUISSE SECURITIES (USA) LLC and LEHMAN BROTHERS INC., as joint lead arrangers (in such capacities, collectively, the “Lead Arrangers”); HARRIS NESBITT CORP., as co-arranger (together with the Lead Arrangers, the “Arrangers”); and LEHMAN BROTHERS INC., as syndication agent (in such capacity, the “Syndication Agent”). RECITALS WHEREAS, on March 30, 2006, the Company entered into the TexCal Acquisition Documents (defined below), and, on March 31, 2006, consummated the TexCal Acquisition (defined below) contemplated thereby; WHEREAS, in connection therewith, each of the Company, the Original Guarantors, the Lenders and the Administrative Agent, among others, entered into that certain Term Loan Agreement dated as of March 30, 2006 (the “Existing Credit Agreement”) pursuant to which the Lenders made term loans to the Company in an aggregate principal amount of $350,000,000; and WHEREAS, the Company has requested that the Existing Credit Agreement be amended and restated to provide for certain amendments on the terms set forth in this Agreement (defined below), which Agreement shall be effective upon satisfaction of certain conditions precedent set forth in this Agreement; WHEREAS, the Lenders are willing to amend and restate the Existing Credit Agreement to provide for certain amendments on the terms set forth in this Agreement, which Agreement shall be effective upon satisfaction of certain conditions precedent set forth in this Agreement; WHEREAS, the Company desires to refinance, renew, extend and continue the Existing Obligations (defined below); and WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Loan Documents (defined below) or evidence payment of all or any of such obligations and liabilities; that this Agreement amend and restate in its entirety the Existing Credit Agreement and renew and extend the extensions of credit under the Existing Credit Agreement, as so amended and restated; and that from and after the Restatement Effective Time the Existing Credit Agreement be of no further force or effect except as to evidence the incurrence of the obligations of the Company and its Subsidiaries thereunder and the representations and warranties made and the actions or omissions performed or required to be performed thereunder, in each case prior to the Restatement Effective Time.   1 --------------------------------------------------------------------------------   NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement shall be and hereby is amended and restated in its entirety as follows: ARTICLE I DEFINITIONS                 1.1           Certain Defined Terms.  The following terms have the following meanings: “Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock of a corporation (or similar entity), which stock has ordinary voting power for the election of the members of such entity’s board of directors or persons exercising similar functions (other than stock having such power only by reason of the happening of a contingency), or the acquisition of in excess of 50% of the partnership interests or equity of any Person not a corporation which acquisition gives the acquiring Person the power to direct or cause the direction of the management and policies of such Person, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or a Subsidiary of the Company is the surviving entity. “Adjusted Base Rate” shall mean, for any day and any Base Rate Loan, an interest rate per annum equal to the greater of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the Base Rate for such day; such rate to be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) during the period for which payable, but in no event shall such rate at any time exceed the maximum rate of interest permitted by applicable law. “Administrative Agent” has the meaning specified in the introductory clause hereto. “Administrative Agent-Related Persons” means Administrative Agent, its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of the Administrative Agent and its Affiliates. “Administrative Questionnaire” has the meaning specified in Section 11.8(a). “Affected Lender” has the meaning specified in Section 3.7. “Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. “Agent-Related Persons” means with respect to each Agent, such Agent, its Affiliates, and each of the officers, directors, employees, agents and attorneys-in-fact of it and its Affiliates.   2 --------------------------------------------------------------------------------   “Agents” means, collectively, the Administrative Agent, the Arrangers and the Syndication Agent. “Agent’s Payment Office” means the address set forth on the signature pages hereto in relation to the Administrative Agent, or such other address as the Administrative Agent may from time to time specify. “Aggregate Exposure” means, with respect to any Lender at any time, an amount equal to (a) if at such time the Commitments have not been reduced to zero, the sum of the aggregate unpaid principal amount of the Loans of such Lender and the aggregate amount of such Lender’s Commitments at such time and (b) if at such time the Commitments have been reduced to zero, the sum of the aggregate unpaid principal amount of the Loans of such Lender. “Agreement” means (i) as to any time prior to the Restatement Effective Time, the Existing Credit Agreement, and (ii) as to any time at or after the Restatement Effective Time, this Amended and Restated Term Loan Agreement, as such may be further amended, supplemented or otherwise modified from time to time pursuant to the terms hereof and of the Intercreditor Agreement. “Applicable Margin” means, with respect to any Base Rate Loan or LIBO Rate Loan on any day, an amount equal to the percentage for such day under the Pricing Grid for such type of Loan. “Applicable Percentage” means eighty percent (80%). “Arrangers” has the meaning specified in the introductory clause hereto. “Assignee” has the meaning specified in Section 11.8(a). “Assignment and Acceptance” has the meaning specified in Section 11.8(a). “Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of reasonable internal legal services and all disbursements of internal counsel. “Audited Financial Statements” means the Company’s consolidated financial statements as of and for the years ended December 31, 2004, 2003 and 2002, together with the unqualified independent auditors’ report and opinion of Deloitte & Touche LLP thereon, all in form and substance satisfactory to the Administrative Agent. “Available Borrowing Base” means, at the particular time in question, the Borrowing Base (as defined in the First Lien Credit Agreement) in effect at such time minus the applicable Effective Amount (as defined in the First Lien Credit Agreement) at such time. “Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.). “Base Rate” means, for any day, the rate of interest in effect for such day as publicly   3 --------------------------------------------------------------------------------   announced from time to time by Administrative Agent at its New York, New York office as its “base rate” for Dollar loans made in the United States.  (The “base rate” is a rate set by Administrative Agent based upon various factors including costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.)  Any change in the base rate announced by Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change. “Base Rate Loan” means a Loan that bears interest based at the Adjusted Base Rate, plus the Applicable Margin. “BMC” means BMC, Ltd., a California limited partnership comprised of the Company, as General Partner, and Whittier, as Limited Partner. “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close and, if the applicable Business Day relates to any LIBO Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. “Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. “Capital Lease” means, when used with respect to any Person, any lease in respect of which the obligations of such Person constitute Capitalized Lease Obligations. “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. “Capitalized Lease Obligations” means, when used with respect to any Person, without duplication, all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) Property, or a combination thereof, which obligations shall have been or should be, in accordance with GAAP, capitalized on the books of such Person. “Carpinteria Bluffs Dividend” has the meaning specified in Section 8.2(i). “Cash Dividends” means with respect to the Company, at any time, the distribution of earnings in Dollars to shareholders of the Company, determined in conformity with GAAP. “Cash Equivalents” means:  (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than twelve (12) months from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, or bankers’ acceptances having in each case a tenor of not more than twelve (12) months from the date of   4 --------------------------------------------------------------------------------   acquisition issued by and demand deposits with any U.S. commercial bank or any branch or agency of a non-U.S. commercial bank licensed to conduct business in the U.S. having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000) whose long term securities are rated at least A (or then equivalent grade) by S&P and A2 (or then equivalent grade) by Moody’s at the time of acquisition; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s at the time of acquisition, and in either case having a tenor of not more than twelve (12) months; (d) repurchase agreements with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) money market mutual or similar funds having assets in excess of $100,000,000. “Change of Control” means (a) a purchase or acquisition, directly or indirectly, by any “person” or “group” within the meaning of Section 13(d)(3) and 14(d)(2) of the Exchange Act (a “Group”), other than a Permitted Holder, of “beneficial ownership” (as such term is defined in Rule 13d-3 under the Exchange Act) of securities of the Company which, together with any securities owned beneficially by any “affiliates” or “associates” of such Group (as such terms are defined in Rule 12b-2 under the Exchange Act), shall represent more than (i) fifty percent (50%) or (ii) after a Qualifying IPO, thirty percent (30%), in the case of (i) or (ii), of the combined voting power of the Company’s securities which are entitled to vote generally in the election of directors and which are outstanding on the date immediately prior to the date of such purchase or acquisition; provided, however, that no such “Change of Control” under clause (a)(ii) of this definition of “Change of Control” shall be deemed to have occurred after a Qualifying IPO, if, and for so long as, Permitted Holders have “beneficial ownership” (as such term is defined in Rule 13d-3 under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the Company’s securities which are entitled to vote generally in the election of directors and which are outstanding on the date of determination; (b) a sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or Group; (c) the liquidation or dissolution of the Company; or (d) the first day on which a majority of the Board of Directors of the Company are not Continuing Directors (as herein defined).  As herein defined, “Continuing Directors” means any member of the Board of Directors of the Company who (x) is a member of such Board of Directors as of the Effective Date or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of two-thirds of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election. “Code” means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. “Collateral” means all Property which is subject to a Lien in favor of the Collateral Trustee, for the benefit of the Secured Parties, or which under the terms of any Security Document is purported to be subject to such Lien. “Collateral Trust Agreement” means that certain Collateral Trust Agreement dated as of the Effective Date by and among the Loan Parties, the Administrative Agent and the Collateral Trustee in the form of “Exhibit I” hereto, as amended, restated, supplemented or otherwise modified from time to time pursuant to the terms hereof and thereof. “Collateral Trustee” has the meaning assigned to such term in the Collateral Trust   5 --------------------------------------------------------------------------------   Agreement. “Commitment” means as to each Lender, such Lender’s obligation to have made, on the Effective Date, Loans to the Company under this Agreement in an aggregate principal amount not exceeding the amount set forth under the heading “Commitment” opposite the name of such Lender on Schedule 1.1(a) hereto, or if such Lender is a party to an Assignment and Acceptance, the amount set forth on the most recent Assignment and Acceptance of such Lender, as that amount has been reduced or terminated pursuant to this Agreement. “Commitment Letter” means the commitment letter dated March 30, 2006 by and among the Company, Harris Nesbitt Corp., Bank of Montreal, Credit Suisse Securities (USA) LLC, Credit Suisse, Cayman Islands Branch, Lehman Commercial Paper Inc. and Lehman Brothers Inc., as amended, restated, supplemented or otherwise modified from time to time. “Company” means Venoco, Inc. a Delaware corporation. “Compliance Certificate” means a certificate substantially in the form of Exhibit “C”. “Consolidated EBITDA” means with respect to the Company and its Subsidiaries on a consolidated basis for any fiscal period, without duplication, (a) Consolidated Net Income plus (b) depreciation, depletion, amortization, adjustments resulting from the application of FAS 123R and other non-cash items reducing Consolidated Net Income plus (c) Consolidated Interest Expense plus (d) income tax expense minus (e) any non-cash items increasing Consolidated Net Income, all determined in accordance with GAAP.  For purposes of Sections 8.12 and 8.14, Consolidated EBITDA shall be calculated to give pro forma effect to the TexCal Acquisition and other acquisitions and Dispositions as if such acquisition(s) or Disposition(s) had been consummated on the first day of the period of four consecutive fiscal quarters ending on the relevant date of calculation. “Consolidated Interest Expense” means, with respect to the Company and its Subsidiaries on a consolidated basis for any fiscal period, total interest expenses (including that portion attributable to Capitalized Lease Obligations and capitalized interest) of the Company and its Subsidiaries in such fiscal period which are classified as interest expense on the consolidated financial statements of the Company and its Subsidiaries, all as determined in conformity with GAAP.  Consolidated Interest Expense shall be calculated to give pro forma effect to the financing of the TexCal Acquisition or other financing transactions as if such financing had been consummated on the first day of the period of four consecutive fiscal quarters ending on the relevant date of calculation. “Consolidated Leverage Ratio” means as at the last day of any period of four consecutive fiscal quarters of the Company, commencing with the fiscal quarter ended June 30, 2006 as the last quarter in the initial period of four consecutive fiscal quarters contemplated hereby, the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA for such period. “Consolidated Liabilities” means, when used with respect to the Company and its Subsidiaries, all items which are or should be classified as liabilities on the consolidated financial statements of the Company and its Subsidiaries, all determined in conformity with GAAP.   6 --------------------------------------------------------------------------------   “Consolidated Net Income” means, with respect to the Company and its Subsidiaries on a consolidated basis, for any fiscal period, the net income (or net loss) of the Company and its Subsidiaries for such period determined in accordance with GAAP, but excluding the effects of the application of FAS 133 and 143 and any expensing of capitalized costs required by Rule 4-10 of Regulation S-X promulgated by the SEC as applied to reporting entities employing the full cost method. “Consolidated Total Debt” means, at any date, the aggregate principal amount of all Indebtedness of the Company and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. “Contingent Obligation” means, as to any Person without duplication, any direct or indirect liability of that Person with or without recourse, (a) with respect to any Indebtedness, dividend, letter of credit or other similar obligation (the “primary obligations”) of another Person (the “primary obligor”), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a “Guaranty Obligation”); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other Property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other Property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other Property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Derivative Contract.  The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the lesser of (i) the stated maximum amount, if any, of such Contingent Obligation and (ii) the maximum stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the lesser of (i) the stated maximum amount, if any, of such Contingent Obligation and (ii) the maximum reasonably anticipated liability in respect thereof. “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound. “Conversion/Continuation Date” means any date on which, under Section 2.3 of this Agreement, the Company (a) converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues as Loans of the same Interest Rate Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.   7 --------------------------------------------------------------------------------   “Credit Extension” means and includes the making, conversion or continuation of any Loan hereunder. “Current Assets” means, for any Person, all assets of such Person that, in accordance with GAAP, would be included as current assets on a balance sheet as of a date of calculation; provided, however, an amount equal to the Available Borrowing Base shall be included as current assets. “Current Liabilities” means, for any Person, all liabilities of such Person that, in accordance with GAAP, would be included as current liabilities on a balance sheet as of the date of calculation; provided, however, the current portion of the Loans which are not past due may be excluded from Current Liabilities. “Declined Proceeds” has the meaning specified in Section 2.10(e). “Default” means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. “Default Rate” has the meaning specified in Section 2.7(c). “Derivative Contract” means all futures contracts, forward contracts, swap, put, cap or collar contracts, option contracts, hedging contracts or other derivative contracts or similar agreements covering oil and gas commodities or prices or financial, monetary or interest rate instruments. “Disposition” has the meaning specified in Section 8.2. “Disqualified Stock” means, as to any Person, any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) requires the payment of dividends (other than dividends payable solely in Capital Stock which does not otherwise constitute Disqualified Stock) or matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Indebtedness or is redeemable at the option of the holder thereof, in whole or in part, at any time on or prior to the date six (6) months after the Maturity Date. “Dollars”, “dollars” and “$” each mean lawful money of the United States. “Effective Amount” means on any date, the aggregate outstanding principal amount of all Loans after giving effect to any prepayments or repayments of such Loans occurring on such date. “Effective Date” means the date on which the Effective Time occurred, which date was March 30, 2006. “Effective Time” means the time as of which all conditions precedent set forth in Section 5.1 were satisfied or waived by all Lenders.   8 --------------------------------------------------------------------------------   “Ellwood” means Ellwood Pipeline, Inc., a California corporation and a wholly owned Subsidiary of the Company. “Environmental Claims” means all material claims by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. “Environmental Laws” means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, and safety matters. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate (other than pursuant to Section 4041(b) of ERISA), the treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. “Eurodollar Reserve Percentage” has the meaning specified in the definition of “LIBO Rate”. “Event of Default” means any of the events or circumstances specified in Section 9.1. “Exchange Act” means the Securities and Exchange Act of 1934. “Existing Credit Agreement” has the meaning specified in the recitals hereto. “Existing Derivative Contracts” means the contracts listed on Schedule 6.25 hereto. “Existing Loan Documents” means the “Loan Documents” (as defined in the Existing Credit Agreement).   9 --------------------------------------------------------------------------------   “Existing Obligations” means the “Obligations” (as defined in the Existing Credit Agreement) outstanding at the Restatement Effective Time. “FAS 123R” means Financial Accounting Statement 123R promulgated by the Financial Accounting Standards Board. “FAS 133” means Financial Accounting Statement 133 promulgated by the Financial Accounting Standards Board. “FAS 143” means Financial Accounting Statement 143 promulgated by the Financial Accounting Standards Board. “FDIC” means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions. “Federal Funds Rate” means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York, New York time) on that day by each of three leading brokers of Federal funds transactions in New York, New York selected by the Administrative Agent. “Fee Letter Agreement” means the letter agreement dated March 30, 2006 among Harris Nesbitt Corp., Bank of Montreal, Credit Suisse, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, Lehman Commercial Paper Inc., Lehman Brothers Inc. and Venoco, Inc., as amended, restated, supplemented or otherwise modified from time to time. “First Lien Commitments” means the aggregate “Commitments” (as defined in the First Lien Credit Agreement). “First Lien Credit Agent” means the Administrative Agent (as defined in the First Lien Credit Agreement). “First Lien Credit Agreement” means the Second Amended and Restated Credit Agreement among the Loan Parties, the First Lien Credit Agent, Harris Nesbitt Corp., as lead arranger, Credit Suisse Securities (USA) LLC and Lehman Brothers Inc., as co-arrangers, Credit Suisse, Cayman Islands Branch, and Lehman Commercial Paper Inc., as co-syndication agents and co-documentation agents, and the other lenders from time to time party thereto dated as of the Effective Date, as amended, restated, supplemented or otherwise modified in accordance with the terms hereof. “First Lien Credit Documents” means the “First Lien Loan Documents” (as defined in the First Lien Credit Agreement).   10 --------------------------------------------------------------------------------   “First Lien Credit Lenders” means the “Lenders” (as defined in the First Lien Credit Agreement). “First Lien Loans” means the loans to be made from time to time under and in accordance with the First Lien Credit Documents. “First Lien Maximum Loan Amount” means “Maximum Loan Amount” (as defined in the First Lien Credit Agreement). “First Lien Obligations” has the meaning ascribed thereto in the Intercreditor Agreement. “First Lien Secured Parties” means the “Secured Parties” (as defined in the First Lien Credit Agreement). “First Liens” has the meaning specified in Section 7.14(b). “Fiscal Quarter” means each of the three-month periods coinciding with the fiscal quarters adopted by the Company for financial reporting purposes. “FRB” means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. “GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. “Granting Lender” has the meaning specified in Section 11.8(d). “Guarantor” means (i) each of the Original Guarantors, (ii) each of the TexCal Subsidiaries, and (iii) any new Subsidiary of the Company which is required to execute the Guaranty under Section 7.12 upon the execution and delivery by such entity of the Guaranty. “Guaranty” means the Guaranty Agreement, substantially in the form of Exhibit “G” hereto executed by each Guarantor in favor of the Administrative Agent, for the benefit of the Lender Parties, as the same may be amended, supplemented or otherwise modified from time to time pursuant to the terms hereof (including, in the case of any Subsidiary required to execute the Guaranty pursuant to Section 7.12, by execution and delivery of a joinder thereto in the form of Annex 1 thereto).   11 --------------------------------------------------------------------------------   “Guaranty Obligation” has the meaning specified in the definition of “Contingent Obligation.” “Highest Lawful Rate” means, as of a particular date, the maximum nonusurious interest rate that under applicable federal and state law may then be contracted for, charged or received by the Lenders in connection with the Obligations. “Hydrocarbon Interests” means leasehold and other interests in or under oil, gas and other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests, production payment interests relating to oil, gas or other liquid or gaseous hydrocarbons wherever located including any reserved or residual interest of whatever nature, covering lands in or offshore the continental United States. “Indebtedness” of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade payables entered into in the ordinary course of business on ordinary terms and not past due for more than 90 days after the due date thereof, other than those trade payables disputed in good faith); (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such Property) including, without limitation, production payments, net profit interests and other Hydrocarbon Interests subject to repayment out of future Oil and Gas production; (f) all obligations with respect to Capital Leases; (g) all non-contingent net obligations with respect to Derivative Contracts; (h) gas imbalances or obligations under take-or-pay or prepayment contracts with respect to any of the Oil and Gas Properties which would require the Company or any of its Subsidiaries to deliver Oil and Gas from any of the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor; (i) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (j) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. “Indemnified Liabilities” has the meaning specified in Section 11.5. “Indemnified Person” has the meaning specified in Section 11.5. “Indenture Trustee” has the meaning ascribed to such term in the Intercreditor Agreement. “Independent Auditor” has the meaning specified in Section 7.1(a). “Independent Engineer” has the meaning specified in Section 7.2(c).   12 --------------------------------------------------------------------------------   “Initial Reserve Report” has the meaning specified in Section 6.11. “Insolvency Proceeding” means (a) any case, action or proceeding relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. “Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Effective Date among the Loan Parties, the First Lien Credit Agent and the Collateral Trustee in the form of Exhibit “H” hereto, as amended, restated, supplemented or otherwise modified from time to time pursuant to the terms hereof and thereof. “Interest Payment Date” (a) as to any Base Rate Loan, means May 1, 2006 and the first day of each month thereafter prior to the Termination Date and each date on which such a Base Rate Loan is converted into another Interest Rate Type of Loan, and (b) as to any LIBO Rate Loan, the last day of the Interest Period applicable to such Loan; provided, however, that if any Interest Period for an LIBO Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period is also an Interest Payment Date. “Interest Period” means, as to any LIBO Rate Loan, the period commencing on the Effective Date or on the Conversion/Continuation Date on which such Loan is converted into or continued as LIBO Rate Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Conversion/Continuation; provided, however, that:  (a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an LIBO Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period pertaining to an LIBO Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Termination Date. “Interest Rate Type” means, with respect to any Loan, the interest rate, being either the Base Rate or the LIBO Rate forming the basis upon which interest is charged against such Loan hereunder. “IRS” means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. “Lender Parties” means (i) the Lenders, (ii) the Administrative Agent and (iii) the holders from time to time of the Obligations. “Lenders” has the meaning specified in the introductory clause hereto. “Lending Office” means, as to any Lender, the office or offices of such Lender specified   13 --------------------------------------------------------------------------------   as its “Lending Office” or “Domestic Lending Office” or “Offshore Lending Office,” as the case may be, on the signature pages hereof, or such other office or offices as such Lender may from time to time notify the Company and the Administrative Agent. “Letter of Credit” has the meaning ascribed thereto in the First Lien Credit Agreement. “LIBO Rate” means, for any Interest Period, with respect to LIBO Rate Loans, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Administrative Agent as follows: LIBO Rate =   LIBOR     1.00 - Eurodollar Reserve Percentage       where,   “Eurodollar Reserve Percentage” means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”); and           “LIBOR” means relative to any Interest Period for LIBO Rate Loans:   (a)           the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page, currently page 3750, of the Telerate screen (or any successor thereto or substitute therefor) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b)           if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c)           if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by Credit Suisse and with a term equivalent to such Interest Period would be offered by Credit Suisse’s London Branch to major banks in the London interbank eurodollar market at their request at   14 --------------------------------------------------------------------------------   approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period. The LIBO Rate shall be adjusted automatically as to all LIBO Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. “LIBO Rate Loan” means a Loan that bears interest based on the LIBO Rate plus the Applicable Margin. “Lien” means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any Property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement and the interest of a lessor under a Capital Lease), any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law and any contingent or other agreement to provide any of the foregoing, but not including (a) the interest of a lessor under a lease on Oil and Gas Properties or (b) the interest of a lessor under an Operating Lease. “Loan Documents” means this Agreement, the Notes, each Guaranty, the Security Documents, any Qualifying Derivative Contracts, the Fee Letter Agreement, the Commitment Letter and all other documents delivered to the Administrative Agent or any Lender in connection herewith. “Loans” has the meaning specified in Section 2.1(a). “Loan Parties” means the Company and each Guarantor. “Mandatory Prepayment Amount” has the meaning specified in Section 2.10(e). “Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the FRB. “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, (i) the TexCal Acquisition or (ii) the operations, business, properties or financial condition of the Company and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of the Company or any Subsidiary to perform under any material Loan Document and to avoid any Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any Subsidiary of any material Loan Document. “Maturity Date” means the fifth anniversary of the Effective Date. “Moody’s” means Moody’s Investors Service, Inc. “Mortgages” means the Mortgages, Deeds of Trust, Security Agreements, Assignments of Production and Financing Statements from the Company and BMC, and, from and after the Effective Time, the TexCal Subsidiaries, in favor of the Collateral Trustee, for the benefit of the   15 --------------------------------------------------------------------------------   Secured Parties, covering the Oil and Gas Properties of the Company and the Guarantors and all supplements, assignments, assumptions, amendments and restatements thereto (or any agreement in substitution therefor) which have been or are executed and delivered to the Administrative Agent for benefit of the Lenders pursuant to Article IV of this Agreement. “Mortgaged Properties” means such Oil and Gas Properties upon which the Company and the Guarantors have granted the Collateral Trustee for the benefit of the Secured Parties a valid, second Lien pursuant to the Mortgages, subject to Permitted Liens. “Multiemployer Plan” means a “multiemployer plan”, within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. “Net Cash Proceeds” means (a) in connection with any Disposition or any Recovery Event, all proceeds thereof in the form of cash and Cash Equivalents of such Disposition or Recovery Event, net of (i) amounts required by the First Lien Credit Agreement to be applied to the repayment of the First Lien Obligations or the cash collateralization of outstanding Letters of Credit, (ii) reasonable and customary Attorney Costs, accountants’ fees and investment banking fees, (iii) amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any Property which is the subject of such Disposition or Recovery Event, (iv) other reasonable and customary fees and expenses actually incurred in connection therewith and (v) taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence (other than the exercise price of stock options issued for compensatory purposes), net of (i) amounts required by Section 2.6(f) of the First Lien Credit Agreement to be applied to the repayment of the First Lien Obligations or the cash collateralization of outstanding Letters of Credit, (ii) Attorney Costs, investment banking fees, accountants’ fees and underwriting discounts and commissions and (iii) other customary fees and expenses actually incurred in connection therewith. “Net Present Value” means the PV 10 Value of the Oil and Gas Properties and adjusted at the date of determination on the same basis as the most recent Reserve Report previously delivered pursuant to Section 6.11 or Section 7.2(c) for Dispositions and purchases of Hydrocarbon Interests occurring since the date of such report.  The Net Present Value shall be calculated by the Company as of each date of determination. “Net Proceeds of Production” means the amounts attributable to the Company’s and its Subsidiaries’ interest in the proceeds received from the sale of Oil and Gas produced from Mortgaged Properties after deduction of (a) royalties existing as of the effective date on which the Company or its Subsidiaries first mortgaged its interests in such Mortgaged Properties in favor of the Lenders or their predecessors; (b) third party pipeline and transportation charges; (c) production, ad valorem and severance taxes chargeable against such production; (d) marketing costs; (e) overriding royalties existing as of the effective date on which the Company or its Subsidiaries first mortgaged its interests in such Mortgaged Properties in favor of the Lenders or   16 --------------------------------------------------------------------------------   their predecessors; (f) other interests in and measured by production burdening the Mortgaged Properties existing as of the effective date on which the Company or its Subsidiaries first mortgaged its interests in such Mortgaged Properties in favor of the Lenders or their predecessors; and (g) the current portion of direct operating or production costs which is allocable to such interest in such Mortgaged Properties. “Non-U.S. Lender” has the meaning specified in Section 3.1(f). “Notes” means the promissory notes, whether one or more, specified in Section 2.1(c), substantially in the same form as Exhibit “F”, including any amendments, modifications, renewals or replacements of such promissory notes. “Notice of Conversion/Continuation” means a notice in substantially the form of Exhibit ”B” to this Agreement. “NYMEX” means the New York Mercantile Exchange. “Obligations” means the unpaid principal of and interest (including interest accruing at the then applicable rate provided herein after the maturity of the Loans and interest accruing at the then applicable rate provided herein after the filing of any petition for an Insolvency Proceeding, or the commencement of any Insolvency Proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans and all other advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Lender, the Administrative Agent, any Qualifying Derivative Contract Counterparty or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel) or otherwise. “Oil and Gas” means petroleum, natural gas and other related hydrocarbons or minerals or any of them and all other substances produced or extracted in association therewith. “Oil and Gas Liens” means (a) Liens arising under oil and gas leases, overriding royalty agreements, net profits agreements, royalty trust agreements, farm-out agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, operating agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements that are customary in the oil and gas business and are entered into by the Company in the ordinary course of business; provided, however, in all instances that such Liens are limited to the assets that are the subject of the relevant agreement; and (b) Liens on pipelines or pipeline facilities that arise by operation of law. “Oil and Gas Properties” means Hydrocarbon Interests now or hereafter owned by the Company and the Guarantors and contracts executed in connection therewith and all tenements, hereditaments, appurtenances, and properties belonging, affixed or incidental to such   17 --------------------------------------------------------------------------------   Hydrocarbon Interests, including, without limitation, any and all Property, now owned by the Company and the Guarantors and situated upon or to be situated upon, and used, built for use, or useful in connection with the operating, working or developing of such Hydrocarbon Interests, including, without limitation, any and all petroleum or natural gas wells, buildings, structures, field separators, liquid extractors, plant compressors, pumps, pumping units, field gathering systems, tank and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and rods, surface leases, rights of way, easements and servitudes, and all additions, substitutions, replacements for, fixtures and attachments to any and all of the foregoing owned directly or indirectly by the Company and the Guarantors. “Operating Agreements” mean those agreements now or hereafter executed in connection with the operation of the Oil and Gas Properties. “Operating Lease” means an operating lease determined in accordance with GAAP. “Optionee Payment” means cash bonus payments in the aggregate amount not to exceed $1,500,000 that certain existing holders of options outstanding under the Company’s 2000 Stock Incentive Plan are entitled to receive upon the declaration and payment  of any dividends paid by the Company on its common stock (including the non-cash dividends described on Schedule 8.6).” “Organization Documents” means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation and for any limited liability company means the limited liability company agreement, initial resolution of members and all other documents filings and instruments necessary to create and constitute such company, or for any limited partnership means the original agreement of limited partnership as same has been amended from time to time. “Original Guarantor” means BMC or Whittier. “Originating Lender” has the meaning specified in Section 11.8(f). “Other Taxes” means any present or future stamp or documentary taxes or any other excise or Property Taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. “Participant” has the meaning specified in Section 11.8(f). “PBGC” means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. “Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, which the Company or any of its Subsidiaries sponsors, maintains, or to which it makes, is making, or is obligated to make   18 --------------------------------------------------------------------------------   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 (5) plan years. “Permitted Holder” means Timothy M. Marquez and Bernadette B. Marquez, individually or as Trustees of the Marquez Trust dated February 26, 2002 (a trust of which Timothy M. Marquez and Bernadette B. Marquez have sole discretionary authority), and any entity of which any such Person owns, directly or indirectly, and exercises voting power with respect to, 80% or more of the capital stock, partnership or membership interests or other ownership interests entitled (without regard to the occurrence of any contingency, to vote in the election of (a) the board of directors of such entity, if such entity is a corporation, (b) the board of directors of its general partner, if such entity is a limited partnership or (c) the board or committee of such entity serving a function comparable to that to the board of directors of a corporation, if such entity is neither a corporation nor limited partnership. “Permitted Indebtedness” has the meaning specified in Section 8.5. “Permitted Liens” means the collective reference to (i) in the case of Collateral other than Pledged Stock, Liens permitted by Section 8.1 and (ii) in the case of Collateral consisting of Pledged Stock, (A) Liens permitted by Sections 8.1(b) and (j) and (B) non-consensual Liens permitted by Section 8.1 to the extent arising by operation of law. “Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to ERISA, other than a Multiemployer Plan. “Pledged Stock” means “Pledged Stock” as such term is defined in the Security Agreement. “Premium” has the meaning specified in Section 2.4(b). “Pricing Grid” means the annualized rates (stated in terms of basis points (“bps”)) set forth below which shall be computed as of each day during the term hereof for the Applicable Margin as follows:   19 --------------------------------------------------------------------------------             Applicable Margin Pricing Level     Criteria   Base Rate Loan (bps)   LIBO Rate Loan (bps) Level II   • Pre-Qualifying IPO or   350 bps   450 bps                     • Consolidated Leverage Ratio equal to or greater than 3.00 to 1.00                         Level I   • Post-Qualifying IPO and   300 bps   400 bps                     • Consolidated Leverage Ratio less than 3.00 to 1.00           “Principal Business” means the business of the exploration for, and development, acquisition, production, and upstream marketing and transportation of Oil and Gas. “Pro Forma Financial Statements” has the meaning specified in Section 6.14(b). “Pro Rata Share” means, as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender’s Aggregate Exposure divided by the combined Aggregate Exposure of all Lenders. “Production Sales Contracts” mean those agreements now or hereafter executed in connection with the sale of Oil and Gas attributable to the Oil and Gas Properties. “Projected Oil and Gas Production” has the meaning specified in Section 7.15. “Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible. “Proved Developed Producing Reserves” means those Oil and Gas Properties designated as proved developed producing (in accordance with the Definitions for Oil and Gas Reserves approved by the Board of Directors of the Society of Petroleum Engineers, Inc. from time to time) in the Reserve Report. “Proved Reserves” means those Oil and Gas Properties designated as proved (in accordance with the Definitions for Oil and Gas Reserves approved by the Board of Directors of the Society of Petroleum Engineers, Inc. from time to time) in the Reserve Report. “PV 10 Value” means, as of any date of determination, the present value of future cash flows from Proved Reserves included in the Oil and Gas Properties as set forth in the most recent Reserve Report delivered pursuant to Section 6.11 or 7.2(c), utilizing the average of the Three-Year Strip Price for crude oil (WTI Cushing) and natural gas (Henry Hub), quoted on the New York Mercantile Exchange (or its successor) and utilizing a 10% discount rate.  The PV 10 Value shall be adjusted to give effect to the Company’s and its Subsidiaries’ Derivative   20 --------------------------------------------------------------------------------   Contracts for the purpose of hedging prices of Oil and Gas.  The PV 10 Value shall be calculated by the Company as of each date of determination. “Qualifying Derivative Contract” means any Derivative Contract between any Loan Party and any Qualifying Derivative Contract Counterparty. “Qualifying Derivative Contract Counterparty” means, with respect to a Qualifying Derivative Contract, any Person that was a Lender or an Affiliate thereof at the time such Qualifying Derivative Contract was originally entered into. “Qualifying IPO” means the initial firm commitment underwritten offering of Capital Stock of the Company that is not Disqualified Stock to the general public that is registered under the Securities Act of 1933, as amended and pursuant to which the Company receives cash proceeds of at least $200,000,000, net of (i) Attorney Costs, investment banking fees, accountants’ fees and underwriting discounts and commissions and (ii) other customary fees and expenses actually incurred in connection therewith. “Quarterly Status Report” means a status report prepared quarterly by the Company in form, scope and content acceptable to the Administrative Agent for such quarter then ended (a) detailing production from the Mortgaged Properties, the volumes of Oil and Gas produced and saved, the volumes of Oil and Gas sold, gross revenue, net income, related leasehold operating expenses, severance taxes, other taxes, capital costs and any production imbalances incurred during such period, (b) describing the Company’s position regarding its Derivative Contracts including, as of the last Business Day of such quarter, a summary of its hedging positions under its Derivative Contracts, including the type, term, price, effective date and notional principal amount or volumes (in total and as a percentage of the Company’s total anticipated production), “mark to market” and margin calculations, the hedged price(s), interest rate(s) or exchange rate(s), as applicable, and any collateral therefor and credit support agreements relating thereto and the counterparty to each Derivative Contract, (c) containing a table that demonstrates the Company’s compliance with the requirements set forth in Section 8.10 and (d) containing such additional information with respect to any of Company’s Oil and Gas Properties as may be reasonably requested by Administrative Agent. “Real Estate Contingent Obligations” means the Contingent Obligations of the Company under the Guaranty and Indemnity (Third Party-Unsecured) and the Environmental Indemnity Agreement (Third Party-Unsecured), each dated December 8, 2004 and made in favor of German American Capital Corporation and as in effect at the Effective Time. “Recovery Event” means any settlement of or payment in respect of any Property of the Company or any Subsidiary arising from a casualty insurance claim or any condemnation proceeding. “Register” means a register for the recordation of the names and addresses of the Lenders and the Commitments thereof, and the principal amount of the Loans owing to such Lender from time to time.   21 --------------------------------------------------------------------------------   “Regulation U” and “Regulation X” means Regulation U and Regulation X, respectively, of the FRB from time to time in effect and shall include any successor or other regulations or official interpretations of the FRB relating to the subject matter addressed therein. “Related Funds” has the meaning specified in Section 11.8(a). “Replacement Lender” has the meaning specified in Section 3.7. “Reportable Event” means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. “Required Lenders” means, at any time, subject to Section 11.1, the Administrative Agent and the Lenders holding at least 50% of the sum of the Effective Amount at such time or, if there is no Effective Amount at such time, the Administrative Agent and the Lenders holding at least 50% of the aggregate Commitments at such time. “Requirement of Law” means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its Property or to which the Person or any of its Property is subject. “Reserve Report” means (i) the Initial Reserve Report, (ii) the TexCal Reserve Report and (iii) each subsequent report delivered pursuant to Section 7.2(c), each of which shall be a report, in form, scope and content acceptable to the Administrative Agent, covering proved developed and proved undeveloped reserves attributable to the Company’s and its Subsidiaries’ Oil and Gas Properties and setting forth with respect thereto, (a) the total quantity of proved developed and proved undeveloped Oil and Gas reserves (separately classified as to producing, shut in, behind pipe, and undeveloped), (b) the estimated future net revenues and cumulative estimated future net revenues, (c) the present discounted value of future net revenues, and (d) such other information and data with respect to the Mortgaged Properties as the Administrative Agent may reasonably request. “Responsible Officer” means, with respect to any Person, the chief executive officer, president, chief financial officer or treasurer of the Person. “Restatement Effective Date” means the date on which the Restatement Effective Time occurs. “Restatement Effective Time” means the time as of which all conditions precedent set forth in Section 5.3 are satisfied or waived by all Lenders. “Restricted Payments” has the meaning specified in Section 8.9. “S&P” means Standard & Poor’s Rating Services. “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.   22 --------------------------------------------------------------------------------   “Secured Parties” has the meaning ascribed thereto in the Security Agreement. “Security Agreement” means the Security Agreement in substantially the form of Exhibit “D” executed by the Company and each Guarantor pledging to the Collateral Trustee for benefit of the Secured Parties all of the Property of the Company and each Guarantor, as security for the payment of the Sharing Obligations, as the same may be amended, supplemented or otherwise modified from time to time pursuant to the terms hereof (including, in the case of any Subsidiary required to execute the Security Agreement pursuant to Section 7.12, by execution and delivery of a joinder thereto in the form of Annex 2 thereto). “Security Documents” means the Intercreditor Agreement, the Collateral Trust Agreement, the Mortgages, the Security Agreement, and related financing statements as same may be amended from time to time and any and all other instruments now or hereafter executed in connection with or as security for the payment of the Sharing Obligations. “Senior Note Debt Documents” has the meaning ascribed to such term in the Intercreditor Agreement. “Senior Note Debt Instrument” has the meaning ascribed to such term in the Collateral Trust Agreement. “Senior Note Lien Termination Time” has the meaning ascribed to such term in the Intercreditor Agreement. “Senior Note Subsidiary Guarantees” has the meaning ascribed to such term in the Intercreditor Agreement. “Senior Notes” means the 8.75% Senior Unsecured Notes due 2011 originally issued in aggregate principal amount of $150,000,000 under the Senior Notes Indenture. “Senior Notes Indenture” means that certain indenture dated as of December 20, 2004 among the Company, the Guarantors and U.S. Bank National Association, as Trustee. “Sharing Collateral” has the meaning ascribed to such term in the Collateral Trust Agreement. “Sharing Obligations” has the meaning ascribed to such term in the Collateral Trust Agreement. “Solvent” means, as to any Person at any time, that (a) the fair value of all of the Property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair salable value of all of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s   23 --------------------------------------------------------------------------------   Property would constitute unreasonably small capital. “SPC” has the meaning specified in Section 11.8(d). “Special Damages” has the meaning specified in Section 11.21. “Subsidiary” of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly, at the relevant time, by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof.  From and after the TexCal Closing Time, references herein to a “Subsidiary” of the Company shall include each of the TexCal Subsidiaries.  Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Company, except that for purposes of Article IV only, “Subsidiary” excludes Ellwood. “Surety Instruments” means all letters of credit (including standby), banker’s acceptances, bank guaranties, shipside bonds, surety bonds, performance bonds (including plugging and abandonment bonds) and similar instruments. “Syndication Agent” has the meaning specified in the introductory clause hereto. “Taxes” means any and all present or future taxes, levies, imposts, deductions, charges or withholdings which arise from any payment made hereunder, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender’s net income, gross receipts or capital by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a lending office or conducts business (other than solely by reason of the transactions evidenced hereby or taking any action contemplated by the Loan Documents). “Termination Date” means the earlier of (a) the Maturity Date or (b) the date on which all Obligations (other than those to Qualified Derivative Contract Counterparties in respect of Qualified Derivative Contracts) have been satisfied and all Commitments have terminated, in each case in accordance with the provisions of this Agreement. “TexCal Acquisition” means the acquisition on March 31, 2006 by the Company of all of the outstanding Capital Stock in TexCal Energy pursuant to the TexCal Acquisition Agreement. “TexCal Acquisition Agreement” means the Agreement and Plan of Merger dated effective as of March 30, 2006 by and among TexCal Energy, the Company, and Bicycle Acquisition Company, LLC, a Delaware limited liability company and a wholly owned Subsidiary of the Company, as amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement. “TexCal Acquisition Documents” means, collectively, the TexCal Acquisition Agreement and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith, in each case, as amended, supplemented or otherwise modified from time to time.   24 --------------------------------------------------------------------------------   “TexCal Audited Financial Statements” means (a) TexCal Energy’s consolidated balance sheet at December 31, 2005, together with the statements of operations, cash flows and members’ equity for the year then ended and (b) TexCal Energy’s consolidated balance sheet at December 31, 2004 together with the statements of operations, cash flows and members’ equity of TexCal Energy for the three months then ended, in each case together with the unqualified independent auditors’ report and opinion of BDO Seidman, LLP thereon. “TexCal Closing Time” means the time of the closing of the TexCal Acquisition. “TexCal Energy” means TexCal Energy (LP) LLC, a Delaware limited liability company. “TexCal Reserve Report” has the meaning specified in Section 6.11. “TexCal Subsidiaries” means TexCal Energy and each of the entities specified on Schedule 1.1(b) hereto. “Three-Year Strip Price” shall mean, as of any date of determination, (a) for the 36-month period commencing with the month immediately following the month in which the date of determination occurs, the monthly futures contract prices for crude oil and natural gas for the 36 succeeding months as quoted on the applicable commodities exchange as contemplated in the definition of “PV 10 Value” and (b) for periods after such 36-month period, the average of such quoted prices for the period from and including the 25th month in such 36-month period through the 36th month in such period. “Transaction Documents” means, collectively, the Loan Documents and the TexCal Acquisition Documents. “Triggering Event” has the meaning ascribed thereto in the Collateral Trust Agreement. “Trust Estate” has the meaning ascribed thereto in the Collateral Trust Agreement. “UCC” means the Uniform Commercial Code as adopted and in effect in any applicable jurisdiction. “Unfunded Pension Liability” means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. “United States” and “U.S.” each means the United States of America. “Ventura Dividend” has the meaning specified in Section 8.2(i). “Whittier” means Whittier Pipeline Corporation, a Delaware corporation.                 1.2           Other Interpretive Provisions.  The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  Unless otherwise specified or   25 --------------------------------------------------------------------------------   the context clearly requires otherwise, the words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement.  The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.  The term “including” is not limiting and means “including without limitation.”  The term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”.  In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”  Unless otherwise expressly provided herein, (a) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (b) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.  The recitals, captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.  This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.  This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Company and the other parties, and are the products of all parties.  Accordingly, they shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent’s or Lenders’ involvement in their preparation.  The terms “Lender”, “Administrative Agent”, “First Lien Credit Agent” and “First Lien Credit Lenders” include their respective successors.                 1.3           Accounting Principles. (A)           UNLESS THE CONTEXT OTHERWISE CLEARLY REQUIRES, ALL ACCOUNTING TERMS NOT EXPRESSLY DEFINED HEREIN SHALL BE CONSTRUED, AND ALL FINANCIAL COMPUTATIONS REQUIRED UNDER THIS AGREEMENT SHALL BE MADE, IN ACCORDANCE WITH GAAP, CONSISTENTLY APPLIED.  REFERENCES TO “CONSOLIDATED”, WHEN IT PRECEDES ANY ACCOUNTING TERM, MEANS SUCH TERM AS IT WOULD APPLY TO THE COMPANY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, DETERMINED IN ACCORDANCE WITH GAAP. (B)           REFERENCES HEREIN TO “FISCAL YEAR” AND “FISCAL QUARTER” REFER TO SUCH FISCAL PERIODS OF THE COMPANY. ARTICLE II THE CREDIT                 2.1           Amounts and Terms of the Loans. (A)           EACH LENDER, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT, MADE TERM LOANS (TOGETHER WITH ANY CONVERSIONS OR CONTINUATIONS THEREOF, THE “LOANS”) TO THE COMPANY ON THE EFFECTIVE DATE IN AN AGGREGATE PRINCIPAL AMOUNT OF   26 --------------------------------------------------------------------------------   $350,000,000.  Principal amounts paid on account of the Loans may not be reborrowed. (B)           THE COMMITMENT OF EACH LENDER WAS PERMANENTLY REDUCED ON THE DATE OF FUNDING OF THE LOANS PURSUANT TO SECTION 2.1(A) OF THE EXISTING CREDIT AGREEMENT BY THE PRINCIPAL AMOUNT OF THE LOANS FUNDED.  SUCH COMMITMENT REDUCTIONS WERE MADE FOR THE ACCOUNT OF THE LENDERS PRO RATA IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES. (C)           EACH LENDER MADE THE AMOUNT OF ITS PRO RATA SHARE OF THE LOANS AVAILABLE TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF THE COMPANY AT THE AGENT’S PAYMENT OFFICE BY 4:00 P.M. (NEW YORK, NEW YORK TIME) ON THE EFFECTIVE DATE IN FUNDS IMMEDIATELY AVAILABLE TO THE ADMINISTRATIVE AGENT.  THE PROCEEDS OF ALL SUCH LOANS WERE MADE AVAILABLE TO THE COMPANY BY THE ADMINISTRATIVE AGENT BY WIRE OR INTRABANK TRANSFER OF FUNDS FOR PAYMENT OF A PORTION OF THE PURCHASE PRICE FOR THE TEXCAL ACQUISITION. (D)           THE COMPANY AGREES THAT UPON THE REQUEST TO THE ADMINISTRATIVE AGENT BY ANY LENDER, THE COMPANY WILL PROMPTLY EXECUTE AND DELIVER TO ANY LENDER A PROMISSORY NOTE OF THE COMPANY EVIDENCING ANY LOANS OF SUCH LENDER, SUBSTANTIALLY IN THE FORM OF EXHIBIT F (A “NOTE”), WITH APPROPRIATE INSERTIONS AS TO DATE AND PRINCIPAL AMOUNT; PROVIDED, HOWEVER, THAT DELIVERY OF NOTES SHALL NOT BE A CONDITION PRECEDENT TO THE OCCURRENCE OF THE RESTATEMENT EFFECTIVE DATE.  THE AMOUNT OF PRINCIPAL OWING ON ANY LENDER’S NOTE, IF ANY, AT ANY GIVEN TIME SHALL BE THE AGGREGATE AMOUNT OF ALL LOANS THERETOFORE MADE BY SUCH LENDER MINUS ALL PAYMENTS OF PRINCIPAL THERETOFORE RECEIVED BY SUCH LENDER ON SUCH NOTE.  INTEREST ON EACH NOTE SHALL ACCRUE AND BE DUE AND PAYABLE AS PROVIDED HEREIN AND THEREIN.                 2.2           Maturity Date.  The Loans of each Lender shall mature on the Maturity Date.                 2.3           Conversion and Continuation Elections. (A)           PRIOR TO THE TERMINATION DATE, THE COMPANY MAY, UPON IRREVOCABLE WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT IN ACCORDANCE WITH SECTION 2.3(B) (I) ELECT, AS OF ANY BUSINESS DAY IN THE CASE OF BASE RATE LOANS, OR AS OF THE LAST DAY OF THE APPLICABLE INTEREST PERIOD IN THE CASE OF LIBO RATE LOANS, TO CONVERT ANY SUCH LOANS INTO LOANS OF ANY OTHER INTEREST RATE TYPE; OR (II) ELECT AS OF THE LAST DAY OF THE APPLICABLE INTEREST PERIOD, TO CONTINUE ANY LOANS HAVING INTEREST PERIODS EXPIRING ON SUCH DAY; PROVIDED, HOWEVER, THAT IF AT ANY TIME AN LIBO RATE LOAN IS REDUCED, BY PAYMENT, PREPAYMENT, OR CONVERSION OF PART THEREOF TO LESS THAN $1,000,000, SUCH LIBO RATE LOAN SHALL AUTOMATICALLY CONVERT INTO A BASE RATE LOAN. (B)           THE COMPANY SHALL DELIVER A NOTICE OF CONVERSION/CONTINUATION TO BE RECEIVED BY THE ADMINISTRATIVE AGENT NOT LATER THAN 12:00 P.M. (NEW YORK, NEW YORK TIME) AT LEAST THREE BUSINESS DAYS IN ADVANCE OF THE CONVERSION/CONTINUATION DATE, IF THE LOANS ARE TO BE CONVERTED INTO OR CONTINUED AS LIBO RATE LOANS; AND (II) ON THE CONVERSION/CONTINUATION DATE, IF THE LOANS ARE TO BE CONVERTED INTO BASE RATE LOANS, SPECIFYING: (A) THE PROPOSED CONVERSION/CONTINUATION DATE; (B) THE AGGREGATE AMOUNT OF LOANS TO BE CONVERTED OR CONTINUED; (C) THE INTEREST RATE TYPE OF LOANS RESULTING FROM THE PROPOSED CONVERSION OR CONTINUATION; AND (D) OTHER THAN IN THE CASE OF CONVERSIONS INTO BASE RATE LOANS, THE DURATION OF THE REQUESTED INTEREST PERIOD. (C)           IF, UPON THE EXPIRATION OF ANY INTEREST PERIOD APPLICABLE TO LIBO RATE   27 --------------------------------------------------------------------------------   Loans, the Company has failed to select in a timely manner a new Interest Period to be applicable to LIBO Rate Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such LIBO Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period. (D)           THE ADMINISTRATIVE AGENT WILL PROMPTLY NOTIFY EACH LENDER OF ITS RECEIPT OF A NOTICE OF CONVERSION/CONTINUATION, OR, IF NO TIMELY NOTICE IS PROVIDED BY THE COMPANY, THE ADMINISTRATIVE AGENT WILL PROMPTLY NOTIFY EACH LENDER OF THE DETAILS OF ANY AUTOMATIC CONVERSION.  ALL CONVERSIONS AND CONTINUATIONS SHALL BE MADE RATABLY ACCORDING TO THE RESPECTIVE LENDER’S PRO RATA SHARE OF OUTSTANDING PRINCIPAL AMOUNTS OF THE LOANS WITH RESPECT TO WHICH THE NOTICE WAS GIVEN. (E)           THE NUMBER OF TRANCHES OUTSTANDING OF LIBO RATE LOANS, WHETHER UNDER A CONVERSION OR CONTINUATION, SHALL NOT EXCEED EIGHT (8) AT ANY ONE TIME.                 2.4           Optional Prepayments. (A)           SUBJECT TO SECTION 3.4, THE COMPANY MAY, AT ANY TIME OR FROM TIME TO TIME, SUBJECT TO THE CONCURRENT PAYMENT OF THE PREMIUM: (I)            PREPAY BASE RATE LOANS UPON IRREVOCABLE NOTICE TO THE ADMINISTRATIVE AGENT NOT LESS THAN ONE (1) BUSINESS DAY, RATABLY AS TO EACH LENDER, IN WHOLE OR IN PART, IN AGGREGATE MINIMUM PRINCIPAL AMOUNTS OF $100,000 OR INTEGRAL MULTIPLES THEREOF, PLUS ALL INTEREST AND EXPENSES THEN OUTSTANDING ON SUCH BASE RATE LOANS, AND (II)           PREPAY LIBO RATE LOANS UPON IRREVOCABLE NOTICE TO THE ADMINISTRATIVE AGENT NOT LESS THAN THREE (3) BUSINESS DAYS, RATABLY AS TO EACH LENDER, IN WHOLE OR IN PART, IN AGGREGATE MINIMUM PRINCIPAL AMOUNTS OF $500,000 OR INTEGRAL MULTIPLES THEREOF PLUS ALL INTEREST AND EXPENSES THEN OUTSTANDING ON SUCH LIBO RATE LOANS. Such notice of prepayment shall specify the date and amount of such prepayment and the Interest Rate Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of any such notice, and of such Lender’s Pro Rata Share of such prepayment.  The payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid, the applicable Premium, and any amounts required pursuant to Section 3.4. (B)           FOR PURPOSES HEREOF, THE “PREMIUM” SHALL BE A CASH AMOUNT EQUAL TO THE PERCENTAGES OF PRINCIPAL AMOUNT OF THE LOANS BEING PREPAID SET FORTH BELOW: If prepaid after the Effective Date, but prior to the first anniversary of the Effective Date   2.0 %   28 --------------------------------------------------------------------------------   If prepaid on or after the first anniversary of the Effective Date, but prior to second anniversary of the Effective Date   1.0 % If prepaid on or after the second anniversary of the Effective Date   0.0 %                   2.5           Mandatory Prepayments. (A)           IF THE COMPANY OR ANY OF ITS SUBSIDIARIES SHALL RECEIVE NET CASH PROCEEDS FROM ANY DISPOSITION DESCRIBED IN SECTIONS 8.2(F) OR (G) OR ANY RECOVERY EVENT THAT EXCEEDS, AS TO ANY DISPOSITION OR RECOVERY EVENT, $500,000, TO THE EXTENT (A) SUCH DISPOSITION AND RELATED RECEIPT OF NET CASH PROCEEDS DO NOT RESULT IN AN AUTOMATIC REDUCTION TO THE BORROWING BASE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT AT THE RESTATEMENT EFFECTIVE DATE) PURSUANT TO SECTION 8.2(F) OF THE FIRST LIEN CREDIT AGREEMENT (AS IN EFFECT AT THE RESTATEMENT EFFECTIVE DATE) AND (B) SUCH NET PROCEEDS ARE NOT USED TO CURE A DEFICIENCY (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE RESTATEMENT EFFECTIVE DATE) OR OTHERWISE APPLIED AS REQUIRED BY SECTION 2.6(F)(III) OF THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE RESTATEMENT EFFECTIVE DATE, THE COMPANY SHALL (I) FIRST, APPLY SUCH PORTION OF SUCH NET CASH PROCEEDS TO THE REPAYMENT OF THE LOANS UNDER THE FIRST LIEN CREDIT AGREEMENT AS SHALL BE NECESSARY TO CAUSE THE UTILIZATION PERCENTAGE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT IN EFFECT ON THE EFFECTIVE DATE) TO BE NO GREATER THAN 75% AND (II) SECOND, TO THE EXTENT OTHERWISE PERMITTED BY SECTION 8.9 OF THE FIRST LIEN CREDIT AGREEMENT, OFFER TO PREPAY THE LOANS IN AN AMOUNT EQUAL TO THE AMOUNT OF THE REMAINING NET CASH PROCEEDS AFTER MAKING ANY PAYMENTS REQUIRED UNDER CLAUSE (I) OF THIS SECTION 2.5(A), AS SET FORTH IN SECTIONS 2.5(E) AND 2.10.  THE PROVISIONS OF THIS SECTION 2.5(A) DO NOT CONSTITUTE A CONSENT TO THE CONSUMMATION OF ANY DISPOSITION NOT PERMITTED BY SECTION 8.2(F) OR OTHERWISE REQUIRING THE PRIOR WRITTEN CONSENT OF THE REQUIRED LENDERS. (B)           IF THE COMPANY OR ANY OF ITS SUBSIDIARIES SHALL ISSUE ANY CAPITAL STOCK RESULTING IN THE RECEIPT BY THE ISSUER OF NET CASH PROCEEDS, THEN ON THE THIRD BUSINESS DAY FOLLOWING THE DATE OF SUCH ISSUANCE, THE COMPANY SHALL (I) FIRST, APPLY SUCH PORTION OF SUCH NET CASH PROCEEDS TO THE REPAYMENT OF THE LOANS UNDER THE FIRST LIEN CREDIT AGREEMENT AS SHALL BE NECESSARY TO CAUSE THE UTILIZATION PERCENTAGE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT IN EFFECT ON THE EFFECTIVE DATE) TO BE NO GREATER THAN 75% AND (II) SECOND, TO THE EXTENT OTHERWISE PERMITTED BY SECTION 8.9 OF THE FIRST LIEN CREDIT AGREEMENT, CAUSE THE LOANS TO BE PREPAID IN AN AMOUNT EQUAL TO 50% OF THE NET CASH PROCEEDS REMAINING AFTER MAKING PAYMENTS REQUIRED UNDER CLAUSE (I) OF THIS 2.5(B), AS SET FORTH IN SECTIONS 2.5(E) AND 2.10; PROVIDED, HOWEVER, THAT IF AT THE TIME OF SUCH ISSUANCE OF CAPITAL STOCK THE CONSOLIDATED LEVERAGE RATIO (AFTER GIVING EFFECT TO SUCH ISSUANCE AND THE PROPOSED USE OF THE NET CASH PROCEEDS THEREOF) WOULD BE LESS THAN 3.00 TO 1.00 BUT EQUAL TO OR GREATER THAN 2.00 TO 1.00, THEN THE AMOUNT REQUIRED TO BE SO APPLIED SHALL BE REDUCED TO 25% OF SUCH NET CASH PROCEEDS; AND PROVIDED FURTHER, HOWEVER, THAT IF AT THE TIME OF SUCH ISSUANCE OF CAPITAL STOCK THE CONSOLIDATED LEVERAGE RATIO (AFTER GIVING EFFECT TO SUCH ISSUANCE AND THE PROPOSED USE OF THE NET CASH PROCEEDS THEREOF) WOULD BE LESS THAN 2.00 TO 1.00, NO PREPAYMENT SHALL BE REQUIRED AS A RESULT OF SUCH ISSUANCE.  THE PROVISIONS OF THIS SECTION 2.5(B) DO NOT CONSTITUTE A CONSENT TO THE ISSUANCE OF ANY CAPITAL STOCK BY ANY PERSON WHOSE CAPITAL STOCK IS PLEDGED PURSUANT TO THE SECURITY DOCUMENTS.   29 --------------------------------------------------------------------------------   (C)           IF THE COMPANY OR ANY OF ITS SUBSIDIARIES SHALL INCUR ANY INDEBTEDNESS (OTHER THAN PERMITTED INDEBTEDNESS) THEN ON THE DATE OF SUCH INCURRENCE, THE COMPANY SHALL (I) FIRST, APPLY SUCH PORTION OF SUCH NET CASH PROCEEDS TO THE REPAYMENT OF THE LOANS UNDER THE FIRST LIEN CREDIT AGREEMENT AS SHALL BE NECESSARY TO CAUSE THE UTILIZATION PERCENTAGE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT IN EFFECT ON THE EFFECTIVE DATE) TO BE NO GREATER THAN 75% AND (II) SECOND, TO THE EXTENT OTHERWISE PERMITTED BY SECTION 8.9 OF THE FIRST LIEN CREDIT AGREEMENT, CAUSE THE LOANS TO BE PREPAID IN AN AMOUNT EQUAL TO THE NET CASH PROCEEDS OF SUCH INCURRENCE, AS SET FORTH IN SECTIONS 2.5(E) AND 2.10.  THE PROVISIONS OF THIS SECTION 2.5(C) DO NOT CONSTITUTE A CONSENT TO THE INCURRENCE OF ANY SUCH INDEBTEDNESS BY THE COMPANY OR ANY OF ITS SUBSIDIARIES. (D)           [INTENTIONALLY OMITTED]. (E)           ALL MANDATORY PREPAYMENTS PROVIDED FOR IN THIS SECTION 2.5 SHALL BE MADE TOGETHER WITH INTEREST ACCRUED ON THE PRINCIPAL AMOUNT PREPAID AND ANY AMOUNT REQUIRED BY SECTION 3.4, BUT WITHOUT ANY PREMIUM.  ANY AMOUNT REQUIRED TO BE PREPAID PURSUANT TO THIS SECTION 2.5 SHALL BE APPLIED TO PREPAY THE LOANS.                 2.6           Repayment. (A)           PRINCIPAL.  THE COMPANY SHALL REPAY TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE LENDERS THE OUTSTANDING PRINCIPAL BALANCE OF THE LOANS (AND THE OUTSTANDING PRINCIPAL OF THE LOANS SHALL BE DUE AND PAYABLE) ON THE MATURITY DATE OR ON SUCH DATE ON WHICH THE LOANS BECOME DUE AND PAYABLE PURSUANT TO SECTIONS 2.4 OR 2.5 OR ARTICLE IX. (B)           EACH LENDER SHALL MAINTAIN IN ACCORDANCE WITH ITS USUAL PRACTICE AN ACCOUNT OR ACCOUNTS EVIDENCING INDEBTEDNESS OF THE COMPANY TO SUCH LENDER RESULTING FROM EACH LOAN OF SUCH LENDER FROM TIME TO TIME, INCLUDING THE AMOUNTS OF PRINCIPAL AND INTEREST PAYABLE AND PAID TO SUCH LENDER FROM TIME TO TIME UNDER THIS AGREEMENT. (C)           THE ADMINISTRATIVE AGENT, ON BEHALF OF THE COMPANY, SHALL MAINTAIN THE REGISTER, AND A SUBACCOUNT THEREIN FOR EACH LENDER, IN WHICH SHALL BE RECORDED (I) THE AMOUNT OF EACH LOAN MADE HEREUNDER, (II) THE AMOUNT OF ANY PRINCIPAL OR INTEREST DUE AND PAYABLE OR TO BECOME DUE AND PAYABLE FROM THE COMPANY TO EACH LENDER HEREUNDER AND (III) BOTH THE AMOUNT OF ANY SUM RECEIVED BY THE ADMINISTRATIVE AGENT HEREUNDER FROM THE COMPANY AND EACH LENDER’S SHARE THEREOF.  THE REGISTER SHALL BE AVAILABLE FOR INSPECTION BY EACH LOAN PARTY, THE ADMINISTRATIVE AGENT AND ANY LENDER AT ANY REASONABLE TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR NOTICE. (D)           THE ENTRIES MADE IN THE REGISTER AND THE ACCOUNTS OF EACH LENDER MAINTAINED PURSUANT TO SECTION 2.7(B) SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE PRIMA FACIE EVIDENCE OF THE EXISTENCE AND AMOUNTS OF THE OBLIGATIONS OF THE COMPANY THEREIN RECORDED; PROVIDED, HOWEVER, THAT THE FAILURE OF ANY LENDER OR THE ADMINISTRATIVE AGENT TO MAINTAIN THE REGISTER OR ANY SUCH ACCOUNT, OR ANY ERROR THEREIN, SHALL NOT IN ANY MANNER AFFECT THE OBLIGATION OF THE COMPANY TO REPAY (WITH APPLICABLE INTEREST) THE LOANS MADE TO THE COMPANY BY SUCH LENDER IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT OR THE COMPANY’S ENTITLEMENT TO CREDIT FOR ANY PAYMENT OF PRINCIPAL OR INTEREST ON THE LOANS.                 2.7           Interest.   30 --------------------------------------------------------------------------------   (A)           EACH LOAN SHALL BEAR INTEREST ON THE PRINCIPAL AMOUNT THEREOF FROM THE EFFECTIVE DATE OR DATE OF CONVERSION OR CONTINUATION PURSUANT TO SECTION 2.3 OF THIS AGREEMENT, AS THE CASE MAY BE, AT A RATE PER ANNUM EQUAL TO THE LESSER OF (I) THE LIBO RATE OR THE ADJUSTED BASE RATE, AS THE CASE MAY BE, PLUS THE APPLICABLE MARGIN AND (II) THE HIGHEST LAWFUL RATE. (B)           INTEREST ON EACH LOAN SHALL BE PAID IN ARREARS ON EACH INTEREST PAYMENT DATE.  INTEREST SHALL ALSO BE PAID ON THE DATE OF ANY PREPAYMENT OF LOANS UNDER SECTION 2.4 OR 2.5 FOR THE PORTION OF THE LOANS SO PREPAID AND UPON PAYMENT (INCLUDING PREPAYMENT) IN FULL THEREOF AND, DURING THE EXISTENCE OF ANY EVENT OF DEFAULT, INTEREST SHALL BE PAID ON DEMAND OF THE ADMINISTRATIVE AGENT. (C)           NOTWITHSTANDING PARAGRAPH (A) OF THIS SECTION 2.7, WHILE ANY EVENT OF DEFAULT EXISTS OR AFTER ACCELERATION, THE COMPANY SHALL PAY INTEREST (AFTER AS WELL AS BEFORE ENTRY OF JUDGMENT THEREON TO THE EXTENT PERMITTED BY LAW) ON THE PRINCIPAL AMOUNT OF ALL OUTSTANDING LOANS, AT A RATE PER ANNUM EQUAL TO THE LESSER OF (I) THE HIGHEST LAWFUL RATE AND (II) THE RATE OTHERWISE APPLICABLE PLUS TWO PERCENT (2%) (“DEFAULT RATE”).                 2.8           Fees.  The Company has paid or will pay (as applicable) fees to the parties and in the amounts specified in the Fee Letter Agreement.                 2.9           Computation of Fees and Interest. (A)           ALL COMPUTATIONS OF INTEREST FOR BASE RATE LOANS SHALL BE MADE ON THE BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE, AND ACTUAL DAYS ELAPSED.  ALL OTHER COMPUTATIONS OF FEES AND INTEREST SHALL BE MADE ON THE BASIS OF A 360-DAY YEAR AND ACTUAL DAYS ELAPSED (WHICH RESULTS IN MORE INTEREST BEING PAID THAN IF COMPUTED ON THE BASIS OF A 365 DAY YEAR).  INTEREST AND FEES SHALL ACCRUE DURING EACH PERIOD DURING WHICH INTEREST OR SUCH FEES ARE COMPUTED FROM THE FIRST DAY THEREOF TO THE LAST DAY THEREOF. (B)           EACH DETERMINATION OF AN INTEREST RATE BY THE ADMINISTRATIVE AGENT SHALL BE CONCLUSIVE AND BINDING ON THE COMPANY AND THE LENDERS IN THE ABSENCE OF MANIFEST ERROR.                 2.10         Payments by the Company; Loans Pro Rata. (A)           ALL PAYMENTS TO BE MADE BY THE COMPANY SHALL BE MADE WITHOUT SET OFF, RECOUPMENT OR COUNTERCLAIM.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, ALL PAYMENTS BY THE COMPANY SHALL BE MADE TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF THE LENDERS AT THE AGENT’S PAYMENT OFFICE, AND SHALL BE MADE IN DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS, NO LATER THAN 12:00 P.M. (NEW YORK, NEW YORK TIME) ON THE DATE SPECIFIED HEREIN.  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED HEREIN, (I) EACH PAYMENT BY THE COMPANY OF FEES SHALL BE MADE FOR THE ACCOUNT OF THE LENDERS PRO RATA IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES, (II) EACH PAYMENT OF PRINCIPAL OF LOANS SHALL BE MADE FOR THE ACCOUNT OF THE LENDERS PRO RATA IN ACCORDANCE WITH THEIR RESPECTIVE OUTSTANDING PRINCIPAL AMOUNT OF SUCH LOANS, AND (III) EACH PAYMENT OF INTEREST ON LOANS SHALL BE MADE FOR THE ACCOUNT OF THE LENDERS PRO RATA IN ACCORDANCE WITH THEIR RESPECTIVE SHARES OF THE AGGREGATE AMOUNT OF INTEREST DUE AND PAYABLE TO THE LENDERS.  THE ADMINISTRATIVE AGENT WILL PROMPTLY DISTRIBUTE TO EACH LENDER ITS APPLICABLE SHARE OF SUCH PAYMENT IN LIKE FUNDS AS RECEIVED.  ANY PAYMENT RECEIVED BY THE ADMINISTRATIVE AGENT LATER THAN 12:00 P.M. (NEW YORK, NEW YORK TIME) SHALL BE DEEMED TO HAVE BEEN RECEIVED ON THE FOLLOWING   31 --------------------------------------------------------------------------------   BUSINESS DAY AND ANY APPLICABLE INTEREST OR FEE SHALL CONTINUE TO ACCRUE. (B)           SUBJECT TO THE PROVISIONS SET FORTH IN THE DEFINITION OF “INTEREST PERIOD” HEREIN, WHENEVER ANY PAYMENT IS DUE ON A DAY OTHER THAN A BUSINESS DAY, SUCH PAYMENT SHALL BE MADE ON THE FOLLOWING BUSINESS DAY, AND SUCH EXTENSION OF TIME SHALL IN SUCH CASE BE INCLUDED IN THE COMPUTATION OF INTEREST OR FEES, AS THE CASE MAY BE. (C)           UNLESS THE ADMINISTRATIVE AGENT RECEIVES NOTICE FROM THE COMPANY PRIOR TO THE DATE ON WHICH ANY PAYMENT IS DUE TO THE LENDERS THAT THE COMPANY WILL NOT MAKE SUCH PAYMENT IN FULL AS AND WHEN REQUIRED, THE ADMINISTRATIVE AGENT MAY ASSUME THAT THE COMPANY HAS MADE SUCH PAYMENT IN FULL TO THE ADMINISTRATIVE AGENT ON SUCH DATE IN IMMEDIATELY AVAILABLE FUNDS AND THE ADMINISTRATIVE AGENT MAY (BUT SHALL NOT BE SO REQUIRED), IN RELIANCE UPON SUCH ASSUMPTION, DISTRIBUTE TO EACH LENDER ON SUCH DUE DATE AN AMOUNT EQUAL TO THE AMOUNT THEN DUE SUCH LENDER.  IF AND TO THE EXTENT THE COMPANY HAS NOT MADE SUCH PAYMENT IN FULL TO THE ADMINISTRATIVE AGENT, EACH LENDER SHALL REPAY TO THE ADMINISTRATIVE AGENT ON DEMAND SUCH AMOUNT DISTRIBUTED TO SUCH LENDER, TOGETHER WITH INTEREST THEREON AT THE FEDERAL FUNDS RATE FOR EACH DAY FROM THE DATE SUCH AMOUNT IS DISTRIBUTED TO SUCH LENDER UNTIL THE DATE REPAID. (D)           EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED HEREIN, THE LOANS HEREUNDER SHALL BE FROM THE LENDERS PRO RATA IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES. (E)           NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 2.5(A), (B), (C) OR ELSEWHERE IN THIS SECTION 2.10, WITH RESPECT TO THE AMOUNT OF ANY MANDATORY PREPAYMENT DESCRIBED IN SECTIONS 2.5(A), (B) OR (C) THAT IS ALLOCATED TO THE LOANS (SUCH AMOUNT, THE “MANDATORY PREPAYMENT AMOUNT”), ANY LENDER MAY ELECT, BY NOTICE TO THE ADMINISTRATIVE AGENT AT OR PRIOR TO THE TIME AND IN THE MANNER SPECIFIED BY THE ADMINISTRATIVE AGENT, PRIOR TO ANY PREPAYMENT OF LOANS REQUIRED TO BE MADE BY THE COMPANY PURSUANT TO SECTIONS 2.5(A), (B) OR (C), TO DECLINE ALL (BUT NOT A PORTION) OF ITS PRO RATA SHARE OF SUCH MANDATORY PREPAYMENT AMOUNT (SUCH DECLINED AMOUNTS, THE “DECLINED PROCEEDS”).  ANY DECLINED PROCEEDS SHALL BE OFFERED ONE ADDITIONAL TIME TO THE LENDERS NOT SO DECLINING SUCH PREPAYMENT (WITH SUCH LENDERS HAVING THE RIGHT TO DECLINE ANY PREPAYMENT WITH DECLINED PROCEEDS AT THE TIME AND IN THE MANNER SPECIFIED BY THE ADMINISTRATIVE AGENT).  ANY REMAINING DECLINED PROCEEDS SHALL BE APPLIED AS DETERMINED BY THE COMPANY IN ACCORDANCE WITH THIS AGREEMENT. (F)            THE COMPANY SHALL DELIVER TO THE ADMINISTRATIVE AGENT, AT THE TIME OF EACH PREPAYMENT REQUIRED UNDER SECTIONS 2.5(A), (B) OR (C), (I) A CERTIFICATE SIGNED BY A RESPONSIBLE OFFICER SETTING FORTH IN REASONABLE DETAIL THE CALCULATION OF THE APPLICABLE MANDATORY PREPAYMENT AMOUNT AND (II) TO THE EXTENT PRACTICABLE, AT LEAST THREE DAYS PRIOR WRITTEN NOTICE OF SUCH PREPAYMENT. EACH NOTICE OF PREPAYMENT SHALL SPECIFY THE PREPAYMENT DATE, THE TYPE OF EACH LOAN BEING PREPAID (I.E., SPECIFYING BASE RATE LOANS OR LIBO RATE LOANS) AND THE PRINCIPAL AMOUNT OF EACH LOAN (OR PORTION THEREOF) TO BE PREPAID; PROVIDED, HOWEVER, THAT, IF AT THE TIME OF ANY PREPAYMENT PURSUANT TO SECTIONS 2.5(A), (B) OR (C) THERE SHALL BE LOANS OF DIFFERENT TYPES OR LIBO RATE LOANS WITH DIFFERENT INTEREST PERIODS, AND IF SOME BUT NOT ALL LENDERS SHALL HAVE ACCEPTED SUCH MANDATORY PREPAYMENT, THEN THE AGGREGATE AMOUNT OF SUCH MANDATORY PREPAYMENT SHALL BE ALLOCATED RATABLY TO EACH OUTSTANDING LOAN OF THE ACCEPTING LENDERS.   32 --------------------------------------------------------------------------------   (G)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT, EACH PAYMENT IN RESPECT OF PRINCIPAL OR INTEREST ON THE LOANS, EACH PAYMENT IN RESPECT OF FEES PAYABLE HEREUNDER AND ANY PROCEEDS OF COLLATERAL, AND NET CASH PROCEEDS RECEIVED BY THE ADMINISTRATIVE AGENT AND NOT REQUIRED TO BE TURNED OVER TO THE FIRST LIEN CREDIT AGENT PURSUANT TO THE INTERCREDITOR AGREEMENT SHALL BE APPLIED IN THE FOLLOWING ORDER: (I)            FIRST, TO THE PAYMENT OR REIMBURSEMENT OF THE ADMINISTRATIVE AGENT FOR ALL COSTS, EXPENSES, DISBURSEMENTS AND LOSSES INCURRED BY THE ADMINISTRATIVE AGENT AND WHICH THE COMPANY IS REQUIRED TO PAY OR REIMBURSE PURSUANT TO THE LOAN DOCUMENTS; (II)           SECOND, TO THE PAYMENT OR REIMBURSEMENT OF THE LENDERS FOR ALL COSTS, EXPENSES, DISBURSEMENTS AND LOSSES INCURRED BY SUCH PERSONS AND WHICH ANY LOAN PARTY IS REQUIRED TO PAY OR REIMBURSE PURSUANT TO THE LOAN DOCUMENTS; (III)          THIRD, TO THE PAYMENT OR PREPAYMENT TO THE LENDERS OF ALL OBLIGATIONS; AND (IV)          FOURTH, TO WHOMSOEVER SHALL BE LEGALLY ENTITLED THERETO. If any Lender owes payments to the Administrative Agent hereunder, any amounts otherwise distributable under this Section 2.10(g) to such Lender shall be deemed to belong to the Administrative Agent to the extent of such unpaid payments, and the Administrative Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Lender.  All distributions of amounts described in paragraphs second and third above shall be made by the Administrative Agent to each Lender based on its Pro Rata Share.                 2.11         [Intentionally Omitted].                 2.12         Sharing of Payments, Etc.  If any Lender shall obtain on account of the Obligations held by it any payment (whether voluntary, involuntary, through the exercise of any right of set off, or otherwise) or receive any collateral in respect thereof in excess of the amount such Lender was entitled to receive pursuant to the terms hereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment according to the terms hereof; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.  The Company agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set off, but subject to Section 11.9) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.12 and will in each case notify   33 --------------------------------------------------------------------------------   THE LENDERS FOLLOWING ANY SUCH PURCHASES OR REPAYMENTS. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY                 3.1           Taxes. (A)           ANY AND ALL PAYMENTS BY THE COMPANY TO EACH LENDER OR THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT SHALL BE MADE FREE AND CLEAR OF, AND WITHOUT DEDUCTION OR WITHHOLDING FOR ANY TAXES.  IN ADDITION, THE COMPANY SHALL PAY ALL OTHER TAXES. (B)           SUBJECT TO SECTION 3.1(F), THE COMPANY AGREES TO INDEMNIFY AND HOLD HARMLESS EACH LENDER AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 3.1) PAID BY THE LENDER OR THE ADMINISTRATIVE AGENT AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, ADDITIONS TO TAX AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED.  PAYMENT UNDER THIS INDEMNIFICATION SHALL BE MADE WITHIN 30 DAYS AFTER THE DATE THE AFFECTED LENDER OR THE ADMINISTRATIVE AGENT MAKES WRITTEN DEMAND THEREFOR. (C)           IF THE COMPANY SHALL BE REQUIRED BY LAW TO DEDUCT OR WITHHOLD ANY TAXES OR OTHER TAXES FROM OR IN RESPECT OF ANY SUM PAYABLE HEREUNDER TO ANY LENDER OR THE ADMINISTRATIVE AGENT, THEN: (I) THE SUM PAYABLE SHALL BE INCREASED AS NECESSARY SO THAT AFTER MAKING ALL REQUIRED DEDUCTIONS AND WITHHOLDINGS (INCLUDING DEDUCTIONS AND WITHHOLDINGS APPLICABLE TO ADDITIONAL SUMS PAYABLE UNDER THIS SECTION 3.1), SUCH LENDER OR THE ADMINISTRATIVE AGENT, AS THE CASE MAY BE, RECEIVES AN AMOUNT EQUAL TO THE SUM IT WOULD HAVE RECEIVED HAD NO SUCH DEDUCTIONS OR WITHHOLDINGS BEEN MADE; (II) THE COMPANY SHALL MAKE SUCH DEDUCTIONS AND WITHHOLDINGS; (III) THE COMPANY SHALL PAY THE FULL AMOUNT DEDUCTED OR WITHHELD TO THE RELEVANT TAXING AUTHORITY OR OTHER AUTHORITY IN ACCORDANCE WITH APPLICABLE LAW; AND (IV) THE COMPANY SHALL ALSO PAY TO EACH AFFECTED LENDER OR THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF SUCH LENDER, AT THE TIME INTEREST IS PAID, ALL ADDITIONAL AMOUNTS WHICH SUCH LENDER SPECIFIES AS NECESSARY TO PRESERVE THE AFTER-TAX YIELD SUCH LENDER WOULD HAVE RECEIVED IF SUCH TAXES OR OTHER TAXES HAD NOT BEEN IMPOSED. (D)           WITHIN 30 DAYS AFTER THE DATE OF ANY PAYMENT BY THE COMPANY OF TAXES OR OTHER TAXES UNDER SECTION 3.1(C) ABOVE, THE COMPANY SHALL FURNISH THE ADMINISTRATIVE AGENT THE ORIGINAL OR A CERTIFIED COPY OF A RECEIPT EVIDENCING PAYMENT THEREOF, OR OTHER EVIDENCE OF PAYMENT SATISFACTORY TO THE ADMINISTRATIVE AGENT. (E)           IF THE COMPANY IS REQUIRED TO PAY ADDITIONAL AMOUNTS TO ANY LENDER OR THE ADMINISTRATIVE AGENT PURSUANT TO SECTION 3.1(C), THEN UPON WRITTEN REQUEST OF THE COMPANY SUCH LENDER SHALL USE REASONABLE EFFORTS (CONSISTENT WITH LEGAL AND REGULATORY RESTRICTIONS) TO CHANGE THE JURISDICTION OF ITS LENDING OFFICE SO AS TO ELIMINATE ANY SUCH ADDITIONAL PAYMENT BY THE COMPANY WHICH MAY THEREAFTER ACCRUE, IF SUCH CHANGE IN THE JUDGMENT OF SUCH LENDER IS NOT OTHERWISE DISADVANTAGEOUS TO SUCH LENDER.   34 --------------------------------------------------------------------------------   (F)            NO LENDER THAT IS REQUIRED TO COMPLY WITH SECTION 10.10 SHALL BE ENTITLED TO ANY INDEMNIFICATION UNDER THIS SECTION 3.1 IF THE OBLIGATION WITH RESPECT TO WHICH INDEMNIFICATION IS SOUGHT WOULD NOT HAVE ARISEN BUT FOR A FAILURE OF THE AFFECTED LENDER TO COMPLY WITH SUCH SECTION 10.10.                 3.2           Illegality. (A)           IF ANY LENDER DETERMINES THAT THE INTRODUCTION OF ANY REQUIREMENT OF LAW, OR ANY CHANGE IN ANY REQUIREMENT OF LAW, OR IN THE INTERPRETATION OR ADMINISTRATION OF ANY REQUIREMENT OF LAW, HAS MADE IT UNLAWFUL, OR THAT ANY CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY HAS ASSERTED THAT IT IS UNLAWFUL, FOR ANY LENDER OR ITS APPLICABLE LENDING OFFICE TO MAKE LIBO RATE LOANS, THEN, ON NOTICE THEREOF BY THE LENDER TO THE COMPANY THROUGH THE ADMINISTRATIVE AGENT, ANY OBLIGATION OF THAT LENDER TO MAKE LIBO RATE LOANS SHALL BE SUSPENDED UNTIL SUCH LENDER NOTIFIES THE ADMINISTRATIVE AGENT AND THE COMPANY THAT THE CIRCUMSTANCES GIVING RISE TO SUCH DETERMINATION NO LONGER EXIST. (B)           IF A LENDER DETERMINES THAT IT IS UNLAWFUL TO MAINTAIN ANY LIBO RATE LOAN, THE COMPANY SHALL, UPON ITS RECEIPT OF NOTICE OF SUCH FACT AND DEMAND FROM SUCH LENDER (WITH A COPY TO THE ADMINISTRATIVE AGENT), PREPAY IN FULL SUCH LIBO RATE LOANS OF THAT LENDER THEN OUTSTANDING, TOGETHER WITH INTEREST ACCRUED THEREON AND AMOUNTS REQUIRED UNDER SECTION 3.4, EITHER ON THE LAST DAY OF THE INTEREST PERIOD THEREOF, IF THE LENDER MAY LAWFULLY CONTINUE TO MAINTAIN SUCH LIBO RATE LOANS TO SUCH DAY, OR IMMEDIATELY, IF THE LENDER MAY NOT LAWFULLY CONTINUE TO MAINTAIN SUCH LIBO RATE LOAN.  IF THE COMPANY IS REQUIRED TO SO PREPAY ANY LIBO RATE LOAN, THEN CONCURRENTLY WITH SUCH PREPAYMENT, THE COMPANY SHALL BORROW FROM THE AFFECTED LENDER, IN THE AMOUNT OF SUCH REPAYMENT, A BASE RATE LOAN. (C)           IF THE OBLIGATION OF ANY LENDER TO MAKE OR MAINTAIN LIBO RATE LOANS HAS BEEN SO TERMINATED OR SUSPENDED, ALL LOANS WHICH WOULD OTHERWISE BE MADE BY THE LENDER AS LIBO RATE LOANS SHALL BE INSTEAD BASE RATE LOANS. (D)           BEFORE GIVING ANY NOTICE TO THE ADMINISTRATIVE AGENT UNDER THIS SECTION 3.2, THE AFFECTED LENDER SHALL DESIGNATE A DIFFERENT LENDING OFFICE WITH RESPECT TO ITS LIBO RATE LOANS IF SUCH DESIGNATION WILL AVOID THE NEED FOR GIVING SUCH NOTICE OR MAKING SUCH DEMAND AND WILL NOT, IN THE JUDGMENT OF SUCH LENDER, BE ILLEGAL OR OTHERWISE DISADVANTAGEOUS TO SUCH LENDER.                 3.3           Increased Costs and Reduction of Return. (A)           IF ANY LENDER DETERMINES THAT, DUE TO EITHER (I) THE INTRODUCTION OF OR ANY CHANGE (OTHER THAN ANY CHANGE BY WAY OF IMPOSITION OF OR INCREASE IN RESERVE REQUIREMENTS INCLUDED IN THE CALCULATION OF THE LIBO RATE) IN OR IN THE INTERPRETATION OF ANY LAW OR REGULATION OR (II) THE COMPLIANCE BY THAT LENDER WITH ANY GUIDELINE OR REQUEST FROM ANY CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY (WHETHER OR NOT HAVING THE FORCE OF LAW), THERE SHALL BE ANY INCREASE IN THE COST TO SUCH LENDER OF AGREEING TO MAKE OR MAKING, FUNDING OR MAINTAINING ANY LIBO RATE LOANS, THEN THE COMPANY SHALL BE LIABLE FOR, AND SHALL FROM TIME TO TIME, UPON DEMAND (WITH A COPY OF SUCH DEMAND TO BE SENT TO THE ADMINISTRATIVE AGENT), PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF SUCH LENDER, ADDITIONAL AMOUNTS AS ARE SUFFICIENT TO COMPENSATE SUCH LENDER FOR SUCH INCREASED COSTS.   35 --------------------------------------------------------------------------------   (B)           IF ANY LENDER SHALL HAVE DETERMINED THAT (I) THE INTRODUCTION OF ANY CAPITAL ADEQUACY REGULATION, (II) ANY CHANGE IN ANY CAPITAL ADEQUACY REGULATION, (III) ANY CHANGE IN THE INTERPRETATION OR ADMINISTRATION OF ANY CAPITAL ADEQUACY REGULATION BY ANY CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY CHARGED WITH THE INTERPRETATION OR ADMINISTRATION THEREOF, OR (IV) COMPLIANCE BY SUCH LENDER (OR ITS LENDING OFFICE) OR ANY AFFILIATE CONTROLLING SUCH LENDER WITH ANY CAPITAL ADEQUACY REGULATION, AFFECTS OR WOULD AFFECT THE AMOUNT OF CAPITAL REQUIRED OR EXPECTED TO BE MAINTAINED BY SUCH LENDER OR ANY AFFILIATE CONTROLLING SUCH LENDER AND (TAKING INTO CONSIDERATION SUCH LENDER’S OR SUCH AFFILIATE’S POLICIES WITH RESPECT TO CAPITAL ADEQUACY AND SUCH LENDER’S DESIRED RETURN ON CAPITAL) DETERMINES THAT THE AMOUNT OF SUCH CAPITAL IS INCREASED AS A CONSEQUENCE OF ITS COMMITMENT, LOANS, OTHER CREDIT EXTENSIONS, OR OBLIGATIONS UNDER THIS AGREEMENT, THEN, UPON DEMAND OF SUCH LENDER TO THE COMPANY THROUGH THE ADMINISTRATIVE AGENT, THE COMPANY SHALL PAY TO SUCH LENDER, FROM TIME TO TIME AS SPECIFIED BY SUCH LENDER, ADDITIONAL AMOUNTS SUFFICIENT TO COMPENSATE SUCH LENDER FOR SUCH INCREASE.                 3.4           Funding Losses.  The Company shall reimburse each Lender and hold each Lender harmless from any loss or expense which the Lender may sustain or incur as a consequence of (a) the failure of the Company to make on a timely basis any payment of principal of any LIBO Rate Loan; (b) the failure of the Company to continue a LIBO Rate Loan or to convert a Base Rate Loan to a LIBO Rate Loan after the Company has given (or is deemed to have given) a Notice of Conversion/Continuation (including by reason of the failure to satisfy any condition precedent thereto); (c) the failure of the Company to make any prepayment in accordance with any notice delivered under Sections 2.4 or 2.5; (d) the prepayment (including pursuant to Sections 2.4 or 2.5) or other payment (including after acceleration thereof) of a LIBO Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.3 of any LIBO Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBO Rate Loans or from fees payable to terminate the deposits from which such funds were obtained.  For purposes of calculating amounts payable by the Company to the Lenders under this Section 3.4 and under Section 3.3(a), each LIBO Rate Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the LIBO Rate for such LIBO Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan is in fact so funded.                 3.5           Inability to Determine Rates.  If the Administrative Agent determines that for any reason adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate applicable pursuant to Section 2.7(b) for any requested Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative Agent will promptly so notify the Company and each Lender.  Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans hereunder shall be suspended until the Administrative Agent upon the instruction of the Lenders revokes such notice in writing.  Upon receipt of such notice, the Company may revoke any Notice of Conversion/Continuation then submitted by it.  If the Company does not revoke such notice, the Lenders shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made,   36 --------------------------------------------------------------------------------   converted or continued as Base Rate Loans instead of LIBO Rate Loans.                 3.6           Certificates of Lenders.  Any Lender claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to such Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error; provided, however, that such Lender shall only be entitled to collect amounts incurred within 180 days of such notice.                 3.7           Substitution of Lenders.  Upon the receipt by the Company from any Lender of a claim for compensation under this Article III and, as a result, the Company elects by written notice to the Administrative Agent to replace such dissenting Lender pursuant to this Section 3.7 (such Lender, an “Affected Lender”), the Company may:  (a) obtain a replacement bank or financial institution satisfactory to the Administrative Agent to acquire and assume all or a ratable part of all of such Affected Lender’s Loans (a “Replacement Lender”); or (b) request one more of the other Lenders to acquire and assume all or part of such Affected Lender’s Loans but none of the Lenders shall have any obligation to do so.  Any such designation of a Replacement Lender under clause (a) shall be subject to the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld.                 3.8           Survival.  The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. ARTICLE IV SECURITY                 4.1           The Security.  The Obligations will be secured by the Security Documents.                 4.2           Agreement to Deliver Security Documents.  The Company shall, and shall cause its Subsidiaries to, execute and deliver to the Collateral Trustee, with an executed copy of each thereof provided to the Administrative Agent, to further secure the Sharing Obligations, whenever requested by the Administrative Agent in its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other Security Documents, for the benefit of the Secured Parties, in form and substance satisfactory to the Administrative Agent, for the purpose of granting, confirming, and perfecting, for the benefit of the Secured Parties, second and prior Liens or security interests in any Property now owned or hereafter acquired by the Company or any of its Subsidiaries, as applicable, subject only to Permitted Liens.  The Company shall, and shall cause its Subsidiaries to, deliver, and cause its Subsidiaries, where applicable, to deliver, in each case to the Collateral Trustee, with an executed copy of each thereof provided to the Administrative Agent, whenever requested by the Administrative Agent, favorable title opinions from legal counsel acceptable to the Administrative Agent, title insurance policies, or such other evidence of title satisfactory to the Administrative Agent with respect to the Mortgaged Properties designated by the Administrative Agent, based upon abstract or record examinations acceptable to the Administrative Agent and (a) stating that the Company or its Subsidiary, as applicable, has good and marketable title to the Mortgaged Properties, free and clear of all Liens except Permitted Liens, (b) confirming that   37 --------------------------------------------------------------------------------   such Mortgaged Properties are subject to Security Documents securing the Sharing Obligations that constitute and create legal, valid and duly perfected deed of trust or mortgage Liens in such Mortgaged Properties and interests, and assignments of and security interests in the Oil and Gas attributable to such Mortgaged Properties comprised of Oil and Gas Properties and interests and the proceeds thereof, in each case subject only to Permitted Liens, and (c) covering such other matters as the Administrative Agent may reasonably request.                 4.3           Perfection and Protection of Security Interests and Liens.  The Company shall, and shall cause its Subsidiaries to, from time to time deliver to the Collateral Trustee, with a copy of each thereof to the Administrative Agent, any financing statements, amendment, assignment and continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by the Company or its Subsidiary, as applicable, in form and substance satisfactory to the Administrative Agent, which the Administrative Agent reasonably requests for the purpose of perfecting, confirming, or protecting any Liens or other rights in Collateral securing any Sharing Obligations, for the benefit of the Secured Parties.                 4.4           Offset.  To secure the repayment of the Sharing Obligations, the Company hereby grants the Administrative Agent and each Lender a security interest, a Lien, and a right of offset, each of which shall be in addition to all other interests, Liens, and rights of the Administrative Agent and the Lenders at common law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other Property (and the proceeds therefrom) of the Company now or hereafter held or received by or in transit to the Administrative Agent or any Lender from or for the account of the Company, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or final) of the Company with the Administrative Agent or any Lender, and (c) any other credits and claims of the Company at any time existing against the Administrative Agent or any Lender, including claims under certificates of deposit. During the existence of any Event of Default, the Administrative Agent or any Lender is hereby authorized to foreclose upon, offset, appropriate, and apply, at any time and from time to time, without notice to the Company, any and all items hereinabove referred to against the Obligations then due and payable.                 4.5           Guaranty. (A)           EACH ORIGINAL GUARANTOR AND EACH TEXCAL SUBSIDIARY HAS EXECUTED AND DELIVERED TO THE ADMINISTRATIVE AGENT, AND EACH SUBSIDIARY OF THE COMPANY NOW EXISTING OR CREATED, ACQUIRED OR COMING INTO EXISTENCE AFTER THE RESTATEMENT EFFECTIVE DATE THAT IS REQUIRED UNDER SECTION 7.12 TO BE A GUARANTOR SHALL, PROMPTLY UPON REQUEST BY THE ADMINISTRATIVE AGENT, EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT, A GUARANTY (OR A JOINDER THERETO).  THE COMPANY WILL CAUSE EACH OF ITS SUBSIDIARIES TO DELIVER TO THE ADMINISTRATIVE AGENT, SIMULTANEOUSLY WITH ITS DELIVERY OF SUCH A GUARANTY, WRITTEN EVIDENCE SATISFACTORY TO THE ADMINISTRATIVE AGENT AND ITS COUNSEL THAT SUCH SUBSIDIARY HAS TAKEN ALL CORPORATE, LIMITED LIABILITY COMPANY OR PARTNERSHIP ACTION NECESSARY TO DULY APPROVE AND AUTHORIZE ITS EXECUTION, DELIVERY AND PERFORMANCE OF SUCH GUARANTY AND ANY SECURITY DOCUMENTS AND OTHER DOCUMENTS WHICH IT IS REQUIRED TO EXECUTE.   38 --------------------------------------------------------------------------------   (B)           GUARANTY REPRESENTATIONS.  TO INDUCE THE LENDERS AND THE ADMINISTRATIVE AGENT TO ENTER INTO THIS AGREEMENT, THE COMPANY AND EACH GUARANTOR REPRESENTS AND WARRANTS TO EACH SUCH PERSON, (I) AS OF AND AFTER GIVING EFFECT TO THE MAKING OF THE LOANS AT THE EFFECTIVE TIME, (II) AFTER GIVING EFFECT TO THE TEXCAL ACQUISITION, AS OF THE TEXCAL CLOSING TIME AND (III) AS OF THE RESTATEMENT EFFECTIVE TIME: (I)            BENEFIT TO GUARANTORS.  THE COMPANY AND EACH GUARANTOR ARE MUTUALLY DEPENDENT ON EACH OTHER IN THE CONDUCT OF THEIR RESPECTIVE BUSINESSES, WITH THE CREDIT NEEDED FROM TIME TO TIME BY EACH OFTEN BEING PROVIDED BY ANOTHER OR BY MEANS OF FINANCING OBTAINED BY ONE SUCH AFFILIATE WITH THE SUPPORT OF THE OTHER FOR THEIR MUTUAL BENEFIT AND THE ABILITY OF EACH TO OBTAIN SUCH FINANCING IS DEPENDENT ON THE SUCCESSFUL OPERATIONS OF THE OTHER.  THE BOARD OF DIRECTORS, MANAGER OR GENERAL PARTNER, WHERE APPLICABLE, OF EACH GUARANTOR HAS DETERMINED THAT SUCH GUARANTOR’S EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT MAY REASONABLY BE EXPECTED TO DIRECTLY OR INDIRECTLY BENEFIT SUCH GUARANTOR AND IS IN THE BEST INTERESTS OF SUCH GUARANTOR. (II)           REASONABLE CONSIDERATION FOR GUARANTIES.  THE DIRECT OR INDIRECT VALUE OF THE CONSIDERATION RECEIVED AND TO BE RECEIVED BY SUCH GUARANTOR IN CONNECTION HEREWITH IS REASONABLY WORTH AT LEAST AS MUCH AS THE LIABILITY AND OBLIGATIONS OF EACH GUARANTOR HEREUNDER AND ITS GUARANTY, AND THE INCURRENCE OF SUCH LIABILITY AND OBLIGATIONS IN RETURN FOR SUCH CONSIDERATION MAY REASONABLY BE EXPECTED TO BENEFIT SUCH GUARANTOR, DIRECTLY OR INDIRECTLY. (III)          NO INSOLVENCIES.  NEITHER THE COMPANY NOR ANY GUARANTOR IS “INSOLVENT” (THAT IS, THE SUM OF SUCH PERSON’S ABSOLUTE AND CONTINGENT LIABILITIES, INCLUDING THE OBLIGATIONS, DOES NOT EXCEED THE FAIR MARKET VALUE OF SUCH PERSON’S ASSETS, INCLUDING ANY RIGHTS OF CONTRIBUTION, REIMBURSEMENT OR INDEMNITY).  EACH OF THE COMPANY AND EACH GUARANTOR HAS CAPITAL WHICH IS ADEQUATE FOR THE BUSINESSES IN WHICH SUCH PERSON IS ENGAGED AND INTENDS TO BE ENGAGED.  NONE OF  THE COMPANY NOR ANY GUARANTOR HAS INCURRED (WHETHER HEREBY OR OTHERWISE), NOR DOES THE COMPANY OR GUARANTOR INTEND TO INCUR OR BELIEVE THAT IT WILL INCUR, LIABILITIES WHICH WILL BE BEYOND ITS ABILITY TO PAY AS SUCH LIABILITIES MATURE.                 4.6           Production Proceeds.  Notwithstanding that, by the terms of the various Security Documents, the Company is and will be assigning to the Collateral Trustee all of the Net Proceeds of Production accruing to the Mortgaged Properties covered thereby, so long as no Event of Default has occurred and is continuing, pursuant to Section 7.03 of the Collateral Trust Agreement, the Collateral Trustee, on behalf of the Secured Parties, has granted each of the Company and its Subsidiaries a revocable license to continue to receive from the purchasers of production all such Net Proceeds of Production, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified.  During the continuance of an Event of Default described under Sections 9.1(g) or (h), pursuant to Section 7.03 of the Collateral Trust Agreement, this license shall be automatically revoked, and during the continuance of any other Event of Default, this license shall be revocable by the Collateral Trustee, subject to Section 3.04(b) of the Collateral Trust Agreement, upon the written direction of the Administrative Agent in the sole discretion of the Administrative Agent, by notice to the   39 --------------------------------------------------------------------------------   Company, and the Collateral Trustee may exercise all rights and remedies granted under the Security Documents, including the right to obtain possession of all Net Proceeds of Production then held by the Company and its Subsidiaries or to receive directly from the purchasers of production all other Net Proceeds of Production.  In no case shall any failure, whether purposeful or inadvertent, by the Collateral Trustee to collect directly any such Net Proceeds of Production constitute in any way a waiver, remission or release of any of its rights under the Security Documents, nor shall any release of any Net Proceeds of Production by the Collateral Trustee to the Company and its Subsidiaries constitute a waiver, remission, or release of any other Net Proceeds of Production or of any rights of the Collateral Trustee to collect other Net Proceeds of Production thereafter. ARTICLE V CONDITIONS PRECEDENT                 5.1           Conditions of the Effective Date.  The effectiveness of the Existing Credit Agreement was subject to the condition that on or before the Effective Time the Administrative Agent received all of the following, in form and substance satisfactory to the Administrative Agent and each Lender, and in sufficient copies for each Lender (or, in the case of clauses (g), (i), or (r), the conditions specified therein shall have been satisfied): (A)           CREDIT AGREEMENT AND RELATED DOCUMENTS.  THIS AGREEMENT, THE NOTES, THE GUARANTY AND THE SECURITY DOCUMENTS, DULY EXECUTED AND DELIVERED BY EACH OF THE COMPANY AND THE ORIGINAL GUARANTORS PARTY THERETO; (b)           First Lien Credit Documents; Collateral Trust Agreement; Senior Notes Indenture.  (i) Evidence that (x) each of the First Lien Credit Documents has been duly executed and delivered by each of the parties thereto; and (y) each of the Intercreditor Agreement and the Collateral Trust Agreement has been duly executed and delivered by each of the parties thereto other than the Administrative Agent; and (ii) true and correct copies, certified as to authenticity by the Company, of (x) the First Lien Credit Documents and (y) the Senior Notes Indenture; (C)           RESOLUTIONS; INCUMBENCY; ORGANIZATION DOCUMENTS.  (I) RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY AND MEMBERS OR THE BOARD OF DIRECTORS OF EACH ORIGINAL GUARANTOR OR ITS GENERAL PARTNER, AS APPLICABLE, AUTHORIZING THE TRANSACTIONS CONTEMPLATED HEREBY, CERTIFIED AS OF THE EFFECTIVE TIME BY THE SECRETARY OR AN ASSISTANT SECRETARY OF SUCH PERSON; (II) CERTIFICATES OF THE SECRETARY OF THE COMPANY AND THE SECRETARY OF EACH ORIGINAL GUARANTOR CERTIFYING THE NAMES AND TRUE SIGNATURES OF THE OFFICERS OF SUCH PERSON AUTHORIZED TO EXECUTE, DELIVER AND PERFORM, AS APPLICABLE, THIS AGREEMENT, THE SECURITY DOCUMENTS, THE GUARANTY, AND ALL OTHER LOAN DOCUMENTS TO BE DELIVERED BY IT HEREUNDER; AND (III) THE ORGANIZATION DOCUMENTS OF THE COMPANY AND OF EACH ORIGINAL GUARANTOR AS IN EFFECT ON THE EFFECTIVE TIME, CERTIFIED BY THE SECRETARY OR ASSISTANT SECRETARY OF THE SUCH PERSON AS OF THE EFFECTIVE TIME; (D)           GOOD STANDING.  A GOOD STANDING CERTIFICATE FOR THE COMPANY AND EACH ORIGINAL GUARANTOR FROM ITS STATE OF INCORPORATION OR FORMATION, AND EVIDENCING ITS QUALIFICATION TO DO BUSINESS IN (I) CALIFORNIA FOR THE COMPANY AND EACH ORIGINAL GUARANTOR, (II) TEXAS FOR THE COMPANY, AND (III) IN EACH OTHER JURISDICTION WHERE ITS OWNERSHIP, LEASE OR OPERATION OF   40 --------------------------------------------------------------------------------   PROPERTIES OR THE CONDUCT OF ITS BUSINESS REQUIRES SUCH QUALIFICATION, IN EACH CASE AS OF A RECENT DATE; (E)           PAYMENT OF FEES.  EVIDENCE OF PAYMENT BY THE COMPANY OF ALL ACCRUED AND UNPAID FEES, COSTS AND EXPENSES OWED PURSUANT TO THE EXISTING CREDIT AGREEMENT (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE EFFECTIVE DATE), THE FIRST LIEN CREDIT AGREEMENT AND UNDER THIS AGREEMENT, INCLUDING THE FEE LETTER AGREEMENT, IN EACH CASE TO THE EXTENT THEN DUE AND PAYABLE AT THE EFFECTIVE TIME, INCLUDING ANY SUCH COSTS, FEES AND EXPENSES ARISING UNDER OR REFERENCED IN SECTIONS 2.8 AND 11.4; (F)            CERTIFICATE.  A CERTIFICATE SIGNED BY A RESPONSIBLE OFFICER, DATED AS OF THE EFFECTIVE TIME, STATING THAT (I) THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE VI AND SECTION 4.5(B) ARE TRUE AND CORRECT ON AND AS OF THE EFFECTIVE DATE, AS THOUGH MADE ON AND AS OF SUCH DATE; (II) NO LITIGATION IS PENDING OR THREATENED AGAINST THE COMPANY OR ANY SUBSIDIARY OR ANY TEXCAL SUBSIDIARY IN WHICH THERE IS A REASONABLE PROBABILITY OF AN ADVERSE DECISION WHICH WOULD RESULT IN A MATERIAL ADVERSE EFFECT; AND (III) THERE HAS OCCURRED NO EVENT OR CIRCUMSTANCE THAT HAS RESULTED OR WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT SINCE DECEMBER 31, 2004; (G)           [INTENTIONALLY OMITTED]; (H)           TITLE.  EVIDENCE THAT THE COMPANY AND ITS SUBSIDIARIES HAVE AND, UPON CONSUMMATION OF THE TEXCAL ACQUISITION, WILL HAVE GOOD AND MARKETABLE TITLE ON AT LEAST 85% OF THE NET PRESENT VALUE OF THE PROVED RESERVES SUBJECT TO NO OTHER LIENS, OTHER THAN PERMITTED LIENS, EVIDENCED BY TITLE INFORMATION SATISFACTORY TO THE ADMINISTRATIVE AGENT AND THE LENDERS; (I)            ENVIRONMENTAL.  THE ADMINISTRATIVE AGENT SHALL HAVE COMPLETED A REVIEW SATISFACTORY TO THE ADMINISTRATIVE AGENT OF CURRENT PUBLIC ENVIRONMENTAL DATA SOURCES, REGISTERS AND LISTS REGARDING THE COMPANY, EACH ORIGINAL GUARANTOR AND EACH TEXCAL SUBSIDIARY AND THEIR RESPECTIVE OIL AND GAS PROPERTIES AND THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL BE SATISFIED WITH ALL ENVIRONMENTAL MATTERS; (J)            INSURANCE CERTIFICATES.  INSURANCE CERTIFICATES IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT, FROM THE COMPANY’S INSURANCE CARRIERS REFLECTING THE CURRENT INSURANCE POLICIES REQUIRED UNDER SECTION 7.6 (SUCH INSURANCE WILL BE PRIMARY AND NOT CONTRIBUTING) INCLUDING ANY NECESSARY ENDORSEMENTS TO REFLECT THE ADMINISTRATIVE AGENT AS LOSS PAYEE FOR THE RATABLE BENEFIT OF THE LENDERS, WITH THE RIGHT TO RECEIVE AT LEAST 30 DAYS PRIOR NOTICE OF CANCELLATION OF ANY SUCH POLICY; (K)           OTHER DOCUMENTS.  SUCH OTHER APPROVALS, OPINIONS, DOCUMENTS OR MATERIALS AS THE ADMINISTRATIVE AGENT OR ANY LENDER MAY REQUEST, INCLUDING THOSE IN CONNECTION WITH THE TEXCAL ACQUISITION; (L)            OPINIONS OF COUNSEL.  (I) AN OPINION OF DAVIS GRAHAM & STUBBS LLP COVERING SUCH MATTERS AS THE ADMINISTRATIVE AGENT MAY REQUIRE AND IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT DATED AS OF THE EFFECTIVE TIME, (II) AN OPINION OF BRACEWELL & GIULIANI LLP COVERING SUCH MATTERS OF NEW YORK LAW AS THE ADMINISTRATIVE AGENT MAY REQUIRE IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT DATED AS OF THE   41 --------------------------------------------------------------------------------   EFFECTIVE TIME AND (III) OPINIONS OF HAYNES AND BOONE, LLP AND DOWNEY BRAND LLP AS TO THE ENFORCEABILITY AND PERFECTION OF THE LIENS AND SECURITY INTERESTS CREATED UNDER THE MORTGAGES FILED OR TO BE FILED IN TEXAS AND CALIFORNIA, RESPECTIVELY; (M)          TEXCAL ACQUISITION.  (I) EVIDENCE THAT ALL CONDITIONS PRECEDENT UNDER THE TEXCAL ACQUISITION AGREEMENT OTHER THAN PAYMENT OF THE “CLOSING DATE MERGER CONSIDERATION” (AS DEFINED THEREIN) HAVE BEEN SATISFIED OR WAIVED BY ALL PARTIES THERETO; AND (II) TRUE AND CORRECT COPIES (IN A FORM REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT), CERTIFIED AS TO AUTHENTICITY BY A RESPONSIBLE OFFICER OF THE COMPANY, OF THE TEXCAL ACQUISITION DOCUMENTATION; (N)           INITIAL RESERVE REPORT, TEXCAL RESERVE REPORT, FINANCIAL STATEMENTS AND  PRO FORMA FINANCIAL STATEMENTS.  THE INITIAL RESERVE REPORT, THE TEXCAL RESERVE REPORT, THE AUDITED FINANCIAL STATEMENTS, THE COMPANY’S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, THE TEXCAL AUDITED FINANCIAL STATEMENTS AND THE PRO FORMA FINANCIAL STATEMENTS, EACH IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT; (O)           LIEN SEARCHES.  EVIDENCE OF THE RESULTS OF A RECENT LIEN SEARCH IN EACH OF THE JURISDICTIONS IN WHICH UCC FINANCING STATEMENTS OR OTHER FILINGS OR RECORDATIONS SHOULD BE MADE TO EVIDENCE OR PERFECT SECURITY INTERESTS IN ANY ASSETS OF THE COMPANY, ANY ORIGINAL GUARANTOR OR ANY TEXCAL SUBSIDIARY, AND SUCH SEARCH SHALL REVEAL NO LIENS ON ANY OF THE PROPERTY OF THE COMPANY, ANY ORIGINAL GUARANTOR OR ANY TEXCAL SUBSIDIARY, EXCEPT FOR PERMITTED LIENS; (P)           MMS OPERATIONAL MATTERS.  EVIDENCE THAT THE COMPANY IS QUALIFIED BY THE MINERALS MANAGEMENT SERVICE OF THE UNITED STATES DEPARTMENT OF INTERIOR TO OPERATE ITS HYDROCARBON INTERESTS COMPRISED OF LEASES COVERING SUBMERGED LANDS ON THE FEDERAL OUTER CONTINENTAL SHELF; (Q)           FILINGS, REGISTRATIONS AND RECORDINGS.  EACH DOCUMENT (INCLUDING, WITHOUT LIMITATION, ANY UCC FINANCING STATEMENT) REQUIRED BY THE SECURITY DOCUMENTS OR UNDER LAW OR REASONABLY REQUESTED BY THE ADMINISTRATIVE AGENT TO BE FILED, REGISTERED OR RECORDED IN ORDER TO CREATE IN FAVOR OF THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, A SECOND PRIORITY PERFECTED LIEN ON THE SHARED COLLATERAL DESCRIBED IN ANY SECURITY DOCUMENT TO WHICH THE COMPANY OR ANY ORIGINAL GUARANTOR IS (OR, UPON CONSUMMATION OF THE TEXCAL ACQUISITION, ANY TEX CAL SUBSIDIARY WILL BE) A PARTY, PRIOR AND SUPERIOR IN RIGHT TO ANY OTHER PERSON (OTHER THAN WITH RESPECT TO PERMITTED LIENS), SHALL HAVE BEEN FILED, REGISTERED OR RECORDED OR SHALL HAVE BEEN DELIVERED TO THE COLLATERAL TRUSTEE IN PROPER FORM FOR FILING, REGISTRATION OR RECORDATION; (R)            APPROVALS.  ALL GOVERNMENT AND THIRD PARTY APPROVALS (INCLUDING ANY CONSENTS) NECESSARY IN CONNECTION WITH THE TEXCAL ACQUISITION, THE CONTINUING OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES AND THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT, AND ALL APPLICABLE WAITING PERIODS SHALL HAVE EXPIRED WITHOUT ANY ACTION BEING TAKEN OR THREATENED BY ANY COMPETENT AUTHORITY WHICH WOULD RESTRAIN, PREVENT OR OTHERWISE IMPOSE ADVERSE CONDITIONS ON THE TEXCAL ACQUISITION OR THE FINANCING CONTEMPLATED HEREBY;   42 --------------------------------------------------------------------------------   (S)           SOLVENCY.  A CERTIFICATE FROM A RESPONSIBLE OFFICER OF THE COMPANY CERTIFYING THAT, ON A CONSOLIDATED BASIS, THE COMPANY AND ITS SUBSIDIARIES (I) AS OF THE EFFECTIVE TIME, ARE, AND (II) AFTER GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE TEXCAL ACQUISITION, WILL BE, SOLVENT; (T)            PLEDGED STOCK; STOCK POWERS; ACKNOWLEDGMENT AND CONSENT; PLEDGED NOTES.  THE FIRST LIEN CREDIT AGENT, ON BEHALF OF ITSELF, FOR THE BENEFIT OF THE FIRST LIEN SECURED PARTIES, AND AS AGENT AND BAILEE FOR THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, SHALL HAVE RECEIVED (I) THE CERTIFICATES REPRESENTING THE SHARES OF CAPITAL STOCK OF THE COMPANY’S SUBSIDIARIES PLEDGED PURSUANT TO THE SECURITY AGREEMENT, TOGETHER WITH AN UNDATED STOCK POWER FOR EACH SUCH CERTIFICATE EXECUTED IN BLANK BY A DULY AUTHORIZED OFFICER OF THE PLEDGOR THEREOF, AND (II) EACH PROMISSORY NOTE PLEDGED BY THE COMPANY AND THE GUARANTORS PURSUANT TO THE SECURITY AGREEMENT ENDORSED (WITHOUT RECOURSE) IN BLANK (OR ACCOMPANIED BY AN EXECUTED TRANSFER FORM IN BLANK SATISFACTORY TO THE FIRST LIEN CREDIT AGENT) BY THE PLEDGOR THEREOF; AND (U)           NOTICE OF BORROWING.  THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A NOTICE OF BORROWING IN THE FORM OF EXHIBIT A WITH RESPECT TO THE INITIAL CREDIT EXTENSIONS HEREUNDER CONTEMPLATED BY SECTION 2.1.                 5.2           Conditions to All Credit Extensions.  The obligation of each Lender to have made the Loans on the Effective Date and to continue or convert any Loan under Section 2.3 (but specifically excluding the conversion of LIBO Rate Loans on the last day of the Interest Period therefor into Base Rate Loans) from and after the Effective Time was and is subject to the satisfaction of the following conditions precedent on the Effective Date or Conversion/Continuation Date, as applicable: (A)           NOTICE.  THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A NOTICE OF CONVERSION/CONTINUATION (IF APPLICABLE); (B)           CONTINUATION OF REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND WARRANTIES IN ARTICLE VI AND SECTION 4.5(B) SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON AND AS OF THE EFFECTIVE DATE OR CONVERSION/CONTINUATION DATE WITH THE SAME EFFECT AS IF MADE ON AND AS OF THE EFFECTIVE DATE OR CONVERSION/CONTINUATION DATE (EXCEPT TO THE EXTENT SUCH REPRESENTATIONS AND WARRANTIES EXPRESSLY REFER TO AN EARLIER DATE, IN WHICH CASE THEY SHALL BE TRUE AND CORRECT AS OF SUCH EARLIER DATE); (C)           NO EXISTING DEFAULT.  NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST OR SHALL RESULT FROM SUCH MAKING, CONTINUATION OR CONVERSION; (D)           NO EVENT OR CONDITION OF MATERIAL ADVERSE EFFECT.  NO EVENT OR CONDITION HAVING A MATERIAL ADVERSE EFFECT SHALL HAVE OCCURRED SINCE DECEMBER 31, 2004, OR IF APPLICABLE THE DATE OF THE MOST RECENT ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY DELIVERED TO THE ADMINISTRATIVE AGENT PURSUANT TO SECTION 7.1(A); AND (E)           MORTGAGED PROPERTIES.  THE ADMINISTRATIVE AGENT SHALL BE SATISFIED THAT THE LOAN PARTIES HAVE GRANTED TO THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, AT SUCH TIME, FULLY PERFECTED LIENS ON OIL AND GAS PROPERTIES THAT ARE MORTGAGED PROPERTIES, SUBJECT ONLY TO PERMITTED LIENS, SUFFICIENT TO CAUSE THE MORTGAGED PROPERTIES TO INCLUDE EIGHTY-FIVE   43 --------------------------------------------------------------------------------   percent (85%) of the Net Present Value of the Proved Reserves and at least ninety-five percent (95%) of the Net Present Value of the Proved Developed Producing Reserves. Each Notice of Conversion/Continuation submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of the Conversion/Continuation Date that the conditions in Section 5.2 are satisfied.                 5.3           Conditions to the Restatement Effective Time.  The effectiveness of this Agreement is subject to the condition that on or before the Restatement Effective Time the Administrative Agent shall have received all of the following, in form and substance satisfactory to the Administrative Agent and each Lender, and in sufficient copies for each Lender: (A)           CREDIT AGREEMENT.  THIS AGREEMENT, DULY EXECUTED AND DELIVERED BY EACH OF THE COMPANY AND THE GUARANTORS PARTY THERETO; (B)           RESOLUTIONS; INCUMBENCY; ORGANIZATION DOCUMENTS.  (I) RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY AND MEMBERS OR THE BOARD OF DIRECTORS OF EACH GUARANTOR OR ITS GENERAL PARTNER, AS APPLICABLE, AUTHORIZING THE TRANSACTIONS CONTEMPLATED HEREBY, CERTIFIED AS OF THE RESTATEMENT EFFECTIVE TIME BY THE SECRETARY OR AN ASSISTANT SECRETARY OF SUCH PERSON; (II) CERTIFICATES OF THE SECRETARY OF THE COMPANY AND THE SECRETARY OF EACH GUARANTOR CERTIFYING THE NAMES AND TRUE SIGNATURES OF THE OFFICERS OF SUCH PERSON AUTHORIZED TO EXECUTE, DELIVER AND PERFORM, AS APPLICABLE, THIS AGREEMENT; AND (III) THE ORGANIZATION DOCUMENTS OF THE COMPANY AND OF EACH GUARANTOR AS IN EFFECT ON THE RESTATEMENT EFFECTIVE TIME, CERTIFIED BY THE SECRETARY OR ASSISTANT SECRETARY OF THE SUCH PERSON AS OF THE RESTATEMENT EFFECTIVE TIME; (C)           PAYMENT OF FEES.  EVIDENCE OF PAYMENT BY THE COMPANY OF ALL ACCRUED AND UNPAID FEES, COSTS AND EXPENSES OWED PURSUANT TO THIS AGREEMENT, INCLUDING THE FEE LETTER AGREEMENT, IN EACH CASE TO THE EXTENT THEN DUE AND PAYABLE AT THE RESTATEMENT EFFECTIVE TIME, INCLUDING ANY SUCH COSTS, FEES AND EXPENSES ARISING UNDER OR REFERENCED IN SECTIONS 2.8 AND 11.4; (D)           CERTIFICATE.  A CERTIFICATE SIGNED BY A RESPONSIBLE OFFICER, DATED AS OF THE RESTATEMENT EFFECTIVE TIME, STATING THAT (I) THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE VI AND SECTION 4.5(B) ARE TRUE AND CORRECT ON AND AS OF THE RESTATEMENT EFFECTIVE DATE, AS THOUGH MADE ON AND AS OF SUCH DATE; (II) NO LITIGATION IS PENDING OR THREATENED AGAINST THE COMPANY OR ANY SUBSIDIARY IN WHICH THERE IS A REASONABLE PROBABILITY OF AN ADVERSE DECISION WHICH WOULD RESULT IN A MATERIAL ADVERSE EFFECT; AND (III) THERE HAS OCCURRED NO EVENT OR CIRCUMSTANCE THAT HAS RESULTED OR WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT SINCE DECEMBER 31, 2004; AND (E)           OTHER DOCUMENTS.  SUCH OTHER APPROVALS, OPINIONS, DOCUMENTS OR MATERIALS AS THE ADMINISTRATIVE AGENT OR ANY LENDER MAY REQUEST. ARTICLE VI REPRESENTATIONS AND WARRANTIES To induce the Lenders and the Administrative Agent to enter into this Agreement, the Company and each Guarantor represents and warrants to each such Person, (i) as of and after   44 --------------------------------------------------------------------------------   GIVING EFFECT TO THE MAKING OF THE LOANS AT THE EFFECTIVE TIME AND (II) AS OF THE RESTATEMENT EFFECTIVE TIME:                 6.1           Organization, Existence and Power.  Each of the Company and its Subsidiaries: (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (b) has the power and authority and all material governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Transaction Documents; (c) is duly qualified as a foreign corporation, limited partnership or limited liability company and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification or license, except where failure to do so would not reasonably be expected to have a Material Adverse Effect; and (d) is in compliance in all material respects with all Requirements of Law.                 6.2           Corporate Authorization; No Contravention.  The execution, delivery and performance by the Company and its Subsidiaries of this Agreement and each other Transaction Document to which such Person is a party have been duly authorized by all necessary organizational action, and do not and will not: (a) contravene the terms of any of that Person’s Organization Documents; (b) contravene the First Lien Credit Agreement; (c) contravene the Senior Notes Indenture; (d) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any material Contractual Obligation to which such Person is a party that would be prior to the Liens granted to the Collateral Trustee for the benefit of the Secured Parties or otherwise that would constitute a Material Adverse Effect, or any order, injunction, writ or decree of any Governmental Authority to which such Person or its material Property is subject; or (e) violate in any material respect any Requirement of Law.                 6.3           Governmental Authorization.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of this Agreement or any other Transaction Document to which it is a party, except for the filing of a Certificate of Merger with the Secretary of State of the State of Delaware with respect to the TexCal Acquisition; filings necessary to obtain and maintain perfection of Liens; routine filings related to the Company and the operation of its business; and such filings as may be necessary in connection with the Lenders’ exercise of remedies hereunder.                 6.4           Binding Effect.  This Agreement and each other Transaction Document to which the Company or such Subsidiary is a party constitute the legal, valid and binding obligations of the Company and any of its Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.                 6.5           Litigation.  Unless specifically disclosed in Schedule 6.5 attached hereto, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company or its Subsidiaries or any of their respective Properties which (i) purport to affect or pertain to this Agreement or any other Transaction   45 --------------------------------------------------------------------------------   Document, or any of the transactions contemplated hereby or thereby; or (ii) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Transaction Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.                 6.6           No Default.  No Default or Event of Default exists or would be reasonably expected to result from the incurring of any Obligations by the Company.  No “Default” or “Event of Default” (as those terms are defined in the First Lien Credit Agreement or the Senior Notes Indenture) exists under the First Lien Credit Agreement or the Senior Notes Indenture, respectively.  Neither the Company nor any Subsidiary is in default under or with respect to any other Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect.                 6.7           ERISA Compliance.  Except as specifically disclosed in Schedule 6.7: (A)           EACH PLAN IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH THE APPLICABLE PROVISIONS OF ERISA, THE CODE AND OTHER FEDERAL OR STATE LAW.  EACH PLAN THAT IS INTENDED TO BE QUALIFIED UNDER CODE SECTION 401(A) IS EITHER (I) A PROTOTYPE PLAN ENTITLED TO RELY ON THE OPINION LETTER ISSUED BY THE IRS AS TO THE QUALIFIED STATUS OF SUCH PLAN UNDER SECTION 401 OF THE CODE TO THE EXTENT PROVIDED IN REVENUE PROCEDURE 2005-16, OR (II) THE RECIPIENT OF A DETERMINATION LETTER FROM THE IRS TO THE EFFECT THAT SUCH PLAN IS QUALIFIED, AND THE PLANS AND TRUSTS RELATED THERETO ARE EXEMPT FROM FEDERAL INCOME TAXES UNDER SECTIONS 401(A) AND 501(A), RESPECTIVELY, OF THE CODE.  TO THE BEST KNOWLEDGE OF THE COMPANY, NOTHING HAS OCCURRED WHICH WOULD CAUSE THE LOSS OF SUCH QUALIFICATION.  THE COMPANY AND EACH ERISA AFFILIATE HAVE MADE ALL REQUIRED CONTRIBUTIONS TO ANY PLAN SUBJECT TO SECTION 412 OF THE CODE, AND NO APPLICATION FOR A FUNDING WAIVER OR AN EXTENSION OF ANY AMORTIZATION PERIOD PURSUANT TO SECTION 412 OF THE CODE HAS BEEN MADE WITH RESPECT TO ANY PLAN. (B)           THERE ARE NO PENDING OR, TO THE BEST KNOWLEDGE OF COMPANY, THREATENED CLAIMS, ACTIONS OR LAWSUITS, OR ACTION BY ANY GOVERNMENTAL AUTHORITY, WITH RESPECT TO ANY PLAN WHICH HAS RESULTED OR WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.  THERE HAS BEEN NO PROHIBITED TRANSACTION OR VIOLATION OF THE FIDUCIARY RESPONSIBILITY RULES WITH RESPECT TO ANY PLAN WHICH HAS RESULTED OR COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT. (C)           (I) NO ERISA EVENT HAS OCCURRED OR IS REASONABLY EXPECTED TO OCCUR; (II) NO PENSION PLAN HAS ANY UNFUNDED PENSION LIABILITY; (III) NEITHER THE COMPANY NOR ANY ERISA AFFILIATE HAS INCURRED, OR REASONABLY EXPECTS TO INCUR, ANY LIABILITY UNDER TITLE IV OF ERISA WITH RESPECT TO ANY PENSION PLAN (OTHER THAN PREMIUMS DUE AND NOT DELINQUENT UNDER SECTION 4007 OF ERISA);  (IV) NEITHER THE COMPANY NOR ANY ERISA AFFILIATE HAS INCURRED, OR REASONABLY EXPECTS TO INCUR, ANY LIABILITY (AND NO EVENT HAS OCCURRED WHICH, WITH THE GIVING OF NOTICE UNDER SECTION 4219 OF ERISA, WOULD RESULT IN SUCH LIABILITY) UNDER SECTION 4201 OR 4243 OF ERISA WITH RESPECT TO A MULTIEMPLOYER PLAN; AND (V) NEITHER THE COMPANY NOR ANY ERISA AFFILIATE HAS ENGAGED IN A TRANSACTION THAT COULD BE SUBJECT TO SECTION 4069 OR 4212(C) OF ERISA.   46 --------------------------------------------------------------------------------                   6.8           Use of Proceeds; Margin Regulations.  The proceeds of the Loans are or were used (as applicable) solely for the purposes set forth in and permitted by Section 7.13.  Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.                 6.9           Title to Properties.  The Company and each Subsidiary have good and marketable title to the Mortgaged Properties subject only to Permitted Liens, and, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, have good and marketable title to, or valid leasehold interests in, all other Property necessary or used in the ordinary conduct of their respective businesses.  The Mortgaged Properties of the Company and its Subsidiaries are subject to no Liens, other than Permitted Liens.                 6.10         Oil and Gas Reserves.  The Company and each Subsidiary is and will hereafter be, in all material respects, the owner of the Oil and Gas that it purports to own from time to time in and under its Oil and Gas Properties, together with the right to produce the same.  The Oil and Gas Properties are not subject to any Lien other than as set forth in the financial statements referred to in Section 6.14, as disclosed in such financial statements to the Lenders in writing prior to the Effective Time and Permitted Liens.  All Oil and Gas has been and will hereafter be produced, sold and delivered by the Company and its Subsidiaries in accordance in all material respects with all applicable laws and regulations of every Governmental Authority; each of the Company and its Subsidiaries has complied in all material respects (from the time of acquisition by the Company or a Subsidiary) and will hereafter use commercially reasonable efforts to comply with all material terms of each oil, gas and mineral lease comprising its Oil and Gas Properties; and all such material oil, gas and mineral leases under which the Company or a Subsidiary is a lessee or co-lessee have been and will hereafter be maintained in full force and effect; provided, however, that nothing in this Section 6.10 shall prevent the Company or its Subsidiaries from abandoning any well or forfeiting, surrendering or releasing any lease in the ordinary course of business which is not materially disadvantageous in any way to the Lenders and which, in the opinion of the Company or its Subsidiaries, is in its best interest, and following which the Company and its Subsidiaries are and will hereafter be in compliance with all obligations hereunder and the other Loan Documents.  To the best of the knowledge of the Company and its Subsidiaries, all of the Hydrocarbon Interests comprising its Oil and Gas Properties are and will hereafter be enforceable in all material respects in accordance with their terms, except as such may be modified by applicable bankruptcy law or an order of a court in equity.                 6.11         Reserve Report.  The Company has heretofore delivered to the Administrative Agent a true and complete copy of (x) a report, dated effective as of January 1, 2006, prepared by Netherland Sewell & Associates, Inc.  (the “Initial Reserve Report”) covering certain of the Company’s Oil and Gas Properties located in or offshore California relating to an evaluation of the Oil and Gas attributable to certain of the Mortgaged Properties described therein and (y) a report, dated as of December 31, 2005, as amended through the Restatement Effective Date, prepared by DeGolyer and MacNaughton covering certain Oil and Gas Properties of the TexCal Subsidiaries (the “TexCal Reserve Report”).  To the best knowledge of the Company, (i) the assumptions stated or used in the preparation of any Reserve Report are reasonable, (ii) all information furnished by the Company or any Guarantor to the Independent Engineer for use in   47 --------------------------------------------------------------------------------   the preparation of any Reserve Report was accurate in all material respects, (iii) there has been no material adverse change in the amount of the estimated Oil and Gas reserves shown in any Reserve Report since the date thereof, except for changes which have occurred as a result of production in the ordinary course of business, and (iv) each Reserve Report does not, in any case, omit any material statement or information necessary to cause the same not to be misleading to the Lenders.                 6.12         Gas Imbalances.  Except as disclosed to the Lenders in writing prior to the Effective Time, there are no gas imbalances, take or pay or other prepayments with respect to any of the Oil and Gas Properties in excess of $400,000 in the aggregate which would require the Company or its Subsidiaries to deliver Oil and Gas produced from any of the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor.                 6.13         Taxes.  The Company and its Subsidiaries have filed all federal Tax returns and reports required to be filed, and have paid all federal Taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP.  The Company and its Subsidiaries have filed all state and other non-federal Tax returns and reports required to be filed, and have paid all state and other non-federal Taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets prior to delinquency thereof, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP.  To the Company’s knowledge, there is no proposed Tax assessment against the Company or any Subsidiary that would, if made, reasonably be expected to have a Material Adverse Effect.                 6.14         Financial Statements and Condition. (A)           THE AUDITED FINANCIAL STATEMENTS, THE COMPANY’S AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2005 AND THE TEXCAL AUDITED FINANCIAL STATEMENTS (I) WERE PREPARED IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED THROUGHOUT THE PERIODS COVERED THEREBY, EXCEPT AS OTHERWISE EXPRESSLY NOTED THEREIN; (II) FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL CONDITION OF THE COMPANY AND ITS SUBSIDIARIES OR THE TEXCAL SUBSIDIARIES, AS THE CASE MAY BE, AS OF THE DATES THEREOF AND RESULTS OF OPERATIONS FOR THE PERIODS COVERED THEREBY; AND (III) EXCEPT AS SPECIFICALLY DISCLOSED IN SCHEDULE 6.14(A) OR (A) IN THE CASE OF THE COMPANY AND ITS SUBSIDIARIES, IN THE AUDITED FINANCIAL STATEMENTS OR THE COMPANY’S AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2005 AND (B) IN THE CASE OF THE TEXCAL SUBSIDIARIES, THE TEXCAL AUDITED FINANCIAL STATEMENTS, NEITHER THE COMPANY AND ITS SUBSIDIARIES, ON THE ONE HAND, NOR THE TEXCAL SUBSIDIARIES, ON THE OTHER HAND, RESPECTIVELY, HAVE ANY MATERIAL INDEBTEDNESS OR OTHER MATERIAL LIABILITIES, DIRECT OR CONTINGENT, AS OF THE EFFECTIVE DATE, INCLUDING LIABILITIES FOR TAXES, MATERIAL COMMITMENTS OR CONTINGENT OBLIGATIONS. (B)           THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES AS OF DECEMBER 31, 2005, AND THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS OF THE COMPANY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS   48 --------------------------------------------------------------------------------   FOR THE YEAR ENDED DECEMBER 31, 2005 (INCLUDING THE NOTES THERETO) (COLLECTIVELY, THE “PRO FORMA FINANCIAL STATEMENTS”), COPIES OF WHICH HAVE HERETOFORE BEEN FURNISHED TO EACH LENDER, HAS BEEN PREPARED GIVING EFFECT (AS IF SUCH EVENTS HAD OCCURRED ON SUCH DATE OR THE BEGINNING OF SUCH PERIOD) TO (I) THE TEXCAL ACQUISITION, (II) THE EXTENSIONS OF CREDIT TO BE MADE UNDER THIS AGREEMENT AND THE FIRST LIEN CREDIT AGREEMENT PRIOR TO OR IN CONNECTION WITH THE TEXCAL ACQUISITION AND (III) THE PAYMENT OF FEES AND EXPENSES IN CONNECTION WITH THE FOREGOING.  THE PRO FORMA FINANCIAL STATEMENTS HAVE BEEN PREPARED BASED ON ASSUMPTIONS THAT THE COMPANY BELIEVES ARE REASONABLE AS OF THE EFFECTIVE TIME, AND PRESENT FAIRLY ON A PRO FORMA BASIS THE ESTIMATED FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS AS AT DECEMBER 31, 2005 AND FOR THE YEAR THEN ENDED, ASSUMING THAT THE EVENTS SPECIFIED IN THE PRECEDING SENTENCE HAD ACTUALLY OCCURRED AT SUCH DATE OR AT THE BEGINNING OF SUCH PERIOD. (C)           DURING THE PERIOD FROM DECEMBER 31, 2005 TO AND INCLUDING THE RESTATEMENT EFFECTIVE DATE THERE HAS BEEN NO DISPOSITION BY THE COMPANY OR ANY SUBSIDIARIES OF ANY MATERIAL PART OF ITS BUSINESS OR PROPERTY, OTHER THAN (I) THE DIVIDEND OF THE MEMBERSHIP INTERESTS IN 6267 CARPINTERIA AVENUE, LLC AND (II) DISPOSITIONS PERMITTED BY SECTION 8.2(A), (B), (C), (D) OR (E). (D)           SINCE DECEMBER 31, 2004 THROUGH THE EFFECTIVE TIME OR THE RESTATEMENT EFFECTIVE TIME (AS APPLICABLE), THERE HAS BEEN NO MATERIAL ADVERSE EFFECT.                 6.15         Environmental Matters.  Each of the Company and its Subsidiaries conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and Properties, and such Properties which it is acquiring or planning to acquire and as a result thereof the Company has reasonably concluded that, unless specifically disclosed in Schedule 6.15, such Environmental Laws and Environmental Claims would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.                 6.16         Regulated Entities.  None of the Company, its Subsidiaries, any Person controlling the Company, or any Subsidiary, is an “investment company” within the meaning of the Investment Company Act of 1940.  None of the Company, any Person controlling the Company or any Subsidiary, is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other federal or state statute or regulation limiting its ability to incur Indebtedness.                 6.17         No Burdensome Restrictions.  Except as set forth on Schedule 6.17, neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which would reasonably be expected to have a Material Adverse Effect.                 6.18         Copyrights, Patents, Trademarks and Licenses, etc.  The Company and each Subsidiary own or are licensed or otherwise have the right to use all of the material patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without material conflict with the rights of any other Person.  To the best knowledge of the Company, no   49 --------------------------------------------------------------------------------   slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any rights held by any other Person.  Except as specifically disclosed in Schedule 6.5, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Company, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect.                 6.19         Subsidiaries.  As of the Effective Time and, after giving effect to the TexCal Acquisition as of the TexCal Closing Time and as of the Restatement Effective Time, the Company has no Subsidiary other than those specifically disclosed in part (a) of Schedule 6.19 hereto (and, with respect to the TexCal Closing Time and the Restatement Effective Time, those specified in Schedule 1.1(c) hereto) and has no material equity investments in any other Person other than those specifically disclosed in part (b) of Schedule 6.19.                 6.20         Insurance.  The Properties of the Company and each Subsidiary are insured with financially sound and reputable insurance companies that are not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where the Company or such Subsidiary operates.  Such insurance is primary and not contributing.                 6.21         Full Disclosure.  None of the representations or warranties made by the Company or any Subsidiary 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, written statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents, taken as whole, contains any untrue statement of a material fact known to the Company or omits any material fact known to the Company required to be stated therein or 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.                 6.22         Solvency.  The Company and its Subsidiaries, taken as a whole are, and the Company, individually, and each Guarantor, and after giving effect to (a) the TexCal Acquisition and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith, and (b) all rights of contribution of such Person against other Loan Parties under the Guaranty, at law, in equity or otherwise, will be and will continue to be, Solvent.                 6.23         Labor Matters.  Except to the extent such matters do not to constitute a Material Adverse Effect, (a) no actual or threatened strikes, labor disputes, slowdowns, walkouts, work stoppages, or other concerted interruptions of operations that involve any employees employed at any time in connection with the business activities or operations at the Property of the Company or any Subsidiary exist, (b) hours worked by and payment made to the employees of the Company have not been in violation of the Fair Labor Standards Act or any other applicable laws pertaining to labor matters, (c) all payments due from the Company or any Subsidiary for employee health and welfare insurance, including, without limitation, workers compensation insurance, have been paid or accrued as a liability on its books, and (d) except as set forth in Item 3 of Schedule 6.5, the business activities and operations of the Company and each Subsidiary are in compliance with the Occupational Safety and Health Act and other applicable health and   50 --------------------------------------------------------------------------------   SAFETY LAWS.                 6.24         Downstream Contracts.  The Company’s marketing, gathering, transportation, processing and treating facilities and equipment, together with any marketing, gathering, transportation, processing and treating contracts in effect among, inter alia, Company and any other Person, are, except as set forth on Schedule 6.24, sufficient to market, gather, transport, process or treat, as applicable, reasonably anticipated volumes of production of Oil and Gas from the Company’s Oil and Gas Properties.  Any such contracts with Affiliates are disclosed on Schedule 6.24 hereto.                 6.25         Derivative Contracts.  Neither the Company nor any Subsidiary is party to any Derivative Contract other than (a) as of the Effective Time, the Existing Derivative Contracts or (b) after the Effective Time, Derivative Contracts permitted by Sections 7.15 or 8.10.                 6.26         Ellwood Subsidiary.  Ellwood (a) has not engaged in any business other than the ownership and operation of common carrier crude oil pipelines and (b) as a result of Requirements of Law in effect as of the Effective Date and as of the Restatement Effective Time, is prevented from duly executing and delivering to the Administrative Agent and the Lenders a Guaranty (or a joinder thereto) or the Security Agreement (or a joinder thereto).                 6.27         Senior Notes Indenture.  The Obligations incurred in connection with the Loan Documents, after giving effect to the transactions and extensions of credit contemplated hereby, including the TexCal Acquisition, (a) constitute “Senior Debt”, as defined in the Senior Notes Indenture and (b) constitutes Indebtedness (as defined in the Senior Notes Indenture) that is permitted to be incurred under the Indenture pursuant to Section 3.3(a) of the Senior Notes Indenture.  The Senior Notes and the Senior Note Subsidiary Guarantees are secured by the Liens granted under the Security Documents on an “equal and ratable” basis with the Liens securing the Obligations.                 6.28         Existing Indebtedness.  Other than Permitted Indebtedness, after giving effect to the transactions contemplated hereby, including the TexCal Acquisition, no Loan Party has any Indebtedness or Disqualified Stock outstanding.                 6.29         TexCal Acquisition Documents.  The TexCal Acquisition Documents listed on Schedule 6.29 constitute all of the material agreements, instruments and undertakings with TexCal Energy or its Affiliates to which the Company or any of its Subsidiaries is bound or by which such Person or any of its property or assets is bound or affected relating to the TexCal Acquisition (other than agreements, instruments or undertakings of TexCal and its Subsidiaries existing prior to the completion of the TexCal Acquisition).                 6.30         Security Documents. (A)           THE SECURITY AGREEMENT IS EFFECTIVE TO CREATE IN FAVOR OF THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, A LEGAL, VALID, BINDING AND ENFORCEABLE SECURITY INTEREST IN THE COLLATERAL DESCRIBED THEREIN AND PROCEEDS AND PRODUCTS THEREOF.  IN THE CASE OF THE PLEDGED STOCK DESCRIBED IN THE SECURITY AGREEMENT, WHEN ANY STOCK CERTIFICATES REPRESENTING SUCH PLEDGED STOCK ARE DELIVERED TO THE FIRST LIEN CREDIT AGENT, AS AGENT AND BAILEE FOR THE COLLATERAL TRUSTEE, AND IN THE CASE OF THE OTHER COLLATERAL DESCRIBED IN THE SECURITY AGREEMENT,   51 --------------------------------------------------------------------------------   WHEN FINANCING STATEMENTS IN APPROPRIATE FORM ARE FILED IN THE OFFICES SPECIFIED ON SCHEDULE 6.30(A)-1 (WHICH FINANCING STATEMENTS MAY BE FILED BY THE COLLATERAL TRUSTEE) AT ANY TIME AND SUCH OTHER FILINGS AS ARE SPECIFIED ON SCHEDULE 3 TO THE SECURITY AGREEMENT HAVE BEEN COMPLETED (ALL OF WHICH FILINGS MAY BE FILED BY THE COLLATERAL TRUSTEE) AT ANY TIME, THE SECURITY AGREEMENT SHALL CONSTITUTE A FULLY PERFECTED LIEN ON, AND SECURITY INTEREST IN, ALL RIGHT, TITLE AND INTEREST OF THE LOAN PARTIES IN SUCH COLLATERAL AND THE PROCEEDS AND PRODUCTS THEREOF, AS SECURITY FOR THE SHARING OBLIGATIONS, IN EACH CASE PRIOR AND SUPERIOR IN RIGHT TO ANY OTHER PERSON (EXCEPT PERMITTED LIENS).  SCHEDULE 6.30(A)-2 LISTS EACH UCC FINANCING STATEMENT THAT (I) NAMES ANY LOAN PARTY AS DEBTOR AND (II) REMAINS ON FILE AT THE RESTATEMENT EFFECTIVE TIME.  SCHEDULE 6.30(A)-3 LISTS EACH UCC FINANCING STATEMENT THAT (I) NAMES ANY LOAN PARTY AS DEBTOR AND (II) WAS TERMINATED AT OR PROMPTLY AFTER THE EFFECTIVE TIME OR THE TEXCAL CLOSING TIME (AS APPLICABLE). (B)           EACH OF THE MORTGAGES IS EFFECTIVE TO CREATE IN FAVOR OF THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, A LEGAL, VALID, BINDING AND ENFORCEABLE LIEN ON THE MORTGAGED PROPERTIES DESCRIBED THEREIN AND PROCEEDS AND PRODUCTS THEREOF; AND WHEN THE MORTGAGES ARE FILED IN THE OFFICES SPECIFIED ON SCHEDULE 6.30(B) (IN THE CASE OF MORTGAGES TO BE EXECUTED AND DELIVERED ON THE EFFECTIVE DATE OR THE TEXCAL CLOSING TIME (AS APPLICABLE)) OR IN THE RECORDING OFFICE DESIGNATED BY THE COMPANY (IN THE CASE OF ANY MORTGAGE TO BE EXECUTED AND DELIVERED PURSUANT TO SECTION 7.14(B)), EACH MORTGAGE SHALL CONSTITUTE A FULLY PERFECTED LIEN ON, AND SECURITY INTEREST IN, ALL RIGHT, TITLE AND INTEREST OF THE LOAN PARTIES IN THE MORTGAGED PROPERTIES DESCRIBED THEREIN AND THE PROCEEDS AND PRODUCTS THEREOF, AS SECURITY FOR THE SHARING OBLIGATIONS, IN EACH CASE PRIOR AND SUPERIOR IN RIGHT TO ANY OTHER PERSON (OTHER THAN PERSONS HOLDING LIENS OR OTHER ENCUMBRANCES OR RIGHTS PERMITTED BY THE RELEVANT MORTGAGE). ARTICLE VII AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied:                 7.1           Financial Statements.  The Company and each Guarantor shall, and shall cause each of its Subsidiaries to, (i) maintain for itself and each of its respective Subsidiaries, on a consolidated basis a system of accounting established and administered in accordance with GAAP and (ii) deliver to the Administrative Agent who will make available to each Lender: (A)           AS SOON AS AVAILABLE, NOT LATER THAN 90 DAYS AFTER THE END OF EACH FISCAL YEAR, A COPY OF THE ANNUAL AUDITED CONSOLIDATED BALANCE SHEET OF THE COMPANY AND ITS SUBSIDIARIES AS AT THE END OF SUCH YEAR, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS, COMPREHENSIVE INCOME AND CASH FLOWS FOR SUCH YEAR, SETTING FORTH IN EACH CASE IN COMPARATIVE FORM THE FIGURES FOR THE PREVIOUS FISCAL YEAR; THE COMPANY’S FINANCIAL STATEMENTS SHALL BE ACCOMPANIED BY THE UNQUALIFIED OPINION (OR, IF QUALIFIED, OF A NON-MATERIAL NATURE (E.G. FASB CHANGES OF ACCOUNTING PRINCIPLES) OR NOTHING INDICATIVE OF GOING CONCERN OR MATERIAL MISREPRESENTATION NATURE) AND A COPY OF THE MANAGEMENT LETTER OF DELOITTE & TOUCHE LLP OR OTHER NATIONALLY RECOGNIZED INDEPENDENT PUBLIC ACCOUNTING FIRM ACCEPTABLE TO THE ADMINISTRATIVE AGENT (THE “INDEPENDENT AUDITOR”), WHICH REPORT SHALL STATE THAT SUCH CONSOLIDATED FINANCIAL   52 --------------------------------------------------------------------------------   STATEMENTS PRESENT FAIRLY IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND ITS SUBSIDIARIES AT THE END OF SUCH PERIODS AND THE RESULTS OF THEIR OPERATIONS AND THEIR CASH FLOWS FOR THE PERIODS INDICATED IN CONFORMITY WITH GAAP; AND (B)           AS SOON AS AVAILABLE, BUT NOT LATER THAN 60 DAYS AFTER THE CLOSE OF EACH OF THE FIRST THREE QUARTERLY PERIODS, A COPY OF THE UNAUDITED CONSOLIDATED BALANCE SHEET OF THE COMPANY AS OF THE END OF SUCH QUARTER AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS, COMPREHENSIVE INCOME AND CASH FLOWS FOR THE PERIOD COMMENCING ON THE FIRST DAY AND ENDING ON THE LAST DAY OF SUCH PERIOD, SETTING FORTH IN EACH CASE IN COMPREHENSIVE FORM THE FIGURES FOR THE COMPARABLE PERIOD IN THE PREVIOUS FISCAL YEAR AND CERTIFIED BY A RESPONSIBLE OFFICER AS FAIRLY PRESENTING IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH GAAP (SUBJECT TO NORMAL AND RECURRING YEAR-END AUDIT ADJUSTMENTS), THE CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND ITS SUBSIDIARIES AT THE END OF SUCH PERIODS AND THE RESULTS OF THEIR OPERATIONS AND THEIR CASH FLOWS.                 7.2           Certificates; Other Production and Reserve Information.  The Company shall furnish to the Administrative Agent, who will make available to each Lender: (A)           AS SOON AS AVAILABLE, BUT NOT LATER THAN 60 DAYS AFTER THE CLOSE OF EACH QUARTER, A QUARTERLY STATUS REPORT IN A FORM REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT, AS OF THE LAST DAY OF THE IMMEDIATELY PRECEDING QUARTER; (B)           CONCURRENTLY WITH THE DELIVERY OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTIONS 7.1(A) AND (B), AND THE REPORTS REFERRED TO IN SECTION 7.2(A), A COMPLIANCE CERTIFICATE EXECUTED BY A RESPONSIBLE OFFICER; (C)           ON OR BEFORE (I) APRIL 1, EFFECTIVE AS OF JANUARY 1, OF EACH YEAR DURING THE TERM OF THIS AGREEMENT, A RESERVE REPORT PREPARED BY RYDER SCOTT CO. L.P., NETHERLAND SEWELL & ASSOCIATES, INC., DEGOLYER AND MACNAUGHTON OR OTHER INDEPENDENT PETROLEUM ENGINEER ACCEPTABLE TO THE ADMINISTRATIVE AGENT (THE “INDEPENDENT ENGINEER”) AND (II) OCTOBER 1, EFFECTIVE AS OF JULY 1, OF EACH YEAR DURING THE TERM OF THIS AGREEMENT, A RESERVE REPORT PREPARED BY THE COMPANY IN SUBSTANTIALLY THE SAME FORM AS THE JANUARY 1 RESERVE REPORT AND CERTIFIED BY A RESPONSIBLE OFFICER AS TRUE AND CORRECT IN ALL MATERIAL RESPECTS, IN EACH CASE IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT; (D)           PROMPTLY UPON THE REQUEST OF THE ADMINISTRATIVE AGENT, AT THE REQUEST OF ANY LENDER, SUCH COPIES OF ALL GEOLOGICAL, ENGINEERING AND RELATED DATA CONTAINED IN THE COMPANY’S FILES OR READILY ACCESSIBLE TO THE COMPANY RELATING TO ITS AND ITS SUBSIDIARIES’ OIL AND GAS PROPERTIES AS MAY REASONABLY BE REQUESTED; (E)           ON REQUEST BY THE ADMINISTRATIVE AGENT, BASED UPON THE ADMINISTRATIVE AGENT’S OR THE REQUIRED LENDERS’ GOOD FAITH BELIEF THAT THE COMPANY’S OR ITS SUBSIDIARIES’ TITLE TO THE MORTGAGED PROPERTIES OR THE ADMINISTRATIVE AGENT’S LIEN THEREON IS SUBJECT TO CLAIMS OF THIRD PARTIES, OR IF REQUIRED BY REGULATIONS TO WHICH THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS IS SUBJECT, TITLE AND MORTGAGE LIEN EVIDENCE SATISFACTORY TO THE ADMINISTRATIVE AGENT COVERING SUCH MORTGAGED PROPERTY AS MAY BE DESIGNATED BY THE ADMINISTRATIVE AGENT, COVERING THE COMPANY’S OR ITS SUBSIDIARIES’ TITLE THERETO AND EVIDENCING THAT THE OBLIGATIONS ARE SECURED BY LIENS AND   53 --------------------------------------------------------------------------------   SECURITY INTERESTS AS PROVIDED IN THIS AGREEMENT AND THE SECURITY DOCUMENTS; (F)            PROMPTLY UPON ITS COMPLETION IN EACH FISCAL YEAR OF THE COMPANY COMMENCING WITH THE 2006 FISCAL YEAR THROUGH AND INCLUDING THE 2011 FISCAL YEAR, AND NOT LATER THAN JANUARY 30 OF EACH SUCH FISCAL YEAR, A COPY OF THE ANNUAL BUDGET OF THE COMPANY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS FOR SUCH FISCAL YEAR, PROJECTING TOTAL OIL AND GAS REVENUE, TOTAL REVENUE, TOTAL OPERATING COSTS AND EXPENSES, CONSOLIDATED NET INCOME, CONSOLIDATED INTEREST EXPENSE, CONSOLIDATED EBITDA AND TOTAL CAPITAL EXPENDITURES, BY FISCAL QUARTER; (G)           SIMULTANEOUSLY WITH TRANSMISSION THEREOF, SUCH NOTICES, CERTIFICATES, DOCUMENTS AND INFORMATION (OTHER THAN INTEREST RATE ELECTIONS RELATING TO THE SELECTION OF THE LIBO RATE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT) AND ROUTINE CORRESPONDENCE AND OTHER COMMUNICATIONS) AS ANY LOAN PARTY MAY FURNISH THE INDENTURE TRUSTEE OR ANY HOLDERS OF SENIOR NOTES, THE FIRST LIEN CREDIT AGENT OR ANY FIRST LIEN CREDIT LENDER; (H)           NO LATER THAN TEN BUSINESS DAYS PRIOR TO THE EFFECTIVENESS THEREOF, COPIES OF SUBSTANTIALLY FINAL DRAFTS OF ANY PROPOSED AMENDMENT, SUPPLEMENT, WAIVER OR OTHER MODIFICATION IN RESPECT OF ANY FIRST LIEN CREDIT DOCUMENT OR SENIOR NOTE DEBT DOCUMENT, OR ANY AGREEMENTS, INSTRUMENTS OR OTHER DOCUMENTS IN RESPECT OF THE TERMINATION, REPLACEMENT OR REFINANCING THEREOF; AND (I)            PROMPTLY, SUCH ADDITIONAL INFORMATION REGARDING THE BUSINESS, FINANCIAL OR CORPORATE AFFAIRS OF THE COMPANY OR ANY SUBSIDIARY AS THE ADMINISTRATIVE AGENT, AT THE REQUEST OF ANY LENDER, MAY FROM TIME TO TIME REASONABLY REQUEST.                 7.3           Notices.  The Company shall promptly notify the Administrative Agent and each Lender in writing: (A)           OF THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT, AND OF THE OCCURRENCE OR EXISTENCE OF ANY EVENT OR CIRCUMSTANCE THAT WOULD REASONABLY BE EXPECTED TO BECOME A DEFAULT OR EVENT OF DEFAULT; (B)           OF ANY MATTER THAT HAS RESULTED OR MAY REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, INCLUDING (I) MATERIAL BREACH OR NON PERFORMANCE OF, OR ANY DEFAULT UNDER, A CONTRACTUAL OBLIGATION OF THE COMPANY OR ANY SUBSIDIARY OR ANY ALLEGATION THEREOF; (II) ANY MATERIAL DISPUTE, LITIGATION, INVESTIGATION, PROCEEDING OR SUSPENSION BETWEEN THE COMPANY OR ANY SUBSIDIARY AND ANY GOVERNMENTAL AUTHORITY; OR (III) THE COMMENCEMENT OF, OR ANY MATERIAL DEVELOPMENT IN, ANY MATERIAL LITIGATION OR PROCEEDING AFFECTING THE COMPANY OR ANY SUBSIDIARY, INCLUDING PURSUANT TO ANY APPLICABLE ENVIRONMENTAL LAWS; (C)           OF ANY MATERIAL CHANGE IN ACCOUNTING POLICIES OR FINANCIAL REPORTING PRACTICES BY THE COMPANY OR ANY OF ITS CONSOLIDATED SUBSIDIARIES; (D)           OF THE FORMATION OR ACQUISITION OF ANY SUBSIDIARY; (E)           OF ANY NEW PLUGGING BOND OR PERFORMANCE BOND ISSUED FOR THE ACCOUNT OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IF THE UNINSURED PORTION OF THE OBLIGATION UNDERLYING SUCH BOND IS GREATER THAN OR EQUAL TO $6,000,000; AND   54 --------------------------------------------------------------------------------   (F)            ANY PROPOSED AMENDMENT, SUPPLEMENT, WAIVER OR OTHER MODIFICATION TO, OR IN RESPECT OF, OR THE PROPOSED TERMINATION, REPLACEMENT OR REFINANCING OF, ANY OF THE FIRST LIEN CREDIT DOCUMENTS OR SENIOR NOTE DEBT DOCUMENTS. Each notice under this Section 7.3 shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time.  Each notice under Section 7.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated.                 7.4           Preservation of Company Existence, Etc.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to: (A)           PRESERVE AND MAINTAIN IN FULL FORCE AND EFFECT ITS LEGAL EXISTENCE, AND MAINTAIN ITS GOOD STANDING UNDER THE LAWS OF ITS STATE OR JURISDICTION OF FORMATION EXCEPT WHERE THE FAILURE TO DO SO WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; (B)           PRESERVE AND MAINTAIN IN FULL FORCE AND EFFECT ALL GOVERNMENTAL RIGHTS, PRIVILEGES, QUALIFICATIONS, PERMITS, LICENSES AND FRANCHISES NECESSARY OR DESIRABLE IN THE NORMAL CONDUCT OF ITS BUSINESS EXCEPT WHERE THE FAILURE TO DO SO WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; (C)           USE REASONABLE EFFORTS, IN THE ORDINARY COURSE OF BUSINESS, TO PRESERVE ITS BUSINESS ORGANIZATION AND GOODWILL EXCEPT WHERE THE FAILURE TO DO SO WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; AND (D)           PRESERVE OR RENEW ALL OF ITS REGISTERED PATENTS, TRADEMARKS, TRADE NAMES AND SERVICE MARKS, THE NON PRESERVATION OF WHICH WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.                 7.5           Maintenance of Property.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, maintain and preserve all its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and to use the standard of care typical in the industry in the operation and maintenance of its facilities except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Section 7.5 shall prevent the Company or any of its Subsidiaries from abandoning any well or forfeiting, surrendering or releasing any lease in the ordinary course of business which is not materially disadvantageous in any way to the Lenders and which, in its opinion, is in the best interest of the Company, and following which the Company and each of its Subsidiaries is and will hereafter be in compliance with all obligations hereunder and the other Loan Documents.                 7.6           Insurance.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, maintain, with financially sound and reputable independent insurers, insurance with respect to its Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other   55 --------------------------------------------------------------------------------   Persons except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.  Such insurance will be primary and not contributing.                 7.7           Payment of Obligations.  Unless being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary, the Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, pay and discharge prior to delinquency, all their respective obligations and liabilities, including: (a) all Tax liabilities, assessments and governmental charges or levies upon it or its Properties or assets; (b) all lawful claims which, if unpaid, would by law become a Lien upon its Property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.                 7.8           Compliance with Laws.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), including with respect to the transactions contemplated by the TexCal Acquisition, except (a) such as may be contested in good faith or as to which a bona fide dispute may exist or (b) where the failure to do so would not reasonably be expected to have a Material Adverse Effect.                 7.9           Compliance with ERISA.  The Company and each Guarantor shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code.                 7.10         Inspection of Property and Books and Records.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiaries.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, permit representatives and independent contractors of the Administrative Agent or any Lender to visit and inspect any of their respective Properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective managers, directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Administrative Agent or any Lender may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice.                 7.11         Environmental Laws.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, conduct its respective operations and keep and maintain   56 --------------------------------------------------------------------------------   their respective Properties in compliance with all Environmental Laws, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.                 7.12         New Subsidiary Guarantors.  If, at any time after the Effective Date, there exists any Subsidiary with total assets with a book value of $100,000 or more, then the Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, on the date any such Subsidiary is acquired or acquires or otherwise becomes possessed of such amount of total assets, (a) cause each such Subsidiary (excluding Ellwood) to execute and deliver the Guaranty (or a joinder thereto) to the Administrative Agent and the Security Agreement to the Collateral Trustee, (b) pledge to the Collateral Trustee for the benefit of the Secured Parties all of the outstanding Capital Stock thereof pursuant to a Security Document satisfactory to the Administrative Agent, to be held by the First Lien Credit Agent on behalf of itself, for the benefit of the First Lien Secured Parties, and the Collateral Trustee, for the benefit of the Secured Parties, and (c) cause such Subsidiary to execute and deliver such Security Documents as may be required pursuant to Sections 4.2, 4.5(a) or 7.14(b).  Upon the execution and delivery by any Subsidiary of a Guaranty, such Subsidiary shall automatically and immediately, and without any further action on the part of any Person, (i) become a Guarantor for all purposes of this Agreement and (ii) be deemed to have made the representations and warranties, as applied to and including such new Subsidiary from and after such time, set forth in this Agreement.                 7.13         Use of Proceeds.  The Company and each Guarantor shall, and shall cause each of its respective Subsidiaries to, use, or cause to be used, the proceeds of the Loans only for the following purposes: (i) at the TexCal Closing Time, together with approximately $160,000,000 in proceeds of the First Lien Loans, to pay the Closing Date Merger Consideration (as defined in the TexCal Acquisition Agreement) for the TexCal Acquisition (other than fees and expenses described in (ii) below) in an aggregate amount not to exceed $485,000,000; (ii) to pay fees and expenses incurred in connection with the TexCal Acquisition; (iii) to fund the acquisition, exploration and development of Hydrocarbon Interests; (iv) the acquisition of the real Property described in Section 8.2(h) for a cash purchase price not to exceed $300,000; and (v) for working capital and other general corporate purposes.                 7.14         Further Assurances. (A)           THE COMPANY AND EACH GUARANTOR SHALL, AND SHALL CAUSE EACH OF ITS RESPECTIVE SUBSIDIARIES TO, PROMPTLY (AND IN NO EVENT LATER THAN TWENTY (20) DAYS AFTER BECOMING AWARE OF THE NEED THEREFOR) CURE ANY DEFECTS IN THE CREATION AND ISSUANCE OF THE NOTES AND THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE SECURITY DOCUMENTS OR ANY OTHER INSTRUMENTS REFERRED TO OR MENTIONED HEREIN OR THEREIN.  THE COMPANY AND EACH GUARANTOR SHALL, AND SHALL CAUSE EACH OF ITS RESPECTIVE SUBSIDIARIES TO, AT THE COMPANY’S EXPENSE, PROMPTLY (AND IN NO EVENT LATER THAN TWENTY (20) DAYS AFTER BECOMING AWARE OF THE NEED THEREFOR) DO ALL ACTS AND THINGS, AND WILL EXECUTE AND FILE OR RECORD, ALL INSTRUMENTS REASONABLY REQUESTED BY THE ADMINISTRATIVE AGENT, TO ESTABLISH, PERFECT, MAINTAIN AND CONTINUE THE PERFECTED SECURITY INTEREST OF THE LENDERS IN OR THE LIEN OF THE LENDERS ON THE MORTGAGED PROPERTIES. (B)           THE COMPANY SHALL PROMPTLY (AND IN NO EVENT LATER THAN TEN (10) BUSINESS DAYS AFTER THE NEED ARISES) EXECUTE AND CAUSE ITS SUBSIDIARIES THAT ARE GUARANTORS TO EXECUTE SUCH ADDITIONAL SECURITY DOCUMENTS IN FORM AND SUBSTANCE SATISFACTORY TO ADMINISTRATIVE AGENT,   57 --------------------------------------------------------------------------------   GRANTING TO THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, FULLY PERFECTED LIENS ON OIL AND GAS PROPERTIES THAT ARE NOT THEN PART OF THE MORTGAGED PROPERTIES, SUBJECT ONLY TO THE LIENS SECURING THE COLLATERAL IN RESPECT OF THE FIRST LIEN CREDIT DOCUMENTS (THE “FIRST LIENS”) AND OTHER PERMITTED LIENS, SUFFICIENT TO CAUSE THE MORTGAGED PROPERTIES TO INCLUDE AT ALL TIMES EIGHTY-FIVE PERCENT (85%) OF THE NET PRESENT VALUE OF THE PROVED RESERVES AND AT LEAST NINETY-FIVE PERCENT (95%) OF THE NET PRESENT VALUE OF THE PROVED DEVELOPED PRODUCING RESERVES, IN EACH CASE AS SET FORTH IN THE MOST RECENT RESERVE REPORT.  IN ADDITION, THE COMPANY AND EACH GUARANTOR SHALL, AND SHALL CAUSE EACH OF ITS RESPECTIVE SUBSIDIARIES TO, FURNISH TO THE ADMINISTRATIVE AGENT TITLE DUE DILIGENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT AND WILL FURNISH ALL OTHER DOCUMENTS AND INFORMATION RELATING TO SUCH MORTGAGED PROPERTIES AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST.  THE COMPANY SHALL PAY THE COSTS AND EXPENSES OF ALL FILINGS AND RECORDINGS AND ALL SEARCHES DEEMED NECESSARY BY THE ADMINISTRATIVE AGENT TO ESTABLISH AND DETERMINE THE VALIDITY AND THE PRIORITY OF THE LIENS CREATED OR INTENDED TO BE CREATED BY THE SECURITY DOCUMENTS; AND THE COMPANY AND EACH GUARANTOR SHALL, AND SHALL CAUSE EACH OF ITS RESPECTIVE SUBSIDIARIES TO, SATISFY ALL OTHER CLAIMS AND CHARGES WHICH IN THE REASONABLE OPINION OF THE ADMINISTRATIVE AGENT MIGHT PREJUDICE, IMPAIR OR OTHERWISE AFFECT ANY OF THE MORTGAGED PROPERTIES OR THE LIEN THEREON OF THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES. (C)           WITH RESPECT TO ANY PROPERTY ACQUIRED AFTER THE EFFECTIVE DATE BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AS TO WHICH THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, DOES NOT OTHERWISE HAVE FULLY PERFECTED LIENS SUBJECT ONLY TO THE FIRST LIENS, PROMPTLY (AND IN NO EVENT LATER THAN TWENTY (20) DAYS AFTER BECOMING AWARE OF THE NEED THEREFOR) TAKE ALL ACTIONS NECESSARY OR ADVISABLE TO GRANT TO THE COLLATERAL TRUSTEE, FOR THE BENEFIT OF THE SECURED PARTIES, FULLY PERFECTED SECURITY INTEREST SUBJECT ONLY TO THE FIRST LIENS AND OTHER PERMITTED LIENS IN SUCH PROPERTY, INCLUDING WITHOUT LIMITATION, THE FILING OF UCC FINANCING STATEMENTS IN SUCH JURISDICTIONS AS MAY BE REQUIRED BY THE SECURITY DOCUMENTS OR BY LAW OR AS MAY BE REQUESTED BY THE ADMINISTRATIVE AGENT.                 7.15         Hedging Program.  As of the Effective Date, the Company has entered into or caused its Subsidiaries to enter into, and shall maintain at all times thereafter during the relevant period, Derivative Contracts for the purpose of hedging prices on the Oil and Gas thereafter expected to be produced by the Company or any of its Subsidiaries, which contracts shall (a) at all times through the third anniversary of the Effective Date cover not less than 50% of the Company’s and its Subsidiaries’ aggregate Projected Oil and Gas Production anticipated to be sold in the ordinary course of such Persons’ business during such three-year period, (b) thereafter, roll forward on a semi-annual basis in order to cover not less than 50% of the Company’s and its Subsidiaries’ aggregated Projected Oil and Gas Production anticipated to be sold in the ordinary course of such Person’s business during the ensuing four fiscal quarters and (c) otherwise be in form and substance reasonably acceptable to the Administrative Agent.  As used in this Agreement, the term “Projected Oil and Gas Production” means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular half-year, as applicable, from Oil and Gas Properties and interests owned by the Company and its Subsidiaries which have attributable to them Proved Developed Producing Reserves, as such production is projected in the most recent Reserve Report delivered pursuant to Section 7.2(c), after deducting projected production from any Oil and Gas Properties sold or under contract for sale that had been included in such report and after   58 --------------------------------------------------------------------------------   adding projected production from any Oil and Gas Properties or Hydrocarbon Interests that had not been reflected in such report but that are reflected in a separate or supplemental reports prepared on the same basis as the reports delivered pursuant to Section 7.2(c) above and otherwise are satisfactory to the Administrative Agent.  The Company shall provide copies to the Administrative Agent of all Derivative Contracts then in effect not later than January 1 and July 1 of each year beginning July 1, 2006.                 7.16         TexCal Acquisition.  The TexCal Acquisition has been consummated on the terms described in the TexCal Acquisition Agreement. ARTICLE VIII NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied:                 8.1           Limitation on Liens.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following: (A)           ANY LIEN ON PROPERTY OF THE COMPANY OR ANY SUBSIDIARY AS SET FORTH IN SCHEDULE 8.1 SECURING INDEBTEDNESS OUTSTANDING ON THE EFFECTIVE DATE; (B)           ANY LIEN CREATED UNDER ANY LOAN DOCUMENT; (C)           LIENS FOR TAXES, FEES, ASSESSMENTS OR OTHER GOVERNMENTAL CHARGES WHICH ARE NOT DELINQUENT OR REMAIN PAYABLE WITHOUT PENALTY, OR TO THE EXTENT THAT NON PAYMENT THEREOF IS PERMITTED BY SECTION 7.7; (D)           CARRIERS’, WAREHOUSEMEN’S, MECHANICS’, LANDLORDS’, MATERIALMEN’S, REPAIRMEN’S OR OTHER SIMILAR LIENS ARISING IN THE ORDINARY COURSE OF BUSINESS (WHETHER BY LAW OR BY CONTRACT) WHICH ARE NOT DELINQUENT OR REMAIN PAYABLE WITHOUT PENALTY OR WHICH ARE BEING CONTESTED IN GOOD FAITH AND BY APPROPRIATE PROCEEDINGS, WHICH PROCEEDINGS HAVE THE EFFECT OF PREVENTING THE FORFEITURE OR SALE OF THE PROPERTY SUBJECT THERETO; (E)           LIENS CONSISTING OF PLEDGES OR DEPOSITS REQUIRED IN THE ORDINARY COURSE OF BUSINESS IN CONNECTION WITH WORKERS’ COMPENSATION, UNEMPLOYMENT INSURANCE AND OTHER SOCIAL SECURITY LEGISLATION; (F)            EASEMENTS, RIGHTS OF WAY, RESTRICTIONS, DEFECTS OR OTHER EXCEPTIONS TO TITLE AND OTHER SIMILAR ENCUMBRANCES INCURRED IN THE ORDINARY COURSE OF BUSINESS WHICH, IN THE AGGREGATE, ARE NOT SUBSTANTIAL IN AMOUNT, ARE NOT INCURRED TO SECURE INDEBTEDNESS, AND WHICH DO NOT IN ANY CASE MATERIALLY DETRACT FROM THE VALUE OF THE PROPERTY SUBJECT THERETO OR INTERFERE WITH THE ORDINARY CONDUCT OF THE BUSINESSES OF THE COMPANY, THE GUARANTORS AND THEIR RESPECTIVE SUBSIDIARIES;   59 --------------------------------------------------------------------------------   (G)           LIENS ON THE PROPERTY OF THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY OF SUCH PERSON SECURING (I) THE NON-DELINQUENT PERFORMANCE OF BIDS, TRADE CONTRACTS (OTHER THAN FOR BORROWED MONEY) OR STATUTORY OBLIGATIONS, (II) CONTINGENT OBLIGATIONS ON SURETY AND APPEAL BONDS, AND (III) OTHER NON-DELINQUENT OBLIGATIONS OF A LIKE NATURE; IN EACH CASE, INCURRED IN THE ORDINARY COURSE OF BUSINESS; (H)           LIENS ARISING SOLELY BY VIRTUE OF ANY STATUTORY OR COMMON LAW PROVISION RELATING TO BANKER’S LIENS, RIGHTS OF SET-OFF OR SIMILAR RIGHTS AND REMEDIES AS TO DEPOSIT ACCOUNTS OR OTHER FUNDS MAINTAINED WITH A CREDITOR DEPOSITORY INSTITUTION OR UNDER ANY DEPOSIT ACCOUNT AGREEMENT ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS; PROVIDED, HOWEVER, THAT (I) SUCH DEPOSIT ACCOUNT IS NOT A DEDICATED CASH COLLATERAL ACCOUNT AND IS NOT SUBJECT TO RESTRICTIONS AGAINST ACCESS BY THE COMPANY, (II) THE COMPANY (OR APPLICABLE SUBSIDIARY) MAINTAINS (SUBJECT TO SUCH RIGHT OF SET OFF) DOMINION AND CONTROL OVER SUCH ACCOUNT(S), AND (III) SUCH DEPOSIT ACCOUNT IS NOT INTENDED BY THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY TO PROVIDE CASH COLLATERAL TO THE DEPOSITORY INSTITUTION; (I)            OIL AND GAS LIENS TO SECURE OBLIGATIONS WHICH ARE NOT DELINQUENT AND WHICH DO NOT IN ANY CASE MATERIALLY DETRACT FROM THE VALUE OF THE OIL AND GAS PROPERTY SUBJECT THERETO; (J)            LIENS ON THE COLLATERAL SECURING THE FIRST LIEN OBLIGATIONS; PROVIDED, HOWEVER, THAT SUCH LIENS ARE SUBJECT TO THE INTERCREDITOR AGREEMENT; AND (K)           LIENS NOT OTHERWISE PERMITTED PURSUANT TO THIS SECTION 8.1 SECURING PERMITTED INDEBTEDNESS TO THE EXTENT THAT THE AGGREGATE PRINCIPAL AMOUNT OF THE OBLIGATIONS OF THE LOAN PARTIES SECURED THEREBY DOES NOT EXCEED $5,000,000 AT ANY ONE TIME OUTSTANDING.                 8.2           Disposition of Assets.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) (collectively, “Dispositions”) any Property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except: (A)           AS PERMITTED UNDER SECTIONS 6.10, 7.5, 8.3, 8.4, OR 8.10; (B)           DISPOSITIONS OF INVENTORY INCLUDING PRODUCED OIL AND GAS IN THE ORDINARY COURSE OF BUSINESS; (C)           DISPOSITIONS AMONG THE COMPANY AND WHOLLY-OWNED SUBSIDIARIES WHICH ARE GUARANTORS; (D)           USED, WORN OUT OR SURPLUS EQUIPMENT IN THE ORDINARY COURSE OF BUSINESS; (E)           DISPOSITIONS OF ACCOUNTS AND NOTES RECEIVABLE IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICES; (F)            DISPOSITIONS OF INTERESTS IN OIL AND GAS PROPERTIES, OR PORTIONS THEREOF, THAT ARE SOLD FOR FAIR CASH CONSIDERATION (CONSIDERING ANY NET PRODUCTION PROCEEDS FROM THE EFFECTIVE   60 --------------------------------------------------------------------------------   DATE OF ANY SUCH DISPOSITION TO THE CLOSING THEREOF THAT ARE CREDITED AGAINST THE PURCHASE PRICE PAYABLE AT SUCH CLOSING AS NET CASH PROCEEDS RECEIVED BY THE COMPANY OR SUCH GUARANTOR); PROVIDED, HOWEVER, THAT THE AGGREGATE SALES PRICES (AS OF THE EFFECTIVE DATE OF EACH PARTICULAR DISPOSITION) FOR DISPOSITIONS MADE PURSUANT TO THIS SECTION 8.2(F) DURING ANY BORROWING BASE PERIOD (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE EFFECTIVE DATE) SHALL NOT EXCEED FIVE PERCENT (5%) OF THE PRESENT VALUE OF THE FUTURE CASH FLOWS FROM PROVED RESERVES INCLUDED IN THE OIL AND GAS PROPERTIES AS SET FORTH IN THE MOST RECENT RESERVE REPORT DELIVERED PURSUANT TO SECTION 6.11 OR 7.2(C); (G)           DISPOSITIONS OF INTERESTS IN THE OIL AND GAS PROPERTIES LISTED ON SCHEDULE 8.2, OR PORTIONS THEREOF, THAT ARE SOLD FOR FAIR CASH CONSIDERATION (CONSIDERING ANY NET PRODUCTION PROCEEDS FROM THE EFFECTIVE DATE OF ANY SUCH DISPOSITION TO THE CLOSING THEREOF THAT ARE CREDITED AGAINST THE PURCHASE PRICE PAYABLE AT SUCH CLOSING AS NET CASH PROCEEDS RECEIVED BY THE COMPANY OR SUCH GUARANTOR), EACH OF WHICH WERE ACQUIRED AS A RESULT OF THE TEXCAL ACQUISITION; (H)           THE DISPOSITION OF A 50% UNDIVIDED INTEREST IN APPROXIMATELY TEN ACRES OF REAL PROPERTY LOCATED IN CARPINTERIA, CALIFORNIA, WHICH INTEREST MAY HEREAFTER BE ACQUIRED BY THE COMPANY FROM EXXONMOBIL CORPORATION OR AN AFFILIATE THEREOF; OR (I)            THE DIVIDEND OF THE COMPANY’S INTEREST IN REAL PROPERTY LOCATED IN CARPINTERIA, CALIFORNIA (THE “CARPINTERIA BLUFFS DIVIDEND”) AND THE DIVIDEND OF THE COMPANY’S INTEREST IN REAL PROPERTY LOCATED IN VENTURA COUNTY, CALIFORNIA (THE “VENTURA DIVIDEND”), NONE OF WHICH CONSTITUTES OIL AND GAS PROPERTIES.                 8.3           Consolidations and Mergers.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (A)           ANY GUARANTOR MAY MERGE WITH THE COMPANY OR ANOTHER GUARANTOR; PROVIDED, HOWEVER, THAT THE COMPANY SHALL BE THE CONTINUING OR SURVIVING CORPORATION IN THE CASE OF A MERGER INVOLVING THE COMPANY; (B)           ANY SUBSIDIARY THAT IS NOT A GUARANTOR MAY MERGE WITH THE COMPANY OR A GUARANTOR; PROVIDED, HOWEVER, THAT THE COMPANY OR SUCH GUARANTOR SHALL BE THE CONTINUING OR SURVIVING CORPORATION IN THE CASE OF A MERGER INVOLVING THE COMPANY OR A GUARANTOR; (C)           ANY GUARANTOR OR OTHER SUBSIDIARY MAY MAKE DISPOSITIONS TO THE COMPANY OR ANOTHER GUARANTOR; AND (D)           BICYCLE ACQUISITION COMPANY, LLC MAY BE MERGED WITH AND INTO TEXCAL ENERGY IN CONSUMMATION OF THE TEXCAL ACQUISITION.                 8.4           Loans and Investments.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or   61 --------------------------------------------------------------------------------   make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person, including any Affiliate of the Company, except for: (A)           INVESTMENTS IN CASH EQUIVALENTS; (B)           EXTENSIONS OF CREDIT IN THE NATURE OF ACCOUNTS RECEIVABLE OR NOTES RECEIVABLE ARISING FROM THE SALE OR LEASE OF GOODS OR SERVICES IN THE ORDINARY COURSE OF BUSINESS; (C)           INVESTMENTS IN GUARANTORS THAT ARE DIRECTLY OR INDIRECTLY WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY; (D)           INVESTMENTS IN DERIVATIVE CONTRACTS PERMITTED UNDER SECTION 8.10; (E)           INVESTMENTS RESULTING FROM TRANSACTIONS SPECIFICALLY PERMITTED UNDER SECTION 8.3; (F)            INVESTMENTS WITH THIRD PARTIES THAT ARE (I) CUSTOMARY IN THE OIL AND GAS BUSINESS, (II) MADE IN THE ORDINARY COURSE OF THE COMPANY’S BUSINESS, AND (III) MADE IN THE FORM OF OR PURSUANT TO OPERATING AGREEMENTS, PROCESSING AGREEMENTS, FARM-IN AGREEMENTS, FARM-OUT AGREEMENTS, JOINT VENTURE AGREEMENTS, DEVELOPMENT AGREEMENTS, UNITIZATION AGREEMENTS, POOLING AGREEMENTS, JOINT BIDDING AGREEMENTS, SERVICE CONTRACTS AND OTHER SIMILAR AGREEMENTS THAT DO NOT, IN ANY CASE, (X) CONSTITUTE AN INVESTMENT IN ANY STATE LAW PARTNERSHIP OR OTHER PERSON OR (Y) INVOLVE THE DISPOSITION OF ANY MORTGAGED PROPERTY COVERING PROVED RESERVES; (G)           ADVANCES BY THE COMPANY TO ANY OF ITS FULL-TIME EMPLOYEES FOR HOUSING LOANS AND FOR THE PAYMENT OF RELOCATION EXPENSES WHICH DO NOT EXCEED $2,000,000 AT ANY TIME OUTSTANDING IN THE AGGREGATE TO ALL SUCH EMPLOYEES; (H)           ACQUISITIONS OF PROVED HYDROCARBON INTERESTS AND RELATED ASSETS; (I)            PROVIDED THAT THERE SHALL NOT HAVE OCCURRED AND BE CONTINUING A DEFAULT HEREUNDER, AND NO SUCH DEFAULT WOULD RESULT THEREFROM, THE COMPANY MAY MAKE CASH INVESTMENTS IN ELLWOOD NOT TO EXCEED AN AGGREGATE AMOUNT OF $2,000,000 IN ANY FISCAL YEAR; (J)            THE TEXCAL ACQUISITION; AND (K)           IN ADDITION TO INVESTMENTS OTHERWISE EXPRESSLY PERMITTED BY THIS SECTION 8.4, OTHER INVESTMENTS OF THE LOAN PARTIES NOT TO EXCEED $10,000,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING.                 8.5           Limitation on Indebtedness.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, create, incur, assume, suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness, except (collectively, “Permitted Indebtedness”): (A)           INDEBTEDNESS INCURRED PURSUANT TO THIS AGREEMENT; (B)           INDEBTEDNESS INCURRED PURSUANT TO THE FIRST LIEN CREDIT AGREEMENT;   62 --------------------------------------------------------------------------------   (C)           INDEBTEDNESS CONSISTING OF CONTINGENT OBLIGATIONS PERMITTED PURSUANT TO SECTION 8.8; (D)           [INTENTIONALLY OMITTED]; (E)           IN ADDITION TO THE INDEBTEDNESS OTHERWISE PERMITTED UNDER THIS SECTION 8.5, INDEBTEDNESS DESCRIBED IN THE DEFINITION THEREOF OF THE LOAN PARTIES NOT TO EXCEED $10,000,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING; (F)            INDEBTEDNESS REPRESENTED BY THE SENIOR NOTES AND THE SENIOR NOTES INDENTURE IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $150,000,000; AND (G)           IN ADDITION TO THE INDEBTEDNESS OTHERWISE PERMITTED UNDER THIS SECTION 8.5, INDEBTEDNESS OF THE COMPANY AND THE GUARANTORS FOR BORROWED MONEY (INCLUDING, FOR THE AVOIDANCE OF DOUBT, INDEBTEDNESS INCURRED UNDER THE SENIOR NOTES INDENTURE IN ADDITION TO THE INDEBTEDNESS SET FORTH IN SECTION 8.5(F)) THAT IS UNSECURED NOT TO EXCEED $200,000,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING; PROVIDED, HOWEVER, THAT (I) THE COMPANY AND ITS SUBSIDIARIES ARE IN PRO FORMA COMPLIANCE (AFTER GIVING EFFECT TO THE INCURRENCE OF SUCH INDEBTEDNESS) WITH THE FINANCIAL COVENANTS SET FORTH IN SECTIONS 8.12, 8.13, 8.14 AND 8.15, RECOMPUTED AS AT THE LAST DAY OF THE MOST RECENTLY ENDED FISCAL QUARTER OF THE COMPANY FOR WHICH FINANCIAL STATEMENTS ARE AVAILABLE, (II) NO DEFAULT OR EVENT OF DEFAULT (X) SHALL HAVE OCCURRED AND BE CONTINUING AT THE TIME OF INCURRENCE THEREOF OR (Y) WOULD RESULT THEREFROM, (III) SUCH INDEBTEDNESS SHALL MATURE AT LEAST SIX MONTHS AFTER THE MATURITY DATE AND SHALL REQUIRE NO SCHEDULED PAYMENT OF PRINCIPAL (INCLUDING ANY PAYMENT AT THE OPTION OF THE HOLDERS OF SUCH INDEBTEDNESS AND ANY PAYMENT PURSUANT A SINKING FUND OBLIGATION) PRIOR TO THE DATE THAT IS AT LEAST SIX MONTHS AFTER THE MATURITY DATE AND (IV) THE OTHER TERMS OF SUCH INDEBTEDNESS SHALL BE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT.                 8.6           Transactions with Affiliates.  Except as set forth on Schedule 8.6 and for the Optionee Payment, the Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, enter into any transaction with or make any payment or transfer to any Affiliate of the Company or its shareholders, except in the ordinary course of business and upon fair and reasonable terms no less favorable to the Company, such Guarantor or such Subsidiary than would obtain in a comparable arm’s length transaction with a Person not an Affiliate of the Company, such Guarantor or such Subsidiary or to the extent permitted under Sections 8.2(h), 8.2(i), 8.8(g), or 8.9.                 8.7           Margin Stock.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, suffer or permit any Subsidiary to, use any portion of the proceeds of the Loans (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 15(d) of the Exchange Act.                 8.8           Contingent Obligations.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Contingent Obligations except:   63 --------------------------------------------------------------------------------   (A)           ENDORSEMENTS FOR COLLECTION OR DEPOSIT IN THE ORDINARY COURSE OF BUSINESS; (B)           DERIVATIVE CONTRACTS PERMITTED UNDER SECTION 8.10 HEREOF; (C)           OBLIGATIONS UNDER PLUGGING BONDS, PERFORMANCE BONDS AND FIDELITY BONDS ISSUED FOR THE ACCOUNT OF THE COMPANY OR ITS SUBSIDIARIES, OBLIGATIONS TO INDEMNIFY OR MAKE WHOLE ANY SURETY AND SIMILAR AGREEMENTS INCURRED IN THE ORDINARY COURSE OF BUSINESS AND OBLIGATIONS OF THE COMPANY UNDER THE PURCHASE AND SALE AGREEMENT DATED NOVEMBER 4, 1998, AS AMENDED BY THE FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT DATED JANUARY 13, 1999, AMONG THE COMPANY, ELLWOOD, CHEVRON U.S.A., INC. AND CHEVRON PIPELINE COMPANY; (D)           THIS AGREEMENT AND EACH GUARANTY; (E)           THE REAL ESTATE CONTINGENT OBLIGATIONS; (F)            GUARANTY OBLIGATIONS OF THE GUARANTORS UNDER OR IN RESPECT OF (I) THE FIRST LIEN CREDIT DOCUMENTS, (II) THE SENIOR NOTE DEBT DOCUMENTS AND (III) INDEBTEDNESS INCURRED PURSUANT TO SECTION 8.5(E); (G)           INDEMNITY OBLIGATIONS OF THE COMPANY UNDER THE PURCHASE AND SALE AGREEMENT DATED AS OF DECEMBER 3, 2004 AMONG THE COMPANY AND THE MEMBERS OF MARQUEZ ENERGY, LLC; (H)           OBLIGATIONS OF THE TEXCAL SUBSIDIARIES IN RESPECT OF “ASSUMED LIABILITIES” AS SUCH TERM IS DEFINED IN THE PURCHASE AND SALE AGREEMENT DATED AS OF AUGUST 20, 2004 AMONG TRI-UNION DEVELOPMENT CORPORATION AND TRI-UNION OPERATING COMPANY, AS SELLERS AND TEXCAL ENERGY, AS PURCHASER; AND (I)            GUARANTY OBLIGATIONS OF THE GUARANTORS UNDER OR IN RESPECT OF PERMITTED INDEBTEDNESS DESCRIBED IN SECTION 8.5(G), WHICH OBLIGATIONS ARE UNSECURED.                 8.9           Restricted Payments.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, (i) purchase, redeem or otherwise acquire for value any of its Capital Stock, now or hereafter outstanding from the holders thereof (other than from such holders that are Loan Parties); (ii) declare or pay any distribution, dividend or return capital to its members, partners or stockholders or holders of warrants, rights or options to acquire its membership interests, partnership interests or shares (other than to such Persons that are Loan Parties), or make any distribution of assets in cash or in kind to its members, partners, stockholders or holders of warrants, rights or options to acquire its membership interests, partnership interests or shares (other than to such Persons that are Loan Parties); or (iii) make any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness (A) outstanding under or in respect of the Senior Notes Indenture or (B) constituting Permitted Indebtedness under clause (g) of the definition of “Permitted Indebtedness” (collectively “Restricted Payments”); provided, however, that the Company may (w) make regularly scheduled payments of interest or mandatory prepayments in respect of Indebtedness constituting Permitted Indebtedness under clause (g) of the definition of “Permitted Indebtedness”, but only to the extent required by the   64 --------------------------------------------------------------------------------   agreement or document governing such Indebtedness; (x) make regularly scheduled payments of interest or mandatory prepayments in respect of Indebtedness under or in respect of the Senior Notes Indenture in accordance with the terms of the Senior Notes Indenture and the Intercreditor Agreement, but only to the extent required by the Senior Notes Indenture; (y) make optional prepayments in respect of any (1) Senior Note Debt Instrument or (2) Indebtedness constituting Permitted Indebtedness under clause (g) of the definition of “Permitted Indebtedness”, in the case of (1) or (2), using the Net Cash Proceeds of an “Equity Offering” (as defined in the Senior Notes Indenture); and (z) declare and pay the Carpinteria Bluffs Dividend and the Ventura Dividend; provided, further, however that, in the case of any Restricted Payments permitted under clauses (w), (x) and (z) and, in respect of prepayments with respect to the Senior Notes Indenture or Indebtedness constituting Permitted Indebtedness under clause (g) of the definition of “Permitted Indebtedness”, Restricted Payments permitted under clauses (w), (x) and (y), (A) no Default has occurred and is continuing and (B) no such payment shall cause a Default.                 8.10         Derivative Contracts. (A)           THE COMPANY AND EACH GUARANTOR SHALL NOT, AND SHALL NOT PERMIT ANY OF ITS RESPECTIVE SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, ENTER INTO OR IN ANY MANNER BE LIABLE ON ANY DERIVATIVE CONTRACT EXCEPT: (I)            DERIVATIVE CONTRACTS ENTERED INTO WITH THE PURPOSE AND EFFECT OF FIXING PRICES ON OIL OR GAS EXPECTED TO BE PRODUCED BY SUCH PERSON; PROVIDED, HOWEVER, THAT AT ALL TIMES (I) NO SUCH CONTRACT SHALL BE FOR SPECULATIVE PURPOSES; (II) AS OF ANY DATE (THE “CALCULATION DATE”) NO SUCH CONTRACT, WHEN AGGREGATED WITH ALL DERIVATIVE CONTRACTS PERMITTED UNDER THIS SECTION 8.10(A)(I), BUT EXCLUDING DERIVATIVE CONTRACTS DESCRIBED IN CLAUSE (V) OF THIS SECTION 8.10, SHALL COVER A NOTIONAL VOLUME IN EXCESS OF THE APPLICABLE PERCENTAGE OF THE TOTAL PROJECTED OIL AND GAS PRODUCTION TO BE PRODUCED IN ANY MONTH FROM THE PROVED DEVELOPED PRODUCING RESERVES REFLECTED IN THE MOST RECENT RESERVE REPORT; (III) EACH SUCH CONTRACT (EXCLUDING DERIVATIVE CONTRACTS OFFERED BY NATIONAL COMMODITY EXCHANGE) SHALL BE WITH THE ADMINISTRATIVE AGENT, OR ANY OF THE LENDERS, THE FIRST LIEN CREDIT AGENT OR ANY FIRST LIEN LENDER OR WITH A COUNTERPARTY OR HAVE A GUARANTOR OF THE OBLIGATION OF THE COUNTERPARTY WHICH, AT THE TIME THE CONTRACT IS MADE, HAS LONG-TERM OBLIGATIONS RATED BBB+ OR BAA1 OR BETTER, RESPECTIVELY, BY S&P OR MOODY’S; (IV) NO SUCH CONTRACT REQUIRES THE COMPANY TO PUT UP MONEY, ASSETS, LETTERS OF CREDIT OR OTHER SECURITY AGAINST THE EVENT OF ITS NON-PERFORMANCE PRIOR TO ACTUAL DEFAULT BY THE COMPANY IN PERFORMING ITS OBLIGATIONS THEREUNDER, EXCEPT LIENS IN FAVOR OF THE COLLATERAL TRUSTEE FOR THE BENEFIT OF THE SECURED PARTIES UNDER THE SECURITY DOCUMENTS OR THE FIRST LIENS; AND (V) WITH RESPECT TO DERIVATIVE CONTRACTS UNDER WHICH THE COMPANY’S, A GUARANTOR’S OR ANY OF THEIR RESPECTIVE SUBSIDIARIES’ ONLY INTEREST IS A “PUT” RIGHT OR WHICH IS A COMMODITY PRICE HEDGE BY MEANS OF A PRICE “FLOOR” (A) EITHER (1) THERE EXISTS NO DEFERRED OBLIGATION TO PAY THE RELATED PREMIUM OR OTHER PURCHASE PRICE OR (2) IF THERE EXISTS ANY DEFERRED OBLIGATION TO PAY THE RELATED PREMIUM OR OTHER PURCHASE PRICE, THE COMPANY’S, SUCH GUARANTOR’S OR SUCH SUBSIDIARY’S AGGREGATE NET EXPOSURE DOES NOT EXCEED AT ANY TIME PRIOR TO APRIL 30, 2006, $15,000,000, AND AT ANY TIME THEREAFTER UNTIL APRIL 30, 2007, $5,000,000,   65 --------------------------------------------------------------------------------   FOLLOWING WHICH DATE NO SUCH CONTRACTS ARE PERMITTED TO EXIST AND (B) ALL SUCH CONTRACTS ARE WITH QUALIFYING DERIVATIVE CONTRACT COUNTERPARTIES. (II)           THE EXISTING DERIVATIVE CONTRACTS; PROVIDED, HOWEVER, THAT NO EXISTING DERIVATIVE CONTRACT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED OR EXTENDED WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT; OR (III)          DERIVATIVE CONTRACTS ENTERED INTO WITH THE PURPOSE AND EFFECT OF FIXING INTEREST RATES ON A PRINCIPAL AMOUNT OF INDEBTEDNESS OF THE COMPANY THAT IS ACCRUING INTEREST AT A VARIABLE RATE; PROVIDED, HOWEVER, THAT (I) NO SUCH CONTRACT SHALL BE FOR SPECULATIVE PURPOSES; (II) THE FLOATING RATE INDEX OF EACH SUCH CONTRACT GENERALLY MATCHES THE INDEX USED TO DETERMINE THE FLOATING RATES OF INTEREST ON THE CORRESPONDING INDEBTEDNESS OF THE COMPANY TO BE HEDGED BY SUCH CONTRACT, (III) NO SUCH CONTRACT REQUIRES THE COMPANY TO PUT UP MONEY, ASSETS, LETTERS OF CREDIT, OR OTHER SECURITY AGAINST THE EVENT OF ITS NON-PERFORMANCE PRIOR TO ACTUAL DEFAULT BY THE COMPANY IN PERFORMING ITS OBLIGATIONS THEREUNDER, (IV) THE AGGREGATE NOTIONAL AMOUNT OF THE DERIVATIVE CONTRACTS SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE BORROWING BASE (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE EFFECTIVE DATE) DURING ANY BORROWING BASE PERIOD (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE EFFECTIVE DATE), AND (V) EACH SUCH CONTRACT SHALL BE WITH A LENDER OR WITH A COUNTERPARTY OR HAVE A GUARANTOR OF THE OBLIGATION OF THE COUNTERPARTY WHO, AT THE TIME THE CONTRACT IS MADE, HAS LONG-TERM OBLIGATIONS RATED BBB+ OR BAA1 OR BETTER, RESPECTIVELY, BY S&P OR MOODY’S. (B)           IN THE EVENT THE COMPANY ENTERS INTO A DERIVATIVE CONTRACT WITH ANY LENDER, THE CONTINGENT OBLIGATION EVIDENCED UNDER SUCH DERIVATIVE CONTRACT SHALL NOT BE APPLIED AGAINST SUCH LENDER’S COMMITMENT NOR AGAINST THE EFFECTIVE AMOUNT.  THE BENEFITS OF THE SECURITY DOCUMENTS AND OF THE PROVISIONS OF THE LOAN DOCUMENTS RELATING TO THE COLLATERAL SHALL ALSO EXTEND TO AND BE AVAILABLE ON A PRO RATA BASIS TO EACH QUALIFYING DERIVATIVE CONTRACT COUNTERPARTY IN RESPECT TO ALL OBLIGATIONS WITH RESPECT TO THE RELATED QUALIFYING DERIVATIVE CONTRACT.                 8.11         Sale Leasebacks.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, become liable, directly or by way of any Guaranty Obligation, with respect to any lease of any Property (whether real, personal or mixed) whether now owned or hereafter acquired, (a) which the Company or such Subsidiary has sold or transferred (excluding transfers effected by means of dividends of Property or Capital Stock permitted hereunder) or is to sell or transfer to any other Person or (b) which the Company or such Subsidiary of the Company intends to use for substantially the same purposes as any other Property which has been or is to be sold or transferred (excluding transfers effected by means of dividends of Property or Capital Stock permitted hereunder) by the Company or such Subsidiary to any other Person in connection with such lease.                 8.12         Consolidated Leverage Ratio.  The Company shall not permit the Consolidated Leverage Ratio to exceed 4.50 to 1.00 for each fiscal quarter through the fiscal quarter ending December 31, 2006; 4.00 to 1.00 for each of the fiscal quarters ending March 31 and June 30,   66 --------------------------------------------------------------------------------   2007; and 3.50 to 1.00 for each fiscal quarter ending thereafter.                 8.13         Current Ratio.  The Company shall not permit the ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00; provided, however, that for purposes of such ratio, assets or liabilities required by FAS 133 and 143 shall be excluded from current assets and current liabilities, respectively.                 8.14         Minimum Interest Coverage Ratio.  The Company shall not permit the ratio of Consolidated EBITDA for any period of four consecutive fiscal quarters of the Company, commencing with the fiscal quarter ended June 30, 2006 as the last quarter in the initial period of four consecutive fiscal quarters contemplated hereby, to Consolidated Interest Expense for such period to be less than 2.50 to 1.00 for each such period ending with each fiscal quarter through the fiscal quarter ending December 31, 2006; 3.00 to 1.00 for each such period ending with each of the fiscal quarters ending March 31 and June 30, 2007; and 3.50 to 1.00 for each such period ending thereafter.                 8.15         Minimum PV 10 to Consolidated Total Debt Ratio.  The Company shall not permit the ratio of Net Present Value to Consolidated Total Debt at the end of any fiscal quarter to be less than 1.25 to 1.00 for each fiscal quarter through the fiscal quarter ending December 31, 2006 and 1.50 to 1.00 for each fiscal quarter ending thereafter.                 8.16         Change in Business.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, engage in any business or activity other than the Principal Business.  The Company and each Guarantor shall not permit Ellwood to, directly or indirectly, engage in any business other than the ownership and operation of common carrier crude oil pipelines.                 8.17         Accounting Changes.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any Subsidiary.                 8.18         Certain Contracts; Amendments; Multiemployer ERISA Plans.  Except for the restrictions expressly set forth in the Loan Documents, the First Lien Credit Documents and the Senior Notes Indenture, the Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Subsidiary of the Company to: (a) pay dividends or make other distributions to the Company, (b) redeem equity interests held in it by the Company, (c) repay loans and other Indebtedness owing by it to the Company, or (d) transfer any of its assets to the Company.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, enter into any “take-or-pay” contract or other contract or arrangement for the purchase of goods or services which obligates it to pay for such goods or service regardless of whether they are delivered or furnished to it, except as permitted by Section 8.5(e).  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, amend or permit any amendment to any other contract or lease which releases, qualifies, limits, makes contingent or otherwise detrimentally affects the rights and benefits of the Administrative Agent or any Lender   67 --------------------------------------------------------------------------------   under or acquired pursuant to any Security Documents.  The Company and each Guarantor shall not, and shall not permit any ERISA Affiliate to, incur any obligation to contribute to any Multiemployer Plan.                 8.19         Senior Notes.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly: (A)           AMEND OR MODIFY ANY OF THE TERMS OR PROVISIONS OF THE SENIOR NOTES INDENTURE OR THE SENIOR NOTES IF SUCH AMENDMENT OR MODIFICATION WOULD HAVE THE EFFECT OF (I) ACCELERATING THE MATURITY DATE OF THE PRINCIPAL AMOUNT THEREOF, OR ANY SCHEDULED INTEREST PAYMENT THEREON; (II) INCREASING THE PRINCIPAL AMOUNT THEREOF OR INTEREST RATE THEREON; (III) CAUSING, OR PURPORTING TO CAUSE THE LIENS SECURING THE OBLIGATIONS TO CEASE TO BE PERMITTED UNDER THE SENIOR NOTES INDENTURE, (IV) CAUSING, OR PURPORTING TO CAUSE, THE SENIOR NOTES AND THE SENIOR NOTE SUBSIDIARY GUARANTEES TO BE SECURED (X) AT ANY TIME PRIOR TO THE SENIOR NOTE LIEN TERMINATION TIME, OTHER THAN ON AN “EQUAL AND RATABLE” BASIS WITH THE LIENS SECURING THE OBLIGATIONS, OR (Y) THEREAFTER OTHER THAN AS (AND ONLY TO THE EXTENT) REQUIRED UNDER SECTION 3.5 OF THE SENIOR NOTE INDENTURE AS IN EFFECT ON THE EFFECTIVE DATE; OR (V) REQUIRING THE COMPANY TO GRANT ANY LIEN FOR THE BENEFIT OF THE HOLDERS THEREOF, OTHER THAN AS (AND ONLY TO THE EXTENT) REQUIRED UNDER SECTION 3.5 OF THE SENIOR NOTE INDENTURE AS IN EFFECT ON THE EFFECTIVE DATE (IT BEING UNDERSTOOD IN ALL EVENTS THAT NO LIEN WHICH WOULD CAUSE THE COMPANY TO BE REQUIRED TO GRANT ANY SUCH LIEN MAY BE GRANTED IF PROHIBITED BY ANY TERM OF THIS AGREEMENT); (B)           AMEND OR MODIFY ANY OTHER TERM OR PROVISION OF THE SENIOR NOTES INDENTURE OR SENIOR NOTES IF SUCH AMENDMENT OR MODIFICATION WOULD BE MATERIALLY ADVERSE TO THE LENDERS; OR (C)           PREPAY, REDEEM, PURCHASE OR DEFEASE ANY SENIOR NOTES (EXCEPT WITH PROCEEDS OF AN EQUITY OFFERING (AS DEFINED IN THE SENIOR NOTES INDENTURE) AND SUBJECT TO COMPLIANCE WITH SECTIONS 8.9 AND 2.5 HEREOF).                 8.20         Limitation on Amendments to TexCal Acquisition Documents.  The Company shall not, directly or indirectly: (A)           AMEND, SUPPLEMENT OR OTHERWISE MODIFY ANY MATERIAL TERM OR CONDITION (PURSUANT TO A WAIVER GRANTED BY OR TO SUCH PERSON OR OTHERWISE) OR FAIL TO ENFORCE STRICTLY THE TERMS AND CONDITIONS OF THE INDEMNITIES AND RIGHTS FURNISHED TO THE COMPANY OR ANY OF ITS SUBSIDIARIES PURSUANT TO THE TEXCAL ACQUISITION DOCUMENTS SUCH THAT AFTER GIVING EFFECT THERETO SUCH INDEMNITIES OR RIGHTS SHALL BE MATERIALLY LESS FAVORABLE TO THE INTERESTS OF THE LOAN PARTIES OR THE LENDERS WITH RESPECT THERETO; OR (B)           OTHERWISE AMEND, SUPPLEMENT OR OTHERWISE MODIFY OR FAIL TO ENFORCE THE TERMS AND CONDITIONS OF THE TEXCAL ACQUISITION DOCUMENTS EXCEPT TO THE EXTENT THAT ANY SUCH AMENDMENT, SUPPLEMENT OR MODIFICATION OR FAILURE TO ENFORCE COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.                 8.21         First Lien Credit Documents.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, amend, waive or modify any term or   68 --------------------------------------------------------------------------------   provision of any First Lien Credit Document unless such amendment or modification is permitted by Section 5.3(a) of the Intercreditor Agreement.                 8.22         Forward Sales, Production Payments, Etc.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly: (A)           ENTER INTO ANY FORWARD SALES TRANSACTION OR AGREEMENT WITH RESPECT TO PHYSICAL DELIVERIES OF OIL AND GAS OUTSIDE THE ORDINARY COURSE OF BUSINESS AS CONDUCTED PRIOR TO THE EFFECTIVE TIME; OR (B)           SELL OR CONVEY ANY PRODUCTION PAYMENT, TERM OVERRIDING INTEREST, NET PROFITS INTEREST OR ANY SIMILAR INTEREST (EXCEPT FOR OVERRIDING ROYALTY OR NET PROFITS INTERESTS GRANTED TO EMPLOYEES OR CONSULTANTS OF THE COMPANY OR ANY SUBSIDIARY IN THE ORDINARY COURSE OF BUSINESS IN CONNECTION WITH THE GENERATION OF PROSPECTS OR THE DEVELOPMENT OF OIL AND GAS PROPERTIES).                 8.23         Use of Proceeds.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, use or permit the use of all or any portion of the Loans for any purpose other than those set forth in Section 7.13. ARTICLE IX EVENTS OF DEFAULT                 9.1           Event of Default.  Any of the following shall constitute an “Event of Default”: (A)           PRINCIPAL NON PAYMENT.  THE COMPANY FAILS TO PAY, WHEN AND AS REQUIRED TO BE PAID HEREIN, ANY AMOUNT OF SCHEDULED PRINCIPAL PAYMENT OF ANY LOAN, INCLUDING ANY MANDATORY PREPAYMENT UNDER SECTION 2.5 OF THIS AGREEMENT; (B)           INTEREST AND EXPENSE NON-PAYMENT.  ANY LOAN PARTY FAILS TO PAY, WHEN AND AS REQUIRED TO BE PAID HEREIN, ANY INTEREST DUE ON ANY INTEREST PAYMENT DATE, ANY OTHER PAYMENTS FOR FEES, EXPENSES, OR OTHER AMOUNT PAYABLE HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT WITHIN THREE (3) BUSINESS DAYS AFTER THE SAME BECOMES DUE AND PAYABLE; (C)           REPRESENTATION OR WARRANTY.  ANY WRITTEN REPRESENTATION OR WARRANTY BY THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY MADE OR DEEMED MADE HEREIN, IN ANY OTHER LOAN DOCUMENT, OR WHICH IS CONTAINED IN ANY CERTIFICATE, DOCUMENT OR FINANCIAL OR OTHER STATEMENT BY THE COMPANY, ANY GUARANTOR, ANY OTHER SUBSIDIARY, OR ANY RESPONSIBLE OFFICER, FURNISHED AT ANY TIME UNDER THIS AGREEMENT, OR IN OR UNDER ANY OTHER LOAN DOCUMENT, IS INCORRECT IN ANY MATERIAL RESPECT ON OR AS OF THE DATE MADE OR DEEMED MADE; (D)           SPECIFIC DEFAULTS.  ANY LOAN PARTY FAILS TO PERFORM OR OBSERVE ANY TERM, COVENANT OR AGREEMENT CONTAINED IN SECTIONS 7.3(A), 7.6, 7.12, 7.13 OR 7.15 OR IN ARTICLE VIII, IN THE COMMITMENT LETTER OR THE FEE LETTER AGREEMENT; (E)           OTHER DEFAULTS.  THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY FAILS TO PERFORM OR OBSERVE ANY OTHER TERM OR COVENANT CONTAINED IN THIS AGREEMENT OR ANY OTHER   69 --------------------------------------------------------------------------------   LOAN DOCUMENT, AND SUCH DEFAULT SHALL CONTINUE UNREMEDIED FOR A PERIOD OF (I) 15 DAYS, IN THE CASE OF SECTIONS 7.1 AND 7.14 AND (II) 30 DAYS, IN ALL OTHER CASES AFTER THE EARLIER OF (X) THE DATE UPON WHICH A RESPONSIBLE OFFICER KNEW OR REASONABLY SHOULD HAVE KNOWN OF SUCH DEFAULT OR (Y) THE DATE UPON WHICH WRITTEN NOTICE THEREOF IS GIVEN TO THE COMPANY BY THE ADMINISTRATIVE AGENT OR ANY LENDER; (F)            CROSS DEFAULT.  (I) THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY (X) FAILS TO MAKE ANY PAYMENT OF MORE THAN $5,000,000 IN RESPECT OF ANY INDEBTEDNESS OR CONTINGENT OBLIGATION (OTHER THAN IN RESPECT OF THE FIRST LIEN CREDIT AGREEMENT) WHEN DUE (WHETHER BY SCHEDULED MATURITY, REQUIRED PREPAYMENT, ACCELERATION, DEMAND, OR OTHERWISE) AND SUCH FAILURE CONTINUES AFTER THE APPLICABLE GRACE OR NOTICE PERIOD, IF ANY, SPECIFIED IN THE RELEVANT DOCUMENT ON THE DATE OF SUCH FAILURE; OR (Y) FAILS AFTER THE APPLICABLE GRACE OR NOTICE PERIOD, IF ANY, SPECIFIED IN THE RELEVANT DOCUMENT ON THE DATE OF SUCH FAILURE TO PERFORM OR OBSERVE ANY OTHER CONDITION OR COVENANT, OR ANY OTHER EVENT SHALL OCCUR OR CONDITION EXIST, UNDER ANY AGREEMENT OR INSTRUMENT RELATING TO ANY SUCH INDEBTEDNESS OR CONTINGENT OBLIGATION HAVING AN AGGREGATE PRINCIPAL AMOUNT OF MORE THAN $5,000,000 (OTHER THAN IN RESPECT OF THE FIRST LIEN CREDIT AGREEMENT) IF THE EFFECT OF SUCH FAILURE, EVENT OR CONDITION IS TO CAUSE, OR TO PERMIT THE HOLDER OR HOLDERS OF SUCH INDEBTEDNESS OR BENEFICIARY OR BENEFICIARIES OF SUCH INDEBTEDNESS (OR A TRUSTEE OR AGENT ON BEHALF OF SUCH HOLDER OR HOLDERS OR BENEFICIARY OR BENEFICIARIES) TO CAUSE SUCH INDEBTEDNESS TO BE DECLARED TO BE DUE AND PAYABLE PRIOR TO ITS STATED MATURITY, OR SUCH CONTINGENT OBLIGATION TO BECOME PAYABLE OR CASH COLLATERAL IN RESPECT THEREOF TO BE DEMANDED; OR (II) ANY INDEBTEDNESS OR CONTINGENT OBLIGATION OF THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY IN EXCESS OF $5,000,000 SHALL BE DECLARED DUE AND PAYABLE PRIOR TO ITS STATED MATURITY OR CASH COLLATERAL IS DEMANDED IN RESPECT OF SUCH CONTINGENT OBLIGATION; OR (III) AN “EVENT OF DEFAULT” (AS DEFINED IN THE SENIOR NOTES INDENTURE AS IN EFFECT ON THE RESTATEMENT EFFECTIVE DATE), OR ANY OTHER OR ADDITIONAL “EVENT OF DEFAULT” WHICH MAY BE ADDED TO OR OTHERWISE BE INCLUDED OR EXIST AFTER THE RESTATEMENT EFFECTIVE DATE IN THE SENIOR NOTES INDENTURE, SHALL OCCUR AND BE CONTINUING; OR (IV) A TRIGGERING EVENT SHALL OCCUR; OR (V) (X) AN “EVENT OF DEFAULT” (AS DEFINED IN THE FIRST LIEN CREDIT AGREEMENT AS IN EFFECT ON THE RESTATEMENT EFFECTIVE DATE), OR ANY OTHER OR ADDITIONAL “EVENT OF DEFAULT” WHICH MAY BE ADDED TO OR OTHERWISE BE INCLUDED OR EXIST AFTER THE EFFECTIVE DATE IN THE FIRST LIEN CREDIT AGREEMENT, SHALL HAVE OCCURRED AND BE CONTINUING AND (Y) (A) SUCH “EVENT OF DEFAULT” SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 45 DAYS AFTER THE EARLIER OF (1) THE DATE UPON WHICH A RESPONSIBLE OFFICER KNEW OR REASONABLY SHOULD HAVE KNOWN OF SUCH “EVENT OF DEFAULT” OR (2) THE DATE UPON WHICH NOTICE OF SUCH “EVENT OF DEFAULT” IS GIVEN BY THE FIRST LIEN CREDIT AGENT OR A FIRST LIEN CREDIT LENDER TO THE COMPANY, OR BY THE COMPANY TO THE FIRST LIEN CREDIT AGENT OR A FIRST LIEN CREDIT LENDER OR (B) THE ACCELERATION OF THE MATURITY OF ANY OF THE FIRST LIEN LOANS SHALL HAVE OCCURRED AS A RESULT OF SUCH “EVENT OF DEFAULT” OR (C) ANY OF THE FIRST LIEN COMMITMENTS SHALL HAVE BEEN TERMINATED AS A RESULT OF SUCH “EVENT OF DEFAULT”; (G)           INSOLVENCY; VOLUNTARY PROCEEDINGS.  THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY (I) GENERALLY FAILS TO PAY, OR ADMITS IN WRITING ITS INABILITY TO PAY, ITS DEBTS AS THEY BECOME DUE, SUBJECT TO APPLICABLE GRACE PERIODS, IF ANY, WHETHER AT STATED MATURITY OR OTHERWISE; (II) COMMENCES ANY INSOLVENCY PROCEEDING WITH RESPECT TO ITSELF; OR (III) TAKES ANY ACTION TO EFFECTUATE OR AUTHORIZE ANY OF THE FOREGOING; (H)           INVOLUNTARY PROCEEDINGS. (I) ANY INVOLUNTARY INSOLVENCY PROCEEDING IS COMMENCED OR FILED AGAINST THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY, OR ANY WRIT,   70 --------------------------------------------------------------------------------   JUDGMENT, WARRANT OF ATTACHMENT, EXECUTION OR SIMILAR PROCESS, IS ISSUED OR LEVIED AGAINST ALL OR A SUBSTANTIAL PART OF THE COMPANY’S, ANY GUARANTOR’S OR ANY SUBSIDIARY’S PROPERTIES, AND ANY SUCH PROCEEDING OR PETITION SHALL NOT BE DISMISSED, OR SUCH WRIT, JUDGMENT, WARRANT OF ATTACHMENT, EXECUTION OR SIMILAR PROCESS SHALL NOT BE RELEASED, VACATED OR FULLY BONDED WITHIN 60 DAYS AFTER COMMENCEMENT, FILING OR LEVY; (II) THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY ADMITS THE MATERIAL ALLEGATIONS OF A PETITION AGAINST IT IN ANY INSOLVENCY PROCEEDING, OR AN ORDER FOR RELIEF (OR SIMILAR ORDER UNDER NON-U.S. LAW) IS ORDERED IN ANY INSOLVENCY PROCEEDING; OR (III) THE COMPANY, ANY GUARANTOR OR ANY SUBSIDIARY ACQUIESCES IN THE APPOINTMENT OF A RECEIVER, TRUSTEE, CUSTODIAN, CONSERVATOR, LIQUIDATOR, MORTGAGEE IN POSSESSION (OR AGENT THEREFOR), OR OTHER SIMILAR PERSON FOR ITSELF OR A SUBSTANTIAL PORTION OF ITS PROPERTY OR BUSINESS; (I)            MONETARY JUDGMENTS.  ONE OR MORE NON-INTERLOCUTORY JUDGMENTS, NON-INTERLOCUTORY ORDERS, DECREES OR ARBITRATION AWARDS IS ENTERED AGAINST THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY INVOLVING IN THE AGGREGATE A LIABILITY (TO THE EXTENT NOT COVERED BY INDEPENDENT THIRD-PARTY INSURANCE AS TO WHICH THE INSURER DOES NOT DISPUTE COVERAGE) AS TO ANY SINGLE OR RELATED SERIES OF TRANSACTIONS, INCIDENTS OR CONDITIONS, OF $5,000,000 OR MORE, AND THE SAME SHALL REMAIN UNSATISFIED, UNVACATED AND UNSTAYED PENDING APPEAL FOR A PERIOD OF 30 DAYS AFTER THE ENTRY THEREOF; (J)            CHANGE OF CONTROL.  THERE OCCURS ANY CHANGE OF CONTROL; (K)           LOSS OF PERMIT.  ANY GOVERNMENTAL AUTHORITY REVOKES OR FAILS TO RENEW ANY MATERIAL LICENSE, PERMIT OR FRANCHISE OF THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY, OR THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY FOR ANY REASON LOSES ANY MATERIAL LICENSE, PERMIT OR FRANCHISE, OR THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY SUFFERS THE IMPOSITION OF ANY RESTRAINING ORDER, ESCROW, SUSPENSION OR IMPOUND OF FUNDS IN CONNECTION WITH ANY PROCEEDING (JUDICIAL OR ADMINISTRATIVE) WITH RESPECT TO ANY MATERIAL LICENSE, PERMIT OR FRANCHISE AND, IN EACH CASE, SUCH REVOCATION, FAILURE OR LOSS COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; AND SUCH DEFAULT REMAINS UNREMEDIED FOR A PERIOD OF 30 DAYS AFTER THE EARLIER OF (I) THE DATE UPON WHICH A RESPONSIBLE OFFICER KNEW OR REASONABLY SHOULD HAVE KNOWN OF SUCH DEFAULT OR (II) THE DATE UPON WHICH WRITTEN NOTICE THEREOF IS GIVEN TO THE COMPANY BY THE ADMINISTRATIVE AGENT OR ANY LENDER; (L)            ADVERSE CHANGE.  THERE OCCURS A MATERIAL ADVERSE EFFECT; (M)          GUARANTY DEFAULT.  A GUARANTY IS FOR ANY REASON PARTIALLY (INCLUDING WITH RESPECT TO FUTURE ADVANCES) OR WHOLLY REVOKED OR INVALIDATED, OR OTHERWISE CEASES TO BE IN FULL FORCE AND EFFECT, OR SUCH GUARANTOR OR ANY OTHER PERSON CONTESTS IN ANY MANNER THE VALIDITY OR ENFORCEABILITY THEREOF OR DENIES THAT IT HAS ANY FURTHER LIABILITY OR OBLIGATION THEREUNDER; (N)           ENFORCEABILITY OR PERFECTION OF LOAN DOCUMENTS.  (I) ANY LOAN DOCUMENT SHALL, AT ANY TIME AFTER ITS EXECUTION AND DELIVERY AND FOR ANY REASON, CEASE TO BE IN FULL FORCE AND EFFECT OR SHALL BE DECLARED TO BE NULL AND VOID, THE VALIDITY OR ENFORCEABILITY THEREOF SHALL BE CONTESTED BY ANY PERSON PARTY THERETO (OTHER THAN THE ADMINISTRATIVE AGENT OR ANY LENDER) OR ANY SUCH PERSON PARTY THERETO (OTHER THAN THE ADMINISTRATIVE AGENT OR ANY LENDER) SHALL DENY THAT IT HAS ANY OR FURTHER LIABILITY OR OBLIGATION THEREUNDER, OR THE OBLIGATIONS SHALL BE SUBORDINATED FOR ANY REASON (OTHER THAN BY THE CONSENT OF THE LENDERS); OR (II) ANY LIEN CREATED   71 --------------------------------------------------------------------------------   UNDER ANY LOAN DOCUMENT SHALL FAIL TO CONSTITUTE A FULLY PERFECTED LIEN IN A MATERIAL PORTION OF THE COLLATERAL, SUBJECT ONLY TO PERMITTED LIENS, AND SUCH FAILURE SHALL CONTINUE FOR AT LEAST 30 DAYS AFTER THE EARLIER OF (A) THE DATE UPON WHICH A RESPONSIBLE OFFICER KNEW OR REASONABLY SHOULD HAVE KNOWN OF SUCH DEFAULT OR (B) THE DATE UPON WHICH WRITTEN NOTICE THEREOF IS GIVEN TO THE COMPANY BY THE ADMINISTRATIVE AGENT OR ANY LENDER; (O)           MATERIAL AGREEMENTS.  THE COMPANY, ANY GUARANTOR OR ANY OTHER SUBSIDIARY FAILS TO DULY OBSERVE, PERFORM OR COMPLY WITH ANY AGREEMENT WITH ANY PERSON OR ANY TERM OR CONDITION OF ANY INSTRUMENT, IF SUCH FAILURE IS NOT REMEDIED WITHIN THE APPLICABLE PERIOD OF GRACE (IF ANY) PROVIDED IN SUCH AGREEMENT OR INSTRUMENT AND THE TERMINATION OF THE INSTRUMENT OR AGREEMENT WOULD HAVE A MATERIAL ADVERSE EFFECT; OR (P)           ERISA.  EITHER (I) ANY “ACCUMULATED FUNDING DEFICIENCY” (AS DEFINED IN SECTION 412(A) OF THE CODE) IN EXCESS OF $100,000 EXISTS WITH RESPECT TO ANY ERISA PLAN, WHETHER OR NOT WAIVED BY THE SECRETARY OF THE TREASURY OR HIS DELEGATE, OR (II) THE COMPANY OR ANY ERISA AFFILIATE INSTITUTES STEPS TO TERMINATE ANY ERISA PLAN AND THE THEN CURRENT VALUE OF SUCH ERISA PLAN’S BENEFIT LIABILITIES EXCEEDS THE THEN CURRENT VALUE OF SUCH ERISA PLAN’S ASSETS AVAILABLE FOR THE PAYMENT OF SUCH BENEFIT LIABILITIES BY MORE THAN $100,000.                 9.2           Remedies.  If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders: (A)           DECLARE THE COMMITMENT, IF ANY, OF EACH LENDER TO MAKE LOANS TO BE TERMINATED, OR DECLARE ALL OR ANY PART OF THE UNPAID PRINCIPAL OF THE LOANS, ALL INTEREST ACCRUED AND UNPAID THEREON AND ALL OTHER AMOUNTS PAYABLE UNDER THE LOAN DOCUMENTS TO BE IMMEDIATELY DUE AND PAYABLE, WHEREUPON THE SAME SHALL, WITHOUT PRESENTMENT, DEMAND, PROTEST, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION, OR ANY OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY THE COMPANY AND EACH GUARANTOR; (B)           GIVE NOTICE THEREOF TO THE COLLATERAL TRUSTEE AND ISSUE DIRECTIONS TO THE COLLATERAL TRUSTEE TO COMMENCE EXERCISE OF ANY OF THE COLLATERAL TRUSTEE’S RIGHTS AND REMEDIES UNDER THE COLLATERAL TRUST AGREEMENT AND THE OTHER SECURITY DOCUMENTS AND OTHERWISE DIRECT THE TIME, METHOD AND PLACE OF CONDUCTING ANY PROCEEDING FOR THE EXERCISE OF ANY RIGHT OR REMEDY AVAILABLE TO THE COLLATERAL TRUSTEE WITH RESPECT TO THE COLLATERAL, OR OF EXERCISING ANY TRUST OR POWER CONFERRED ON THE COLLATERAL TRUSTEE, OR FOR THE TAKING OF ANY OTHER ACTION AUTHORIZED BY THE INSTRUMENTS COMPRISING THE TRUST ESTATE (INCLUDING THE MAKING OF ANY DETERMINATIONS TO BE MADE BY THE COLLATERAL TRUSTEE THEREUNDER); AND (C)           EXERCISE ON BEHALF OF ITSELF AND THE LENDERS ALL RIGHTS AND REMEDIES AVAILABLE TO IT AND THE LENDERS UNDER THE LOAN DOCUMENTS OR APPLICABLE LAW; PROVIDED, HOWEVER, THAT UPON THE OCCURRENCE OF ANY EVENT SPECIFIED IN SECTION 9.1(G) OR (H) (IN THE CASE OF CLAUSE (I) OF SECTION 9.1(H) UPON THE EXPIRATION OF THE 60-DAY PERIOD MENTIONED THEREIN), THE OBLIGATION OF EACH LENDER TO MAKE LOANS SHALL AUTOMATICALLY TERMINATE AND THE UNPAID PRINCIPAL AMOUNT OF ALL OUTSTANDING LOANS AND ALL INTEREST AND OTHER AMOUNTS AS AFORESAID SHALL AUTOMATICALLY BECOME DUE AND PAYABLE WITHOUT FURTHER ACT OF THE ADMINISTRATIVE AGENT, OR ANY LENDER AND WITHOUT PRESENTMENT, DEMAND, PROTEST, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION OR ANY OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY THE COMPANY AND EACH   72 --------------------------------------------------------------------------------   GUARANTOR.                 9.3           Rights Not Exclusive.  The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE X THE ADMINISTRATIVE AGENT                 10.1         Appointment and Authorization; Limitation of Agency.  Each Lender hereby irrevocably (subject to Section 10.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  The duties of the Administrative Agent shall be administrative and mechanical in nature; notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duty or responsibility, except those expressly set forth herein, nor shall the Administrative Agent, under any circumstances, have or be deemed to have any fiduciary relationship with any Person, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.                 10.2         Delegation of Duties.  The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care.                 10.3         Liability of Administrative Agent.  None of the Administrative Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company, any Guarantor or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness (other than such Administrative Agent-Related Person’s own due execution and delivery), genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company, any Guarantor or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Administrative Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company or any of   73 --------------------------------------------------------------------------------   the Company’s Subsidiaries or Affiliates.                 10.4         Reliance by Administrative Agent. (A)           THE ADMINISTRATIVE AGENT SHALL BE ENTITLED TO RELY, AND SHALL BE FULLY PROTECTED IN RELYING, UPON ANY WRITING, RESOLUTION, NOTICE, CONSENT, CERTIFICATE, AFFIDAVIT, LETTER, TELEGRAM, FACSIMILE, TELEX OR TELEPHONE MESSAGE, STATEMENT OR OTHER DOCUMENT OR CONVERSATION BELIEVED BY IT TO BE GENUINE AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE BY THE PROPER PERSON OR PERSONS, AND UPON ADVICE AND STATEMENTS OF LEGAL COUNSEL, INDEPENDENT ACCOUNTANTS AND OTHER EXPERTS SELECTED BY THE ADMINISTRATIVE AGENT. THE ADMINISTRATIVE AGENT SHALL BE FULLY JUSTIFIED IN FAILING OR REFUSING TO TAKE ANY ACTION UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT UNLESS IT SHALL FIRST RECEIVE SUCH ADVICE OR CONCURRENCE OF THE LENDERS AS IT DEEMS APPROPRIATE AND, IF IT SO REQUESTS, IT SHALL FIRST BE INDEMNIFIED TO ITS SATISFACTION BY THE LENDERS AGAINST ANY AND ALL LIABILITY AND EXPENSE WHICH MAY BE INCURRED BY IT BY REASON OF TAKING OR CONTINUING TO TAKE ANY SUCH ACTION.  THE ADMINISTRATIVE AGENT SHALL IN ALL CASES BE FULLY PROTECTED IN ACTING, OR IN REFRAINING FROM ACTING, UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ACCORDANCE WITH A REQUEST OR CONSENT OF THE LENDERS AND SUCH REQUEST AND ANY ACTION TAKEN OR FAILURE TO ACT PURSUANT THERETO SHALL BE BINDING UPON ALL OF THE LENDERS. (B)           FOR PURPOSES OF DETERMINING COMPLIANCE WITH THE CONDITIONS SPECIFIED IN SECTIONS 5.1, 5.2 AND 5.3, EACH LENDER THAT HAS MADE AVAILABLE TO THE ADMINISTRATIVE AGENT ITS PRO RATA SHARE OF THE INITIAL CREDIT EXTENSION OR SUBSEQUENT CREDIT EXTENSION, AS THE CASE MAY BE, SHALL BE DEEMED TO HAVE CONSENTED TO, APPROVED OR ACCEPTED OR TO BE SATISFIED WITH, EACH DOCUMENT OR OTHER MATTER EITHER SENT BY THE ADMINISTRATIVE AGENT TO SUCH LENDER FOR CONSENT, APPROVAL, ACCEPTANCE OR SATISFACTION, OR REQUIRED THEREUNDER TO BE CONSENTED TO OR APPROVED BY OR ACCEPTABLE OR SATISFACTORY TO THE LENDER AS A CONDITION PRECEDENT TO SUCH INITIAL CREDIT EXTENSION OR SUBSEQUENT CREDIT EXTENSION, AS APPLICABLE.                 10.5         Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to Defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  The Administrative Agent will notify the Lenders of its receipt of any such notice.  Subject to Section 10.4(a), the Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Lenders in accordance with Article IX; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.                 10.6         Credit Decision.  Each Lender acknowledges that no Administrative Agent-Related Person has made any representation or warranty to it, and that no act by any Administrative Agent-Related Person hereafter taken, including any review of the affairs of the Company, any Guarantor or their respective Subsidiaries, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Lender.  Each   74 --------------------------------------------------------------------------------   Lender represents to the Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, Property, financial and other condition and creditworthiness of the Company, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder.  Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, Property, financial and other condition and creditworthiness of the Company.  Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, Property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Administrative Agent-Related Persons.                 10.7         Indemnification.  Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Administrative Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata according to each respective Lender’s Pro Rata Share, each Administrative Agent-Related Person from and against any and all Indemnified Liabilities INCLUDING SUCH INDEMNIFIED LIABILITIES AS MAY ARISE OR BE CAUSED BY THE NEGLIGENCE, SOLE, JOINT, CONCURRENT, COMPARATIVE OR OTHERWISE OF SUCH ADMINISTRATIVE AGENT-RELATED PERSONS; provided, however, that no Lender shall be liable for the payment to any Administrative Agent-Related Persons of any portion of such Indemnified Liabilities to the extent the same arise from (i) the gross negligence or willful misconduct of any Administrative Agent-Related Person or (ii) a claim or action asserted by one or more other Administrative Agent-Related Persons.  Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out of pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Transaction Document or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 10.7 shall survive the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent.                 10.8         Administrative Agent in Individual Capacity.  Credit Suisse, Cayman Islands Branch, and its Affiliates may make loans to, accept deposits from, acquire or underwrite equity or debt securities of and generally engage in any kind of banking, investment banking, trust, financial advisory, underwriting or other business with the Company and its Affiliates as though Credit Suisse, Cayman Islands Branch, was not the Administrative Agent hereunder and without notice to or consent of the Lenders.  The Lenders acknowledge that, pursuant to such activities,   75 --------------------------------------------------------------------------------   Credit Suisse, Cayman Islands Branch, or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliate) and acknowledge that the Administrative Agent-Related Persons shall be under no obligation to provide such information to them.  With respect to Obligations held by it, Credit Suisse, Cayman Islands Branch, shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent.                 10.9         Successor Administrative Agent.  The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders.  If the Administrative Agent resigns under this Agreement, the Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders.  If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders, a successor administrative agent from among the Lenders.  Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article X and Sections 11.4 and 11.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.  If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Lenders appoint a successor administrative agent as provided for above.                 10.10       Withholding Tax. (A)           IF ANY LENDER IS A “FOREIGN CORPORATION, PARTNERSHIP OR TRUST” WITHIN THE MEANING OF THE CODE AND SUCH LENDER CLAIMS EXEMPTION FROM, OR A REDUCTION OF, U.S. WITHHOLDING TAX UNDER SECTIONS 1441 OR 1442 OF THE CODE, SUCH LENDER AGREES WITH AND IN FAVOR OF THE ADMINISTRATIVE AGENT, TO DELIVER TO THE ADMINISTRATIVE AGENT: (I)            IF SUCH LENDER CLAIMS AN EXEMPTION FROM, OR A REDUCTION OF, WITHHOLDING TAX UNDER A UNITED STATES TAX TREATY, PROPERLY COMPLETED IRS FORMS 1001 AND W 8 BEFORE THE PAYMENT OF ANY INTEREST IN THE FIRST CALENDAR YEAR AND BEFORE THE PAYMENT OF ANY INTEREST IN EACH THIRD SUCCEEDING CALENDAR YEAR DURING WHICH INTEREST MAY BE PAID UNDER THIS AGREEMENT; (II)           IF SUCH LENDER CLAIMS THAT INTEREST PAID UNDER THIS AGREEMENT IS EXEMPT FROM UNITED STATES WITHHOLDING TAX BECAUSE IT IS EFFECTIVELY CONNECTED WITH A UNITED STATES TRADE OR BUSINESS OF SUCH LENDER, TWO PROPERLY COMPLETED AND EXECUTED COPIES OF IRS FORM 4224 BEFORE THE PAYMENT OF ANY INTEREST IS DUE IN THE FIRST TAXABLE YEAR OF SUCH LENDER AND IN EACH SUCCEEDING TAXABLE YEAR OF SUCH LENDER DURING WHICH INTEREST MAY BE PAID UNDER THIS AGREEMENT, AND IRS   76 --------------------------------------------------------------------------------   FORM W 9; AND (III)          SUCH OTHER FORM OR FORMS AS MAY BE REQUIRED UNDER THE CODE OR OTHER LAWS OF THE UNITED STATES AS A CONDITION TO EXEMPTION FROM, OR REDUCTION OF, UNITED STATES WITHHOLDING TAX. Such Lender agrees to promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (B)           IF ANY LENDER CLAIMS EXEMPTION FROM, OR REDUCTION OF, WITHHOLDING TAX UNDER A UNITED STATES TAX TREATY BY PROVIDING IRS FORM 1001 AND SUCH LENDER SELLS, ASSIGNS, GRANTS A PARTICIPATION IN, OR OTHERWISE TRANSFERS ALL OR PART OF THE OBLIGATIONS HELD BY SUCH LENDER, SUCH LENDER AGREES TO NOTIFY THE ADMINISTRATIVE AGENT OF THE PERCENTAGE AMOUNT IN WHICH IT IS NO LONGER THE BENEFICIAL OWNER OF OBLIGATIONS HELD BY SUCH LENDER.  TO THE EXTENT OF SUCH PERCENTAGE AMOUNT, THE ADMINISTRATIVE AGENT WILL TREAT SUCH LENDER’S IRS FORM 1001 AS NO LONGER VALID. (C)           IF ANY LENDER CLAIMING EXEMPTION FROM UNITED STATES WITHHOLDING TAX BY FILING IRS FORM 4224 WITH THE ADMINISTRATIVE AGENT SELLS, ASSIGNS, GRANTS A PARTICIPATION IN, OR OTHERWISE TRANSFERS ALL OR PART OF THE OBLIGATIONS HELD BY SUCH LENDER, SUCH LENDER AGREES TO UNDERTAKE SOLE RESPONSIBILITY FOR COMPLYING WITH THE WITHHOLDING TAX REQUIREMENTS IMPOSED BY SECTIONS 1441 AND 1442 OF THE CODE. (D)           IF ANY LENDER IS ENTITLED TO A REDUCTION IN THE APPLICABLE WITHHOLDING TAX, THE ADMINISTRATIVE AGENT MAY WITHHOLD FROM ANY INTEREST PAYMENT TO SUCH LENDER AN AMOUNT EQUIVALENT TO THE APPLICABLE WITHHOLDING TAX AFTER TAKING INTO ACCOUNT SUCH REDUCTION.  IF THE FORMS OR OTHER DOCUMENTATION REQUIRED BY SECTION 10.10(A) OF THIS SECTION ARE NOT DELIVERED TO THE ADMINISTRATIVE AGENT, THEN THE ADMINISTRATIVE AGENT MAY WITHHOLD FROM ANY INTEREST PAYMENT TO SUCH LENDER NOT PROVIDING SUCH FORMS OR OTHER DOCUMENTATION AN AMOUNT EQUIVALENT TO THE APPLICABLE WITHHOLDING TAX. (E)           IF THE IRS OR ANY OTHER GOVERNMENTAL AUTHORITY OF THE UNITED STATES OR OTHER JURISDICTION ASSERTS A CLAIM THAT THE ADMINISTRATIVE AGENT DID NOT PROPERLY WITHHOLD TAX FROM AMOUNTS PAID TO OR FOR THE ACCOUNT OF ANY LENDER (BECAUSE THE APPROPRIATE FORM WAS NOT DELIVERED, WAS NOT PROPERLY EXECUTED, OR BECAUSE SUCH LENDER FAILED TO NOTIFY THE ADMINISTRATIVE AGENT OF A CHANGE IN CIRCUMSTANCES WHICH RENDERED THE EXEMPTION FROM, OR REDUCTION OF, WITHHOLDING TAX INEFFECTIVE, OR FOR ANY OTHER REASON) SUCH LENDER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT FULLY FOR ALL AMOUNTS PAID, DIRECTLY OR INDIRECTLY, BY THE ADMINISTRATIVE AGENT AS TAX OR OTHERWISE, INCLUDING PENALTIES AND INTEREST, AND INCLUDING ANY TAXES IMPOSED BY ANY JURISDICTION ON THE AMOUNTS PAYABLE TO THE ADMINISTRATIVE AGENT UNDER THIS SECTION 10.10(E), TOGETHER WITH ALL COSTS AND EXPENSES (INCLUDING ATTORNEY COSTS).  THE OBLIGATION OF THE LENDERS UNDER THIS SECTION 10.10(E) SHALL SURVIVE THE PAYMENT OF ALL OBLIGATIONS AND THE RESIGNATION OR REPLACEMENT OF THE ADMINISTRATIVE AGENT.                 10.11       Arrangers; Syndication Agents.  Each of the Arrangers and the Syndication Agent, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement or the other Loan Documents.   77 --------------------------------------------------------------------------------                   10.12       Release of Collateral.  The Administrative Agent is hereby irrevocably authorized by each of the Lenders to instruct the Collateral Trustee to effect any release of Liens or guarantee obligations contemplated by Section 11.26. ARTICLE XI MISCELLANEOUS                 11.1         Amendments and Waivers.  No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company, any Guarantor or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Administrative Agent at the written request of the Required Lenders) and the Company and acknowledged by the Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given; provided, however, that no such waiver, amendment, modification, termination or consent shall, unless in writing and signed by all the Lenders and the Company and acknowledged by the Administrative Agent, do any of the following: (A)           INCREASE OR EXTEND THE COMMITMENT OF ANY LENDER; (B)           POSTPONE THE FINAL MATURITY DATE OF ANY LOAN, OR POSTPONE OR DELAY ANY DATE FIXED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT FOR ANY PAYMENT OF PRINCIPAL, INTEREST, FEES OR OTHER AMOUNTS DUE TO THE LENDERS (OR ANY OF THEM) HEREUNDER (INCLUDING ANY MANDATORY PREPAYMENTS THEREOF) OR UNDER ANY OTHER LOAN DOCUMENT; (C)           REDUCE THE PRINCIPAL OF, OR THE RATE OF INTEREST SPECIFIED HEREIN ON ANY LOAN, OR (SUBJECT TO CLAUSE (II) BELOW) ANY FEES OR OTHER AMOUNTS PAYABLE HEREUNDER (INCLUDING ANY MANDATORY PREPAYMENTS THEREOF) OR UNDER ANY OTHER LOAN DOCUMENT; (D)           CHANGE THE PRO RATA SHARES OR CHANGE IN ANY MANNER THE DEFINITION OF “REQUIRED LENDERS” OR THE LENDERS REQUIRED TO RESCIND OR ANNUL AN ACCELERATION; (E)           AMEND THIS SECTION 11.1 OR SECTION 9.1, OR ANY PROVISION OF THIS AGREEMENT WHICH, BY ITS TERMS, EXPRESSLY REQUIRES THE APPROVAL OR CONCURRENCE OF ALL LENDERS; OR (F)            RELEASE ALL, SUBSTANTIALLY ALL, OR ANY MATERIAL PORTION OF THE COLLATERAL (EXCEPT FOR RELEASES IN CONNECTION WITH DISPOSITIONS WHICH ARE PERMITTED HEREUNDER OR UNDER ANY LOAN DOCUMENT), OR RELEASE ANY GUARANTOR FROM ANY GUARANTY; provided further, however, that (i) any amendment, modification, termination or waiver of any of the provisions contained in Article V shall be effective only if evidenced by a writing signed by or on behalf of the Administrative Agent and the Required Lenders, and (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document.                 11.2         Notices.   78 --------------------------------------------------------------------------------   (A)           ALL NOTICES, REQUESTS AND OTHER COMMUNICATIONS SHALL BE IN WRITING AND MAILED, FAXED OR DELIVERED, TO THE ADDRESS OR FACSIMILE NUMBER SPECIFIED FOR NOTICES ON THE SIGNATURE PAGES HEREOF; OR, AS DIRECTED TO THE COMPANY OR THE ADMINISTRATIVE AGENT, TO SUCH OTHER ADDRESS AS SHALL BE DESIGNATED BY SUCH PARTY IN A WRITTEN NOTICE TO THE OTHER PARTIES, AND AS DIRECTED TO ANY OTHER PARTY, AT SUCH OTHER ADDRESS AS SHALL BE DESIGNATED BY SUCH PARTY IN A WRITTEN NOTICE TO THE COMPANY AND THE ADMINISTRATIVE AGENT. (B)           ALL SUCH NOTICES, REQUESTS AND COMMUNICATIONS SHALL, WHEN TRANSMITTED BY OVERNIGHT DELIVERY, OR FAXED, BE EFFECTIVE WHEN DELIVERED FOR OVERNIGHT (NEXT-DAY) DELIVERY, OR TRANSMITTED IN LEGIBLE FORM BY FACSIMILE MACHINE, RESPECTIVELY, OR IF MAILED, UPON THE THIRD BUSINESS DAY AFTER THE DATE DEPOSITED INTO THE U.S. MAIL, OR IF DELIVERED, UPON DELIVERY; EXCEPT THAT NOTICES PURSUANT TO ARTICLE II OR IX SHALL NOT BE EFFECTIVE UNTIL ACTUALLY RECEIVED BY THE ADMINISTRATIVE AGENT. (C)           ANY AGREEMENT OF THE ADMINISTRATIVE AGENT AND THE LENDERS HEREIN TO RECEIVE CERTAIN NOTICES BY TELEPHONE OR FACSIMILE IS SOLELY FOR THE CONVENIENCE AND AT THE REQUEST OF THE COMPANY.  THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL BE ENTITLED TO RELY ON THE AUTHORITY OF ANY PERSON PURPORTING TO BE A PERSON AUTHORIZED BY THE COMPANY TO GIVE SUCH NOTICE AND THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO THE COMPANY OR OTHER PERSON ON ACCOUNT OF ANY ACTION TAKEN OR NOT TAKEN BY THE ADMINISTRATIVE AGENT OR THE LENDERS IN RELIANCE UPON SUCH TELEPHONIC OR FACSIMILE NOTICE.  THE OBLIGATION OF THE COMPANY TO REPAY THE LOANS SHALL NOT BE AFFECTED IN ANY WAY OR TO ANY EXTENT BY ANY FAILURE BY THE ADMINISTRATIVE AGENT AND THE LENDERS TO RECEIVE WRITTEN CONFIRMATION OF ANY TELEPHONIC OR FACSIMILE NOTICE OR THE RECEIPT BY THE ADMINISTRATIVE AGENT AND THE LENDERS OF A CONFIRMATION WHICH IS AT VARIANCE WITH THE TERMS UNDERSTOOD BY THE ADMINISTRATIVE AGENT AND THE LENDERS TO BE CONTAINED IN THE TELEPHONIC OR FACSIMILE NOTICE.                 11.3         No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof;  nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.                 11.4         Costs and Expenses.  The Company shall: (A)           WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, PAY OR REIMBURSE THE ADMINISTRATIVE AGENT WITHIN FIVE BUSINESS DAYS AFTER DEMAND (SUBJECT TO SECTION 5.3(C)) FOR ALL REASONABLE COSTS AND EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT OR ANY OTHER AGENT, THE LENDERS OR ANY OF THEIR AFFILIATES IN CONNECTION WITH THE SYNDICATIONS OF THE EXTENSIONS OF CREDIT HEREUNDER (OTHER THAN FEES PAYABLE TO SYNDICATE MEMBERS) AND THE DEVELOPMENT, PREPARATION, DELIVERY, ADMINISTRATION AND EXECUTION OF, AND ANY AMENDMENT, SUPPLEMENT, WAIVER OR MODIFICATION TO (IN EACH CASE, WHETHER OR NOT CONSUMMATED), THIS AGREEMENT, ANY LOAN DOCUMENT AND ANY OTHER DOCUMENTS PREPARED IN CONNECTION HEREWITH OR THEREWITH, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND THE SYNDICATION OF THE CREDIT FACILITIES PROVIDED HEREIN, INCLUDING ATTORNEY COSTS INCURRED BY THE ANY SUCH PERSON WITH RESPECT THERETO EXCEPT SUCH COSTS AND EXPENSES AS MAY BE INCURRED BY THE ASSIGNOR LENDERS OR ASSIGNEE UNDER SECTION 11.8(A); AND   79 --------------------------------------------------------------------------------   (B)           PAY OR REIMBURSE THE ADMINISTRATIVE AGENT, ANY OTHER AGENT AND EACH LENDER WITHIN FIVE BUSINESS DAYS AFTER DEMAND (SUBJECT TO SECTION 5.3(C)) FOR ALL COSTS AND EXPENSES (INCLUDING ATTORNEY COSTS) INCURRED BY EACH OF THEM IN CONNECTION WITH THE ENFORCEMENT, ATTEMPTED ENFORCEMENT, OR PRESERVATION OF ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT DURING THE EXISTENCE OF AN EVENT OF DEFAULT OR AFTER ACCELERATION OF THE LOANS (INCLUDING IN CONNECTION WITH ANY “WORKOUT” OR RESTRUCTURING REGARDING THE LOANS, AND INCLUDING IN ANY INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING).                 11.5         Indemnity.  Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold each Agent-Related Person and each Lender and each of their respective Affiliates, successors and assignors and its and their respective officers, directors, employees, counsel, agents, advisors, controlling Persons, members and attorneys in fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans, and the termination, resignation or replacement of the Administrative Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, including any of the Transaction Documents, or the transactions contemplated hereby, including the TexCal Acquisition, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement, any Transaction Agreement, the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY’S NEGLIGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM; provided, however, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent same arise from the gross negligence or willful misconduct of any Indemnified Person.  No Indemnified Person shall be liable for any damages arising from the use by unauthorized Persons of information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such Persons or for any special, indirect, consequential or punitive damages in connection with this Agreement.  All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor.  The agreements in this Sections 11.4 and 11.5 shall survive payment of all other Obligations.                 11.6         Payments Set Aside.  To the extent that the Company makes a payment to the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, debtor-in-possession, receiver or any other Person, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery   80 --------------------------------------------------------------------------------   the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent or such Lender upon demand its Pro Rata Share of any amount so recovered from or repaid by the Administrative Agent or such Lender.                 11.7         Successors and Assigns.  This Agreement shall become effective at the Restatement Effective Time after it shall have been executed by the Company, each Original Guarantor, each TexCal Subsidiary and the Administrative Agent and after the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender.                 11.8         Assignments, Participations, etc. (A)           EACH LENDER MAY ASSIGN TO ONE OR MORE ASSIGNEES (EACH, AN “ASSIGNEE”) ALL OR A PORTION OF ITS INTERESTS, RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT (INCLUDING ALL OR A PORTION OF ITS COMMITMENT AND THE LOANS AT THE TIME OWING TO IT) WITH THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT (NOT TO BE UNREASONABLY WITHHELD OR DELAYED); PROVIDED, HOWEVER, THAT (I) THE AMOUNT OF THE COMMITMENT OR LOANS OF THE ASSIGNING LENDER SUBJECT TO EACH SUCH ASSIGNMENT (DETERMINED AS OF THE DATE THE ASSIGNMENT AND ACCEPTANCE IN THE FORM OF EXHIBIT “E” (THE “ASSIGNMENT AND ACCEPTANCE”) WITH RESPECT TO SUCH ASSIGNMENT IS DELIVERED TO THE ADMINISTRATIVE AGENT AND DETERMINED ON AN AGGREGATE BASIS IN THE EVENT OF CONCURRENT ASSIGNMENTS TO RELATED FUNDS (AS DEFINED BELOW)) SHALL NOT, UNLESS CONSENTED TO BY THE ADMINISTRATIVE AGENT, BE LESS THAN $1,000,000 (OR, IF LESS, THE ENTIRE REMAINING AMOUNT OF SUCH LENDER’S COMMITMENT OR LOANS), (II) THE PARTIES TO EACH SUCH ASSIGNMENT SHALL EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT AN ASSIGNMENT AND ACCEPTANCE VIA AN ELECTRONIC SETTLEMENT SYSTEM ACCEPTABLE TO THE ADMINISTRATIVE AGENT (OR, IF PREVIOUSLY AGREED WITH THE ADMINISTRATIVE AGENT, MANUALLY) AND SHALL PAY TO THE ADMINISTRATIVE AGENT A PROCESSING AND RECORDATION FEE IN THE AMOUNT OF $3,500.00 (WHICH FEE MAY BE WAIVED OR REDUCED IN THE SOLE DISCRETION OF THE ADMINISTRATIVE AGENT), PROVIDED, HOWEVER, THAT ONLY ONE SUCH FEE SHALL BE PAYABLE IN THE CASE OF CONCURRENT ASSIGNMENTS TO PERSONS THAT, AFTER GIVING EFFECT TO SUCH ASSIGNMENTS, WILL BE RELATED FUNDS AND (III) THE ASSIGNEE, IF IT SHALL NOT BE A LENDER, SHALL DELIVER TO THE ADMINISTRATIVE AGENT AN ADMINISTRATIVE QUESTIONNAIRE IN SUCH FORM AS SUPPLIED FROM TIME TO TIME BY THE ADMINISTRATIVE AGENT (AN “ADMINISTRATIVE QUESTIONNAIRE”) AND ALL APPLICABLE TAX FORMS. UPON ACCEPTANCE AND RECORDING PURSUANT TO SECTION 11.8(C), FROM AND AFTER THE EFFECTIVE DATE SPECIFIED IN EACH ASSIGNMENT AND ACCEPTANCE, (A) THE ASSIGNEE THEREUNDER SHALL BE A PARTY HERETO AND, TO THE EXTENT OF THE INTEREST ASSIGNED BY SUCH ASSIGNMENT AND ACCEPTANCE, HAVE THE RIGHTS AND OBLIGATIONS OF A LENDER UNDER THIS AGREEMENT AND (B) THE ASSIGNING LENDER THEREUNDER SHALL, TO THE EXTENT OF THE INTEREST ASSIGNED BY SUCH ASSIGNMENT AND ACCEPTANCE, BE RELEASED FROM ITS OBLIGATIONS UNDER THIS AGREEMENT (AND, IN THE CASE OF AN ASSIGNMENT AND ACCEPTANCE COVERING ALL OR THE REMAINING PORTION OF AN ASSIGNING LENDER’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT, SUCH LENDER SHALL CEASE TO BE A PARTY HERETO BUT SHALL CONTINUE TO BE ENTITLED TO THE BENEFITS OF ARTICLE III AND SECTION 11.5, AS WELL AS TO ANY FEES ACCRUED FOR ITS ACCOUNT PRIOR TO THE EFFECTIVE DATE SPECIFIED IN SUCH ASSIGNMENT AND ACCEPTANCE AND NOT YET PAID). THE TERM “RELATED   81 --------------------------------------------------------------------------------   FUNDS” SHALL MEAN WITH RESPECT TO ANY LENDER THAT IS A FUND OR COMBINED INVESTMENT VEHICLE THAT INVESTS IN BANK LOANS, ANY OTHER FUND THAT INVESTS IN BANK LOANS AND IS MANAGED OR ADVISED BY THE SAME INVESTMENT ADVISOR AS SUCH LENDER OR BY AN AFFILIATE OF SUCH INVESTMENT ADVISOR. (B)           BY EXECUTING AND DELIVERING AN ASSIGNMENT AND ACCEPTANCE, THE ASSIGNING LENDER THEREUNDER AND THE ASSIGNEE THEREUNDER SHALL BE DEEMED TO CONFIRM TO AND AGREE WITH EACH OTHER AND THE OTHER PARTIES HERETO AS FOLLOWS: (I) SUCH ASSIGNING LENDER WARRANTS THAT IT IS THE LEGAL AND BENEFICIAL OWNER OF THE INTEREST BEING ASSIGNED THEREBY FREE AND CLEAR OF ANY ADVERSE CLAIM AND THAT ITS COMMITMENT, AND THE OUTSTANDING BALANCES OF ITS LOANS, IN EACH CASE WITHOUT GIVING EFFECT TO ASSIGNMENTS THEREOF WHICH HAVE NOT BECOME EFFECTIVE, ARE AS SET FORTH IN SUCH ASSIGNMENT AND ACCEPTANCE, (II) EXCEPT AS SET FORTH IN (I) ABOVE, SUCH ASSIGNING LENDER MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO RESPONSIBILITY WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN CONNECTION WITH THIS AGREEMENT, OR THE EXECUTION, LEGALITY, VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO, OR THE FINANCIAL CONDITION OF THE COMPANY OR ANY SUBSIDIARY OR THE PERFORMANCE OR OBSERVANCE BY THE COMPANY OR ANY SUBSIDIARY OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO; (III) SUCH ASSIGNEE REPRESENTS AND WARRANTS THAT IT IS LEGALLY AUTHORIZED TO ENTER INTO SUCH ASSIGNMENT AND ACCEPTANCE; (IV) SUCH ASSIGNEE CONFIRMS THAT IT HAS RECEIVED A COPY OF THIS AGREEMENT, TOGETHER WITH COPIES OF THE MOST RECENT FINANCIAL STATEMENTS REFERRED TO IN SECTION 5.1 OR DELIVERED PURSUANT TO SECTION 7.1, THE INTERCREDITOR AGREEMENT, THE COLLATERAL TRUST AGREEMENT AND SUCH OTHER DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE TO MAKE ITS OWN CREDIT ANALYSIS AND DECISION TO ENTER INTO SUCH ASSIGNMENT AND ACCEPTANCE; (V) SUCH ASSIGNEE WILL INDEPENDENTLY AND WITHOUT RELIANCE UPON THE ADMINISTRATIVE AGENT, SUCH ASSIGNING LENDER OR ANY OTHER LENDER AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN TAKING OR NOT TAKING ACTION UNDER THIS AGREEMENT; (VI) SUCH ASSIGNEE APPOINTS AND AUTHORIZES THE ADMINISTRATIVE AGENT AND THE COLLATERAL TRUSTEE TO TAKE SUCH ACTION AS AGENT ON ITS BEHALF AND TO EXERCISE SUCH POWERS UNDER THIS AGREEMENT AND THE COLLATERAL TRUST AGREEMENT, RESPECTIVELY, AS ARE DELEGATED TO THE ADMINISTRATIVE AGENT AND THE COLLATERAL TRUSTEE, RESPECTIVELY, BY THE TERMS HEREOF AND THEREOF, TOGETHER WITH SUCH POWERS AS ARE REASONABLY INCIDENTAL THERETO; AND (VII) SUCH ASSIGNEE AGREES THAT IT WILL PERFORM IN ACCORDANCE WITH THEIR TERMS ALL THE OBLIGATIONS WHICH BY THE TERMS OF THIS AGREEMENT ARE REQUIRED TO BE PERFORMED BY IT AS A LENDER AND WILL BE BOUND BY AND WILL TAKE NO ACTIONS CONTRARY TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT OR THE COLLATERAL TRUST AGREEMENT. THE ADMINISTRATIVE AGENT SHALL BE ENTITLED TO RELY, WITHOUT ANY INDEPENDENT INVESTIGATION, ON THE REPRESENTATIONS AND WARRANTIES AND OTHER STATEMENTS DEEMED TO BE MADE BY THE ASSIGNING LENDER AND THE ASSIGNEE PURSUANT TO THIS SECTION 11.8(C) AND SHALL NOT INCUR ANY LIABILITY FOR RELYING THEREON. (C)           THE ADMINISTRATIVE AGENT, ACTING FOR THIS PURPOSE AS AN AGENT OF THE COMPANY, SHALL MAINTAIN AT ONE OF ITS OFFICES IN THE CITY OF NEW YORK A COPY OF EACH ASSIGNMENT AND ACCEPTANCE DELIVERED TO IT.  UPON ITS RECEIPT OF, AND CONSENT TO, A DULY COMPLETED ASSIGNMENT AND ACCEPTANCE EXECUTED BY AN ASSIGNING LENDER AND AN ASSIGNEE, AN ADMINISTRATIVE QUESTIONNAIRE COMPLETED IN RESPECT OF THE ASSIGNEE (UNLESS THE ASSIGNEE SHALL ALREADY BE A LENDER HEREUNDER), THE PROCESSING AND RECORDATION FEE REFERRED TO IN SECTION 11.8(B) ABOVE, IF APPLICABLE, AND THE WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT TO SUCH ASSIGNMENT AND ANY APPLICABLE TAX FORMS, THE ADMINISTRATIVE AGENT SHALL (I) ACCEPT SUCH ASSIGNMENT AND   82 --------------------------------------------------------------------------------   ACCEPTANCE AND (II) RECORD THE INFORMATION CONTAINED THEREIN IN THE REGISTER. NO ASSIGNMENT SHALL BE EFFECTIVE UNLESS IT HAS BEEN RECORDED IN THE REGISTER AS PROVIDED IN SECTION 11.8(C).  THE REGISTER SHALL BE AVAILABLE FOR INSPECTION BY THE COMPANY OR ANY LENDER (WITH RESPECT TO ANY ENTRY RELATING TO SUCH LENDER’S LOANS) AT ANY REASONABLE TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR NOTICE. (D)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, ANY LENDER (A “GRANTING LENDER”) MAY GRANT TO A SPECIAL PURPOSE FUNDING VEHICLE (AN “SPC”), IDENTIFIED AS SUCH IN WRITING FROM TIME TO TIME BY THE GRANTING LENDER TO THE ADMINISTRATIVE AGENT AND THE COMPANY, THE OPTION TO PROVIDE TO THE COMPANY ALL OR ANY PART OF ANY LOAN THAT SUCH GRANTING LENDER WOULD OTHERWISE BE OBLIGATED TO MAKE TO THE COMPANY ON THE EFFECTIVE DATE PURSUANT TO THIS AGREEMENT; PROVIDED, HOWEVER, THAT (I) NOTHING HEREIN SHALL CONSTITUTE A COMMITMENT BY ANY SPC TO MAKE ANY LOAN AND (II) IF AN SPC ELECTS NOT TO EXERCISE SUCH OPTION OR OTHERWISE FAILS TO PROVIDE ALL OR ANY PART OF SUCH LOAN, THE GRANTING LENDER SHALL BE OBLIGATED TO MAKE SUCH LOAN PURSUANT TO THE TERMS HEREOF. THE MAKING OF A LOAN BY AN SPC HEREUNDER SHALL UTILIZE THE COMMITMENT OF THE GRANTING LENDER TO THE SAME EXTENT, AND AS IF, SUCH LOAN WERE MADE BY SUCH GRANTING LENDER. EACH PARTY HERETO HEREBY AGREES THAT NO SPC SHALL BE LIABLE FOR ANY INDEMNITY OR SIMILAR PAYMENT OBLIGATION UNDER THIS AGREEMENT (ALL LIABILITY FOR WHICH SHALL REMAIN WITH THE GRANTING LENDER). IN FURTHERANCE OF THE FOREGOING, EACH PARTY HERETO HEREBY AGREES (WHICH AGREEMENT SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT) THAT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF ALL OUTSTANDING COMMERCIAL PAPER OR OTHER SENIOR INDEBTEDNESS OF ANY SPC, IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, SUCH SPC ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS UNDER THE LAWS OF THE UNITED STATES OR ANY STATE THEREOF. IN ADDITION, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 11.8, ANY SPC MAY (I) WITH NOTICE TO, BUT WITHOUT THE PRIOR WRITTEN CONSENT OF, THE COMPANY AND THE ADMINISTRATIVE AGENT AND WITHOUT PAYING ANY PROCESSING FEE THEREFOR, ASSIGN ALL OR A PORTION OF ITS INTERESTS IN ANY LOANS TO THE GRANTING LENDER OR TO ANY FINANCIAL INSTITUTIONS (CONSENTED TO BY THE ADMINISTRATIVE AGENT) PROVIDING LIQUIDITY AND/OR CREDIT SUPPORT TO OR FOR THE ACCOUNT OF SUCH SPC TO SUPPORT THE FUNDING OR MAINTENANCE OF LOANS AND (II) DISCLOSE ON A CONFIDENTIAL BASIS ANY NON-PUBLIC INFORMATION RELATING TO ITS LOANS TO ANY RATING AGENCY, COMMERCIAL PAPER DEALER OR PROVIDER OF ANY SURETY, GUARANTEE OR CREDIT OR LIQUIDITY ENHANCEMENT TO SUCH SPC. (E)           WITHIN FIVE BUSINESS DAYS AFTER ITS RECEIPT OF NOTICE BY THE ADMINISTRATIVE AGENT THAT IT HAS RECEIVED AN EXECUTED ASSIGNMENT AND ACCEPTANCE AND PAYMENT OF THE PROCESSING FEE, IF A NOTE WAS ISSUED IN RESPECT OF THE ASSIGNED INTERESTS, UPON THE REQUEST OF THE ADMINISTRATIVE AGENT BY THE ASSIGNEE, THE COMPANY SHALL EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT A NEW NOTE EVIDENCING SUCH ASSIGNEE’S ASSIGNED LOANS AND, IF THE ASSIGNOR LENDER HAS RETAINED A PORTION OF ITS LOANS AND ITS COMMITMENT, A REPLACEMENT NOTE, UPON THE REQUEST OF THE ADMINISTRATIVE AGENT BY THE ASSIGNOR LENDER, IN THE PRINCIPAL AMOUNT EQUAL TO THE LOANS AND COMMITMENTS, IF ANY, RETAINED BY THE ASSIGNOR LENDER (SUCH NOTE TO BE IN EXCHANGE FOR, BUT NOT IN PAYMENT OF, THE NOTE HELD BY SUCH LENDER). (F)            ANY LENDER MAY AT ANY TIME SELL TO ONE OR MORE COMMERCIAL BANKS OR OTHER PERSONS NOT AFFILIATES OF THE COMPANY (A “PARTICIPANT”) PARTICIPATING INTERESTS IN ANY LOANS, THE COMMITMENT OF THAT LENDER, IF ANY, AND THE OTHER INTERESTS OF THAT LENDER (THE “ORIGINATING LENDER”) HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT   83 --------------------------------------------------------------------------------   (I) THE ORIGINATING LENDER’S OBLIGATIONS UNDER THIS AGREEMENT SHALL REMAIN UNCHANGED, THE ORIGINATING LENDER SHALL REMAIN A LENDER FOR ALL PURPOSES HEREOF AND THE OTHER LOAN DOCUMENTS TO WHICH SUCH ORIGINATING LENDER IS A PARTY, AND THE PARTICIPANT MAY NOT BECOME A LENDER FOR PURPOSES HEREOF OR FOR ANY OTHER OF THE LOAN DOCUMENTS, (II) THE ORIGINATING LENDER SHALL REMAIN SOLELY RESPONSIBLE FOR THE PERFORMANCE OF SUCH OBLIGATIONS, (III) THE COMPANY AND THE ADMINISTRATIVE AGENT SHALL CONTINUE TO DEAL SOLELY AND DIRECTLY WITH THE ORIGINATING LENDER IN CONNECTION WITH THE ORIGINATING LENDER’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND (IV) NO LENDER SHALL TRANSFER OR GRANT ANY PARTICIPATING INTEREST UNDER WHICH THE PARTICIPANT HAS RIGHTS TO APPROVE ANY AMENDMENT TO, OR ANY CONSENT OR WAIVER WITH RESPECT TO, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, EXCEPT TO THE EXTENT SUCH AMENDMENT, CONSENT OR WAIVER WOULD REQUIRE UNANIMOUS CONSENT OF THE LENDERS. IN THE CASE OF ANY SUCH PARTICIPATION, THE PARTICIPANT SHALL NOT HAVE ANY RIGHTS UNDER THIS AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS (THE PARTICIPANT’S RIGHTS AGAINST THE ORIGINATING LENDER IN RESPECT OF SUCH PARTICIPATION BEING THOSE SET FORTH IN THE AGREEMENT CREATING OR EVIDENCING SUCH PARTICIPATION WITH SUCH LENDER), AND ALL AMOUNTS PAYABLE BY THE COMPANY HEREUNDER SHALL BE DETERMINED AS IF SUCH LENDER HAD NOT SOLD SUCH PARTICIPATION; EXCEPT THAT, IF AMOUNTS OUTSTANDING UNDER THIS AGREEMENT ARE DUE AND UNPAID, OR SHALL HAVE BEEN DECLARED OR SHALL HAVE BECOME DUE AND PAYABLE UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, EACH PARTICIPANT SHALL BE DEEMED TO HAVE THE RIGHT OF SET OFF IN RESPECT OF ITS PARTICIPATING INTEREST IN AMOUNTS OWING UNDER THIS AGREEMENT TO THE SAME EXTENT AS IF THE AMOUNT OF ITS PARTICIPATING INTEREST WERE OWING DIRECTLY TO IT AS A LENDER UNDER THIS AGREEMENT. (G)           EACH LENDER AGREES TO TAKE NORMAL AND REASONABLE PRECAUTIONS AND EXERCISE DUE CARE TO MAINTAIN THE CONFIDENTIALITY OF ALL INFORMATION IDENTIFIED AS “CONFIDENTIAL” OR “SECRET”  BY THE COMPANY AND PROVIDED TO IT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR BY THE ADMINISTRATIVE AGENT ON SUCH COMPANY’S OR SUBSIDIARY’S BEHALF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND NEITHER IT NOR ANY OF ITS AFFILIATES SHALL USE ANY SUCH INFORMATION OTHER THAN IN CONNECTION WITH OR IN ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, EXCEPT TO THE EXTENT SUCH INFORMATION (I) WAS OR BECOMES GENERALLY AVAILABLE TO THE PUBLIC OTHER THAN AS A RESULT OF DISCLOSURE BY SUCH LENDER, OR (II) WAS OR BECOMES AVAILABLE ON A NON CONFIDENTIAL BASIS FROM A SOURCE OTHER THAN THE COMPANY, PROVIDED,  HOWEVER, THAT SUCH SOURCE IS NOT BOUND BY A CONFIDENTIALITY AGREEMENT WITH THE COMPANY KNOWN TO THE LENDER; PROVIDED FURTHER, HOWEVER, THAT ANY LENDER MAY DISCLOSE SUCH INFORMATION (A) AT THE REQUEST OR PURSUANT TO ANY REQUIREMENT OF ANY GOVERNMENTAL AUTHORITY TO WHICH SUCH LENDER IS SUBJECT OR IN CONNECTION WITH AN EXAMINATION OF SUCH LENDER BY ANY SUCH AUTHORITY; (B) PURSUANT TO SUBPOENA OR OTHER COURT PROCESS; (C) WHEN REQUIRED TO DO SO IN ACCORDANCE WITH THE PROVISIONS OF ANY APPLICABLE REQUIREMENT OF LAW; (D) TO THE EXTENT REASONABLY REQUIRED IN CONNECTION WITH ANY LITIGATION OR PROCEEDING TO WHICH THE ADMINISTRATIVE AGENT, ANY LENDER OR THEIR RESPECTIVE AFFILIATES MAY BE PARTY; (E) TO THE EXTENT REASONABLY REQUIRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT; (F) TO SUCH LENDER’S INDEPENDENT AUDITORS AND OTHER PROFESSIONAL ADVISORS; (G) TO ANY AFFILIATE OF SUCH LENDER, OR TO ANY PARTICIPANT OR ASSIGNEE, ACTUAL OR POTENTIAL, PROVIDED THAT SUCH AFFILIATE, PARTICIPANT OR ASSIGNEE AGREES TO KEEP SUCH INFORMATION CONFIDENTIAL TO THE SAME EXTENT REQUIRED OF THE LENDERS HEREUNDER, AND (H) AS TO ANY LENDER, AS EXPRESSLY PERMITTED UNDER THE TERMS OF ANY OTHER DOCUMENT OR AGREEMENT REGARDING CONFIDENTIALITY TO WHICH THE COMPANY IS PARTY OR IS DEEMED PARTY WITH SUCH LENDER.   84 --------------------------------------------------------------------------------   (H)           NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, ANY LENDER MAY AT ANY TIME CREATE A SECURITY INTEREST IN, OR PLEDGE, ALL OR ANY PORTION OF ITS RIGHTS UNDER AND INTEREST IN THIS AGREEMENT AND THE NOTES HELD BY IT IN FAVOR OF ANY FEDERAL RESERVE LENDER IN ACCORDANCE WITH REGULATION A OF THE FRB OR U.S. TREASURY REGULATION 31 CFR §203.14, AND SUCH FEDERAL RESERVE LENDER MAY ENFORCE SUCH PLEDGE OR SECURITY INTEREST IN ANY MANNER PERMITTED UNDER APPLICABLE LAW.  ANY LENDER MAY AT ANY TIME ASSIGN ALL OR ANY PORTION OF ITS RIGHTS UNDER THIS AGREEMENT TO SECURE EXTENSIONS OF CREDIT TO SUCH LENDER OR IN SUPPORT OF OBLIGATIONS OWED BY SUCH LENDER; PROVIDED, HOWEVER, THAT NO SUCH ASSIGNMENT SHALL RELEASE A LENDER FROM ANY OF ITS OBLIGATIONS HEREUNDER OR SUBSTITUTE ANY SUCH ASSIGNEE FOR SUCH LENDER AS A PARTY HERETO. (I)            NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 11.8(G) OR ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, ANY PARTY HERETO OR THERETO (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH PARTY) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN AND ALL MATERIALS OF ANY KIND IN EACH CASE WITHIN THE MEANING OF UNITED STATES TREASURY REGULATION SECTION 1.6011-4 (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO SUCH PARTY RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE; PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY DOCUMENT OR SIMILAR ITEM THAT IN EITHER CASE CONTAINS INFORMATION CONCERNING TAX TREATMENT OR TAX STRUCTURE OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AS WELL AS OTHER INFORMATION, THIS SECTION 11.8(I) SHALL ONLY APPLY TO SUCH PORTIONS OF THE DOCUMENT OR SIMILAR ITEM THAT RELATE TO SUCH TAX TREATMENT OR TAX STRUCTURE.                 11.9         Interest.  It is the intention of the parties hereto to comply with applicable usury laws, if any; accordingly, notwithstanding any provision to the contrary in this Agreement, the Notes or in any of the other Loan Documents securing the payment hereof or otherwise relating hereto, in no event shall this Agreement, the Notes or such other Loan Documents require or permit the payment, taking, reserving, receiving, collection, or charging of any sums constituting interest under applicable laws which exceed the Highest Lawful Rate.  If any such excess interest is called for, contracted for, charged, taken, reserved, or received in connection with the Loans evidenced by the Notes or in any of the Loan Documents securing the payment thereof or otherwise relating thereto, or in any communication by the Administrative Agent or the Lenders or any other Person to the Company or any other Person, or in the event all or part of the principal or interest thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved, or received on the amount of principal actually outstanding from time to time under the Notes or any other Loan Document shall exceed the Highest Lawful Rate, then in any such event it is agreed as follows:  (i) the provisions of this Section 11.9 shall govern and control, (ii) neither any Company nor any other Person now or hereafter liable for the payment of the Notes shall be obligated to pay the amount of such interest to the extent such interest is in excess of the Highest Lawful Rate, (iii) any such excess which is or has been received notwithstanding this Section 11.9 shall be credited against the then unpaid principal balance of the Notes or, if the Notes have been or would be paid in full, refunded to the Company, and (iv) the provisions of this Agreement, the Notes and the other Loan Documents securing the payment thereof and otherwise relating thereto, and any communication to the Company, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the Highest Lawful Rate as now or hereafter construed by   85 --------------------------------------------------------------------------------   courts having jurisdiction hereof or thereof.  Without limiting the foregoing, all calculations of the rate of the interest contracted for, charged, collected, taken, reserved, or received in connection with the Notes, this Agreement or any other Loan Document which are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Loans, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved, or received.  The terms of this Section 11.9 shall be deemed to be incorporated in every document and communication relating to the Notes, the Loans or any other Loan Document.                 11.10       Indemnity and Subrogation.  In addition to all such rights of indemnity and subrogation as any Guarantor may have under applicable law, the Company agrees that in the event a payment shall be made by a Guarantor under a Guaranty in respect of a Credit Extension to the Company, the Company shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment subject to the provisions of the Guaranty executed by such Guarantor.  Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under this Section 11.10 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations, and no payments may be made in respect of such rights of indemnity, contribution or subrogation until all the Obligations have been paid in full and the Commitment shall have expired.  No failure on the part of the Company to make the payments required by this Section 11.10 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of the Guarantors with respect to any Guaranty, and each Guarantor shall remain liable for the full amount of the obligation of the Guarantors under each such Guaranty in accordance therewith.                 11.11       Automatic Debits of Fees.  With respect to any fee or any other cost or expense (including Attorney Costs) due and payable to the Administrative Agent under the Loan Documents, the Company hereby irrevocably authorizes the Administrative Agent, after giving reasonable prior notice to the Company, to debit any deposit account of the Company with the Administrative Agent in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense.  If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in the Administrative Agent’s sole discretion) and such amount not debited shall be deemed to be unpaid.  No such debit under this Section 11.11 shall be deemed a set-off.                 11.12       Notification of Addresses, Lending Offices, Etc.  Each Lender shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Administrative Agent shall reasonably request.                 11.13       Counterparts.  This Agreement may be executed in any number of separate counterparts, no one of which need be signed by all parties; each of which, when so executed, shall be deemed an original, and all of such counterparts taken together shall be deemed to   86 --------------------------------------------------------------------------------   constitute but one and the same instrument.  A fully executed counterpart of this Agreement by facsimile signatures shall be binding upon the parties hereto.                 11.14       Severability.  The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.                 11.15       No Third Parties Benefited.  This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Guarantors, the Lenders, the Administrative Agent, the Administrative Agent-Related Persons and the Indemnified Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.                 11.16       Governing Law, Jurisdiction.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11.17       Submission To Jurisdiction; Waivers.  Each of the Company and each Guarantor hereby irrevocably and unconditionally, and shall cause each of their respective Subsidiaries to irrevocably and unconditionally: (A)           SUBMIT, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE COMPANY AND EACH GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (B)           WAIVE, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (C)           CONSENT TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES HEREIN. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.   87 --------------------------------------------------------------------------------                   11.18       Entire Agreement.  This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Guarantors, the Lenders and the Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, oral or written, relating to the subject matter hereof and thereof.                 11.19       NO ORAL AGREEMENTS.  THIS WRITTEN AMENDED AND RESTATED TERM LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.                 11.20       Accounting Changes.  In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Company and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Company’s financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made.  Until such time as such an amendment shall have been executed and delivered by the Company, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred.  “Accounting Change” refers to any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.                 11.21       WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.  THE COMPANY AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY “SPECIAL DAMAGES”, AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 11.21.  AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR   88 --------------------------------------------------------------------------------   PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.                 11.22       Intercreditor Agreement; Collateral Trust Agreement.  Each Lender (a) hereby agrees that it will be bound by and take no actions contrary to the Intercreditor Agreement or the Collateral Trust Agreement and (b) hereby irrevocably authorizes and instructs the Administrative Agent to enter into and perform the Intercreditor Agreement and the Collateral Trust Agreement on its behalf.                 11.23       USA PATRIOT ACT.  EACH LENDER HEREBY NOTIFIES EACH LOAN PARTY THAT PURSUANT TO THE REQUIREMENTS OF THE USA PATRIOT ACT (TITLE III OF PUB. L. 107-56 (SIGNED INTO LAW OCTOBER 26, 2001)), IT IS REQUIRED TO OBTAIN, VERIFY AND RECORD INFORMATION THAT IDENTIFIES EACH LOAN PARTY, WHICH INFORMATION INCLUDES THE NAME AND ADDRESS OF SUCH LOAN PARTY AND OTHER INFORMATION THAT WILL ALLOW SUCH LENDER TO IDENTIFY SUCH LOAN PARTY IN ACCORDANCE WITH SAID ACT.                 11.24       Acknowledgments.  Each of the Company and each Guarantor hereby acknowledges that: (A)           IT HAS BEEN ADVISED BY COUNSEL IN THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; (B)           NEITHER THE ADMINISTRATIVE AGENT NOR THE OTHER AGENTS NOR ANY LENDER HAS ANY FIDUCIARY RELATIONSHIP WITH OR DUTY TO THE COMPANY OR ANY GUARANTOR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND THE RELATIONSHIP BETWEEN THE ADMINISTRATIVE AGENT, THE OTHER AGENTS AND THE LENDERS, ON ONE HAND, AND THE COMPANY AND THE GUARANTORS, ON THE OTHER HAND, IN CONNECTION HEREWITH OR THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR; AND (C)           NO JOINT VENTURE IS CREATED HEREBY OR BY THE OTHER LOAN DOCUMENTS OR OTHERWISE EXISTS BY VIRTUE OF THE TRANSACTIONS CONTEMPLATED HEREBY AMONG THE ADMINISTRATIVE AGENT, THE OTHER AGENTS AND THE LENDERS OR AMONG THE COMPANY AND THE GUARANTORS AND THE LENDERS.                 11.25       Survival of Representations and Warranties.  All representations and warranties made herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the consummation of the TexCal Acquisition and the making of the Loans and other extensions of credit hereunder.                 11.26       Release of Collateral and Guarantee Obligations.  (A)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT (OTHER THAN THE INTERCREDITOR AGREEMENT AND THE COLLATERAL TRUST AGREEMENT), UPON REQUEST OF THE COMPANY IN CONNECTION WITH ANY DISPOSITION OF PROPERTY PERMITTED BY THE LOAN DOCUMENTS, BUT SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND THE COLLATERAL TRUST AGREEMENT, UNLESS A TRIGGERING EVENT HAS OCCURRED AND IS CONTINUING, THE ADMINISTRATIVE AGENT SHALL (WITHOUT NOTICE TO, OR VOTE OR CONSENT OF, ANY LENDER OR ANY QUALIFIED DERIVATIVE   89 --------------------------------------------------------------------------------   CONTRACT COUNTERPARTY) (I) ISSUE WRITTEN DIRECTIONS TO THE COLLATERAL TRUSTEE IN ACCORDANCE WITH SECTION 7.02 OF THE COLLATERAL TRUST AGREEMENT AUTHORIZING THE COLLATERAL TRUSTEE TO RELEASE ITS SECURITY INTEREST IN ANY COLLATERAL BEING DISPOSED OF IN SUCH DISPOSITION AND (II) TAKE SUCH ACTIONS AS SHALL BE REQUIRED TO RELEASE ANY GUARANTEE OBLIGATIONS UNDER ANY LOAN DOCUMENT OF ANY PERSON BEING DISPOSED OF IN SUCH DISPOSITION, TO THE EXTENT NECESSARY TO PERMIT CONSUMMATION OF SUCH DISPOSITION IN ACCORDANCE WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT THE COMPANY SHALL HAVE DELIVERED TO THE ADMINISTRATIVE AGENT AND THE COLLATERAL TRUSTEE, AT LEAST TEN BUSINESS DAYS PRIOR TO THE DATE OF THE PROPOSED RELEASE (OR SUCH SHORTER PERIOD AGREED TO BY THE ADMINISTRATIVE AGENT AND THE COLLATERAL TRUSTEE), A WRITTEN REQUEST FOR RELEASE IDENTIFYING THE RELEVANT COLLATERAL BEING DISPOSED OF IN SUCH DISPOSITION AND THE TERMS OF SUCH DISPOSITION IN REASONABLE DETAIL, INCLUDING THE DATE THEREOF, THE PRICE THEREOF AND ANY EXPENSES IN CONNECTION THEREWITH, TOGETHER WITH A CERTIFICATION BY THE COMPANY STATING THAT SUCH TRANSACTION IS IN COMPLIANCE WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT THE PROCEEDS OF SUCH DISPOSITION WILL BE APPLIED IN ACCORDANCE WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. (B)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR ANY OTHER LOAN DOCUMENT, WHEN ALL OBLIGATIONS (OTHER THAN OBLIGATIONS IN RESPECT OF ANY QUALIFIED DERIVATIVE CONTRACT) HAVE BEEN PAID IN FULL AND ALL COMMITMENTS HAVE TERMINATED OR EXPIRED, UPON REQUEST OF THE COMPANY, THE ADMINISTRATIVE AGENT SHALL (WITHOUT NOTICE TO, OR VOTE OR CONSENT OF, ANY LENDER, OR ANY QUALIFIED DERIVATIVE CONTRACT COUNTERPARTY) (I) ISSUE WRITTEN DIRECTIONS TO THE COLLATERAL TRUSTEE IN ACCORDANCE WITH SECTION 7.02 OF THE COLLATERAL TRUST AGREEMENT AUTHORIZING THE COLLATERAL TRUSTEE TO RELEASE ITS SECURITY INTEREST IN ALL COLLATERAL, AND (II) TAKE SUCH ACTIONS AS SHALL BE REQUIRED TO RELEASE ALL GUARANTEE OBLIGATIONS PROVIDED FOR IN ANY LOAN DOCUMENT, WHETHER OR NOT ON THE DATE OF SUCH RELEASE THERE MAY BE OUTSTANDING OBLIGATIONS IN RESPECT OF THE QUALIFIED DERIVATIVE CONTRACTS.  ANY SUCH RELEASE OF GUARANTEE OBLIGATIONS SHALL BE DEEMED SUBJECT TO THE PROVISION THAT SUCH GUARANTEE OBLIGATIONS SHALL BE REINSTATED IF AFTER SUCH RELEASE ANY PORTION OF ANY PAYMENT IN RESPECT OF THE OBLIGATIONS GUARANTEED THEREBY SHALL BE RESCINDED OR MUST OTHERWISE BE RESTORED OR RETURNED UPON THE INSOLVENCY, BANKRUPTCY, DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE COMPANY OR ANY GUARANTOR, OR UPON OR AS A RESULT OF THE APPOINTMENT OF A RECEIVER, INTERVENOR OR CONSERVATOR OF, OR TRUSTEE OR SIMILAR OFFICER FOR, THE COMPANY OR ANY GUARANTOR OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT HAD NOT BEEN MADE.                 11.27       Amendment and Restatement. (A)           FROM AND AFTER THE RESTATEMENT EFFECTIVE TIME, THIS AGREEMENT AMENDS AND RESTATES IN ITS ENTIRETY THE EXISTING CREDIT AGREEMENT; THE EXISTING CREDIT AGREEMENT SHALL THEREAFTER BE OF NO FURTHER FORCE AND EFFECT EXCEPT TO EVIDENCE (I) THE INCURRENCE BY THE COMPANY OF THE LOANS AND THE OTHER “OBLIGATIONS” UNDER AND AS DEFINED THEREIN (WHETHER OR NOT SUCH “OBLIGATIONS” ARE CONTINGENT AS OF THE RESTATEMENT EFFECTIVE TIME), (II) THE REPRESENTATIONS AND WARRANTIES MADE BY ANY LOAN PARTY PRIOR TO THE RESTATEMENT EFFECTIVE TIME AND (III) ANY ACTION OR OMISSION PERFORMED OR REQUIRED TO BE PERFORMED PURSUANT TO THE EXISTING CREDIT AGREEMENT PRIOR TO THE RESTATEMENT EFFECTIVE TIME (INCLUDING ANY FAILURE, PRIOR TO THE RESTATEMENT EFFECTIVE TIME, TO COMPLY WITH THE COVENANTS CONTAINED IN SUCH EXISTING CREDIT AGREEMENT).  THE AMENDMENTS AND RESTATEMENTS SET FORTH HEREIN SHALL NOT CURE ANY BREACH THEREOF OR ANY “DEFAULT” OR “EVENT OF DEFAULT” UNDER AND AS DEFINED IN THE EXISTING CREDIT AGREEMENT EXISTING PRIOR TO THE RESTATEMENT EFFECTIVE TIME.  THIS AGREEMENT DOES NOT CONSTITUTE AND SHALL NOT BE CONSTRUED TO   90 --------------------------------------------------------------------------------   EVIDENCE A NOVATION OF OR A PAYMENT AND READVANCE OF ANY OF THE “OBLIGATIONS” (AS DEFINED IN THE EXISTING CREDIT AGREEMENT) HERETOFORE OUTSTANDING UNDER THE EXISTING CREDIT AGREEMENT, IT BEING THE INTENTION OF THE PARTIES HERETO THAT THIS AGREEMENT PROVIDE FOR THE TERMS AND CONDITIONS OF THE SAME LOANS AND OTHER “OBLIGATIONS” AS WERE THEN OUTSTANDING UNDER THE EXISTING CREDIT AGREEMENT. (B)           THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE ADMINISTRATIVE AGENT’S AND THE LENDERS’ RIGHTS AND REMEDIES UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL APPLY TO ALL OF THE LOANS AND OTHER “OBLIGATIONS” INCURRED UNDER THE EXISTING CREDIT AGREEMENT. (C)           THE COMPANY REAFFIRMS THE LIENS GRANTED PURSUANT TO THE EXISTING LOAN DOCUMENTS TO THE COLLATERAL TRUSTEE FOR THE BENEFIT OF THE SECURED PARTIES, WHICH LIENS SHALL CONTINUE IN FULL FORCE AND EFFECT DURING THE TERM OF THIS AGREEMENT AND ANY RENEWALS OR EXTENSIONS THEREOF AND SHALL CONTINUE TO SECURE THE SHARING OBLIGATIONS. (D)           FROM AND AFTER THE RESTATEMENT EFFECTIVE TIME, EXCEPT AS THE CONTEXT OTHERWISE PROVIDES, (I) ALL REFERENCES TO THE EXISTING CREDIT AGREEMENT (OR TO ANY AMENDMENT, SUPPLEMENT, MODIFICATION OR AMENDMENT AND RESTATEMENT THEREOF) IN THE LOAN DOCUMENTS (OTHER THAN THIS AGREEMENT) SHALL BE DEEMED TO REFER TO THE EXISTING CREDIT AGREEMENT AS AMENDED AND RESTATED HEREBY AND AS THE SAME MAY BE FURTHER AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS OF THIS AGREEMENT AND OF THE INTERCREDITOR AGREEMENT, (II) ALL REFERENCES TO ANY SECTION (OR SUBSECTION) OF THE EXISTING CREDIT AGREEMENT IN ANY LOAN DOCUMENT (BUT NOT HEREIN) SHALL BE AMENDED TO BECOME MUTATIS MUTANDIS, REFERENCES TO THE CORRESPONDING PROVISIONS OF THE EXISTING CREDIT AGREEMENT, AS AMENDED AND RESTATED BY THIS AGREEMENT AND AS THE SAME MAY BE FURTHER AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS OF THIS AGREEMENT AND OF THE INTERCREDITOR AGREEMENT, AND (III) ALL REFERENCES TO THIS AGREEMENT HEREIN (INCLUDING FOR PURPOSES OF INDEMNIFICATION AND REIMBURSEMENT OF FEES) SHALL BE DEEMED TO BE REFERENCES TO THE EXISTING CREDIT AGREEMENT AS AMENDED AND RESTATED HEREBY AND AS THE SAME MAY BE FURTHER AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS OF THIS AGREEMENT AND OF THE INTERCREDITOR AGREEMENT. (E)           THIS AMENDMENT AND RESTATEMENT IS LIMITED AS WRITTEN AND IS NOT A CONSENT TO ANY OTHER AMENDMENT, RESTATEMENT, WAIVER OR OTHER MODIFICATION, WHETHER OR NOT SIMILAR, AND, EXCEPT AS EXPRESSLY PROVIDED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ALL TERMS AND CONDITIONS OF THE LOAN DOCUMENTS REMAIN IN FULL FORCE AND EFFECT UNLESS OTHERWISE SPECIFICALLY AMENDED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.                 11.28       Amendment and Restatement of the First Lien Credit Agreement.  Each Agent and each Lender hereby consents to the First Amendment to the Second Amended and Restated Credit Agreement of the Company described in the definition of “First Lien Credit Agreement”. [THE REMAINDER OF THIS PAGE IS LEFT BLANK]   91 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.   COMPANY:           VENOCO, INC.           By: /s/ Timothy M. Marquez     Timothy M. Marquez     Chief Executive Officer                   GUARANTORS:           WHITTIER PIPELINE CORPORATION           By: /s/ Timothy M. Marquez     Timothy M. Marquez     President                   BMC, LTD.           By: Venoco, Inc., General Partner             By: /s/ Timothy M. Marquez       Timothy M. Marquez       Chief Executive Officer                   TEXCAL ENERGY (LP) LLC           By: /s/ Timothy M. Marquez     Timothy M. Marquez     Chief Executive Officer                   TEXCAL ENERGY (GP) LLC           By: /s/ Timothy M. Marquez     Timothy M. Marquez     Chief Executive Officer   --------------------------------------------------------------------------------   GUARANTORS:           TEXCAL ENERGY NORTH CAL L.P.           By: TEXCAL ENERGY (GP) LLC, as general partner             By: /s/ Timothy M. Marquez       Timothy M. Marquez       Chief Executive Officer           TEXCAL ENERGY SOUTH CAL L.P.           By: TEXCAL ENERGY (GP) LLC, as general partner             By: /s/ Timothy M. Marquez       Timothy M. Marquez       Chief Executive Officer           TEXCAL ENERGY SOUTH TEXAS L.P.           By: TEXCAL ENERGY (GP) LLC, as general partner             By: /s/ Timothy M. Marquez       Timothy M. Marquez       Chief Executive Officer           Address for Notice to the Company and the Guarantors:   Principal Place of Business and Chief Executive Office:           370 17th Street, Suite 2950       Denver, Colorado 80202-1370       Attention: Chief Financial Officer       Facsimile No.: (303) 626-8315   --------------------------------------------------------------------------------     ADMINISTRATIVE AGENT AND A LENDER:           CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent and a Lender           By: /s/ Vanessa Gomez     Name: Vanessa Gomez     Title: Vice President           By: /s/ Gregory S. Richards     Name: Gregory S. Richards     Title: Associate           Address: Eleven Madison Avenue       New York, NY 10010           Facsimile No.1: (212) 448-3755   Facsimile No.2: (212) 322-0419           Attention: Vanessa Gomez           with copy to:             Address: Credit Suisse       Transaction Management Group       Eleven Madison Avenue       New York, NY 10010           Facsimile No.: (212) 743-2375           Attention: Lillian Cortes           Applicable Lending Office   for Base Rate Loans and   LIBO Rate Loans:           Address: One Madison Avenue       New York, NY 10010           Facsimile No.1: (212) 538-6851   Facsimile No.2: (212) 325-8317           Attention: Ed Markowski   --------------------------------------------------------------------------------     SYNDICATION AGENT:           LEHMAN BROTHERS INC.           By: /s/ Jeff Ogden     Name: Jeff Ogden     Title: Managing Director           Address: 745 7th Avenue, 5th Floor       New York, NY 10019   Facsimile No.: 646-758-1986   Attention: Frank Turner           with a copy to:             Address: 745 7th Avenue, 5th Floor       New York, NY 10019   Facsimile No.: 212-520-0450   Attention: Cindy Eng   --------------------------------------------------------------------------------

Exhibit 10.9   LOGO [g56774ex9.jpg]   Grant Acceptance Agreement     Prudential Financial, Inc. Executive Stock Option Program Grant Acceptance Agreement   (for executives subject to the reporting requirements under Section 16(a) of the U.S. Securities Exchange Act of 1934)   (Insert Name of Employee) (Equity Edge Account ID#)   February 11, 2003   You have been granted Xxx options (each an “option”) to purchase Xxx shares of Prudential Financial, Inc. common stock (“shares”).   Vesting:   Xx options on February 11, 2004 Xx options on February 11, 2005 Xx options on February 11, 2006   Grant price: $XX.XX per share Expiration: February 11, 2013   (the tenth anniversary of the grant date)   See the brochure entitled Executive Stock Option Program (“brochure”) for more information about this grant. This Agreement and the brochure are subject to the terms, conditions and restrictions contained in the Prudential Financial, Inc. Stock Option Plan (“Plan”) document. This is not a substitute for the official Plan document, which governs the operation of the Plan. Also, this is not a stock certificate or negotiable instrument.   Your eligibility for the Executive Stock Option Program, the benefits provided by this program and all other terms and conditions of the program and any grant of stock options will be determined pursuant to and are governed by the provisions of the Plan document. If there is any discrepancy between the information in this grant or in the Executive Stock Option Program brochure or if there is a conflict between information discussed by Prudential Financial, Inc. (“Prudential”) associates and the actual Plan document, the Plan document, as interpreted by the plan administrator in its sole discretion, always will govern.   Nothing contained in this grant or the Executive Stock Option Program brochure is intended to constitute or create a contract of employment nor shall it constitute or create the right to remain associated with or in the employ of Prudential for any particular period of time. Employment with Prudential is employment at will, which means that either you or Prudential may terminate the employment relationship at any time, with or without cause or notice.   These stock options are neither transferrable nor assignable.         LOGO [g56774logo.jpg] -------------------------------------------------------------------------------- 1. Exercise Methods   Cash Exercise – lets you receive stock, after paying the grant price, applicable taxes and fees, in cash.   Sell to Cover – lets you exercise your options and receive stock after paying the grant price, applicable taxes and fees, without paying cash out of your pocket. Please refer to Section 6 for important exercise information.   2. Taxes   Prudential/your employer shall have the right to deduct and report taxes (federal, state, local or social insurance taxes) or other obligations required to be withheld by law on options from any stock or cash payments or distributions made to you. Prudential/your employer may defer issuance of shares upon the exercise of any options until such withholding is satisfied. You will be fully responsible for satisfying your tax responsibility, if any.   3. Option Term   You will have until February 11, 2013 (the tenth anniversary of the grant date) to exercise your options, unless your employment ends during the option term. See the brochure for more information on the Plan terms regarding the effect termination of employment will have on your options.   4. Value of Options   Prudential makes no representation as to the value of these options or whether you will be able to realize any profit out of them.   5. Covenant Not to Solicit   (a) Restrictions During Employment. You agree that during your employment with Prudential or any of its direct or indirect subsidiaries (the “Company Group”), you shall not, other than on behalf of any member of the Company Group, or as may otherwise be required in connection with the performance of your duties on behalf of any member of the Company Group, solicit or induce, either directly or indirectly, or take any action to assist any entity, either directly or indirectly, in soliciting or inducing any employee of the Company Group (other than your administrative assistant) to leave the employ of the Company Group (“Induce Departures”).   (b) Post-Employment Restrictions. You agree that for a period of one year after the termination of your employment with each member of the Company Group for any reason, you shall not Induce Departures or hire or employ, or assist in the hire or employment of, either directly or indirectly, any individual (other than your administrative assistant) whose employment by the Company Group ended within sixty (60) days preceding that individual’s hire or employment by you or your successor employer.   (c) Restrictions Separable and Divisible. You hereby acknowledge that you understand the restrictions imposed upon you by Subsections 5(a) and 5(b) of this Agreement. You and Prudential understand and intend that each such restriction agreed to by you will be construed as separable and divisible from every other restriction, and that the unenforceability, in whole or in part, of any restriction will not affect the enforceability of the remaining restrictions and that one or more or all of such restrictions may be enforced in whole or in part as the circumstances warrant. No waiver of any one breach of the restrictions contained herein will be deemed a waiver of any other breach.   (d) Remedies. You agree that the covenants in Subsections 5(a) and 5(b) are fair, reasonable and necessary and are reasonably required for the protection of Prudential and any other member of the Company Group. You also agree and acknowledge that the amount of damages that would derive from the breach of these covenants is not readily ascertainable and that the covenant contained herein is a significant portion of the consideration that you are conveying or have conveyed to Prudential in consideration of the grant of the option evidenced by this Grant Acceptance Agreement (“Agreement”). Accordingly, you agree that, in the event that you breach any of the covenants set forth in Subsections 5(a) and 5(b), (i) all unvested and all vested and unexercised options granted to you under this Agreement shall be cancelled and (ii) you shall disgorge to Prudential Prudential Financial, Inc. Common Stock (rounded to the nearest whole share) equal in value (using the current Fair Market Value of Prudential Financial, Inc. Common Stock as defined in the Plan, on the date the letter of notification of breach is dated) to the profit that you realized from the exercise of any portion of this option occurring (x) in the case of any breach occurring while you are an employee of the Company Group, within 12 months before the date of such breach or at any time after the date of such breach or (y) in the case of a breach occurring after the termination of your employment, within 6 months before the date on which your employment with the Company Group terminates or at any time after the date of such termination of employment. For the avoidance of doubt, the profit referred to in the preceding sentence shall be equal to the sums (determined separately for each exercise of any portion of the option occurring within the applicable period established pursuant to such sentence) of (i) (A) the Fair Market Value (as defined in the Plan) of a share of Common Stock on the date of exercise, in the case of a cash exercise, or the price at which shares of Common Stock are sold, in the case of a cashless exercise, minus (B) the per share exercise price of the option, times (ii) the number of shares of Common Stock acquired upon such exercise of the option. You shall pay any such amount (in the form of Prudential Financial, Inc. Common Stock) to Prudential within five (5) business days of the date Prudential notifies you that a breach of the provisions of this Section 5 has occurred. If payment is not made within such period, any subsequent payment shall be made with interest at a rate equal to the prime rate as reported in The Wall Street Journal (Eastern Edition) on the date on which notice of your breach is sent to you by Prudential, plus 2 percent. Interest payments shall be made in the form of cash only. You also acknowledge that, in the event you breach any part of this Section, the damages to Prudential would be irreparable. Therefore, in addition to monetary damages and/or reasonable attorney’s fees, Prudential shall have the right to seek injunctive and/or other equitable relief in any court of competent jurisdiction to enforce this covenant. Further, you consent to the issuance of a temporary restraining order to maintain the status quo pending the outcome of any proceeding.   6. Agreement to Retain Shares   You agree to retain ownership of 50% of the net shares (after payment of the applicable exercise price, if any, applicable fees and applicable taxes) of Common Stock of the Company (“Shares”) acquired upon exercise of any of these options. You also agree to hold all Shares retained pursuant to the preceding sentence until the later of (i) one year following the date of acquisition of such Shares or (ii) the date that you have satisfied the share ownership guidelines set forth in the letter from Arthur Ryan dated April 4, 2002 (the “Guidelines”). Once you have satisfied the holding period set forth in the preceding sentence, you may dispose of any Shares held in excess of the Guidelines. This agreement to retain shares is applicable to this grant and for as long as you are an insider for purpose of Section 16(a) of the U.S. Securities Exchange Act of 1934.   7. Governing Law   The validity, construction and effect of this Agreement and the Plan shall be determined in accordance with the laws of the State of New Jersey without regard to principles of conflict of laws.   8. Other Terms   Your participation in the Plan is voluntary. The award of these options does not entitle you to any benefit other than that granted under the Plan.   Any benefits granted under the Plan are not deemed compensation under any Prudential pension plan, welfare plan or any compensation plan or program and shall not be considered as part of such compensation for purposes of calculating pension, bonuses, long-service awards, or in the event of severance, redundancy or resignation.   Prudential/your employer will not be responsible if you do not exercise your options.   You understand and accept that the benefits granted under the Plan are entirely at the discretion of Prudential Financial, Inc., and that Prudential Financial, Inc. may modify, amend, suspend or terminate the Plan or any and all of the policies, programs and plans described in this agreement in whole or in part, at any time, without notice to you or your consent.   You understand that you do not have any rights as a stockholder by virtue of the grant of stock options but only with respect to shares of common stock actually issued to you in accordance with the terms hereof.   I accept the terms of this Agreement, and acknowledge that I understand this Agreement and the terms of the Plan. I have received a copy of the Executive Stock Option Program brochure as currently in effect.   -------------------------------------------------------------------------------- (Signature)   -------------------------------------------------------------------------------- (Print Name)   (Date)           Please return a signed copy of this Agreement by May 12, 2003, to Prudential—Stock Options, Attention: Compensation Admin. Team, P.O. Box 4450, The Woodlands, TX 77387-4450.   Code: US/GAA/B/2-03 EMPL-D1089

Exhibit 10.2   AMENDMENT NO. 1 TO CREDIT AGREEMENT AND WAIVER   This Amendment No. 1 to Credit Agreement and Waiver (this “Agreement”) dated as of January 24, 2006 is made by and among MUELLER GROUP, LLC, a Delaware limited liability company (the “Borrower”), BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States (“Bank of America”), in its capacity as administrative agent for the Lenders (as defined in the Credit Agreement (as defined below)) (in such capacity, the “Administrative Agent”), and each of the Lenders signatory hereto, and each of the Guarantors (as defined in the Credit Agreement) signatory hereto.   W I T N E S S E T H:   WHEREAS, the Borrower, the Administrative Agent and the Lenders have entered into that certain Credit Agreement dated as of October 3, 2005 (as hereby amended and as from time to time hereafter further amended, modified, supplemented, restated, or amended and restated, the “Credit Agreement”; the capitalized terms used in this Agreement not otherwise defined herein shall have the respective meanings given thereto in the Credit Agreement), pursuant to which the Lenders have made available to the Borrower a term loan facility and a revolving credit facility, including a letter of credit facility and a swing line facility; and   WHEREAS, each of the Guarantors has entered into a Guaranty or Parent Guaranty pursuant to which it has guaranteed certain or all of the obligations of the Borrower under the Credit Agreement and the other Loan Documents; and   WHEREAS, the Borrower has informed the Administrative Agent and the Lenders that   New Holdco intends to effect an initial public offering of Equity Interests (the “IPO”) and, in connection therewith, both Mueller Water Products, LLC and Mueller Water Products Co-Issuer, Inc. will merge with and into New Holdco and New Holdco will change its name to Mueller Water Products, Inc. (the “Holdco Merger”); and   WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders agree to amend certain terms of the Credit Agreement, which the Administrative Agent and the Lenders party hereto are willing to do on the terms and conditions contained in this Agreement; and   WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders provide limited waivers of certain provisions of the Credit Agreement described below, which the Administrative Agent and the Lenders party hereto are willing to do on the terms and conditions contained in this Agreement; and   NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:     --------------------------------------------------------------------------------   1.             Amendments to Credit Agreement.  Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows: (a)           The definition of “Excess Cash Flow in Section 1.01 is hereby amended by: (i)            deleting subpart (b)(ix) of such definition and inserting “(ix) Restricted Payments of the type described in clause (e) of Section 8.06 and Restricted Payments of the type described in clause (f) of Section 8.06, in each case to the extent made during such period plus” in lieu thereof; and (ii)           deleting the proviso following clause (b) of such definition; (b)           Without limiting the generality of Section 1.02(a)(ii) of the Credit Agreement, after the effectiveness of the Holdco Merger all references in the Credit Agreement and the other Loan Documents to either New Holdco or to Mueller Water Products shall be deemed to refer to Mueller Water Products, Inc., the surviving entity of the Holdco Merger; (c)           Section 1.03(a) is hereby amended by deleting the second sentence thereof in its entirety; (d)           Section 1.03(c) is hereby amended by deleting the reference to “December 31, 2006” in the last sentence and inserting a reference to “September 30, 2006” in lieu thereof; (e)           Section 2.06(d)(iv) is hereby amended so that, as amended, it shall read in its entirety as follows: “(iv)        Within ten Business Days after financial statements for each fiscal year of the Borrower ending on or after September 30, 2006 have been delivered pursuant to Section 7.01(a) and the related Compliance Certificate has been delivered pursuant to Section 7.02(b), the Borrower shall make a prepayment of the Outstanding Amount of the Term Loan in an amount equal to 50% of Excess Cash Flow for the fiscal year covered by such financial statements; provided that such prepayment shall only be required to the extent the amount of Consolidated Senior Secured Indebtedness, as reduced by giving effect to such prepayment, would result in a Consolidated Senior Secured Leverage Ratio of greater than or equal to 1.50 to 1.00 on a pro forma basis as of the date of such prepayment. (f)            Section 7.01(a) is hereby amended by deleting therefrom the parenthetical phrase “(subject to Section 1.03(a) with respect to the fiscal year ending December 31, 2005)”; (g)           Section 7.02(e) is hereby amended by replacing “60 days” therein with the following phrase: “(x) in the case of the fiscal year of the Borrower commencing October 1, 2005, March 15, 2006, and (y) in the case of each other fiscal year of the Borrower, 75 days”; (h)           Section 7.15 is hereby amended by deleting the phrase “on the Closing Date” in the fourth line and substituting in lieu thereof the phrase “outstanding at any time (such amount as of any date being equal to the amount of Consolidated Funded Indebtedness reflected on the   --------------------------------------------------------------------------------   most recent financial statements delivered pursuant to Sections 7.01(a) or (b))”; (i)            Upon the later to occur of the effectiveness of this Agreement and the consummation of the IPO, and without further action, Section 8.06(f)  shall be and be deemed amended so that, as amended, it shall read as follows:                 “(f)          the Borrower shall be permitted to make Restricted Payments in the form of cash dividends to New Holdco for further distribution to the shareholders of New Holdco in an aggregate amount in any fiscal year not to exceed $8,500,000; provided that, any amount of cash dividends permitted to be paid by this clause (f) but not paid in respect of any fiscal year commencing on or after October 1, 2005, may be carried forward and paid in any subsequent fiscal year.”; and (j)            Section 8.12(d) is hereby amended by deleting therefrom the parenthetical phrase “(calculated for the entire fiscal year ending December 31, 2005, including the period prior to the Closing Date) “ and substituting in lieu thereof the phrase “(commencing with the fiscal year beginning October 1, 2005)”. 2.             Waivers.  Subject to the terms and conditions set forth herein: (a)           The parties hereto agree that the Borrower shall not be required to change its fiscal year end to December 31 as required by Section 1.03(a) prior to the effectiveness of this Amendment, and hereby waive any Default arising from the Borrower’s failure to so comply with such provisions of Section 1.03(a); (b)           The parties hereto hereby waive the Default arising from the Borrower’s failure to deliver its consolidated business plan and related documents within the time period required by Section 7.02(e) as in effect prior to the effectiveness of this Amendment; and (c)           The parties hereto hereby waive any further or other advance notice of the Holdco Merger or the change of the name of Mueller Holding Company, Inc. to Mueller Water Products, Inc. in connection with the Holdco Merger provided for in Section 3.03 or in any of the Security Instruments; provided, however, that this waiver shall not limit in any way any other obligation of any Loan Party or any right of the Administrative Agent or any Lender provided for in the Loan Documents pertaining to the Holdco Merger or such name change. 3.             Effectiveness; Conditions Precedent.  The effectiveness of this Agreement, the amendments to the Credit Agreement provided in Paragraph 1 hereof and the waivers provided in Paragraph 2 hereof are all subject to the satisfaction of each the following conditions precedent: (a)           The Administrative Agent shall have received each of the following documents or instruments in form and substance reasonably acceptable to the Administrative Agent: (i)            counterparts of this Agreement, duly executed by the Borrower, the Administrative Agent, each Guarantor and the Required Lenders, which counterparts may be delivered by telefacsimile or other electronic means, but such   --------------------------------------------------------------------------------   delivery will be promptly followed by the delivery of four (4) original signature pages by each Person party hereto unless waived by the Administrative Agent; and (ii)           such other assurances, certificates, documents, consents or opinions as the Administrative Agent reasonably may require. (b)           All fees and expenses payable to the Administrative Agent and the Lenders (including the reasonable fees and expenses of counsel to the Administrative Agent) shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses). 4.             Consent of the Guarantors.  Each Guarantor hereby consents, acknowledges and agrees to the amendments, the waiver and other matters set forth herein and hereby confirms and ratifies in all respects the Guaranty to which such Guarantor is a party  (including without limitation the continuation of such Guarantor’s payment and performance obligations thereunder upon and after the effectiveness of this Agreement and the amendments, waivers and consents contemplated hereby) and the enforceability of such Guaranty against such Guarantor in accordance with its terms. 5.             Representations and Warranties.  In order to induce the Administrative Agent and the Lenders to enter into this Agreement, the Borrower represents and warrants to the Administrative Agent and the Lenders as follows:                 (a)           The representations and warranties made by the Borrower in Article VI of the Credit Agreement and in each of the other Loan Documents to which it is a party are true and correct in all material respects on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date;   (b)           The Persons appearing as Guarantors on the signature pages to this Agreement constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date, and each of such Persons has become and remains a party to a Guaranty as a Guarantor;   (c)           This Agreement has been duly authorized, executed and delivered by the Borrower and Guarantors party hereto and constitutes a legal, valid and binding obligation of such parties; and                   (d)           After giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.   6.             Entire Agreement.  This Agreement, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter.  No promise, condition,   --------------------------------------------------------------------------------   representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty.  Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof.  None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 11.01 of the Credit Agreement. 7.             Full Force and Effect of Agreement.  Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to their respective terms. 8.             Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 9.             Governing Law.  This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed and to be performed entirely within such State, and shall be further subject to the provisions of Sections 11.14 and 11.15 of the Credit Agreement. 10.           Enforceability.  Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 11.           References.  All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby. 12.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each of the Guarantors and Lenders, and their respective successors, legal representatives, and assignees to the extent such assignees are permitted assignees as provided in Section 11.06 of the Credit Agreement. [Signature pages omitted.]     --------------------------------------------------------------------------------

  Exhibit 10.1       (Merrill Lynch Logo) [g00143g0014301.gif] Private Client Group Merrill Lynch Business Financial Services Inc. 222 North LaSalle Street 17th Floor Chicago, Illinois 60601 (312) 269-4485 FAX: (312) 845-9093 March 6, 2006 Continucare Corporation 7200 Corporate Center Drive Suite 600 Miami, FL 33126 Re: WCMA Line of Credit Increase and Extension Ladies & Gentlemen: This Letter Agreement will serve to confirm certain agreements of Merrill Lynch Business Financial Services Inc. (“MLBFS”) and Continucare Corporation (“Customer”) with respect to: (i) that certain WCMA LOAN AND SECURITY AGREEMENT NO. 81V-07064 between MLBFS and Customer (including any previous amendments and extensions thereof), and (ii) all other agreements between MLBFS and Customer in connection therewith (collectively, the “Loan Documents”). Capitalized terms used herein and not defined herein shall have the meaning set forth in the Loan Documents. Subject to the terms hereof, effective as of the “Effective Date” (as defined below) the Loan Documents are hereby amended as follows: (a) The “Maturity Date” of the WCMA Line of Credit is hereby extended to September 30, 2007. (b) The “Maximum WCMA Line of Credit” is hereby increased to $5,000,000.00. (c) The “Line Fee” for the period ending September 30, 2007, shall be $37,500.00. Customer hereby authorizes and directs MLBFS to charge said amount to WCMA Account No. 81V-07064 on or at any time after the Effective Date. Subject to any further change in the WCMA Line of Credit and/or other amendment of terms, if the WCMA Line of Credit is renewed beyond the new Maturity Date, the annual Line Fee during the renewal period shall be $25,000.00. (d) “Interest Rate” shall mean a variable per annum rate of interest equal to the sum of 2.50%, plus the 30-day Dealer Commercial Paper Rate. “30-day Dealer Commercial Paper Rate” shall mean, as of the date of any determination, the interest rate then most recently published in the “Money Rates” section of The Wall Street Journal as the Dealer Commercial Rate for 30-day high-grade unsecured notes sold through dealers by major corporations (or if more than one such rate is published, the highest of such rates). The Interest Rate will change as of the date of publication in The Wall Street Journal of a 30-day Dealer Commercial Paper Rate that is different from that published on the preceding Business Day. In the event that The Wall Street Journal shall, for any reason, fail or cease to publish the 30-day Dealer Commercial Paper Rate, MLBFS will choose a reasonably comparable index or source to use as the basis for the Interest Rate.   --------------------------------------------------------------------------------   (e) Customer shall no longer be required to maintain a Minimum Corporate Liquidity covenant as of the Effective Date. (f) For all purposes of the Loan Documents, Customer’s address shall be 7200 Corporate Center Drive, Suite 600, Miami, FL 33126. (g) Customer’s “EBITDA” shall at all times exceed $1,500,000.00. For purposes hereof, “EBITDA” shall mean Customer’s income before interest (including payments in the nature of interest under capital leases), taxes, depreciation, amortization, and other non-cash charges; all as determined on a trailing 12-month basis as set forth in Customer’s regular quarterly financial statements prepared in accordance with GAAP. Except as expressly amended hereby, the Loan Documents shall continue in full force and effect upon all of their terms and conditions. Customer acknowledges, warrants and agrees, as a primary inducement to MLBFS to enter into this Agreement, that: (a) no Default or Event of Default has occurred and is continuing under the Loan Documents; (b) each of the warranties of Customer in the Loan Documents are true and correct as of the date hereof and shall be deemed remade as of the date hereof; (c) Customer does not have any claim against MLBFS or any of its affiliates arising out of or in connection with the Loan Documents or any other matter whatsoever; and (d) Customer does not have any defense to payment of any amounts owing, or any right of counterclaim for any reason under, the Loan Documents. Provided that no Event of Default, or event which with the giving of notice, passage of time, or both, would constitute an Event of Default, shall then have occurred and be continuing under the terms of the Loan Documents, the amendments and agreements in this Letter Agreement will become effective on the date (the “Effective Date”) upon which: (a) Customer shall have executed and returned the duplicate copy of this Letter Agreement enclosed herewith; (b) Customer shall furnish to MLBFS a check in the amount of $2,450.00 made payable to “UCC Direct Services” representing the documentary stamp tax required by the Secretary of State, Florida. Consult your tax advisor about this tax, since it may not be due if the Loan Document is executed outside the State of Florida, as evidenced by a notary’s acknowledgment at the end of the Loan Document; and (c) an officer of MLBFS shall have reviewed and approved this Letter Agreement as being consistent in all respects with the original internal authorization hereof. Notwithstanding the foregoing, if Customer does not execute and return the duplicate copy of this Letter Agreement within 7 days from the date hereof, or if for any other reason (other than the sole fault of MLBFS) the Effective Date shall not occur within said 7-day period, then all of said amendments and agreements will, at the sole option of MLBFS, be void. Very truly yours, Merrill Lynch Business Financial Services Inc. By: /s/Michael Kozak                                    Michael Kozak      Senior Credit Underwriter   --------------------------------------------------------------------------------   Accepted:           Continucare Corporation       By:   /s/ Richard C. Pfenniger, Jr.       Printed Name:   Richard C. Pfenniger, Jr.      Title:   Chief Executive Officer                STATE OF MARYLAND   }         }   SS. COUNTY OF BALTIMORE   }     The foregoing instrument was acknowledged before me this day of 8 March AD, 2006 by Richard C. Pfenninger of Continucare Corporation, a Florida corporation, on behalf of the corporation. Said person is personally known to me or has produced said license as identification.               Marcella M. Szyjko       NOTARY PUBLIC                Marcella M. Szyjko       PRINTED NAME OF NOTARY PUBLIC              My Commission Expires:       1/1/07     [S E A L]             

Exhibit 10.2 INCENTIVE BONUS PROGRAM Section 1. Establishment Generally. TVI has established this Incentive Bonus Program (the “Program”) for the benefit of the Employee, subject to all of the terms and conditions set forth herein. Section 2. EBITDA Bonus Payments. (a) Subject to the provisions of Section 4(b) hereof and Sections 5, 10(c) and 11 of the Employment Agreement, within one hundred twenty (120) days after the end of each EBITDA Bonus Period, TVI will determine and calculate a bonus payment for each such EBITDA Bonus Period (such payment, if any, an “EBITDA Bonus Payment”). Any EBITDA Bonus Payment shall be payable to the Employee as set forth herein. (b) The EBITDA Bonus Payment for each EBITDA Bonus Period, if any, will be an amount equal to Employee’s Allocable Share of fifty percent (50%) of the Excess EBITDA for such period. Section 3. Return on Invested Capital Bonus Payment. (a) Subject to the provisions of Section 4(b) hereof and Sections 5, 10(c) and 11 of the Employment Agreement, within one hundred twenty (120) days after the end of the Return on Invested Capital Bonus Period, TVI will determine and calculate a bonus payment for such Return on Invested Capital Bonus Period (such payment, if any, the “Return on Invested Capital Bonus Payment”). Any Return on Invested Capital Bonus Payment shall be payable to the Employee as set forth herein. (b) The Return on Invested Capital Bonus Payment, if any, will be an amount equal to Employee’s Allocable Share of fifty percent (50%) of the product of: (i) six and six-tenths (6.6) multiplied by (ii) Excess EBIT. Section 4. Calculation; Eligibility. (a) As soon as reasonably practicable following TVI’s determination of any Bonus Payment, TVI will deliver to the Employee: (A) a statement that includes each element of the calculation of the Bonus Payment; and (B) a certificate of TVI’s Chief Financial Officer certifying on behalf of TVI that the calculation of the Bonus Payment was made in accordance with the terms hereof (such statement and certificate being referred to as the “Bonus Payment Certificate”). The Employee and his professional advisors will be given reasonable access to the books and records of the Company that are necessary to confirm the calculation of the Bonus Payment. All information obtained by the Employee and his advisors shall be deemed to be “Confidential Information” of TVI and remain subject to the restrictions of Section 6 of the Employment Agreement. (b) Notwithstanding any other provision hereof, the Employee shall be entitled to receive any Bonus Payment hereunder only for so long as he remains continuously employed under his Employment Agreement with TVI at all times through the end of the applicable Bonus Period; provided, however, that Employee shall continue to be eligible to receive a Bonus Payment notwithstanding the earlier termination of the Employee’s employment with TVI in accordance with the terms of Section 5(a) of the Employment Agreement. In the event Employee is not entitled to receive any Bonus Payment (or portion thereof) hereunder, the same shall immediately and automatically be deemed forfeited in full and retained by TVI. -------------------------------------------------------------------------------- Section 5. Dispute Resolution. (a) The amount of a Bonus Payment set forth in a Bonus Payment Certificate shall be binding on the Employee unless the Employee presents to TVI within ten (10) Business Days after receipt thereof written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement with respect to TVI’s determination of a Bonus Payment. TVI and the Employee shall attempt in good faith during the thirty (30) days immediately following TVI’s receipt of the Employee’s timely notice of disagreement to resolve any disagreement with respect to such Bonus Payment. (b) If, at the end of the thirty (30) day period referenced in Section 5(a) above, TVI and the Employee have not resolved all disagreements with respect to whether the calculation of a Bonus Payment is in accordance with the terms hereof, such disagreement, regardless of the legal theory upon which it is based, will be settled in accordance with Section 13(l) of the Employment Agreement. Section 6. Payment. (a) EBIDTA Bonus Payments, if any, will be paid to the Employee within thirty (30) days after the amount of such EBIDTA Bonus Payment has been determined conclusively for a particular EBIDTA Bonus Period, and as contemplated herein. Subject to Section 6(d) below, any such payment will be paid: (i) in cash, or (ii) partly in cash and partly in TVI Shares, as TVI shall, in its sole discretion, elect, provided however, that at least thirty-five percent (35%) of each such Bonus Payment shall be in cash. (b) The Return on Invested Capital Bonus Payment, if any, will be paid to the Employee as follows: one-half (1/2) of the amount of such Return on Invested Capital Bonus Payment will be paid no later than January 1, 2011 and the remaining one-half (1/2) of the amount of such Return on Invested Capital Bonus Payment will be paid no later than January 1, 2012. Subject to Section 6(d) below, any such payment will be paid: (i) in cash, or (ii) partly in cash and partly in TVI Shares, as TVI shall, in its sole discretion, elect, provided however, that at least thirty-five percent (35%) of each such Bonus Payment shall be in cash. (c) In the event of any issuance of TVI Shares hereunder, such number of shares shall be calculated based upon the average closing price of the such shares as reported on the NASDAQ Capital Market (or other exchange or market on which TVI Shares then trade) for the twenty (20) trading day period immediately preceding the date each Bonus Payment is made. (d) Notwithstanding any other provision hereof, the total number of TVI Shares issuable under: (i) this Employment Agreement, (ii) the employment agreements entered into this date with other members of the Signature Management Team, and (iii) any other agreement to which TVI is a party relating to the series of transactions contemplated by the Purchase Agreement, that certain Finder’s Agreement dated as of the date hereof and other related documents and agreements shall not exceed nineteen and nine tenths percent (19.9%) of the total number of TVI Shares issued and outstanding as of the Effective Date. (e) Any TVI Shares issued hereunder shall be issued under the terms of a Stock Agreement (the “Stock Agreement”) which shall specify such terms, conditions and restrictions   2 -------------------------------------------------------------------------------- regarding the TVI Shares as the Company believes are reasonably necessary or appropriate to achieve compliance with both the provisions of applicable Securities Laws and exchange or listing requirements to which the Company is then subject. (f) Notwithstanding any other provision hereof, in the event that TVI makes payment for any portion of the Return on Invested Capital Bonus Payment by delivery of TVI Shares, the Stock Agreement governing all of such shares (the “Restricted Shares”) shall provide that the Restricted Shares will vest over the two-year period immediately following issuance of such shares conditioned upon Employee’s continued and uninterrupted employment under the Employment Agreement during that period. Specifically, the Stock Agreement shall provide that one-half (1/2) of the Restricted Shares shall vest and be released to Employee on January 1, 2011, and the remaining one-half (1/2) of the Restricted Shares shall vest and be released to Employee on January 1, 2012 (each date, a “Vesting Date”). Notwithstanding any other provision hereof, the Stock Agreement shall provide that in the event Employee’s employment under the Employment Agreement terminates for any reason whatsoever prior to either Vesting Date, the then-unvested portion of any Restricted Shares will, immediately and automatically, be forfeited in full and Employee shall thereafter have no right to same whatsoever. To facilitate the Company’s rights and obligations under this Program, the Company reserves the right to appoint an escrow agent to hold the Restricted Shares during through the relevant Vesting Date(s). Section 7. Reservation of Rights. Neither this Program nor any action taken hereunder shall be construed as giving any Company employee, including Employee, any right to be retained as an officer or employee of TVI or any of its Affiliates. Participation in the Program and the right to receive Bonus Payments hereunder shall not give any Company employee any proprietary, ownership, equity or other interest in TVI or any of its Affiliates. No trust fund shall be created in connection with the Program, and there shall be no required funding of amounts that may become payable under the Program. Section 8. Conduct of Business. (a) Notwithstanding any other provision hereof, the Employee understands, acknowledges and agrees that TVI is entitled to manage and operate the Company and its businesses in any manner it deems necessary from time to time. Without limiting the generality of the forgoing, with respect to TVI and each of its subsidiaries (including, without limitation, Acquisition Sub) and operating units, TVI shall have the sole right to establish, control and change: (i) the appropriate levels of Working Capital, capital expenditures and selling, general and administrative expenses, (ii) general business, strategic, product and marketing strategies and (iii) the prices, charges and terms and conditions governing the marketing and sales of all of its products and services and reserves the right, in its sole discretion, to accept or reject any order or offers, and to cancel any previously accepted order or offers. (b) Subject to Section 8(a) above, for each applicable Bonus Period, the general manager(s) of the SSES Business shall present an annual budget to the Chief Employee Officer of TVI for discussion and consultation. The Chief Employee Officer of TVI shall consider in good faith the comments and observations of the general manager(s) of the SSES Business regarding the annual budget and shall make such adjustments, if any, based on such consultation and discussion as the Chief Employee Officer of TVI shall determine are appropriate in light of the then-current business needs of TVI considered as a whole. The Employee acknowledges that he is not authorized to, and will not, take (and will not attempt to cause TVI, the Acquisition Sub or any of their employees to take) any action in bad faith in order to increase the amount of or accelerate the payments, if any, pursuant hereto.   3 -------------------------------------------------------------------------------- Section 9. Non-Transferability. The interests of Employee hereunder cannot be assigned, anticipated, sold, encumbered or pledged in any manner whatsoever (except upon the death of the Employee by will or by the laws of descent and distribution), and shall not be subject to the claims of the Employee’s creditors and any attempted alienation, anticipation, assignment or attachment shall be void and of no effect ab initio. Prior to payment of any Bonus Payment, no benefit provided hereunder shall be subject to alienation, anticipation or assignment by the Employee (or by any beneficiary), nor shall it be subject to attachment or other legal process of whatever nature. Bonus Payments under this Agreement shall be made only to the Employee or beneficiary entitled to receive the same or to the Employee’s authorized legal representative. Deposit of any sum in any financial institution to the credit of the Employee (or of any beneficiary) shall constitute payment to the Employee (or beneficiary). Section 10. Tax Withholding. TVI shall have the right to deduct from any Bonus Payment any federal, state, local or employment taxes which it deems are required by law to be withheld with respect to such payment. Upon the reasonable request of the Employee or beneficiary, or as required by law, such sums as may be required for the payment of any estimated or accrued income tax liability may be withheld and paid over to the governmental entity entitled to receive the same. Section 11. Securities Law Matters. (a) Employee acknowledges that the Securities Laws require that no TVI Shares may be offered or issued hereunder or sold or transferred by Employee unless either registered or qualified under such acts or exemptions from such registrations are available. Employee further acknowledges that any TVI Shares to be issued hereunder have not been registered under the Securities Laws and the Company does not intend to, and is not obligated to, register or qualify the offering or issuance of TVI Shares hereunder under any such acts. Consequently, Employee will not be able to transfer any TVI Shares except in compliance with rules and regulations regarding exemptions from such registrations. The share certificate(s) representing any TVI Shares issued hereunder will bear a restrictive legend to this effect. Employee is familiar with the provisions of Rule 144 under the 1933 Act (“Rule 144”) which, as currently in effect, generally permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering, subject to the satisfaction of the conditions thereof. (b) Regardless of whether the offering and issuance of TVI Shares hereunder have been registered under the Securities Laws, the Company may impose reasonable restrictions upon the sale, pledge, or other transfer of such TVI Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such restrictions are reasonably necessary or desirable to achieve compliance with the provisions of the Securities Laws. If the offering and/or issuance of TVI Shares hereunder is not registered under such act and the Company determines that the registration requirements of the Securities Laws apply but exemptions are available which requires an investment representation or other representation, the Employee shall be required, as a condition to acquiring such TVI Shares, to represent that such TVI Shares are being acquired for investment only, and not with a view towards the sale or distribution thereof, except in compliance with the Securities Laws, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel. Notwithstanding any other provision hereof, no TVI Shares shall be issued under this   4 -------------------------------------------------------------------------------- Program unless and until the Company has determined that all required actions have been taken to register such TVI Shares under the Securities Laws or the Company has determined that exemptions therefrom are available, any applicable listing requirements of any stock exchange on which the TVI Shares are then listed have been satisfied, and any other applicable provision of state, federal or foreign law, has been satisfied. (c) In connection with any underwritten public offering of TVI Shares, Employee agrees that it shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any TVI Shares for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the 1933 Act. Employee agrees to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to Employee’s TVI Shares until the end of such period. (d) Anything set forth herein or in the Employment Agreement to the contrary notwithstanding, in exchange for Employee agreeing to accept TVI Shares as part payment of amounts due to Employee by the Company, the Company shall, at its own expense, take all commercially reasonable efforts to permit the TVI Shares issued to Employee under this Agreement to be lawfully saleable by Employee to the public pursuant to Rule 144 (or any similar rule or regulation of the Commission allowing it to sell the TVI Shares without registration). Without limiting the generality of the foregoing, the Company agrees to: (i) Make and keep available “adequate current public information” about the Company, as that term is understood and defined in Rule 144. (ii) File with the Commission in a timely manner all reports and other documents required of the Company under the 1933 Act and the Securities Exchange Act of 1934, as amended (the “1934 Act”). (iii) Furnish to Employee upon request: (A) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act; (B) a copy of the most recent annual or quarterly report of the Company; and (C) such other reports and documents of the Company as the Employee may reasonably request to avail himself of Rule 144 (or any similar rule or regulation of the Commission allowing it to sell the TVI Shares without registration). (iv) Subject to the satisfaction of the legal and factual requirements of Rule 144 (or any similar rule or regulation of the Commission allowing it to sell the TVI Shares without registration) instruct: (A) its securities counsel to issue the legal opinions typically required to permit qualifying sales thereunder, without cost to Employee; and (B) its transfer agent to process Rule 144 sale requests including, without limitation, removing any Rule 144 restrictive legend from the share certificate(s) representing the TVI Shares, without cost to Employee. Section 12. Government and Other Regulations. The obligation of TVI to make any payment hereunder shall be subject to all applicable laws, and regulations promulgated thereunder, and to such approvals by government agencies as may be required.   5 -------------------------------------------------------------------------------- Section 13. Tax Matters. Employee understands and acknowledges that TVI has directed Employee to seek independent tax and financial advice regarding the tax consequences hereunder including the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the income tax laws of any municipality, state or foreign country in which Employee may reside, and the tax consequences hereunder generally including, without limitation, the operation of Code Section 83. Employee assumes all responsibility for paying taxes resulting hereunder. Section 14. Relation to Employment Agreement. Except as expressly set forth herein, this Program is subject to all the provisions of the Employment Agreement. In the event of any conflict between the provisions of this Program and those of the Employment Agreement, the provisions of the Employment Agreement shall control. Any capitalized term used herein not specifically defined herein shall have the same meaning as is ascribed to such term under the Employment Agreement. Section 15. Definitions. For convenience, certain terms used in more than one part of this Agreement are listed in alphabetical order and defined or referred to below. “1933 Act” means the Securities Act of 1933, as amended. “Accounting Policies” means the cost accounting policies established by TVI from time to time in the exercise of its sole discretion and consistently applied by it to the SSES Business. “Actual Average Annual EBIT” means the average annual EBIT over the Return on Invested Capital Bonus Period, calculated as the sum of EBIT for each year of the Return on Invested Capital Bonus Period (i.e., each of the years ending December 31, 2007, 2008 and 2009) divided by three (3). “Actual EBIT Ratio” is a percentage obtained by dividing Actual Average Annual EBIT by the Total Invested Capital. “Aggregate Non-compete Fee” means an amount equal to three million dollars ($3,000,000). “Bonus Payment” means an EBITDA Bonus Payment or the Return on Invested Capital Bonus Payment, if any. “Bonus Payment Certificate” has the meaning set forth in Section 4(a) hereof. “Bonus Period” means an EBITDA Bonus Period or the Return on Invested Capital Bonus Period, as the case may be. “Commission” means the Securities and Exchange Commission. “EBIT” means EBITDA, less the SSES Business’ depreciation and amortization plus any EBITDA Bonus Payments. “EBIT Hurdle Ratio” means fifteen percent (15%). “EBITDA” means, for each EBITDA Bonus Period, the net income of the SSES Business, as determined in accordance with GAAP, plus interest, income taxes, depreciation and   6 -------------------------------------------------------------------------------- amortization of the SSES Business for such period; provided, however, that for purposes of calculating EBITDA: (a) such calculations shall be determined in a manner consistent with the Accounting Policies; and (b) any other extraordinary gain or loss (as defined under APB Opinion No. 30 or SFAS No. 144) shall be excluded. For purposes of clarification, in determining EBITDA, direct and indirect (allocated) costs and expenses incurred by TVI or any of its Affiliates on behalf of the SSES Business (e.g., salary, bonuses and related employment expenses for any personnel of TVI or its Affiliates attributable to the SSES Business, the insurance coverage obtained with respect to the SSES Business under policies maintained by TVI or any of its Affiliates, corporate governance and Sarbanes-Oxley costs, audit fees and other similar costs and expenses) will be included among the expenses of the SSES Business. “EBITDA Bonus Payment” has the meaning set forth in Section 2(b). “EBITDA Bonus Periods” means each of the: (a) the period from the date hereof through December 31, 2006, and (b) the three (3) separate calendar years ending December 31, 2007, 2008 and 2009. “EBITDA Milestone” means: (a) for the period from the date hereof until December 31, 2006, eight hundred seventy-five thousand dollars ($875,000), and (b) for each of the calendar years ending December 31, 2007, 2008 and 2009, three million five hundred thousand dollars ($3,500,000). “Employee’s Allocable Share” means thirty-three and one-third percent (33 &1/3%). “Employee’s Non-compete Share” means thirty-three and one-third percent (33 &1/3%). “Employment Agreement” means the Employment Agreement entered into between TVI and Employee as of this date, to which this Program is an exhibit. “Excess EBIT” means a dollar amount obtained by multiplying the difference, if any, by which the Actual EBIT Ratio exceeds the EBIT Hurdle Ratio by the Total Invested Capital. “Excess EBITDA” means, for each EBITDA Bonus Period, the amount by which actual EBITDA for such period exceeds the EBITDA Milestone for such period. “Non-compete Fee” means an amount equal to Employee’s Non-compete Share multiplied by the Aggregate Non-compete Fee. “Other Programs” means the two (2) other bonus programs established as of this date for the two other Signature Managers substantially identical to this Program excepting the definition of “Employee’s Allocable Share.” “Return on Invested Capital Bonus Payment” has the meaning set forth in Section 3(b). “Return on Invested Capital Bonus Period” means the three-year period beginning January 1, 2007 and ending December 31, 2009. “Securities Laws” means the 1933 Act, the 1934 Act and the State Acts.   7 -------------------------------------------------------------------------------- “Signature Business Finder’s Fee” means an amount equal to two million dollars ($2,000,000). “SSES Business” means the Signature Business, as owned and conducted by Acquisition Sub and TVI after consummation of the Transaction. “SSES Business Fixed Assets” means the amount invested by TVI and its Affiliates in the SSES Business’ buildings, machinery, fixtures, furniture and equipment and other tangible assets not expected to be consumed or converted into cash within one (1) year. “Signature Business Purchase Price” means the “Purchase Price,” as such term is defined in, and adjusted under, the Purchase Agreement. “SSES Business Working Capital” means as of any date, the excess of the Total Current Assets minus Total Current Liabilities as of that date. “State Acts” means the securities laws of states and jurisdictions other than the United States. “Total Current Assets” means the sum of the value of the following assets: (a) cash and cash equivalents, (b) accounts receivable (of ninety (90) days or less) and (c) inventory (including stock and work-in-progress). “Total Current Liabilities” means the sum of the following liabilities: (a) amounts owed for interest, (b) amounts owed for accounts payable, (c) amounts owed for short-term loans, (d) amounts owed for expenses incurred but unpaid and (e) other debts or liabilities due within one (1) year. “Total Invested Capital” means: (a) the sum of (i) the Signature Business Purchase Price, (ii) the Signature Business Finder’s Fee, and (iii) the Aggregate Non-compete Fee, plus or minus (b) any net increase or decrease from the beginning of the Return on Invested Capital Bonus Period compared to the end of the Return on Invested Capital Bonus Period, as the case may be, in both SSES Business Working Capital and SSES Business Fixed Assets. “TVI Shares” means TVI’s Common Stock, par value One Cent ($0.01) per share.   8

Exhibit 10.3 TERMINATION, RELEASE AND NONCOMPETITION AGREEMENT This Termination, Release and Noncompetition Agreement (the “Agreement”) is entered into as of July 18, 2006 by and among John M. Lilly (the “Executive”), Westbank Corporation (“WBC”), a Massachusetts corporation, Westbank, a Massachusetts chartered bank and trust company and a wholly-owned subsidiary of WBC, and NewAlliance Bancshares, Inc. (“NewAlliance”), a Delaware corporation. RECITALS: WHEREAS, NewAlliance, NewAlliance Bank, WBC and Westbank are entering into an Agreement and Plan of Merger, dated as of July 18, 2006 (the “Merger Agreement”); and WHEREAS, Section 7.5.7 of the Merger Agreement provides that NewAlliance, WBC, Westbank and the Executive shall enter into this Agreement, which shall terminate the change of control agreement between WBC, Westbank and the Executive dated December 17, 2003 (the “Change of Control Agreement”) as of the Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein; NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Executive, WBC, Westbank and NewAlliance agree as follows: 1. Actions to be Taken in 2006. (a) The Executive hereby agrees to take the following actions between the date hereof and December 29, 2006, it being the intention of the parties hereto that all of such actions shall be fully effective and consummated no later than December 29, 2006 (or such other date as may be specified below): (i) consent, to the extent any such consent is required by the Executive, to the accelerated vesting as of the date the shareholders of WBC approve the Merger Agreement of all unvested restricted stock awards granted to the Executive with respect to the common stock of WBC, provided that any unvested restricted stock awards scheduled to vest prior to such date shall vest on their originally scheduled vesting date; (ii) accept on or before December 29, 2006 such prepayment, if any, of the dollar amount specified in Section 2(a) below that may be mutually agreed to by WBC and NewAlliance in order to avoid the potential reduction in payments under Section 2(c) below; and (iii) cooperate with NewAlliance and WBC and take such other steps as may in good faith be requested of the Executive by NewAlliance in order to avoid the potential reduction in payments under Section 2(c) below. -------------------------------------------------------------------------------- (b) WBC shall take all steps necessary to accelerate as of the date the shareholders of WBC approve the Merger Agreement the vesting of all of the unvested restricted stock awards granted to the Executive. (c) In the event the above actions are taken but are insufficient to avoid the potential reduction in payments under Section 2(c) below, then WBC or Westbank shall prepay to the Executive on or before December 29, 2006 such portion of the dollar amount specified in Section 2(a) below as shall be mutually agreed to by WBC and NewAlliance (which agreement shall not be unreasonably withheld or delayed). 2. Payments to Be Made as of the Effective Time of the Merger. (a) As of the Effective Time of the Merger, provided the Executive is still employed by WBC immediately prior to such date and provided that the Executive and WBC have taken all of the actions required to be taken pursuant to Section 1 hereof, and in consideration of the obligations and commitments of the Executive under this Agreement, WBC or Westbank shall pay to the Executive a lump sum cash amount equal to $773,510, subject to adjustment as set forth in Section 2(c) below (the “Maximum Amount”), less applicable tax withholdings and less any portion thereof that is prepaid in December 2006 pursuant to Sections 1(a)(ii) and 1(c) above. In consideration of such payment and the other provisions of this Agreement, the Executive, WBC, Westbank and NewAlliance hereby agree that the Change of Control Agreement and the Executive’s employment with WBC shall be terminated without any further action of any of the parties hereto, effective immediately prior to the Effective Time of the Merger, except as set forth in Section 4 hereof. The Executive agrees that the above payment shall be in complete satisfaction of all of his rights to payments or benefits under the Change of Control Agreement, except as set forth in Section 4 hereof. (b) WBC and the Executive represent and warrant that the information with respect to the Executive contained in Section 4.14.8 of the WBC Disclosure Schedule to the Merger Agreement accurately reflects the Executive’s taxable Form W-2 income for each of the four years ended December 31, 2005 and contains a complete listing of all payments or benefits to the Executive that could be deemed to be a parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), based on the assumptions set forth in such schedule. (c) Each of the parties hereto agrees that if the actions specified in Section 1 above are taken as required, then based on Section 2(b) above the payments and benefits to be provided to the Executive should not trigger any tax reimbursement payments pursuant to Section 13 of the Change of Control Agreement. In the event any of the actions specified in Section 1 above is not taken as required, or if any of the representations in Section 2(b) is not correct, and if such failure results in the Maximum Amount, either alone or together with other payments and benefits which the Executive has the right to receive from NewAlliance, WBC or Westbank, whether pursuant to this Agreement or otherwise, being a “parachute payment” under Section 280G of the Code, then the Maximum Amount payable by WBC or Westbank pursuant to Section 2(a) hereof shall be reduced by the amount which is the minimum necessary to result in 2 -------------------------------------------------------------------------------- no portion of the payment payable by WBC or Westbank under Section 2(a) being non-deductible to WBC, Westbank or NewAlliance (or any successors thereto) pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. If any of the payments or benefits to be provided by WBC, Westbank or NewAlliance are subject to the excise tax imposed by Section 4999 of the Code but are not required to be reduced by this Section 2(c), then the indemnity under Section 13 of the Change of Control Agreement (which section remains in full force and effect pursuant to Section 4 of this Agreement) shall be provided to the Executive by NewAlliance; provided, however, that if the amount of the indemnity is known as of the Effective Time of the Merger, then such indemnity shall be provided by either WBC or Westbank at the request of NewAlliance. (d) As of the Business Day immediately prior to the Effective Date of the Merger, provided the Executive is still employed by WBC immediately prior to such date, WBC or Westbank shall pay to the Executive an additional lump sum cash amount equal to $408,817, less applicable tax withholdings, in complete satisfaction of all of the Executive’s rights to payments or benefits under the Executive Supplemental Retirement Plan Agreement between the Executive and Westbank (formerly Park West Bank and Trust Company) dated July 2, 2001 (the “SERP Agreement”). In consideration of such payment, the parties hereto agree that the SERP Agreement shall be terminated without any further action of any of the parties hereto on or before the date of such payment in accordance with the terms of the Merger Agreement. (e) As of the Effective Time of the Merger, the Executive shall be given the opportunity to purchase the automobile currently provided to him by Westbank at its then fair market value if he wishes to do so, provided that in no event shall such fair market value be less than the greater of (i) the Kelley blue book value of such automobile as of the Effective Time, or (ii) WBC’s book value or residual leasehold interest in such automobile as of the Effective Time. (f) The parties hereto agree that the payment pursuant to Section 1(a)(ii) above should not trigger any of the excise taxes or interest penalties under Section 409A of the Code based on the current provisions of such section and the proposed regulations issued under Section 409A of the Code. However, in the event the final regulations issued under Section 409A are construed so as to impose the excise tax and interest penalties specified under Section 409A of the Code on the payment under Section 1(a)(ii) of this Agreement, then NewAlliance shall provide a tax indemnification to the Executive so that the Executive is in the same after-tax position he would have been in if the excise tax and interest penalties under Section 409A of the Code had not been imposed on such payment; provided, however, that if the amount of the indemnity is known as of the Effective Time of the Merger, then such indemnity shall be provided by either WBC or Westbank at the request of NewAlliance. 3. Payment of Fringe Benefits. (a) NewAlliance agrees to provide the Executive with continued health, dental, life and disability coverage, pursuant to either the policies currently offered by WBC and Westbank or the policies to be offered by NewAlliance to the Continuing Employees of WBC, until the earlier of thirty (30) calendar months following the Effective Time of the Merger or the 3 -------------------------------------------------------------------------------- Executive’s commencement of full-time employment with a new employer, subject to the terms and conditions of such policies, with the Executive responsible for paying the same share of any premiums, copayments or deductibles as if he was an employee and with the disability and life insurance coverage subject to the maximum coverage limits in the current policies of WBC or Westbank, except as set forth below in this Section 3(a). The health and dental coverage shall include any dependents of the Executive who are covered by WBC or Westbank as of the date of this Agreement and who remain covered by WBC or Westbank as of the Effective Time of the Merger. In the event the Executive’s participation in any such plan is barred, NewAlliance shall arrange to provide the Executive with benefits substantially similar to those which the Executive would otherwise have received under such plans from which his continued participation is barred or pay to the Executive a cash amount equal to the amount NewAlliance would have paid for such coverage if the Executive was still an employee. In addition, notwithstanding the foregoing, if the provision of any of the benefits covered by this Section 3(a) would trigger the 20% tax and interest penalties under Section 409A of the Code either due to the nature of such benefit or the length of time it is being provided, then the benefit(s) that would trigger such tax and interest penalties due to the nature of the benefit shall not be provided at all and the benefit(s) that would trigger the tax and interest penalties if provided beyond the “limited period of time” set forth in the regulations under Section 409A shall not be provided beyond such limited period of time (collectively, the “Excluded Benefits”), and in lieu of the Excluded Benefits NewAlliance shall pay to the Executive, in a lump sum within 30 days following termination of employment or within 30 days after such determination should it occur after termination of employment, a cash amount equal to the amount NewAlliance would have paid for such Excluded Benefits in the absence of Section 409A of the Code. (b) In calculating the value of the benefits to be provided pursuant to Section 3(a) above, the parties agree to assume that the premiums in effect as of August 31, 2006 will increase by 15% per year to cover anticipated premium increases over the 30 month period specified in Section 3(a) above. 4. Releases. Upon payment of the amounts set forth in Section 2(a) hereof (as such amount may be adjusted pursuant to Section 2(c) hereof) and in Section 2(d) hereof, the Executive, for himself and for his heirs, successors and assigns, does hereby release completely and forever discharge WBC, Westbank and their successors from any obligation under the Change of Control Agreement, except for the provisions of Section 13 of the Change of Control Agreement which shall remain in full force and effect, and under the SERP Agreement. The obligations of NewAlliance to provide benefits pursuant to Section 3 above shall continue for the period specified therein. This Agreement shall not release WBC or NewAlliance from any of the following: (a) obligations to pay to the Executive wages earned up to the Effective Time of the Merger; (b) the payment of any of the Executive’s vested benefits, or honoring any of the Executive’s rights, under the WBC Employee Plans, excluding any bonus plans, employment agreement or other severance agreement or plan, (c) the payment of the Merger Consideration with respect to the Executive’s common stock of WBC or stock options or restricted stock awards with respect to the common stock of WBC, or (d) the obligations of NewAlliance under Section 7.6 of the Merger Agreement. 4 -------------------------------------------------------------------------------- 5. Non-Competition Provisions. The Executive agrees that during the 12-month period immediately following the Effective Date of the Merger (the “Non-Competition Period”), the Executive will not (i) engage in, become interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a shareholder in a corporation, or become associated with, in the capacity of employee, director, officer, principal, agent, trustee or in any other capacity whatsoever, any enterprise or entity located in either Hampden County in the Commonwealth of Massachusetts or Windham County in the State of Connecticut (collectively, the “Counties” and individually a “County”), which proprietorship, partnership, corporation, enterprise or other entity is engaged in any line of business conducted by NewAlliance, NewAlliance Bank or any of their subsidiaries immediately following the Effective Time of the Merger, including but not limited to entities which lend money and take deposits (in each case, a “Competing Business”), provided, however, that this provision shall not prohibit the Executive from owning bonds, non-voting preferred stock or up to five percent (5%) of the outstanding common stock of any Competing Business if such common stock is publicly traded, (ii) solicit or induce, or cause others to solicit or induce, any employee of NewAlliance or any of its subsidiaries to leave the employment of such entities, or (iii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of NewAlliance or any of its subsidiaries) any customer of NewAlliance or any of its subsidiaries to transact business with any Competing Business, or to reduce or refrain from doing any business with NewAlliance or its subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between NewAlliance or its subsidiaries and any such customers. 6. Enforcement. (a) This Agreement shall be construed, enforced and interpreted in accordance with and governed by the laws of the State of Connecticut, without reference to its principles of conflict of laws, except to the extent that federal law shall be deemed to preempt such state laws. (b) It is the intention of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability or the modification to conform with such laws or public policies of any provision hereof shall not render unenforceable or impair the remainder of the Agreement. The covenants in Section 5 of this 5 -------------------------------------------------------------------------------- Agreement with respect to the Counties shall be deemed to be separate covenants with respect to each County, and should any court of competent jurisdiction conclude or find that this Agreement or any portion is not enforceable with respect to a County, such conclusion or finding shall in no way render invalid or unenforceable the covenants herein with respect to the other County. Accordingly, if any provision shall be determined to be invalid or unenforceable either in whole or in part, this Agreement shall be deemed amended to delete or modify as necessary the invalid or unenforceable provisions to alter the balance of this Agreement in order to render the same valid and enforceable. (c) The Executive acknowledges that NewAlliance and NewAlliance Bank would not have entered into the Merger Agreement or intend to consummate the Merger unless the Executive had, among other things, entered into this Agreement. Any breach of Section 5 of this Agreement will result in irreparable damage to NewAlliance and NewAlliance Bank for which NewAlliance and NewAlliance Bank will not have an adequate remedy at law. In addition to any other remedies and damages available to NewAlliance and NewAlliance Bank, the Executive further acknowledges that NewAlliance and NewAlliance Bank shall be entitled to seek injunctive relief hereunder to enjoin any breach of Section 5 of this Agreement, and the parties hereby consent to any injunction issued in favor of NewAlliance and NewAlliance Bank by any court of competent jurisdiction, without prejudice to any other right or remedy to which NewAlliance and NewAlliance Bank may be entitled. The Executive represents and acknowledges that, in light of his experience and capabilities, the Executive can obtain employment with other than a Competing Business or in a business engaged in other lines and/or of a different nature than those engaged in by NewAlliance or its subsidiaries or affiliates, and that the enforcement of a remedy by way of injunction will not prevent the Consultant from earning a livelihood. Each of the remedies available to NewAlliance and NewAlliance Bank in the event of a breach by the Consultant shall be cumulative and not mutually exclusive. 7. General. (a) Heirs, Successors and Assigns. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors and assigns. (b) Final Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior understandings, written or oral. The terms of this Agreement may be changed, modified or discharged only by an instrument in writing signed by each of the parties hereto. In the event the Internal Revenue Service issues final regulations under Section 409A of the Code prior to the Effective Time of the Merger and such regulations are deemed to result in the imposition of the excise taxes and/or interest penalties under Section 409A of the Code on any of the payments or benefits to be provided under this Agreement, then the parties hereto agree to negotiate in good faith an amendment to this Agreement to avoid such excise taxes and/or interest penalties to the extent possible, provided that the amounts payable to the Executive under Sections 1, 2(a) and 2(d) of this Agreement shall not be delayed beyond the Effective Time of the Merger or reduced in the aggregate. (c) Withholdings. WBC, Westbank and NewAlliance may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as may be required to be withheld pursuant to applicable law or regulation. (d) Defined Terms. Any capitalized terms not defined in this Agreement shall have as their meaning the definitions contained in the Merger Agreement. (e) Voluntary Action and Waiver. The Executive acknowledges that by his free and voluntary act of signing below, the Executive agrees to all of the terms of this Agreement and intends to be legally bound thereby. The Executive acknowledges that he has been advised to consult with an attorney prior to executing this Agreement. 6 -------------------------------------------------------------------------------- (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 8. Effectiveness. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is terminated for any reason, this Agreement shall be deemed null and void with respect to all actions not yet taken pursuant to this Agreement. [Signature page follows] 7 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, NewAlliance, WBC and Westbank have each caused this Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written. WITNESS: EXECUTIVE:         /s/ Robert J. Perlak /s/ John M. Lilly  Name: Robert J. Perlak Name: John M. Lilly             ATTEST: WESTBANK CORPORATION             /s/ Robert J. Perlak By:  /s/ Ernest N. Laflamme, Jr. Name: Robert J. Perlak Name: Ernest N. Laflamme, Jr.   Title: Chairman of the Board         ATTEST: WESTBANK             /s/ Robert J. Perlak By:  /s/ Ernest N. Laflamme, Jr. Name: Robert J. Perlak Name: Ernest N. Laflamme, Jr.   Title: Chairman of the Board         ATTEST: NEWALLIANCE BANCSHARES, INC.             /s/ Brian Arsenault By:  /s/ Merrill B. Blanksteen Name: Brian Arsenault Name: Merrill B. Blanksteen   Title:   Executive Vice President and Chief   Financial Officer   8 --------------------------------------------------------------------------------

Exhibit 10.5 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this “Agreement”) is made and entered into as of September 15, 2006 among Inovio Biomedical Corporation, a Delaware corporation (the “Company”), and each of the purchasers executing this Agreement and listed on Schedule 1 attached hereto (collectively, the “Purchasers”). This Agreement is being entered into pursuant to the Securities Purchase and Exchange Agreement, dated as of the date hereof, by and among the Company, its subsidiary, Inovio Asia Pte. Ltd., incorporated in the Republic of Singapore (“IAPL”), and the Purchasers (the “Purchase Agreement”). The Company and the Purchasers hereby agree as follows: 1.             Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: “Advice” shall have the meaning set forth in Section 3(m). “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, “control,” when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing. “Blackout Period” shall have the meaning set forth in Section 3(n). “Board” shall have the meaning set forth in Section 3(n). “Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of California generally are authorized or required by law or other government actions to close or a day on which the Commission is closed. “Closing Date” means the Closing Date as defined in the Purchase Agreement. “Commission” means the Securities and Exchange Commission. “Common Stock” means the Company’s Common Stock, par value $0.001 per share. “Effectiveness Period” shall have the meaning set forth in Section 2. -------------------------------------------------------------------------------- “Exchange Date” means the date upon which at least 75% of the ordinary shares of IAPL sold pursuant to the Purchase Agreement are exchanged for the Shares and Warrants. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Filing Date” means the 5th day following the Exchange Date. “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities, including without limitation the Purchasers and their assignees. For purposes of this Agreement, the holder or holders of Warrants shall be deemed to be holders of that number of shares of Registrable Securities into which such Warrants are exercisable at the applicable time. “Indemnified Party” shall have the meaning set forth in Section 5(c). “Indemnifying Party” shall have the meaning set forth in Section 5(c). “Lead Purchaser” shall mean Broadven Ltd. “Losses” shall have the meaning set forth in Section 5(a). “Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. “Prospectus” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), 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 such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. “Registrable Securities” means (a) the Shares and the Warrant Shares (without regard to any limitations on beneficial ownership contained in the Warrants) or other securities issued or issuable to each Purchaser or its transferee or designee (i) upon exercise of the Warrants, or (ii) upon any dividend or distribution with respect to, any exchange for or any replacement of such Shares, Warrants or Warrant Shares or (iii) upon any conversion, exercise or exchange of any securities issued in connection with any such distribution, exchange or replacement; (b) securities issued or issuable upon any stock split, stock dividend, recapitalization or similar event with respect to the foregoing; and (c) any other security issued as a dividend or other distribution with respect to, in exchange for, in replacement or redemption of, or in reduction of the liquidation value of, any of the 2 -------------------------------------------------------------------------------- securities referred to in the preceding clauses; provided, however, that such securities shall cease to be Registrable Securities when such securities have been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction or when such securities may be sold without any restriction pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company’s transfer agent to such effect as described in Section 2 of this Agreement. “Registration Statement” means the registration statements and any additional registration statements contemplated by Section 2, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. “Rule 158” means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. “Securities Act” means the Securities Act of 1933, as amended. “Shares” means shares of the Company’s Common Stock issued or issuable upon an Exchange pursuant to the Purchase Agreement. “Trading Day” means a day on which the Common Stock is traded on a Trading Market. “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market or the Nasdaq Capital Market. “Warrants” means warrants to purchase shares of the Company’s Common Stock issued or issuable upon an Exchange pursuant to the Purchase Agreement. “Warrant Shares” means the shares of the Company’s Common Stock issuable upon the exercise of the Warrants issued or to be issued to the Purchasers or their assignees or designees upon an Exchange pursuant to the Purchase Agreement. 2.             Registration. As soon as possible following the Exchange Date (but not later 3 -------------------------------------------------------------------------------- than the Filing Date), the Company shall prepare and file with the Commission a “shelf” Registration Statement covering all Registrable Securities for a secondary or resale offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if such form is not available to the Company on another form appropriate for such registration in accordance herewith). The Company shall use its best efforts to cause the Registration Statement to be declared effective under the Securities Act not later than ninety (90) days after the Exchange Date (including filing with the Commission a request for acceleration of effectiveness in accordance with Rule 461 promulgated under the Securities Act within five (5) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that a Registration Statement will not be “reviewed,” or not be subject to further review) and to keep such Registration Statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold or (y) the date on which the Registrable Securities may be sold without any restriction pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company’s transfer agent to such effect (the “Effectiveness Period”). For purposes of the obligations of the Company under this Agreement, no Registration Statement shall be considered “effective” with respect to any Registrable Securities unless such Registration Statement lists the Holders of such Registrable Securities as “Selling Stockholders” and includes such other information as is required to be disclosed with respect to such Holders to permit them to sell their Registrable Securities pursuant to such Registration Statement, unless any such Holder is not included as a “Selling Stockholder” pursuant to Section 3(m). Upon the initial filing thereof, the Registration Statement shall cover all of the Shares and the number of Warrant Shares underlying the Warrants outstanding at such time.  Such Registration Statement also shall cover, to the extent allowable under the Securities Act and the Rules promulgated thereunder (including Securities Act Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. 3.             Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall: (a) Prepare and file with the Commission on or prior to the Filing Date, a Registration Statement on Form S-3 (or if such form is not available to the Company on another form appropriate for such registration in accordance herewith) (which shall include a Plan of Distribution substantially in the form of Exhibit A attached hereto, to be adjusted if necessary in relation to the Preferred Exchange, as defined in the Purchase Agreement), and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than three (3) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall (i) furnish (including via email attachment) to the Lead Purchaser, copies of all such documents proposed to be filed (other than those incorporated by reference), and (ii) at the request of any Holder cause its officers and directors, counsel or independent certified public accountants, as applicable, to respond to such inquiries as shall be necessary, 4 -------------------------------------------------------------------------------- in the reasonable opinion of counsel to such Holder, to conduct a reasonable investigation within the meaning of the Securities Act. (b)           (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and to the extent any Registrable Securities are not included in such Registration Statement for reasons other than the failure of the Holder to comply with Section 3(m) hereof, shall prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement, but not, without the prior written consent of the Holders, any comments that would result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.  In addition, the Company shall promptly prepare and file such amendments, including post-effective amendments, to the Registration Statement and the related prospectus and take all other actions as may be necessary to register the sale of Registrable Securities by any Holder to whom the rights under this Agreement have been assigned pursuant to Section 7(i). (c)           Notify the Holders of Registrable Securities to be sold as promptly as possible (A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed (but in no event in the case of this subparagraph (A), less than two (2) Business Days prior to date of such filing); (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective, and after the effectiveness thereof: (i) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iii) if at any time any of the representations and warranties of the Company contained in any agreement contemplated hereby ceases to be true and correct in all material respects as of the date such representations and warranties were made; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) if the financial statements 5 -------------------------------------------------------------------------------- included in the Registration Statement become ineligible for inclusion therein or of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limitation to any remedies to which the Holders may be entitled under this Agreement, if any of the events described in Section 3(c)(C) occur, the Company shall use its reasonable best efforts to respond to and correct the event as promptly as practicable. (d)           Use its best efforts to avoid the issuance of, or, if issued, use best efforts to obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e)           If requested by any Holder of Registrable Securities, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 3(e) that would, in the written opinion of counsel for the Company, violate applicable law. (f)            Furnish to each Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference), which may be provided via e-mail attachment, promptly after the filing of such documents with the Commission. (g)           Promptly deliver to each Holder, without charge, at least one copy of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto, and as many additional copies thereof as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h)           Prior to any public offering of Registrable Securities, use its reasonable commercial efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to 6 -------------------------------------------------------------------------------- enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (i)            Cooperate with the Holders, and take all reasonable actions as may be available to it, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law and the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any Holder may request at least two (2) Business Days prior to any sale of Registrable Securities. In connection therewith, the Company shall promptly after the effectiveness of the Registration Statement cause an opinion of counsel to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent, which authorize and direct the transfer agent to issue such Registrable Securities without legend upon sale by the Holder of such shares of Registrable Securities under the Registration Statement. (j)            Upon the occurrence of any event contemplated by Section 3(c)(C), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an 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 the light of the circumstances under which they were made, not misleading. (k)           Cause all Registrable Securities relating to such Registration Statement to be listed on the American Stock Exchange and any other United States securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed. (l)            Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 3-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. (m)          Request each selling Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law or the Commission to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who fails to furnish such information within a reasonable time prior to the filing of each Registration Statement, 7 -------------------------------------------------------------------------------- supplemented Prospectus and/or amended Registration Statement. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), and without limitation to any remedies to which the Holder may be entitled under any other provision of this Agreement, such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company shall deliver the Advice to the Holders in writing as soon as the event described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n) shall cease to exist or shall otherwise no longer require that Holders discontinue disposition of Registrable Securities under the Registration Statement. (n)           If (i) there is material non-public information regarding the Company which the Company’s Board of Directors (the “Board”) reasonably determines not to be in the Company’s best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board reasonably determines not to be in the Company’s best interest to disclose and which the Company would be required to disclose under the Registration Statement, then the Company may, upon delivery of written notice to each Holder (including via email), postpone or suspend filing or effectiveness of a Registration Statement (subject to Section 3(o)). (o)           In no event shall the Holders be required to discontinue disposition of Registrable Securities under the Registration Statement, or the Company be entitled to postpones or suspend filing or effectiveness of a Registration Statement pursuant to Section 3(n), for a period of more than 30 consecutive days, provided that the Holders shall not be required to discontinue dispositions under Section 3(m), and the Company may not postpone or suspend its obligation under Section 3(n), for more than 45 days in the aggregate during any 12 month period (each, a “Blackout Period”). 4.             Registration Expenses. All fees and expenses incident to the performance of or compliance with this 8 -------------------------------------------------------------------------------- Agreement by the Company shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the American Stock Exchange and each other securities exchange, quotation system, market or over-the-counter bulletin board on which Registrable Securities are required hereunder to be listed, (B) with respect to filings required to be made with the Commission, and (C) in compliance with state or provincial securities or Blue Sky laws, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing or photocopying prospectuses), (iii) messenger, telephone and delivery expenses, (iv) Securities Act liability insurance, if the Company so desires such insurance, and (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company’s independent public accountants (including, in the case of an underwritten offering, the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort letters) and legal counsel.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. 5.             Indemnification. (a)           Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained or incorporated by reference in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or amendment or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to (x) such Holder and was reviewed and expressly 9 -------------------------------------------------------------------------------- approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of prospectus or in any amendment or supplement thereto or (y) such Holder’s proposed method of distribution of Registrable Securities as set forth in Exhibit A (or as such Holder otherwise informs the Company in writing); or (ii) in the case of an occurrence of an event of the type described in Section 3(c)(C)(ii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), the use by a Holder of an outdated or defective Prospectus after the delivery to the Holder of written notice from the Company that the Prospectus is outdated or defective and in each case prior to the receipt by such Holder of the Advice contemplated in Section 3(m). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 5(c) to this Agreement) and shall survive the transfer of the Registrable Securities by the Holders. (b)           Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents and employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that (i) such untrue statement or omission is contained in or omitted from any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus, or in any amendment or supplement thereto, or to the extent that such information relates to (x) such Holder and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus, or such form of prospectus or in any amendment or supplement thereto or (y) such Holder’s proposed method of distribution of Registrable Securities as set forth in Exhibit A (or as such Holder otherwise informs the Company in writing) or (ii) in the case of an occurrence of an event of the type described in Section 3(c)(C)(ii), 3(c)(C)(iv), 3(c)(C)(v) or 3(n), the use by a Holder of an outdated or defective Prospectus after the delivery to the Holder of written notice from the Company that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 3(m); provided, however, that the indemnity agreement contained in this Section 5(b) shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the prior written consent of the Holder, which consent shall not be unreasonably withheld. (c)           Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought 10 -------------------------------------------------------------------------------- (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the reasonable expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding and does not impose any monetary or other obligation or restriction on the Indemnified Party. The Indemnified Party shall pay all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section), as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party accompanied by reasonably itemized statements from their attorney(s) (except that any such information may be excluded if disclosure could reasonably be expected to waive any attorney-client privilege), which notice shall be delivered no more frequently than on a monthly basis (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d)           Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public 11 -------------------------------------------------------------------------------- policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses 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 any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying, Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. (e)           Limitation of Liability.         Notwithstanding anything to the contrary contained herein, no Holder shall be required to contribute or indemnify under this Section 5 an amount that exceeds the net proceeds to such Holder as a result of the sale of Registrable Securities pursuant to such Registration Statement minus the purchase price paid by such Holder for such Registrable Securities (or securities delivered to the Company in exchange for such Registrable Securities).   The parties hereto agree that it would not be just and equitable if contribution pursuant to Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. 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. The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. The indemnity and contribution agreements herein are in addition to and not in diminution or limitation of any indemnification provisions under the Purchase Agreement. 6.             Rule 144. As long as any Holder owns Shares, Warrants or Warrant Shares (or any securities issued in exchange or replacement therefore), the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Holder owns Shares, Warrants or Warrant Shares (or any securities issued in exchange or replacement therefore), if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance 12 -------------------------------------------------------------------------------- substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request in writing, all to the extent required from time to time to enable such Person to sell Shares and Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including compliance with the provisions of the Purchase Agreement relating to the transfer of the Shares and Warrant Shares (or any securities issued in exchange or replacement therefore). Upon the request of any Holder, in writing, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7.             Miscellaneous. (a)           Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b)           No Inconsistent Agreements. Except as otherwise disclosed in the Purchase Agreement, neither the Company nor any of its subsidiaries is a party to an agreement currently in effect, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict with the provisions of this Agreement. (c)           Notice of Effectiveness. Within five (5) Business Days after the Registration Statement which includes the Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Holders whose Registrable Securities are included in such Registration Statement) confirmation that the Registration Statement has been declared effective by the Commission in the form attached hereto as Exhibit B. (d)           Piggy-Back Registrations. If at any time (after the Exchange Date) when there is not an effective Registration Statement covering all of the Registrable Securities, the 13 -------------------------------------------------------------------------------- Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or its then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each Holder of Registrable Securities written notice of such determination and, if within seven (7) Business Days after receipt of such notice, any such Holder shall so request in writing (which request shall specify the Registrable Securities intended to be disposed of by the Holder), the Company will cause the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 7(d) for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the managing underwriter should reasonably determine that the inclusion of such Registrable Securities, would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer or none of the Registrable Securities of the Holders, then (x) the number of Registrable Securities of the Holders included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration), if the Company after consultation with the underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of the Holders shall be included in such registration statement, if the Company after consultation with the underwriter(s) recommends the inclusion of none of such Registrable Securities; provided, however, that if securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company).  The Company shall have no obligations under this Section 7(d) with respect to its existing Registration Statement on file with the Commission (File No. 333-134084), and any amendments or supplements thereto. 14 -------------------------------------------------------------------------------- (e)           Specific Enforcement, Consent to Jurisdiction. (i)            The Company and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. (ii)           Each of the Company and the Holders (i) hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Los Angeles, California for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Holders consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 7(e) shall affect or limit any right to serve process in any other manner permitted by law. (f)            Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority of the Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (g)           Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) one Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 2:00 p.m. (San Diego time) on a Trading Day, (b) two Trading Days after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 2:00 p.m. (San Diego time) on any Trading Day, (c) the fourth Trading Day following the date of shipment, if sent by internationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto. The Company shall, concurrently with providing any notice in the manner set forth in the preceding two 15 -------------------------------------------------------------------------------- sentences, transmit a copy of such notice (which copy shall not, by itself, be deemed to constitute notice hereunder) by email to such email address as is set forth on Schedule 1 hereto). The addresses for such communications shall be with respect to each Holder at its address set forth under its name on Schedule 1 attached hereto, or with respect to the Company, addressed to: Inovio Biomedical Corporation 11494 Sorrento Valley Road San Diego, CA 92121-1334 Attention:     Peter Kies Chief Financial Officer Facsimile No.:  858-597-0451 or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice. Copies of notices to the Company shall be sent to Kirkpatrick & Lockhart, Nicholson Graham, LLP, 10100 Santa Monica Boulevard, 7th Floor, Los Angeles, CA, 90067, Attention: Mark A. Klein, Esq, Facsimile: 310- 552-5001. Copies of notices to any Holder shall be sent to the addresses, if any, listed on Schedule 1 attached hereto. Copies of notices to the Lead Purchaser shall be sent to Fenwick & West LLP, 801 California Street, Mountain View, California 94041, Attention: Barry Kramer and David Michaels, Facsimile: 650-938-5200. (h)           Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each Holder and its successors and assigns; provided, that the Company may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of Holders holding a majority of the Registrable Securities; and provided, further, that each Holder may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement and Section 7(i). (i)            Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any transferee of such Holder of all or a portion of the Warrants or the Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section 7(i), the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the 16 -------------------------------------------------------------------------------- Purchase Agreement and applicable securities legislation. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. The Company may require, as a condition of allowing such assignment in connection with a transfer of Warrants or Registrable Securities (i) that the Holder or transferee of all or a portion of the Warrants or the Registrable Securities as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such transfer may be made without registration under the Securities Act, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and substantially in the form attached as Exhibit C to the Warrants and (iii) that the transferee be (A) an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act, (B) a non-US Person (within the meaning of Regulation S promulgated under the Securities Act, or (C) an affiliate of the Holder, as defined and applied under Rule 501(b) of Regulation D under the Securities Act. (j)            Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (k)           Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law thereof. (l)            Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (m)          Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (n)           Headings; Interpretation. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.  Any form of the word “include” as used in this Agreement shall be deemed to be followed by the phrase “without limitation”. (o)           Registrable Securities Held by the Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required 17 -------------------------------------------------------------------------------- hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (p)           Obligations of Purchasers. The Company acknowledges that the obligations of each Purchaser under this Agreement, are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement.  The decision of each Purchaser to enter into to this Agreement has been made by such Purchaser independently of any other Purchaser.  The Company further acknowledges that nothing contained in this Agreement, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each party hereto acknowledges that Fenwick & West LLP is legal counsel to the Lead Purchaser and not any other Purchaser.  For reasons of administrative convenience only, the Purchasers acknowledge and agree that they and their respective counsel have chosen to communicate with the Company through the Lead Purchaser.  The Company acknowledges that this Agreement in no way creates a presumption that the Purchasers are in any way acting in concert or as a group with respect to this Agreement or the transactions contemplated hereby or thereby. [signature page follows] 18 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized persons as of the date first indicated above. COMPANY:   INOVIO BIOMEDICAL CORPORATION     By:   /s/ Avtar Dhillon   Name: Avtar Dhillon, MD Title: President & CEO   19 --------------------------------------------------------------------------------   PURCHASER:   Print Exact Name:                 By:   /s/ by purchasers listed in the attached schedule   Name: Title:     [Omnibus Inovio Biomedical Corporation Registration Rights Agreement Signature Page] 20 --------------------------------------------------------------------------------   SCHEDULE 1 REGISTRATION RIGHTS AGREEMENT Purchasers and Shares of Common Stock and Warrants Name, Address, Phone/Fax Number,                   and Email of Purchaser, and       Common Stock   Common Stock   Total   Registration Instructions   Copies of Notices to   Issued   Warrants Underlying   Subscription   ATP Investments Limited   Fenwick & West LLP   823,045   288,065   USD$ 1,999,999.35   80 Raffles Place, #51-02   Embarcadero Center West               Singapore 048624   275 Battery Street               Attention: Patrick gan   San Francisco, CA 94111               Tel: +(65) 65383345   Attn: David Michaels, Esq.               Fax: +(65) 65368129   Tel: (415) 875-2455               Email: [email protected]   Fax: (415) 281-1350                 Email: [email protected]                                   Evia Growth Opportunities Limited   Fenwick & West LLP   411,522   144,032   USD$ 999,998.46   80 Raffles Place, #51-02   Embarcadero Center West               Singapore 048624   275 Battery Street               Attention: Patrick gan   San Francisco, CA 94111               Tel: +(65) 65383345   Attn: David Michaels, Esq.               Fax: +(65) 65368129   Tel: (415) 875-2455               Email: [email protected]   Fax: (415) 281-1350                 Email: [email protected]                                   Aventures 1 Pte Ltd   Fenwick & West LLP   102,880   36,008   USD$ 249,998.4   No. 1 Shenton Way, #16-03   Embarcadero Center West               Singapore 068803   275 Battery Street               Attention: Koh Eng Hong   San Francisco, CA 94111               Tel: +(65) 62210839   Attn: David Michaels, Esq.               Fax: +(65) 62205078   Tel: (415) 875-2455               Email: [email protected]   Fax: (415) 281-1350                 Email: [email protected]                                   Skyven Growth Capital Fund Pte Ltd   Fenwick & West LLP   102,880   36,008   USD$ 249,998.4   2 Alexandra Road, #06-02   Embarcadero Center West               Delta House, Singapore 159919   275 Battery Street               Tel: +(65) 63717088   San Francisco, CA 94111               Fax: +(65) 62720602   Attn: David Michaels, Esq.               Email: [email protected]   Tel: (415) 875-2455                 Fax: (415) 281-1350                 Email: [email protected]                                   HSBC Institutional Trust Services   Fenwick & West LLP   205,761   72,016   USD$ 499,999.23   (Singapore) Limited, as trustee of Pre-IPO   Embarcadero Center West                 Fund   275 Battery Street                 21 Collyer Quay, #14-01 HSBC   San Francisco, CA 94111               Building, Singapore 049320   Attn: David Michaels, Esq.               Tel: +(65) 64394488   Tel: (415) 875-2455               Fax: +(65) 65345526   Fax: (415) 281-1350               Email: [email protected]; [email protected]   Email: [email protected]                                   Raintree Fund 1 Pte Ltd   Fenwick & West LLP   514,403   180,041   USD$ 1,249,999.29   5 Shenton Way, #11-08, UIC Building   Embarcadero Center West               Singapore 068808   275 Battery Street               Tel: +(65) 63194999   San Francisco, CA 94111               Fax: +(65) 62265206   Attn: David Michaels, Esq.               Email: [email protected]   Tel: (415) 875-2455                 Fax: (415) 281-1350                 Email: [email protected]                                   Broadven Limited   Fenwick & West LLP   41,153   14,403   USD$ 100,001.79   80 Raffles Place, #51-02   Embarcadero Center West               Singapore 048624   275 Battery Street               Attention: Ng Tee Khiang   San Francisco, CA 94111               Tel: +(65) 65383345   Attn: David Michaels, Esq.               Fax: +(65) 65368129   Tel: (415) 875-2455               Email: [email protected]   Fax: (415) 281-1350                 Email: [email protected]                                   Total       2,201,644   770,573   USD$ 5,349,994.92     21 -------------------------------------------------------------------------------- EXHIBIT A PLAN OF DISTRIBUTION 22 -------------------------------------------------------------------------------- EXHIBIT B FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT 23 --------------------------------------------------------------------------------

  EXHIBIT 10.1 Royalty Agreement      This Royalty Agreement (“Agreement”) is entered into this 28th day of August, 2006, by and between Kenneth R. Council, Trustee of the ALS Charitable Remainder Trust, dated August 28, 2006 (“ALSCT”), and CytRx Corporation, a Delaware corporation (“CytRx”) headquartered at 11726 San Vicente Blvd., Suite 650, Los Angeles, CA 90049.      Prior to 8:30 a.m. EDT on the date immediately following the date hereof, ALSCT shall transfer shares of Tribune Co. Common Stock and Berkshire Hathaway Inc. Class A and Class B Common Stock having a combined value of twenty four million five hundred thousand dollars ($24,500,000) (the “Royalty Shares”) to an account designated by CytRx. For purposes of this Agreement, the Royalty Shares shall be valued at the closing trading price of the shares on the date hereof on the New York Stock Exchange.      In consideration for the transfer of the Royalty Shares, CytRx shall pay to ALSCT royalties in the amount of one percent (1.0%) of the worldwide Net Sales of Arimoclomol by CytRx and CytRx Affiliates (as hereinafter defined) for treatment of Amyotrophic lateral sclerosis (“ALS”).      CytRx agrees to use its commercially reasonable efforts to use the proceeds of the sale of the Royalty Shares to advance the clinical and non-clinical development of Arimoclomol and other drugs by CytRx for the treatment of ALS. The use of such proceeds may include, among other things, a Phase I dose ranging study, Phase II efficacy study(ies), FDA mandatory Phase I safety studies, including dedicated cardiac safety study, drug-interaction safety studies, special population studies (renal insufficiency and hepatic insufficiency), special toxicology studies, additional metabolism studies, and the evaluation of CytRx’s pipeline of other drugs for potential efficacy in ALS using in vitro and in vivo screening tools.      I. Definitions.      The following definitions shall apply:      “Arimoclomol” shall mean the chemical substance /+/-(2R),(Z)-N-[2-HYDROXY-3-(PIPERIDIN-1-YL)PROPOXY]-PYRIDINE-1-OXIDE-3-CARBOXIMIDOYL CHLORIDE, as well as any pharmaceutical equivalents or alternate salts thereof.      “CytRx Affiliate” shall mean: (a) any person or entity which owns or controls at least fifty percent (50%) of the equity or voting stock of CytRx, (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by CytRx, or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of CytRx.   --------------------------------------------------------------------------------        “CytRx Patents” means any patent or patent application owned or controlled by CytRx or any CytRx Affiliate, in existence as of the date of this Agreement, to the extent covering developing, making, having made, using, importing, offering to sell, or commercializing Arimoclomol for ALS. All CytRx Patents in existence as of the date of this Agreement and relating to Arimoclomol are enumerated on Schedule A hereto.      “Net Sales” shall mean the amounts actually received on all sales of Arimoclomol as a treatment for ALS and sold by CytRx or a CytRx Affiliate, less the reasonable and customary deductions from such gross amounts including: (i) normal and customary trade, cash and quantity discounts, allowances and credits actually granted; (ii) credits or allowances actually granted for damaged goods and returns or rejections of Arimoclomol; (iii) sales taxes, duties or other taxes with respect to such sales (including, without limitation, value added taxes or other governmental charges); (iv) insurance, postage, customs duties and transportation costs actually incurred in shipping Arimoclomol; (v) rebates actually granted to managed health care organizations, wholesalers or to federal, state and local governments or by national, state or local governmental authorities in countries other than the United States. Notwithstanding the foregoing, Net Sales shall not include, and shall be deemed zero with respect to: (i) the actual distribution of reasonable quantities of promotional samples of Arimoclomol, (ii) Arimoclomol provided for clinical trials or research purposes at cost or at no charge, and (iii) Arimoclomol provided to a Third Party pursuant to a Third Party Arrangement (as hereinafter defined) in which CytRx or a CytRx Affiliate shall be receiving royalties or other consideration upon which CytRx must make payments to ALSCT under this Agreement.In the event that Arimoclomol is sold in the form of a combination product containing Arimoclomol and one or more other active ingredients (a “Combination Product”), then Net Sales for such Combination Product will be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/(A+B) where: A is the invoice price of Arimoclomol contained in the Combination Product if sold separately by CytRx and B is the invoice price of any other active component or components in the Combination Product if sold separately by CytRx. In the event that Arimoclomol is sold in the form of a Combination Product containing one or more active ingredients other than Arimoclomol and one or more such active ingredients of the Combination Product are not sold separately, then the above formula shall be modified such that A shall be the total cost to CytRx of Arimoclomol and B shall be the total cost to CytRx of any other active component or components in the combination.      “Third Party” means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, proprietorship or other de jure entity organized under the laws of any jurisdiction that is neither a party to this Agreement nor a CytRx Affiliate.      II. Royalties based on CytRx Licenses, Sublicenses and Other Business Arrangements with Third Parties.      This Agreement shall not preclude CytRx or CytRx Affiliates from entering into a license, sublicense and/or other business arrangement with respect to Arimoclomol with a 2 --------------------------------------------------------------------------------   Third Party (“Third Party Arrangement”); provided, however, that CytRx shall pay ALSCT a royalty equal to one percent (1.0%) of all cash licensing fees, royalties and milestone payments (“Licensing Revenue”) to the extent actually received by CytRx or CytRx Affiliates as consideration for the grant of rights to such Third Party relating to Arimoclomol for the treatment of ALS; provided, however, that purchases of equity or debt of CytRx or CytRx Affiliates, payments made in connection with research and development agreements or collaborations, and other payments made by a Third Party where CytRx or CytRx Affiliates are obligated to perform services or to provide goods in connection with such payment shall not be considered Licensing Revenue for purposes of this Agreement.      III. Payment Reports; Payment of Royalty; Payment Exchange Rate and Currency Conversions.      Within forty five (45) calendar days following the close of each calendar quarter, following the first commercial sale of Arimoclomol or receipt of Licensing Revenue, CytRx shall furnish to ALSCT a written report for the calendar quarter showing in each such report, if and as applicable: (1) the number, description, internal product number and aggregate selling prices of Arimoclomol sold or otherwise disposed of by CytRx or any CytRx Affiliate for the treatment of ALS, and the specific itemized deductions taken during such calendar quarter, (2) any Licensing Revenue actually received by CytRx and a summary of the relevant provisions of any Third Party Arrangement based upon which payments are made to ALSCT hereunder during such calendar quarter, and (3) the royalties payable to ALSCT under this Agreement for such calendar quarter. Simultaneously with the submission of the written report, CytRx shall pay to ALSCT a sum equal to the aggregate royalty amount due under this Agreement for such calendar quarter. In the event royalty payments or fees are not received by ALSCT when due, CytRx shall pay to ALSCT interest at the lower of (a) the then-current prime lending rate as published by the American East Coast edition of the Wall Street Journal or (b) the maximum rate of interest allowed by law on the royalties overdue. Payments to be made by CytRx to ALSCT under this Agreement shall be paid by bank wire transfer in immediately available funds to such bank account as is designated in writing by ALSCT from time to time. Royalty payments shall be made in United States dollars. All royalties owing with respect to Net Sales or Licensing Revenue stated in currencies other than United States Dollars shall be converted at an exchange rate that is the arithmetic mean of the opening telegraphic transfer selling and buying rate published by the American East Coast edition of the Wall Street Journal on the day preceding the payment. If by law, regulation or fiscal policy of any country, conversion from that country’s currency into United States Dollars is restricted or forbidden, written notice thereof shall be given to ALSCT and payment of amounts from that country shall be made through such lawful means as ALSCT shall designate, including, without limitation, deposit of local currency in such recognized banking institution as ALSCT shall designate. When in any country the law or regulation prohibits both the transmittal and the deposit of royalties on sales in that country, royalty payments from that country will be suspended for as long as the prohibition is in effect and, as soon as the prohibition ceases, all royalties that CytRx or 3 --------------------------------------------------------------------------------   any CytRx Affiliate would have been obligated to pay, but for the prohibition, will promptly be deposited or transmitted, as the case may be, to the extent then allowed.      CytRx shall keep complete and accurate records in sufficient detail to enable the royalties payable hereunder to be determined. Upon forty-five (45) days prior written notice from ALSCT, CytRx shall permit an independent certified public accounting firm of nationally recognized standing selected by ALSCT, at ALSCT’s expense, to have access during normal business hours to examine the books and records of CytRx as reasonably necessary to verify the royalty reports. The examination shall be limited to pertinent books and records for any year ending not more than twenty-four (24) months prior to the date of such request. An examination shall not occur more than once in any calendar year.      If such accounting firm correctly concludes that additional royalties were owed during such period, CytRx shall pay the additional royalties within thirty (30) days, together with interest thereon at the lower of: (a) one percent (1%) per month pro-rated, or (b) the maximum rate of interest allowed by law. If such underpayment exceeds ten percent (10%) of the royalty correctly due ALSCT with respect to the audited period under inspection, then the fees charged by such accounting firm for the work associated with the underpayment audit shall be paid by CytRx. Any overpayments by CytRx will be credited against future royalty obligations. In the event that CytRx disagrees with the audit report and the chief financial officer of CytRx and ALSCT (or their designees) fail to resolve such disagreement, the dispute will be resolved through the dispute resolution mechanism set forth in this Agreement.      IV. Reports.      CytRx shall submit a report to ALSCT on each anniversary of the date of this Agreement setting forth the use of the proceeds of the sale of the Royalty Shares in reasonable detail. CytRx’s obligations under this Section shall terminate once CytRx has delivered one or more reports to ALSCT showing the use of all of the proceeds of the sale of the Royalty Shares.      V. Representations and Warranties.      ALSCT represents and warrants that:      ALSCT is the owner of all right, title and interest in and to the Royalty Shares, free and clear of any and all liens, encumbrances or security interests of any kind. Except as set forth in this Agreement, no person or entity has any agreement, contract, option, warrant or other right entitling such party to the Royalty Shares. Kenneth Council is the sole Trustee of the ALSCT. The trust agreement establishing the ALSCT has not been revoked. 4 --------------------------------------------------------------------------------        CytRx represents and warrants that:      (1) At the date of this Agreement, CytRx has full title and ownership to the CytRx Patents;      (2) the CytRx Patents are to CytRx’s knowledge not currently being infringed or misappropriated by any Third Party;      (3) at the date of this Agreement, CytRx has not received any notices of infringement or any written communications relating in any way to a possible infringement with respect to Arimoclomol, and CytRx is not aware of any manner in which to develop, make, have made, use, import, offer to sell, or commercialize Arimoclomol that would infringe any patent rights of any Third Party;      (4) there are no claims pending against CytRx before any court, arbitrator, governmental or administrative agency or regulatory authority (“Governmental Agency”) relating to the CytRx Patents, and CytRx is not subject to any judgment or settlement from or with any Governmental Agency relating to the CytRx Patents; and      (5) CytRx does not own or control any patents or patent applications other than the CytRx Patents that currently, or when issued, would be infringed by the making, using, offering for sale, selling, or importing of Arimoclomol.      ALSCT and CytRx represent and warrant that:      CytRx and ALSCT have the right, power, legal capacity and authority to enter into and perform their respective obligations under this Agreement; and no approvals or consents of any persons other than CytRx and ALSCT are necessary in connection with it. This Agreement has been duly executed and delivered by CytRx and ALSCT and constitutes the legal, valid and binding obligation of CytRx and ALSCT enforceable against them in accordance with its terms. The consummation of the transactions contemplated by this agreement will not result in or constitute any of the following: (1) a breach of any term or provision of this Agreement; (2) a default or an event that, with notice, lapse of time, or both, would be a default, breach, or violation of the terms of the ALSCT trust agreement or any promissory note, contract, commitment, indenture, other agreement, instrument or arrangement to which CytRx or ALSCT is a party or by which any of them or the property of any of them is bound; or (3) the creation or imposition of any lien, charge or encumbrance on any of the properties of ALSCT.      VI. Confidentiality and Publicity.      The parties may provide to one another information that is confidential (“Confidential Information”), which the parties agree includes all materials and reports provided by the parties pursuant to this Agreement. All other information which is Confidential Information must, prior to its disclosure, (1) be labeled as “Confidential” or 5 --------------------------------------------------------------------------------   otherwise clearly identified as confidential, or (2) if disclosed orally, be identified as such and be reduced to writing, marked as “Confidential” and delivered to the recipient within twenty days of such disclosure. Confidential Information shall not include information which: (a) is or becomes a part of the public domain through no act or omission of the receiving party; (b) was in the receiving party’s lawful possession prior to the disclosure and had not been obtained by the receiving party either directly or indirectly from the disclosing party; (c) is lawfully disclosed to the receiving party by a third party without restriction on disclosure; (d) is independently developed by the receiving party; or (e) is disclosed pursuant to the order or requirement of a court, administrative agency, or other governmental body; provided, however, that the receiving party shall provide prompt notice of such court order or requirement to the disclosing party to enable the disclosing party to seek a protective order or otherwise prevent or restrict such disclosure. The parties agree that, for the term of ten years from receipt, the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for herein any such Confidential Information. Disclosure of Confidential Information by either party shall be strictly limited to the recipient’s employees, consultants or contractors on a need to know basis only and subject to a written undertaking which protects the information at least as well as this Agreement.      Except as required by applicable law (including securities laws), neither party may use the name of the other party or any of its trustees, beneficiaries, officers, directors, employees, agents or affiliated entities, or any terms of this Agreement, in public announcements or disclosures without the prior written consent of the other party, which consent shall not be unreasonably withheld.      This provision shall survive any termination or expiration of this Agreement.      VII. Indemnification.      CytRx agrees to indemnify, defend, and hold harmless ALSCT, its trustees, beneficiaries and successors and assigns, and each of their respective affiliated entities, officers, directors, employees, agents, and successors and assigns, from any claims relating to the clinical and non-clinical development of Arimoclomol by CytRx and any CytRx Affiliates and the judicial exercise of any rights by CytRx or any CytRx Affiliate in connection with the CytRx Patents (“Claims”). Claims means any and all costs (including, without limitation, attorneys’ fees and expenses, which fees and expenses shall include, without limitation, fees and expenses of both outside and staff counsel), expenses or losses arising from any and all claims, seizures, forfeitures, demands, obligations, losses, damages, liabilities, fines, penalties, charges, injuries to person, property, administrative and judicial proceedings, causes of action and orders, injunctive relief, judgments and enforcement actions of any kind, arising directly or indirectly, in whole or in part, out of or attributable to the research, development and commercialization of Arimoclomol and the judicial exercise of any rights by CytRx or any CytRx Affiliate in connection with the CytRx Patents.      This provision shall survive any termination or expiration of this Agreement. 6 --------------------------------------------------------------------------------        VIII. General Provisions.      This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and the provisions hereof and thereof have superseded any and all prior and contemporaneous agreements or understandings relating to the matters specifically addressed herein or therein. This Agreement may be assigned by ALSCT to the beneficiaries of ALSCT pursuant to the terms of the trust agreement establishing ALSCT. CytRx may not assign this Agreement to any Third Party absent prior written consent from ALSCT; provided, however, that CytRx may assign this Agreement to any CytRx Affiliate or to a successor in connection with the merger, consolidation, or sale of all or substantially all of its assets or that portion of its business to which this Agreement relates.      Failure or inability of either party to enforce any right hereunder shall not waive any right with respect to any other or future rights or occurrences, nor shall waiver of any condition or right in any instance be deemed a waiver of any condition or right in any other instance. If any provision of this Agreement shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement shall not be affected thereby, and each provision shall be valid and shall be enforced to the fullest extent permitted by law.      If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged or actual dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorney’s fees and other costs incurred in such action or proceeding in addition to any other relief to which it may be entitled.      It is the express intention of the parties that their relationship is that of independent contractors and not agents, partners, or joint venturers. Nothing in this Agreement is intended or will be construed to permit or authorize either party to incur, or represent that it has the power to incur, any obligation or liability on behalf of the other party.      This Agreement has been negotiated, executed and delivered and will be performed in the State of California and shall be governed by and construed in accordance with its laws.      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.      Any dispute between the parties related to this Agreement shall be resolved exclusively by arbitration, which shall be held in Los Angeles, California, and conducted in accordance with the Rules of the American Arbitration Association. The award of arbitration shall be final and non-appealable and may be entered as a judgment in any 7 --------------------------------------------------------------------------------   court having jurisdiction. Each party shall bear its own expenses of the arbitration, and the arbitrator’s fees shall be shared equally.      This Agreement is binding upon and inures to the benefit of the parties and their respective permitted successors and assigns.      This Agreement may be amended or modified only by a written instrument executed by CytRx and ALSCT.      IN WITNESS WHEREOF, CytRx and ALSCT have executed this Agreement on the date first written above.       CytRx Corporation,   Kenneth R. Council, a Delaware corporation   as Trustee of ALS Charitable Remainder     Trust dated August 28, 2006           /s/ STEVEN A. KRIEGSMAN       /s/ STEVEN A. KRIEGSMAN       By: Steven A. Kriegsman     Its: President and Chief Executive Officer     8 --------------------------------------------------------------------------------   Schedule A CytRx Patents   (1)   PCT applications   •   PCT/HU96/00064 published as WO 97/16439 (CytRx/009)     •   PCT/HU00/00015 published as WO 00/50403 (CytRx/010)     •   PCT/HU01/00046 published as WO 01/79174 (CytRx/011)     •   PCT/HU2004/000098 published as WO 05/041965 (CytRx/012)   (2)   Foreign Counterparts entitled to claim priority from (1) Select Application Numbers                                               Foreign     DOCKET   TITLE   PCT   U.S.   EP   Counterparts   Coverage   CytRx/009   Hydroxylamine derivatives for enhancing molecular chaperone production and the preparation thereof   PCT/HU96/00064 WO 97/16439   08/860,582 U.S. Pat. 6,653,326 DIV 10/618,157 DIV2 10/618,162   Granted European Patent EP0801649B1   Pending   Arimoclomol (generic)                           CytRx/010   N-[2-hydroxy-3-(1-piperidinyl)-propoxy]- pyridine-1-oxide-3-carboximidoyl chloride and its use in the treatment of insulin resistance (Insulin Resistance)   PCT/HU00/00015 WO 00/50403   09/913,263 U.S. Pat. 6,649,628   Granted European Patent EP1163224B1   Pending   Arimoclomol (species)                           CytRx/011   A pyridine-1-oxide derivative and process for its transformation into pharmaceutically effective compounds (N-Oxide Intermediate)   PCT/HU01/00046 WO 01/79174   10/257,755 Allowed; RCE filed   EP 01 928 133.6 Pending   Pending   intermediate for arimoclomol                           CytRx/012   Use of a hydroximic acid halide derivative in the treatment of neurodegenerative diseases (arimoclomol)   PCT/HU04/00098 WO 05/041965   10/582,124 pending   EP [ ] Pending   Pending   Arimoclomol (generic and species) 9

Exhibit 10.3   This SHAREHOLDER AGREEMENT (this “Agreement”), dated as of February 3, 2006, is by and between Sky Financial Group, Inc., an Ohio corporation (“Parent”), and Jeffrey H. Thomasson (the “Shareholder”).   WHEREAS, Parent, WMC Acquisition LLC, an Indiana limited liability company and wholly owned subsidiary of Parent (“Merger Sub”), and Waterfield Mortgage Company, Incorporated, an Indiana corporation (the “Company”), propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the “Merger Agreement” capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement), providing for the merger of the Company with and into Merger Sub;   WHEREAS, the Shareholder owns the number of shares of Company Stock set forth opposite his name on Schedule A hereto (such Company Stock together with any other capital shares of the Company, including New Shares, acquired by the Shareholder after the date hereof and during the term of this Agreement, being collectively referred to herein as the “Subject Shares”) and   WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has requested that the Shareholder enter into this Agreement.   NOW, THEREFORE, the parties hereto agree as follows:   SECTION 1. Representations and Warranties of the Shareholder. The Shareholder hereby represents and warrants to Parent as of the date hereof as follows:   (a) Authority; Execution and Delivery; Enforceability. The Shareholder has all requisite power and authority to execute this Agreement and to consummate the transactions contemplated hereby. The Shareholder has duly executed and delivered this Agreement, and this Agreement constitutes the valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. The execution and delivery by the Shareholder of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the Subject Shares under, any provision of any contract, permit, license, loan or credit agreement, note, bond, mortgage, indenture, lease or other property agreement, partnership or joint venture agreement or other legally binding agreement, whether oral or written (each, a “Contract”) to which the Shareholder is a party or by which any Subject Shares are bound or any provision of any judgment, order or decree (collectively, “Judgment”) to which the Shareholder is subject. No trust of which the Shareholder is a trustee requires the consent of any beneficiary to the execution and delivery of this Agreement or to the consummation of the transactions contemplated hereby.   (b) The Subject Shares. The Shareholder has, and will continue to have until the completion of the Company Shareholder’s Meeting, the sole right to vote the Subject Shares -------------------------------------------------------------------------------- set forth opposite the Shareholders’ name on Schedule A hereto, and none of the Subject Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of the Subject Shares, except for the Shareholders’ Agreement dated as of May 27, 1999, between the Company and all of the Company’s shareholders, as amended, and as contemplated by this Agreement.   SECTION 2. Representations and Warranties of Parent. Parent hereby represents and warrants to the Shareholder as follows: Parent has all requisite corporate power and authority to execute this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by Parent of this Agreement and consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Parent. Parent has duly executed and delivered this Agreement, and this Agreement constitutes the valid and binding obligation of Parent, enforceable against Parent in accordance with its terms. The execution and delivery by Parent of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the properties or assets of Parent under, the Articles of Incorporation or Regulations of Parent, any provision of any Contract to which Parent is a party or by which any properties or assets of Parent are bound or any provision of any Judgment applicable to Parent or the properties or assets of Parent.   SECTION 3. Covenants of the Shareholder. The Shareholder covenants and agrees as follows:   (a) (1) At any meeting of the shareholders of the Company called to seek the Company Shareholder Approval or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger Agreement or the Merger is sought, the Shareholder shall, including by executing a written consent solicitation if requested by Parent, vote (or cause to be voted) the Subject Shares in favor of granting the Company Shareholder Approval.   (2) IRREVOCABLE PROXY. The Shareholder hereby irrevocably grants to, and appoints, Parent, Granger Souder and Kevin Thompson, or any of them, and any individual designated in writing by any of them, and each of them individually, as the Shareholder’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Shareholder, to vote the Subject Shares, or grant a consent or approval in respect of the Subject Shares, in a manner consistent with this Section 3. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Shareholder’s execution and delivery of this Agreement. The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 3(a)(2) is given in connection with the execution of the Merger Agreement and is therefore coupled with an interest. The Shareholder hereby further affirms that the irrevocable proxy may under no circumstances be revoked. The Shareholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 23-1-30-3 of the IBCL. The irrevocable proxy granted hereunder shall automatically terminate upon the termination of this Agreement. -------------------------------------------------------------------------------- (b) At any meeting of shareholders of the Company or at any adjournment thereof or in any other circumstances upon which the Shareholder’s vote, consent or other approval is sought, the Shareholder shall vote (or cause to be voted or execute a consent with respect thereto) the Subject Shares against (i) any Acquisition Proposal, and (ii) any other action which might impede the Merger, including any action, amendment or other proposal or transaction which would in any manner impede, frustrate, prevent or nullify any provision of the Merger Agreement or the Merger or change in any manner the voting rights of any class of the Company’s capital stock. The Shareholder shall not commit or agree to take any action inconsistent with the foregoing.   (c) Other than this Agreement, the Shareholder shall not (i) sell, transfer, pledge, assign or otherwise encumber or dispose of (including by gift) (collectively, “Transfer”), or enter into any Contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of, any Subject Shares or any rights to acquire any securities of the Company to any Person other than pursuant to the Merger or (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, with respect to any Subject Shares or any rights to acquire any securities of the Company and shall not commit or agree to take any of the foregoing actions. As used in this Agreement, the term “Transfer,” shall also include any pledge, hypothecation, encumbrance, assignment or constructive sale or other disposition of such security or the record or beneficial ownership thereof, the offer to make a sale, transfer, constructive sale or other disposition, and each agreement, arrangement or understanding whether or not in writing, to effect any of the foregoing. As used in this Agreement, the term “constructive sale” means a short sale with respect to such security, entering into or acquiring a derivative Contract with respect to such security, entering into or acquiring a futures or forward Contract to deliver such security or entering into any transaction that has substantially the same effect as any of the foregoing. Notwithstanding the restrictions set forth in this Section 3(c), nothing shall prohibit the Shareholder from Transferring the Shares or New Shares, provided that, as a condition to such Transfer, the Person to whom such Shares or New Shares are Transferred (whether by pledge or otherwise) executes an agreement providing that it agrees to be bound by the terms of this Agreement and acknowledges that, notwithstanding any such Transfer, the Shareholder shall continue to retain all voting power with respect to such Shares or New Shares.   (d) The Shareholder hereby consents to and approves the actions taken by the Board of Directors of the Company in approving the Merger. The Shareholder hereby waives, and agrees not to exercise or assert, any appraisal rights under Section 23-1-44 of the IBCL in connection with the Merger.   (e) The Shareholder hereby agrees that, in the event (i) of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares of capital stock of the Company or any Company Subsidiary of, or affecting, the Subject Shares, (ii) that the Shareholder purchases or otherwise acquires beneficial ownership of or an interest in any shares of capital stock of the Company or any Company Subsidiary after the execution of this Agreement (including by conversion) or (iii) that the Shareholder voluntarily acquires the right to vote or share in the voting of any shares of capital stock of the Company or any Company Subsidiary other than the Subject Shares (collectively, the “New Shares”), any New Shares so acquired or purchased by the Shareholder shall be subject to the terms of this Agreement, including the representations and warranties set forth in Section 1, and shall constitute Subject Shares to the same extent as if those New Shares were owned by the Shareholder on the date of this Agreement. -------------------------------------------------------------------------------- (f) The Shareholder agrees that he will not, and will cause his representatives and agents not to, directly or indirectly: (i) initiate, solicit or knowingly encourage (including by way of furnishing non-public information or assistance) the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, or (ii) enter into or maintain or continue discussions or negotiate with any Person in furtherance of or to obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal, or authorize any of its representatives or agents to take any such action.   SECTION 4. Termination. This Agreement shall terminate upon the earliest of (i) the Effective Time and (ii) the termination of the Merger Agreement in accordance with its terms. No party hereto shall be relieved from any liability for any intentional breach of this Agreement by reason of any such termination.   SECTION 5. Additional Matters.   (a) The Shareholder shall, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement.   (b) The Shareholder does not make any agreement or understanding herein in his capacity as a director or officer of the Company. The Shareholder signs solely in his capacity as the record holder and beneficial owner of the Subject Shares and nothing herein shall limit or affect any actions taken by the Shareholder in his capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement.   SECTION 6. General Provisions.   (a) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.   (b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent in accordance with Section 13.2 of the Merger Agreement and to the Shareholder at the Shareholder’s address set forth on Schedule A hereto (or at such other address for a party as shall be specified by like notice).   (c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. 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. Wherever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.   (d) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal -------------------------------------------------------------------------------- substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.   (e) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. This Agreement shall become effective against Parent when one or more counterparts have been signed by Parent and delivered to the Shareholder. This Agreement shall become effective against the Shareholder when one or more counterparts have been executed by the Shareholder and delivered to Parent. Each party need not sign the same counterpart.   (f) Entire Agreement: No Third-Party Beneficiaries. This Agreement (i) 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 and (ii) is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.   (g) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Indiana, regardless of the Laws that might otherwise govern under applicable principles of conflicts of law thereof.   (h) Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise, by Parent without the prior written consent of the Shareholder or by the Shareholder without the prior written consent of Parent, and any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.   (i) Enforcement. The transactions contemplated by this Agreement are unique and the parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties hereto acknowledges and agrees that, in addition to all other remedies to which it may be entitled, each of the parties hereto is entitled to a decree of specific performance, provided that such party hereto is not in material default or breach hereunder. The parties hereto agree that, if for any reason a party hereto shall have failed to perform its obligations under this Agreement, then the party hereto seeking to enforce this Agreement against such nonperforming party under this Agreement 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 that any party hereto may have against another party hereto for any failure to perform its obligations under this Agreement.   (j) Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby or thereby may be brought in any federal or state court located in the State of Indiana, and each of the parties hereby consents to the jurisdiction of such courts (and of the -------------------------------------------------------------------------------- appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process by U.S. registered mail to such party’s address set forth herein shall be deemed effective service of process on such party; provided that nothing herein shall affect the right of any party to serve legal process in any other manner permitted by Law. The consent to jurisdiction set forth in this Agreement shall not constitute a general consent to service of process in the State of Indiana and shall have no effect for any purpose except as provided in this Agreement. The parties hereto agree that final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.   [Signatures are on the following page(s)] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each party has duly executed this Agreement, all as of the date first written above.   SKY FINANCIAL GROUP, INC. By:   /s/ W. Granger Souder, Jr. -------------------------------------------------------------------------------- Name:   W. Granger Souder, Jr. Title:   Executive Vice President and     General Counsel SHAREHOLDER /s/ Jeffrey H. Thomasson -------------------------------------------------------------------------------- Name:   Jeffrey H. Thomasson -------------------------------------------------------------------------------- SCHEDULE A   Name and Address of Shareholder --------------------------------------------------------------------------------   Number of Shares of Company Stock Owned as of the Date Hereof -------------------------------------------------------------------------------- Jeffrey H. Thomasson 7950 Sycamore Road Indianapolis, IN 46240   48,832

-------------------------------------------------------------------------------- Exhibit 10.10 SUPPLEMENTAL LIMITED JOINDER In order to induce Lender to make the Loan, the undersigned Net Worth Guarantor(s) have agreed to enter into this Supplemental Limited Joinder in connection with that certain Loan Agreement (the "Loan Agreement") dated February 8, 2006, between ADRIAEN'S LANDING HOTEL, LLC, a Connecticut limited liability company ("Borrower"), and MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business Financial Services Inc., a Delaware corporation (collectively, with its successors and assigns, "Lender"). (All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.) Each Principal acknowledges that without this Supplemental Limited Joinder, Lender would be unwilling to make the Loan. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree and covenant as follows: 1.    Retained Liabilities. Except for the Retained Liabilities (defined below) and the obligations, if any, of any Principal under any separate guaranty provided to Lender in connection with the Loan, no Net Worth Guarantor shall be personally liable to pay the Loan, or any other amount due, or to perform any obligation, under the Loan Documents, and Lender agrees to look solely to all revenue and assets of Borrower, the Project and any other collateral heretofore, now, or hereafter pledged by any party to secure the Loan. The obligations of each Net Worth Guarantor hereunder are separate and independent obligations and are not secured by the grant or pledge by Borrower pursuant to the Mortgage. This Supplemental Limited Joinder is a guaranty of full and complete payment and performance and not of collectability. Each Net Worth Guarantor, jointly and severally, shall be personally liable for the following (the "Retained Liabilities"): (a)   All losses, damages, causes of actions, suits and Expenses incurred by Lender or any Affiliate or agent thereof as a result of (i) any failure after the occurrence and during the continuance of any default by Borrower (without benefit of any applicable grace or cure period) to apply any portion of the revenue from the Project to the Loan as required per the Loan Agreement or to customary operating expenses of the Project, (ii) fraud by any Borrower Party, (iii) misapplication, misappropriation or conversion by any Borrower Party of any rents, proceeds or funds deriving from (A) the Project, (B) any insurance proceeds paid by reason of any loss, damage or destruction to the Project and not used by Borrower for restoration or repair of the Project; and/or (C) any awards or amounts received in connection with condemnation of all or a portion of the Project and not used by Borrower or Operating Lessee for restoration or repair of the Project, (iv) material misrepresentation, (v) any material waste or abandonment of the Project, (vi) failure to keep the Project insured in accordance with the terms of the Loan Documents to the extent of Gross Revenue available therefore, (vii) any fees paid by Borrower or Operating Lessee to a Principal, Net Worth Guarantor, Manager, Asset Manager, Operating Lessee or any Affiliate after any default under the Loan Documents, (viii) any breach of the Environmental Obligations by Borrower or any Environmental Indemnitor or any representation or warranty contained in Article 6 of the Loan Agreement (Environmental Matters), (ix) Borrower's hiring of employees in violation of the Loan Documents, (x) voluntary termination of the License Agreement by Borrower or Operating Lessee, (xi) any failure of Borrower or any Principal (or any other holder of the liquor license or liquor permit) to fully cooperate with Lender in the transfer of the liquor license for the Project to Lender, or its designee, following a foreclosure or deed-in-lieu of foreclosure or in operating all bar and other facilities requiring a liquor license during such transition period; or (xi) any claim against Lender by any depository bank which is the holder of a Depository Account unless such claim is solely the result of Lender's gross negligence or willful misconduct; (xiii) the failure of Borrower to obtain the Final C/O on or before June 30, 2006, for any reason whatsoever; or (xiv) Lender becoming liable (by operation of law or pursuant to Lender's exercise of any rights or remedies under the Loan Documents or otherwise) for any of Borrower's liabilities under the Tax Assessment Fixing Agreement first arising prior to the date on which Lender (or its nominee) takes title to the Project whether by foreclosure of the Mortgage, deed-in-lieu thereof or otherwise. -------------------------------------------------------------------------------- (b)   Repayment of the Loan, the Exit Fee, all costs and expenses of Lender, and all other payment obligations of Borrower under the Loan Documents in the event of (i) any breach by Borrower of any of the following covenants of the Loan Agreement in (A) Section 4.2(b) (transfers and change of control), (B) Section 4.2(l) (no additional debt or encumbrances), (C) Section 4.2(m) (organizational documents), (D) Section 4.2(n) (single purpose entity), or (E) Section 4.2(u) (depository accounts and credit card issuers), or (F) Section 4.2(cc) (revocation of the temporary c/o), or (ii) the filing by Borrower or Operating Lessee or any Net Worth Guarantor or any Principal, or the filing against Borrower or Operating Lessee or any Net Worth Guarantor or any Principal by any Principal or any Net Worth Guarantor or any Affiliate of any Principal or any Net Worth Guarantor, of any proceeding for relief under any federal or state bankruptcy, insolvency or receivership laws or any assignment for the benefit of creditors made by Borrower or Operating Lessee. (c)   Satisfaction of the obligations of Net Worth Guarantors under the Net Worth Guaranty of even date herewith in favor of Lender. The liability of each Net Worth Guarantor shall be direct and immediate as a primary and not a secondary obligation or liability, and is not conditional or contingent upon the pursuit of any remedies against Borrower, or any other Net Worth Guarantor or any other person, or against any collateral or liens held by Lender. The foregoing shall in no way limit or impair the enforcement against the Borrower, Project or any other collateral security granted by the Loan Documents of any of the Lender's rights and remedies pursuant to the Loan Documents. "Borrower Party" means, collectively, Borrower, Operating Lessee, Manager, Asset Manager, Principal, Net Worth Guarantors and each of their agents and Affiliates. 2.    Waivers.  To the fullest extent permitted by applicable law, each Net Worth Guarantor waives all rights and defenses of sureties, guarantors, accommodation parties and/or co-makers and agrees that its obligations under this Joinder shall be direct, primary, absolute and unconditional and that its obligations under this Joinder shall be unaffected by any of such rights or defenses, including,   (a) Any rights which it may have to require that (1) Lender first proceed against Borrower, any other Net Worth Guarantor or any other person or entity with respect to the Retained Liabilities or (2) Lender first proceed against any collateral held by Lender or (3) any party to be joined in any proceeding to enforce the Retained Liabilities;   (b) The incapacity, lack of authority, death or disability of Borrower, any Net Worth Guarantor or any other person or entity;   (c) The failure of Lender to commence an action against Borrower or any other person or entity or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy whatsoever at any time;   (d) Any duty on the part of Lender to disclose to any Net Worth Guarantor any facts it may now or hereafter know regarding Borrower regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which any Net Worth Guarantor intends to assume or has reason to believe that such facts are unknown to any Net Worth Guarantor, each Net Worth Guarantor acknowledging that it is fully responsible for being and keeping informed of the financial condition and affairs of Borrower; -2- --------------------------------------------------------------------------------   (e) Lack of notice of default, demand of performance or notice of acceleration to Borrower, any other person or entity with respect to the Loan or the Retained Liabilities;   (f) The consideration for this Supplemental Limited Joinder;   (g) Any acts or omissions of Lender which vary, increase or decrease the risk on any Net Worth Guarantor;   (h) Any statute of limitations affecting the liability of any Net Worth Guarantor hereunder, the liability of Borrower or any guarantor under the Loan Documents, or the enforcement hereof, to the extent permitted by law;   (i) The application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or any Net Worth Guarantor;   (j) An election of remedies by Lender, including any election to proceed against any collateral by judicial or non-judicial foreclosure, whether real property or personal property, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, and whether or not any such election of remedies destroys or otherwise impairs the subrogation rights of any Net Worth Guarantor or the rights of any Net Worth Guarantor to proceed against Borrower or any guarantor for reimbursement, or both;   (k) Any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other aspects more burdensome than that of a Net Worth Guarantor;   (1) Any rights to enforce any remedy which Lender may have against Borrower, any rights to participate in any security for the Loan and any rights of indemnity, reimbursement, contribution or subrogation which any Net Worth Guarantor may have against Borrower or any other Net Worth Guarantor or Person;   (m) Lender's election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111 (b)(2) of the Federal Bankruptcy Code or any successor statute; and   (n) Any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code.   -3- --------------------------------------------------------------------------------   3.    Consents and Releases.  Each Net Worth Guarantor hereby consents and agrees that Lender may at any time, and from time to time, without notice to or further consent from any Net Worth Guarantor and either with or without consideration do any one or more of the following, all without affecting the agreements contained herein or the liability of any Net Worth Guarantor for the Retained Liabilities: (a) surrender without substitution any property or other collateral of any kind or nature whatsoever held by it, or by any person, firm or corporation on its behalf or for its account, securing the Loan or the Retained Liabilities; (b) modify the terms of any document evidencing, securing or setting forth the terms of the Loan; (c) grant releases, compromises and indulgences with respect to the Loan or the Retained Liabilities or any persons or entities now or hereafter liable thereon; or (d) take or fail to take any action of any type whatsoever with respect to the Loan or the Retained Liabilities; (e) release any Net Worth Guarantor hereunder; or (f) enforce this Supplemental Limited Joinder in separate actions against one or more of the Net Worth Guarantors, or by an action against some or all of the Net Worth Guarantors, or any combination of the foregoing. To the maximum extent permitted by law, each Net Worth Guarantor knowingly, voluntarily and intentionally agrees to be bound by the provisions of Article 3 of the Loan Agreement (solely with respect to providing financial information with respect to themselves), Section 4.2(m) of the Loan Agreement and Article 11 of the Loan Agreement, including, without limitation, the waiver of the right to a trial by jury in Section 11.2, and the consents to jurisdiction and the governing law of Illinois set forth in Sections 11.3, and 11.4, respectively. 4.    Successors and Assigns.  Subject to the restrictions on transfer and assignment contained in Section 4.2(b) of the Loan Agreement, this Supplemental Limited Joinder shall be binding on Hersha Hospitality Limited Partnership and Mystic Hotel Investors, LLC, as applicable, and their respective heirs, successors and permitted assigns. 5.    Enforcement.  Lender's right to enforce this Supplemental Limited Joinder against Net Worth Guarantors shall be subject to the terms and conditions relating to enforcement set forth in Section 4.4(b) of the Loan Agreement. -4- --------------------------------------------------------------------------------   Executed as of February _____, 2006       NET WORTH GUARANTORS:       HERSHA HOSPITALITY LIMITED   PARTNERSHIP, a Virginia limited partnership       By: /s/ Ashish R. Parikh   Name: Ashish R. Parikh   Address:               Tax ID #: 25-1811499                     MYSTIC HOTEL INVESTORS, LLC, a Delaware limited liability company         By:            Name:         Address:               Tax ID #:       Signature Page to Supplemental Limited Joinder -------------------------------------------------------------------------------- Executed as of February _____, 2006       NET WORTH GUARANTORS:       HERSHA HOSPITALITY LIMITED   PARTNERSHIP, a Virginia limited partnership       By:           Name:         Address:               Tax ID #:                       MYSTIC HOTEL INVESTORS, LLC, a Delaware limited liability company         By: /s/ Glenn A. Jette   Name: Glenn A. Jette   Address: 914 Hartford Turnpike     Waterford, CT 06385   Tax ID #: 06-1547126   Signature Page to Supplemental Limited Joinder --------------------------------------------------------------------------------

EXHIBIT 10.23(a) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made on January 10, 2006 by and between Quantum Fuel Systems Technologies Worldwide, Inc. (“Quantum” or the “Company”) and William Brian Olson (“Employee”). Capitalized terms not otherwise defined in the body of this Agreement shall have the meanings specified in Section 5 hereof. RECITALS WHEREAS, Employer desires to employ Employee in accordance with the terms and conditions of this Agreement and Employee desires to be so employed by Employer. WHEREAS, by executing this Agreement, the parties desire to terminate that certain Employment Agreement by and between the Company and Employee dated May 1, 2005. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: SECTION 1. EMPLOYMENT. The Company hereby employs Employee as Chief Financial Officer for the Company. Employee hereby accepts employment under this Agreement and agrees to devote his best effort and substantially full time, attention and energy to the Company’s business. Employee’s duties shall include all of the duties, including reasonable business-related travel, normally associated with the position named above, and shall include such other activities, responsibilities and duties that are consistent with such position as may be reasonably assigned from time to time by the Board of Directors or the CEO. The Company, through the Board of Directors and the CEO, shall retain full direction and control of the manner, means and methods by which Employee performs the services for which he is employed hereunder. SECTION 2 COMPENSATION. 2.1 BASE SALARY. During the Term, Quantum will pay Employee a base salary of Four Hundred Fifty Thousand dollars ($450,000) per year. The CEO shall review this base salary at least annually, and the Compensation Committee shall review and approve any recommended increases. Said salary, including any increases, shall be paid to Employee in accordance with Quantum’s normal payroll policies as in effect from time to time. 2.2 INCENTIVE COMPENSATION. During the Term, Employee shall be eligible for: (a) participation in any executive cash bonus plan adopted by the Company, which shall be payable based on achievement of corporate and individual performance objectives to be determined by the CEO and approved by the Compensation Committee, and which shall be paid within one hundred (100) days following the end of the Fiscal Year, and shall be pro rated on a -------------------------------------------------------------------------------- daily basis for any period of the Term which does not include all of a Fiscal Year; and (b) awards under the Company’s long-term incentive plans, including but not limited to stock options andrestricted stock, under the terms of such plans as in effect from time to time. 2.3 BENEFITS. During the Term, Employee shall be entitled to the following benefits: (a) Except as otherwise specified in this Agreement, the fringe benefits that the Company makes generally available to its executive officers, which currently include medical insurance, a Section 401(k) defined contribution employee savings plan, and a non-qualified deferred compensation plan; (b) Term life insurance coverage, paid for by the Company, in the face amount of the greater of (i) two (2) times an annual amount which is the sum of Employee’s annual base salary under Section 2.1 as in effect from time to time, and the average of Employee’s prior two (2) years’ annual cash bonuses under Section 2.2, and (ii) one million dollars ($1,000,000); provided, however, that the face amount of this coverage shall never decrease; (c) If Employee becomes eligible to receive payments under the Company’s standard long-term disability (“LTD”) insurance, supplemental LTD insurance coverage, such that the combination of monthly payments from the Company’s standard LTD plan and from this supplemental LTD policy shall equal one twelfth (1/12) of sixty percent (60%) of Employee’s annual base salary as in effect from time to time. (d) Four (4) weeks of paid vacation each calendar year, pro rated on a daily basis for any period of the Term which is less than a full calendar year. (e) A car allowance of one thousand five hundred ($1,500) per month, pro rated on a daily basis for any period of the Term which is less than a full month; (f) If Employee becomes unable to work due to disability, sick leave that covers Employee at full base salary and continued participation in whatever other Company-sponsored pay and benefit arrangements that are in place for Employee immediately prior to such disability, until Employee is eligible for LTD benefits. Any unused sick leave shall not be accumulated or carried over, nor paid for upon termination of this Agreement. 2.4 BUSINESS EXPENSE REIMBURSEMENT. During the Term, the Company shall reimburse Employee for reasonable and necessary out-of-pocket expenses incurred by Employee in performance of services for the Company under this Agreement (e.g. transportation, lodging and food expenses incurred while traveling on Company business), all subject to such policies and other requirements as the Company may from time to time establish for its employees generally. Employee shall maintain such records as will enable the Company to deduct such items as business expenses when computing its taxes. 2.5 WITHHOLDING. Payment of compensation to Employee shall be subject to withholding of such amounts on account of payroll taxes, income taxes and other withholding as may be required by applicable law, rule or regulation of any governmental authority or as consented to by Employee.   2 -------------------------------------------------------------------------------- SECTION 3 TERM AND TERMINATION PAYMENTS. 3.1 TERM. The Term shall commence effective as of January 10, 2006 and shall continue until the earliest of: (a) the Company’s termination of Employee’s employment as set forth in Section 3.2 of this Agreement; (b) Employee’s termination of employment as set forth in Section 3.3 of this Agreement; or (c) the Employee’s Disability, Death or Retirement, as set forth in Section 3.4 of this Agreement. 3.2 TERMINATION BY COMPANY. The Company may terminate Employee’s employment with Cause effective immediately, or without Cause at any time by giving Employee written notice at least thirty (30) days prior to the effective date of termination; provided, that if such termination of employment is made by the Company without Cause, then Employee shall be entitled to the following severance benefits (the “Severance Benefits”): (a) a lump sum cash payment equal to two (2) times the Employee’s Base Salary in effect immediately prior to the date of termination. Said payment shall be paid to Employee within ten (10) days of Employee’s execution of the Release (as hereinafter defined); (b) continuation of the benefits provided pursuant to Section 2.3 (a) and (b) for a period of two (2) years following the date of termination (the “Severance Period”) to the extent permitted by the applicable plans; provided, however, that said benefits shall cease immediately when Employee is next employed with reasonably comparable benefits; and further provided, however, that if Employee elects during the Severance Period to convert Employee’s health coverage under COBRA, then Employee shall pay the Company the same premiums for health coverage that Employee paid prior to electing COBRA and the Company shall pay the balance of the COBRA premiums during the Severance Period; and (c) All incentive compensation awards including, without limitation, stock options (qualified and non-qualified), restricted stock and other stock-based compensation, shall immediately and automatically become fully vested. (d) In the event that Section 280G of the Internal Revenue Code, as amended from time to time, shall apply to Employee’s Severance Benefits and Employee’s Severance Benefits shall exceed the 2.99x limit set forth in said Section 280G (the “280G Limit”), then the Company shall provide Employee a Section 280G tax gross-up payment, subject to a maximum payment of one-sixth (1/6) of the aggregate amount of the 280G Limit. Employee’s eligibility, both initially and ongoing, to receive the foregoing Severance Benefits shall be conditioned on Employee having first signed a release agreement, in the form attached as Exhibit A (the “Release”).   3 -------------------------------------------------------------------------------- Notwithstanding anything contained in this Agreement to the contrary, under no circumstances shall Employee have any duty or obligation to mitigate the amount of Severance Benefits due under this Agreement. 3.3 TERMINATION BY EMPLOYEE. Employee may terminate employment with the Company with or without Good Reason effective at any time by giving the Company written notice at least thirty (30) days prior to the effective date of termination; provided, however, that if Employee seeks to terminate employment for Good Reason, then Employee shall give the Company: (a) written notice no more than fifteen (15) days from the date when Employee first became aware that Good Reason has taken place (or else Employee forfeits the right to terminate employment for Good Reason) and (b) the opportunity, for no less than thirty (30) days from the effective date of Employee’s written notice to the Company, to cure the purported situation that gave rise to Good Reason. In the event of termination by Employee without Good Reason, Employee shall not be entitled to any compensation or benefits following the effective date of termination of employment, except as expressly provided under the terms of the Company’s applicable plans and policies. In the event of termination by Employee for Good Reason and after the Company shall have failed to cure, then Employee shall be entitled to the Severance Benefits set forth in Section 3.2 above. 3.4 TERMINATION BY DEATH, DISABILITY OR RETIREMENT. Employee’s employment shall terminate automatically upon the earliest of Employee’s death and, to the extent permitted by law, Disability and Retirement. In the event that Employee’s employment is terminated by death, Disability or Retirement, then the Company shall pay all compensation and benefits to which Employee is entitled up to the date of such termination. Thereafter, all obligations of the Company shall cease. A termination by death, Disability or Retirement shall not constitute: (a) a termination by the Company without Cause for purposes of Section 3.2 above or (b) a termination by Employee for Good Reason for purposes of Section 3.3 above. Nothing in this section shall affect Employee’s rights under any Company plan in which Employee is a participant. SECTION 4 CONFIDENTIALITY. 4.1 CONFIDENTIAL INFORMATION. Employee shall not at any time, during the period of employment with the Company or thereafter, except as required in the course of employment with the Company or as authorized in writing by the Board of Directors, directly or indirectly use, disclose, disseminate or reproduce any Confidential Information or use any Confidential Information to compete, directly or indirectly, with the Company. All notes, notebooks, memoranda, computer program and similar repositories of information containing or relating in any way to Confidential Information shall be the property of the Company. All such items made or compiled by Employee or made available to Employee during the Term, including all copies thereof, shall be delivered to the Company by Employee upon termination of the Term or at any other time, upon request of the Company. 4.2 PROPRIETARY INFORMATION OF OTHERS. Employee shall not use in the course of employment with the Company, or disclose or otherwise make available to the Company, any information, documents or other items which Employee may have received from any prior employer or other person and which Employee is prohibited from so using, disclosing or making available by reason of any contract, court order, law or other obligation by which Employee is bound.   4 -------------------------------------------------------------------------------- 4.3 EQUITABLE RELIEF. Employee acknowledges that: the provisions of this Section 4 of the Agreement are essential to the Company; the Company would not enter into this Agreement if it did not include such provisions; the damages sustained by the Company as a result of any breach of such provisions cannot be adequately remedied by damages; and, in addition to any other right or remedy that the Company may have under this Agreement by law or otherwise, the Company will be entitled to injunctive and other equitable relief to prevent or curtail any breach of any such provisions. SECTION 5 DEFINITIONS. Whenever used in this Agreement with initial letters capitalized, the following terms shall have the following meanings: “BOARD OF DIRECTORS” means, unless otherwise specified, Quantum Fuel Systems Technologies Worldwide, Inc.’s Board of Directors. “CAUSE” means (i) Employee’s conviction of a felony crime involving dishonesty, breach of trust, or physical harm to any person; (ii) Employee willfully engaging in fraud or embezzlement; (iii) Employee’s commission of a material breach of this Agreement, which breach is not cured within ninety (90) days after written notice to Employee from the Company. “CEO” means the Chief Executive Officer of the Company. “CHANGE OF CONTROL” means a change in ownership or control of the Company effected through a merger, consolidation or acquisition by any person or related group of persons (other than an acquisition by the Company or by a Company-sponsored employee benefit plan or by a person or persons that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of securities possessing more than fifty percent (50%) of the total combined voting power of the outstanding securities of the Company. “COMPENSATION COMMITTEE” means the Compensation Committee of the Board of Directors. “CONFIDENTIAL INFORMATION” means information not generally known relating to the business of the Company or any third party that is contributed to, developed by, disclosed to, or known to Employee in the course of employment by the Company, including but not limited to customer lists, specifications, data, research, test procedures and results, know-how, services used, computer programs, information regarding past, present and prospective plans and methods of purchasing, accounting, engineering, business, marketing, merchandising, selling and servicing used by the Company. “DISABILITY” means that Employee becomes eligible for the Company’s long-term disability benefits or, in the sole discretion of the Company, Employee is unable to carry out Employee’s executive responsibilities by reason of any physical or mental impairment for more than ninety (90) consecutive days or more than one hundred and twenty (120) days in any twelve-month period.   5 -------------------------------------------------------------------------------- “FISCAL YEAR” means the Company’s fiscal year for financial accounting purposes as in effect from time to time, which is currently a fiscal year ending on April 30. “GOOD REASON” means the occurrence of any of the following events or conditions, unless consented to by Employee or cured by the Company: (a) a change in Employee’s status, title, position or responsibilities which represents a material adverse change from Employee’s status, title, position or responsibilities as in effect at any time during the Term; provided, however, that if after a Change in Control, Employee retains substantially the same status, title, position and responsibilities that Employee had prior to the Change in Control but Employee is serving as the Chief Financial Officer of the Company as a subsidiary or division of another entity, then Good Reason shall not have occurred; (b) a reduction in Employee’s base salary to a level below that in effect at any time during the Term; (c) requiring Employee to be based at any place outside a fifty (50) mile radius from Employee’s job location at the time of the execution of this Agreement, except for business-related travel reasonably required for the performance of Employee’s duties as the Company’s Chief Financial Officer; or (d) requiring Employee to undertake business-related travel requirements that are materially greater than the business-related travel requirements as set forth in subsection (c) above and Section 1 of this agreement. “RETIREMENT” means Employee’s retirement in accordance with the plans and policies of the Company as in effect from time to time and applicable to Employee. “TERM” means the period during which Agreement is in effect as provided in Section 3.1. SECTION 6 MISCELLANEOUS. 6.1 COMPLIANCE WITH LAWS. In the performance of this Agreement, each party shall comply with all applicable laws, regulations, rules, orders and other requirements of governmental authorities having jurisdiction. 6.2 NONWAIVER. The failure of any party to insist upon or enforce strict performance by any other of any provision of this Agreement or to exercise any right, remedy or provision of this Agreement shall not be interpreted or construed as a waiver or relinquishment to any extent of such party’s right to consent or rely upon the same in that or any other instance; rather, the same shall be and remain in full force and effect. 6.3 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement, and supersedes any and all prior agreements between the Company and Employee. No amendment, modification or waiver of any of the provisions of this Agreement shall be valid unless set forth in a written instrument signed by the party to be bound thereby. 6.4 APPLICABLE LAW AND VENUE. This Agreement shall be interpreted, construed and enforced in all respects in accordance with the laws of the State of California, and venue for any action arising out of this Agreement shall be in the federal or state courts in Orange County, California.   6 -------------------------------------------------------------------------------- 6.5 SURVIVAL. Section 4, together with all other provisions of this Agreement which may reasonably be interpreted or construed to survive any termination of the Term, shall survive termination of the Term. 6.6 ATTORNEYS’ FEES. In the event any suit or proceeding is instituted by any party against another arising out of this Agreement, the prevailing party shall be entitled to recover its attorneys’ fees and expenses of litigation; provided, however, that in the event of the settlement of any suit or proceeding, the parties shall bear their own attorneys’ fees and expenses of litigation. 6.7 SEVERABILITY. If any term, provision, covenant or condition of this Agreement shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, then the remainder of this Agreement shall remain in full force and effect. 6.8 HEADINGS. The headings and captions of this Agreement are provided for convenience only, and are not intended to have any effect upon the interpretation or construction of the Agreement. 6.9 NOTICES. Any notice, request, consent or approval required or permitted to be given under this Agreement or pursuant to law shall be sufficient if in writing, and personally delivered to Employee or by registered or certified mail to Employee’s residence (as noted in the Company’s records), or if personally delivered to the Company’s Corporate Secretary at the Company’s principal office.   EMPLOYEE:    QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. /s/ W. Brian Olson    /s/ Alan P. Niedzwiecki William Brian Olson    Alan P. Niedzwiecki    President and Chief Executive Officer   7 -------------------------------------------------------------------------------- EXHIBIT A FORM OF RELEASE CERTIFICATE (“You”) and Quantum Fuel Systems Technologies Worldwide, Inc. (the “Company”) have agreed to enter into this Release Certificate on the following terms: Within ten (10) days after you sign this Release Certificate (which you may sign no sooner than the last day of your employment with the Company), you will become eligible to receive the Severance Benefits in accordance with the terms of your Employment Agreement with the Company. In return for the consideration described in the Employment Agreement, you and your representatives completely release the Company, its affiliated, related, parent or subsidiary corporations, and its and their present and former directors, officers and employees (the “Released Parties”) from all claims of any kind, known and unknown,1 which you may now have or have ever had against any of them, or arising out of your relationship with any of them, including all claims arising from your employment or the termination of your employment, with the exception of Severance Payments as outlined in Section 3.2, whether based on contract, tort, statute, local ordinance, regulation or any comparable law in any jurisdiction (“Released Claims”). By way of example and not in limitation, the Released Claims shall include any claims arising under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Worker Adjustment and Retraining Notification Act, the Age Discrimination in Employment Act, and the California Fair Employment and Housing Act, and any other comparable state or local law, as well as any claims asserting wrongful termination, breach of contract, breach of the covenant of good faith and fair dealing, negligent or intentional misrepresentation, defamation and any claims for attorneys’ fees. You also agree not to initiate or cause to be initiated against any of the Released Parties any lawsuit, compliance review, administrative claim, investigation or proceedings of any kind which pertain in any manner to the Released Claims. You acknowledge that the release of claims under the Age Discrimination in Employment Act (“ADEA”) is subject to special waiver protection. Therefore, you acknowledge the following: (a) you have had twenty-one (21) days to consider this Release Certificate (but may sign it at any time beforehand, if you so desire); (b) you can consult an attorney in doing so; (c) you can revoke this Release Certificate within seven (7) days of signing it, by sending a certified letter to that effect to the Company’s Chief Executive Officer; and that (d) notwithstanding the foregoing, the portion of this Release Certificate that pertains to the release of claims under ADEA shall not become effective or enforceable and no funds shall be exchanged until the seven (7)-day revocation period has expired, but that all other provisions of this Release Certificate shall become effective upon its execution by the parties.   -------------------------------------------------------------------------------- 1 You further agree that because this Release Certificate specifically covers known and unknown claims, you waive your rights under Section 1542 of the California Civil Code or under any other comparable law of another jurisdiction that limits a general release to claims that are known to exist at the date of this release. Section 1542 of the California Civil Code states 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.” -------------------------------------------------------------------------------- The parties agree that this Release Certificate and the Employment Agreement contain all of our agreements and understandings with respect to their subject matter, and may not be contradicted by evidence of any prior or contemporaneous agreement, except to the extent that the provisions of any such agreement have been expressly referred to in this Release Certificate or the Employment Agreement as having continued effect. It is agreed that this Release Certificate shall be governed by the laws of the State of California. If any provision of this Release Certificate or its application to any person, place or circumstance is held by a court of competent jurisdiction to be invalid, unenforceable or void, then the remainder of this Release Certificate and such provision as applied to other person, places and circumstances shall remain in full force and effect. Notwithstanding anything contained in this Release Certificate to the contrary, the Company acknowledges and agrees that Employee is not releasing the Company from any claims for indemnification that Employee may have against the Company arising from or related to Employee’s status as an officer of the Company whether such rights to indemnification arise from the Company’s Articles of Incorporation, Bylaws or by statute, contract or otherwise. Please note that this Release Certificate may not be signed before the last day of your employment with the Company, and that your eligibility for severance benefits is conditioned upon meeting the terms set forth in your Employment Agreement.         Date:                          Employee     QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.     By:         Date:                          Name:         Title:        

  EXHIBIT 10.29 CONTRIBUTION AGREEMENT between ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership (the “Partnership”) and EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (the “Contributor”) Property: Marriott Crystal City Gateway Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale   --------------------------------------------------------------------------------   TABLE OF CONTENTS                       Page ARTICLE I DEFINITIONS   1   1.1   Definitions     1     ARTICLE II CONTRIBUTION; DEPOSIT; PAYMENT OF CONTRIBUTION VALUE; STUDY PERIOD   10   2.1   Contribution     10   2.2   Payment of Contribution Value     10   2.3   Deposit     10   2.4   Inspection     11     ARTICLE III CONTRIBUTOR’S REPRESENTATIONS AND WARRANTIES   12   3.1   Organization and Power     12   3.2   Authorization and Execution     12   3.3   Non-contravention     13   3.4   Title To Real Property     13   3.5   No Special Taxes     13   3.6   Compliance with Existing Laws     13   3.7   Personal Property and Inventory     13   3.8   Operating Agreements/Off-Site Facility Agreements/Leased Property Agreements     13   3.9   Insurance     14   3.10   Condemnation Proceedings; Roadways     14   3.11   Actions or Proceedings     14   3.12   Labor and Employment Matters     14   3.13   Financial Information and Submission Matters     14   3.14   Bankruptcy     15   3.15   As-Is; Where-Is     15   3.16   Occupancy Agreements     15   3.17   Utilities     16   3.18   No Commitments     16   3.19   Contributor Is Not a “Foreign Person”     16   3.20   No Other Property Interests     16   3.21   Investment Representations and Warranties     16   3.22   Existing Lien     17                 ARTICLE IV THE PARTNERSHIP’S REPRESENTATIONS AND WARRANTIES   18   4.1   Organization and Power     18   4.2   Authorization and Execution     18   4.3   Non-contravention     18   4.4   Litigation     18   4.5   Bankruptcy     19   Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale i  --------------------------------------------------------------------------------                         Page 4.6   Issuance of Units     19   4.7   Partnership Documentation     20   4.8   SEC Documents     20   4.9   Tax Status of Partnership     20   4.10   REIT Status of Company     21                 ARTICLE V CONDITIONS PRECEDENT   21   5.1   As to the Partnership’s Obligations     21   5.2   As to Contributor’s Obligations     23                 ARTICLE VI COVENANTS OF CONTRIBUTOR   24   6.1   Operating Agreements/Leased Property Agreements/Off-Site Facility Agreements     24   6.2   Warranties and Guaranties     25   6.3   Insurance     25   6.4   Independent Audit     25   6.5   Operation of Property Prior to Closing     25   6.6   No Marketing     27   6.7   Employees and Continuation of Contributor’s Group Health Plans     27   6.8   Rights of First Refusal and Options     27   6.9   Intentionally Omitted     28   6.10   Prospective Subscriber Questionnaire     28   6.11   Delivery of Tax Information     28   6.12   Cooperation on Tax Matters     28   6.13   Information Regarding the Restrictions on Beneficial Ownership of Units     29   6.14   Partnership Agreement     29   6.15   Lock-Up Agreement     29   6.16   Pledge Agreement     30                 ARTICLE VII CLOSING   30   7.1   Closing     30   7.2   Contributor’s Deliveries     30   7.3   The Partnership’s Deliveries     34   7.4   Mutual Deliveries     34   7.5   Closing Costs     34   7.6   Revenue and Expense Allocations     35                 ARTICLE VIII GENERAL PROVISIONS   37   8.1   Condemnation     37   8.2   Risk of Loss     37   8.3   Broker     37   8.4   Bulk Sale     38   8.5   Confidentiality     38   8.6   Contributor’s Accounts Receivable     39   Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale ii  --------------------------------------------------------------------------------                         Page               ARTICLE IX LIABILITY OF THE PARTNERSHIP; INDEMNIFICATION BY CONTRIBUTOR; DEFAULT; TERMINATION RIGHTS   39   9.1   Liability of the Partnership     39   9.2   Indemnification by Contributor     40   9.3   Default by Contributor/Failure of Conditions Precedent     40   9.4   Default by the Partnership/Failure of Conditions Precedent     40   9.5   Costs and Attorneys’ Fees     41   9.6   Limitation of Liability     41                 ARTICLE X RESTRICTIONS ON TRANSFER   41   10.1   Restrictions on Transfer of Property by Purchaser     41                 ARTICLE XI MISCELLANEOUS PROVISIONS   42   11.1   Completeness; Modification     42   11.2   Inspection Agreement     42   11.3   Assignments     42   11.4   Successors and Assigns     42   11.5   Days     42   11.6   Governing Law     43   11.7   Counterparts     43   11.8   Severability     43   11.9   Costs     43   11.10   Notices     43   11.11   Escrow Agent     44   11.12   Incorporation by Reference     45   11.13   Survival     45   11.14   Further Assurances     45   11.15   No Partnership     45   11.16   Time of Essence     45   11.17   Signatory Exculpation     45   11.18   Rules of Construction     45   Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale iii  --------------------------------------------------------------------------------             EXHIBITS         Exhibit A   —   Land Exhibit B   —   Title Cure Obligations Exhibit C   —   Special Warranty Bill of Sale Exhibit D   —   Special Warranty Deed Exhibit E   —   Assignment and Assumption Agreement (of Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements) Exhibit F   —   Assignment and Assumption of Occupancy Agreements Exhibit G   —   Intentionally Omitted Exhibit H   —   Registration Rights Agreement Exhibit I   —   Partnership Amendment Exhibit J   —   Prospective Subscriber Questionnaire Exhibit K   —   Prospective Power of Attorney and Limited Partner Signature Page Exhibit L   —   Partnership Letter Exhibit M   —   Lock-Up Agreement Exhibit N   —   Pledge and Security Agreement Exhibit O   —   Tax Reporting and Protection Agreement           SCHEDULES         Schedule 1   —   Intentionally Omitted Schedule 2   —   Operating Agreements and Leased Property Agreements and Off-Site Facility Agreements Schedule 3   —   Employment Agreements Schedule 4   —   Occupancy Agreements Schedule 5   —   Additional Defined Terms Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale iv  --------------------------------------------------------------------------------   CONTRIBUTION AGREEMENT      THIS CONTRIBUTION AGREEMENT (this “Agreement”) is made as of this 18th day of May, 2006, between ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership (the “Partnership”), and EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (“Contributor”). R E C I T A T I O N S:      A. Contributor is the owner of that certain real property more particularly described on Exhibit A attached hereto and made a part hereof for all purposes, being a 697-room hotel commonly known as the “Marriott Crystal City Gateway” hotel located at 1700 Jefferson Davis Highway in Arlington, Virginia (the “Hotel”).      B. The Partnership is desirous of acquiring such hotel property from Contributor and Contributor is desirous of contributing such hotel property to the Partnership, for the consideration and upon the terms and conditions hereinafter set forth.      NOW, THEREFORE, in consideration of premises and in consideration of the mutual covenants, promises and undertakings of the parties hereinafter set forth, and for other good and valuable considerations, the receipt and sufficiency of which is hereby acknowledged by the parties, it is agreed: ARTICLE I DEFINITIONS      1.1 Definitions. The following terms shall have the indicated meanings:           “Act of Bankruptcy” shall mean if a party hereto or any general partner thereof shall (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (b) admit in writing its inability to pay its debts as they become due, (c) make a general assignment for the benefit of its creditors, (d) file a voluntary petition or commence a voluntary case or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, (g) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take any corporate or partnership action for the purpose of effecting any of the foregoing; or if a proceeding or case shall be commenced, without the application or consent of a party hereto or any general partner thereof, in any court of competent jurisdiction seeking (1) the liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of debts, of such party or general partner, (2) the appointment of a receiver, custodian, trustee or liquidator for such party or general partner or all or any substantial part of its assets, or (3) other similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   shall continue undismissed; or an order (including an order for relief entered in an involuntary case under the Federal Bankruptcy Code, as now or hereafter in effect) judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) consecutive days.           “Advance Bookings” shall mean reservations made by Contributor or its manager prior to Closing for Hotel rooms or meeting rooms to be utilized after Closing, or for catering services or other Hotel services to be provided after Closing, in the ordinary course of business.           “Affiliate” of a Person shall mean (i) any other Person that is directly or indirectly (through one or more intermediaries) controlled by, under common control with, or controlling such Person, or (ii) any other Person in which such Person has a direct or indirect equity interest constituting at least a majority interest of the total equity of such other Person. For purposes of this definition, “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any Person or the power to veto major policy decisions of any Person, whether through the ownership of voting securities, by contract or otherwise.           “Affiliated Company” means any other entity which is, along with Contributor, a member of a controlled group of corporations or a controlled group of trades or businesses (as defined in Section 414(b) or (c) of the Internal Revenue Code), any entity which, along with Contributor, is included in an affiliated service group as defined in Section 414(m) of the Internal Revenue Code, and any other entity which is required to be aggregated with Contributor pursuant to Treasury Regulations under Section 414(o) of the Internal Revenue Code.           “Alcoholic Beverage Management Agreement” shall have the meaning as set forth in Section 6.9 hereof.           “Applicable Laws” shall mean any applicable building, zoning, subdivision, environmental, health, safety or other governmental laws, statutes, ordinances, resolutions, rules, codes, regulations, orders or determinations of any Governmental Authority or of any insurance boards of underwriters (or other body exercising similar functions), or any restrictive covenants or deed restrictions affecting the Property or the ownership, operation, use, maintenance or condition thereof.           “Assets” shall have the meaning given such term in Section 6.11 hereof.           “Assignment and Assumption Agreement” shall mean one or more assignment and assumption agreements whereby Contributor (1) assigns and the Partnership and/or its property manager, lessee or other designee (as the Partnership shall specify) assumes the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements that have not been terminated prior to Closing in accordance herewith, to the extent of obligations thereunder which accrue and are applicable to periods from and after the Closing Date, and (2) assigns all of Contributor’s right, title and interest in and to the Intangible Personal Property for the Property, to the extent assignable. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------             “Assignment of Occupancy Agreements” shall mean one or more assignment agreements, whereby Contributor assigns and the Partnership and/or its property manager, lessee or other designee (as the Partnership shall specify) assumes all of Contributor’s right, title and interest in and to the Occupancy Agreements, to the extent of obligations thereunder which accrue and are applicable to periods from and after the Closing Date.           “Authorizations” shall mean all licenses, permits and approvals required by any governmental or quasi-governmental agency, body, department, commission, board, bureau, instrumentality or office, or otherwise appropriate with respect to the construction, ownership, operation, leasing, maintenance, or use of the Property or any part thereof.           “Bill of Sale” shall mean that certain bill of sale conveying title to the Inventory, Tangible Personal Property and the Intangible Personal Property to the Partnership or the Partnership’s property manager, lessee or other designee (as the Partnership shall specify).           “Broker” shall mean Molinaro Koger.           “Class B Common Partnership Unit Return” shall mean, as to each Class B Common Partnership Unit that has not yet then been redeemed by the Partnership: (i) for the period commencing on the Closing Date and ending on the last day of the calendar quarter in which the Closing Date shall occur (the “Initial Period”), a cash distribution equal to $771,344.34, divided by the number of days in such calendar quarter, times the number of days in the Initial Period, divided by the number of Units issued to Contributor on the Closing Date, (ii) for the three-year period commencing on first day of the calendar quarter following the Initial Period and ending on the third anniversary of such date, a cumulative quarterly cash distribution equal to $771,344.34 divided by the number of Units issued to Contributor on the Closing Date and (iii) thereafter, a cumulative quarterly cash distribution equal to $814,390.78 divided by the number of Units issued to Contributor on the Closing Date. The foregoing amounts designated for the Class B Common Partnership Unit Return are based on the assumption that the full amount of the Net Contribution Value shall be paid in the form of Units pursuant to Section 2.2(b) of this Agreement. Therefore, in the event any portion of the Net Contribution Value is paid in the form of cash pursuant to Section 2.2(b)(i) of this Agreement, the foregoing amounts designated for the Class B Common Partnership Unit Return shall be reduced proportionately by the proportion to which the Net Contribution Value as reduced by such cash payment bears to the full amount of the Net Contribution Value. As an example, for illustrative purposes only, if the Net Contribution Value is $50 million and the amount of cash paid pursuant to Section 2.2(b)(i) is $5 million, the amount of Net Contribution Value to be paid in the form of Units thus becomes $45 million, and the resulting Class B Common Partnership Unit Return shall be equal to 90% of the amounts stated above for the Class B Common Partnership Unit Return (45 / 50 = 90%).           “Closing” shall mean the Closing of the contribution of the Property to the Partnership pursuant to this Agreement and shall be deemed to occur on the Closing Date.           “Closing Date” shall mean the date on which the Closing occurs.           “Closing Documents” shall mean the documents defined as such in Section 7.1 hereof. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------             “COBRA” shall have the meaning given such term in Section 6.7 hereof.           “Code” shall have the meaning given such term in Section 10.1(a) hereof.           “Common Stock” has the meaning given such term in the attached Exhibit H (form of Registration Rights Agreement).           “Company” shall mean Ashford Hospitality Trust, Inc., a Maryland corporation.           “Contribution Value” shall mean $100,000,000.00 payable in the manner described in Section 2.2 hereof, subject to any adjustments as set forth in Article VII of this Agreement.           “Contributor’s Organizational Documents” shall mean the current partnership agreement and certificate of limited partnership of Contributor and its general partners, true and correct copies of which shall be provided to the Partnership prior to Closing.           “Contributor Partner” shall have the meaning given such term in Section 4.6(a) hereof.           “Covenants, Conditions and Restrictions” shall mean those covenants, conditions and/or restrictions binding, restricting or benefiting the Property which are set forth in the Title Commitment.           “Deed” shall mean that certain deed conveying title to the Real Property with special warranty covenants of title from Contributor to the Partnership or the Partnership’s designee, and subject only to Permitted Title Exceptions. If there is any difference between the description of the Land, as shown on Exhibit A attached hereto and the description of the Land as shown on the Survey, the description of the Land to be contained in the Deed and the description of the Land set forth in the Title Commitment shall conform to the description shown on the Survey.           “Deposit” shall mean all amounts deposited from time to time with Escrow Agent by the Partnership pursuant to Section 2.3 hereof, plus all interest or other earnings that may accrue thereon. All cash Deposits shall be invested by Escrow Agent in a commercial bank or banks acceptable to the Partnership at money market rates, or in such other investments as shall be approved in writing by Contributor and the Partnership. The Deposit shall be held and disbursed by Escrow Agent in strict accordance with the terms and provisions of this Agreement.           “Effective Date” shall have the meaning given such term in Section 11.18(e) hereof.           “Employment Agreements” shall mean all employment agreements, written or oral, between Contributor and the persons employed with respect to the Property.           “Escrow Agent” shall mean Chicago Title Insurance Company, 830 East Main St.,. Richmond, Virginia 23219, Attn: Lou Scott. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------             “Existing Lien” shall mean that certain loan in the original principal amount of $64,000,000.00 held by Morgan Guaranty Trust Company of New York (“Lender”) and secured by a deed of trust lien on the Property.           “Financial Information” shall mean the financial information defined as such in Section 3.13 hereof.           “FIRPTA Certificate” shall mean the affidavit of Contributor under Section 1445 of the Internal Revenue Code, as amended, certifying that Contributor is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Internal Revenue Code and regulations promulgated thereunder), in form and substance satisfactory to the Partnership.           “Governmental Authority” shall mean any federal, state, county, municipal or other government or any governmental or quasi-governmental agency, department, commission, board, bureau, officer or instrumentality, foreign or domestic, or any of them.           “Hotel” shall mean the hotel and related amenities located on the Land.           “Improvements” shall mean the Hotel and all other buildings, improvements, fixtures and other items of real estate located on the Land.           “Inspection Agreement” shall mean that certain Exclusivity and Inspection Agreement dated February 21, 2006, executed by and between Contributor and the Partnership.           “Insurance Policies” shall mean all policies of insurance maintained by or on behalf of Contributor pertaining to the Property, its operation, or any part thereof.           “Intangible Personal Property” shall mean all intangible personal property owned or possessed by Contributor, if any, and used in connection with the ownership, operation, leasing, occupancy or maintenance of the Property, including, without limitation, (1) the Authorizations, (2) telephone numbers, TWX numbers, post office boxes, Warranties and Guaranties, signage rights, utility and development rights and privileges, general intangibles, business records, site plans, surveys, environmental and other physical reports, plans and specifications pertaining to the Real Property and the Personal Property, (3) any unpaid award for taking by condemnation or any damage to the Land by reason of a change of grade or location of or access to any street or highway, (4) the share of the Rooms Ledger determined under Section 7.6 hereof, and (5) all websites and domains used for the Hotel, including access to the FTP files of the websites to obtain website information and content pertaining to the Hotel, excluding (a) any of the aforesaid rights the Partnership elects not to acquire, (b) Contributor’s cash on hand, in bank accounts and invested with financial or other institutions and (c) accounts receivable except for the above described share of the Rooms Ledger.           “Inventory” shall mean all tangible personal property described in Section 7.7 hereof.           “Land” shall mean that certain parcel of real estate more particularly described on Exhibit A attached hereto, together with all easements, rights, privileges, remainders, reversions Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5 --------------------------------------------------------------------------------   and appurtenances thereunto belonging or in any way appertaining, and all of the estate, right, title, interest, claim or demand whatsoever of Contributor therein, in the streets and ways adjacent thereto and in the beds thereof, either at law or in equity, in possession or expectancy, now or hereafter acquired.           “Leased Property” shall mean all leased items of Tangible Personal Property.           “Leased Property Agreements” shall mean the lease agreements pertaining to the Leased Property.           “Lender” shall mean the current holder of the Existing Lien.           “Lock-Up Agreement” shall mean the Lock-Up Agreement in the form of Exhibit M attached hereto.           “Lock-Up Period” shall have the meaning given such term in Section 6.15 hereof.           “Management Agreement” shall mean a management agreement to be dated effective as of the Closing Date, by and between the Partnership or its designee, as owner, and Marriott, as manager.           “Marriott” shall mean Marriott International, Inc. or one of its Affiliates.           “Marriott Lease” shall collectively mean that certain Lease Agreement — Crystal Gateway Marriott Hotel dated April 27, 1984, executed by Eads Associates, as owner, and Marriott Corporation, as tenant, as first amended by the same parties by Statement of Clarification and Amendment to Lease dated December 1, 1983, as subsequently amended by the same parties by Second Amendment to Lease dated August 6, 1986, as thereafter amended by Third Amendment to Lease dated March 1, 1989, executed by Eads Associates Limited Partnership, as owner, and Marriott Corporation, as tenant, and as finally amended by Fourth Amendment to Lease dated November 4, 1993, by Eads Associates Limited Partnership, as owner, and Marriott Hotel Services, Inc., as tenant.           “Net Contribution Value” shall have the meaning given such term in Section 2.2(a).           “Occupancy Agreements” shall mean all leases, concession or occupancy agreements in effect with respect to the Real Property under which any tenants (other than Hotel guests) or concessionaires occupy space upon the Real Property.           “Off-Site Facility Agreements” shall mean those easements, leases, contracts and agreements pertaining to facilities not located on the Property but which the Partnership deems necessary, beneficial or related to the operation of the Hotel including, without limitation, use agreements for local golf courses, parking contracts or leases, garage contracts or leases, skybridge easements, tunnel easements, utility easements, and storm water management agreements. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 6 --------------------------------------------------------------------------------             “Operating Agreements” shall mean all service, supply and maintenance contracts, if any, in effect with respect to the Property and all other contracts (other than the Occupancy Agreements, Management Agreement, Off-Site Facility Agreements and the Employment Agreements) that affect the Property or are otherwise related to the construction, ownership, operation, occupancy or maintenance of the Property.           “Owner’s Title Policy” shall mean an owner’s policy of title insurance issued to the Partnership by the Title Company, pursuant to which the Title Company insures the Partnership’s ownership of fee simple title to the Real Property (including the marketability thereof) subject only to Permitted Title Exceptions. The Owner’s Title Policy shall insure the Partnership in the amount of the Contribution Value and shall be acceptable in form and substance to the Partnership. The Partnership may require such deletions of standard exceptions and such title endorsements as are legally available and customarily required by institutional investors purchasing property comparable to the Property in the State where the Property is situated. The description of the Land in the Owner’s Title Policy shall be by courses and distances or by reference to a legal, subdivided lot and shall be identical to the description shown on the Survey.           “Partnership Agreement” shall mean the Second Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership, a Delaware limited partnership, dated as of April 6, 2004, as the same has been and may be amended from time to time.           “Partnership Amendment” shall have the meaning given such term in Section 4.6(a) hereof.           “Partnership’s Objections” shall mean the objections defined as such in Section 2.4(d) hereof.           “Permitted Title Exceptions” shall mean the Existing Lien and those exceptions to title to the Real Property that are satisfactory to the Partnership as determined pursuant to Section 2.4(d) hereof.           “Per Share Price” shall have the meaning given such term in Section 2.2(b) hereof.           “Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Authority.           “Personal Property” shall mean collectively the Tangible Personal Property and the Intangible Personal Property, but shall not include any property located on the Property which is owned by Contributor’s property manager.           “Pledge Agreement” shall mean the Pledge Agreement in the form of Exhibit N attached hereto.           “Pledged Units” shall have the meaning as set forth in Section 6.16 hereof. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 7 --------------------------------------------------------------------------------             “Power of Attorney and Limited Partner Signature Page” shall mean a limited partner signature page in the form of Exhibit K attached hereto.           “Property” shall mean collectively the Real Property, the Inventory, the Tangible Personal Property and the Intangible Personal Property.           “Prospective Subscriber Questionnaire” shall mean the Prospective Subscriber Questionnaire in the form of Exhibit J attached hereto.           “Protected Period” shall have the meaning given such term in Section 10.1(a) hereof.           “Real Property” shall collectively mean the Land and the Improvements.           “Registration Rights Agreement” shall mean a Registration Rights Agreement in the form attached hereto as Exhibit H.           “REIT” shall have the meaning given such term in Section 8.5 hereof.           “Rooms Ledger” shall mean the final night’s room revenue (revenue from rooms occupied as of 6:00 a.m. on the Closing Date, exclusive of food, beverage, telephone and similar charges which shall be retained by Contributor), including any sales taxes, room taxes or other taxes thereon.           “SEC Documents” shall mean all documents and agreements required to be filed by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934.           “Survey” shall mean the survey defined as such in and prepared pursuant to Section 2.4(d) hereof.           “Tangible Personal Property” shall mean the items of tangible personal property consisting of all furniture, fixtures, equipment, machinery, Inventory and other personal property of every kind and nature (including cash-on-hand and petty cash funds) located on or used or useful in the operation of the Hotel and owned by Contributor, including, without limitation, Contributor’s interest as lessee with respect to any such Tangible Personal Property.           “Tax Authority” means any state or local government, or agency, instrumentality or employee thereof, charged with the administration of any law or regulation relating to Taxes.           “Tax Protection and Reporting Agreement” shall have the meaning set forth in Section 7.2(t) hereof.           “Tax Return” means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes.           “Taxable Event” shall have the meaning given such term in Section 10.1(a) hereof. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 8 --------------------------------------------------------------------------------             “Third Party Consents” shall have the meaning given such term in Section 5.1(h) hereof.           “Title Commitment” shall mean the title commitment and exception documents defined as such in Section 2.4(d) hereof.           “Title Company” shall mean Escrow Agent on behalf of Chicago Title Insurance Company or other title insurance underwriter selected by the Partnership.           “UCC Reports” shall mean the reports defined as such in Section 2.4(d) hereof.           “Units” shall mean “Class B Common Partnership Units” of the Partnership, the preferences, priorities, rights and entitlements thereof to be more particularly defined in a Partnership Amendment as: “a fractional, undivided share of the Class B Common Partnership Interests of all Partners issued hereunder, each of which Class B Common Partnership Unit shall be treated as a Common Partnership Unit for all purposes of this Agreement and shall be subject to the same rights, privileges, qualifications, limitations and other characteristics as a Common Partnership Unit and all references to Class B Common Partnership Units in this Agreement shall be deemed to be references to Common Partnership Units as well as Class B Common Partnership Units, except, in each case, (i) in lieu of receiving distributions by the Partnership to holders of Common Partnership Units, each holder of a Class B Common Partnership Unit shall be entitled to the payment of the Class B Common Partnership Unit Return; (ii) the Class B Common Partnership Unit Return shall have priority over the payment of any cash distribution with respect to a Common Partnership Unit pursuant to Section 8.1(a) of the Partnership Agreement (while still being junior in priority to the payment of any cash distribution with respect to a Preferred Unit); and the Partnership or holder of the Class B Common Partnership Unit shall have the right to redeem or cause the redemption of the Class B Common Partnership Units, in whole or in part, from time to time, at any time after the tenth (10th) anniversary of the Closing Date, in exchange for an equivalent number of Common Units.”           “Utilities” shall mean public sanitary and storm sewers, natural gas, telephone, public water facilities, electrical facilities and all other utility facilities and services necessary or appropriate for the operation and occupancy of the Property as a hotel.           “Warranties and Guaranties” shall mean all warranties and guaranties relating to the Improvements or the Tangible Personal Property or any part thereof. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 9 --------------------------------------------------------------------------------   ARTICLE II CONTRIBUTION; DEPOSIT; PAYMENT OF CONTRIBUTION VALUE; STUDY PERIOD; REIMBURSEMENT FOR CAPITAL EXPENDITURES      2.1 Contribution. Contributor agrees to contribute and the Partnership agrees to acquire the Property for the Contribution Value and in accordance with and subject to the other terms and conditions set forth herein.      2.2 Payment of Contribution Value. The Contribution Value shall be paid to Contributor in the following manner:           (a) The Contribution Value shall be adjusted as set forth in Article VII of this Agreement, and the Partnership shall receive a credit against the adjusted Contribution Value in an amount equal to the outstanding principal balance of the Existing Lien as of the Closing Date (such adjusted and credited Contribution Value, the “Net Contribution Value”). At Closing, the Partnership shall assume the outstanding principal balance of the Existing Lien as of the Closing Date.           (b) The Net Contribution Value shall be paid in the form of (i) a cash amount of up to Five Million and No/100 Dollars ($5,000,000.00) to the extent requested in writing by Contributor and agreed to by the Partnership, to be allocated to one or more Contributor Partners in order to reduce the number of Contributor Partners who might otherwise receive Units pursuant to the following clause, and (ii) Units issued directly to Contributor, or at the option of the Contributor, the Contributor Partners provided any such Contributor Partner receiving Units satisfies the criteria set forth in Section 4.6(b) of this Agreement with respect to a transfer of Units, the number of which shall be the quotient (rounded to the nearest whole number) resulting from the Net Contribution Value (less any amount of cash paid pursuant to clause (i) of this sentence) divided by the “Per Share Price”. “Per Share Price” means $11.20.      2.3 Deposit. Within two (2) business days after the execution hereof by both Contributor and the Partnership and as a condition precedent to the effectiveness of this Agreement, the Partnership shall deliver to Escrow Agent a wire transfer or check in the sum of Five Million and No/100 Dollars ($5,000,000.00), the proceeds of which wire transfer or check Escrow Agent shall deposit and invest in an interest bearing account at a financial institution acceptable to the Partnership or as otherwise agreed to in writing by Contributor and the Partnership. Escrow Agent shall hold and invest the Deposit pursuant to the terms, conditions and provisions of this Agreement. All accrued interest on the Deposit shall become part of the Deposit. The Deposit shall be either (a) returned to the Partnership on the Closing Date upon a successful closing (or applied against any cash payments required of the Partnership at Closing pursuant to this Agreement, as shall be reflected on the Closing Statement), (b) returned to the Partnership pursuant to the terms of this Agreement, or (c) paid to Contributor pursuant to the terms of this Agreement. For purposes of reporting earned interest with respect to the Deposit, the Partnership’s Federal Tax Identification Number is 20-0110897, and Contributor’s Federal Tax Identification Number is 52-1159237. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 10 --------------------------------------------------------------------------------        2.4 Inspection.           (a) The Partnership and the Partnership’s potential lessee or manager shall have the right until Closing to enter upon the Real Property upon one (1) business day notice to Contributor and to perform, at the Partnership’s expense, such economic, surveying, engineering, topographic, environmental, marketing and other tests, studies and investigations as the Partnership and the Partnership’s potential lessee may deem appropriate; provided, however, that no borings, drillings or samplings shall be done at the Property without Contributor’s prior written consent. The Partnership agrees to not interfere unreasonably with Contributor’s or Marriott’s operations at the Property. Any entry upon the Property shall be during normal business hours. The Partnership shall fully comply with all governmental laws applicable to its investigations and furnish to Contributor, at no cost or expense to Contributor, copies of all surveys, soil test results, engineering, environmental and other studies and reports relating to its tests and investigations promptly after the Partnership’s receipt of same if requested by Contributor.           (b) Until the Closing, Contributor shall make available to the Partnership, its agents, auditors, engineers, attorneys, potential lessees and other designees, for inspection and/or copying, copies of all existing architectural and engineering studies, surveys, title insurance policies, zoning and site plan materials, correspondence, environmental audits and reviews, books, records, tax returns, bank statements, financial statements, advance reservations and room bookings and function bookings, rate schedules and any and all other materials or information relating to the Property which are in, or come into, Contributor’s possession or control or are otherwise reasonably available to Contributor.           (c) The Partnership shall indemnify and defend Contributor against any loss, damage, claim and expenses (including, without limitation, reasonable attorneys’ fees and disbursements), suffered or incurred by Contributor and arising out of or in connection with (i) the Partnership’s entry upon the Property, (ii) any tests or investigations or other activities conducted thereon by the Partnership, (iii) any liens or encumbrances filed or recorded against the Property as a consequence of the Partnership’s tests or investigations. The Partnership shall maintain or cause to be maintained, at the Partnership’s expense, a policy of comprehensive general public liability insurance, with a broad form contractual liability endorsement covering the Partnership’s indemnification obligations contained in this Section 2.4(c), and with a combined single limit of not less than $2,000,000 per occurrence for bodily injury and property damage insuring the Partnership and Contributor, as additional insureds, against any injuries or damages to persons or property that may result from or are related to any entry onto the Property by the Partnership or any tests or investigations conducted thereon by or on behalf of the Partnership, which insurance shall be on an “occurrence form” and otherwise in such form and with an insurance company reasonably acceptable to Contributor and deliver a copy of a certificate or binder of such insurance to Contributor prior to the first entry on the Property. In no event shall any of its activities undertaken by the Partnership result in any liens, judgments or other encumbrances being filed or recorded against the Property, and the Partnership shall, at its sole cost and expense, promptly discharge of record any such liens or encumbrances that are so filed or recorded (including, without limitation, liens for services, labor or materials furnished). The Partnership, at its own expense, shall restore any damage to the Property caused by any of the tests or studies made by the Partnership unless arising from the negligent or willful acts of Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 11 --------------------------------------------------------------------------------   Contributor or any of its agents, contractors or employees. This provision shall survive any termination of this Agreement and a closing of the transaction contemplated hereby.           (d) The Partnership acknowledges receipt of (a) a Survey of the Land and the Improvements, prepared by a Surveyor licensed to practice as such in the State where the Land is located and reasonably acceptable to the Partnership, (b) a current title insurance commitment issued by the Title Company covering the Real Property, together with legible copies of all documents identified in such title insurance commitment as exceptions to title (collectively, the “Title Commitment”), and (c) reports of searches of the Uniform Commercial Code records of both the county and State in which the Property is located and the state of Contributor’s formation (collectively, the “UCC Reports”) with respect to the state of title to the Property. Contributor shall cure and cause to be removed from the Title Commitment, on or before Closing, the matters described on Exhibit B attached hereto. Contributor shall not, after the date of this Agreement, subject the Real Property to or permit or suffer to exist any liens, encumbrances, covenants, conditions, restrictions, easements or other title matters or seek any zoning changes or take any other action which may affect or modify the status of title without the Partnership’s prior written consent. All title matters revealed by the Title Commitment, UCC Reports and Survey (other than those set forth on Exhibit B) shall be deemed Permitted Title Exceptions.      2.5 Reimbursement for Capital Expenditures. In addition to the payment of the Net Contribution Value in accordance with Section 2.2 (b) above, at Closing the Partnership shall (i) reimburse the Contributor in cash for certain capital expenditures with respect to the Property in the aggregate amount of $7,191,326.00 that were incurred by the Contributor during the two-year period preceding Closing, and (ii) assume and pay on account of the Contributor’s capital expenditure obligation due Vornado Realty Trust (“Vornado”), or its designee, the sum of $1,650,000 for termination of the consulting agreement between the Contributor and Vornado. ARTICLE III CONTRIBUTOR’S REPRESENTATIONS AND WARRANTIES      To induce the Partnership to enter into this Agreement and to purchase the Property, and to pay the Contribution Value therefor, Contributor hereby makes the following representations and warranties with respect to the Property, upon each of which Contributor acknowledges and agrees that the Partnership is entitled to rely and has relied:      3.1 Organization and Power. Contributor is a limited partnership, validly existing and in good standing under the laws of the Commonwealth of Virginia and has all requisite powers and all governmental licenses, authorizations, consents and approvals to carry on its business as now conducted and to enter into and perform its obligations hereunder and under any document or instrument required to be executed and delivered on behalf of Contributor hereunder.      3.2 Authorization and Execution. This Agreement has been duly authorized by all necessary action on the part of Contributor, has been duly executed and delivered by Contributor, constitutes the valid and binding agreement of Contributor and is enforceable in accordance with Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 12 --------------------------------------------------------------------------------   its terms. There is no other person or entity who has an ownership interest in the Property or whose consent is required in connection with Contributor’s performance of its obligations hereunder. The person executing this Agreement on behalf of Contributor has the authority to do so.      3.3 Non-contravention. The execution and delivery of, and the performance by Contributor of its obligations under, this Agreement do not and will not contravene, or constitute a default under, any provision of Applicable Law or regulation, Contributor’s Organizational Documents or any agreement, judgment, injunction, order, decree or other instrument binding upon Contributor or to which the Property is subject, or result in the creation of any lien or other encumbrance on any asset of Contributor. There are no outstanding agreements (written or oral) pursuant to which Contributor (or any predecessor to or representative of Contributor) has agreed to sell or has granted an option or right of first refusal to purchase the Property or any part thereof.      3.4 Title To Real Property. Contributor is the sole owner of fee simple absolute title to the Real Property.      3.5 No Special Taxes. Contributor has no knowledge of, nor has it received any notice of, any special taxes or assessments relating to the Property or any part thereof or any planned public improvements that may result in a special tax or assessment against the Property.      3.6 Compliance with Existing Laws. To Contributor’s knowledge, Contributor has not misrepresented or failed to disclose any material relevant fact in obtaining and maintaining any and all required Authorizations. Contributor has no knowledge, nor has it received written notice from applicable governmental authorities within the past three (3) years, of any existing or threatened violation of any provision of any Applicable Laws including, but not limited to, those of environmental agencies or insurance boards of underwriters with respect to the ownership, operation, use, maintenance or condition of the Property or any part thereof, or requiring any repairs or alterations to the Property other than those that have been made prior to the date hereof. Contributor has no knowledge, nor has it received notice within the past three (3) years, of any existing or threatened violation of any restrictive covenants or deed restrictions affecting the Property.      3.7 Personal Property and Inventory. All of the Personal Property being conveyed by Contributor hereunder are free and clear of all liens and encumbrances except for the Existing Lien and those which will be discharged by Contributor at Closing, and Contributor has good and merchantable title thereto and the right to convey same in accordance with the terms of this Agreement.      3.8 Operating Agreements/Off-Site Facility Agreements/Leased Property Agreements. To Contributor’s knowledge, Contributor is not a party to any management, service, supply or maintenance contracts in effect with respect to the Property other than the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements, listed on Schedule 2 attached hereto. To Contributor’s knowledge, Marriott has performed all of its obligations under each of the Operating Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 13 --------------------------------------------------------------------------------   Agreements, Leased Property Agreements and Off-Site Facility Agreements to which it is a party. To Contributor’s knowledge, all other parties to the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements have performed all of their obligations thereunder in all material respects, and are not in default thereunder in any material respect. Contributor has received no notice of any intention by any of the parties to any of the Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements to cancel the same, nor has Contributor canceled any of same. Contributor has provided to the Partnership a true, correct and complete copy of each of the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements.      3.9 Insurance. To Contributor’s knowledge, all of the Insurance Policies are valid and in full force and effect and are in compliance with all requirements or recommendations of the insurance carriers of the Insurance Policies.      3.10 Condemnation Proceedings; Roadways. Contributor has received no notice of any condemnation or eminent domain proceeding pending or threatened against the Property or any part thereof. Contributor has no knowledge of any change or proposed change in the route, grade or width of, or otherwise affecting, any street, creek or road adjacent to or serving the Real Property.      3.11 Actions or Proceedings. There is no action, suit or proceeding pending or known to Contributor to be threatened against or affecting Contributor or the Property, or to Contributor’s knowledge, Marriott, in any court, before any arbitrator or before or by any Governmental Authority which (a) in any manner raises any question affecting the validity or enforceability of this Agreement or any other agreement or instrument to which Contributor is a party or by which it is bound and that is or is to be used in connection with, or is contemplated by, this Agreement, (b) could materially and adversely affect the business, financial position or results of operations of Contributor or the Property, (c) could materially and adversely affect the ability of Contributor to perform its obligations hereunder, or under any document to be delivered pursuant hereto, (d) could create a lien on the Property, any part thereof or any interest therein, (e) concerns any past or present employee of Contributor or its managing agent or Marriott or (f) could otherwise adversely affect the Property, any part thereof or any interest therein or the use, operation, condition or occupancy thereof.      3.12 Labor and Employment Matters. To Contributor’s knowledge, Contributor is not a party to any oral or written employment contracts or agreements with respect to the Property other than the Employment Agreements. Schedule 3 is a complete list of the Employment Agreements. To Contributor’s knowledge, no party is in default under any Employment Agreement. To Contributor’s knowledge, there are no labor disputes or organizing activities pending or threatened against Contributor or Marriott as to the operation or maintenance of the Property or any part thereof. Neither Contributor nor to its knowledge Marriott is a party to any union or other collective bargaining agreement with employees employed in connection with the ownership, operation or maintenance of the Property, except for those described on Schedule 3.      3.13 Financial Information and Submission Matters. To Contributor’s knowledge, all of the financial information, including, without limitation, all books and records and financial statements delivered to the Partnership (“Financial Information”) is correct and complete in all material respects and presents accurately the results of the operations of the Property for the periods indicated. Since the date of the last financial statement included in the Financial Information, there has been no material adverse change in the financial condition of the Contributor. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 14 --------------------------------------------------------------------------------        3.14 Bankruptcy. No Act of Bankruptcy has occurred with respect to Contributor.      3.15 As-Is; Where-Is. Except as specifically provided in this Agreement, Contributor makes no covenant, representation or warranty as to the suitability of the Property for any purpose whatsoever or as to the physical condition of the Property or relating to its environmental (including any laws concerning the presence of oil or hazardous materials) condition or status (including handicap access and compliance with laws benefiting the disabled). Except as specifically provided in this Agreement, the Property is being conveyed “AS IS”, “WHERE IS”, “WITH ALL FAULTS” and “SUBJECT TO ALL DEFECTS,” AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED.      Except as otherwise expressly stated herein, no materials provided to the Partnership by Contributor pursuant to the terms of the Inspection Agreement are a representation or warranty as to any matter contained therein. To Contributor’s knowledge, Contributor is unaware of any inaccuracies in any such materials provided to the Partnership.      Except as otherwise expressly stated in this Agreement, Contributor is not bound in any manner by express or implied warranties, guaranties, promises, statements, representations or information pertaining to the Property as to its physical condition, compliance with laws, permits, licenses, space leases, rents, income, cash flow, gross income, net income, profits, earnings, occupancies, expenses and operations, or any other matter or thing, except as specifically set forth in this Agreement. In addition, except as otherwise expressly stated in this Agreement, Contributor is not bound or liable in any manner by any verbal or written statements, representations or any information pertaining to the Property, or claimed to have been furnished by any person or party, agent, contractor, engineer, consultant, broker or employee of Contributor.      3.16 Occupancy Agreements. To Contributor’s knowledge, there are no leases, concessions or occupancy agreements to which Contributor is a party in effect with respect to the Real Property other than the Occupancy Agreements listed on Schedule 4 attached hereto. Except as specifically provided in the Occupancy Agreements, to Contributor’s knowledge, no tenant or concessionaire is entitled to any rebates, allowances, free rent or rent abatement for any period after the Closing of the transaction contemplated hereby. Contributor has received no notice of any intention by any of the parties to any of the Occupancy Agreements to cancel the same, nor has Contributor canceled any of same. To Contributor’s knowledge, to the extent that any of the Occupancy Agreements call for security, such security remains on deposit with Marriott, and has not been applied towards any payment due under said Occupancy Agreements. Contributor has not received any advance rent or advance compensation under any of said Occupancy Agreements in excess of one month. No brokerage commissions or compensation of any kind shall be due in connection with the Occupancy Agreements, and the rents or revenues to be derived therefrom. To Contributor’s knowledge, no party is in default under any Occupancy Agreements. To Contributor’s knowledge, Contributor and Marriott have performed all obligations required of them under all of the Occupancy Agreements and there remain no Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 15 --------------------------------------------------------------------------------   unfulfilled obligations of Contributor or Marriott (as applicable) under the Occupancy Agreements. To Contributor’s knowledge, no tenant has given notice of its intention to institute litigation with respect to any Occupancy Agreement.      3.17 Utilities. To Contributor’s knowledge, all Utilities required for the operation of the Property as presently conducted either enter the Property through adjoining streets, or they pass through adjoining land, do so in accordance with valid public easements or irrevocable private easements, and all of said Utilities are installed and operating and all installation and connection charges therefor have been paid in full.      3.18 No Commitments. To Contributor’s knowledge, no commitments have been made to any Governmental Authority, utility company, school board, church or other religious body, or any homeowners’ association or any other organization, group or individual, relating to the Property which would impose an obligation upon the Partnership to make any contribution or dedication of money or land or to construct, install or maintain any improvements of a public or private nature on or off the Property.      3.19 Contributor Is Not a “Foreign Person”. Contributor is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code, as amended (i.e., Contributor is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person as those terms are defined in the Internal Revenue Code and regulations promulgated thereunder).      3.20 No Other Property Interests. There are no property interests, buildings, structures or other improvements or personal property that are owned by Contributor which are necessary for the operation of the Hotel that are not being conveyed pursuant to this Agreement, except as listed on Schedule ___attached hereto.      3.21 Investment Representations and Warranties. Contributor represents, warrants and covenants as follows:           (a) Contributor is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act. Contributor understands the risks of, and other considerations relating to, the purchase of the Units. Contributor, by reason of its business and financial experience, together with the business and financial experience of those persons, if any, retained by it to represent or advise it with respect to its investment in the Units, (i) has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type, (ii) is capable of evaluating the merits and risks of an investment in the Partnership and of making an informed investment decision, (iii) is capable of protecting its own interest or has engaged representatives or advisors to assist it in protecting its interests and (iv) is capable of bearing the economic risk of such investment.           (b) The Units to be issued to Contributor will be acquired by Contributor for its own account for investment only and not with a view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, other than the potential distribution of the Units to the partners of Contributor following the expiration of the Lock-Up Period provided in Section 6.15 of this Agreement. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 16 --------------------------------------------------------------------------------             (c) Contributor acknowledges that (i) the Units to be issued to Contributor have not been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws, (ii) the Partnership’s reliance on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of Contributor contained herein, (iii) such Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws (unless an exemption from registration is available), (iv) there is no public market for such Units, and (v) the Partnership has no obligation or intention to register such Units for resale under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws. Contributor hereby acknowledges that because of the restrictions on transfer or assignment of such Units to be issued hereunder (such restrictions on transfer or assignment being set forth in this Agreement and the Partnership Agreement), Contributor may have to bear the economic risk of the investment commitment evidenced by this Agreement and any Units purchased hereby for an indefinite period of time, although (x) Units may be redeemed at the request of the holder thereof for cash or (at the option of the general partner of the Partnership) for Common Stock of Company pursuant to the terms of the Partnership Agreement at any time after expiration of the applicable Lock-Up Period (which redemption rights may be limited or modified pursuant to the terms of the Partnership Agreement) and (y) Company and Contributor will execute and deliver a Registration Rights Agreement in the form attached hereto as Exhibit H. Anything contained herein to the contrary notwithstanding, Contributor shall have the right at Closing and at all times thereafter to assign all or any part of the Units to be received hereunder to a Contributor Partner(s), provided the Contributor Partner(s) receiving the Units is an “accredited investor” and satisfies the criteria set forth in Section 4.6(b) of this Agreement with respect to a transfer of Units.      The address set forth for Contributor in this Agreement is the address of the Contributor’s principal place of business or residence, as applicable, and Contributor has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which principal place of business or residence, as applicable, is sited.      3.22 Existing Lien. The Existing Lien is in full force and effect and Contributor has received no written notice of any defaults which have not been cured thereunder. Contributor has received no written notice that there are any existing events of default under the Existing Lien and, to Contributor’s knowledge, no event has occurred that with the passage if time or the giving of notice would constitute an event of default under the Existing Lien.      Each of the representations and warranties contained in this Article III and its various subparagraphs are intended for the benefit of the Partnership and may be waived in whole or in part, by the Partnership, but only by an instrument in writing signed by the Partnership. All rights and remedies arising in connection with the untruth or inaccuracy of any such representations and warranties shall survive the Closing of the transaction contemplated hereby, except to the extent that Contributor gives the Partnership written notice prior to Closing of the untruth or inaccuracy of any representation or warranty, or the Partnership otherwise obtains actual knowledge prior to Closing of the untruth or inaccuracy of any representation or warranty, and the Partnership nevertheless elects to close this transaction. The Partnership shall be deemed to have actual knowledge of the untruth or inaccuracy of any representation or warranty only if Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 17 --------------------------------------------------------------------------------   (i) the Partnership receives written notice thereof, or (ii) David A. Brooks has actual knowledge of any such untruth or inaccuracy. Except to the extent otherwise expressly provided in the immediately preceding sentence, no investigation, audit, inspection, review or the like conducted by or on behalf of the Partnership shall be deemed to terminate the effect of any such representations, warranties and covenants, it being understood that the Partnership has the right to rely thereon and that each such representation and warranty constitutes a material inducement to the Partnership to execute this Agreement and to close the transaction contemplated hereby and to pay the Contribution Value to Contributor.      The term “to Contributor’s knowledge” or similar phrase shall mean the actual knowledge of Robert H. Smith, Robert P. Kogod and/or Arthur A. Birney, Jr. ARTICLE IV THE PARTNERSHIP’S REPRESENTATIONS AND WARRANTIES      To induce Contributor to enter into this Agreement and to sell the Property, the Partnership hereby makes the following representations and warranties, upon each of which the Partnership acknowledges and agrees that Contributor is entitled to rely and has relied:      4.1 Organization and Power. The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all partnership power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and to enter into and perform its obligations under this Agreement and any of the other Closing Documents to be executed and delivered on behalf of the Partnership hereunder.      4.2 Authorization and Execution. This Agreement has been duly authorized by all necessary action on the part of the Partnership, has been duly executed and delivered by the Partnership, constitutes the valid and binding agreement of the Partnership and is enforceable in accordance with its terms. The person executing this Agreement on behalf of the Partnership has the authority to do so.      4.3 Non-contravention. The execution and delivery of this Agreement and the performance by the Partnership of its obligations hereunder do not and will not contravene, or constitute a default under, any provisions of Applicable Law or regulation, or any agreement, judgment, injunction, order, decree or other instrument binding upon the Partnership or result in the creation of any lien or other encumbrance on any asset of the Partnership.      4.4 Litigation. There is no action, suit or proceeding, pending or known to be threatened, against or affecting the Partnership in any court or before any arbitrator or before any Governmental Authority which (a) in any manner raises any question affecting the validity or enforceability of this Agreement or any other agreement or instrument to which the Partnership is a party or by which it is bound and that is to be used in connection with, or is contemplated by, this Agreement, (b) could materially and adversely affect the business, financial position or results of operations of the Partnership, and (c) could materially and adversely affect the ability of the Partnership to perform its obligations hereunder, or under any document to be delivered pursuant hereto. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 18 --------------------------------------------------------------------------------        4.5 Bankruptcy. No Act of Bankruptcy has occurred with respect to the Partnership.      4.6 Issuance of Units. Capitalized terms used in this Section 4.6 and not otherwise defined shall have the meaning given such terms in the Partnership Agreement.           (a) The Partnership Agreement shall be amended effective as of the Closing Date by amendment thereto substantially in the form attached hereto as Exhibit I (the “Partnership Amendment”), to add an exhibit that will provide for the issuance of the Units to Contributor as provided herein. The Units to be issued in connection with the transactions herein contemplated have been, or prior to the Closing Date will have been, duly authorized for issuance by the Partnership to Contributor and, on the Closing Date, will be validly issued and when issued will be fully paid and non-assessable, free and clear of any mortgage, pledge, lien, encumbrance, security interest, claim or right of interest of any third party of any nature whatsoever. The rights and obligations of Unit holders will be as set forth in the Partnership Agreement, provided that, a transfer of the Units by Contributor to any of its partners (a “Contributor Partner”) that satisfies the criteria set forth in Section 4.6(b) of this Agreement shall be excepted from the restrictions of subsections 9.5(a) of the Partnership Agreement, and such Contributor Partner transferee shall be admitted as a limited partner of the Partnership, fully excepted from the provisions of Section 9.6(a)(i) of the Partnership Agreement. In addition, any Contributor Partner that receives Units from the Contributor shall have the right to make donative Transfers of such Units to immediate family members or trusts as contemplated in Section 9.5(d) of the Partnership Agreement.           (b) With respect to the transfer of Units by Contributor to any Contributor Partner, the parties further agree that the provisions relating to a “Transfer” in Section 9.5 and Section 9.6 of the Partnership Agreement will be deemed to have been satisfied or discharged as to any such transfer to such Contributor Partner upon the following:           (1) such Contributor Partner completes, executes and delivers to the Partnership the Subscriber Questionnaire in the form attached hereto as Exhibit J;           (2) such Contributor Partner executes and delivers to the Partnership the Power of Attorney and Limited Partner Signature Page in the form attached hereto as Exhibit K;           (3) such Contributor Partner executes and delivers to the Partnership a letter in the form of Exhibit L attached hereto;           (4) such Contributor Partner executes and delivers to Company the signature page to the Registration Rights Agreement, the form of which is attached hereto as Exhibit H;           (5) such Contributor Partner is an “accredited investor” within the meaning of Rule 501 of the Securities Act, as evidenced by the Subscriber Questionnaire; and           (6) if such Contributor Partner is a corporation, partnership or trust, such Contributor Partner shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a limited partner of the Partnership; and Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 19 --------------------------------------------------------------------------------             (7) the Partnership shall not have received an opinion from legal counsel that there has been a change in the Securities Act or any applicable federal or state securities or “Blue Sky” law, (including investment suitability standards) which would require registration under the Securities Act of the Units being transferred to the Contributor Partner.           (c) Notwithstanding Section 9.5(a) of the Partnership Agreement, at any time after Closing, the Units, exclusive of the Pledged Units, may be pledged at any time to secure indebtedness of any Contributor Partner that has been admitted as a limited partner of the Partnership; provided, however, any pledgee of such Units shall be subject to the restrictions set forth in this Agreement pertaining to the Lock-Up Period, such that until the expiration of the Lock-Up Period, any pledgee of such Units shall not be permitted to sell, pledge, assign or otherwise transfer the Units, or cause the sale, pledge, assignment or other transfer of the Units, or exercise any rights or remedies it may have under the terms and conditions of such pledge which results in the sale, pledge, assignment or transfer of the Units.      4.7 Partnership Documentation. The Partnership has furnished to Contributor a true and complete copy of the Partnership Agreement, as amended to date, other than exhibits that relate solely to other limited partners, and will provide the Contributor copies of any and all amendments thereto, other than exhibits that relate solely to other limited partners, from and after the date hereof until the Closing Date.      4.8 SEC Documents. The Company has filed with the Securities and Exchange Commission the SEC Documents required to date. As of their respective filing dates (or if amended, revised or superseded by a subsequent filing with the Securities and Exchange Commission, then on the date of such subsequent filing), the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and none of the SEC Documents (including any and all financial statements included therein) as of such dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.      4.9 Tax Status of Partnership. The Partnership (i) beginning with its taxable year ended December 31, 2003 has qualified as a partnership for federal income tax purposes (and is not classified as an association taxable as a corporation for federal income tax purposes), (ii) has operated, and intends to continue to operate, in such a manner as to qualify as a partnership and avoid classification as a corporation and (iii) has not taken or omitted to take any action which would reasonably be expected to result in a challenge to its status as a partnership, and to the knowledge of Partnership, no such challenge is pending or threatened. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 20 --------------------------------------------------------------------------------        4.10 REIT Status of Company. The Company, (i) beginning with first its taxable year ended December 31, 2003, and through the most recent taxable year ended December 31, 2005, has been subject to taxation as a REIT within the meaning of the Code and has satisfied all requirements to qualify as a REIT for such years, (ii) has operated in such a manner as to qualify as a REIT for the taxable year ending December 31, 2006, and all subsequent taxable years, and (iii) has not taken or omitted to take any action which could reasonably be expected to result in a challenge to its status as a REIT, and to the knowledge of the Company, no such challenge is pending or threatened. ARTICLE V CONDITIONS PRECEDENT      5.1 As to the Partnership’s Obligations. The Partnership’s obligations hereunder are subject to the satisfaction of the following conditions precedent:           (a) Contributor’s Deliveries. Contributor shall have delivered to or for the benefit of the Partnership, on or before the Closing Date, all of the documents and other information required of Contributor pursuant to Sections 7.2 and 7.4 hereof (unless, as set forth therein, such matters have previously been provided or made available to the Partnership for copying if originals are not in the possession or control of Contributor).           (b) Representations, Warranties and Covenants; Obligations of Contributor; Certificate. All of Contributor’s representations and warranties made in this Agreement shall be true and correct in all material respects as of the date hereof and as of the date of Closing as if then made; there shall have been no material adverse change in the business conducted by Contributor at the Property or the financial results thereof from the date of acceptance of this Agreement and no matter, condition or event shall have occurred which could in the Partnership’s reasonable judgment, materially and adversely affect the operation, value or marketability of the Property or any part thereof; Contributor shall have performed in all material respects all of its covenants and other obligations under this Agreement and Contributor shall have executed and delivered to the Partnership at Closing a certificate to the foregoing effect.           (c) Title to Property. Contributor shall be the sole owner of good and marketable fee simple title to the Real Property and good and marketable fee simple title to the Tangible Personal Property, free and clear of all liens, encumbrances, restrictions, conditions and agreements (including those described on Exhibit B attached hereto) except for the Permitted Title Exceptions. Contributor shall not have taken any action or permitted or suffered any action to be taken by others from the date hereof and through and including the date of Closing that would adversely affect the status of title to the Real Property and Tangible Personal Property.           (d) Condition of Improvements. The Improvements and the Tangible Personal Property (including but not limited to the mechanical systems, plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning and ventilating equipment, elevators, boilers, equipment, roofs, structural members and furnaces) shall be in substantially the same condition at Closing as they are as of the date hereof, reasonable wear and tear excepted. Contributor shall not have removed or caused or permitted to be removed any part or portion of the Real Property or the Tangible Personal Property without the Partnership’s prior written consent unless Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 21 --------------------------------------------------------------------------------   the same is replaced, prior to Closing, with a similar item of at least equal suitability, quality and value, free and clear of any lien or security interest.           (e) Publicly Traded Partnership. The Partnership shall be satisfied, based on advise of its counsel, that the issuance of Units will not result in the Partnership’s being treated as a publicly traded partnership taxable as a corporation.           (f) Intentionally Omitted.           (g) Intentionally Omitted.           (h) Third-Party Consents. On or before the Closing Date, Contributor shall furnish the Partnership, in form and content reasonably satisfactory to the Partnership, with any and all third party consents (the “Third Party Consents”), if any, which are necessary to consummate the transaction contemplated in this Agreement.           (i) Intentionally Omitted.           (j) Rights of First Refusal. Contributor shall provide the Partnership with reasonably satisfactory evidence of the waiver of any and all rights of first refusal or options related to the Property that may have been granted with respect to the Property.           (k) No Violations of Applicable Laws. There shall be no outstanding notices of violations of Applicable Laws with respect to the Property or the Hotel arising from and after the Effective Date which could have a material adverse affect on the Property or the ownership, management or operation thereof.           (l) Litigation. There shall be no pending or threatened litigation against Contributor or the Property, which, if adversely determined, could have a material adverse affect on the Property or the ownership, management or operation thereof.           (m) Marriott Lease/Management Agreement. The Marriott Lease shall have been terminated. Marriott shall have entered into the Management Agreement on terms and conditions satisfactory to the Partnership in its reasonable discretion. All costs and expenses incurred in obtaining Marriot’s consent to termination of the Marriott Lease and entering into the Management Agreement shall be borne by the Partnership.           (n) Offering of Units. There shall have been no change in any securities or related law or interpretation, nor any change in Contributor’s status as an “accredited investor” under the Securities Act that would render the consummation of the conveyance of the Property for Units, as contemplated by this Agreement, a violation of any such laws or interpretations thereof.           (o) Existing Lien. The Lender shall have consented in writing to (i) the acquisition of the Property by the Partnership or its designee, and (ii) the assumption of the Existing Lien by the Partnership or its designee. The loan assumption documents to be executed at Closing in connection with the assignment of the Existing Lien shall be reasonably acceptable to the Partnership in all respects. There shall be no defaults under the Existing Lien, and no Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 22 --------------------------------------------------------------------------------   events shall have occurred which with the passage of time or the giving of notice would constitute an event of default under the Existing Lien. The amount of the Existing Lien at Closing shall be a credit to the Contribution Value. The Partnership shall apply for, and diligently prosecute procurement of, the consent (the “Lender Consent”) by the holder of the Existing Lien to the assumption at Closing by the Partnership of the Existing Lien and the concurrent prospective release of Contributor and any existing guarantors of all obligations under the Existing Lien arising from and after the Closing. Contributor shall cooperate at no cost or expense to Contributor in connection with procurement of the Lender Consent except as otherwise provided in Section 7.5 of this Agreement. The Partnership shall keep Contributor regularly apprised of its discussions with the holder.      Each of the conditions contained in this Section are intended for the benefit of the Partnership and may be waived in whole or in part, by the Partnership, but only by an instrument in writing signed by the Partnership.      5.2 As to Contributor’s Obligations. Contributor’s obligations hereunder are subject to the satisfaction of the following conditions precedent:           (a) The Partnership’s Deliveries. The Partnership shall have delivered to or for the benefit of Contributor, on or before the Closing Date, all of the documents and payments required of the Partnership pursuant to Sections 7.3 and 7.4 hereof.           (b) Representations, Warranties and Covenants; Obligations of the Partnership. All of the Partnership’s representations and warranties made in this Agreement shall be true and correct in all material respects as of the date hereof and as of the date of Closing as if then made and the Partnership shall have performed in all material respects all of its covenants and other obligations under this Agreement.           (c) Existing Lien. Contributor and any existing guarantor shall be released by Lender under Existing Lien for all liabilities and obligations accruing from and after Closing.           (d) Tax Reporting and Protection Agreement. On the Closing Date, Partnership shall enter into the Tax Reporting and Protection Agreement in substantially the form attached hereto as Exhibit O, with Contributor, Messrs. Smith, Kogod and Birney, in their capacity as managers of the general partners of Contributor and in their capacity as the representatives of and for the benefit of each Contributor Partner and each direct or indirect successor, whether by transfer, assignment, or otherwise, of each such Contributor Partner, and for their own account (the “Tax Reporting and Protection Agreement”) .           (e) Tax Opinion Relating to Partnership Status. Contributor shall have received the opinion of Andrews Kurth LLP or other counsel to Partnership reasonably satisfactory to Contributor, dated as of the Closing Date, that Partnership has been during and since its taxable year ended December 31, 2003, and continues to be, treated for federal income tax purposes as a partnership and not as a corporation or association taxable as a corporation, and that, after giving effect to the transactions contemplated by this Agreement, Partnership’s proposed method of operation will enable it to continue to be treated for federal income tax purposes as a partnership and not as a corporation or association taxable as a corporation (with customary exceptions, assumptions and qualifications and based upon customary representations). Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 23 --------------------------------------------------------------------------------             (f) Tax Opinion Relating to the Transaction. Contributor shall have received an opinion dated the Closing Date from Hogan & Hartson L.L.P. or other counsel reasonably satisfactory to Contributor, based upon customary certificates and letters, which letters and certificates are to be in a form to be agreed upon by the parties and dated the Closing Date, to the effect that the Transaction will not result in the recognition of taxable gain or loss, at the time of the Transaction, to Contributor or any of its partners: (A) who is a “U.S. person” (as defined for purposes of Sections 897 and 1445 of the Code); (B) who does not exercise its redemption right with respect to the Units under the Partnership Agreement on a date sooner than the date two years after the Closing; (C) who does not receive a cash distribution in connection with the transactions contemplated by this Agreement (or a deemed cash distribution resulting from relief or a deemed relief from liabilities, including as a result of the prepayment of indebtedness of Contributor in connection with or following the Closing of the transactions contemplated by this Agreement) in excess of such Person’s adjusted basis in its interest in Contributor at the time of the Closing; (D) who is not required to recognize gain by reason of the application of Section 707(a) of the Code and the Treasury Regulations thereunder to the Transaction, with the result that the transactions contemplated by this Agreement are treated as part of a “disguised sale” by reason of any transactions undertaken by Contributor prior to or in connection with the Closing or any debt of Contributor that is assumed or repaid in connection with the transactions contemplated by this Agreement; and (E) whose “at risk” amount does not fall below zero as a result of the transactions contemplated by this Agreement.      Each of the conditions contained in this Section are intended for the benefit of Contributor and may be waived in whole or in part, by Contributor, but only by an instrument in writing signed by Contributor. ARTICLE VI COVENANTS OF CONTRIBUTOR      To induce the Partnership to enter into this Agreement and to purchase the Property, and to pay the Contribution Value therefor, Contributor covenants and agrees to the following:      6.1 Operating Agreements/Leased Property Agreements/Off-Site Facility Agreements. Contributor shall not enter into any new management agreement, maintenance or repair contract, supply contract, lease in which it is lessee or other agreements with respect to the Property, nor shall Contributor enter into any agreements modifying the Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements, unless (a) any such agreement or modification will not bind the Partnership or the Property after the date of Closing or is subject to termination on not more than thirty (30) days’ notice without penalty, or (b) Contributor has obtained the Partnership’s prior written consent to such agreement or modification, which consent shall not be unreasonably withheld. Contributor agrees not to cancel and terminate effective as of the Closing Date any Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements unless requested by the Partnership in writing to be terminated prior to Closing. Copies of any new Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements or modifications, renewals, extensions or terminations shall be promptly delivered to the Partnership. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 24 --------------------------------------------------------------------------------        6.2 Warranties and Guaranties. Contributor shall not before or after Closing release or modify any Warranties and Guaranties, if any, except with the prior written consent of the Partnership.      6.3 Insurance. Contributor shall pay all premiums on, and shall not cancel or voluntarily allow to expire, any of Contributor’s Insurance Policies unless such policy is replaced, without any lapse of coverage, by another policy or policies providing coverage at least as extensive as the policy or policies being replaced.      6.4 Independent Audit. Promptly following the execution of this Agreement and prior to Closing, Contributor shall provide and shall use commercially reasonable efforts to cause Marriott to provide to the Partnership’s representatives and independent accounting firm access to financial and other information relating to the Property in the possession of or otherwise available to Contributor, its affiliates or Marriott which would be sufficient to enable the Partnership’s representatives and independent accounting firm to prepare audited financial statements for the three (3) calendar years prior to the Closing and during the year in which the Closing occurs in conformity with generally accepted accounting principles and to enable them to prepare such statements, reports or disclosures as the Partnership may deem necessary or advisable. Contributor shall authorize and shall use commercially reasonable efforts to cause Marriott to authorize any attorneys who have represented Contributor or Marriott in material litigation pertaining to or affecting the Property to respond, at the Partnership’s expense, to inquiries from the Partnership’s representatives and independent accounting firm. If and to the extent Contributor’s financial statements pertaining to the Property for any periods during the three (3) calendar years prior to the Closing and during the year in which the Closing occurs have been audited, promptly after the execution of this Agreement Contributor shall provide the Partnership with copies of such audited financial statements and shall cooperate with the Partnership’s representatives and independent public accountants to enable them to contact the auditors who prepared such audited financial statements and to obtain, at the Partnership’s expense, a reissuance of such audited financial statements.      6.5 Operation of Property Prior to Closing. Contributor covenants and agrees with the Partnership that, between the date of this Agreement and the date of Closing:           (a) Subject to the restrictions contained herein, to the extent Contributor has the right to do so under the Marriott Lease, Contributor shall use commercially reasonable efforts to cause Marriott to cause the Property to be operated in the ordinary course of business and in the same manner in which the Property was operated prior to the execution of this Agreement, so as to keep the Property in good condition, reasonable wear and tear excepted, so as to maintain consistent inventory levels, so as to maintain the existing caliber of the Hotel operations conducted at the Property and so as to maintain the reasonable good will of all tenants of the Property and all employees, guests and other customers of the Hotel. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 25 --------------------------------------------------------------------------------             (b) Contributor shall maintain its books of account and records in the usual, regular and ordinary manner, in accordance with sound accounting principles applied on a basis consistent with the basis used in keeping its books in prior years.           (c) Contributor shall maintain in full force and effect all Insurance Policies.           (d) Contributor shall maintain in full force and effect, and not cause or permit a default by Contributor under (with or without the giving of any required notice and/or lapse of time), the Marriott Lease.           (e) Contributor shall use and operate the Property in compliance with Applicable Laws and the requirements of the Marriott Lease, the Existing Lien, and any other lease, Occupancy Agreement, Operating Agreement and Insurance Policy affecting the Property.           (f) Intentionally Omitted.           (g) Except as otherwise permitted hereby, Contributor shall not take any action or fail to take action the result of which would have a material adverse effect on the Property or the Partnership’s ability to continue the operation thereof after the date of Closing in substantially the same manner as presently conducted, or which would cause any of the representations and warranties contained in Article III hereof to be untrue as of Closing in any material respect.           (h) Contributor shall not enter into new Occupancy Agreements of any kind or nature affecting the Property without the express written consent of the Partnership. Contributor shall not, without the express written consent of the Partnership, in any manner change, modify, extend, renew or terminate any Occupancy Agreement except as required by the terms thereof. Copies of any new Occupancy Agreement or modification, renewals, extensions or terminations shall be promptly delivered to the Partnership. Contributor shall not apply all or any part of the security or damage deposit of a tenant under any Occupancy Agreement to obligations of such tenant unless such tenant has vacated its portion of the Property as of the Closing Date.           (i) Intentionally Omitted.           (j) Intentionally Omitted.           (k) Intentionally Omitted.           (l) Intentionally Omitted.           (m) Contributor (1) shall not enter into any new Employment Agreements which would be binding on the Partnership with respect to the Property without the express written consent of the Partnership, and (2) shall not change, modify, extend, renew or terminate any Employment Agreement in effect as of the date hereof which would be binding on the Partnership with respect to the Property without the express written consent of the Partnership. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 26 --------------------------------------------------------------------------------             (n) Contributor shall promptly advise the Partnership of any litigation, arbitration or administrative hearing concerning or affecting the Property of which Contributor obtains actual knowledge.           (o) Contributor shall not modify or release any Warranties or Guaranties applicable to the Property.           (p) Contributor shall not grant any encumbrances on the Property or contract for any construction or service for the Property which may impose any mechanics’ or materialmen’s lien on the Property.      Notwithstanding any of the foregoing contained in this Section 6.5, if with respect to any of the foregoing covenants and agreements, Marriott is the actual responsible party under the Marriott Lease, Contributor agrees to use commercially reasonable efforts to enforce Marriott’s compliance with such obligations to the extent Contributor is afforded the right to do so pursuant to the terms of the Marriott Lease.      6.6 No Marketing. Contributor agrees, for and on behalf of itself, its officers, directors, and partners, not to directly or indirectly, offer for sale, market, negotiate for the sale or transfer of the Property to any other third party or to otherwise implement any marketing efforts for the sale, conveyance or transfer of the Property.      6.7 Employees and Continuation of Contributor’s Group Health Plans. Payment of all costs and expenses associated with accrued but unpaid salary, earned but unpaid vacation pay, accrued but unearned vacation pay, pension and welfare benefits, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) benefits, employee fringe benefits, employee termination payments or any other employee benefits due to Contributor’s, or Contributor’s management company’s employees (if any) (but not with respect to any employees of Marriott) up to the Closing Date shall be the sole responsibility and obligation of and shall be paid promptly by Contributor or Contributor’s management company, if applicable. Contributor shall indemnify and defend the Partnership and/or its lessee or management company, from and against any and all claims, causes of action, proceedings, judgments, damages, penalties and liabilities made, assessed or rendered against the Partnership and/or its lessee or management company and any costs and expenses (including attorneys’ fees and disbursements) incurred by the Partnership and/or its lessee or management company with respect to claims, causes of action, judgments, damages, penalties and liabilities asserted by such employees arising out of the failure of Contributor or its management company to comply with the provisions of this Section 6.9. This indemnification shall be separate from and in addition to the indemnification given by Contributor to the Partnership in Article IX below.      6.8 Rights of First Refusal and Options. Contributor shall provide the Partnership with reasonably satisfactory evidence of the waiver of any and all rights of first refusal or options related to the Property that may have been granted to any party. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 27 --------------------------------------------------------------------------------        6.9 Intentionally Omitted .      6.10 Prospective Subscriber Questionnaire. Contributor shall deliver to the Partnership, at or prior to Closing, a Prospective Subscriber Questionnaire with respect to Contributor in substantially the form attached hereto and made a part hereof as Exhibit J. Contributor shall also deliver to the Partnership, upon the Partnership’s reasonable request, such other information, certificates and materials as the Partnership may reasonably request in connection with offering the Units without registration under the Securities Act and the securities laws of applicable states and other jurisdictions.      6.11 Delivery of Tax Information. In connection with the issuance of Units to Contributor, Contributor shall deliver to the Partnership on or before thirty (30) days after the Closing, at Contributor’s sole cost and expense, the following information, attributable to and covering the time period ending on the Closing Date and certified to Contributor’s knowledge as true and correct in all material respects as of the Closing Date:           (a) depreciation and amortization schedules for all assets constituting or otherwise included in the Property (the “Assets”), as kept for both book and tax purposes, showing original basis and accumulated depreciation or amortization;           (b) basis information (computed for both book and tax purposes, if different) for all non-depreciable, non-amortizable Assets;           (c) as to each of Contributor’s partners, such partner’s share of the adjusted basis in the Assets (to the extent, if any, that such share is different from the percentage interest of such partner in Contributor;           (d) Intentionally Omitted;           (e) breakouts of basis information for any other balance sheet accounts of Contributor for which information has not been provided pursuant to the other clauses of this Section;           (f) the names and tax identification numbers of Contributor’s partners; and           (g) for each of Contributor’s partners that is a partnership (or other entity treated as a partnership for federal income tax purposes), S corporation or grantor trust (any of the foregoing, a “look-through entity”), and for each look-through entity that holds an indirect interest in Contributor through other look-through entities, the names and tax identification numbers of such entity’s partners, shareholders or grantors.      6.12 Cooperation on Tax Matters. Contributor shall deliver to the Partnership copies of its federal, state and local Tax Returns (including information returns) for the tax year in which the Closing occurs, including any amendments thereto, and Contributor shall notify the Partnership, in writing, of any audits of such Tax Returns, or of any audits for other tax years that could affect the amounts shown on the Tax Returns, for the tax year in which the Closing occurs. Copies of such Tax Returns shall be provided to the Partnership in draft form at least twenty (20) days before they are filed and in final form upon filing. Contributor shall also provide to the Partnership, promptly upon receipt, any notice that Contributor receives from any of its partners Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 28 --------------------------------------------------------------------------------   that such partner intends to prepare its Tax Returns in a manner inconsistent with the Tax Returns filed by Contributor. The parties understand and agree that the Tax Returns filed by Contributor will be substantially consistent with the information provided to the Partnership pursuant to this Agreement. Upon written request from Partnership, Contributor shall provide to Partnership such additional information related to tax matters of Contributor as shall be reasonably requested by Partnership in order to permit Partnership to prepare and file its federal, state and local Tax Returns, provided that Partnership shall reimburse Contributor for all reasonable out-of-pocket expenses incurred in connection therewith. The provisions of this Section shall survive the Closing.      6.13 Information Regarding the Restrictions on Beneficial Ownership of Units. From the date of this Agreement until the Closing, and then so long as Contributor holds any Units, Contributor shall promptly provide the Partnership with written notice of any change in the identity or number of its partners (or of its indirect partners as identified pursuant to this Agreement), and shall provide the information called for in this Agreement with respect to any such change as to which it has actual knowledge. In addition, so long as Contributor holds any Units, Contributor shall not, without the prior written consent of the Partnership: (i) admit additional partners, (ii) permit the transfer of interests in Contributor to a look-through entity, or (iii) permit any transfer of interests in Contributor if, as a result of the admissions or transfers described in the foregoing (i) through (iii), the number of direct or indirect Beneficial Owners (as such term is defined in the Partnership Agreement) in Contributor would increase. Contributor shall use its best efforts to secure the compliance of any look-through entities that hold direct or indirect interests of Contributor with the requirements of this Section as if such requirements applied directly to such entities. Contributor acknowledges that the provisions of this Section are imposed to aid the Partnership in avoiding taxation as a corporation for federal income tax purposes, agrees that monetary damages may be insufficient to remedy the potential harm caused by any breach of the provisions of this Section, and agrees that injunctive relief, including specific performance or another equitable remedy would be an appropriate remedy. The provisions of this Section shall survive the Closing.      6.14 Partnership Agreement. Contributor agrees to be bound by and subject to all of the terms of the Partnership Agreement, including the grant of the power of attorney to the general partner of the Partnership evidenced by the executed Power of Attorney and Limited Partner Signature Page. The Units will be transferable as permitted in the Partnership Agreement, subject to the Lock-Up Period restrictions described in Section 6.15 hereof. At or prior to the Closing, Contributor shall execute and deliver to the Partnership a Power of Attorney and Limited Partner Signature Page in substantially the form attached hereto and made a part hereof as Exhibit K.      6.15 Lock-Up Agreement. Contributor acknowledges and agrees that (i) for a period of one (1) year from the Closing Date with respect to all of the Units issued to it at Closing, (ii) for a period of eighteen (18) months from the Closing Date with respect to two-third of the Units issued to it at Closing, and (iii) for a period of twenty-four (24) months from the Closing Date with respect to one-third of the Units issued to it at Closing, except as expressly provided in Section 4.6(c) of this Agreement, such Units may not be assigned, pledged, sold or otherwise transferred in whole or in part or subject to any claim, lien, pledge, voting agreement, option, charge, security interest, mortgage, deed of trust, encumbrance, rights of assignment, purchase Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 29 --------------------------------------------------------------------------------   rights or rights of any nature whatsoever of any third party excluding the Pledge Agreement, described below, in favor of the Partnership (each of the periods described in the foregoing (i) through (iii), a “Lock-Up Period”). After the expiration of the applicable Lock-Up Period, the applicable Units may be redeemed by the holder thereof, as further provided in the Partnership Agreement, for cash (based on the then-current market price of the Company’s Common Stock) or, at the Partnership’s general partner’s option (at the direction of the Company), into Company Common Stock on a one-for-one basis. The Company will agree under a Registration Rights Agreement to register with the Commission and maintain the effectiveness of any such registration statement for any Common Stock issued in exchange for Units. The Registration Rights Agreement will be similar to the Company’s previously executed registration rights agreements. In furtherance of this provision, at or prior to Closing, Contributor shall execute and deliver to the Partnership a Lock-Up Agreement in substantially the form attached hereto and made a part hereof as Exhibit M.      6.16 Pledge Agreement. Upon issuance of the Units, Contributor agrees to pledge Units having a value of $4,000,000 based on the Per Share Price (collectively, the “Pledged Units”) to the Partnership as security for the indemnity and other post-Closing obligations of Contributor provided herein upon the terms and provisions as set forth in the Pledge and Security Agreement (the “Pledge Agreement”) attached hereto as Exhibit N. ARTICLE VII CLOSING      7.1 Closing. The Closing shall occur on a business day designated by the Partnership, with at least five (5) days written notice to Contributor (or if such written notice is not given, no later than thirty (30) days following the Effective Date), provided, the Partnership shall have the right to extend the Closing Date up to an additional thirty (30) days in the event the condition set forth in Section 5.1(o) of this Agreement is not satisfied on or before the originally scheduled Closing Date. As more particularly described below, at the Closing the parties hereto will meet to (i) execute all of the documents required to be delivered in connection with the transactions contemplated hereby (the “Closing Documents”), (ii) deliver the same to Escrow Agent, and (iii) take all other action required to be taken in respect of the transactions contemplated hereby. The Closing will occur either through escrow or at the offices of the Contributor in Washington, DC. At the Closing, Escrow Agent shall update the title to the Property and, provided there has been no change in the status of title as reflected in the Title Commitment and Survey, Escrow Agent shall record the Deed, release and date, where appropriate, the Closing Documents in accordance with the instructions of Contributor. As provided herein, the parties hereto will agree upon adjustments and prorations to certain items which cannot be exactly determined at the Closing and will make the appropriate adjustments to the Contribution Value with respect thereto. Possession of the Property shall be delivered to the Partnership at the Closing, subject only to Permitted Title Exceptions and the rights of tenants under the Occupancy Agreements and guests in possession.      7.2 Contributor’s Deliveries. At the Closing, Contributor shall deliver to Escrow Agent all of the following instruments (unless previously provided or made available to the Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 30 --------------------------------------------------------------------------------   Partnership for copying and originals are not in the possession or within the control of Contributor), each of which shall have been duly executed and, where applicable, acknowledged and/or sworn on behalf of Contributor and shall be dated as of the Closing Date:           (a) The certificate required by Section 5.1(b) hereof.           (b) The Deed, in the form attached hereto as Exhibit D (subject to such changes as are required by Applicable Law, local recording requirements and/or customary real estate practices in the jurisdiction(s) in which the Property is located, provided, the substantive terms and provisions of the Deed attached hereto are not modified as a result of any such changes).           (c) The Bill of Sale, in the form attached hereto as Exhibit C.           (d) The Assignment of Occupancy Agreements, in the form attached hereto as Exhibit F.           (e) The Assignment and Assumption Agreement (of Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements), in the form attached hereto as Exhibit E.           (f) All Third Party Consents.           (g) Intentionally Omitted.           (h) Certificate(s)/Registration of Title for any vehicle owned by Contributor and used in connection with the Property.           (i) Such agreements, affidavits or other documents as may be required by the Title Company to issue the Owner’s Title Policy subject only to the Permitted Title Exceptions and to eliminate such standard exceptions and to issue such endorsements thereto which may be eliminated and issued under applicable State law and which are customarily required by institutional investors purchasing property comparable to the Property.           (j) The FIRPTA Certificate.           (k) Copies of Contributor’s Organizational Documents.           (l) Appropriate resolutions of the partners of Contributor, together with all other necessary approvals and consents of Contributor and such documentary and other evidence as may be reasonably required by the Partnership or Escrow Agent, authorizing and evidencing the authorization of (i) the execution on behalf of Contributor of this Agreement and the authority of the person or persons who are executing the various documents to be executed and delivered by Contributor prior to, at or otherwise in connection with the Closing, and (ii) the performance by Contributor of its obligations hereunder and under such documents.           (m) An assignment of each of the Leased Property Agreements to the Partnership and/or its property manager, lessee or other designee (as the Partnership shall Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 31 --------------------------------------------------------------------------------   specify), together with (1) the written consent of the lessors of such Leased Property Agreements, if required by such Leased Property Agreements, and (2) executed originals of all such Leased Property Agreements in Contributor’s possession or reasonably available to Contributor. If any Leased Property is leased pursuant to a Leased Property Agreements which is a capital lease, in accordance with generally accepted accounting principles, Contributor shall cancel such capital lease at its expense and convey good and marketable title to such property (which shall constitute Tangible Personal Property hereunder) to the Partnership and/or its property manager, lessee or other designee (as the Partnership shall specify) free from any lien or encumbrance pursuant to the Bill of Sale — Personal Property.           (n) Written notice executed by Contributor notifying all interested parties, including, without limitation, all tenants under any Occupancy Agreements, that the Property has been conveyed to the Partnership and directing that all payments, inquiries and the like be forwarded to the Partnership at the address to be provided by the Partnership.           (o) Agreement of Termination of Lease, whereby Contributor and Marriott have terminated the Marriott Lease, at Contributor’s sole cost and expense.           (p) The Lock-Up Agreement restricting transfer of Units.           (q) The Prospective Subscriber Questionnaire.           (r) The Registration Rights Agreement.           (s) The Pledge Agreement.           (t) The Tax Protection and Reporting Agreement, in the form attached hereto as Exhibit O.           (u) The Power of Attorney and Limited Partner Signature Page.           (v) A written instrument executed by Contributor, conveying and transferring to the Partnership all of Contributor’s right, title and interest, if any, in any telephone numbers and TWX numbers relating to the Property, and, if Contributor maintains a post office box, conveying to the Partnership all of its interest in and to such post office box and the number associated therewith, so as to assure a continuity in operation and communication. At the Closing, Contributor shall deliver to the Partnership or make available to the Partnership at the Property the following documents (unless previously provided or made available to the Partnership for copying and originals are not in the possession or within the control of Contributor):           (w) All original Warranties and Guaranties in Contributor’s possession or reasonably available to Contributor.           (x) Intentionally Omitted. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 32 --------------------------------------------------------------------------------             (y) If the Partnership is assuming obligations under any or all of the Operating Agreements, Off-Site Facility Agreements or Covenants, Conditions and Restrictions, to the extent in Contributor’s possession or reasonably available to Contributor, the originals of such agreements, duly assigned to the Partnership and with such assignment acknowledged and approved by the other parties to such Operating Agreements, Off-Site Facility Agreements or Covenants, Conditions and Restrictions to the extent required by such Operating Agreements, Off-Site Facility Agreements or Covenants, Conditions and Restrictions.           (z) To the extent in Contributor’s possession or reasonably available to Contributor, originals of the following items (copies of which were delivered by Contributor to the Partnership with the Submission Matters): (1) complete sets of all architectural, mechanical, structural and/or electrical plans and specifications used in connection with the construction of or alterations or repairs to the Property; and (2) as-built plans and specifications for the Property.           (aa) Duplicate originals of all agreements, leases, concession agreements and other instruments affecting the Property and the Hotel and/or restaurant business conducted thereon.           (bb) All current real estate and personal property tax bills in Contributor’s possession or under its control.           (cc) An updated schedule of employees, showing salaries and duties, with a statement of the length of service of each such employee, brought current to a date not more than forty-eight (48) hours prior to the Closing.           (dd) Intentionally Omitted.           (ee) Intentionally Omitted.           (ff) Intentionally Omitted.           (gg) A list of all vendors and suppliers servicing the Hotel.           (hh) All books, records, operating reports, appraisal reports, files and other materials in Contributor’s possession or control which are necessary in the Partnership’s discretion to maintain continuity of operation of the Property.           (ii) Executed originals of all Occupancy Agreements, Employment Agreements and, to the extent available, Authorizations transferred or assigned to the Partnership at Closing as required hereunder to the extent in Contributor’s possession or reasonably available to Contributor.           (jj) All surveys and plot plans of the Real Property in possession of or in the control of Contributor.           (kk) Any other document or instrument reasonably necessary or required to consummate the transactions contemplated by this Agreement. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 33 --------------------------------------------------------------------------------        7.3 The Partnership’s Deliveries. At the Closing, the Partnership shall deliver to Escrow Agent all of the following, each of which, if required, shall have been duly executed and, where applicable, acknowledged and/or sworn on behalf of the Partnership and shall be dated as of the Closing Date:           (a) The portion of the Contribution Value described in Section 2.2 hereof.           (b) The Assignment and Assumption of Occupancy Agreements.           (c) The Assignment and Assumption of Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements.           (d) To Contributor, the Partnership Amendment executed by the general partner of the Partnership.           (e) To Contributor, the Registration Rights Agreement executed by the Company.           (f) The Tax Protection and Reporting Agreement, in the form attached hereto as Exhibit O, duly executed by Contributor.           (g) The opinion of Andrews Kurth LLC provided for in Section 5.2(e).           (h) Any other document or instrument reasonably necessary or required to consummate the transactions contemplated by this Agreement.      7.4 Mutual Deliveries. At the Closing, the Partnership and Contributor shall mutually execute and deliver each to the other:           (a) A final closing statement reflecting the Contribution Value and the adjustments and prorations required hereunder.           (b) Such other and further documents, papers and instruments as may be reasonably required by the parties hereto or their respective counsel.      7.5 Closing Costs. Except as is explicitly provided in this Agreement, each party hereto shall pay its own legal fees and expenses. The escrow fees shall be shared equally between Contributor and the Partnership. All filing fees for the Deed and all transfer, recording, sales or other similar taxes and surtaxes due with respect to the transfer of title by Contributor as grantor shall be paid by Contributor. Any state and local taxes pertaining to the Partnership as grantee shall be paid by the Partnership. The Partnership shall pay all costs associated with the Survey. The Partnership shall pay all costs for title search and the title insurance premium for the issuance of the Title Policy and the cost of the UCC searches. Contributor shall pay for the cost of any tax certificates. The Partnership shall pay all costs associated with assumption of the Existing Lien, including, without limitation, all transfer fees, application fees, points and/or assumption fees required in connection with the assignment of the Existing Lien and all expenses of Lender, including, without limitation, legal fees and expenses, all mortgage and similar stamp taxes in connection with the assumption of the Existing Lien (collectively, the “Existing Lien Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 34 --------------------------------------------------------------------------------   Costs”), up to one percent (1%) of the principal amount of the Existing Lien outstanding at Closing, and Contributor agrees to pay any Existing Lien Costs in excess of such one percent (1%). All endorsements to the Title Policy shall be paid by the Partnership. All other costs (except any costs incurred by Contributor for its own account) which are necessary to carry out the transactions contemplated hereunder shall be allocated between the Partnership and Contributor in accordance with local custom in the jurisdiction in which the Property is located.      7.6 Revenue and Expense Allocations. All revenues and expenses with respect to the Property, and applicable to the period of time before and after Closing, determined in accordance with sound accounting principles consistently applied, shall be allocated between Contributor and the Partnership as provided herein. Contributor shall be entitled to all revenue and shall be responsible for all expenses for the period of time up to and including the date of Closing, and the Partnership shall be entitled to all revenue and shall be responsible for all expenses for the period of time after the date of Closing (provided that housekeeping costs and the Rooms Ledger for the date of Closing shall be shared equally between the Partnership and Contributor). Such adjustments shall be shown on the closing statements (with such supporting documentation as the parties hereto may require being attached as exhibits to the closing statements) and shall increase or decrease (as the case may be) the Units to be issued pursuant to Section 2.2 hereof. All amounts payable under the Marriott Lease shall be settled between Marriott and Contributor. Purchaser shall receive a credit to the Contribution Value in an amount equal to the difference between (i) all amounts distributed and to be distributed to Contributor under the Marriott Lease during the fiscal year in which the Closing occurs, and (ii) the sum of (x) the debt service actually paid by Contributor under the Existing Lien during such partial fiscal year through the Closing Date, and (y) one-half (1/2) of the Net House Profit (as defined in the Marriott Lease) for such partial fiscal year through the Closing Date after deduction of an amount equal to five percent (5%) of Gross Revenues (as defined in the Marriott Lease) for such partial fiscal year through the Closing Date and the amount set forth in clause (x) of this sentence. The following is an example of the calculation of the foregoing credit based on the assumptions contained in items A-E: A. The amount distributed and to be distributed to Contributor under the Marriott Lease through Closing: $6,651,020 B. Debt service under Existing Lien through Closing: $2,559,788 C. Gross Revenues through Closing: $26,051,565 D. FF&E Reserve through Closing based on 5% of gross revenues: $1,302,578 E. House Profit through Closing: $9,058,411 The amount of the proration to the Partnership would equal $1,439,210 calculated as follows: $6,651,020 — ($2,559,788 + (0.5)x(9,058,411 — 2,559,788 — 1,302,578.25)). Without limiting the generality of the foregoing, the following items of revenue and expense shall be allocated at Closing:           (a) Current rents.           (b) Real estate and personal property taxes. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 35 --------------------------------------------------------------------------------             (c) Revenue and expenses under the Operating Agreements, Off-Site Facility Agreements and, Covenants, Conditions and Restrictions to be assigned to and assumed by the Partnership.           (d) Municipal or other governmental improvement liens, which shall be paid by Contributor at Closing where the work has physically commenced, and which shall be assumed by the Partnership at Closing where the work has been authorized, but not physically commenced.           (e) Insurance premiums for Insurance Policies maintained by Contributor, to the extent required hereby.           (f) License and permit fees, where transferable.           (g) Interest for the then current interest period under the Existing Lien.      All cash reserves, if any, held pursuant to the terms of the Marriott Lease shall continue to be held by Marriott under the terms of the Management Agreement, and Contributor shall not receive a credit to the Contribution Value for such reserves at Closing. All cash reserves and escrowed funds held by Lender under the Existing Lien shall continue to be held by Lender under the terms of the Existing Lien, and Contributor shall receive a credit to the Contribution Value for such amounts at Closing.      Contributor shall pay or cause to be paid all real estate taxes and special assessments for the Property due and payable in, or deferred with respect to the years prior to, the year in which the Closing occurs. All special assessments pending, levied or due and payable on or prior to the Closing Date shall be paid by Contributor on or before the Closing Date. All subdivision and platting costs and expenses heretofore incurred by Contributor, including, without limitation, all subdivision exactions, fees and costs and all dedication of land for parks and other public uses or payment of fees in lieu thereof, shall be paid by Contributor on or prior to the Closing Date. The Partnership acknowledges that Marriott has initiated a pending tax assessment appeal with respect to the Property for the calendar year 2006 and the Partnership hereby confirms that Marriott shall be entitled to continue to prosecute such appeals and that any refunds of taxes attributable to any period prior to Closing shall belong to Contributor.      Contributor shall be required to pay or cause to be paid on or before the Closing Date any accrued or earned wages, vacation pay, sick leave, bonuses, pension, profit-sharing and welfare benefits and other compensation and fringe benefits of all persons employed by Contributor at the Property on or before the Closing Date, including any employment taxes or other fees or assessments attributable thereto.      The Partnership shall not be obligated to collect any delinquent rents, accounts receivable or revenues accrued prior to the Closing Date for Contributor, but if the Partnership collects same, such amounts shall be promptly remitted to Contributor in the form received.      If accurate allocations cannot be made at Closing because current bills are not obtainable (as, for example, in the case of utility bills and/or real estate or personal property taxes, and/or Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 36 --------------------------------------------------------------------------------   amounts payable under the Marriott Lease), the parties shall allocate such revenue or expenses at Closing on the best available information, subject to adjustment upon receipt of the final bill or other evidence of the applicable revenue or expense. Such adjustment shall be completed within 90 days after Closing. The obligation to make the adjustment shall survive the closing of the transaction contemplated by this Agreement. Any revenue received or expense incurred by Contributor or the Partnership with respect to the Property after the date of Closing shall be promptly allocated in the manner described herein and the parties shall promptly pay or reimburse any amount due. The proration provisions of this Agreement shall survive the closing of the transaction contemplated hereby for a period of twelve (12) months. ARTICLE VIII GENERAL PROVISIONS      8.1 Condemnation. In the event of any actual or threatened taking, pursuant to the power of eminent domain, of all or any portion of the Real Property, or any proposed sale in lieu thereof, Contributor shall give written notice thereof to the Partnership promptly after Contributor learns or receives notice thereof. If all or any part of the Real Property is, or is to be, so condemned or sold, the Partnership shall have the right to terminate this Agreement pursuant to Section 9.3 hereof. If the Partnership elects not to terminate this Agreement, all proceeds, awards and other payments arising out of such condemnation or sale (actual or threatened) shall be paid or assigned, as applicable, to the Partnership at Closing. Contributor shall not settle or compromise any such proceeding without the Partnership’s written consent. If the Partnership elects to terminate this Agreement by giving Contributor written notice thereof prior to the Closing, the Deposit shall be promptly returned to the Partnership and all rights and obligations of Contributor and the Partnership hereunder (except those set forth herein which expressly survive a termination of this Agreement) shall terminate immediately.      8.2 Risk of Loss. The risk of any loss or damage to the Property prior to the recordation of the Deed shall remain upon Contributor. If any such loss or damage occurs prior to Closing, the Partnership shall have the right to terminate this Agreement pursuant to Section 9.3 hereof. If the Partnership elects not to terminate this Agreement, all insurance proceeds and rights to proceeds arising out of such loss or damage shall be paid or assigned, as applicable, to the Partnership at Closing and the Partnership shall receive as a credit against the Contribution Value the amount of any deductibles under the policies of insurance covering such loss or damage. If the Partnership elects to terminate this Agreement by giving Contributor written notice thereof prior to the Closing, the Deposit shall be promptly returned to the Partnership and all rights and obligations of Contributor and the Partnership hereunder (except those set forth herein which expressly survive a termination of this Agreement) shall terminate immediately.      8.3 Broker. The parties acknowledge that Broker has been the procuring cause of this Agreement. It shall be the obligation of the Partnership to pay Broker its commission of $670,000.00, when, as and if the transaction contemplated hereby actually closes, in accordance with a separate agreement with the Broker. There is no other real estate broker involved in this transaction. The Partnership warrants and represents to Contributor that the Partnership has not dealt with any other real estate broker in connection with this transaction, nor has the Partnership been introduced to the Property or to Contributor by any other real estate broker, and the Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 37 --------------------------------------------------------------------------------   Partnership shall indemnify Contributor and hold Contributor harmless from and against any claims, suits, demands or liabilities of any kind or nature whatsoever arising on account of the claim of any other person, firm or corporation to a real estate brokerage commission or a finder’s fee as a result of having dealt with the Partnership, or as a result of having introduced the Partnership to Contributor or to the Property. In like manner, Contributor warrants and represents to the Partnership that Contributor has not dealt with any other real estate broker in connection with this transaction, nor has Contributor been introduced to the Partnership by any other real estate broker, and Contributor shall indemnify the Partnership and save and hold the Partnership harmless from and against any claims, suits, demands or liabilities of any kind or nature whatsoever arising on account of the claim of any person, firm or corporation to a real estate brokerage commission or a finder’s fee as a result of having dealt with Contributor in connection with this transaction. This provision shall survive any termination of this Agreement and a closing of the transaction contemplated hereby.      8.4 Bulk Sale. It shall be the obligation of Contributor to comply with any bulk sale requirements, statutes, laws, ordinances and regulations promulgated with respect thereto, if any, in the State in which the Property is located, or in or by any governmental entity having jurisdiction with respect thereto, and to provide proof of such compliance or proof that no such compliance is required, to the Partnership, at or prior to Closing. In any event, Contributor shall indemnify the Partnership and save and hold the Partnership harmless from and against any claims, suits, demands, liabilities or obligations of any kind or nature whatsoever, including all costs of defending same, and reasonable attorneys’ fees paid or incurred in connection therewith, arising out of or relating to any claim made by any third party or any liability asserted by any third party that any applicable bulk sales law or like statute has not been complied with. The provisions of this Section shall survive the Closing of the transaction contemplated hereby.      8.5 Confidentiality. Except as hereinafter provided, from and after the execution of this Agreement, the Partnership and Contributor shall keep the terms, conditions and provisions of this Agreement confidential and neither shall make any public announcements hereof unless the other first approves of same in writing, nor shall either disclose the terms, conditions and provisions hereof, except to persons who “need to know,” such as their respective officers, directors, employees, attorneys, accountants, engineers, surveyors, consultants, financiers, partners, investors, potential lessees and bankers and such other third parties whose assistance is required in connection with the consummation of this transaction. Notwithstanding the foregoing, it is acknowledged that the Partnership is, or is an affiliate of, a real estate investment trust (the “REIT”), and the REIT has and will seek to sell shares to the general public; consequently, the Partnership shall have the absolute and unbridled right to disclose any information regarding the transaction contemplated by this Agreement required by law or as determined to be necessary or appropriate by the Partnership or the Partnership’s attorneys to satisfy disclosure and reporting obligations of the Partnership or its affiliates. On or at any time following the Effective Date, the Partnership may make a press release and file with the United States Securities Exchange Commission information regarding the transaction contemplated by this Agreement. Contributor and the Partnership and their representatives are cautioned that United States securities laws restrict the purchase and sale of securities by anyone who possesses non-public information about the issue of such securities. Accordingly, neither Contributor or any of its Affiliates nor its representatives may buy or sell any of the securities of the Partnership or any of its Affiliates so long as any of them is in possession of any material non-public Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 38 --------------------------------------------------------------------------------   information about the Partnership or any of its Affiliates, including information contained in or derived from confidential information.      8.6 Contributor’s Accounts Receivable. It is expressly agreed by and between the Partnership and Contributor that Contributor is not hereby agreeing to sell to the Partnership, and the Partnership is not hereby agreeing to purchase from Contributor, any of Contributor’s accounts receivable. All of Contributor’s accounts receivable shall be and remain the property of Contributor, subsequent to the Closing of the transaction contemplated hereby. At the Closing, Contributor shall prepare a list of its outstanding accounts receivable as of midnight on the date prior to the Closing, specifying the name of each account and the amount due to Contributor. The Partnership shall hold any funds received by the Partnership explicitly designated as payment of such accounts receivable, in trust, if the Partnership actually collects any such amounts, and shall pay the monies collected in respect thereof to Contributor at the end of each calendar month, accompanied by a statement showing the amount collected on each such account. Other than the foregoing, the Partnership shall have no obligation with respect to any such account, and the Partnership shall not be required to take any legal proceeding or action to effect collection on behalf of Contributor. It is generally the intention of the Partnership and Contributor that although all of Contributor’s accounts receivable shall be and remain the property of Contributor, still, if any such accounts are paid to the Partnership, then the Partnership shall collect same and remit to Contributor in the manner above provided. Nothing herein contained shall be construed as requiring the Partnership to remit to Contributor any funds collected by the Partnership on account of the Partnership’s accounts receivable generated from Hotel operations, even if the person or entity paying same is also indebted to Contributor. Contributor agrees that it shall not bring any legal action to enforce collection of payment of any accounts receivable against any current tenant of the Property or other third party in a contractual or business relationship with the Property as of the Closing Date. ARTICLE IX LIABILITY OF THE PARTNERSHIP; INDEMNIFICATION BY CONTRIBUTOR; DEFAULT; TERMINATION RIGHTS      9.1 Liability of the Partnership. Except for obligations expressly assumed or agreed to be assumed by the Partnership hereunder, the Partnership is not assuming any obligations of Contributor or any liability for claims arising out of any act, omission or occurrence which occurs, accrues or arises prior to the Closing Date, and Contributor hereby indemnifies and holds the Partnership harmless from and against any and all claims, costs, penalties, damages, losses, liabilities and expenses (including reasonable attorneys’ fees) that may at any time be incurred by the Partnership as a result of (1) obligations of Contributor under the Marriott Lease, (2) obligations of Contributor not expressly assumed or agreed to be assumed by the Partnership hereunder, including, without limitation, obligations or liabilities under the Existing Lien which arise or accrue to the period prior to the Closing Date, or (3) acts, omissions or occurrences which occur, accrue or arise prior to the Closing Date. The provisions of this Section shall survive the Closing. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 39 --------------------------------------------------------------------------------        9.2 Indemnification by Contributor. Contributor hereby indemnifies and holds the Partnership harmless from and against any and all claims, costs, penalties, damages, losses, liabilities and expenses (including reasonable attorneys’ fees) that may at any time be incurred by the Partnership, whether before or after Closing, as a result of any inaccuracy or breach by Contributor of any of its representations, warranties, covenants or obligations set forth herein or in any other document delivered by Contributor pursuant hereto except for any breach or inaccuracy of any representation or warranty as to which Contributor has given the Partnership written notice prior to Closing of the untruth or inaccuracy or of which the Partnership otherwise had actual knowledge prior to the Closing and nevertheless elected to consummate the Closing; provided, however, the foregoing knowledge limitation on Contributor’s indemnity shall not limit the Partnership’s remedy described in Section 9.3(a)(ii) hereof. The provisions of this Section shall survive the Closing of the transaction contemplated hereby for a period of twelve (12) months period following the Closing Date.      9.3 Default by Contributor/Failure of Conditions Precedent. If any condition set forth herein for the benefit of the Partnership cannot or will not be satisfied prior to Closing, or upon the occurrence of any other event that would entitle the Partnership to terminate this Agreement and its obligations hereunder, and if Contributor fails to cure any such matter or satisfy that condition within ten (10) business days after notice thereof from the Partnership (or such other time period as may be explicitly provided for herein), the Partnership, at its option, may elect (a) to terminate this Agreement, in which event (i) the Deposit shall be promptly returned to the Partnership, (ii) if the condition which has not been satisfied is a breach of a representation, warranty or covenant, then Contributor shall be obligated upon demand to reimburse the Partnership (in a total amount not to exceed $100,000.00) for the Partnership’s actual out-of-pocket inspection, financing and other costs related to the Partnership’s entering into this Agreement, inspecting the Property and preparing for a Closing of the transaction contemplated hereby, including, without limitation, the Partnership’s attorneys’ fees incurred in connection with the preparation, negotiation and execution of this Agreement and in connection with the Partnership’s due diligence review, audits and preparation for a Closing (it being expressly recognized and acknowledged that in no event shall the Contributor have any liability hereunder in the event the condition that is not satisfied is due to Marriott’s failure to take any required action of it hereunder or the failure of the Lender to consent to the transactions contempolated hereby), and (iii) all other rights and obligations of Contributor and the Partnership hereunder (except those set forth herein which expressly survive a termination of this Agreement) shall terminate immediately; or (b) elect to proceed to Closing. If the Partnership elects to proceed to Closing and there is either a misrepresentation or breach of a warranty by Contributor (other than a breach of a representation or warranty of which the Partnership had actual knowledge prior to the Closing and nevertheless elected to consummate the Closing) or the breach of a covenant by Contributor or a failure by Contributor to perform its obligations hereunder, the Partnership shall retain all remedies accruing as a result thereof, including, but not limited to the remedy of specific performance of Contributor’s covenants and obligations and the remedy of the recovery of all reasonable damages resulting from Contributor’s breach of warranty or covenant.      9.4 Default by the Partnership/Failure of Conditions Precedent. If any condition set forth herein for the benefit of Contributor (other than a default by the Partnership) cannot or will not be satisfied prior to Closing, and if the Partnership fails to satisfy that condition within ten (10) business days after notice thereof from Contributor (or such other time period as may be Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 40 --------------------------------------------------------------------------------   explicitly provided for herein), Contributor may, at its option, elect either (a) to terminate this Agreement in which event the Deposit shall be promptly returned to the Partnership and the parties hereto shall be released from all further obligations hereunder except those which expressly survive a termination of this Agreement, or (b) to waive its right to terminate, and instead, to proceed to Closing. If, prior to Closing, the Partnership defaults in performing any of its obligations under this Agreement (including its obligation to purchase the Property), and the Partnership fails to cure any such default within ten (10) business days after notice thereof from Contributor, then Contributor’s sole remedy for such default shall be to terminate this Agreement and retain the Deposit. Contributor and the Partnership agree that, in the event of such a default, the damages that Contributor would sustain as a result thereof would be difficult if not impossible to ascertain. Therefore, Contributor and the Partnership agree that, Contributor shall retain the Deposit as full and complete liquidated damages and as Contributor’s sole remedy.      9.5 Costs and Attorneys’ Fees. In the event of any litigation or dispute between the parties arising out of or in any way connected with this Agreement, resulting in any litigation, then the prevailing party in such litigation shall be entitled to recover its costs of prosecuting and/or defending same, including, without limitation, reasonable attorneys’ fees at trial and all appellate levels. The provisions of this Section 9.5 shall survive the Closing of the transaction contemplated hereby.      9.6 Limitation of Liability. Notwithstanding anything herein to the contrary, except in the case of fraud by either party, the liability of each party hereto resulting from the breach or default by either party shall be limited to actual damages incurred by the injured party and except in the case of fraud by either party, the parties hereto hereby waive their rights to recover from the other party consequential, punitive, exemplary, and speculative damages. The provisions of this Section 9.6 shall survive the Closing of the transaction contemplated hereby. Notwithstanding anything contained herein to the contrary notwithstanding, the liability of the Contributor under this Agreement with respect to Section 9.2 and 9.3 herein above shall be limited to the Pledged Units and neither Contributor nor any partner of Contributor shall have any personal liability hereunder with respect to such Sections 9.2 and 9.3. ARTICLE X RESTRICTIONS ON TRANSFER      10.1 Restrictions on Transfer of Property by Purchaser. The Partnership hereby agrees that, during the period commencing on the Closing Date and ending on the tenth (10th) anniversary of such date (the “Protected Period”), it shall not sell, transfer, exchange or otherwise dispose of all or any portion of its interest in the Property or any other Taxable disposition of the Property, or engage in a merger, sale of all or substantially all of its assets or a liquidation or dissolution of the Partnership or modify the Existing Lien (either by repayment, in whole or in part, or by refinancing), if as a result, the Contributor or a Contributor Partner will recognize gain (other than gains resulting from normal amortization of the Existing Lien and income and gain allocated pursuant to Section 704(c) of the Code) for federal income tax purposes or recapture income under the at risk rules contained in Section 465 of the Code (a “Taxable Event”), except in connection with either (a) a like-kind exchange of the Property in Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 41 --------------------------------------------------------------------------------   which no gain or loss is recognized pursuant to Section 1031 of the Internal Revenue Code of 1986 (as amended, the “Code”), or (b) a transfer of the Property in a transaction described in Section 1033 of the Code.      10.2 Fixed Charge Coverage Ratio. At all times prior to the expiration or termination of the Protected Period, Purchaser covenants and agrees that Purchaser shall not permit or suffer a violation of the Fixed Charge Coverage Ratio test as then set forth (if at all) in the Senior Credit Facility, subject to applicable grace and cure periods set forth in the Senior Credit Facility. For informational purposes only, the Fixed Charge Ratio test set forth in the Senior Credit Facility as of the Effective Date provides that the Fixed Charge Coverage Ratio for each period of four (4) consecutive fiscal quarters ended on the last day of each fiscal quarter shall not be less than 1.25:1. For purposes of this Section 10.2, the defined terms set forth in this Section 10.2 (which are not defined in Section 1.1 of this Agreement) shall have the definitions as of the Effective Date (which terms shall be deemed modified to the extent such terms may be hereafter modified in the Senior Credit Facility) as set forth on Schedule 5 attached to this Agreement. ARTICLE XI MISCELLANEOUS PROVISIONS      11.1 Completeness; Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior discussions, understandings, agreements and negotiations between the parties hereto. This Agreement may be modified only by a written instrument duly executed by the parties hereto.      11.2 Inspection Agreement. Parties hereby agree that all provisions in the Inspection Agreement that survived the termination of the Inspection Agreement shall no longer survive and are hereby superseded by the terms of this Agreement.      11.3 Assignments. The Partnership may assign all or any portion of its rights hereunder to one or more Affiliates of the Partnership without the consent of Contributor; however, any such assignment shall not relieve the Partnership of its obligations under this Agreement.      11.4 Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.      11.5 Days. If any action is required to be performed, or if any notice, consent or other communication is given, on a day that is a Saturday or Sunday or a legal holiday in the jurisdiction in which the action is required to be performed or in which is located the intended recipient of such notice, consent or other communication, such performance shall be deemed to be required, and such notice, consent or other communication shall be deemed to be given, on the first business day following such Saturday, Sunday or legal holiday. Unless otherwise specified herein, all references herein to a “day” or “days” shall refer to calendar days and not business days. Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 42 --------------------------------------------------------------------------------        11.6 Governing Law. This Agreement and all documents referred to herein shall be governed by and construed and interpreted in accordance with the laws of the state where the Property is located.      11.7 Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signature on behalf of both parties hereto appear on each counterpart hereof. All counterparts hereof shall collectively constitute a single agreement.      11.8 Severability. If any term, covenant or condition of this Agreement, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to other persons or circumstances, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law.      11.9 Costs. Regardless of whether Closing occurs hereunder, and except as otherwise expressly provided herein, each party hereto shall be responsible for its own costs in connection with this Agreement and the transactions contemplated hereby, including, without limitation, fees of attorneys, engineers and accountants.      11.10 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand, transmitted by facsimile transmission, sent prepaid by Federal Express (or a comparable overnight delivery service) or sent by the United States mail, certified, postage prepaid, return receipt requested, at the addresses and with such copies as designated below. Any notice, request, demand or other communication delivered or sent in the manner aforesaid shall be deemed given or made (as the case may be) when actually delivered to the intended recipient.       If to Contributor:   Eads Associates Limited Partnership     1735 Jefferson Davis Highway     Arlington, Virginia 22202     Attn: Robert H. Smith     Telecopy: (703) 769-1226       With a copy to:   Arthur A. Birney, Jr.     The Brick Companies     3168 Braverton Street     Edgewater, Maryland     Telecopy: (443) 951-2020       With a copy to:   Grossberg, Yochelson, Fox & Beyda, LLP     2000 L Street, N.W.     Suite 675     Washington, D.C. 20036-4907     Attn: C. Richard Beyda     Telecopy: (202) 296-7777 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 43 --------------------------------------------------------------------------------               If to the Partnership:   Ashford Hospitality Limited Partnership     c/o Ashford Hospitality Trust, Inc.     14185 Dallas Parkway, Suite 1100     Dallas, Texas 75254     Attn: David A. Brooks and Christopher A. Peckham     Telecopy: (972) 490-9605       With a copy to:   Andrews Kurth LLP     1717 Main Street, Suite 3700     Dallas, Texas 75201     Attn: Brigitte Kimichik     Telecopy: (214) 659-4777       If to Escrow Agent:   Chicago Title Insurance Company     711 Third Avenue, 5th Floor     New York, New York 10017     Attn: Ms. Sie Cheung     Telecopy: (214) 880-9623 or to such other address as the intended recipient may have specified in a notice to the other party. Any party hereto may change its address or designate different or other persons or entities to receive copies by notifying the other party and Escrow Agent in a manner described in this Section.      11.11 Escrow Agent. Escrow Agent referred to in the definition thereof contained in Section 1.1 hereof has agreed to act as such for the convenience of the parties without fee or other charges for such services as Escrow Agent. Escrow Agent shall not be liable: (a) to any of the parties for any act or omission to act except for its own willful misconduct or gross negligence; (b) for any legal effect, insufficiency, or undesirability of any instrument deposited with or delivered by Escrow Agent or exchanged by the parties hereunder, whether or not Escrow Agent prepared such instrument; (c) for any loss or impairment of funds that have been deposited in escrow while those funds are in the course of collection, or while those funds are on deposit in a financial institution, if such loss or impairment results from the failure, insolvency or suspension of a financial institution; (d) for the expiration of any time limit or other consequence of delay, unless a properly executed written instruction, accepted by Escrow Agent, has instructed Escrow Agent to comply with said time limit; (e) for the default, error, action or omission of either party to the escrow. Escrow Agent, in its capacity as escrow agent, shall be entitled to rely on any document or paper received by it, believed by such Escrow Agent, in good faith, to be bona fide and genuine. In the event of any dispute as to the disposition of the Deposit or any other monies held in escrow, or of any documents held in escrow, Escrow Agent may, if such Escrow Agent so elects, interplead the matter by filing an interpleader action in a court of general jurisdiction in the county or circuit where the Real Property is located (to the jurisdiction of which both parties do hereby consent), and pay into the registry of the court the Deposit, or deposit any such documents with respect to which there is a dispute in the Registry of such court, whereupon such Escrow Agent shall be relieved and released from any further liability as Escrow Agent hereunder. Escrow Agent shall not be liable for Escrow Agent’s compliance with any Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 44 --------------------------------------------------------------------------------   legal process, subpoena, writ, order, judgment and decree of any court, whether issued with or without jurisdiction, and whether or not subsequently vacated, modified, set aside or reversed.      11.12 Incorporation by Reference. All of the exhibits attached hereto are by this reference incorporated herein and made a part hereof. Notwithstanding the foregoing, Contributor and the Partnership agree that to the extent any of the exhibits or schedules are not attached hereto on the date of execution of this Agreement, the parties hereto shall use their best efforts to complete and agree to such exhibits and schedules within ten (10) days after execution of this Agreement.      11.13 Survival. All of the covenants and agreements of Contributor and the Partnership made in, or pursuant to, this Agreement shall survive Closing and shall not merge into the Deed or any other document or instrument executed and delivered in connection herewith.      11.14 Further Assurances. Contributor and the Partnership each covenant and agree to sign, execute and deliver, or cause to be signed, executed and delivered, and to do or make, or cause to be done or made, upon the written request of the other party, any and all agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise, as may be reasonably required by either party hereto for the purpose of or in connection with consummating the transactions described herein.      11.15 No Partnership. This Agreement does not and shall not be construed to create a partnership, joint venture or any other relationship between the parties hereto except the relationship of Contributor and the Partnership specifically established hereby.      11.16 Time of Essence. Time is of the essence with respect to every provision hereof.      11.17 Signatory Exculpation. The signatory(ies) for the Partnership and Contributor is/are executing this Agreement in his/their capacity as representative of the Partnership and Contributor and not individually and, therefore, shall have no personal or individual liability of any kind in connection with this Agreement and the transactions contemplated by it.      11.18 Rules of Construction. The following rules shall apply to the construction and interpretation of this Agreement:           (a) Singular words shall connote the plural number as well as the singular and vice versa, and the masculine shall include the feminine and the neuter.           (b) All references herein to particular articles, sections, subsections, clauses or exhibits are references to articles, sections, subsections, clauses or exhibits of this Agreement.           (c) The table of contents and headings contained herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.           (d) Each party hereto and its counsel have reviewed and revised (or requested revisions of) this Agreement and have participated in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved against a Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 45 --------------------------------------------------------------------------------   particular party shall not be applicable in the construction and interpretation of this Agreement or any exhibits hereto.           (e) As used herein, the term or phrases “Effective Date,” “date of this Agreement” or “date hereof” shall mean the first date Escrow Agent is in receipt of this Agreement executed by Contributor and the Partnership. [Remainder of page intentionally left blank — signatures follow on next page] Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 46 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, Contributor and the Partnership have caused this Agreement to be executed in their names by their respective duly authorized representatives.                       CONTRIBUTOR:                       EADS ASSOCIATES LIMITED PARTNERSHIP,     a Virginia limited partnership                       BY: EADS, LLC, general partner                       By:   /S/ ROBERT H. SMITH                                 Date of Execution:   May 18, 2006                                         THE PARTNERSHIP:                       ASHFORD HOSPITALITY LIMITED PARTNERSHIP,     a Delaware limited partnership                       By:   Ashford OP General Partner LLC,         its general partner                           By:   /S/ DAVID A. BROOKS                           David A. Brooks             Vice President                       Date of Execution:   May 18, 2006                   Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 47 --------------------------------------------------------------------------------                     ESCROW AGENT:                   Chicago Title Insurance Company (Escrow Agent hereby acknowledges receipt of a fully executed Agreement from both Contributor and the Partnership for purposes of Sections 11.10 and 11.17 hereof.)                   By:                       Name:                       Title:                                     Date:       , 2006               RECEIPT OF ESCROW AGENT      Chicago Title Insurance Company, as Escrow Agent, acknowledges receipt of the sum of $5,000,000.00 by check or by wire transfer from the Partnership as described in Section 2.2 of the foregoing Agreement of Purchase and Sale, said check or wire transfer to be held pursuant to the terms and provisions of said Agreement.      DATED this ___day of May, 2006.               CHICAGO TITLE INSURANCE COMPANY               By:                   Name:                   Title:               Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 48 --------------------------------------------------------------------------------   LIST OF EXHIBITS AND SCHEDULES           EXHIBITS         Exhibit A   —   Land Exhibit B   —   Title Cure Obligations Exhibit C   —   Special Warranty Bill of Sale Exhibit D   —   Special Warranty Deed Exhibit E   —   Assignment and Assumption Agreement (of Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements) Exhibit F   —   Assignment and Assumption of Occupancy Agreements Exhibit G   —   Intentionally Omitted Exhibit H   —   Registration Rights Agreement Exhibit I   —   Partnership Amendment Exhibit J   —   Prospective Subscriber Questionnaire Exhibit K   —   Prospective Power of Attorney and Limited Partner Signature Page Exhibit L   —   Partnership Letter Exhibit M   —   Lock-Up Agreement Exhibit N   —   Pledge and Security Agreement Exhibit O   —   Tax Reporting and Protection Agreement           SCHEDULES         Schedule 1   —   Intentionally Omitted Schedule 2   —   Operating Agreements and Leased Property Agreements and Off-Site Facility Agreements Schedule 3   —   Employment Agreements Schedule 4   —   Occupancy Agreements Schedule 5   —   Additional Defined Terms Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale   --------------------------------------------------------------------------------   EXHIBIT A LAND Tract 1: Parcel 1, containing 100,012 square feet, more or less, as shown on “Plat Showing the Resubdivision of the Property of Eads Associates, a Limited Partnership” attached to a Deed of Resubdivision and Easement recorded in Deed Book 2231, page 1330, among the land records of Arlington County, Virginia, and more particularly described as follows: BEGINNING at the intersection of the westerly right of way line of South Jefferson-Davis Highway, U.S. Rte. 1, with the northerly right of way line of 18th Street South, said point of beginning being the southeasterly corner of property of Eads Associates as acquired in Deed Book 1997, page 1214 of the land records of Arlington County, Virginia; thence running with said northerly right of way line of 18th Street South, along the following courses and distances: S. 79° 04' 35" W. 11.74 feet of the P. C. of a curve to the left; thence continuing 83.47 feet along the arc of said curve to the left, which curve has a radius of 8,739.66 feet, the chord of which arc bears S. 78°48' 10" W, 83.47 feet to the P. T.; thence continuing S. 78°31'45" W. 53.05 feet to the P.C. of a curve to the right; thence 34.04 feet along the arc of said curve to the right, which curve has a radius of 20.00 feet, the chord of which arc bears N. 52°43'01.5" W. 30.08 feet to the P. T; thence still continuing 63.93 feet along the arc of a curve to the right, which curve has a radius of 2,919.79 feet, the chord of which arc bears S. 3°20' 17" E. 63.93 feet to a point lying in the original northerly right of way line of 18th Street South; thence still continuing S. 85°56'59'W. 30.01 feet to this intersection with the easterly right of way line of South Eads Street; thence running with said easterly right of way line of South Eads Street, 420.99 feet along the arc of a curve to the left ,which curve has a radius of 2,889.79 feet, the chord of which arc bears N. 60°52'06.5" W. 420.62 feet to the P. T; thence still continuing N 11 °02' 31" W. 97.16 feet to a point; thence departing from the easterly right of way line of South Eads Street and running through the property of Eads Associates S. 87°50'00" E. 247.90 feet to a point in the new westerly right of way line of South Jefferson-Davis Highway, U.S. Route 1; thence running with said new westerly right of way line of South Jefferson-Davis Highway, along the following courses and distances: S. 3°08'36" E. 67.80 feet; S. 86°51'24" W. 2.00 feet S. 30°8'36" E 118.00 feet; N. 86°51'24" E. 2.00 feet; S. 30°8'36" E. 15.50 feet; thence 103.46 feet along the arc of a curve to the right, which curve has a radius of 3,331.66 feet, the chord of which arc bears S. 2°15' 13.5" E. 103.45 feet; N. 88°38'09" E. 1.00 feet; thence 84.20 feet along the arc of a curve to the right, which curve has a radius of 3,332.66 feet, the chord of which arc bears S. 0 ° 38'25.5" E. 84.19 feet to a P. C. C; thence continuing 38.36 feet along the arc of a curve to the right, which curve has a radius of 2,845.79 feet, the chord of which arc bears S. 0°28' 10" W. 38.35 feet to the point of beginning; containing 100,012 square feet of land, more or less, Tract 2: Parcel 2B, containing 46,553 square feet, more or less, as shown on “Plat Showing the Resubdivision of the Property of Eads Associates, a Limited Partnership” attached to a Deed of Resubdivision and Easement recorded in Deed Book 2231, page 1330, among the land records of Arlington County, Virginia, and more particularly described as follows: Exhibit A Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale   --------------------------------------------------------------------------------   BEGINNING at a point lying in the southerly right of way line of 15th Street South, said point of beginning being the P.C. of a return curve located at the intersection of the aforesaid southerly right of way line of 15th Street South with the new westerly right of way line of South Jefferson Davis Highway, U.S. Route 1 as established by the Virginia Department of Highways and Transportation, said point of beginning lying 70 feet from the Virginia Department of Highways and Transportation construction centerline of 15th Street South; thence 74.39 feet along the arc of a curve to the right, which curve has a radius of 44. 75 feet, the chord of which arc bears S, 46°02' 22.5" E. 66.12 feet to a P. R. C., said P. C. lying in the westerly right of way line of South Jefferson Davis Highway, U.S. Route 1; thence 4.02 feet along the arc of a curve to the left, which curve has a radius of 1,916.86 feet, the chord of which arc bears S. 1°31' 27.5” W., 4.02 feet to a point; thence still continuing with said right of way line N. 88°32' 09' W., 12.00 feet; thence still continuing 155.11 feet along the arc of a curve to the left, which curve has a radius of 1,928.86 feet, the chord of which arc bears S. 04°50'22.5" E. 155,07 feet to the P.T; thence still continuing S. 34°08'36" E. 29.42 feet; S. 86°51'24" W. 1.00 feet, and S. 3°08'36" E, 91.20 feet to a point; thence departing from said right of way line and crossing the lands of Eads Associates as same appears duly platted and recorded in Deed Book 1997, page 1214, among the land records of Arlington County, Virginia, N. 87°50' 00" W. 247.90 feet to a point, said point lying in the easterly right of way line of South Eads Street (25 feet distant from the centerline thereof); thence running with a portion of said easterly right of way line of South Eads Street, N. 11°02'31" W. 35.63 feet to a point, said point being the southwesterly corner of the property of Eads Condominium Corp. as same appears duly recorded in Deed Book 2171, page 100, among the aforesaid land records; thence departing from said street line and running with the southerly and easterly boundary of the property of Eads Condominium Corp. along the following courses and distances: S. 87°50'00" E. 79.20 feet; N. 02°10' 00" E. 75.96 feet; N 42°50' 00" W. 26.63 feet; N. 47°10' 00" E. 63.92 feet; N. 2°10' 00" E. 4.71 feet; N. 42°50' 00" W. 13.42 feet; N. 47°10' 00" E. 35.06 feet; N. 24°10' 00" E. 16.38 feet; N. 47°10' 00" E. 23.74 feet; S. 87°50' 00" E. 16.38 feet; N. 47°10' 00" E. 33.11 feet; N. 2°10' 00" E. 31.11 feet; N. 87°50' 00" W., 18.36 feet and N. 2°10' 00" E. 17.72 feet to a point, said point lying in the aforementioned southerly right of way line of 15th Street South (70 feet distant from the VDH&T construction centerline); thence running with a portion of the new southerly right of way line of 15th Street South, N. 86°20'11" E. 41.52 feet to the point of beginning, containing 46,553 square feet of land, more or less. AND BEING a portion of the same property conveyed to EADS Associates, a Virginia limited partnership, by deed from Washington Brick and Terra Cotta Company, a Virginia limited partnership, dated August 15,1979, and recorded September 25, 1979, in Deed Book 1997, page 1214 among the land records of Arlington County, Virginia. Tract 3: TOGETHER WITH non-exclusive easements for pedestrian and vehicular ingress and egress to and from the underground parking garages of Phase 11 and the Residential Building as defined in Paragraph 1(a) of that certain Easement Agreement by and between EADS CONDOMINIUM CORPORATION, a Virginia corporation, and EADS ASSOCIATES, a Virginia limited partnership, dated August 28, 1986, and recorded September 2, 1986, in Deed Book 2232, page 1307. Exhibit A Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale   --------------------------------------------------------------------------------   EXHIBIT B TITLE CURE OBLIGATIONS 1.   All “Special Requirements” set forth in Schedule B and “Requirements” set forth in Schedule B — Section 1 of the Title Commitment, must be satisfied except as set forth in item 2 below.   2.   The underlying liens to be assumed and set forth in Item 5 of the Title Commitment should be reviewed and edited to accurately describe the liens to be assumed and should appear in the final Title Policy as an exception to title.   3.   Seller shall use commercially reasonable efforts to provide a good standing/estoppel certificate executed by the parties to the easement agreement contained in Schedule B — Section 2, Item 14 of the Title Commitment, in form and substance acceptable to the Partnership prior to Closing.   4.   The Lease evidenced by the Memorandum of Lease referenced in Schedule B — Section 2, Item 15 of the Title Commitment shall be terminated and the Memorandum of Lease shall be removed as an exception to title. Exhibit B Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   EXHIBIT C SPECIAL WARRANTY BILL OF SALE      For Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (“Contributor”), hereby conveys to                                         , a                                          (“the Partnership”) all of the following (collectively, the “Personal Property”):      (i) all items of Tangible Personal Property (as defined in that certain Agreement of Purchase and Sale dated                     , 2006, by and between Contributor and the Partnership (the “Agreement”)), except any Tangible Personal Property leased by Contributor;      (ii) to the extent transferable, all of the Intangible Personal Property (as defined in the Agreement);      (iii) all subsisting and assignable Warranties and Guaranties (as defined in the Agreement); and      (iv) all petty cash funds used in connection with hotel guest operations at the Property.      TO HAVE AND TO HOLD the Personal Property, together with any rights and appurtenances thereto, unto the Partnership, its successors and assigns, and Contributor agrees to WARRANT AND FOREVER DEFEND, all and singular, the Personal Property unto the Partnership, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same, or any part thereof, by, through or under Contributor, but not otherwise.      IN WITNESS WHEREOF, Contributor has executed this Bill of Sale effective as of _________, 2006.           CONTRIBUTOR:           EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership           By:               Its General Partner       By:               Its General Partner Exhibit C Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   EXHIBIT D SPECIAL WARRANTY DEED           STATE OF VIRGINIA   §         §   KNOW ALL MEN BY THESE PRESENTS THAT: COUNTY OF                        §          THAT EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (hereinafter called “Grantor”), for and in consideration of the sum of TEN AND NO/100 Dollars ($10.00) and other good and valuable consideration in hand paid by                                         , a                                          (hereinafter called “Grantee”), whose mailing address is c/o Ashford Hospitality Trust, Inc., 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, SOLD AND CONVEYED and by these presents does GRANT, SELL AND CONVEY unto Grantee all of Grantor’s rights, titles, powers, privileges, and interests in and to that certain real property situated in                      County, Virginia, and more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the “Land”), together with all rights, titles, benefits, easements, privileges, remainders, tenements, hereditaments, interests, reversions and appurtenances thereunto belonging or in any way appertaining, and all of the estate, right, title, interest, claim or demand whatsoever of Grantor therein, in and to adjacent strips and gores, if any, between the Land and abutting properties, and in and to adjacent streets, highways, roads, alleys or rights-of-way, and the beds thereof (except to the extent, if any, that such easements, or such strips or gores or such streets, highways, roads, alleys or rights-of-way abut or provide access to or benefit other properties owned by Grantor), either at law or in equity, in possession or expectancy, now or hereafter acquired (all of the above-described properties together with the Land are hereinafter collectively referred to as the “Property”).      This conveyance is made and accepted subject and subordinate to (a) standby fees, taxes and assessments by any taxing authority for the current year, and subsequent years, and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership, which standby fees, taxes and assessments Grantee assumes and agrees to pay, (b) zoning laws and regulations and ordinances of municipal and other governmental authorities affecting the Property, and (c) the matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (all of those items described in (a) through (c) above are hereinafter collectively referred to as the “Permitted Encumbrances”).      TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in any wise belonging unto Grantee, Grantee’s heirs, executors, administrators, personal representatives, successors and assigns forever and subject to the Permitted Encumbrances, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, Grantee’s heirs, executors, administrators, personal representatives, successors and assigns, against every Exhibit D Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, subject, however, to the Permitted Encumbrances. EXECUTED this ___day of                     , 2006, to be effective for all purposes as of the ___day of                     , 2006.           GRANTOR:           EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership           By:               Its General Partner       By:               Its General Partner                     STATE OF VIRGINIA   §     §   COUNTY OF                        §          BEFORE ME, the undersigned authority, on this day personally appeared                                         , the General Partner of EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership, known to me to be the person 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 and deed of said limited partnership.      GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ___day of                     , 2006.                             Notary Public in and for           County, Virginia My Commission Expires:   Exhibit D Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------             STATE OF VIRGINIA   §     §   COUNTY OF                                  §                    BEFORE ME, the undersigned authority, on this day personally appeared                                         , the General Partner of EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership, known to me to be the person 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 and deed of said limited partnership.      GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ___day of                     , 2006.                             Notary Public in and for           County, Virginia My Commission Expires:   After recording this documents should be returned to: Brigitte Kimichik Andrews Kurth LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 Exhibit D Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------   Exhibit A to Special Warranty Deed Description of Land Exhibit D Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------   Exhibit B to Special Warranty Deed Permitted Exceptions Exhibit D Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5 --------------------------------------------------------------------------------   EXHIBIT E ASSIGNMENT AND ASSUMPTION AGREEMENT (OF OPERATING AGREEMENTS, LEASED PROPERTY AGREEMENTS AND OFF-SITE FACILITY AGREEMENTS)      For Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (“Contributor”) hereby assigns and delegates to ___________________________, a _________(“Assignee”) all of its right, title and interest in and to the following:                (i) all Operating Agreements (as defined in that certain Agreement of Purchase and Sale dated ______, 2006, by and between Contributor and Assignee (the “Agreement”)) with respect to the Property (as defined in the Agreement), and listed on Exhibit A attached hereto;                (ii) all Leased Property Agreements (as defined in the Agreement) described on Exhibit A attached hereto;                (iii) all Off-Site Facility Agreements (as defined in the Agreement) described on Exhibit A attached hereto;      Assignee hereby assumes and agrees to perform all of the obligations of Contributor under the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements (collectively the “Assigned Agreements”), to the extent any such obligations accrue and are applicable to periods from and after the date hereof or which accrue prior to the date hereof for which Assignee received a credit on the closing statement of even date herewith between the parties (or pursuant to any post-closing adjustment thereof).      Contributor hereby agrees to indemnify, defend and hold harmless Assignee and its affiliates from and against any and all liabilities, claims, costs and expenses, including, without limitation, reasonable attorney’s fees, relating to acts or omissions accruing under the Assigned Agreements prior to the date hereof. Assignee hereby agrees to indemnify, defend and hold harmless Contributor and its affiliates from and against any and all liabilities, claims, costs and expenses, including, without limitation, reasonable attorney’s fees, relating to acts or omissions accruing under the Assigned Agreements from and after the date hereof or with respect to obligations otherwise assumed by Assignee herein.      If any litigation between Contributor and Assignee arises out of the obligations of the parties under this Assignment and Assumption Agreement or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such litigation including, without limitation, reasonable attorneys’ fees.      This Assignment and Assumption Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an Exhibit E Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   original and all of which shall constitute one and the same instrument. Telecopied signatures shall have the same valid and binding effect as original signatures.      IN WITNESS WHEREOF, Contributor and Assignee have executed this Assignment as of _______________, 2006.             CONTRIBUTOR: EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership       By:           Its General Partner                  By:                   Its General Partner                  ASSIGNEE:       _____________________________________________________________, a ____________________________                    By:       Name:       Title:     Exhibit E Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------   Exhibit A to Assignment and Assumption Agreement OPERATING AGREEMENTS, LEASED PROPERTY AGREEMENTS AND OFF SITE FACILITY AGREEMENTS Exhibit E Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------   EXHIBIT F ASSIGNMENT OF ASSUMPTION OCCUPANCY AGREEMENTS      For Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership (“Contributor”), hereby assigns to ________________________, a _________(“Assignee”) all of its right, title and interest in and to the Occupancy Agreements, as defined in that certain Agreement of Purchase and Sale dated _________, 2006, by and between Contributor and Assignee (the “Agreement”), listed on Exhibit A attached hereto. Assignee hereby assumes and agrees to perform all of the obligations of Contributor under the Occupancy Agreements to the extent any such obligations accrue and are applicable to periods from and after the date hereof or which accrue prior to the date hereof for which Assignee received a credit on the closing statement of even date herewith between the parties (or pursuant to any post-closing adjustment thereof).      Contributor hereby agree to indemnify, defend and hold harmless Assignee and its affiliates from and against any and all liabilities, claims, costs and expenses, including, without limitation, reasonable attorney’s fees, relating to acts or omissions accruing under the Occupancy Agreements prior to the date hereof. Assignee hereby agrees to indemnify, defend and hold harmless Contributor and its affiliates from and against any and all liabilities, claims, costs and expenses, including, without limitation, reasonable attorney’s fees, relating to acts or omissions accruing under the Occupancy Agreements from and after the date hereof or with respect to obligations otherwise assumed by Assignee herein.      If any litigation between Contributor and Assignee arises out of the obligations of the parties under this Assignment of Occupancy Agreements or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such litigation including, without limitation, reasonable attorneys’ fees.      This Assignment of Occupancy Agreements may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument. Telecopied signatures may be attached hereto and shall have the same valid and binding effect as original signatures. Exhibit F Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, Contributor and Assignee have executed this Assignment of Occupancy Agreements as of _________, 2006.             CONTRIBUTOR: EADS ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership       By:           Its General Partner              By:           Its General Partner                      ASSIGNEE:       _____________________________________________________________, a ____________________________                    By:       Name:       Title:     Exhibit F Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------   Exhibit A to Assignment of Occupancy Agreements Occupancy Agreements Exhibit F Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------   EXHIBIT G [INTENTIONALLY OMITTED] Exhibit G Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   EXHIBIT H REGISTRATION RIGHTS AGREEMENT      THIS REGISTRATION RIGHTS AGREEMENT, dated as of ________________________, 20____________, is entered into by and between Ashford Hospitality Trust, Inc., a Maryland corporation (the “Company”) and each holder of common partnership units in Ashford Hospitality Limited Partnership, a Delaware limited partnership (the “Operating Partnership”) whose name is set forth on the signature page hereto (the “Unit Holder”). RECITALS      WHEREAS, pursuant to that certain Agreement of Purchase and Sale dated as of _________, 2006 (the “Closing Date”), between the Operating Partnership and the Unit Holder, the Operating Partnership and the Unit Holder will engage in a transaction (the “Transaction”) whereby the Unit Holder will convey to the Operating Partnership its interest in a certain property in exchange for common partnership units (“OP Units”) in the Operating Partnership;      WHEREAS, pursuant to the Partnership Agreement (as defined below), OP Units owned by the Unit Holder will be redeemable for cash or exchangeable for shares of Common Stock of the Company upon the terms and subject to the conditions contained in the Partnership Agreement.      NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS      Section 1.1 Definitions. In addition to the definitions set forth above, the following terms, as used herein, have the following meanings:      “Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.      “Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.      “Articles of Incorporation” means the Articles of Amendment and Restatement of the Company as filed with the Secretary of State of the State of Maryland on July 28, 2003, as the same may be amended, modified or restated from time to time. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------        “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Dallas, Texas are authorized or required by law, regulation or executive order to close.      “Commission” means the Securities and Exchange Commission.      “Common Stock” means the Company’s common stock, $0.01 par value.      “Demand Registration” means a Demand Registration as defined in Section 2.2.      “Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.      “Exchangeable OP Units” means OP Units which may be redeemable for cash or, at the sole and absolute discretion of the Company, exchangeable for Common Stock pursuant to Section 7.4 of the Partnership Agreement (without regard to any limitations on the exercise of such exchange right as a result of the Ownership Limit Provisions).      “Holder” means any Initial Holder who is the record or beneficial owner of any Registrable Security or any assignee or transferee of such Registrable Security (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) to the extent (x) permitted under the Partnership Agreement and (y) such assignee or transferee agrees in writing to be bound by all the provisions hereof, unless such Registrable Security is acquired in a public distribution pursuant to a registration statement under the Securities Act or pursuant to transactions exempt from registration under the Securities Act where securities sold in such transaction may be resold without subsequent registration under the Securities Act.      “Immediate Family” of any individual means such individual’s estate and heirs or current spouse, or former spouse, parents, parents-in-law, children (whether natural or adoptive or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such individual or any of the foregoing.      “Initial Holder” means (i) the Unit Holder, (ii) any partner, member or stockholder of the Unit Holder, (iii) any Affiliate of any such partner, member or stockholder, and (iv) the Immediate Family of any of the foregoing.      “Ownership Limit Provisions” mean the various provisions of the Company’s Charter set forth in Article VI thereof restricting the ownership of Common Stock by Persons to specified percentages of the outstanding Common Stock.      “Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated as of August 29, 2003, as the same may be amended, modified or restated from time to time. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------        “Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.      “Piggy-Back Registration” means a Piggy-Back Registration as defined in Section 2.3.      “Registrable Securities” means shares of Common Stock of the Company at any time owned, either of record or beneficially, by any Holder which are issuable or issued upon exchange of Exchangeable OP Units issued pursuant to the Transaction and any additional Common Stock issued as a dividend, distribution or exchange for, or in respect of such shares until      (i) a registration statement covering such shares has been declared effective by the Commission and such shares have been disposed of pursuant to such effective registration statement;      (ii) such shares are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or under which such shares may be sold pursuant to Rule 144(k);      (iii) such shares held by such Person may be sold pursuant to Rule 144 under the Securities Act and could be sold in one transaction in accordance with the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act; or      (iv) such shares have been otherwise transferred in a transaction that would constitute a sale thereof under the Securities Act, the Company has delivered a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares may be resold without restriction under the Securities Act; provided, however, that “Registrable Securities” for purposes of the indemnification obligations contained in Sections 2.7 and 2.8 shall mean all shares that are registered on the applicable Shelf Registration, Demand Registration or Piggy-Back Registration, notwithstanding that such shares may not otherwise be “Registrable Securities” by operation of clause (iii) above.      “Securities Act” means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.      “Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act.      “Shelf Registration Statement” means a shelf registration statement as defined in Section 2.1.      “Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------   ARTICLE II REGISTRATION RIGHTS      Section 2.1 Shelf Registration. Commencing on or after the date which is fifty weeks after the Closing Date, the Company shall prepare and file a “shelf” registration statement with respect to the issuance and the resale of the shares of Common Stock issuable upon the exchange of Exchangeable OP Units issued to the Unit Holder in the Transaction and the resale of any other Registrable Securities on an appropriate form for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”) and shall use its best efforts to cause the Shelf Registration Statement to be declared effective on or as soon as practicable thereafter, and to keep such Shelf Registration Statement continuously effective for a period ending when all shares of Common Stock covered by the Shelf Registration Statement are no longer Registrable Securities. In the event that the Company fails to file, or if filed fails to maintain the effectiveness of, a Shelf Registration Statement, the Holders of Registrable Securities may make a written request for a Demand Registration (as defined below) pursuant to Section 2.2 herein or participate in a Piggy Back Registration (as defined below) pursuant to Section 2.3 herein; provided, further, that if and so long as a Shelf Registration Statement is on file and effective, then the Company shall have no obligation to effect a Demand Registration or allow participation in a Piggy Back Registration.      Section 2.2 Demand Registration.      (a) Request for Registration. Subject to Section 2.1 hereof, commencing on or after the date which is one year after the Closing Date, Holders of Registrable Securities may make a written request for registration under the Securities Act of all or part of its or their Registrable Securities (a “Demand Registration”); provided, that the Company shall not be obligated to effect more than one Demand Registration in any twelve month period and not more than two such Demand Registrations in total; and provided, further, that the Holders making such written request number shall propose the sale of at least 100,000 shares of Registrable Securities (such number to be adjusted successively in the event the Company effects any stock split, stock consideration or recapitalization after the date hereof) or such lesser number of Shares if such lesser number is all of the Registrable Shares owned by the Holders. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within ten (10) days after receipt of such request, the Company will give written notice of such registration request to all other Holders of the Registrable Securities and include in such registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) Business Days after the receipt by the applicable Holder of the Company’s notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof.      (b) Effective Registration. A registration will not count as a Demand Registration until it has become effective and has remained effective and available for at least 180 days.      (c) Selling Holders Become Party to Agreement. Each Holder acknowledges that by asserting or participating in its registration rights pursuant to this Article II, he or she may Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------   become a Selling Holder and thereby will be deemed a party to this Agreement and will be bound by each of its terms.      (d) Priority on Demand Registrations. If the Holders of a majority of shares of the Registrable Securities to be registered in a Demand Registration so elect by written notice to the Company, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Company shall select the book-running managing Underwriter in connection with any such Demand Registration; provided that such managing Underwriter must be reasonably satisfactory to the Holders of a majority of the shares of the Registrable Securities. The Company may select any additional investment banks and managers to be used in connection with the offering; provided that such additional investment bankers and managers must be reasonably satisfactory to a majority of the Holders making such Demand Registration. To the extent 10% or more of the Registrable Securities so requested to be registered are excluded from the offering in accordance with Section 2.4, the Holders of such Registrable Securities shall have the right to one additional Demand Registration under this Section in such twelve-month period with respect to such Registrable Securities.      Section 2.3 Piggy-Back Registration. Subject to Section 2.1 hereof, if the Company proposes to file a registration statement under the Securities Act with respect to an underwritten equity offering by the Company for its own account or for the account of any of its respective securityholders of any class of security other than (i) any registration statement filed by the Company under the Securities Act relating to an offering of Common Stock for its own account as a result of the exercise of the exchange rights set forth in Section 7.4 of the Partnership Agreement, (ii) any registration statement filed in connection with a demand registration other than a Demand Registration under this Agreement or (iii) a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) filed in connection with an exchange offer or offering of securities solely to the Company’s existing securityholders, then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than ten (10) days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (a “Piggy-Back Registration”). The Company shall use commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company included therein.      Section 2.4 Reduction of Offering. Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.2 or 2.3 deliver a written opinion to the Company and the Holders of the Registrable Securities included in such offering that (i) the size of the offering that the Holders, the Company and such other persons intend to make or (ii) the kind of securities that the Holders, the Company and/or any other Persons intend to include in such offering are such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5 --------------------------------------------------------------------------------        (A) if the size of the offering is the basis of such Underwriter’s opinion, the amount of securities to be offered for the accounts of Holders shall be reduced pro rata (according to the number of Registrable Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters; provided that, in the case of a Piggy-Back Registration, if securities are being offered for the account of other Persons as well as the Company, then with respect to the Registrable Securities intended to be offered by Holders, the proportion by which the amount of such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced; and      (B) if the combination of securities to be offered is the basis of such Underwriter’s opinion, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)) or (y) if the actions described in clause (x) would, in the judgment of the managing Underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering.      Section 2.5 Registration Procedures; Filings; Information. In connection with any Shelf Registration Statement under Section 2.1 or whenever Holders request that any Registrable Securities be registered pursuant to Section 2.2 hereof, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request:      (a) The Company will as expeditiously as possible prepare and file with the Commission a registration statement on Form S-3 if registered pursuant to Section 2.1 and if registered pursuant to any other section of this Agreement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 270 days; provided that if the Company shall furnish to the Holders making a request pursuant to Section 2.2 a certificate signed by either its Chairman, Chief Executive Officer or President stating that in his or her good faith judgment it would be significantly disadvantageous to the Company or its shareholders for such a registration statement to be filed as expeditiously as possible, the Company shall have a period of not more than 180 days within which to file such registration statement measured from the date of receipt of the request in accordance with Section 2.2.      (b) The Company will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder and Underwriter, if any, such number of conformed copies of such registration statement, each Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 6 --------------------------------------------------------------------------------   amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request to facilitate the disposition of the Registrable Securities owned by such Selling Holder.      (c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.      (d) The Company will use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder or managing Underwriter or Underwriters, if any, reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.      (e) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any 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 and promptly make available to each Selling Holder any such supplement or amendment.      (f) The Company will enter into customary agreements (including an underwriting agreement, if any, in customary form) and take such other actions as are reasonably required to expedite or facilitate the disposition of such Registrable Securities.      (g) The Company will make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 7 --------------------------------------------------------------------------------   confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.      (h) The Company will furnish to each Selling Holder and to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) if eligible under SAS 100, a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Securities included in such offering or the managing Underwriter or Underwriters therefor reasonably requests.      (i) The Company will otherwise comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder (or any successor rule or regulation hereafter adopted by the Commission).      (j) The Company will use its best efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed.      The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding such Selling Holder, the Registrable Securities held by it and the intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.      Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.5(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.5(e) hereof, and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 8 --------------------------------------------------------------------------------   prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing expressly for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 2.5(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 2.5(e) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 2.5(e) hereof.      Section 2.6 Registration Expenses. In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 2.5(h) hereof), and (vii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities, or any out-of-pocket expenses of the Holders (or the agents who manage their accounts) or any transfer taxes relating to the registration or sale of the Registrable Securities.      Section 2.7 Indemnification by the Company. The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any 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, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein. The Company also agrees to indemnify any Underwriters of the Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 9 --------------------------------------------------------------------------------   Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 2.7, provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter of the Registrable Securities from whom the person asserting any such losses, claims, damages or liabilities purchased the Registrable Securities which are the subject thereof if such person did not receive a copy of the prospectus (or the prospectus as supplemented) at or prior to the confirmation of the sale of such Registrable Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as supplemented). The indemnity provided for in this Section 2.7 shall remain in full force and effect regardless of any investigation made by or on behalf of any Selling Holder.      Section 2.8 Indemnification by Holders of Registrable Securities. Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information relating to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.7. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 2.8. The liability of any Selling Holder pursuant to this Section 2.8 may, in no event, exceed the net proceeds received by such Selling Holder from sales of Registrable Securities giving rise to the indemnification obligations of such Selling Holder.      Section 2.9 Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 2.7 or 2.8, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 10 --------------------------------------------------------------------------------   Indemnifying Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.7 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in the case of Persons indemnified pursuant to Section 2.8, the Company. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 Business Days after receipt by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.      Section 2.10 Contribution. If the indemnification provided for in Section 2.7 or 2.8 hereof is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 11 --------------------------------------------------------------------------------   before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.      The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total commissions and discounts received by such Underwriter in connection with the sale of the securities underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the net proceeds from the sale of the securities of such Selling Holder to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. The Selling Holder’s obligations to contribute pursuant to this Section 2.10 are several in proportion to the net proceeds of the offering received by such Selling Holder bears to the total net proceeds of the offering received by all the Selling Holders and not joint.      Section 2.11 Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights provided for in this Article II. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 12 --------------------------------------------------------------------------------        Section 2.12 Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.      Section 2.13 Holdback Agreements.      (a) Restrictions on Public Sale by Holder of Registrable Securities. To the extent not inconsistent with applicable law and except with respect to a shelf registration (including the Shelf Registration Statement), each Holder whose securities are included in a registration statement agrees not to effect any sale or distribution of the issue being registered or a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters in the case of an underwritten public offering.      (b) Restrictions on Public Sale by the Company and Others. The Company agrees that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.2 or Section 2.3 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90-day period beginning on, the effective date of any registration statement (except as part of such registration statement where the Holders of a majority of the Registrable Securities to be included in such registration statement consent or as part of registration statements filed as set forth in Section 2.3(i) or (iii)), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters in the case of an underwritten public offering, in each case including a sale pursuant to Rule 144 under the Securities Act (except as part of any such registration, if permitted); provided, however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities.      (c) Temporary Suspension of Rights to Sell Based on Confidential Information. If the Company determines in its good faith judgment that the filing of the Shelf Registration Statement under Section 2.1 or a Demand Registration under Section 2.2 hereof or the use of any related prospectus would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or the disclosure of which would impede the Company’s ability to consummate a significant transaction (the “Confidential Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 13 --------------------------------------------------------------------------------   Information”), and that the Company is not otherwise required by applicable securities laws or regulations to disclose, upon written notice of such determination by the Company, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the earlier of (i) the date upon which the Company notifies the Holders in writing that suspension of such rights for the grounds set forth in this Section 2.12(c) is no longer necessary and (ii) 180 days; provided, however, no such 180-day period shall be successive with respect to the same Confidential Information. The Company agrees to give such notice as promptly as practicable following the date that such suspension of rights is no longer necessary. Nothing in this Section 2.12(c) shall prevent a Holder from offering, selling or distributing pursuant to Rule 144 at any time.      (d) Temporary Suspension of Rights to Sell Based on Exchange Act Reports not yet Filed or Regulation S-X. If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by the Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X under the Act, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the date on which the Company has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in the Shelf Registration Statement, and the Company shall notify the Holders as promptly as practicable when such suspension is no longer required. Nothing in this Section 2.12(d) shall prevent a Holder from offering, selling or distributing pursuant to Rule 144 at any time. ARTICLE III MISCELLANEOUS      Section 3.1 New York Stock Exchange Listing. In the event that the Company shall issue any Common Stock in exchange for OP Units pursuant to Section 7.4 of the Partnership Agreement, then in any such case the Company agrees to cause any such shares of Common Stock to be listed on the New York Stock Exchange prior to or concurrently with the issuance thereof by the Company.      Section 3.2 Remedies. In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the Holders shall be entitled to specific performance of the rights under this Agreement. The Company 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. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 14 --------------------------------------------------------------------------------        Section 3.3 Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, in each case without the written consent of the Company and the Holders of a majority of the Registrable Securities. No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.      Section 3.4 Notices. All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery to the address set forth on the signature page hereto, or to such other address and to such other Persons as any party hereto may hereafter specify in writing.      All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery.      Section 3.5 Successors and Assigns. Except as expressly provided in this Agreement the rights and obligations of the Initial Holders under this Agreement shall not be assignable by any Initial Holder to any Person that is not an Initial Holder. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.      Section 3.6 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.      Section 3.7 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas without regard to the choice of law provisions thereof.      Section 3.8 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.      Section 3.9 Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 15 --------------------------------------------------------------------------------   to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.      Section 3.10 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.      Section 3.11 No Third Party Beneficiaries. Nothing express or implied herein is intended or shall be construed to confer upon any person or entity, other than the parties hereto and their respective successors and assigns, any rights, remedies or other benefits under or by reason of this Agreement. Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 16 --------------------------------------------------------------------------------   [Registration Rights Agreement Signature Page]      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.             COMPANY: ASHFORD HOSPITALITY TRUST, INC.       By:         Name:     Title:       Address: 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 UNIT HOLDER:             _____________________________________________________________, a ___________________________________________________________       By:     Name:     Title:       Address:                               Exhibit H Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 17 --------------------------------------------------------------------------------   EXHIBIT I PARTNERSHIP AMENDMENT AMENDMENT NO. 5 TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ASHFORD HOSPITALITY LIMITED PARTNERSHIP                     , 2006      This Amendment No. 5 to the Second Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (this “Amendment”) is made as of                                         , 2006 by Ashford OP General Partner, LLC, a Delaware limited liability corporation, as general partner (the “General Partner”) of Ashford Hospitality Limited Partnership, a Delaware limited partnership (the “Partnership”), pursuant to the authority granted to the General Partner in the Second Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership, dated as of April 6, 2004 (as subsequently amended September 2, 2004, September 22, 2004, December 30, 2004 and March 16, 2005, the “Partnership Agreement”), for the purpose of issuing additional Partnership Units in the form of Class B Common Partnership Units. Capitalized terms used and not defined herein shall have the meanings set forth in the Partnership Agreement.      WHEREAS, the General Partner has determined that it is necessary and desirable to amend the Partnership Agreement to create and issue additional Partnership Units in the form of Class B Common Partnership Units.      NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the General Partner hereby amends the Partnership Agreement as follows:      1. Article 1 of the Partnership Agreement is hereby amended to amend and restate the following definitions in their entirety:      “Class B Common Partnership Interest” shall mean an ownership interest in the Partnership, other than a Preferred Partnership Interest or a Common Partnership Interest, and shall include any and all benefits to which the holder of such an ownership interest may be entitled as provided in this Agreement or the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and the Act.      “Class B Common Partnership Unit” shall mean a fractional, undivided share of the Class B Common Partnership Interests of all Partners issued hereunder, each of which Class B Common Partnership Unit shall be treated as a Common Partnership Unit for all purposes of this Agreement and shall be subject to the same rights, privileges, qualifications, limitations and other characteristics as a Common Partnership Unit and all references to Class B Common   --------------------------------------------------------------------------------   Partnership Units in this Agreement shall be deemed to be references to Common Partnership Units as well as Class B Common Partnership Units, except, in each case, (i) in lieu of receiving distributions by the Partnership to holders of Common Partnership Units, each holder of a ClassB Common Partnership Unit shall be entitled to the payment of the Class B Common Partnership Unit Return; (ii) the Class B Common Partnership Unit Return shall have priority over the payment of any cash distribution with respect to a Common Partnership Unit pursuant to Section 8.1(a) of the Partnership Agreement (while still being junior in priority to the payment of any cash distribution with respect to a Preferred Unit); and the Partnership or a holder of the Class B Common Partnership Unit shall have the right to redeem the Class B Common Partnership Units, in whole or in part, from time to time, at any time after the tenth (10th) anniversary of the date of this Amendment, in exchange for an equivalent number of Common Units.      “Class B Common Partnership Unit Return” shall mean, as to each Class B Common Partnership Unit that has not yet then been redeemed by the Partnership: (i) for the period commencing on the date of this Amendment and ending on the last day of the calendar quarter in which the date of this Amendment shall occur (the “Initial Period”), a cash distribution equal to $                    , divided by the number of days in such calendar quarter, times the number of days in the Initial Period, divided by the number of Class B Common Partnership Units issued on the date of this Amendment, (ii) for the three-year period commencing on first day of the calendar quarter following the Initial Period and ending on the third anniversary of such date, a cumulative quarterly cash distribution equal to $                     divided by the number of Class B Common Partnership Units issued on the date of this Amendment, and (iii) thereafter, a cumulative quarterly cash distribution equal to $                     divided by the number of Class B Common Partnership Units issued on the date of this Amendment.      2. Section 5.1(a) of the Partnership Agreement is hereby amended as follows: (a) Section 5.1(a)(iii) is hereby amended and restated in its entirety as follows: Third, to the holders of Common Partnership Units in accordance with their Common Percentage Interests until the holders of Class B Common Partnership Units have been allocated an amount equal to the total amount distributed to such holders pursuant to Section 8.1(a) for such year. (b) Section 5.1(a)(iv) is hereby amended and restated in its entirety as follows: Fourth, any remaining profits shall be allocated to the holders of Common Partnership Units, other than holders of Class B Common Partnership Units, in accordance with their Common Percentage Interests (calculated without giving effect to the Class B Partnership Units then outstanding).      3. Section 7.1(d) of the Partnership Agreement is hereby deleted in its entirety. 2 --------------------------------------------------------------------------------        4. Section 8.1(a) of the Partnership Agreement is hereby amended and restated in its entirety as follows: (a) The General Partner shall cause the Partnership to distribute on a quarterly basis such portion of the Cash Flow of the Partnership as the General Partner shall determine in its sole discretion. Except as provided in Section 10.4, such distributions shall be made to the Partners who are Partners on the applicable record date as follows: first, to the holders of the Preferred Partnership Units, an amount equal to the unpaid portion of the Preferred Return due to the holder of the Preferred Partnership Units on the applicable Partnership Record Date, as determined pursuant to the applicable exhibit hereto setting forth the terms of such Preferred Partnership Units; second, to all Partners who are Partners on the applicable Partnership Record Date and who beneficially own Class B Common Partnership Units, the Class B Common Partnership Unit Return, including any accrued accumulated but previously unpaid Class B Common Partnership Unit Return, if any; and third, to all Partners who are Partners on the applicable Partnership Record Date and who beneficially own Common Partnership Units (other than Class B Common Partnership Units), in accordance with their respective Common Percentage Interests; provided, however, if for any Common Unit Distribution Period, a Newly Issued Common Unit is outstanding on the Partnership Record Date for such period, there shall not be distributed in respect of such Newly Issued Common Unit the amount (the “Full Distribution Amount”) that would otherwise be distributed in respect of such Unit in accordance with its respective Common Percentage Interest, but rather, the General Partner shall cause to be distributed with respect to each such Newly Issued Common Unit an amount equal to the Full Distribution Amount multiplied by a fraction, the numerator of which equals the number of days such Newly Issued Common Unit has been outstanding during the Distribution Period and the denominator of which equals the total number of days in such Common Unit Distribution Period. Any Cash Flow not distributed to the holders of Units by operation of this provision shall be retained by the Partnership and applied toward future distributions or payment of Partnership expenses. 3 --------------------------------------------------------------------------------        5. Section A.10. of Exhibit B of the Partnership Agreement is hereby amended and restated in its entirety as follows: Notwithstanding any provision of the Partnership Agreement to the contrary, Nonrecourse Deductions for any fiscal or other period shall be specially allocated to the Partners in the manner set forth in Section 5.1(b)(iii) of the Partnership Agreement.      6. In accordance with Section 4.3 of the Partnership Agreement, set forth in Exhibit J hereto are the terms and conditions of the Class B Common Partnership Units established and issued on the date of this Amendment, in consideration of certain contributions to the Partnership, and the Partnership Agreement is amended to incorporate such Exhibit J as Exhibit J thereto. Also in accordance with Section 4.3 of the Partnership Agreement, the Partnership Agreement is hereby amended to replace Exhibit A thereto with a revised Exhibit A, attached hereto, to reflect the issuance of such Class B Common Partnership Units.      7. Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms.      8. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to conflicts of law.      9. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. 4 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first set forth above.             ASHFORD OP GENERAL PARTNER, LLC, a Delaware limited liability corporation, as General Partner of Ashford Hospitality Limited Partnership       By:           David A. Brooks, Vice President              Exhibit I Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5 --------------------------------------------------------------------------------   EXHIBIT J TO PARTNERSHIP AGREEMENT DESIGNATION OF INTERESTS ISSUED TO CRYSTAL CITY LIMITED PARTNERS      Pursuant to Section 4.3(a)(i) of the Second Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (the “Agreement”), to which this Exhibit J is attached, the General Partner has caused the Partnership to issue additional Partnership Interests in the form of Class B Common Partnership Units in the number and to the respective Persons set forth below (collectively, the “Crystal City Limited Partners”). The Class B Common Partnership Units issued to the Crystal City Limited Partners shall be governed by the terms of the Agreement subject to the following: 1.   Definitions. The following terms are hereby defined as follows for purposes of Amendment No. 5 to the Agreement with respect to the Crystal City Limited Partners, any transferees of such Crystal City Limited Partners in a Crystal City Permitted Disposal and the Class B Common Partnership Units acquired by such persons on                     , 2006:           “Crystal City Limited Partners” means:           Class B Common     Partnership Name of Crystal City Limited Partner   Units Issued                        “Crystal City Permitted Disposal” means a transfer by a Crystal City Limited Partner of Class B Common Partnership Units:      (i) to any Person who, on the date of such proposed transfer is either a partner, member or shareholder of such Crystal City Limited Partner, provided that such transferee satisfies all criteria for transfer applicable to such transferee, as set forth in the Partnership Agreement or that certain Contribution Agreement between the Partnership Exhibit I Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 6 --------------------------------------------------------------------------------   and Eads Associates Limited Partnership, dated as of                     , 2006 and agrees in writing to be bound by all of the terms and conditions of the Partnership Agreement; or      (ii) in connection with a pledge, delivery or other grant of a security interest in the Class B Common Partnership Units held by a Crystal City Limited Partner or a transfer under clause (i) for the purpose of securing a bona fide lending transaction.      “Lock-Up Agreement” shall mean the Lock-Up Agreement dated as of                     , 2006, executed by the Crystal City Limited Partners in favor of the Company.      “Lock-Up Period” shall mean (i) a period of one (1) year from the date of this Amendment with respect to all of the Class B Common Partnership Units issued to the Crystal City Limited Partners on such date, (ii) for a period of eighteen (18) months from the date of this Amendment with respect to two-third of the Class B Common Partnership Units issued to each of the Crystal City Limited Partners on such date, and (iii) for a period of twenty-four (24) months from the date of this Amendment with respect to one-third of the Class B Common Partnership Units issued to each of the Crystal City Limited Partners on such date. 2.   Amendment with respect to Section 9.5:      The consent required by Section 9.5(a) shall not be required in the event of a Crystal City Permitted Disposal. 3.   Amendment with respect to Section 9.6(a)(i):      Section 9.6(a)(i) shall not apply in the case of an assignee resulting from a Crystal City Permitted Disposal. 4.   Amendment to Exhibit A:      Exhibit A shall be and is revised as of the date hereof to reflect the Crystal City Limited Partners and their respective ownership of Class B Common Partnership Units, as set forth in Item No. 1 above, as well as the agreed values and percentages attributable thereto. 5.   Amendment to Exhibit B: The following sentence is added as the final sentence of Section A.3. of Exhibit B of the Partnership Agreement: Notwithstanding the foregoing, the Book-Tax Difference with respect to the “Property” as defined in the Contribution Agreement between the Partnership and Eads Associates Limited Partnership, dated as of                     , 2006, shall be accounted for as provided in Article 6 of the Tax Protection Reporting Agreement between the Partnership and Eads Associates Limited Partnership, dated as of                     , 2006.      6. This Exhibit J is incorporated into and has become a part of the Agreement effective as of                     , 2006. Exhibit I Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 7 --------------------------------------------------------------------------------   EXHIBIT J Name: ______________________ PROSPECTIVE SUBSCRIBER QUESTIONNAIRE   Ashford Hospitality Limited Partnership 14185 Dallas Parkway Suite 1100 Dallas, Texas 75254        The units of limited partnership interest (the “Units”) of Ashford Hospitality Limited Partnership (the “Operating Partnership”) are being offered without registration under the Securities Act of 1933, as amended (the “Securities Act”), and the securities laws of certain states. The Units are being offered in reliance on an exemption from registration under Regulation D of the Securities Act (“Regulation D”) and similar state law exemptions. To satisfy the requirements of Regulation D and applicable state law exemptions, the Operating Partnership must determine whether a prospective unitholder meets that Regulation D and state law definitions of “accredited investor” before selling (or, in some states, offering) securities to such person. This Questionnaire is intended to assist the Operating Partnership in making this determination.      Please complete, execute and date this Prospective Subscriber Questionnaire and deliver it to the address set forth above. Your answers will, at all times, be kept confidential except as necessary to establish that the offering and sale of the Units will not result in a violation of the registration provisions of the Securities Act or a violation of the securities laws of any state.      1) To establish the basis of the Subscriber’s status as an accredited investor, please answer the questions set forth below.      2) Is the Subscriber an individual with a net worth (or net worth with his or her spouse) in excess of $1 million: Yes o No o   a)   Is the Subscriber an individual with net income (without including any net income of the Subscriber’s spouse) in excess of $200,000, or joint income with the Subscriber’s spouse, in excess of $300,000, in each of the two most recent years, and does the Subscriber reasonably expect to reach the same income level in the current year? Yes o No o Exhibit J Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------     b)   Is the Subscriber an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (hereinafter “ERISA”) whose decision to invest in the Operating Partnership is being made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment adviser or, alternatively, does the employee benefit plan have total assets in excess of $5,000,000 or is the employee benefit plan “self-directed” with investment decisions made solely by person(s) who answered “Yes” to item 1(a) or 1(b) above? Yes o No o   c)   Is the Subscriber a retirement plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees with total assets in excess of $5,000,000? Yes o No o   d)   Is the Subscriber a trust (including an individual retirement arrangement formed as a trust or a tax-qualified pension and profit sharing plan (e.g., a Keogh Plan) formed as a trust but not subject to ERISA) with total assets in excess of $5,000,000 that was not formed for the specific purpose of acquiring the Units and whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment? Yes o No o   e)   Is the Subscriber a corporation, partnership, Massachusetts or similar business trust or an organization described in Section 501(c)(3) of the Internal Revenue Code that was not formed for the specific purpose of acquiring the Units and whose total assets exceed $5,000,000? Yes o No o   f)   Is the Subscriber one of the following entities:   (i)   A “bank” as defined in Section 3(a)(2) of the Securities Act or any “savings and loan association” or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity;     (ii)   A “broker/dealer” registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; Exhibit J Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------     (iii)   An “insurance company,” as defined in Section 2(13) of the Securities Act;     (iv)   An “investment company” registered under the Investment Company Act of 1940 or a “business development company” as defined in Section 2(a)(48) of the Investment Company Act of 1940;     (v)   A “Small Business Investment Company” licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or     (vi)   A “Private Business Development Company” as defined in Section 202(a)(2) of the Investment Advisers Act of 1940? Yes o No o       If yes, then which entity (i.e., (g)(i) through (vi) above)?     g)   Is the Subscriber an entity (other than a trust, but including a grantor trust) in which all of the equity owners can answer “Yes” to any one question set forth in Sections 1(a) through 1(g) immediately above? Yes o No o      3) Is the Subscriber acquiring the Units of the Operating Partnership as a principal for the purposes of investment and not with a view to resale or distribution? Yes o No o      4) By signing this Questionnaire, the Subscriber hereby confirms the following statements:   a)   The Subscriber is aware that the offering of the Units will involve securities for which no market exists, thereby possibly requiring an investment to be held for an indefinite period of time.     b)   The Subscriber shall immediately provide the Operating Partnership with corrected information in the event any information given herein was untrue.     c)   The Subscriber acknowledges that any delivery of information relating to the Operating Partnership prior to the determination by the Operating Partnership of the suitability of the Subscriber as a Unitholder shall not constitute an offer of Units until such determination of suitability shall be made. Exhibit J Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------     d)   The Subscriber acknowledges that the Operating Partnership will rely on the Subscriber’s representations contained herein as a basis for exemption from registration.     e)   The Subscriber, either alone or with his or her purchase representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the risks and merits of the prospective investment in the Units.     f)   The answers of the Subscriber to the foregoing questions are true and complete to the best of the information and belief of the undersigned, and the Operating Partnership shall be notified promptly (and, in particular, upon the acquisition of additional Units by the Subscriber) of any changes in the foregoing answers.                 Signature of Subscriber (or duly authorized agent)                 Title                 Print Name Signed Above                 Date Exhibit J Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------   EXHIBIT K POWER OF ATTORNEY AND LIMITED PARTNER SIGNATURE PAGE      The undersigned, desiring to become one of the Limited Partners of Ashford Hospitality Limited Partnership (the “Partnership”), hereby becomes a party to the Agreement of Limited Partnership of Ashford Hospitality Limited Partnership, as amended (the “Partnership Agreement”). The undersigned agrees to be bound by all the terms and conditions of the Partnership Agreement and hereby grants to the general partner of the Partnership the “Power of Attorney,” as provided and upon the terms as set forth in Article XII of the Partnership Agreement, and further agrees that this signature page may be attached to any counterpart of the Partnership Agreement.                   By:                         Exhibit K Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   EXHIBIT L LETTER OF INVESTOR REPRESENTATIONS [Date] Ashford Hospitality Limited Partnership 14185 Dallas Parkway Suite 1100 Dallas, Texas 75254 Attn:   David A. Brooks and Christopher A. Peckham Re:   Ashford Hospitality Limited Partnership (the “Partnership”) Common Partnership Units (the “Units”) Ladies and Gentlemen:      Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Agreement of Purchase and Sale between the Partnership and ___, dated ___, 20___, as amended by that certain First Amendment Agreement of Purchase and Sale (the “Purchase Agreement”).      The undersigned (“Investor”) represents, warrants and covenants as follows:      (a) Investor is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act. Investor understands the risks of, and other considerations relating to, the purchase of the Units. Investor, by reason of its business and financial experience, together with the business and financial experience of those persons, if any, retained by it to represent or advise it with respect to its investment in the Units, (i) has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type, (ii) is capable of evaluating the merits and risks of an investment in the Partnership and of making an informed investment decision, (iii) is capable of protecting its own interest or has engaged representatives or advisors to assist it in protecting its interests and (iv) is capable of bearing the economic risk of such investment.      (b) The Units to be issued to Investor will be acquired by Investor for its own account for investment only and not with a view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein.      (c) Investor acknowledges that (i) the Units to be issued to Investor have not been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws, (ii) the Partnership’s reliance on such exemptions is predicated in part on the accuracy and completeness Exhibit L Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   of the representations and warranties of Investor contained herein, (iii) such Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws (unless an exemption from registration is available), (iv) there is no public market for such Units, and (v) the Partnership has no obligation or intention to register such Units for resale under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws. Investor hereby acknowledges that because of the restrictions on transfer or assignment of such Units to be issued hereunder (such restrictions on transfer or assignment being set forth in the Partnership Agreement), Investor may have to bear the economic risk of the investment commitment with respect to any Units purchased hereby for an indefinite period of time, although Units may be redeemed at the request of the holder thereof for cash or (at the option of the general partner of the Partnership) for Common Stock of Company pursuant to the terms of the Partnership Agreement (which redemption rights may be limited or modified pursuant to the terms of the Partnership Agreement). Investor and Company will execute and deliver a Registration Rights Agreement in the form attached as Exhibit I to the Purchase Agreement.      (d) The address set forth for Investor below is the address of Investor’s principal place of business or residence, as applicable, and Investor has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which principal place of business or residence, as applicable, is sited.”               Very truly yours,               [Investor]           Name:                   Address:                                                                           Exhibit L Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------   EXHIBIT M LOCK-UP AGREEMENT [Date] Ashford Hospitality Limited Partnership 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 Attn:   David A. Brooks and Christopher A. Peckham Ladies and Gentlemen:      In consideration of the Agreement of Purchase and Sale between Ashford Hospitality Limited Partnership (the “Partnership”), and ___(“Contributor”), dated ___, as amended (the “Agreement”), pursuant to which the Partnership agreed to acquire certain assets of Contributor for consideration which includes certain units of limited partnership interest (the “Units”) in the Partnership, the undersigned hereby agrees that the undersigned will not assign, pledge, sell or otherwise transfer in whole or in part, or subject to any claim, lien, pledge, voting agreement, option, charge, security interest, mortgage, deed of trust, encumbrance, rights of assignment, purchase rights or rights of any nature whatsoever of any third party (excluding that certain Pledge and Security Agreement executed by Contributor in favor of the Partnership and except as expressly provided in Section 4.6(c) of the Agreement), 1/3 of the Units until the date that is one (1) year from the date of the issuance of the Units, 1/3 of the Units until the date that is 18 months from the date of issuance of the Units and the remaining 1/3 of the Units until the date that is two (2) years from the date of issuance of the Units. Any such transaction prior to the dates set forth in the preceding sentence shall be null and void and shall not be binding on or recognized by the Partnership.                   Very truly yours,     ,           a                         By: ,                   its General Partner           By:                           Name:                           Title:                   Exhibit M Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   EXHIBIT N PLEDGE AND SECURITY AGREEMENT      THIS PLEDGE AND SECURITY AGREEMENT [PARTNERSHIP INTEREST UNITS] (this “Agreement”) dated effective as of ______, 20___, is made by [______], a [______] (the “Pledgor”), in favor of ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership (“Ashford”). RECITALS      A. The Pledgor and Ashford have entered into an Agreement of Purchase and Sale, dated as of ______, 20___(as amended or otherwise modified from time to time, the “Purchase Agreement”), wherein the Pledgor has agreed to sell, among other things, that certain hotel property as described therein and identified on Exhibit A attached hereto and fully incorporated herein by reference for all purposes, in consideration for, among other things, Ashford’s issuance to the Pledgor of the units of limited partnership interest in Ashford as described on Exhibit A attached hereto (the “Ashford Units”).      B. Pursuant to the terms of the Purchase Agreement, including Section 5.1(h), Section 6.7 and Article IX, and the Closing Documents, the Pledgor has agreed, among other things, to indemnify and hold Ashford harmless from certain claims, costs and liabilities as provided therein (the “Indemnity Obligations”).      C. In order to secure the Indemnity Obligations, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor has agreed to pledge and grant a security interest in ______ of the Ashford Units (collectively, the “Pledged Units”) as security for the Indemnity Obligations upon the terms and conditions and for the time period as set forth below. AGREEMENT      NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) paid by Ashford to the Pledgor, the mutual agreements, covenants and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and Ashford agree as follows: SECTION 1. Defined Terms: Interpretation.      1.01 Defined Terms.           (a) The capitalized terms used herein which are not defined herein, shall have the meaning as set forth in the Purchase Agreement. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------             (b) Unless otherwise defined herein or in the Purchase Agreement, terms defined in Articles 8 and 9 of the UCC are used herein as therein defined.           (c) As used in this Agreement, the following terms shall have the following meanings:           “Agreement” has the meaning specified in the Introduction hereof.           “Ashford” has the meaning specified in the Introduction hereof.           “Ashford Units” has the meaning specified in the Recitals.           “Collateral” has the meaning specified in Section 3.           “Event of Default” means the failure to timely satisfy a claim arising under or pursuant to the Indemnity Obligations, which failure continues for 30 days after written notice thereof to Pledgor.           “Indemnity Obligations” shall have the meaning specified in the Recitals.           “Lien” shall mean any mortgage, lien, pledge, charge, security interest or other encumbrance.           “Partnership” shall mean Ashford.           “Pledged Units” has the meaning specified in the Recitals.           “Pledgor” has the meaning specified in the Introduction hereof.           “Proceeds” has the meaning specified in Section 9.102 of the UCC.           “Purchase Agreement” has the meaning specified in the Recitals.           “Termination Date” has the meaning specified in Section 6.08.           “UCC” means the Uniform Commercial Code in effect from time to time in the State of ___; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted hereby in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of ___, “UCC” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.      1.02 Interpretation.           (a) In this Agreement, unless a clear contrary intention appears:           (i) the singular number includes the plural number and vice versa; Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------        (ii) reference to any gender includes each other gender;      (iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision;      (iv) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually, provided that nothing in this clause (iv) is intended to authorize any assignment not otherwise permitted by this Agreement;      (v) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof;      (vi) unless the context indicates otherwise, reference to any Section, Schedule or Exhibit means such Section hereof or such Schedule or Exhibit hereto;      (vii) the word “including” (and with correlative meaning “include”) means including, without limiting the generality of any description preceding such term;      (viii) with respect to the determination of any period of time, the word “from” means “from and including” and the word “to” means “to but excluding”; and      (ix) reference to any law, ordinance, statute, code, rule, regulation, interpretation or judgment means such law, ordinance, statute, code, rule, regulation, interpretation or judgment as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time.           (b) The Section headings herein are for convenience only and shall not affect the construction hereof.           (c) No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. SECTION 2. Representations and Warranties of the Pledgor.      The Pledgor represents and warrants as follows:           (a) The Pledgor is the sole beneficial owner of the Collateral. No Lien exists or will exist upon the Pledged Units at any time (and no right or option to acquire the same exists in favor of any other Person), except for the pledge and security interest in favor of Ashford created or provided for herein, which pledge and security interest constitutes a first priority pledge and security interest in and to all of the Pledged Units. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------             (b) The Pledged Units are duly authorized, validly existing, fully paid and non-assessable and are not nor will be subject to any contractual restriction, or any restriction pursuant to the partnership agreement of the Partnership, upon the transfer of the Pledged Units (except for any such restriction contained herein or in the Purchase Agreement).           (c) No authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Pledgor of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, or (ii) for the exercise by Ashford of the voting or other rights provided for in this Agreement or the remedies in respect of such Collateral pursuant to this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally).           (d) This Agreement creates a valid and first priority security interest in the Collateral, securing the payment of the Indemnity Obligations.           (e) Upon the filing of a financing statement in the office of the Secretary of State of the State of ___, Ashford will have a perfected first priority security interest in the Pledged Units. SECTION 3. Pledge of the Collateral.           (a) In order to secure the full and punctual payment, when due, of the Indemnity Obligations in accordance with the terms thereof, the Pledgor hereby hypothecates, transfers and grants to Ashford a continuing security interest in and to all right, title and interest of the Pledgor in the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the “Collateral”):      (i) the Pledged Units;      (ii) all securities, moneys or other property representing a distribution in respect of any of the Pledged Units, or representing a return of capital upon or in respect of the Pledged Units, or resulting from a split-up, revision, reclassification or other like change of the Pledged Units or otherwise received in exchange therefor, and any subscriptions, warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Units; and      (iii) all Proceeds of and to any of the property of the Pledgor described in the preceding clauses of this Section 3 (including all causes of action, claims and warranties now or hereafter held by the Pledgor in respect of any of the items listed above) and, to the extent related to any property described in said clauses or such Proceeds, all books, correspondence, credit files, records, invoices and other papers.           Ashford shall have the right, at any time after an Event of Default in its sole discretion and without notice to the Pledgor, to transfer to or to register in the name of Ashford or any of its nominees any or all of the Collateral, subject only to the rights of the Pledgor specified in Section 4.03 hereof. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------             (b) The inclusion of Proceeds in this Agreement does not authorize the Pledgor to sell, dispose of or otherwise use the Collateral in any manner not specifically authorized hereby or by the Purchase Agreement. SECTION 4. Delivery; Further Assurances; Remedies.      4.01 Delivery and Other Perfection. Until the Termination Date: the Pledgor shall           (a) if any of the securities, instruments, moneys or property required to be pledged by the Pledgor under Section 3(a) are received by the Pledgor, forthwith either (x) transfer and deliver to Ashford such securities or instruments so received by the Pledgor duly endorsed in blank or accompanied by undated powers duly executed in blank), all of which thereafter shall be held by Ashford pursuant to the terms of this Agreement as part of the Collateral or (y) take such other action as Ashford shall deem necessary or appropriate to duly record the Lien created hereunder in such securities, instruments, moneys or other property in Section 3(a), clauses (i), (ii) and (iii); and           (b) give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be reasonably requested by Ashford in order to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable Ashford to exercise and enforce its rights hereunder with respect to such pledge and security interest, including causing any or all of the Collateral to be transferred of record into the name of Ashford or its nominee (and Ashford agrees that if any Collateral is transferred into its name or the name of its nominee, Ashford will thereafter promptly give to the Pledgor copies of any notices and communications received by it with respect to the Collateral). The Pledgor hereby authorizes Ashford to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.      4.02 Other Financing Statements and Liens. Until the Termination Date,           (a) without the prior written consent of Ashford, the Pledgor shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which Ashford is not named as the sole secured party.           (b) Pledgor agrees that, from time to time upon the written request of Ashford, the Pledgor will execute and deliver such further documents and do such other acts and things as Ashford may reasonably request in order fully to effect the purposes of this Agreement.      4.03 Rights of the Pledgor.           (a) Unless an Event of Default shall have occurred and be continuing and Ashford has notified the Pledgor to the contrary, the Pledgor shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the Collateral for all purposes Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5 --------------------------------------------------------------------------------   not inconsistent with the terms of this Agreement, the Purchase Agreement, or any other instrument or agreement referred to herein or therein, provided that the Pledgor agrees that it will not vote the Collateral in any manner that is inconsistent with the terms of this Agreement, the Purchase Agreement, or any such other instrument or agreement; and Ashford shall execute and deliver to the Pledgor or cause to be executed and delivered to the Pledgor all such proxies, powers of attorney, dividend and other orders, and all such instruments, without recourse, as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the rights and powers that it is entitled to exercise pursuant to this Section 4.03(a).           (b) The Pledgor shall be entitled to receive and retain any and all distributions paid in respect of the Collateral, provided, however, that any and all (i) distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Collateral, (ii) distributions paid or payable in cash in respect of any Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed in redemption of, or in exchange for any Collateral, shall be, and shall be forthwith delivered to Ashford to hold as, Collateral and shall, if received by the Pledgor, be received in trust for the benefit of Ashford, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to Ashford as Collateral in the same form as so received (with any necessary endorsement).           (c) If any Event of Default shall have occurred, then so long as such Event of Default shall continue, and whether or not Ashford exercises any available right to declare any Indemnity Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Agreement, the Purchase Agreement, or any other agreement relating to such Indemnity Obligations, and Ashford so requires by notice to the Pledgor, all distributions received by the Pledgor on the Collateral shall be paid directly by the Pledgor to Ashford and retained by it as part of the Collateral, subject to the terms of this Agreement, and, if Ashford shall so request in writing, the Pledgor agrees to execute and deliver to Ashford appropriate additional distribution and other orders and documents to that end, provided that if such Event of Default is cured, any such distribution theretofore paid to Ashford shall, upon request of the Pledgor (except to the extent theretofore applied to the Indemnity Obligations), be returned by Ashford to the Pledgor.      4.04 Events of Default, Etc.           (a) During the period during which an Event of Default shall have occurred and be continuing:      (i) Ashford shall have all of the rights and remedies with respect to the Collateral of a secured party under the UCC (to the extent permitted by law whether or not the UCC is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction including if Ashford has notified the Pledgor that it intends to exercise such right, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 6 --------------------------------------------------------------------------------        as if Ashford were the sole and absolute owner thereof (and the Pledgor agrees to take all such action as may be appropriate to give effect to such right);      (ii) Upon and during the continuance of an Event of Default, Ashford in its discretion may, in its name or in the name of the Pledgor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and      (iii) Ashford may, upon not less than ten (10) Business Days’ prior authenticated written notice to the Pledgor of the time and place, with respect to the Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of Ashford or any of their respective agents, sell, assign or otherwise dispose of all or any part of such Collateral, at such place or places as Ashford deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, and Ashford or any lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Pledgor, any such demand, notice and right or equity being hereby expressly waived and released. The Pledgor agrees that such ten (10) Business Days’ notice constitutes “reasonable notification” within the meaning of Section 9.612 of the UCC. Ashford may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned.           (b) The proceeds of each collection, sale or other disposition under this Section 4.04 shall be applied in accordance with Section 4.07 hereof.           (c) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, Ashford may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices lower than at a public sale without such restrictions, and notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Ashford shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the Partnership thereof to register it for public sale.      4.05 Removals, Etc. Without at least 30 days’ prior written notice to Ashford, the Pledgor shall not (a) maintain any of its books and records with respect to the Collateral at any office or maintain its principal place of business at any place other than at the address indicated for the Pledgor in the Purchase Agreement, or (b) change its name, or the name under which it does business, from the name shown on the signature pages hereto. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 7 --------------------------------------------------------------------------------        4.06 Private Sale. Ashford shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 4.04 hereof conducted in a commercially reasonable manner and in compliance with all applicable securities laws. The Pledgor hereby waives any claims against Ashford arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Indemnity Obligations.      4.07 Application of Proceeds. Except as otherwise herein expressly provided or as otherwise required by law, the proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash at the time held by Ashford under this Section 4, shall be applied by Ashford in accordance with the Purchase Agreement. Ashford may make distributions hereunder in cash or in kind or on a ratable basis or in any combination thereof.      4.08 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to Ashford, upon the occurrence and during the continuance of any Event of Default, Ashford is hereby appointed the attorney-in-fact of the Pledgor for the purpose of carrying out the provisions of this Section 4 and taking any action and executing any instruments that Ashford may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as Ashford shall be entitled under this Section 4 to make collections in respect of the Collateral, to the extent permitted by law, Ashford shall have the right and power to receive, endorse and collect all checks made payable to the order of the Pledgor representing any distribution or other payment in respect of the Collateral or any part thereof and to give full discharge for the same. SECTION 5. Ashford.      5.01 Limitation on Duty of Ashford in Respect of Collateral. The powers conferred on Ashford hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Ashford shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Ashford shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which Ashford accords its own property, it being understood that Ashford shall not have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, tenders or other matters relative to any Collateral, whether or not Ashford has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Collateral.      5.02 Appointment of Agents and Attorneys-in-Fact. Ashford may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct (except for gross negligence, willful misconduct or unlawful conduct) of any such Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 8 --------------------------------------------------------------------------------   agents or attorneys-in-fact selected by it in good faith. Without limiting the foregoing, at any time or times, in order to comply with any legal requirement in any jurisdiction, Ashford may appoint another bank or trust company or one or more other Persons, either to act as co-agent or co-agents, jointly with Ashford with such power and authority as may be necessary for the effective operation of the provisions hereof and may be specified in the instrument of appointment. SECTION 6. Miscellaneous.      6.01 No Waiver. No failure on the part of Ashford to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Ashford of any right, power or remedy hereunder operate as a waiver thereof; nor shall any single or partial exercise by Ashford of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.      6.02 Notices. All notices, requests, consents and demands hereunder shall be in writing, authenticated if necessary, and telecopied or delivered to the intended recipient pursuant to Section 10.9 of the Purchase Agreement and shall be deemed to have been given at the times specified in that Section 10.9.      6.03 Expenses. Without duplication of the obligations of Pledgor set forth in the Purchase Agreement, the Pledgor agrees to reimburse Ashford for all reasonable costs and expenses of Ashford (including the reasonable fees and expenses of legal counsel) in connection with (a) any Event of Default and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with (i) performance by Ashford of any obligations of the Pledgor in respect of the Collateral that the Pledgor has failed or refused to perform, (ii) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of Ashford in respect thereof, by litigation or otherwise, (iii) judicial or regulatory proceedings and (iv) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (b) the enforcement of this Section 6.03, and all such costs and expenses shall be Indemnity Obligations entitled to the benefits of the collateral security provided pursuant to Section 3 hereof.      6.04 Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Pledgor and Ashford. Any such amendment or waiver shall be binding upon Ashford, each holder of any of the Indemnity Obligations and the Pledgor.      6.05 Certain Documents. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to Ashford, the determination of such satisfaction shall be made by Ashford in its sole and exclusive judgment. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 9 --------------------------------------------------------------------------------        6.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Pledgor, Ashford, and each holder of any of the Indemnity Obligations, provided, however, that the Pledgor shall not assign or transfer its rights hereunder without the prior written consent of Ashford. In the event of a permitted assignment of all or any of the Indemnity Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Agreement shall be binding on the Pledgor and its successors and assigns.      6.07 Marshaling of Assets. All rights to marshaling of assets of the Pledgor, including any such right with respect to the Collateral, are hereby waived by the Pledgor.      6.08 Termination. This Agreement shall terminate upon the earlier to occur of:           (a) Payment in full, satisfaction and/or release of the Indemnity Obligations, or           (b) One (1) year from the date hereof (the “Termination Date”).      Upon termination as provided herein, Ashford shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or upon the order of the Pledgor and shall cause all previously filed financing statements to be terminated of record.      6.09 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of Ashford in order to carry out the intentions of the parties hereto as nearly as may be possible, and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.      6.10 Waivers. The Pledgor hereby expressly waives, to the extent permitted by applicable law (a) notice of the acceptance by Ashford of this Agreement, (b) notice of the existence or creation or non-payment of all or any of the Indemnity Obligations, (c) presentment, demand, notice of dishonor, protest, intent to accelerate, acceleration and all other notices whatsoever, and (d) all diligence in collection or protection of or realization upon the Indemnity Obligations or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing.      6.11 Rescission. The Pledgor agrees that, if at any time all or any part of any payment theretofore applied by Ashford to any of the Indemnity Obligations is or must be rescinded or returned by Ashford for any reason whatsoever (including the insolvency, bankruptcy or reorganization of the Pledgor or any of its Affiliates), such Indemnity Obligations shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by Ashford, and the security interests granted hereunder shall continue to be effective or be reinstated, as the case may be, as to such Indemnity Obligations, all as though such application by Ashford had not been made. Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 10 --------------------------------------------------------------------------------        6.12 Limitation by Law. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and which may not be effectively waived by the Pledgor and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.      6.13 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and either of the parties hereto may execute this Agreement by signing any such counterpart.      6.14 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interests or remedies provided hereunder in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of Texas. [Signature Page to Follow] Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 11 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed by its authorized officer as of the day and year first above written.               PLEDGOR:         ,           a                     By:                   Name:                   Title:               AGREED TO AND ACCEPTED BY ASHFORD THIS ___DAY OF ___, 20___: ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership By:   Ashford OP General Partner LLC, a Delaware limited liability company, as its general partner                   By:           David A. Brooks        Vice President      Exhibit N Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 12 --------------------------------------------------------------------------------   EXHIBIT O TAX REPORTING AND PROTECTION AGREEMENT           Exhibit O Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   SCHEDULE 1 INTENTIONALLY OMITTED Schedule 1 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   SCHEDULE 2 OPERATING AGREEMENTS AND LEASED PROPERTY AGREEMENTS AND OFF-SITE FACILITY AGREEMENTS 1. Agreement dated May 14, 1981, by and between Eads Associates and Commonwealth of Virginia pertaining to the pedestrian underpass at the Hotel. 2. Starbucks License 3. Parking Service Management Agreement dated June 20, 2005, as amended, by and between Town Park, Ld., and Eads Partnership Limited pertaining to valet parking and parking services management. Schedule 2 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   SCHEDULE 3 EMPLOYMENT AGREEMENTS None Schedule 3 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   SCHEDULE 4 OCCUPANCY AGREEMENTS None Schedule 4 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 1 --------------------------------------------------------------------------------   SCHEDULE 5 ADDITIONAL DEFINED TERMS (a)   “Adjusted EBITDA” means, with respect to any fiscal period with respect to which EBITDA is being determined, EBITDA for such period less the FF&E Reserve Amount.   (b)   “Capitalized Lease Obligation” means the obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.   (c)   “Consolidated” (or “consolidated”) means, when used with reference to financial statements or financial statement items of a Person, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.   (d)   “Consolidated Subsidiaries” means, as to any Person, Subsidiaries of such Person with respect to which such Person’s financial statements are prepared on a Consolidated basis. As used in the Senior Credit Facility, any reference to financial statement items of Consolidated Subsidiaries of Ashford Hospitality Trust, Inc. shall mean such items as determined on a Consolidated basis with Ashford Hospitality Trust, Inc. Without limiting the foregoing, the Partnership shall be deemed to be a Consolidated Subsidiary of Ashford Hospitality Trust, Inc.   (e)   “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.   (f)   “EBIDTA” means, with respect to any fiscal period as applicable to the Ashford Hospitality Trust, Inc. and its Consolidated Subsidiaries, Net Income, excluding gains (or losses) from debt restructuring and sales of property and other extraordinary items, plus to the extent deducted in the determination of Net Income for such fiscal period (i) interest expense, (ii) federal, state and local income taxes, (iii) depreciation, (iv) amortization, and (v) non-cash deferred compensation paid to officers and employees of Ashford Hospitality Trust, Inc. or its Consolidated Subsidiaries during such fiscal period, and (vi) other non-cash expenses and after adjustments for unconsolidated partnerships, joint ventures or other entities. (Adjustments for such unconsolidated entities will be calculated to reflect Net Income on a basis acceptable to the administrative agent). Note: Ashford Hospitality Trust, Inc. does not have any unconsolidated entities as of the Effective Date.   (g)   “FF&E Reserve Amount” means, as applied to any Hotel with respect to any fiscal period of the Partnership, an amount equal to four percent (4%) of the aggregate gross revenue derived from such Hotel. Schedule 4 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 2 --------------------------------------------------------------------------------   (h)   “Fixed Charge Coverage Ratio” means, for any fiscal period of Ashford Hospitality Trust, Inc., the ratio of (a) Adjusted EBITDA for such fiscal period to (b) the sum of (i) Interest Expense for such fiscal period, (ii) Principal Expense for such fiscal period and (iii) the aggregate amount of all dividend payments that become due and payable by Ashford Hospitality Trust, Inc. and its Consolidated Subsidiaries during such fiscal period to the holders of preferred shares (excluding Security Capital convertible preferred dividends).   (i)   “GAAP” means generally accepted accounting principles in the United States of America which are recognized as such by the American Institute of Certified Public Accountants or by the financial Accounting Standards Board or through appropriate boards or committees thereof after the Effective Date, and which are consistently applied for all periods, so as to properly reflect the financial position of a Person.   (j)   “Hotel” means a hotel, including any retail, convention, parking and restaurant space contained therein or operated by the owner of such hotel in connection therewith and any office space in the same real estate parcel as the hotel (specifically including land, building, improvements, FF&E, and all related personal property used in connection with such hotel operations) owned or leased by the Partnership or any of its wholly-owned Subsidiaries.   (k)   “Indebtedness” of any Person means, without duplication, (i) all obligations of such Person for borrower money or with respect to deposits or advances of any kind; (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of such Person upon which interest charges are customarily paid, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (v) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business which are not more than sixty (60) days past due), (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed (vii) all guarantees by such Person of Indebtedness of others, (viii) all Capital Lease Obligations of such Person and obligations in respect of synthetic leases, (ix) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (x) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (xi) all obligations of such Person in respect of any Swap Agreements; provided, that the amount of Indebtedness under a Swap Agreement shall be determined based upon the Swap Termination Value of such Swap Agreement.   (l)   “Interest Expense” means, with respect to any fiscal period as applicable to Ashford Hospitality Trust, Inc. or its Consolidated Subsidiaries, the interest expense of Ashford Hospitality Trust, Inc. or its Consolidated Subsidiaries for such fiscal period determined on a Consolidated basis in accordance with GAAP, and shall in any event include (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion Schedule 4 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 3 --------------------------------------------------------------------------------       of any Capitalized Lease Obligation allocated to interest expense, (iv) payments of interest expense in kind and (v) any sums payable by Ashford Hospitality Trust, Inc. or its Consolidated Subsidiaries on account of any “net payments” made to a counterparty under any Rate Agreement, but shall in any event exclude non-recurring interest expenses which may be defined as interest expense under GAAP, including prepayment fees and premiums, exit fees, defeasance costs and charges and sums similar in nature.   (m)   “Lien” means with respect to any asset, (i) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (iii) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.   (n)   “Net Income” means with respect to any Person and any period, the net income (or loss) for the period at issue, of such Person for the period at issue, as determined on a consolidated basis in accordance with GAAP.   (o)   “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority (i.e., the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to the government) or other entity.   (p)   “Principal Expense” means, with respect to any fiscal period as applicable to Ashford Hospitality Trust, Inc. and its Consolidated Subsidiaries, the aggregate amount of all regularly scheduled principal payments that become due and payable by Ashford Hospitality Trust, Inc. and its Consolidated Subsidiaries during such fiscal period, determined on a Consolidated basis in accordance with GAAP, and including in any event the portion of any Capitalized Lease Obligation allocable to principal and payments of principal in kind, provided, that, in clarification of the foregoing, no non-regularly scheduled payments, such as balloon payments, shall constitute a “Principal Expense”.   (q)   “Rate Agreement” means an interest rate swap (including any Swap Agreement), cap or other interest rate protection product.   (r)   “Senior Credit Facility” means that certain Credit Agreement dated as of February 5, 2004 among the Partnership, Calyon New York Branch (“Calyon”), Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) and Wachovia Bank, National Association as the lenders, the guarantors from time to time party thereto, Merrill Lynch, as syndication agent, and Calyon, as administrative agent, as heretofore and/or hereafter amended from time to time, and any facility that at any time hereafter replaces or refinances same.   (s)   “Subsidiaries” (or “subsidiary”) means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity Schedule 4 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 4 --------------------------------------------------------------------------------       the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (i) of which securities or other ownership interests representing more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.   (t)   “Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Ashford Hospitality Trust, Inc. or any of its Subsidiaries shall be a Swap Agreement.   (u)   “Swap Termination Value” means, with respect to any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (i) for any date on or after the date such Swap Agreements have been closed out and termination values determined in accordance therewith, such termination values, and (ii) for any date prior to the date referenced in clause (i), the amounts determined as the mark-to-market values for such Swap Agreements, as determined based upon one or more mid-market or other readily available quotations provided by an recognized dealer in such Swap Agreements (which may include a lender or any affiliate of a lender). Schedule 4 Ashford Hospitality Limited Partnership/Marriott Crystal City Gateway Agreement of Purchase and Sale 5

  Exhibit 10.1 THIRD AMENDMENT      THIRD AMENDMENT (this “Amendment”), dated as of July 7, 2006, among TOWN SPORTS INTERNATIONAL HOLDINGS, INC. (“Holdco”), TOWN SPORTS INTERNATIONAL, LLC (f/k/a TOWN SPORTS INTERNATIONAL, INC.) (the “Borrower”), the financial institutions party to the Credit Agreement referred to below (the “Lenders”), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the “Administrative Agent”), and acknowledged and agreed to by each of the Subsidiary Guarantors. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below. W I T N E S S E T H:      WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement, dated as of April 16, 2003 (as amended, modified and/or supplemented to, but not including, the date hereof, the “Credit Agreement”);      WHEREAS, the Borrower has requested, and the Lenders have agreed, that the Total Revolving Loan Commitment be increased as provided herein; and      WHEREAS, subject to the terms and conditions of this Amendment, the parties hereto agree as follows;      NOW, THEREFORE, it is agreed:      1. As of the Third Amendment Effective Date (as defined below), the Total Revolving Loan Commitment will be increased from $50,000,000 to $75,000,000, as such amount may be reduced from time to time after the Third Amendment Effective Date pursuant to the terms of the Credit Agreement.      2. To the extent that any Revolving Loans are outstanding on the Third Amendment Effective Date (and after such effect thereto), the Borrower shall, in coordination with the Administrative Agent, repay outstanding Revolving Loans of certain of the Lenders, and incur additional Revolving Loans from certain other Lenders (including the New Lenders), in each case to the extent necessary so that all of the Lenders participate in each outstanding Borrowing of Revolving Loans pro rata on the basis of their respective Revolving Loan Commitments (after giving effect to any increase in the Total Revolving Loan Commitment pursuant to this Amendment) and with the Borrower being obligated to pay to the respective Lenders any costs of the type referred to in Section 1.11 in connection with any such repayment and/or incurrence. For the avoidance of doubt, with respect to all Letters of Credit outstanding on the Third Amendment Effective Date and any Unpaid Drawings relating thereto, there shall be an automatic adjustment to the participations pursuant to Section 2.04 of the Credit Agreement to reflect the new Percentages of the Lenders after giving effect to the Third Amendment Effective Date.   --------------------------------------------------------------------------------        3. Schedule I to the Credit Agreement is hereby amended by replacing such Schedule in its entirety with the Schedule I attached hereto.      4. This Amendment shall become effective on the date (the “Third Amendment Effective Date”) when:           (A) Holdco, the Borrower, the Subsidiary Guarantors, the Required Lenders, each Lender whose Revolving Loan Commitment is being increased hereby (each an “Increased Lender”) and each Lender who has signed a counterpart of this Amendment and is not a Lender immediately prior to giving effect to the Third Amendment Effective Date (each a “New Lender’) shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Administrative Agent at the Notice Office; and           (B) the Borrower shall have paid to (x) each Increased Lender, a non-refundable cash fee in an amount equal to 0.50% of the amount by which such Increased Lender’s Revolving Loan Commitment is increased on the Third Amendment Effective Date and (y) each New Lender, a non-refundable cash fee in an amount equal to 0.50% of such New Lender’s Revolving Loan Commitment on the Third Amendment Effective Date, all of which fees shall be paid by the Borrower to the Administrative Agent for distribution to the Lenders entitled thereto.      5. Each New Lender (a) agrees that from and after the Third Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of its Revolving Loan Commitment, shall have the obligations of a Lender thereunder, (b) if it is organized under the laws of a jurisdiction outside the United States, represents and warrants that it has delivered any tax documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by it, (c) appoints and authorizes each of the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to or otherwise conferred upon the Administrative Agent or the Collateral Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto and (d) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender.      6. In order to induce the Lenders to enter into this Amendment, the Borrower hereby represents and warrants that (i) no Default or Event of Default exists on the Third Amendment Effective Date, both before and after giving effect to this Amendment, and (ii) on the Third Amendment Effective Date, both before and after giving effect to this Amendment, all representations and warranties contained in the Credit Agreement and in the other Credit Documents are true and correct in all material respects (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).      7. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same -2- --------------------------------------------------------------------------------   instrument. A complete set of counterparts shall be delivered to the Borrower and the Administrative Agent.      8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.      9. From and after the Third Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.      10. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. * * * -3- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.                       TOWN SPORTS INTERNATIONAL, LLC             By:   Town Sports International Holdings, Inc., Its Sole Member                               By:       /s/ Richard G. Pyle                                   Name: Richard G. Pyle                 Title: CFO                           TOWN SPORTS INTERNATIONAL HOLDINGS, INC.                           By:       /s/ Richard G. Pyle                           Name: Richard G. Pyle             Title: CFO       --------------------------------------------------------------------------------               DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent       By:   /s/ Carin Keegan         Name:   Carin Keegan        Title:   Vice President              By:   /s/ Evelyn Thierry         Name:   Evelyn Thierry        Title:   Vice President        --------------------------------------------------------------------------------               BNP PARIBAS       By:   /s/ Charles Romano         Name:   Charles Romano        Title:   Vice President              By:   /s/ Cecile Scherer         Name:   Cecile Scherer        Title:   Director Merchant Banking Group        --------------------------------------------------------------------------------               CIT LENDING SERVICES CORPORATION       By:   /s/ David Manheim         Name:   David Manheim        Title:   Vice President        --------------------------------------------------------------------------------               MERRILL LYNCH CAPITAL , a division of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.       By:   /s/ F. Delangle         Name:   F. Delangle        Title:   Vice President        --------------------------------------------------------------------------------               CREDIT SUISSE       By:   /s/ Bill O’Daly         Name:   Bill O’Daly        Title:   Director              By:   /s/ Phillip Ho         Name:   Phillip Ho        Title:   Director        --------------------------------------------------------------------------------               GOLDMAN SACHS CREDIT PARTNERS, L.P.       By:   /s/ William W. Archer         Name:   William W. Archer        Title:   Managing Director        --------------------------------------------------------------------------------               ROYAL BANK OF CANADA       By:   /s/ William J. Cegglano         Name:   William J. Cegglano        Title:   Authorized Signatory        --------------------------------------------------------------------------------   Acknowledged and Agreed to: TSI 217 Broadway, Inc. TSI Andover, Inc. TSI Arthro-Fitness Services, Inc. TSI Astoria, Inc. TSI Battery Park, Inc. TSI Bayridge, Inc. TSI Boylston, Inc. TSI Broadway, Inc. TSI Brooklyn Belt, Inc. TSI Brunswick, Inc. TSI Cash Management, Inc. TSI Chevy Chase, Inc. TSI Coble Hill, Inc. TSI Columbia Heights, Inc. TSI Commack, Inc. TSI Connecticut Avenue, Inc. TSI Copley, Inc. TSI Court Street, Inc. TSI Croton, Inc. TSI Danbury, Inc. TSI Danvers, Inc. TSI Downtown Crossing, Inc. TSI Dupont Circle, Inc. TSI Dupont II, Inc. TSI East Cambridge, Inc. TSI East Meadow, Inc. TSI East 23, Inc. TSI East 31, Inc. TSI East 34, Inc. TSI East 36, Inc. TSI 41, Inc. TSI East 51, Inc. TSI, East 59, Inc. TSI East 76, Inc. TSI East 91, Inc. TSI F Street, Inc. TSI Fifth Avenue, Inc. TSI First Avenue, Inc. TSI Forest Hills, Inc. TSI Framingham, Inc.           By:   /s/ Richard G. Pyle                   Name: Richard G. Pyle         Title: CFO       --------------------------------------------------------------------------------   TSI Franklin (MA), Inc. TSI Gallery Place, Inc. TSI Garden City, Inc. TSI Georgetown, Inc. TSI Glover, Inc. TSI Grand Central, Inc. TSI Great Neck, Inc. TSI Greenwich, Inc. TSI Hartsdale, Inc. TSI Hawthorne, Inc. TSI Herald, Inc. TSI Holding (CIP), Inc. TSI Holdings (DC), Inc. TSI Holdings (MA), Inc. TSI Holdings (MD), Inc. TSI Holdings (PA), Inc. TSI Holdings (VA), Inc. TSI Huntington, Inc. TSI Insurance, Inc. TSI International, Inc. TSI Irving Place, Inc. TSI K Street, Inc. TSI Larchmont, Inc. TSI Lexington (MA), Inc. TSI Lincoln, Inc. TSI Long Beach, Inc. TSI Lynnfield, Inc. TSI M Street, Inc. TSI Madison, Inc. TSI Mamaroneck, Inc. TSI Mercer Street, Inc. TSI Midwood, Inc. TSI Murray Hill, Inc. TSI Nanuet, Inc. TSI Natick, Inc. TSI Newbury Street, Inc. TSI Oceanside, Inc. TSI Port Jefferson, Inc. TSI Reade Street, Inc. TSI Rego Park, Inc. TSI Rye, Inc. TSI Scarsdale, Inc.           By:   /s/ Richard G. Pyle                   Name: Richard G. Pyle         Title: CFO       --------------------------------------------------------------------------------   TSI Seaport, Inc. TSI Sheriden, Inc. TSI Smithtown, Inc. TSI Soho, Inc. TSI Somers, Inc. TSI South End, Inc. TSI South Park Slope, Inc. TSI South Station, Inc. TSI Stamford Downtown, Inc. TSI Stamford Post, Inc. TSI Stamford Rinks, Inc. TSI Staten Island, Inc. TSI Supplements, Inc. TSI Syosset, Inc. TSI University Management, Inc. TSI Varick Street, Inc. TSI Wall Street, Inc. TSI Washington, Inc. TSI Watertown, Inc. TSI Wellesley, Inc. TSI West Newton, Inc. TSI West Nyack, Inc. TSI West 14, Inc. TSI West 16, Inc. TSI West 23, Inc. TSI West 38, Inc. TSI West 41, Inc. TSI West 44, Inc. TSI West 48, Inc. TSI West 52, Inc. TSI West 73, Inc. TSI West 76, Inc. TSI West 80, Inc. TSI West 94, Inc. TSI West 125, Inc. TSI Westport, Inc. TSI Weymouth, Inc. TSI White Plains City Center, Inc. TSI White Plains, Inc. TSI Whitestone, Inc. TSI Woodmere, Inc.           By:   /s/ Richard G. Pyle                   Name: Richard G. Pyle         Title: CFO       --------------------------------------------------------------------------------   TSI Alexandria, LLC TSI Allston, LLC TSI Ardmore, LLC TSI Bethesda, LLC TSI Bulfinch, LLC TSI Central Square, LLC TSI Centreville, LLC TSI Cherry Hill, LLC TSI Clarendon, LLC TSI Colonia, LLC TSI Davis Square, LLC TSI Dobbs Ferry, LLC TSI East 48, LLC TSI East 86, LLC TSI Englewood, LLC TSI Fairfax, LLC TSI Fenway, LLC TSI Fort Lee, LLC TSI Franklin Park, LLC TSI Freehold, LLC TSI Germantown, LLC TSI Glendale, LLC TSI Highpoint, LLC TSI Hoboken, LLC TSI Hoboken North, LLC TSI Holdings (IP), LLC TSI Holdings (NJ), LLC TSI Jersey City, LLC TSI Livingston, LLC TSI Mahwah, LLC TSI Market Street, LLC TSI Marlboro, LLC TSI Matawan, LLC TSI Montclair, LLC TSI Nashua, LLC TSI Newark, LLC TSI No Sweat, LLC TSI North Bethesda, LLC           By:   /s/ Richard G. Pyle                   Name: Richard G. Pyle         Title: CFO       --------------------------------------------------------------------------------   TSI Norwalk, LLC TSI Woodmere, Inc. TSI Old Bridge, LLC TSI Parsippany, LLC TSI Plainsboro, LLC TSI Princeton, LLC TSI Princeton North, LLC TSI Radnor, LLC TSI Ramsey, LLC TSI Ridgewood, LLC TSI Rittenhouse, LLC TSI Rodin Place, LLC TSI Silver Spring, LLC TSI Society Hill, LLC TSI Somerset, LLC TSI South Bethesda, LLC TSI Springfield, LLC TSI Sterling, LLC TSI Waltham, LLC TSI Water Street, LLC TSI Wellington Circle, LLC TSI West Caldwell, LLC TSI West Springfield, LLC TSI Westwood, LLC           By:   /s/ Richard G. Pyle                   Name: Richard G. Pyle         Title: CFO       --------------------------------------------------------------------------------   SCHEDULE I COMMITMENTS               Revolving Loan   Lender   Commitment   Deutsche Bank Trust Company Americas   $ 22,500,000.00   BNP Paribas   $ 12,500,000.00   CIT Lending Services Corporation   $ 12,500,000.00   Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc.   $ 12,500,000.00   Credit Suisse   $ 10,000,000.00   Goldman Sachs Credit Partners L.P.   $ 3,500,000.00   Royal Bank of Canada   $ 1,500,000.00           TOTAL:   $ 75,000,000.00    

          January 23, 2006   Kass Bradley East Greenville, PA Dear Kass: It is our great pleasure to inform you that you will be a participant in the 2006 Knoll, Inc. Incentive Compensation Program. We need to do three things to succeed in 2006. Improve our gross margins, continue to build on the sales and marketing initiatives that allowed us to gain share in 2005 and diligently manage our spending. Our success in 2006 will be a direct result of your ability to accomplish these objectives and achieve $110.6M Knoll, Inc. operating profit. Additionally, your award will be based on North America orders of $720M and meeting the Marketing budget of $7.2M. If you achieve this goal and Knoll earns an operating profit of $110.6M, you can qualify for a total target incentive payment of $500,000. This award is subject to our approval and that of the Knoll, Inc. Board of Directors. You must be employed by Knoll on the date this award is distributed in order to receive this incentive. We have great confidence in your ability to help Knoll profitably grow and look forward to being able to present you with your award in early 2007.       /s/ Andrew Cogan Andrew Cogan

Exhibit 10.11 EXECUTION COPY   ADMINISTRATION AGREEMENT This ADMINISTRATION AGREEMENT dated as of March 9, 2006 (as amended from time to time, the “Agreement”), among THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1, a Delaware statutory trust (the “Issuer”), WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity but solely as Owner Trustee (the “Owner Trustee”), U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as trustee under the Indenture (hereinafter defined) (the “Indenture Trustee”), THE NATIONAL COLLEGIATE FUNDING LLC, a Delaware limited liability company (the “Depositor”) and FIRST MARBLEHEAD DATA SERVICES, INC., a Massachusetts corporation (the “Administrator”). WHEREAS, the Issuer is issuing its (a) Student Loan Asset Backed Notes (the “Notes”) pursuant to the Indenture dated as of March 1, 2006 (the “Indenture”), between the Issuer and the Indenture Trustee, and (b) its trust certificates (the “Trust Certificates”) pursuant to the Trust Agreement dated as of March 9, 2006 (the “Trust Agreement”) among the Owner Trustee, The National Collegiate Funding LLC and The Education Resources Institute, Inc. (together with its successors in interest, the “Owners”). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement, or the Indenture (the Trust Agreement and the Indenture are referred to collectively herein as the “Basic Documents”); WHEREAS, pursuant to the Basic Documents, the Issuer, the Owner Trustee and the Depositor are required to perform certain duties in connection with (a) the Student Loans and other collateral pledged pursuant to the Indenture (the “Collateral”), (b) the Notes and (c) the Trust Certificates; WHEREAS, the Issuer, the Owner Trustee and the Depositor desire to have the Administrator perform certain of the duties of the Issuer referred to in the Basic Documents and any other documents signed by the Owner Trustee on behalf of the Issuer (collectively, the “Trust Related Agreements”) and to provide such additional services consistent with the terms of this Agreement and the Trust Related Agreements as the Issuer, the Owner Trustee, the Depositor may from time to time request; and WHEREAS, the Administrator has the capacity to provide the services required hereby and is willing to perform such services for the Issuer, the Owner Trustee and the Depositor on the terms set forth herein; NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:   --------------------------------------------------------------------------------       1. Duties of the Administrator.     (a) Duties with Respect to the Trust Related Agreements. (i)           The Administrator agrees to perform all its duties as Administrator and the duties of the Issuer under the Trust Related Agreements. In addition, the Administrator shall consult with the Owner Trustee regarding the duties of the Issuer under the Trust Related Agreements. The Administrator shall monitor the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the Issuer’s duties under the Trust Related Agreements. The Administrator shall prepare for execution by the Issuer, or shall cause the preparation by other appropriate persons or entities of, all such documents, reports, filings, instruments, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Trust Related Agreements. In furtherance of the foregoing, the Administrator shall take all appropriate action that is the duty of the Issuer to take pursuant to the Trust Related Agreements including, without limitation, such of the foregoing as are required with respect to the following matters under the Indenture: (A)         Directing the Indenture Trustee, by Issuer Order, to deposit moneys with Paying Agents, if any, other than the Indenture Trustee; (B)         Preparing and delivering notice to the Noteholders of any removal of the Indenture Trustee and the appointment of a successor Indenture Trustee; (C)         Preparing an Issuer Order and Officer’s Certificate and obtaining an Opinion of Counsel, if necessary, for any release of property of the Indenture Trust Estate; (D)         Preparing Issuer Requests and obtaining Opinions of Counsel with respect to the execution of amendments to the Indenture and the Trust Agreement and mailing notices to the Noteholders with respect to such amendments;   (E) Paying all expenses in connection with the issuance of the Notes; (F)          Taking all actions on behalf of the Issuer necessary under the TERI Guarantee Agreements; and (G)         Providing instructions to the Indenture Trustee as required by Section 8.02(d) of the Indenture.   (ii) The Administrator will: (A)         Indemnify the Indenture Trustee and its agents for, and hold them harmless against, any losses, liability or expense, including reasonable attorneys’ fees and expenses, incurred in the absence of willful misconduct, negligence or bad faith on the part of the Indenture Trustee and its agents, arising out of the willful misconduct, negligence or bad faith of the Administrator in the performance of the Administrator’s duties contemplated by this Agreement;   --------------------------------------------------------------------------------   (B)         Indemnify the Issuer and the Owner Trustee and their respective agents for, and hold them harmless against, any losses, liability or expense, including reasonable attorneys fees’ and expenses, incurred in the absence of willful misconduct, negligence or bad faith on the part of the Issuer and the Owner Trustee and their respective agents, arising out of the willful misconduct, negligence or bad faith of the Administrator in the performance of the Administrator’s duties contemplated by this Agreement; provided, however, that the Administrator shall not be required to indemnify the Indenture Trustee, the Issuer or the Owner Trustee pursuant to Section 1(a) (ii)(A) or (B) of this Agreement so long as the Administrator has acted pursuant to the instructions of the Owner Trustee or the Owners in accordance with Section 1(d) of this Agreement; and (C)         Pay to the Owner Trustee its fees and expenses as are set forth in section 10.01 of the Trust Agreement.   (b) [Intentionally Omitted]     (c) Additional Duties. (i)           In addition to the duties of the Administrator set forth above, the Administrator shall perform, or cause to be performed, its duties and obligations and the duties and obligations of the Owner Trustee on behalf of the Issuer under the Indenture and the Trust Agreement including, without limitation, those duties and obligations set forth on Schedule A hereto. In furtherance thereof, the Issuer shall execute and deliver to the Administrator and to each successor Administrator appointed pursuant to the terms hereof, one or more powers of attorney substantially in the form of Exhibit A hereto, appointing the Administrator as the attorney-in-fact of the Issuer, for the purpose of executing on behalf of the Issuer all such documents, reports, filings, instruments, certificates and opinions as are required to be executed by the Issuer pursuant to such agreements. Subject to Section 4 of this Agreement, and in accordance with the directions of the Issuer, the Depositor and the Owner Trustee, the Administrator shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Trust Related Agreements) as are not covered by any of the foregoing provisions and as are expressly requested by the Issuer, the Depositor, the Indenture Trustee or the Owner Trustee and are reasonably within the capability of the Administrator. The Administrator agrees to perform such obligations and deliver such notices as are specified as to be performed or delivered by the Administrator under the Indenture and the Trust Agreement. (ii)          In carrying out the foregoing duties or any of its other obligations under this Agreement, the Administrator may enter into transactions or otherwise deal with any of its affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer, the Indenture Trustee, or the Owner Trustee, and shall be, in the Administrator’s opinion, no less favorable to the Issuer than would be available from unaffiliated parties.   --------------------------------------------------------------------------------   (iii)        In carrying out any of its obligations under this Agreement, the Administrator may act either directly or through agents, attorneys, accountants, independent contractors and auditors and may enter into agreements with any of them. (iv)         In carrying out its duties under this Agreement with respect to delinquent or defaulted Student Loans, the Administrator may retain and employ agents to collect on such Student Loans and to commence any actions or proceedings the agents deem necessary in connection with such collection efforts on such Student Loans. (v)          The Administrator shall cause a nationally recognized independent public accounting firm to conduct an annual audit of the Financed Student Loans owned by the Issuer in accordance with procedures acceptable to the Rating Agencies and shall provide the Rating Agencies with a copy of the audit report.   (d) Non-Ministerial Matters. (i)           With respect to matters that in the reasonable judgment of the Administrator are non-ministerial, the Administrator shall not be under any obligation to take any action, and in any event shall not take any action unless the Administrator shall have received instructions from the Indenture Trustee, in accordance with the Indenture, from the Owner Trustee or the Owners, in accordance with the Trust Agreement. For the purpose of the preceding sentence, “non-ministerial matters” shall include, without limitation: (A)         The amendment of or any supplement to the Trust Related Agreements; (B)         The initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer, except for claims or lawsuits initiated in the ordinary course of business by the Issuer or their respective agents or nominees for the collection of the Student Loans owned by the Issuer; (C)         The appointment of successor administrators and successor indenture trustees pursuant to the Indenture, or the consent to the assignment by the Administrator or Indenture Trustee of its obligations under the Indenture;   (D) [Intentionally omitted.]     (E) The removal of the Indenture Trustee. (ii)          Notwithstanding anything to the contrary in this Agreement, the Administrator shall not be obligated to, and shall not (A) make any payments to the Noteholders under the Trust Related Agreements, (B) sell the Collateral pursuant to the Indenture or (C) take any action that the Issuer directs the Administrator not to take on its behalf. (e)          Actions on behalf of the Owners. Pursuant to Section 4.05 of the Trust Agreement, each Owner has appointed the Administrator as its true and lawful attorney-in-fact with respect to certain matters described in such Section 4.05.   --------------------------------------------------------------------------------   2.            Records. The Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Issuer, the Indenture Trustee the Noteholders, the Certificateholders and the Owners at any time during normal business hours. 3.            Compensation. As compensation for the performance of the Administrator’s obligations under this Agreement and as reimbursement for its expenses related thereto, the Administrator shall be entitled to: (a)          A fee (the “Administration Fee”) payable on each Distribution Date at a rate equal to 1/12 of 0.05% of the aggregate outstanding principal balance of the Financed Student Loans owned by the Issuer as of the last day of the prior calendar month (and in the case of the payment of the Administration Fee on the first Distribution Date, the aggregate outstanding principal balance of the Financed Student Loans owned by the Issuer as of the Closing Date); provided that the Administration Fee shall be no less than $20,000 per annum; (b)          Reimbursement for all its expenses incurred performing its obligations hereunder, which expenses shall not exceed $200,000 in the aggregate per annum: The payment of the foregoing fees and expenses shall be solely an obligation of the Issuer. 4.            Additional Information to be Furnished. The Administrator shall furnish to the Issuer, the Noteholders and the Certificateholders from time to time such additional information regarding the Collateral as the Issuer, the Noteholders and the Certificateholders shall reasonably request. 5.            Independence of the Administrator. For all purposes of this Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Owner Trustee, the Administrator shall have no authority to act for or represent the Issuer, the Owner Trustee, respectively, in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee. 6.            No Joint Venture. Nothing contained in this Agreement (i) shall constitute the Administrator and any of the Issuer, the Owner Trustee or any Owner as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them, or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others. 7.            Other Activities of the Administrator. Nothing herein shall prevent the Administrator or its Affiliates from engaging in other businesses or, in its or their sole discretion, from acting in a similar capacity as an administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Issuer, the Owner Trustee or the Indenture Trustee.   8. Term of Agreement; Resignation and Removal of Administrator.     --------------------------------------------------------------------------------   (a)          This Agreement shall continue in force until the dissolution of the Issuer, upon which event this Agreement shall automatically terminate. (b)          Subject to Section 8(e) of this Agreement, the Administrator may resign its duties hereunder by providing the Issuer, the Noteholders, and the Indenture Trustee with at least 60 days’ prior written notice. (c)          Subject to Section 8(e) of this Agreement, the Indenture Trustee, at the direction of certain Noteholders as required by the Indenture, may remove the Administrator without cause by providing the Administrator with at least 60 days’ prior written notice. (d)          Subject to Section 8(e) of this Agreement, at the option of the Indenture Trustee, at the direction of certain Noteholders as required by the Indenture, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator if any of the following events shall occur: (i)           The Administrator shall default in the performance of any of its duties under this Agreement and, after notice of such default, shall not cure such default within ten days (or, if such default cannot be cured in such time, the Administrator shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer); (ii)          A court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, with respect to any involuntary case commenced against the Administrator under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or (iii)        The Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for it or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of its creditors or shall fail generally to pay its debts as they become due. The Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section shall occur, it shall give written notice thereof to the Owner Trustee, the Noteholders and the Indenture Trustee within two Business Days after the happening of such event. (e)          No resignation or removal of the Administrator pursuant to this Section shall be effective until (i) a successor Administrator shall have been appointed by the Issuer (with the consent of the Owner Trustee pursuant to Section 12 of this Agreement) and (ii) such successor Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Administrator is bound hereunder.   --------------------------------------------------------------------------------   (f)           The appointment of any successor Administrator shall be effective only after each Rating Agency, after having been given 10 days’ prior notice of such proposed appointment, shall have declared in writing that such appointment will not result in a reduction or withdrawal of the then-current rating of the Notes. (g)          Concurrently with the execution of this Agreement, the parties hereto shall enter into a Back-up Administration Agreement (the “Back-up Agreement”) pursuant to which U.S. Bank National Association will perform certain duties of the Administrator in accordance with this Agreement in the event that the Administrator is terminated under this Section 8. 9.            Action upon Termination, Resignation or Removal. Promptly upon the effective date of termination of this Agreement pursuant to Section 8(a) of this Agreement or the resignation or removal of the Administrator pursuant to Section 8(b) or (c) of this Agreement, the Administrator shall be entitled to be paid all fees and reimbursable expenses accruing to it to the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to Section 8(a) of this Agreement deliver to the Issuer as appropriate, all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation or removal of the Administrator pursuant to Section 8(b) or (c) of this Agreement, the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator. 10.          Notices. Any notice, report or other communication given hereunder shall be in writing and addressed as follows:   (a) If to the Issuer, to: The National Collegiate Student Loan Trust 2006-1 c/o Wilmington Trust Company, as Owner Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration     (b) If to the Administrator, to: First Marblehead Data Services, Inc. The Prudential Tower 800 Boylston Street - 34th Floor Boston, MA 02199-8157 Attention: Ms. Rosalyn Bonaventure with a copy to: First Marblehead Corporation The Prudential Tower 800 Boylston Street - 34th Floor Boston, MA 02199-8157 Attention: Corporate Law Department     --------------------------------------------------------------------------------     (c) If to the Indenture Trustee, to: U.S. Bank National Association Corporate Trust Services-SFS One Federal Street, 3rd Floor Boston, Massachusetts 02110 Attention: Ms. Vaneta I. Bernard     (d) If to the Owner Trustee, to: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration     (e) [Intentionally Omitted.]   (f) If to the Depositor, to:   The National Collegiate Funding LLC c/o First Marblehead Corporation The Prudential Tower 800 Boylston Street - 34th Floor Boston, MA 02199-8157 Attention: Corporate Law Department   or to such other address as any party shall have provided to the other parties in writing. Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above.   11. Amendments. (a)          This Agreement may be amended from time to time by the parties hereto as specified in this Section, provided that any amendment must be accompanied by the written consent of the Owner Trustee, the Noteholders and the Certificateholders and an Opinion of Counsel to the Indenture Trustee and the Owner Trustee to the effect that such amendment complies with the provisions of this Section. (b)          If the purpose of the amendment (as detailed therein) is to correct any mistake, eliminate any inconsistency, cure any ambiguity or deal with any matter not covered (i.e., to give effect to the intent of the parties and, if applicable, to the expectations of the Noteholders and Certificateholders), it shall not be necessary to obtain the consent of the Noteholders or Certificateholders, but the Indenture Trustee shall be furnished with a letter from each Rating Agency that the amendment will not result in the downgrading or withdrawal of the then-current rating assigned to any Note or Certificate.   --------------------------------------------------------------------------------   (c)          If the purpose of the amendment is to prevent the imposition of any federal or state taxes at any time that any Note is outstanding (i.e., technical in nature), it shall not be necessary to obtain the consent of any Noteholder or Certificateholder, but the Indenture Trustee, the Owner Trustee and the Administrative shall be furnished with an Opinion of Counsel from counsel to the Issuer that such amendment is necessary or helpful to prevent the imposition of such taxes and is not materially adverse to the Noteholders. (d)          If the purpose of the amendment is to add or eliminate or change any provision of the Agreement other than as contemplated in (b) and (c) above, the amendment shall require the consent of each Rating Agency, certain Noteholders as required by the Indenture; provided, however, that no such amendment shall reduce in any manner the amount of, or delay the timing of, payments received that are required to be distributed on the Notes without the consent of certain Noteholders as required by the Indenture. (e)          It shall not be necessary to obtain the consent of a Rating Agency to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. (f)           This Section 11 shall not apply to the execution of the Back-up Agreement by the parties thereto. 12.          Successors and Assigns. This Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer, the Owner Trustee, certain Noteholders as required by the Indenture, and the Indenture Trustee and unless each Rating Agency, after having been given 10 days’ prior notice of such assignment, shall have declared in writing that such assignment will not result in a reduction or withdrawal of the then-current rating of the Notes or Certificates. An assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned by the Administrator, without the consent of the Issuer, the Depositor or the Owner Trustee, to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Administrator; provided that such successor organization executes and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an agreement in which such corporation or other organization agrees to be bound hereunder in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Agreement shall bind any such permitted successors or assigns of the parties hereto. 13.          Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to conflicts of laws provisions thereof (other than Section 5-1401 of the New York General Obligations Law). 14.          Headings. The section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement. 15.          Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall together constitute but one and the same agreement.   --------------------------------------------------------------------------------   16.          Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall 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. 17.          Limitation of Liability of Owner Trustee. Notwithstanding anything contained herein to the contrary, this instrument has been executed by Wilmington Trust Company, not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer, and in no event shall Wilmington Trust Company in its individual capacity or any beneficial owner of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VIII, IX and X of the Trust Agreement. 18.          Third Party Beneficiary. The Parties hereto acknowledge that the Noteholders and Certificateholders are express third party beneficiaries hereof and are entitled to enforce their respective rights hereunder as if actually parties hereto. 19.          No Petition. The parties hereto will not at any time institute against the Issuer any bankruptcy proceeding under any United States federal or state bankruptcy or similar law in connection with any obligations of the Issuer under any Transaction Document as defined in the Indenture.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written.   THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1   By:       Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee   By:     /s/Michele C. Harra Name: Michele C. Harra Title: Financial Services Officer     WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee   By:     /s/Michele C. Harra Name: Michele C. Harra Title: Financial Services Officer     U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee   By: /s/Vaneta I. Bernard Name: Vaneta I. Bernard Title: Vice President     FIRST MARBLEHEAD DATA SERVICES, INC.   By: /s/Rosalyn Bonaventure Name: Rosalyn Bonaventure Title: President     THE NATIONAL COLLEGIATE FUNDING LLC   By: GATE Holdings, Inc., Member   By: /s/Donald R. Peck Name: Donald R. Peck Title: Treasurer       --------------------------------------------------------------------------------   EXHIBIT A POWER OF ATTORNEY STATE OF DELAWARE )     ) ss.: COUNTY OF NEW CASTLE )     KNOW ALL MEN BY THESE PRESENTS, that The National Collegiate Student Loan Trust 2006-1 (the “Issuer”), does hereby make, constitute and appoint First Marblehead Data Services, Inc. as administrator under the Administration Agreement dated as of March 9, 2006 (the “Administration Agreement”), among the Issuer; Wilmington Trust Company, as Owner Trustee; U.S. Bank National Association, as Indenture Trustee; The National Collegiate Funding LLC; and First Marblehead Data Services, Inc., as Administrator, as the same may be amended from time to time, as well as its agents and attorneys, as Attorney-in-Fact to execute on behalf of the Issuer all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Trust Related Agreements, including, without limitation, to appear for and represent the Issuer in connection with the preparation, filing and audit of federal, state and local tax returns pertaining to the Issuer, and with full power to perform any and all acts associated with such returns and audits that the Issuer could perform, including without limitation, the right to distribute and receive confidential information, defend and assert positions in response to audits, initiate and defend litigation, and to execute waivers of restrictions on assessments of deficiencies, consents to the extension of any statutory or regulatory time limit, and settlements. All powers of attorney for these purposes heretofore filed or executed by the Issuer are hereby revoked. Capitalized terms that are used and not otherwise defined herein shall have the meanings ascribed thereto in the Administration Agreement. EXECUTED as of March 9, 2006. THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1   By:     Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee   By:     /s/Michele C. Harra Name: Michele C. Harra Title: Financial Services Officer     --------------------------------------------------------------------------------   SCHEDULE A Duties of the Issuer Performed by the Administrator under the Trust Agreement (A) Filing tax returns, reports and forms under Section 8.04. (B) Furnishing documents to the Owners under Section 9.02. (C) Filing a Certificate of Termination of the Trust upon termination pursuant to Section 11.01. (D) Appointing separate trustees under Section 12.02. (E) Obtaining execution by the Owners of any amendment to the Trust Agreement thereunder.     Duties of the Administrator under the Trust Agreement Interpreting and applying the provisions set forth in Articles V, VI, VII and XI regarding application of funds, allocations of Profit and Loss and Distributions of Net Cash Flow, to resolve any ambiguities that may result from such application and to provide the Owner Trustee and the Owners with clarification of any provision as may be necessary or appropriate. Duties of the Administrator under the Indenture Providing the statements to Noteholders required under Section 8.09. Providing, signing and filing such reports as required by Section 314(a) of the Trust Indenture Act of 1939, as amended, the Sarbanes-Oxley Act of 2002 and any federal and state securities laws. Preparing and making Servicer filings under Section 10.01 and 10.02. Providing instructions to the Indenture Trustee as required under Section 8.02.         --------------------------------------------------------------------------------

Exhibit 10.2 EMPLOYMENT AGREEMENT This AGREEMENT (“Agreement”) is made this 1st day of October, 2006, effective as of October 1, 2006, by and between Fox Chase Bancorp, Inc. (the “Company”), a corporation organized under the laws of the United States of America, with its principal offices at 4390 Davisville Road, Hatboro, Pennsylvania 19040, Fox Chase Bank (the “Bank”), a federally chartered stock savings bank organized under the laws of the United States of America, with its principal offices at 4390 Davisville Road, Hatboro, Pennsylvania 19040 and Jerry D. Holbrook (“Executive”). WHEREAS, the Company and Bank desire to continue to assure both entities of the services of Executive as Executive Vice President and Chief Financial Officer of the Bank and the Company for the period provided for in this Agreement; and WHEREAS, Executive and the Board of Directors of both the Company and Bank desire to enter into an agreement setting forth the terms and conditions of the employment of Executive and the related rights and obligations of each of the parties. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. Position and Responsibilities. (a) During the period of Executive’s employment under this Agreement, Executive agrees to serve as Executive Vice President and Chief Financial Officer of the Company and the Bank. Executive shall have responsibility for the overall financial plans and accounting practices of the Company and the Bank, and shall perform all duties and shall have all powers which are commonly incident to the office of Chief Financial Officer or which, consistent with the office, is delegated to him by the President and Chief Executive Officer of the Company and the Bank. (b) During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, and reasonable leaves of absence, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the Company and its subsidiaries, including the Bank, as well as participation in community, professional and civic organizations; provided, however, that, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations listed by Executive on his annual conflict of interest reporting. (c) The Bank or the Company (as they shall determine), will furnish Executive with the working facilities and staff customary for executive officers with the titles and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank. -------------------------------------------------------------------------------- 2. Term of Employment. (a) The term of Executive’s employment under this Agreement shall be deemed to have commenced as of October 1, 2006 and shall continue for a period of thirty-six (36) full calendar months thereafter. (b) The Compensation Committees of the Boards of Directors of the Company and Bank will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement for an additional year. The Chairman of the Boards of Directors will give notice to the Executive as soon as possible if the Boards have decided not to extend the Agreement. (c) Notwithstanding anything contained in this Agreement to the contrary, either Executive, the Company or the Bank may terminate Executive’s employment at any time during the term of this Agreement, subject to the terms and conditions of this Agreement. 3. Compensation and Benefits. (a) The Bank or the Company (as they shall determine), shall pay Executive as compensation a salary of $200,000 per year (“Base Salary”). In addition to the Base Salary provided in this Section 3(a), the Bank shall also provide Executive with all such other benefits as are provided uniformly to permanent full-time employees of the Bank. If Executive’s Base Salary is increased, such increased Base Salary shall then constitute the Base Salary for all purposes of this Agreement. For purposes of Section 4(b) of this Agreement, Base Salary shall be deemed to include the highest cash bonus or similar cash incentive compensation paid to or accrued on behalf of the Executive with respect to the three (3) taxable years preceding his termination of employment. For purposes of Section 5(c) of this Agreement, Base Salary shall be defined as the amount reported in Box 1 of the Executive’s Form W-2, plus amounts deferred under the Bank’s 401(k) Plan and/or Section 125 Plan (if any), or deferred at the Executive’s election or on behalf of the Executive to any non-qualified deferred compensation plan of the Bank or the Company. (b) Executive shall be entitled to participate in or receive benefits under any employee benefit plans including but not limited to, retirement plans, profit-sharing plans, or any other employee benefit plan or arrangement made available by the Bank or Company in the future to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Executive shall be entitled to incentive compensation and bonuses as provided in any plan of the Bank or Company in which Executive is eligible to participate. For purposes of the 2006 fiscal year, Executive shall have a bonus opportunity of up to $50,000. The actual amount of the bonus will be determined by the Board of Directors of the Bank in its sole discretion based on such factors relating to the performance   2 -------------------------------------------------------------------------------- of Executive, the Bank and the Company. Nothing paid to the Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which the Executive is entitled under this Agreement. From time to time, and as determined by the Boards of Directors of the Company and the Bank, Executive may be entitled to participate in or receive benefits under plans relating to stock options and restricted stock awards that are made available by the Company or the Bank at any time in the future during the term of this Agreement, subject to and on a basis consistent with the terms, conditions and overall administration of such plans. (c) The Company or Bank (as they shall determine) shall also pay or reimburse Executive for all reasonable travel and other reasonable expenses incurred in the performance of Executive’s obligations under this Agreement and may provide such additional compensation in such form and such amounts as the Board of Directors of the Company or Bank may from time to time determine. (d) Executive shall take vacation at a time mutually agreed upon by the Company, Bank and Executive. Executive shall receive his Base Salary and other benefits during periods of vacation. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Bank. 4. Payments to Executive Upon an Event of Termination. (a) Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 4 shall apply. Unless Executive otherwise agrees, as used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Company or Bank of Executive’s full-time employment for any reason other than a termination governed by Section 7 of this Agreement; or (ii) Executive’s resignation from the Bank or Company, upon, any (A) notice to Executive of non-renewal of the term of this Agreement (B) failure to reappoint Executive as Executive Vice President and Chief Financial Officer, (C) material change in Executive’s functions, duties, or responsibilities with the Bank, the Company or its subsidiaries, which change would cause Executive’s position(s) to become of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 of this Agreement, (D) material reduction in the benefits and perquisites provided to Executive from those being provided as of the effective date of this Agreement, except to the extent such coverage may be changed in its application to all Bank employees, (E) liquidation or dissolution of the Company or the Bank, or (F) breach of this Agreement by the Bank or Company. Upon the occurrence of any event described in clauses (A), (B), (C), (E) or (F), above, Executive shall have the right to terminate his employment under this Agreement by resignation upon not less than sixty (60) days prior written notice given within six (6) full calendar months after the event giving rise to Executive’s right to elect to terminate his employment. (b) Upon the occurrence of an Event of Termination, on the Date of Termination, as defined in Section 8, the Company and Bank (as they shall determine) shall be obligated to pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate,   3 -------------------------------------------------------------------------------- as the case may be the Executive’s base salary for the remaining term of the Agreement paid in one lump sum within ten (10) calendar days of such termination. Also, in such event, Executive shall, for the remaining term of the Agreement, receive the benefits he would have received during the remaining term of the Agreement under any retirement programs (whether tax-qualified or non-qualified) in which Executive participated prior to his termination (with the amount of the benefits determined by reference to the benefits received by the Executive or accrued on his behalf under such programs during the twelve (12) months preceding his termination) and continue to participate in any benefit plans of the Company or the Bank that provide health (including medical and dental), or life insurance, or similar coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during such period. In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis. In the event the Bank or the Company is not in compliance with its minimum capital requirements or if such payments pursuant to this subsection (b) would cause the Company or Bank’s capital to be reduced below its minimum regulatory capital requirements, such payments shall be deferred until such time as either the Company or the Bank or successor thereto is in capital compliance. No payments under this Section 4(b) shall be reduced in the event the Executive obtains other employment following termination of employment. (c) During the period commencing on the effective date of Executive’s termination under Section 4(a) of this Agreement and ending one (1) year thereafter (the “Restricted Period”), Executive shall not, without express prior written consent from the Company or the Bank, directly or indirectly, own or hold any proprietary interest in, or be employed by or receive remuneration from, any corporation, partnership, sole proprietorship of other entity (collectively, an “entity”) “engaged in competition” (as defined below) with the Bank or any other affiliates (“Competitor”). For purposes of the preceding sentence, the term “proprietary interest” means direct or indirect ownership of an equity interest in an entity other than ownership of less than two percent (2%) of any class of stock in a publicly-held entity. Further, an entity shall be considered to be “engaged in competition” if such entity is, or is a holding company for, or a subsidiary of an entity which is engaged in the business of providing banking, trust services, asset management advice, or similar financial services to consumers, businesses individuals or other entities; and the entity, holding company or subsidiary maintains physical offices for the transaction of such business or businesses in any city, town or county in which the Executive’s normal business office is located or the Bank has an office or has filed an application for regulatory approval to establish an office, as determined on the date of Executive’s termination of employment. (d) During the Restricted Period, Executive shall not, without express prior written consent of the Bank or the Company, solicit or assist any other person in soliciting for the account of any Competitor, any customer or client of the Bank or any of its subsidiaries. (e) During the Restricted Period, Executive shall not, without the express prior written consent of the Bank, directly or indirectly, (i) solicit or assist any third party in soliciting   4 -------------------------------------------------------------------------------- for employment any person employed by the Bank or any of its subsidiaries at the time of the termination of Executive’s employment (collectively, “Employees”), (ii) employ, attempt to employ or materially assist any third party in employing or attempting to employ any Employee, or (iii) otherwise act on behalf of any Competitor to interfere with the relationship between the Bank or any of its affiliates and their respective Employees. (f) Executive acknowledges that the restrictions contained in this paragraphs (c) through (e) of this Section 4 are reasonable and necessary to protect the legitimate interests of the Bank and the Company and that any breach by Executive of any provision contained in paragraphs (c) through (e) of this Section 4 will result in irreparable injury to the Bank and Company for which a remedy at law would be inadequate. Accordingly, Executive acknowledges that the Bank and Company shall be entitled to temporary, preliminary and permanent injunctive relief against Executive in the event of any breach or threatened breach by Executive of paragraphs (c) through (e) of this Section 4, in addition to any other remedy that may be available to the Bank or the Company whether at law or in equity. With respect to paragraphs (c) through (e) of this Section 4 finally determined by a court of competent jurisdiction to be unenforceable, such court shall be authorized to reform this Agreement or any provision hereof so that it is enforceable to the maximum extent permitted by law. If the covenants of paragraphs (c) through (e) above are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Bank’s or the Company’s right to enforce such covenants in any other jurisdiction and shall not bar or limit the enforceability of any other provisions. The Bank and the Company shall not be required to post any bond or other security in connection with any proceeding to enforce paragraphs (c) through (e) of this Section 4. 5. Change in Control. (a) For purposes of this Agreement, a Change in Control means any of the following events:     i. Merger: The Bank or the Company merges into or consolidates with another entity, or merges another entity into the Bank or the Company, and as a result less than a majority of the combined voting power of the resulting entity immediately after the merger or consolidation is held by persons who were shareholders of the Bank or the Company immediately before the merger or consolidation;     ii. Change in Board Composition: During any period of two consecutive years, individuals who constitute the Boards of Directors of the Bank or the Company at the beginning of the two-year period cease for any reason (other than as required by the Order to Cease and Desist dated June 6, 2005 entered into by the Bank with the Office of Thrift Supervision) to constitute at least a majority of the Boards of Directors of the Bank or the Company; provided, however, that for purposes of this clause (iii), each   5 -------------------------------------------------------------------------------- director who is first elected by the board (or first nominated by the board for election by the members) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or     iii. Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner(s) of 20% or more of a class of the Bank’s or the Company’s voting securities, however this clause (iii) shall not apply to beneficial ownership of Bank or Company voting shares held in a fiduciary capacity by an entity of which the Bank or the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.     iv. Sale of Assets: The Bank or the Company sells to a third party all or substantially all of its assets.     v. Proxy Statement Distribution: An individual or company (other than current management of the Company) solicits proxies from stockholders of the Company seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or Bank with one or more corporations as a result of which the outstanding shares of the class of securities then subject to such plan or transaction are exchanged for or converted into cash or property or securities not issued by the Bank or the Company.     vi. Tender Offer: A tender offer is made for 20% or more of the voting securities of the Bank or Company then outstanding. Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement. (b) If any of the events described in paragraph (a) of this Section 5, constituting a Change in Control, have occurred or the Boards of Directors determine that a Change in Control has occurred, Executive shall be entitled to the benefits provided for in subsections (c) and (d) of this Section 5 upon his termination of employment at any time during the term of this Agreement and any extensions thereof, on or after the date the Change in Control occurs due to (i) Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss of title, office or significant authority or responsibility, reduction in annual compensation or benefits or relocation of his principal place of employment by more than thirty (30) miles from its location   6 -------------------------------------------------------------------------------- immediately prior to the Change in Control or (iii) Executive’s resignation for any reason within the sixty (60) day period following the date that is one year from the date the Change in Control occurred, unless Executive’s termination is for Cause as defined in Section 7 of this Agreement; provided, however, that such benefits shall be reduced by any payment made under Section 4 of this Agreement. (c) Upon the occurrence of a Change in Control followed by Executive’s termination of employment, as provided for in paragraph (b) of this Section 5, the Company or Bank (as they shall determine) shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries or his estate, as the case may be, as severance pay, a sum equal to the greater of: (i) the payments and benefits due for the remaining term of the Agreement or (ii) three (3) times Executive’s average Base Salary for the three (3) taxable years preceding the Change in Control or (iii) three (3) times Executive’s Base Salary for the most recent taxable year or portion thereof preceding the Change in Control. The benefit shall be payable in one lump sum within 10 days of Executive’s last day of employment. (d) Upon the occurrence of a Change in Control and Executive’s termination of employment in connection therewith, the Bank and Company (as they shall determine) will cause to be continued life, medical and dental coverage substantially identical to the coverage maintained by the Bank for Executive and any of his dependents covered under such plans immediately prior to the Change in Control. Such coverage and payments shall cease upon the expiration of thirty-six (36) full calendar months following the Date of Termination. In the event Executive’s participation in any such plan or program is barred, the Bank and/or Company (as they shall determine) shall arrange to provide Executive and his dependents with benefits substantially similar to those of which Executive and his dependents would otherwise have been entitled to receive under such plans and programs from which their continued participation is barred or at the election of Executive, provide their economic equivalent. 6. Change in Control Related Provisions. Notwithstanding the provisions of Section 5, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986 or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to the maximum amount allowable as a deduction by the Bank or Company, as determined in accordance with said Section 280G. The allocation of the reduction required hereby among the Termination Benefits provided by Section 5 shall be determined by Executive.   7 -------------------------------------------------------------------------------- 7. Termination for Cause. The phrase termination for “Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), Executive’s breach of a final cease and desist order issued by the Office of Thrift Supervision, the Securities and Exchange Commission, or any regulatory agency having jurisdiction over the Bank or Company, or material breach of any provision of this Agreement. 8. Notice. (a) Any purported termination by the Bank or Company or by Executive shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. (b) “Date of Termination” shall mean the date specified in the Notice of Termination. (c) If, within thirty (30) days after any Notice of Termination (except for termination for Cause) is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, except upon the occurrence of a Change in Control and voluntary termination by Executive in which case the Date of Termination shall be the date specified in the Notice, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected), and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank and Company (as they shall determine) will continue to pay Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, Base Salary) and continue him as a participant in all compensation, benefit and insurance plans in which he was participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Agreement. Amounts paid pursuant to this provision shall be in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 9. Post-Termination Obligations. All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with this Section 9 for one (1) full year after the earlier of the expiration   8 -------------------------------------------------------------------------------- of this Agreement or termination of Executive’s employment with the Company. Executive shall, upon reasonable notice, furnish such information and assistance to the Company and Bank as may reasonably be required by the Company and Bank in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party. Bank and Company (as they shall determine) shall reimburse Executive all reasonable expenses, including costs, fees and expenses for Executive’s counsel in complying with the provisions of this Section 9. 10. Loyalty and Confidentiality. (a) During the term of this Agreement Executive: (i) shall devote all his time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank. (b) Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business. (c) Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which he may be exposed during the course of his employment. The Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor shall he employ such information in any way other than for the benefit of the Company and the Bank. 11. Death and Disability. (a) Death. Notwithstanding any other provision of this Agreement to the contrary, in the event of Executive’s death during the term of this Agreement, the Bank or Company (as they shall determine) shall immediately pay his estate any salary and bonus accrued but unpaid as of the date of his death, and, for a period of six (6) months after Executive’s death, the Bank shall continue to provide his dependents’ medical insurance benefits existing on the date of his death and shall pay Executive’s designated beneficiary all compensation that would otherwise be payable to him pursuant to Section 3(a) of this Agreement. This provision shall not negate any rights Executive or his beneficiaries may have to death benefits under any employee benefit plan of the Company or the Bank.   9 -------------------------------------------------------------------------------- (b) Disability.     (i) The Bank or Company or Executive may terminate Executive’s employment after having established Executive’s Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under the Company’s or the Bank’s long -term disability plan (or, if the Company or the Bank has no such plan in effect, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Boards of Directors shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant. As a condition to any benefits, the Boards of Directors may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.     (ii) In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of such termination, Executive shall continue to receive two-thirds (66.667%) of his monthly Base Salary (at the annual rate in effect on the Date of Termination) following termination through the earlier of: (A) the date Executive returns to full-time employment at the Company or the Bank in the same capacity as he was prior to his termination for Disability; (B) Executive’s death; or (C) Executive’s attainment of age 65. Such payments shall be reduced by the amount of any short - or long -term disability benefits payable to Executive under any disability program sponsored by the Company or the Bank. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company or the Bank in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Bank or Company. 12. Source of Payments. All payments provided for in this Agreement shall be timely paid in cash or check from the general funds of the Bank. Company and Bank reserve the right to make payments provided for in this Agreement from general funds of the Company.   10 -------------------------------------------------------------------------------- 13. Effect of Prior Agreements and Existing Benefit Plans. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank, Company or any predecessor of the Bank, Company and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement. 14. No Attachment. (a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of Executive, the Bank, the Company and their respective successors and assigns. 15. Modification and Waiver. (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived. 16. Severability. If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity’ shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect. 17. Headings for Reference Only. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.   11 -------------------------------------------------------------------------------- 18. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania (without regard to principles of conflicts of law of that State). 19. Arbitration. Any 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 sitting in a location selected by Executive within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement. 20. Payment of Legal Fees. All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank or Company (as they shall determine), only if Executive is successful pursuant to a legal judgment, arbitration or settlement. 21. Indemnification. The Bank and Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) (in accordance with the By-Laws of both Bank and Company) to the fullest extent permitted under federal law or under the Bank and Company Charters against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Company or Bank (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements.   12 -------------------------------------------------------------------------------- 22. Successor to the Company. The Bank and Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank and Company’s obligations under this Agreement, in the same manner and to the same extent that the Bank and Company would be required to perform if no such succession or assignment had taken place. 23. Required Provisions. In the event any of the foregoing provisions of this Section 23 are in conflict with the terms of this Agreement, this Section 23 shall prevail. (a) The Boards of Directors may terminate Executive’s employment at any time, but any termination by the Bank or the Company, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause as defined in this Agreement. (b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while their contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended. (c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. (d) If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. (e) All obligations under this contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his designee) at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of   13 -------------------------------------------------------------------------------- the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. (f) Any payments made to employees pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments. 24. Miscellaneous. Notwithstanding anything in this Agreement to the contrary, if the Company or the Bank in good faith determines that amounts that, as of the effective date of the Executive’s termination of employment are or may become payable to the Executive upon termination of his employment hereunder are required to be suspended or delayed for six months in order to satisfy the requirements of Section 409A of the Code, then the Company or the Bank will so advise the Executive, and any such payments shall be suspended and accrued for six months, whereupon they shall be paid to the Executive in a lump sum (together with interest thereon at the then-prevailing prime rate). The Executive agrees that the Company or the Bank shall be deemed to be in breach of this Agreement if it delays making a payment otherwise payable hereunder by reason of Section 409A.   14 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Fox Chase Bancorp, Inc. and Fox Chase Bank have caused this Agreement to be executed and its seal to be affixed hereunto by their duly authorized officer and Executive has signed this Agreement, on the 1st day of October, 2006.   ATTEST:   FOX CHASE BANCORP, INC. /s/ Mary Regnery   By:   /s/ Thomas M. Petro     For the Entire Board of Directors ATTEST:   FOX CHASE BANK /s/ Mary Regnery   By:   /s/ Thomas M. Petro     For the Entire Board of Directors WITNESS:     /s/ M.A. Davenport   /s/ Jerry D. Holbrook   Jerry D. Holbrook   15

--------------------------------------------------------------------------------   LOAN AGREEMENT   Dated as of December 28, 2005   Between   COMMERCE SQUARE PARTNERS-PHILADELPHIA PLAZA, L.P. as Borrower   And   GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. as Lender   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS   1.   DEFINITIONS; PRINCIPLES OF CONSTRUCTION    1     1.1    Specific Definitions    1     1.2    Index of Other Definitions    14     1.3    Principles of Construction    16 2.   GENERAL LOAN TERMS    16     2.1    The Loan    16     2.2    Interest; Monthly Payments    16          2.2.1    Generally    16          2.2.2    Default Rate    17          2.2.3    Taxes    17          2.2.4    New Payment Date    17     2.3    Loan Repayment    18          2.3.1    Repayment    18          2.3.2    Mandatory Prepayments    18          2.3.3    Defeasance    18          2.3.4    Optional Prepayments    20     2.4    Release of Property    21          2.4.1    Release on Defeasance    21          2.4.2    Release on Payment in Full    21     2.5    Payments and Computations    21          2.5.1    Making of Payments    21          2.5.2    Computations    21          2.5.3    Late Payment Charge    21 3.   CASH MANAGEMENT AND RESERVES    22     3.1    Cash Management Arrangements    22     3.2    Required Repairs    22          3.2.1    Completion of Required Repairs    22          3.2.2    Intentionally Omitted    22     3.3    Taxes and Insurance    22     3.4    Capital Expense Reserves    23     3.5    Rollover Reserves    24          3.5.1    General    24          3.5.2    Rollover Letter of Credit    25     3.6    Operating Expense Subaccount    27     3.7    Casualty/Condemnation Subaccount    27     3.8    Security Deposits    27     3.9    Cash Collateral Subaccount    28     3.10    Grant of Security Interest; Application of Funds    29     3.11    Property Cash Flow Allocation    29 4.   REPRESENTATIONS AND WARRANTIES    30     4.1    Organization; Special Purpose    30   i --------------------------------------------------------------------------------     4.2    Proceedings; Enforceability    30     4.3    No Conflicts    31     4.4    Litigation    31     4.5    Agreements    31     4.6    Title    31     4.7    No Bankruptcy Filing    32     4.8    Full and Accurate Disclosure    32     4.9    Tax Filings    32     4.10    ERISA; No Plan Assets    33     4.11    Compliance    33     4.12    Contracts    33     4.13    Federal Reserve Regulations; Investment Company Act    33     4.14    Easements; Utilities and Public Access    34     4.15    Physical Condition    34     4.16    Leases    34     4.17    Fraudulent Transfer    35     4.18    Ownership of Borrower    35     4.19    Purchase Options    35     4.20    Management Agreement    36     4.21    Hazardous Substances    36     4.22    Name; Principal Place of Business    36     4.23    Other Debt    36 5.   COVENANTS    37     5.1    Existence    37     5.2    Taxes and Other Charges    37     5.3    Access to Property    37     5.4    Repairs; Maintenance and Compliance; Alterations    37          5.4.1    Repairs; Maintenance and Compliance    37          5.4.2    Alterations    38     5.5    Performance of Other Agreements    38     5.6    Cooperate in Legal Proceedings    38     5.7    Further Assurances    38     5.8    Environmental Matters    39          5.8.1    Hazardous Substances    39          5.8.2    Environmental Monitoring    39          5.8.3    O & M Program    41     5.9    Title to the Property    41     5.10    Leases    41          5.10.1   Generally    41          5.10.2   Material Leases    41          5.10.3   Minor Leases    42          5.10.4   Additional Covenants with respect to Leases    42          5.10.5   NF Clearing Lease    43     5.11    Estoppel Statement    43     5.12    Property Management    44          5.12.1  Management Agreement    44          5.12.2  Termination of Manager    44   ii --------------------------------------------------------------------------------     5.13    Special Purpose Bankruptcy Remote Entity    44     5.14    Assumption in Non-Consolidation Opinion    45     5.15    Change in Business or Operation of Property    45     5.16    Debt Cancellation    45     5.17    Affiliate Transactions    45     5.18    Zoning    45     5.19    No Joint Assessment    45     5.20    Principal Place of Business    45     5.21    Change of Name, Identity or Structure    45     5.22    Indebtedness    46     5.23    Licenses    46     5.24    Compliance with Restrictive Covenants, Etc.    46     5.25    ERISA    46     5.26    Prohibited Transfers    46          5.26.1  Generally    46          5.26.2  Transfer and Assumption    47     5.27    Liens    49     5.28    Dissolution    49     5.29    Expenses    49     5.30    Indemnity    50     5.31    Patriot Act Compliance    51 6.   NOTICES AND REPORTING    52     6.1    Notices    52     6.2    Borrower Notices and Deliveries    52     6.3    Financial Reporting    53          6.3.1     Bookkeeping    53          6.3.2     Annual Reports    53          6.3.3     Quarterly Reports    53          6.3.4     Monthly Reports    54          6.3.5     Other Reports    54          6.3.6     Annual Budget    54          6.3.7     Breach    55 7.   INSURANCE; CASUALTY; AND CONDEMNATION    55     7.1    Insurance    55          7.1.1     Coverage    55          7.1.2     Policies    58     7.2    Casualty    59          7.2.1     Notice; Restoration    59          7.2.2     Settlement of Proceeds    59     7.3    Condemnation    60          7.3.1     Notice; Restoration    60          7.3.2     Collection of Award    60     7.4    Application of Proceeds or Award    61          7.4.1     Application to Restoration    61   iii --------------------------------------------------------------------------------          7.4.2     Application to Debt    61          7.4.3     Procedure for Application to Restoration    61 8.   DEFAULTS    62     8.1    Events of Default    62     8.2    Remedies    64          8.2.1    Acceleration    64          8.2.2    Remedies Cumulative    64          8.2.3    Severance    64          8.2.4    Delay    65          8.2.5    Lender’s Right to Perform    65 9.   SPECIAL PROVISIONS    65     9.1    Sale of Note and Secondary Market Transaction    65          9.1.1    General; Borrower Cooperation    65          9.1.2    Use of Information    66          9.1.3    Borrower Obligations Regarding Disclosure Documents    67          9.1.4    Borrower Indemnity Regarding Filings    67          9.1.5    Indemnification Procedure    68          9.1.6    Contribution    68          9.1.7    Rating Surveillance    68          9.1.8    Severance of Loan    69 10.   MISCELLANEOUS    69     10.1    Exculpation    69     10.2    Brokers and Financial Advisors    71     10.3    Retention of Servicer    71     10.4    Survival    72     10.5    Lender’s Discretion    72     10.6    Governing Law    72     10.7    Modification, Waiver in Writing    73     10.8    Trial by Jury    74     10.9    Headings/Exhibits    74     10.10    Severability    74     10.11    Preferences    74     10.12    Waiver of Notice    74     10.13    Remedies of Borrower    74     10.14    Prior Agreements    75     10.15    Offsets, Counterclaims and Defenses    75     10.16    Publicity    75     10.17    No Usury    75     10.18    Conflict; Construction of Documents    76     10.19    No Third Party Beneficiaries    76     10.20    Yield Maintenance Premium    76     10.21    Assignment    77     10.22    Certain Additional Rights of Lender    77     10.23    Set-Off    78     10.24    Counterparts    78   iv -------------------------------------------------------------------------------- Schedule 1    Required Repairs Schedule 2    Exceptions to Representations and Warranties Schedule 3    Rent Roll Schedule 4    Organization of Borrower Schedule 5    Definition of Special Purpose Bankruptcy Remote Entity   v -------------------------------------------------------------------------------- LOAN AGREEMENT   LOAN AGREEMENT dated as of December 28, 2005 (as the same may be modified, supplemented, amended or otherwise changed, this “Agreement”) between COMMERCE SQUARE PARTNERS-PHILADELPHIA PLAZA, L.P., a Delaware limited partnership (together with its permitted successors and assigns, “Borrower”), and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation (together with its successors and assigns, “Lender”).   1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION   1.1 Specific Definitions. The following terms have the meanings set forth below:   Affiliate: as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person.   Amortization Commencement Date: February 6, 2011, as such date may be changed in accordance with Section 2.2.4.   Approved Bank: a bank or other financial institution, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s.   Approved Capital Expenses: Capital Expenses incurred by Borrower, provided that during a Cash Management Period, such Capital Expenses shall either be (i) included in the Approved Capital Budget for the current calendar year or (ii) approved by Lender in its reasonable discretion.   Approved Leasing Expenses: actual out-of-pocket expenses incurred by Borrower and payable to third parties in leasing space at the Property pursuant to Leases entered into in accordance with the Loan Documents, including brokerage commissions and tenant improvements, which expenses (i) are (A) specifically approved by Lender in connection with approving the applicable Lease, (B) incurred in the ordinary course of business and on market terms and conditions in connection with Leases which do not require Lender’s approval under the Loan Documents, or (C) otherwise approved by Lender, which approval shall not be unreasonably withheld or delayed, and (ii) are substantiated by executed Lease documents and brokerage agreements.   Approved Major Lease Leasing Expenses: actual out-of-pocket expenses incurred by Borrower and payable to third parties in re-leasing space demised under a Major Lease at the Property pursuant to replacement Leases entered into in accordance with the Loan Documents, including brokerage commissions and tenant improvements, which expenses (i) are (A) specifically approved by Lender in connection with approving the applicable Lease, or (B) otherwise approved by Lender, which approval shall not be unreasonably withheld or delayed, and (ii) are substantiated by executed Lease documents and brokerage agreements.   1 -------------------------------------------------------------------------------- Approved Mezzanine Loan: a loan from an Approved Mezzanine Loan Lender to Approved Mezzanine Loan Borrower which Approved Mezzanine Loan: (i) will be in an amount that when added to the Loan will result in a combined loan to “as is” appraised value (based on an appraisal commissioned by Lender and otherwise reasonably acceptable to Lender) of the Property of no more than 75%; (ii) will result in a minimum combined Debt Service Coverage Ratio (the ratio of the Net Operating Income to the combined scheduled principal and interest payments under the Loan and the Approved Mezzanine Loan) of not less than 1.20:1.00; (iii) is on terms and conditions reasonably acceptable to Lender and evidenced by loan documents which have been approved by Lender, (iv) is secured only by a pledge of all or a portion of the ownership interests in Borrower or any other collateral not mortgaged or pledged to Lender under the Loan, (v) creates no obligations or liabilities on the part of Borrower or any SPE Party and results in no Liens on any portion of the Property, (vi) has a term expiring on the Stated Maturity Date, (vii) the Approved Mezzanine Lender shall enter into an intercreditor agreement with Lender in form and substance reasonably acceptable to Lender and the applicable Rating Agencies (the “Intercreditor Agreement”), which Intercreditor Agreement shall, among other things, restrict the ability of such Approved Mezzanine Loan Lender to transfer the Approved Mezzanine Loan or the pledged interests to another Person without first obtaining the consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed, and after a Secondary Market Transaction, a Rating Comfort Letter shall be obtained, and (viii) if the Approved Mezzanine Loan is entered into after a Secondary Market Transaction, no such Approved Mezzanine Loan shall be permitted which would result in a downgrade, qualification or withdrawal of any of the ratings of any of the Securities issued in such Secondary Market Transaction.   Approved Mezzanine Loan Borrower: the borrower under the Approved Mezzanine Loan, which shall be the holder or holders of all or a portion of the direct and indirect ownership interests in Borrower; provided, however that the Approved Mezzanine Loan Borrower shall not be any SPE Party.   Approved Mezzanine Loan Documents: all documents, agreements or instruments evidencing, securing or delivered to and approved by Lender in connection with the Approved Mezzanine Loan, as the same may be modified, amended and restated in accordance with the terms and conditions of the Intercreditor Agreement.   Approved Mezzanine Loan Lender: any bank, savings and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund, pension advisory firm, mutual fund, government entity or plan, investment company or institution substantially similar to any of the foregoing, provided in each case that such institution: (i) has total assets (in name or under management) in excess of $600,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity in excess of $250,000,000, (ii) is regularly engaged in the business of making or owning commercial real estate loans or operating commercial mortgage properties and (iii) has been reasonably approved by Lender and the Rating Agencies.   Approved Mezzanine Loan Liens: the Liens in favor of the holder of the Approved Mezzanine Loan created pursuant to the Approved Mezzanine Loan Documents.   2 -------------------------------------------------------------------------------- Approved Operating Expenses: during a Cash Management Period, operating expenses incurred by Borrower which (i) are included in the Approved Operating Budget for the current calendar month, (ii) are for real estate taxes, insurance premiums, electric, gas, oil, water, sewer or other utility service to the Property, (iii) are for payment of fees and expenses payable to the Manager pursuant to the Management Agreement, or (iv) have been approved by Lender, such approval not to be unreasonably withheld, conditioned or delayed.   Available Cash: as of each Payment Date during the continuance of a Cash Management Period, the amount of Rents, if any, remaining in the Deposit Account after the application of all of the payments required under clauses (i) through (v) of Section 3.11(a) hereof.   Business Day: any day other than a Saturday, Sunday or any day on which commercial banks in New York, New York, Philadelphia, Pennsylvania or Los Angeles, California are authorized or required to close.   Calculation Date: the last day of each calendar quarter during the Term.   Capital Expenses: expenses that are capital in nature or required under GAAP to be capitalized.   Cash Management Period: shall commence upon Lender giving notice to the Clearing Bank of the occurrence of any of the following: (i) the Stated Maturity Date, (ii) an Event of Default, or (iii) if, as of any two consecutive Calculation Dates, the Debt Service Coverage Ratio is less than 1.10:1 (a “DSCR Cash Management Period”) or (iv) the commencement of a Lease Sweep Period; and shall end upon Lender giving notice to the Clearing Bank that the sweeping of funds into the Deposit Account may cease, which notice Lender shall only be required to give if (1) the Loan and all other obligations under the Loan Documents have been repaid in full or (2) the Stated Maturity Date has not occurred and (A) with respect for the matters described in clause (ii) above, such Event of Default has been cured and no other Event of Default has occurred and is continuing or (B) with respect to the matter described in clause (iii) above, Lender has determined that the Property has achieved a Debt Service Coverage Ratio of at least 1.10:1 for two (2) consecutive Calculation Dates or (C) with respect to the matter described in clause (iv) above, such Lease Sweep Period has ended. Additionally, a Cash Management Period shall exist at any time that an Approved Mezzanine Loan (or any portion thereof) is outstanding.   Code: the Internal Revenue Code of 1986, as amended and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.   Control: with respect to any Person, either (i) ownership directly or indirectly of 49% or more of all equity interests in such Person or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities, by contract or otherwise.   3 -------------------------------------------------------------------------------- Debt: the unpaid Principal, all interest accrued and unpaid thereon, any Yield Maintenance Premium and all other sums due to Lender in respect of the Loan or under any Loan Document.   Debt Service: with respect to any particular period, the scheduled Principal and interest payments due under the Note in such period.   Debt Service Coverage Ratio: as of any date, the ratio calculated by Lender of (i) the Net Operating Income for the trailing twelve (12)-month period ending with the most recently completed calendar month to (ii) the Debt Service with respect to such period.   Default: the occurrence of any event under any Loan Document which, with the giving of notice or passage of time, or both, would be an Event of Default.   Default Rate: a rate per annum equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) five percent (5%) above the Interest Rate, compounded monthly.   Defeasance Collateral: U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note after the Defeasance Date and up to and including the Stated Maturity Date, and (ii) in amounts equal to or greater than the Scheduled Defeasance Payments.   Delaware Investments Lease: The lease between Commerce Square Partners-Philadelphia Plaza, L.P., and Delaware Management Holdings, Inc. dated December 20, 1999 for approximately 263,682 square feet amended by a First Amendment dated May 10, 2005 and terminating on September 30, 2012.   Deposit Bank: Wachovia Bank, National Association, or such other bank or depository selected by Lender in its discretion.   Eligible Account: a separate and identifiable account from all other funds held by the holding institution that is either (i) an account or accounts (A) maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (B) as to which Lender has received a Rating Comfort Letter from each of the applicable Rating Agencies with respect to holding funds in such account, or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal depository institution or state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations §9.10(b), having in either case corporate trust powers, acting in its fiduciary capacity, and a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authorities. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.   Eligible Institution: a depository institution insured by the Federal Deposit Insurance Corporation the short term unsecured debt obligations or commercial paper of which are rated at least A-1 by S&P, P-1 by Moody’s and F-1+ by Fitch, in the case of accounts in which funds are held for thirty (30) days or less or, in the case of Letters of Credit or accounts in   4 -------------------------------------------------------------------------------- which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s.   ERISA: the Employment Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.   ERISA Affiliate: all members of a controlled group of corporations and all trades and business (whether or not incorporated) under common control and all other entities which, together with Borrower, are treated as a single employer under any or all of Section 414(b), (c), (m) or (o) of the Code.   GAAP: generally accepted accounting principles in the United States of America as of the date of the applicable financial report.   Gen Par Inc.: TDP-Commerce Square Gen-Par, Inc., a Delaware corporation, the sole managing member of Gen Par LLC.   Gen Par LLC: TDP-Commerce Square Gen-Par, LLC, a Delaware limited liability company, the sole general partner of Borrower.   Governmental Authority: any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) now or hereafter in existence.   Interest Period: (i) the period from the date hereof through the first day thereafter that is the 5th day of a calendar month and (ii) each period thereafter from the 6th day of each calendar month through the 5th day of the following calendar month; except that the Interest Period, if any, that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date. Notwithstanding the foregoing, if Lender exercises its right to change the Payment Date to a New Payment Date in accordance with Section 2.2.4 hereof, then from and after such election, each Interest Period shall be the period from the New Payment Date in each calendar month through the day in the next succeeding calendar month immediately preceding the New Payment Date in such calendar month.   Interest Rate: a rate of interest equal to 5.665% per annum (or, when applicable pursuant to this Agreement or any other Loan Document, the Default Rate).   Leases: all leases and other agreements or arrangements heretofore or hereafter entered into affecting the use, enjoyment or occupancy of the Property or the Improvements, including any extensions, renewals, modifications or amendments thereof and all additional remainders, reversions and other rights and estates appurtenant thereunder.   Lease Sweep Period: the period which shall commence and end as hereinafter provided.   A Lease Sweep Period shall commence on the first Payment Date following the occurrence of any of the following:   (i) the date that is the stated expiration date of the term of any Major Lease (including any renewal terms), or   5 -------------------------------------------------------------------------------- (ii) the date required under a Major Lease by which the applicable Major Tenant is required to give notice of its exercise of a renewal option thereunder (and such renewal has not been so exercised); or   (iii) any Major Lease is surrendered, cancelled or terminated (in whole or in part) prior to its then current expiration date; or   (iv) the occurrence of a Major Tenant Insolvency Proceeding.   Notwithstanding the foregoing, with respect to the matters described in clauses (i), (ii) or (iii) above, a Lease Sweep Period shall not commence if, after giving effect to such matters, the Debt Service Coverage Ratio is at least 1.30:1; provided, however, that for purposes of the foregoing, the Debt Service Coverage Ratio shall be calculated without giving credit for any Rent payable under the subject Major Lease (or portion thereof) that gave rise to the matters described in clauses (i), (ii) or (iii) above.   A Lease Sweep Period shall end upon the earlier to occur of (A) the determination by Lender that sufficient funds have been accumulated in the Rollover Reserve Subaccount to pay for all anticipated expenses in connection with the re-leasing of the space under the applicable Major Lease that gave rise to the subject Lease Sweep Period, including brokerage commissions and tenant improvements, and any anticipated shortfalls of payments required hereunder during any period of time that Rents are insufficient as a result of down-time or free rent periods, (B) the date that either (x) $2,500,000 in the aggregate has been accumulated in the Rollover Reserve Subaccount as a result of the applicable Lease Sweep Period or (y) Borrower delivers to Lender a Rollover Letter of Credit in an amount equal to $2,500,000 in accordance with Section 3.5.2, or (C) the occurrence of any of the following:   (1) with respect to a Lease Sweep Period caused by a matter described in clauses (i), (ii) or (iii) above, upon the earlier to occur of (A) the date on which the subject Major Tenant irrevocably exercises its renewal or extension option (or otherwise enters into an extension agreement with Borrower and acceptable to Lender) with respect to all of the space demised under its Major Lease, and in Lender’s judgment, sufficient funds have been accumulated in the Rollover Reserve Subaccount (during the continuance of the subject Lease Sweep Period) to pay for all anticipated Approved Major Lease Leasing Expenses for such Major Lease and any other anticipated expenses in connection with such renewal or extension, or (B) the date on which (x) all or any portion of the space demised under the subject Major Lease that gave rise to the subject Lease Sweep Period has been re-leased pursuant to a replacement Lease or replacement Leases approved by Lender, and entered into in accordance with Section 5.10 hereof, (y) all Approved Major Lease Leasing Expenses (and any other expenses in connection with the re-tenanting of such space) have been paid in full and (z) after giving effect to the Rent that is payable under such replacement Lease(s), the Property will achieve a Debt Service Coverage Ratio of at least 1.30:1; or   6 -------------------------------------------------------------------------------- (2) with respect to a Lease Sweep Period caused by a matter described in clause (iv) above, if the applicable Major Tenant Insolvency Proceeding has terminated and the applicable Major Lease has been affirmed, assumed or assigned in a manner satisfactory to Lender.   Lease Termination Payments: (i) all fees, penalties, commissions or other payments made to Borrower in connection with or relating to the rejection, buy-out, termination, surrender or cancellation of any Lease (including in connection with any bankruptcy proceeding), (ii) any security deposits or proceeds of letters of credit held by Borrower in lieu of cash security deposits, which Borrower is permitted to retain pursuant to the applicable provisions of any Lease and (iii) any payments made to Borrower relating to unamortized tenant improvements and leasing commissions under any Lease.   Legal Requirements: statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting Borrower, any Loan Document or all or part of the Property or the construction, ownership, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instrument, either of record or known to Borrower, at any time in force affecting all or part of the Property.   Letter of Credit: an irrevocable, unconditional, transferable, clean sight draft letter of credit acceptable to Lender in its reasonable discretion and to the Rating Agencies (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Stated Maturity Date) in favor of Lender and entitling Lender to draw thereon in New York, New York (or such other location agreed to by Lender), issued by a domestic Approved Bank or the U.S. agency or branch of a foreign Approved Bank, to an applicant/obligor that is an Affiliate of Borrower.   Lien: any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, easement, restrictive covenant, preference, assignment, security interest or any other encumbrance, charge or transfer of, or any agreement to enter into or create any of the foregoing, on or affecting all or any part of the Property or any interest therein, or any direct or indirect interest in Borrower or any SPE Party, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.   Loan Documents: this Agreement and all other documents, agreements and instruments now or hereafter evidencing, securing or delivered to Lender in connection with the Loan, including the following, each of which is dated as of the date hereof: (i) the Promissory Note or Promissory Notes made by Borrower to Lender in the aggregate principal amount equal to the Loan (the “Note”), (ii) the Mortgage, Assignment of Leases and Rents and Security Agreement made by Borrower (or the Deed of Trust, Assignment of Leases and Rents and Security Agreement made by Borrower to a trustee, as the case may be) in favor of Lender which covers the Property (the “Mortgage”), (iii) Assignment of Leases and Rents from Borrower to Lender, (iv) Assignment of Agreements, Licenses, Permits and Contracts from Borrower to   7 -------------------------------------------------------------------------------- Lender, (v) the Clearing Account Agreement (the “Clearing Account Agreement”) among Borrower, Lender, Manager and Clearing Bank, and (vi) the Deposit Account Agreement (the “Deposit Account Agreement”) among Borrower, Lender, Manager and the Deposit Bank; as each of the foregoing may be (and each of the foregoing defined terms shall refer to such documents as they may be) amended, restated, replaced, severed, split, supplemented or otherwise modified from time to time (including pursuant to Section 9.1.8 hereof).   Major Lease: the Delaware Investments Lease, the NF Clearing Lease, and any other Lease which covers 200,000 or more rentable square feet of the Improvements.   Major Tenant: any tenant under either a Major Lease, or under one or more Leases (leased by such tenant and/or its Affiliates), which when taken together cover in the aggregate 200,000 or more rentable square feet of the Improvements.   Major Tenant Insolvency Proceeding: (A) the admission in writing by any Major Tenant of its inability to pay its debts generally, or the making of a general assignment for the benefit of creditors, or the instituting by any Major Tenant of any proceeding seeking to adjudicate it insolvent or seeking a liquidation or dissolution, or the taking advantage by any Major Tenant of any Insolvency Law (as hereinafter defined), or the commencement by any Major Tenant of a case or other proceeding naming it as debtor under any Insolvency Law or the instituting of a case or other proceeding against or with respect to any Major Tenant under any Insolvency Law or (B) the instituting of any proceeding against or with respect to any Major Tenant seeking liquidation of its assets or the appointment of (or if any Major Tenant shall consent to or acquiesce in the appointment of) a receiver, liquidator, conservator, trustee or similar official in respect of it or the whole or any substantial part of its properties or assets or the taking of any corporate, partnership or limited liability company action in furtherance of any of the foregoing. As used herein, the term “Insolvency Law” shall mean Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.) as the same has been or may be amended or superseded from time to time, or any other applicable domestic or foreign liquidation, conservatorship, bankruptcy, receivership, insolvency, reorganization, or any similar debtor relief laws affecting the rights, remedies, powers, privileges and benefits of creditors generally.   Management Agreement: the management agreement between Borrower and Manager, pursuant to which Manager is to manage the Property, as same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with Section 5.12 hereof.   Manager: Thomas Properties Group, L.P., a Maryland limited partnership, or any successor, assignee or replacement manager appointed by Borrower in accordance with Section 5.12 hereof.   Material Alteration: any alteration affecting structural elements of the Property the cost of which exceeds $1,000,000; provided, however, that in no event shall (i) any Required Repairs, (ii) any tenant improvement work performed pursuant to any Lease existing on the date hereof or entered into hereafter in accordance with the provisions of this Agreement, or (iii) alterations performed as part of a Restoration, constitute a Material Alteration.   8 -------------------------------------------------------------------------------- Material Lease: all Leases which individually or in the aggregate with respect to the same tenant and its Affiliates (i) cover more than 100,000 square feet of the Improvements or (ii) have a gross annual rent of more than twelve percent (12%) of the total annual Rents.   Maturity Date: the date on which the final payment of principal of the Note becomes due and payable as therein provided, whether at the Stated Maturity Date, by declaration of acceleration, or otherwise.   Minor Lease: any Lease that is not a Material Lease.   Net Operating Income: for any period, the actual net operating income of the Property determined on a cash basis of accounting, after deducting therefrom deposits to (but not withdrawals from) any reserves required under this Agreement, and without giving credit for non-recurring extraordinary items of income.   NF Clearing Lease: The lease between Commerce Square Partners-Philadelphia Plaza, L.P., and Fiserv Securities, Inc. dated April 8, 2002 for approximately 118,908 square feet amended by a “Letter of Cancellation Notice-License Agreement for Antenna” dated April 22, 2002 and a “License Agreement for Use of Generator” dated October 1, 2003 and terminating on August 31, 2013.   Officer’s Certificate: a certificate delivered to Lender by Borrower which is signed by a senior executive officer of Gen Par Inc.   OP: Thomas Properties Group, L.P., a Maryland limited partnership.   Other Charges: all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.   Payment Date: the 6th day of each calendar month or, upon Lender’s exercise of its right to change the Payment Date in accordance with Section 2.2.4 hereof, the New Payment Date (in either case, if such day is not a Business Day, the Payment Date shall be the first Business Day thereafter). The first Payment Date hereunder shall be February 6, 2006.   Permitted Encumbrances: (i) the Liens created by the Loan Documents, (ii) all Liens and other matters disclosed in the Title Insurance Policy, (iii) Liens, if any, for Taxes or Other Charges not yet due and payable and not delinquent, (iv) any workers’, mechanics’ or other similar Liens on the Property provided that any such Lien is bonded or discharged within thirty (30) days after Borrower first receives notice of such Lien, (v) such other title and survey exceptions as Lender approves in writing in Lender’s discretion and (vi) during any period that an Approved Mezzanine Loan is outstanding, the Approved Mezzanine Loan Liens.   9 -------------------------------------------------------------------------------- Permitted Transfers:   (i) a Lease entered into in accordance with the Loan Documents;   (ii) a Permitted Encumbrance;   (iii) a Transfer and Assumption;   (iv) a Transfer of the Property in connection with a Condemnation;   (v) provided that no Default or Event of Default shall then exist, a Transfer of a direct or indirect interest in Borrower, other than the membership or partnership interest held by any SPE Party, or a Transfer of an interest in any SPE Party, to any Person provided that (A) such Transfer shall not (x) cause the transferee (other than TPG or the REIT or an Approved Mezzanine Lender), together with its Affiliates, to acquire Control of Borrower or any SPE Party or to increase its direct or indirect interest in Borrower or in any SPE Party to an amount which equals or exceeds forty-nine percent (49%) or (y) result in Borrower or any SPE Party no longer being Controlled by TPG or the REIT (or an Approved Mezzanine Lender), (B) after giving effect to such Transfer, TPG or the REIT (or an Approved Mezzanine Lender) shall (1) continue to Control Borrower (in the sense of clause (ii) of the defined term “Control”) and (2) directly or indirectly, own at least fifteen percent (15%) of all equity interests (direct or indirect) in Borrower, (C) if such Transfer would cause the transferee (other than TPG or the REIT or an Approved Mezzanine Lender) to increase its direct or indirect interest in Borrower or in any SPE Party to an amount which equals or exceeds twenty percent (20%), Lender shall have approved in its reasonable discretion such proposed transferee, which approval shall be based upon Lender’s satisfactory determination as to the reputable character and creditworthiness of such proposed transferee, as evidenced by credit and background checks performed by Lender and such other financial statements and other information reasonably requested by Lender, (D) Borrower shall give Lender notice of such Transfer together with copies of all instruments effecting such Transfer not less than ten (10) days prior to the date of such Transfer, and (E) the legal and financial structure of Borrower and its members and the single purpose nature and bankruptcy remoteness of Borrower and its members after such Transfer, shall satisfy Lender’s then current applicable underwriting criteria and requirements;   (vi) provided that no Event of Default shall then exist, a Transfer of interests in TPG in connection with the conversion of TPG into a real estate investment trust; provided that (A) after giving affect thereto, the REIT continues to (1) Control Borrower (in the sense of clause (ii) of the defined term “Control”) and (2) own at least fifteen percent (15%) of all equity interests (direct or indirect) in Borrower, (B) such Transfer shall not result in a change of the day to day management and operations of the Property, and (C) Borrower shall give Lender notice of such Transfer together with copies of all instruments effecting such Transfer at least 30 days prior to the date of such Transfer.   (vii) (A) the issuance of any securities, options, warrants or other interests in TPG or the REIT or any entity owning an interest in the REIT, (B) the sale or pledge of stock in the TPG or the REIT, provided such stock is listed on the New York Stock Exchange or such other nationally recognized stock exchange, (C) the merger or consolidation of the REIT or (D) the merger or consolidation of the OP, provided that in the case of each of (C) and (D) above, the surviving entity shall be the REIT and/or the OP, as applicable, and after giving effect to such merger or consolidation, the surviving entity (the REIT or the OP, as applicable) shall continue to own not less than fifteen percent (15%) of all equity interests (direct or indirect) in   10 -------------------------------------------------------------------------------- Borrower and, in the case of each of (A), (B), (C) and (D) above, the REIT shall continue to Control (in the sense of clause (ii) of the defined term “Control”) Borrower and the day to day operations of the Property.   Person: any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.   Plan: (i) an employee benefit or other plan established or maintained by Borrower or any ERISA Affiliate or to which Borrower or any ERISA Affiliate makes or is obligated to make contributions and (ii) which is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.   Property: the parcel of real property and Improvements thereon owned by Borrower and encumbered by the Mortgage; together with all rights pertaining to such real property and Improvements, and all other collateral for the Loan as more particularly described in the Granting Clauses of the Mortgage and referred to therein as the Mortgaged Property. The Property is known as One Commerce Square and is located at 2005 Market Street, Philadelphia, Pennsylvania.   Rating Agency: each of Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”), and Fitch, Inc., a division of Fitch Ratings Ltd. (“Fitch”) or any other nationally-recognized statistical rating organization to the extent any of the foregoing have been engaged by Lender or its designee in connection with or in anticipation of any Secondary Market Transaction.   Rating Comfort Letter: a letter issued by each of the applicable Rating Agencies which confirms that the taking of the action referenced to therein will not result in any qualification, withdrawal or downgrading of any existing ratings of Securities created in a Secondary Market Transaction.   Release Date: the earlier to occur of (i) the thirty sixth (36th) Payment Date of the Term and (ii) the date that is two (2) years from the “startup day” (within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust established in connection with the final Secondary Market Transaction involving this Loan.   REIT: the resulting real estate investment trust from and after the conversion of TPG into a real estate investment trust pursuant to clause (vi) of the definition of “Permitted Transfer” above.   REMIC Trust: a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note.   Rents: all rents, rent equivalents, moneys payable as damages (including payments by reason of the rejection of a Lease in a Bankruptcy Proceeding) or in lieu of rent or rent equivalents, royalties (including all oil and gas or other mineral royalties and bonuses), income, fees, receivables, receipts, revenues (including parking revenue), deposits (including   11 -------------------------------------------------------------------------------- security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other payment and consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower, Manager or any of their agents or employees from any and all sources arising from or attributable to the Property and the Improvements, including all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of the Property or rendering of services by Borrower, Manager or any of their agents or employees and proceeds, if any, from business interruption or other loss of income insurance.   Scheduled Defeasance Payments: the Monthly Debt Service Payment Amount and/or Monthly Interest Payment Amount, as the case may be, required under the Note for all Payment Dates occurring after the Defeasance Date (including payment of the outstanding Principal balance on the Note on the Stated Maturity Date).   Security Agreement: a security agreement in form and substance that would be satisfactory to Lender (in Lender’s sole but good faith discretion) pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral.   Servicer: a servicer selected by Lender to service the Loan, including any “master servicer” or “special servicer” appointed under the terms of any pooling and servicing agreement or similar agreement entered into as a result of a Secondary Market Transaction.   SPE Party: Each of (i) GenPar LLC and (ii) Gen Par Inc.   State: the state in which the Property is located.   Stated Maturity Date: January 6, 2016, as such date may be changed in accordance with Section 2.2.4 hereof.   Survey: ALTA/ACSM Land Title Survey by Barton & Martin.   Taxes: all real estate and personal property taxes, assessments, water rates or sewer rents, maintenance charges, impositions, vault charges and license fees, now or hereafter levied or assessed or imposed against all or part of the Property.   Term: the entire term of this Agreement, which shall expire upon repayment in full of the Debt and full performance of each and every obligation to be performed by Borrower pursuant to the Loan Documents.   Title Insurance Policy: the ALTA mortgagee title insurance policy in the form acceptable to Lender issued with respect to the Property and insuring the Lien of the Mortgage.   TPG: Thomas Properties Group, Inc., a Delaware corporation.   Transfer: (i) any sale, conveyance, transfer, Lease or assignment, or the entry into any agreement to sell, convey, transfer, lease or assign, whether by law or otherwise, of, on,   12 -------------------------------------------------------------------------------- in or affecting (x) all or part of the Property (including any legal or beneficial direct or indirect interest therein), (y) any direct or indirect interest in Borrower (including any profit interest), or (z) any direct or indirect interest in any SPE Party or (ii) any change of Control of Borrower or any SPE Party. For purposes hereof, (i) a Transfer of an interest in Borrower or any SPE Party shall be deemed to include (A) if Borrower or any SPE Party or controlling shareholder of Borrower or any SPE Party is a corporation, the voluntary or involuntary sale, conveyance or transfer of such corporation’s stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise) or the creation or issuance of new stock in one or a series of transactions by which an aggregate of more than ten percent (10%) of such corporation’s stock shall be vested in a party or parties who are not now stockholders or any change in the control of such corporation and (B) if Borrower, any SPE Party or controlling shareholder of Borrower or any SPE Party is a limited or general partnership, joint venture or limited liability company, the change, removal, resignation or addition of a general partner, managing partner, limited partner, joint venturer or member or the transfer of the partnership interest of any general partner, managing partner or limited partner or the transfer of the interest of any joint venturer or member and (ii) a change of Control of Borrower or any SPE Party shall be deemed to have occurred if (A) there is any change in the identity of any individual or entity or any group of individuals or entities who have the right, by virtue of any partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement or any other agreement, with or without taking any formative action, to cause Borrower (or any SPE Party) to take some action or to prevent, restrict or impede Borrower (or any SPE Party) from taking some action which, in either case, Borrower (or any SPE Party) could take or could refrain from taking were it not for the rights of such individuals or (B) the individual or entity or group of individuals or entities that Control Borrower (and any SPE Party) as described in clause (A) ever cease to own at least fifteen percent (15%) of all equity interests (direct or indirect) in Borrower (and each SPE Party).   UCC: the Uniform Commercial Code as in effect in the State or the state in which any of the Cash Management Accounts are located, as the case may be.   U.S. Obligations: (i) direct full faith and credit obligations of (or guaranteed as to timely payment by) the United States of America (or any agency or instrumentality of the United States of America, to the extent acceptable by the applicable Rating Agencies), or the obligations of which are backed by the full faith and credit of the United States of America, in each case that are not subject to prepayment, call or early redemption, or (ii) obligations that are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or (iii) to the extent acceptable to the applicable Rating Agencies, other non-callable government securities satisfying the REMIC Provisions (hereinafter defined), in each case to the extent such obligations are not subject to prepayment, call or early redemption. As used herein, “REMIC Provisions” mean provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Sections 860A through 860G of Subchapter M of Chapter 1 of Subtitle A of the Code, and related provisions, and temporary and final regulations and, to the extent not inconsistent with such temporary and final regulations, proposed regulations, and published rulings, notices and announcements promulgated thereunder, as the foregoing may be in effect from time to time.   13 -------------------------------------------------------------------------------- Welfare Plan: an employee welfare benefit plan, as defined in Section 3(1) of ERISA.   Yield Maintenance Premium: an amount which, when added to the outstanding Principal, would be sufficient to purchase U.S. Obligations which provide payments (a) on or prior to, but as close as possible to, all successive scheduled payment dates under this Agreement through the Stated Maturity Date and (b) in amounts equal to the Monthly Debt Service Payment Amount and/or Monthly Interest Payment Amount, as the case may be, required under this Agreement for all successive scheduled payment dates under this Agreement through the Stated Maturity Date together with the outstanding principal balance of the Note as of the Stated Maturity Date assuming all such Monthly Debt Service Payment Amounts and/or Monthly Interest Payment Amounts, as the case may be, are made (including any servicing costs associated therewith). In no event shall the Yield Maintenance Premium be less than zero.   1.2 Index of Other Definitions. The following terms are defined in the sections or Loan Documents indicated below:   “Annual Budget” - 6.3.5 “Applicable Taxes” - 2.2.3 “Approved Annual Budget” - 6.3.5 “Approved Capital Budget” - 6.3.5 “Approved Operating Budget” - 6.3.5 “Award” - 7.3.2 “Bankruptcy Proceeding” - 4.7 “Borrower’s Recourse Liabilities” - 10.1 “Capital Reserve Subaccount” - 3.4 “Cash Collateral Subaccount” - 3.9 “Cash Management Accounts” - 3.10 “Casualty” - 7.2.1 “Casualty/Condemnation Prepayment” - 2.3.2 “Casualty/Condemnation Subaccount” - 3.7 “Clearing Account” - 3.1 “Clearing Account Agreement” - 1.1 (Definition of Loan Documents) “Clearing Bank” - 3.1 “Condemnation” - 7.3.1 “Defeasance Collateral Account” - 2.3.3 “Defeasance Event” - 2.3.3 “Defeasance Date” - 2.3.3 “Deposit Account” - 3.1 “Deposit Account Agreement” - 1.1 (Definition of Loan Documents) “Disclosure Document” - 9.1.2 “DSCR Cash Management Period” - 1.1 (Definition of Cash Management Period). “Easements” - 4.14 “Endorsement” - 5.26 “Environmental Laws” - 4.21 “Equipment” - Mortgage “Event of Default” - 8.1   14 -------------------------------------------------------------------------------- “Exchange Act” - 9.1.2 “Fitch” - 1.1 (Definition of Rating Agency) “GCM Group” - 9.1.3 “Government Lists” - 5.31 “Hazardous Substances” - 4.21 “Improvements” - Mortgage “Indemnified Liabilities” - 5.30 “Indemnified Party” - 5.30 “Independent Director” - Schedule 5 “Insurance Premiums” - 7.1.2 “Insured Casualty” - 7.2.2 “Intercreditor Agreement” - 1.1 (Definition of Approved Mezzanine Loan) “Issuer” - 9.1.3 “Late Payment Charge” - 2.5.3 “Lender’s Consultant” - 5.8.1 “Liabilities” - 9.1.3 “Licenses” - 4.11 “Loan” - 2.1 “Monthly Debt Service Payment Amount” - 2.2.1 “Monthly Interest Payment Amount” - 2.2.1 “Moody’s” - 1.1 (Definition of Rating Agency) “Mortgage” - 1.1 (Definition of Loan Documents) “New Payment Date” - 2.2.4 “Note” - 1.1 (Definition of Loan Documents) “Notice” - 6.1 “O & M Program” - 5.8.3 “OFAC” - 5.31 “Operating Expense Subaccount” - 3.6 “Patriot Act” - 5.31 “Patriot Act Offense” - 5.31 “Permitted Indebtedness” - 5.22 “Permitted Investments” - Deposit Account Agreement “Permitted Prepayment Date” - 2.3.4 “Policies” - 7.1.2 “Principal” - 2.1 “Proceeds” - 7.2.2 “Proposed Material Lease” - 5.10.2 “Provided Information” - 9.1.1 “Qualified Carrier” - 7.1.1 “Registration Statement” - 9.1.3 “Remedial Work” - 5.8.2 “REMIC Provisions” - 1.1 (Definition of U.S. Obligations) “Rent Roll” - 4.16 “Required Records” - 6.3.6 “Required Repairs” - 3.2.1 “Required Repairs Subaccount” - 3.2.2   15 -------------------------------------------------------------------------------- “Restoration” - 7.4.1 “Rollover Letter of Credit” - 3.5.2 “Rollover Reserve Subaccount” - 3.5 “S&P” - 1.1 (Definition of Rating Agency) “Secondary Market Transaction” - 9.1.1 “Securities” - 9.1.1 “Securities Act” - 9.1.2 “Securitization” - 9.1.1 “Security Deposit Account” - 3.8 “Security Deposit Subaccount” - 3.8 “Significant Casualty” - 7.2.2 “Special Purpose Bankruptcy Remote Entity” - 5.13 “Springing Recourse Event” - 10.1 “Subaccounts” - 3.1 “Successor Borrower” - 2.3.3 “Tax and Insurance Subaccount” - 3.3 “Toxic Mold” - 4.21 “Transfer and Assumption” - 5.26 “Transferee Borrower” - 5.26 “Underwriter Group” - 9.1.3 “Underwriters” - 9.1.3   1.3 Principles of Construction. Unless otherwise specified, (i) all references to sections and schedules are to those in this Agreement, (ii) the words “hereof,” “herein” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision, (iii) all definitions are equally applicable to the singular and plural forms of the terms defined, (iv) the word “including” means “including but not limited to,” and (v) accounting terms not specifically defined herein shall be construed in accordance with GAAP.   2. GENERAL LOAN TERMS   2.1 The Loan. Lender is making a loan (the “Loan”) to Borrower on the date hereof, in the original principal amount (the “Principal”) of $130,000,000, which shall mature on the Stated Maturity Date. Borrower acknowledges receipt of the Loan, the proceeds of which are being and shall be used to (i) refinance and defease the existing loan on the Property, (ii) fund certain of the Subaccounts, and (iii) pay transaction costs. Any excess proceeds may be used for any lawful purpose. No amount repaid in respect of the Loan may be reborrowed.   2.2 Interest; Monthly Payments.   2.2.1 Generally. From and after the date hereof, interest on the unpaid Principal shall accrue at the Interest Rate and be payable as hereinafter provided. On the date hereof, Borrower shall pay interest on the unpaid Principal from the date hereof through and including January 5, 2005. On February 6, 2006 and each Payment Date thereafter through and including the Payment Date immediately preceding the Amortization Commencement Date, Borrower shall pay interest only on the unpaid Principal accrued at the Interest Rate during the   16 -------------------------------------------------------------------------------- Interest Period immediately preceding such Payment Date (the “Monthly Interest Payment Amount”). On the Amortization Commencement Date and each Payment Date thereafter through and including December 6, 2015, the Principal and interest thereon at the Interest Rate shall be payable in equal monthly installments of $751,639.67 (the “Monthly Debt Service Payment Amount”); which is based on the Interest Rate and a 360-month amortization schedule. The Monthly Debt Service Payment Amount due on any Payment Date shall first be applied to the payment of interest accrued during the preceding Interest Period and the remainder of such Monthly Debt Service Payment Amount shall be applied to the reduction of the unpaid Principal. All accrued and unpaid interest shall be due and payable on the Maturity Date. If the Loan is repaid on any date other than on a Payment Date (whether prior to or after the Stated Maturity Date), Borrower shall also pay interest that would have accrued on such repaid Principal to but not including the next Payment Date.   2.2.2 Default Rate. After the occurrence and during the continuance of an Event of Default, the entire unpaid Debt shall bear interest at the Default Rate, and shall be payable upon demand from time to time, to the extent permitted by applicable law.   2.2.3 Taxes. Any and all payments by Borrower hereunder and under the other Loan Documents shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on Lender’s income, and franchise taxes imposed on Lender by the law or regulation of any Governmental Authority (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to in this Section 2.2.3 as “Applicable Taxes”). If Borrower shall be required by law to deduct any Applicable Taxes from or in respect of any sum payable hereunder to Lender, the following shall apply: (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.2.3), Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. Payments pursuant to this Section 2.2.3 shall be made within ten (10) days after the date Lender makes written demand therefor.   2.2.4 New Payment Date. Lender shall have the right, to be exercised not more than once during the term of the Loan, to change the Payment Date to a date later than the sixth day of each month (a “New Payment Date”), on thirty (30) days’ written notice to Borrower; provided, however, that any such change in the Payment Date: (i) shall not modify the amount of regularly scheduled monthly principal and interest payments, except that the first payment of principal and interest payable on the New Payment Date shall be accompanied by interest at the interest rate herein provided for the period from the Payment Date in the month in which the New Payment Date first occurs to the New Payment Date, (ii) shall change the Stated Maturity Date to the New Payment Date occurring in the month set forth in the definition of Stated Maturity Date; and (iii) shall extend the Amortization Commencement Date to the New Payment Date occurring in the month set forth in the definition of Amortization Commencement Date.   17 -------------------------------------------------------------------------------- 2.3 Loan Repayment.   2.3.1 Repayment. Borrower shall repay the entire outstanding principal balance of the Note in full on the Maturity Date, together with interest thereon to (but excluding) the date of repayment and any other amounts due and owing under the Loan Documents. Borrower shall have no right to prepay or defease all or any portion of the Principal except in accordance with Section 2.3.2 below, Section 2.3.3 below and Section 2.4 below. Except during the continuance of an Event of Default, all proceeds of any repayment, including any prepayments of the Loan, shall be applied by Lender as follows in the following order of priority: First, accrued and unpaid interest at the Interest Rate; Second, to Principal; and Third, to and any other amounts then due and owing under the Loan Documents. If prior to the Stated Maturity Date the Debt is accelerated by reason of an Event of Default, then Lender shall be entitled to receive, in addition to the unpaid Principal and accrued interest and other sums due under the Loan Documents, an amount equal to the Yield Maintenance Premium applicable to such Principal so accelerated. During the continuance of an Event of Default, all proceeds of repayment, including any payment or recovery on the Property (whether through foreclosure, deed-in-lieu of foreclosure, or otherwise) shall, unless otherwise provided in the Loan Documents, be applied in such order and in such manner as Lender shall elect in Lender’s discretion.   2.3.2 Mandatory Prepayments. The Loan is subject to mandatory prepayment in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”), in the manner and to the extent set forth in Section 7.4.2 hereof. Each Casualty/Condemnation Prepayment, after deducting Lender’s costs and expenses (including reasonable attorneys’ fees and expenses) in connection with the settlement or collection of the Proceeds or Award, shall be applied in the same manner as repayments under Section 2.3.1 above, and if such Casualty/Condemnation Payment is made on any date other than a Payment Date, then such Casualty/Condemnation Payment shall include interest that would have accrued on the Principal prepaid to but not including the next Payment Date. Provided that no Event of Default is continuing, any such mandatory prepayment under this Section 2.3.2 shall be without the payment of the Yield Maintenance Premium. Notwithstanding anything to the contrary contained herein, each Casualty/Condemnation Prepayment shall be applied in inverse order of maturity and shall not extend or postpone the due dates of the monthly installments due under the Note or this Agreement, or change the amounts of such installments.   2.3.3 Defeasance   (a) Conditions to Defeasance. Provided no Event of Default shall be continuing, Borrower shall have the right on any Payment Date after the Release Date and prior to the Permitted Prepayment Date to voluntarily defease the entire amount of the Principal and obtain a release of the Lien of the Mortgage by providing Lender with the Defeasance Collateral (a “Defeasance Event”), subject to the satisfaction of the following conditions precedent:   (i) Borrower shall give Lender not less than thirty (30) days prior written notice specifying a Payment Date (the “Defeasance Date”) on which the Defeasance Event is to occur.   18 -------------------------------------------------------------------------------- (ii) Borrower shall pay to Lender (A) all payments of Principal and interest due on the Loan to and including the Defeasance Date and (B) all other sums, then due under the Note, this Agreement and the other Loan Documents;   (iii) Borrower shall deposit the Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of subsections (b) and (c) of this Section 2.3.3;   (iv) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Defeasance Collateral;   (v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is standard in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (i) Lender has a legal and valid perfected first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral, (ii) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of a Defeasance Event pursuant to this Section 2.3.3, (iii) the Defeasance Event will not result in a significant modification and will not be an exchange of the Note for purposes of Section 1001 of the Code and the Treasury Regulations thereunder, (iv) delivery of the Defeasance Collateral and the grant of a security interest therein to Lender shall not constitute a voidable preference under Section 547 of the Bankruptcy Code or applicable state law and (v) a non-consolidation opinion with respect to the Successor Borrower;   (vi) if required by any Rating Agency, Borrower shall deliver to Lender and the Rating Agencies a Rating Comfort Letter as to the Defeasance Event;   (vii) Borrower shall deliver an Officer’s Certificate certifying that the requirements set forth in this Section 2.3.3 have been satisfied;   (viii) Borrower shall deliver a certificate of a nationally recognized public accounting firm acceptable to Lender certifying that (A) the Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments, (B) the revenue from the Defeasance Collateral will be applied within four (4) months of receipt towards payments of Debt Service, (C) the securities that comprise the Defeasance Collateral are not subject to prepayment, call or early redemption and (D) the interest income to Borrower (or the Successor Borrower, if applicable) from the Defeasance Collateral will not in any tax year exceed the interest expense associated with the defeased Loan;   (ix) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request;   (x) Borrower shall pay all costs and expenses of Lender incurred in connection with the Defeasance Event, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses; and   19 -------------------------------------------------------------------------------- (xi) All conditions with respect to the defeasance of the Approved Mezzanine Loan, if any (as set forth in the Approved Mezzanine Loan Documents) shall have been satisfied.   (b) Defeasance Collateral Account. On or before the date on which Borrower delivers the Defeasance Collateral, Borrower shall open at any Eligible Institution the defeasance collateral account (the “Defeasance Collateral Account”) which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral, and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied first to accrued and unpaid interest and then to Principal. Any cash from interest and principal paid on the Defeasance Collateral not needed to pay accrued and unpaid interest or Principal shall be retained in the Defeasance Collateral Account as additional collateral for the Loan. Borrower shall cause the Eligible Institution at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Institution shall agree to hold and distribute the Defeasance Collateral in accordance with this Agreement. The Successor Borrower shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Borrower shall prepay all cost and expenses associated with opening and maintaining the Defeasance Collateral Account. Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.   (c) Successor Borrower. In connection with a Defeasance Event under this Section 2.3.3, Borrower shall, if required by the Rating Agencies or if Borrower elects to do so, establish or designate a successor entity (the “Successor Borrower”) which shall be a Special Purpose Bankruptcy Remote Entity and which shall be approved by the Rating Agencies. Any such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the Rating Agencies shall require otherwise. Borrower shall transfer and assign all obligations, rights and duties under and to the Defeased Note, together with the Defeasance Collateral to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement and Borrower shall be relieved of its obligations under such documents. Borrower shall pay a minimum of $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Borrower shall pay all reasonable costs and expenses reasonably incurred by Lender, including Lender’s reasonable attorney’s fees and expenses, reasonably incurred in connection therewith.   2.3.4 Optional Prepayments. From and after the third Payment Date prior to the Stated Maturity Date (the “Permitted Prepayment Date”), Borrower shall have the right to prepay the Loan in whole (but not in part), provided that Borrower gives Lender at least fifteen (15) days’ prior written notice thereof. If any such prepayment is not made on a Payment Date, Borrower shall also pay interest that would have accrued on such prepaid Principal to, but not including, the next Payment Date. Any such prepayment shall be made without payment of the Yield Maintenance Premium.   20 -------------------------------------------------------------------------------- 2.4 Release of Property.   2.4.1 Release on Defeasance. If Borrower has elected to defease the Note and the requirements of Section 2.3.3 above and this Section 2.4 have been satisfied, the Property shall be released from the Lien of the Mortgage and the Defeasance Collateral pledged pursuant to the Security Agreement shall be the sole source of collateral securing the Note. In connection with the release of the Lien, Borrower shall submit to Lender, not less than thirty (30) days prior to the Defeasance Date (or such shorter time as is acceptable to Lender in its sole discretion), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Property is located and contain standard provisions protecting the rights of the releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officer’s Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such release in accordance with the terms of this Agreement. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage, including Lender’s reasonable attorneys’ fees.   2.4.2 Release on Payment in Full. Lender shall, upon the written request and at the expense of Borrower, upon payment in full of the Debt in accordance herewith, release or, if requested by Borrower, assign to Borrower’s designee (without any representation or warranty by and without any recourse against Lender whatsoever), the Lien of the Loan Documents if not theretofore released.   2.5 Payments and Computations.   2.5.1 Making of Payments. Each payment by Borrower shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 3:00 p.m., New York City time, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower. Whenever any such payment shall be stated to be due on a day that is not a Business Day, such payment shall be made on the first Business Day thereafter. All such payments shall be made irrespective of, and without any deduction, set-off or counterclaim whatsoever and are payable without relief from valuation and appraisement laws and with all costs and charges incurred in the collection or enforcement thereof, including attorneys’ fees and court costs.   2.5.2 Computations. Interest payable under the Loan Documents shall be computed on the basis of the actual number of days elapsed over a 360-day year.   2.5.3 Late Payment Charge. If any Principal, interest or other sum due under any Loan Document is not paid by Borrower on the date on which it is due (other than the balloon payment of Principal due on the Maturity Date or acceleration of the Loan), Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law (the “Late Payment Charge”), in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Such amount shall be secured by the Loan Documents. Provided no Event of Default is then continuing, no Late Payment Charge shall apply if adequate funds are available in the Deposit Account for any such Principal, interest or other sums due under any Loan Document and the Deposit Bank fails to allocate such funds in accordance with the Loan Documents.   21 -------------------------------------------------------------------------------- 3. CASH MANAGEMENT AND RESERVES   3.1 Cash Management Arrangements. Borrower shall cause all Rents to be transmitted directly by non-residential tenants of the Property into an Eligible Account (the “Clearing Account”) maintained by Borrower at a local bank selected by Borrower, which shall at all times be an Eligible Institution (the “Clearing Bank”) as more fully described in the Clearing Account Agreement. Without in any way limiting the foregoing, all Rents received by Borrower or Manager shall be deposited into the Clearing Account within three (3) Business Days of receipt. Funds deposited into the Clearing Account shall be swept by the Clearing Bank on a daily basis into Borrower’s operating account at the Clearing Bank, unless a Cash Management Period is continuing, in which event such funds shall be swept on a daily basis into an Eligible Account at the Deposit Bank controlled by Lender (the “Deposit Account”) and applied and disbursed in accordance with this Agreement. Funds in the Deposit Account shall be invested at Borrower’s discretion only in Permitted Investments. Lender will also establish subaccounts of the Deposit Account which shall at all times be Eligible Accounts (and may be ledger or book entry accounts and not actual accounts) (such subaccounts are referred to herein as “Subaccounts”). The Deposit Account and any Subaccount will be under the sole control and dominion of Lender, and Borrower shall have no right of withdrawal therefrom. Borrower shall pay for all expenses of opening and maintaining all of the above accounts.   3.2 Required Repairs.   3.2.1 Completion of Required Repairs. Borrower represents and warrants to Lender that Borrower has reserved on its books sufficient funds to cover Borrower’s share of the repair work at the Property described on Schedule 1 hereto (the “Required Repairs”). Borrower shall perform and complete the Required Repairs within twelve (12) months of the date hereof; provided, however, the inability by Borrower to fully perform any the Required Repairs within the time period set forth above, shall not in and of itself, constitute a Default or an Event of Default hereunder, provided that Borrower is diligently and continuously taking all commercially reasonable steps necessary to perform the Required Repair(s) in question.   3.2.2 Intentionally Omitted.   3.3 Taxes and Insurance. Borrower shall pay to Lender on each Payment Date (i) one-twelfth (1/12th) of the Taxes that Lender reasonably estimates will be payable during the next twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due dates and (ii) one-twelfth (1/12th) of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies. Such amounts will be transferred by Lender to a Subaccount (the “Tax and Insurance Subaccount”). Lender will (a) apply funds in the Tax and Insurance Subaccount to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Section 5.2 hereof and Section 7.1 hereof, provided that Borrower has promptly supplied Lender with notices of all Taxes and Insurance Premiums due, or (b) reimburse Borrower for such amounts upon presentation of evidence of payment; subject, however, to Borrower’s right to contest Taxes in accordance with Section 5.2 hereof. In making any payment relating to Taxes and Insurance   22 -------------------------------------------------------------------------------- Premiums, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If Lender determines in its reasonable judgment that the funds in the Tax and Insurance Subaccount will be insufficient to pay (or in excess of) the Taxes or Insurance Premiums next coming due, Lender may increase (or decrease) the monthly contribution required to be made by Borrower to the Tax and Insurance Subaccount.   3.4 Capital Expense Reserves. (a) Subject to the provisions of subsection (b) below, Borrower shall pay to Lender on each Payment Date an amount initially equal to one-twelfth (1/12th) of the product obtained by multiplying $0.20 by the aggregate number of rentable square feet of space in the Property. Lender will transfer such amounts into a Subaccount (the “Capital Reserve Subaccount”). Additionally, upon thirty (30) days’ prior notice to Borrower, Lender may reassess the amount of the monthly payment required under this Section 3.4 not more than once every six (6) months (based upon its then current underwriting standards); provided, however that Lender shall only increase the amount of such monthly contributions if Lender reasonably determines that such increase is necessary to address unanticipated material changes after the date hereof in the anticipated Capital Expenses for the Property (in which event such reassessment shall be limited to address only such issues). Provided that no Default or Event of Default has occurred and is continuing, Lender shall disburse funds held in the Capital Reserve Subaccount to Borrower, within fifteen (15) days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $5,000 provided that (i) such disbursement is for an Approved Capital Expense; (ii) Lender shall have (if it desires) verified (by an inspection conducted at Borrower’s expense) performance of the work associated with such Approved Capital Expense; and (iii) the request for disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used to pay or reimburse Borrower for Approved Capital Expenses and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been used to pay the previously identified Approved Capital Expenses, and (B) lien waivers or other evidence of payment satisfactory to Lender, (C) at Lender’s option, with respect to disbursements in excess of $100,000, a title search for the Property indicating that the Property is free from all Liens, claims and other encumbrances not previously approved by Lender and (D) such other evidence as Lender shall reasonably request that the Approved Capital Expenses at the Property to be funded by the requested disbursement have been completed and are paid for or will be paid upon such disbursement to Borrower. Any such disbursement of more than $10,000 to pay (rather than reimburse) Approved Capital Expenses may, at Lender’s option, be made by joint check payable to Borrower and the payee on such Approved Capital Expenses.   (b) Notwithstanding anything to the contrary contained in subsection (a) above, Borrower shall not be required to make any payments into the Capital Reserve Subaccount pursuant to subsection (a) above at any time that an Event of Default has not occurred and is continuing.   23 -------------------------------------------------------------------------------- 3.5 Rollover Reserves.   3.5.1 General On each Payment Date occurring during the continuance of a Lease Sweep Period (provided no Cash Management Period is then continuing (other than a Cash Management Period triggered solely as a result of a Lease Sweep Period)), all Available Cash shall be paid to Lender. Lender will transfer such amount into a Subaccount (the “Rollover Reserve Subaccount”). Borrower shall also pay to Lender for transfer into the Rollover Reserve Subaccount all Lease Termination Payments received by Borrower. Provided that no Default or Event of Default has occurred and is continuing, Lender shall disburse funds held in the Rollover Reserve Subaccount to Borrower, within fifteen (15) days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $5,000, provided (i) such disbursement is for an Approved Major Lease Leasing Expense (or any other Approved Leasing Expense if the funds in question are comprised of Lease Termination Payments that have been deposited into the Rollover Reserve Subaccount on account of any other Lease); (ii) Lender shall have (if it desires) verified (by an inspection conducted at Borrower’s expense) performance of any construction work associated with such Approved Major Lease Leasing Expense (or any other Approved Leasing Expense if the funds in question are comprised of Lease Termination Payments that have been deposited into the Rollover Reserve Subaccount on account of any other Lease); and (iii) the request for disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used only to pay (or reimburse Borrower for) Approved Major Lease Leasing Expenses (or any other Approved Leasing Expense if the funds in question are comprised of Lease Termination Payments that have been deposited into the Rollover Reserve Subaccount on account of any other Lease) and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been used only to pay (or reimburse Borrower for) the previously identified Approved Major Lease Leasing Expenses (or any other Approved Leasing Expense if the funds in question are comprised of Lease Termination Payments that have been deposited into the Rollover Reserve Subaccount on account of any other Lease), and (B) reasonably detailed supporting documentation as to the amount, necessity and purpose therefor. Any such disbursement of more than $10,000 to pay (rather than reimburse) Approved Leasing Expenses may, at Lender’s option, be made by joint check payable to Borrower and the payee of such Approved Major Lease Leasing Expenses (or any other Approved Leasing Expense if the funds in question are comprised of Lease Termination Payments that have been deposited into the Rollover Reserve Subaccount on account of any other Lease). Provided no Event of Default is continuing, upon the termination of the subject Lease Sweep Period, and Lender’s receipt of satisfactory evidence that all Approved Major Lease Leasing Expenses incurred in connection therewith (and any other expenses in connection with the re-tenanting of the applicable space) have been paid in full (which evidence may include (i) a letter or certification from the applicable broker, if any, that all brokerage commissions payable in connection therewith have been paid and (ii) an estoppel certificate executed by each applicable tenant which certifies that all contingencies under such Lease to the payment of full rent (including Borrower’s contribution to the cost of any tenant improvement work) have been satisfied), any funds (if any) remaining in the Rollover Reserve Subaccount that have been deposited therein as a result of such Lease Sweep Period shall be disbursed to Borrower; provided, however, if a Cash Management Period is then continuing, then no such funds shall be disbursed to Borrower, and all such funds shall   24 -------------------------------------------------------------------------------- instead be deposited into the Cash Collateral Subaccount, to be applied in accordance with Section 3.9 hereof.   (b) Any Lease Termination Payments and any other funds deposited into the Rollover Reserve Subaccount from the Security Deposit Subaccount in accordance with Section 3.8 hereof shall be applied, at Lender’s election, towards either (a) subject to the rights of Borrower under the applicable Lease, rent arrearages under such Lease (or to cure any other tenant default under such Lease), (b) debt service shortfalls that may arise as a result of a termination of such Lease (and Borrower hereby authorizes Lender to disburse to itself any such amounts without any request therefor by Borrower) or (c) funding any Approved Leasing Expenses (or Approved Major Lease Leasing Expenses, if applicable) which are anticipated to occur in connection with the re-tenanting of the space under the Lease that was the subject of such termination (in accordance with the terms and conditions of Section 3.5(a) above.   (c) Borrower shall pay to Lender $382,000 (the “Stradley T/I Funds”) on the date hereof, and Lender shall transfer such amount to the Rollover Reserve Subaccount. Provided no Event of Default shall have occurred and is continuing, Lender shall disburse all or any portion of the Stradley T/I Funds to Borrower upon receipt of an Officer’s Certificate certifying that such amounts are owing to the tenant under the Stradley Lease, and that such funds shall be used to pay (or reimburse Borrower for) the same. Provided no Event of Default is then continuing, upon receipt of evidence (which may be by way of an estoppel certificate or tenant letter) that all tenant allowance funds payable by the landlord under the Stadley Lease have been paid in full, Lender shall disburse any remaining portion (if any) of the Stradley T/I Funds to Borrower.   3.5.2 Rollover Letter of Credit. Notwithstanding anything to the contrary contained in Section 3.5.1, at Borrower’s option, Borrower may at any time deliver a Letter of Credit to Lender in an amount equal to $2,500,000 (the “Rollover Letter of Credit”), which Rollover Letter of Credit shall be held by Lender subject to and in accordance with the provisions of this Section 3.5.2. Upon delivery by Borrower to Lender of the Rollover Letter of Credit, any funds that have been deposited into the Rollover Reserve Subaccount on account of the subject Lease Sweep Period shall be returned to Borrower (and the subject Lease Sweep Period shall terminate). If Borrower fails to timely pay for any Approved Major Lease Leasing Expenses and such failure continues for ten (10) days after notice from Lender, Lender shall have the right, but not the obligation, to draw on the Rollover Letter of Credit for purposes of making such payment of Approved Major Lease Leasing Expenses.   (b) Borrower may request that the Rollover Letter of Credit be drawn upon in increments of at least $50,000 for Approved Major Lease Leasing Expenses and, within ten (10) days of the delivery of such request (but not more often than once per month), Lender will transfer the amount of the requested funds for Approved Major Lease Leasing Expenses into the Rollover Reserve Subaccount, which funds will be disbursed to pay for Approved Major Lease Leasing Expenses in accordance with the terms and conditions set forth in Section 3.5.1.   (c) The Rollover Letter of Credit delivered under this Section 3.5.2 shall be held by Lender as additional security for the payment of the Debt. Upon the occurrence and during   25 -------------------------------------------------------------------------------- the continuance of an Event of Default, Lender shall have the right, at its option, to draw on the Rollover Letter of Credit and to either deposit all or any portion of the proceeds therefrom into the Rollover Reserve Subaccount (in which event, any such funds shall be disbursed to Borrower with respect to Approved Major Lease Leasing Expenses only upon the satisfaction of the requirements for disbursement set forth in Section 3.5.1), or to apply all or any portion of such proceeds to payment of the Debt in such order, proportion or priority as Lender may determine. Any such application to the Debt, after an Event of Default which remains uncured shall be subject to the Yield Maintenance Premium. On the Maturity Date, the Rollover Letter of Credit may be drawn upon by Lender and applied to any unpaid portion of the Debt.   (d) In addition to any other right Lender may have to draw upon the Rollover Letter of Credit pursuant to the terms and conditions of this Agreement, Lender shall have the additional rights to draw in full the Rollover Letter of Credit: (i) if the Rollover Letter of Credit is an evergreen Letter of Credit, if Lender has received a notice from the issuing bank that the Rollover Letter of Credit will not be renewed and a substitute Rollover Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Rollover Letter of Credit is scheduled to expire; (ii) if the Rollover Letter of Credit has a stated expiration date, if Lender has not received a notice from the issuing bank that it has renewed the Rollover Letter of Credit at least thirty (30) days prior to the date on which such Rollover Letter of Credit is scheduled to expire and a substitute Rollover Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Rollover Letter of Credit is scheduled to expire; (iii) upon receipt of notice from the issuing bank that the Rollover Letter of Credit will be terminated (except if the termination of the Rollover Letter of Credit is permitted pursuant to the terms of this Agreement or a substitute Rollover Letter of Credit is provided); or (iv) if Lender has received notice that the bank issuing the Rollover Letter of Credit shall cease to be an Approved Bank and Borrower has not replaced such Rollover Letter of Credit with a Rollover Letter of Credit issued by an Approved Bank within ten (10) Business Days after written notice thereof from Lender to Borrower. Notwithstanding anything to the contrary contained in the above, Lender is not obligated to draw on the Rollover Letter of Credit upon the happening of an event specified in (i), (ii), (iii) or (iv) above and shall not be liable for any losses sustained by Borrower due to the insolvency of the bank issuing the Rollover Letter of Credit.   (e) Provided no Event of Default is continuing, upon the re-tenanting of all of the space currently demised under the Major Lease that gave rise to the subject Lease Sweep Period pursuant to one or more replacement Leases approved by Lender and entered into in accordance with Section 5.10 hereof, and Lender’s receipt of satisfactory evidence that all Approved Major Lease Leasing Expenses incurred in connection therewith (and any other expenses in connection with the re-tenanting of such space) have been paid in full (which evidence may include, (i) a letter or certification from the applicable broker, if any, that all brokerage commissions payable in connection therewith have been paid and (ii) an estoppel certificate executed by each applicable tenant which certifies that all contingencies under such Lease to the payment of full rent (including Borrower’s contribution to the cost of any tenant improvement work) have been satisfied), the Rollover Letter of Credit shall be returned to Borrower. Additionally, upon Borrower’s delivery to Lender of evidence of payment of any portion of the subject Approved Major Lease Leasing Expenses, then Borrower shall be entitled to reduce the face amount of the Letter of Credit by such amount.   26 -------------------------------------------------------------------------------- 3.6 Operating Expense Subaccount. (a) During a Cash Management Period, on each Payment Date, a portion of the Rents that have been deposited into the Deposit Account during the immediately preceding Interest Period in an amount equal to the monthly amount set forth in the Approved Operating Budget for the following month as being necessary for payment of Approved Operating Expenses at the Property for such month, shall be transferred into a Subaccount for the payment of Approved Operating Expenses (the “Operating Expense Subaccount”). Provided no Default or Event of Default has occurred and is continuing (and subject to the provisions of subsection (b) below), Lender shall disburse funds held in the Operating Expense Subaccount to Borrower, within ten (10) days after delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $1,000, provided (i) such disbursement is for an Approved Operating Expense; and (ii) such disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used to pay Approved Operating Expenses and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been or will be used to pay the previously identified Approved Operating Expenses, and (B) reasonably detailed documentation satisfactory to Lender as to the amount, necessity and purpose therefor.   (b) Notwithstanding anything to the contrary in subsection (a) above, on any Payment Date on which an Event of Default is not then continuing, Lender will automatically disburse to Borrower funds from the Operating Expense Subaccount in an amount equal to the monthly amount set forth in the Approved Operating Budget for the month in which such Payment Date occurs as being necessary for payment of Approved Operating Expenses at the Property for such month (plus any other amounts requested by Borrower for such month for payment of items constituting Approved Operating Expenses, which are not included in the Approved Operating Budget), which disbursement shall be made without any requirement for any Borrower request therefor or any Officer’s Certificate in connection therewith.   3.7 Casualty/Condemnation Subaccount. Borrower shall pay, or cause to be paid, to Lender all Proceeds or Awards due to any Casualty or Condemnation to be transferred to a Subaccount (the “Casualty/Condemnation Subaccount”) in accordance with the provisions of Article 7 hereof. All amounts in the Casualty/Condemnation Subaccount shall disbursed in accordance with the provisions of Article 7 hereof.   3.8 Security Deposits. Borrower shall keep and hold all security deposits under Leases in accordance with applicable Legal Requirements and at a separately designated account under Borrower’s control at the Clearing Bank (or in another Eligible Account at an Eligible Institution) (and in the case of a letter of credit, assigned with full power of attorney and executed sight drafts to Lender) so that the security deposits shall not be commingled with any other funds of Borrower (such account, the “Security Deposit Account”). After the occurrence of an Event of Default, Borrower shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over to Lender the security deposits (and any interest theretofore earned thereon) under Leases, to be held by Lender in a Subaccount (the “Security Deposit Subaccount”) subject to the terms of the Leases. After the occurrence of an Event of Default, Borrower shall also deliver to Lender (for deposit into the Security Deposit Subaccount) all amounts drawn under any letters of credit held by Borrower in lieu of cash security deposits.   27 -------------------------------------------------------------------------------- Security deposits held in the Security Deposit Subaccount will be released by Lender upon notice from Borrower together with such evidence as Lender may reasonably request that such security deposit is required to be returned to a tenant pursuant to the terms of a Lease. Any funds in the Security Deposit Subaccount which Borrower is permitted to retain pursuant to the applicable provisions of any Lease which has expired or has been terminated, cancelled or surrendered shall be paid to Lender and transferred by Lender into the Rollover Reserve Subaccount, to be applied and disbursed in accordance with the provisions of Section 3.5 hereof. Any letter of credit or other instrument that Borrower receives in lieu of a cash security deposit under any Lease entered into after the date hereof shall (i) be maintained in full force and effect in the full amount unless replaced by a cash deposit as hereinabove described and (ii) if permitted pursuant to any Legal Requirements, name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender).   3.9 Cash Collateral Subaccount. If a Cash Management Period shall have commenced (other than a Cash Management Period triggered solely as a result of (i) a Lease Sweep Period or (ii) the existence of an Approved Mezzanine Loan), then on the immediately succeeding Payment Date and on each Payment Date thereafter during the continuance of such Cash Management Period, all Available Cash shall be paid to Lender, which amounts shall be transferred by Lender into a Subaccount (the “Cash Collateral Subaccount”) as cash collateral for the Debt. Notwithstanding the foregoing, if a Lease Sweep Period has occurred and is then continuing during the continuance of any Cash Management Period (other than a Cash Management Period triggered solely as a result of a Lease Sweep Period), Lender shall have the right (but not the obligation) to allocate any funds in the Cash Collateral Subaccount to the Rollover Reserve Subaccount to be applied in accordance with the terms and conditions of Section 3.5.1 hereof. Notwithstanding anything to the contrary contained herein, if Borrower delivers to Lender an Officer’s Certificate (with supporting backup) at least three (3) Business Days prior to a Payment Date, stating that, as a result of advance payments of Rent by tenants (during any prior Interest Period), there will be a shortfall in the Deposit Account necessary to pay the amounts specified in Subsections 3.11(a)(i) through (v) on the applicable Payment Date, then a portion of funds then being held in the Cash Collateral Subaccount (up to the amount represented by such advance rental payments) shall be made available to pay such shortfall (and no Event of Default shall exist as a result thereof). Any funds in the Cash Collateral Account and not previously disbursed or applied shall be disbursed to Borrower upon the termination of such Cash Management Period. Lender shall have the right, but not the obligation, at any time during the continuance of an Event of Default, in its sole and absolute discretion to apply all sums then on deposit in the Cash Collateral Subaccount to the Debt, in such order and in such manner as Lender shall elect in its sole and absolute discretion, including to make a prepayment of Principal (together with the applicable Yield Maintenance Premium applicable thereto). Additionally, Lender shall have the right, but not the obligation, at any time subsequent to the third Calculation Date following the commencement of a DSCR Cash Management Period (whether or not an Event of Default is then continuing), in its sole and absolute discretion to apply all sums then on deposit in the Cash Collateral Subaccount towards a partial Defeasance of the Loan (together with any Defeasance costs associated therewith), and Borrower shall execute such documents and take such other actions necessary to satisfy the Defeasance requirements set forth in Section 2.3.3 hereof.   28 -------------------------------------------------------------------------------- 3.10 Grant of Security Interest; Application of Funds. As security for payment of the Debt and the performance by Borrower of all other terms, conditions and provisions of the Loan Documents, Borrower hereby pledges and assigns to Lender, and grants to Lender a security interest in, all Borrower’s right, title and interest in and to all Rents and in and to all payments to or monies held in the Clearing Account, the Deposit Account, all Subaccounts created pursuant to this Agreement (collectively, the “Cash Management Accounts”). Borrower hereby grants to Lender a continuing security interest in, and agrees to hold in trust for the benefit of Lender, all Rents in its possession prior to the (i) payment of such Rents to Lender or (ii) deposit of such Rents into the Deposit Account. Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Cash Management Account, or permit any Lien to attach thereto, or any levy to be made thereon, or any UCC Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto. This Agreement is, among other things, intended by the parties to be a security agreement for purposes of the UCC. Upon the occurrence and during the continuance of an Event of Default, Lender may apply any sums in any Cash Management Account in any order and in any manner as Lender shall elect in Lender’s discretion without seeking the appointment of a receiver and without adversely affecting the rights of Lender to foreclose the Lien of the Mortgage or exercise its other rights under the Loan Documents. Cash Management Accounts shall not constitute trust funds and may be commingled with other monies held by Lender. All interest which accrues on the funds in any Cash Management Account (other than the Tax and Insurance Subaccount) shall accrue for the benefit of Borrower and shall be taxable to Borrower and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Upon repayment in full of the Debt, all remaining funds in the Subaccounts, if any, shall be promptly disbursed to Borrower.   3.11 Property Cash Flow Allocation.   (a) During any Cash Management Period, all Rents deposited into the Deposit Account during the immediately preceding Interest Period shall be applied on each Payment Date as follows in the following order of priority:   (i) First, to make payments into the Tax and Insurance Subaccount as required under Section 3.3 hereof;   (ii) Second, to pay the monthly portion of the fees charged by the Deposit Bank in accordance with the Deposit Account Agreement;   (iii) Third, to Lender to pay the Monthly Debt Service Payment Amount or the Monthly Interest Payment Amount, as the case may be, due on such Payment Date (plus, if applicable, interest at the Default Rate and all other amounts, other than those described under other clauses of this Section 3.11(a), then due to Lender under the Loan Documents);   (iv) Fourth, to make payments into the Capital Reserve Subaccount, if and as required under Section 3.4 hereof;   29 -------------------------------------------------------------------------------- (v) Fifth, to make payments for Approved Operating Expenses as required under Section 3.6 hereof;   (vi) Sixth, during the continuance of a Lease Sweep Period (provided no other Cash Management Period is then continuing), to make payments in an amount equal to all remaining Available Cash on such Payment Date into the Special Rollover Reserve Subaccount in accordance with Section 3.5.1 hereof;   (vii) Lastly, (A) during the continuance of a Cash Management Period other than a Cash Management Period triggered solely as a result of the existence of an Approved Mezzanine Loan, to make payments in an amount equal to all remaining Available Cash on such Payment Date into the Cash Collateral Subaccount in accordance with Section 3.9 and (B) during a Cash Management Period triggered solely as a result of an Approved Mezzanine Loan, payments to Borrower of any remaining amounts.   (b) The failure of Borrower to make all of the payments required under clauses (i) through (iv) of Section 3.11(a) above in full on each Payment Date shall constitute an Event of Default under this Agreement; provided, however, if adequate funds are available in the Deposit Account for such payments, the failure by the Deposit Bank to allocate such funds into the appropriate Subaccounts shall not constitute an Event of Default. Nothing herein, however, shall be construed to restrict Borrower from depositing its own funds (other than Rents) into the Deposit Account in order to fund any of the amounts required under clauses (i) through (iv) of Section 3.11(a) above (to the extent that the Rents previously deposited into the Deposit Account are insufficient for the same).   (c) Notwithstanding anything to the contrary contained in this Section 3.11, after the occurrence and during the continuance of a Default or an Event of Default, Lender may apply all Rents deposited into the Deposit Account and other proceeds of repayment in such order and in such manner as Lender shall elect.   4. REPRESENTATIONS AND WARRANTIES   Borrower represents and warrants to Lender as of the date hereof that, except to the extent (if any) disclosed on Schedule 2 hereto with reference to a specific Section of this Article 4:   4.1 Organization; Special Purpose. Each of Borrower and each SPE Party has been duly organized and is validly existing and in good standing under the laws of the state of its formation, with requisite power and authority, and all rights, licenses, permits and authorizations, governmental or otherwise, necessary to own its properties and to transact the business in which it is now engaged. Each of Borrower and each SPE Party is duly qualified to transact business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, business and operations. Each of Borrower and each SPE Party is a Special Purpose Bankruptcy Remote Entity.   4.2 Proceedings; Enforceability. Borrower has taken all necessary action to authorize the execution, delivery and performance of the Loan Documents. The Loan Documents have been duly executed and delivered by Borrower and, to Borrower’s knowledge, constitute legal, valid and binding obligations of Borrower enforceable against Borrower in   30 -------------------------------------------------------------------------------- accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and general principles of equity. The Loan Documents are not subject to, and Borrower has not asserted, any right of rescission, set-off, counterclaim or defense, including the defense of usury. No exercise of any of the terms of the Loan Documents, or any right thereunder, will render any Loan Document unenforceable.   4.3 No Conflicts. The execution, delivery and performance of the Loan Documents by Borrower and the transactions contemplated hereby will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any Lien (other than pursuant to the Loan Documents) upon any of the property of Borrower pursuant to the terms of, any agreement or instrument to which Borrower is a party or by which its property is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of its properties. Borrower’s rights under the Licenses and the Management Agreement will not be adversely affected by the execution and delivery of the Loan Documents, Borrower’s performance thereunder, the recordation of the Mortgage, or the exercise of any remedies by Lender. Any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower of the Loan Documents has been obtained and is in full force and effect.   4.4 Litigation. There are no actions, suits or other proceedings at law or in equity by or before any Governmental Authority now pending or threatened against or affecting Borrower, any SPE Party, the Manager or the Property, which, if adversely determined, might materially adversely affect the condition (financial or otherwise) or business of Borrower (including the ability of Borrower to carry out its obligations under the Loan Documents), any SPE Party, Manager or the use, value, condition or ownership of the Property.   4.5 Agreements. Borrower is not a party to any agreement or instrument or subject to any restriction which might adversely affect Borrower or the Property, or Borrower’s business, properties, operations or condition, financial or otherwise. To Borrower’s knowledge, Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it is a party or by which it or the Property is bound.   4.6 Title. Borrower has good, marketable and indefeasible title in fee to the real property and good title to the balance of the Property, free and clear of all Liens except the Permitted Encumbrances. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements in connection with the transfer of the Property to Borrower have been paid. To Borrower’s knowledge, the Mortgage when properly recorded in the appropriate records, together with any UCC Financing Statements required to be filed in connection therewith, will create (i) a valid, perfected first priority lien on the Borrower’s interest in the Property and (ii) valid and perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. All mortgage, recording, stamp, intangible or other similar taxes required to be paid by any Person under applicable Legal   31 -------------------------------------------------------------------------------- Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents have been paid. The Permitted Encumbrances do not materially adversely affect the value, operation or use of the Property, or Borrower’s ability to repay the Loan. No Condemnation or other proceeding has been commenced or, to Borrower’s knowledge, is contemplated with respect to all or part of the Property or for the relocation of roadways providing access to the Property. To Borrower’s knowledge, there are no claims for payment for work, labor or materials affecting the Property which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents. To Borrower’s knowledge, there are no outstanding options to purchase or rights of first refusal affecting all or any portion of the Property. To Borrower’s knowledge, the Survey does not fail to reflect any material matter affecting the Property or the title thereto. To Borrower’s knowledge, except as disclosed on the Survey, all of the Improvements included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvement on an adjoining property encroaches upon the Property, and no easement or other encumbrance upon the Property encroaches upon any of the Improvements, except those insured against by the Title Insurance Policy. Each parcel comprising the Property is a separate tax lot and is not a portion of any other tax lot that is not a part of the Property. There are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, or any contemplated improvements to the Property that may result in such special or other assessments.   4.7 No Bankruptcy Filing. Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency law or the liquidation of all or a major portion of its property (a “Bankruptcy Proceeding”), and Borrower has no knowledge of any Person contemplating the filing of any such petition against it. In addition, neither Borrower nor any SPE Party nor any principal nor Affiliate of either has been a party to, or the subject of a Bankruptcy Proceeding for the past ten (10) years.   4.8 Full and Accurate Disclosure. No statement of fact made by Borrower in any Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein not misleading. There is no material fact presently known to Borrower that has not been disclosed to Lender which adversely affects the Property or the business, operations or condition (financial or otherwise) of Borrower. All financial data, including the statements of cash flow and income and operating expense, that have been delivered to Lender in respect of Borrower and the Property (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of Borrower and the Property as of the date of such reports, and (iii) to the extent prepared by an independent certified public accounting firm, have been prepared in accordance with GAAP consistently applied throughout the periods covered, except as disclosed therein. Borrower has no contingent liabilities, liabilities for taxes, unusual forward or long-term commitments, unrealized or anticipated losses from any unfavorable commitments or any liabilities or obligations not expressly permitted by this Agreement. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower or the Property from that set forth in said financial statements.   4.9 Tax Filings. To the extent required, Borrower has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or   32 -------------------------------------------------------------------------------- made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower. Borrower believes that its tax returns (if any) properly reflect the income and taxes of Borrower for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.   4.10 ERISA; No Plan Assets. As of the date hereof and throughout the Term (i) Borrower is not and will not be an “employee benefit plan,” as defined in Section 3(3) of ERISA, (ii) none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (iii) Borrower is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA, and (iv) transactions by or with Borrower are not and will not be subject to (or are in compliance with) state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans. As of the date hereof, neither Borrower, nor any member of a “controlled group of corporations” (within the meaning of Section 414 of the Code) maintains, sponsors or contributes to a “defined benefit plan” (within the meaning of Section 3(35) of ERISA) or a “multiemployer pension plan” (within the meaning of Section 3(37)(A) of ERISA).   4.11 Compliance. Borrower and, to Borrower’s knowledge, the Property and the use thereof comply in all material respects with all applicable Legal Requirements (including with respect to parking and applicable zoning and land use laws, regulations and ordinances). Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which might materially adversely affect the condition (financial or otherwise) or business of Borrower. The Property is used exclusively for office and other appurtenant and related uses. In the event that all or any part of the Improvements are destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and currently in effect and without the necessity of obtaining any variances or special permits. No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Property. Neither the zoning nor any other right to construct, use or operate the Property is in any way dependent upon or related to any property other than the Property, other than as set forth in the Reciprocal Easement Agreement with Two Commerce Square and the common parking garage. All certifications, permits, licenses and approvals, including certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Property (collectively, the “Licenses”), have been obtained and are in full force and effect. The use being made of the Property is in conformity with the certificate of occupancy issued for the Property and all other restrictions, covenants and conditions affecting the Property.   4.12 Contracts. There are no service, maintenance or repair contracts affecting the Property that are not terminable on one (1) month’s notice or less without cause and without penalty or premium. All service, maintenance or repair contracts affecting the Property have been entered into at arms-length in the ordinary course of Borrower’s business and provide for the payment of fees in amounts and upon terms comparable to existing market rates.   4.13 Federal Reserve Regulations; Investment Company Act. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock”   33 -------------------------------------------------------------------------------- within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose that would be inconsistent with such Regulation U or any other regulation of such Board of Governors, or for any purpose prohibited by Legal Requirements or any Loan Document. Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.   4.14 Easements; Utilities and Public Access. All easements, cross easements, licenses, air rights and rights-of-way or other similar property interests (collectively, “Easements”), if any, necessary for the full utilization of the Improvements for their intended purposes have been obtained, are described in the Title Insurance Policy and are in full force and effect without default thereunder. The Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service it for its intended uses. Except as disclosed on the Survey, to Borrower’s knowledge, all public utilities necessary or convenient to the full use and enjoyment of the Property are located in the public right-of-way abutting the Property, and all such utilities are connected so as to serve the Property without passing over other property absent a valid easement. All roads necessary for the use of the Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities.   4.15 Physical Condition. Except as disclosed in that certain Physical Condition Report: One Commerce Square, prepared by LandAmerica Assessment Corporation, and dated as of December 12, 2005, to Borrower’s knowledge, the Property, including all Improvements, parking facilities, systems, Equipment and landscaping, are in good condition, order and repair in all material respects; there exists no structural or other material defect or damages to the Property, whether latent or otherwise. Borrower has not received notice from any insurance company or bonding company of any defect or inadequacy in the Property, or any part thereof, which would adversely affect its insurability or cause the imposition of extraordinary premiums or charges thereon or any termination of any policy of insurance or bond. Except as disclosed on the Survey, to Borrower’s knowledge, no portion of the Property is located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards. The Improvements have suffered no material casualty or damage which has not been fully repaired and the cost thereof fully paid.   4.16 Leases. The rent roll attached hereto as Schedule 3 (the “Rent Roll”) is, to Borrower’s knowledge, true, complete and correct and the Property is not subject to any Leases other than the Leases described in the Rent Roll. To Borrower’s knowledge, except as set forth on the Rent Roll: (i) each Lease is in full force and effect; (ii) the tenants under the Leases have accepted possession of and are in occupancy of all of their respective demised premises, have commenced the payment of rent under the Leases, and there are no offsets, claims or defenses to the enforcement thereof; (iii) all rents due and payable under the Leases have been paid and no portion thereof has been paid for any period more than thirty (30) days in advance; (iv) the rent payable under each Lease is the amount of fixed rent set forth in the Rent Roll, and there is no claim or basis for a claim by the tenant thereunder for an adjustment to the rent; (v) to   34 -------------------------------------------------------------------------------- Borrower’s knowledge, no tenant has made any claim against the landlord under any Lease which remains outstanding, there are no defaults on the part of the landlord under any Lease, and no event has occurred which, with the giving of notice or passage of time, or both, would constitute such a default; (vi) to Borrower’s best knowledge, there is no present material default by the tenant under any Lease; (vii) all security deposits under Leases are as set forth on the Rent Roll and are held consistent with Section 3.8 hereof; (viii) Borrower is the sole owner of the entire lessor’s interest in each Lease; (ix) each Lease is the valid, binding and enforceable obligation of the Borrower and the applicable tenant thereunder and (x) no Person has any possessory interest in, or right to occupy, the Property except under the terms of the Lease. None of the Leases contains any option to purchase or right of first refusal to purchase the Property or any part thereof. Neither the Leases nor the Rents have been assigned or pledged except to Lender, and no other Person has any interest therein except the tenants thereunder.   4.17 Fraudulent Transfer. Borrower has not entered into the Loan or any Loan Document with the actual intent to hinder, delay, or defraud any creditor, and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the transactions contemplated by the Loan Documents, the fair saleable value of Borrower’s assets exceeds and will, immediately following the execution and delivery of the Loan Documents, exceed Borrower’s total probable liabilities, including subordinated, unliquidated, disputed or contingent liabilities, including the maximum amount of its contingent liabilities or its debts as such debts become absolute and matured. Borrower’s assets do not and, immediately following the execution and delivery of the Loan Documents will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).   4.18 Ownership of Borrower. The sole general partner of Borrower is Gen Par LLC, and the sole managing member of Gen Par LLC is Gen Par Inc. TPG-OCS Holding Company, LLC, a Delaware limited liability company (“Holding Company”) is (i) the owner of all of the issued and outstanding capital stock of Gen Par Inc., all of which capital stock has been validly issued and fully paid and is nonassessable, (ii) the 99% member of Gen Par LLC and (iii) the 87.90 limited partner of Borrower. The only other limited partner of Borrower is Philadelphia Plaza Associates, a Pennsylvania general partnership (11%). The OP is the sole member of Holding Company, and TPG is the sole general partner (50.05%) of the OP. As of the date hereof, the stock of Gen Par Inc. and the partnership and membership interests in Borrower and Gen Par LLC and the OP are owned free and clear of all Liens, warrants, options and rights to purchase. Borrower has no obligation to any Person to purchase, repurchase or issue any ownership interest in it. Borrower has no obligation to any Person to purchase, repurchase or issue any ownership interest in it. The organizational chart attached hereto as Schedule 4 is complete and accurate and illustrates all Persons who have a direct or indirect ownership interest in Borrower.   4.19 Purchase Options. Neither the Property nor any part thereof is subject to any purchase options or other similar rights in favor of third parties.   35 -------------------------------------------------------------------------------- 4.20 Management Agreement. The Management Agreement is in full force and effect. There is no default, breach or violation existing thereunder, and no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a default, breach or violation thereunder, by either party thereto.   4.21 Hazardous Substances. Except as expressly disclosed in any environmental report regarding the Property and delivered to Lender in connection with the Loan, and to Borrower’s knowledge, (i) the Property is not in violation of any Legal Requirement pertaining to or imposing liability or standards of conduct concerning environmental regulation, contamination or clean-up, including the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and Health Act, any state super-lien and environmental clean-up statutes (including with respect to Toxic Mold), any local law requiring related permits and licenses and all amendments to and regulations in respect of the foregoing laws (collectively, “Environmental Laws”); (ii) the Property is not subject to any private or governmental Lien or judicial or administrative notice or action or inquiry, investigation or claim relating to hazardous, toxic and/or dangerous substances, toxic mold or fungus of a type that may pose a risk to human health or the environment or would negatively impact the value of the Property (“Toxic Mold”) or any other substances or materials which are included under or regulated by Environmental Laws (collectively, “Hazardous Substances”); (iii) to Borrower’s knowledge, no Hazardous Substances are or have been (including the period prior to Borrower’s acquisition of the Property), discharged, generated, treated, disposed of or stored on, incorporated in, or removed or transported from the Property other than in compliance with all Environmental Laws; (iv) to Borrower’s knowledge, no Hazardous Substances are present in, on or under any nearby real property which could migrate to or otherwise affect the Property; (v) to Borrower’s knowledge, no Toxic Mold is on or about the Property which requires remediation; (vi) no underground storage tanks exist on the Property and the Property has never been used as a landfill; and (vii) there have been no environmental investigations, studies, audits, reviews or other analyses conducted by or on behalf of Borrower which have not been provided to Lender.   4.22 Name; Principal Place of Business. Borrower does not use and will not use any trade name and has not done and will not do business under any name other than its actual name set forth herein. The principal place of business of Borrower is its primary address for notices as set forth in Section 6.1 hereof, and Borrower has no other place of business.   4.23 Other Debt. There is no indebtedness with respect to the Property or any excess cash flow or any residual interest therein, whether secured or unsecured, other than Permitted Encumbrances and Permitted Indebtedness.   All of the representations and warranties in this Article 4 and elsewhere in the Loan Documents (i) shall survive for so long as any portion of the Debt remains owing to Lender and (ii) shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf, provided, however, that the representations, warranties and covenants set forth in Section 4.21 above shall survive in perpetuity.   36 -------------------------------------------------------------------------------- 5. COVENANTS   Until the end of the Term, Borrower hereby covenants and agrees with Lender that:   5.1 Existence. Each of Borrower and each SPE Party shall (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, and franchises, (ii) continue to engage in the business presently conducted by it, (iii) obtain and maintain all Licenses, and (iv) qualify to do business and remain in good standing under the laws of each jurisdiction, in each case as and to the extent required for the ownership, maintenance, management and operation of the Property.   5.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges as the same become due and payable, and deliver to Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other Charges have been so paid no later than ten (10) days before they would be delinquent if not paid (provided, however, that Borrower need not pay such Taxes nor furnish such receipts for payment of Taxes paid by Lender pursuant to Section 3.3 hereof). Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien against the Property, and shall promptly pay for all utility services provided to the Property. After prior notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application of any Taxes or Other Charges, provided that (i) no Default or Event of Default has occurred and is continuing, (ii) such proceeding shall suspend the collection of the Taxes or such Other Charges (or Borrower otherwise pays the same, including with funds from the Tax and Insurance Subaccount), (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (iv) no part of or interest in the Property will be in danger of being sold, forfeited, terminated, canceled or lost, (v) Borrower shall have furnished such security as may be required in the proceeding, or as may be requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon, which shall not be more than 125% of the Taxes and Other Charges being contested (less amounts then being retained in the Tax and Insurance Subaccount to pay such Taxes so contested), and (vi) Borrower shall promptly upon final determination thereof pay the amount of such Taxes or Other Charges, together with all costs, interest and penalties. Lender may pay over any such security or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established.   5.3 Access to Property. Borrower shall permit agents, representatives, consultants and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice, subject however to the rights of tenants under any Leases.   5.4 Repairs; Maintenance and Compliance; Alterations.   5.4.1 Repairs; Maintenance and Compliance. Borrower shall at all times maintain, preserve and protect all franchises and trade names, and Borrower shall cause the Property to be maintained in a good and safe condition and repair and shall not remove, demolish or alter the Improvements or Equipment (except for alterations performed in accordance with   37 -------------------------------------------------------------------------------- Section 5.4.2 below and normal replacement of Equipment with Equipment of equivalent value and functionality). Borrower shall promptly comply with all Legal Requirements and promptly cure any violation of a Legal Requirement. Borrower shall notify Lender in writing within three (3) Business Days after Borrower first receives notice of any such non-compliance. Borrower shall promptly repair, replace or rebuild any part of the Property that becomes damaged, worn or dilapidated and shall complete and pay for any Improvements at any time in the process of construction or repair.   5.4.2 Alterations. Borrower may, without Lender’s consent, perform alterations to the Improvements and Equipment which (i) do not constitute a Material Alteration, (ii) do not adversely affect Borrower’s financial condition or the value or Net Operating Income of the Property and (iii) are in the ordinary course of Borrower’s business. Borrower shall not perform any Material Alteration without Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any alteration the cost of which is reasonably estimated to exceed $2,500,000 or which is likely to result in a decrease of Net Operating Income by two and one-half percent (2.5%) or more for a period of thirty (30) days or longer. Lender may, as a condition to giving its consent to a Material Alteration, require that Borrower deliver to Lender security for payment of the cost of such Material Alteration in an amount equal to 125% of the amount by which the cost of the Material Alteration as reasonably estimated by Lender exceeds $2,500,000. Upon substantial completion of the Material Alteration, Borrower shall provide evidence satisfactory to Lender that (i) the Material Alteration was constructed in accordance with applicable Legal Requirements and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material Licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. Borrower shall reimburse Lender upon demand for all actual out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.4.2.   5.5 Performance of Other Agreements. Borrower shall observe and perform each and every term to be observed or performed by it pursuant to the terms of any agreement or instrument affecting or pertaining to the Property, including the Loan Documents.   5.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with Lender with respect to, and permit Lender, at its option, to participate in, any proceedings before any Governmental Authority which may in any way affect the rights of Lender under any Loan Document.   5.7 Further Assurances. Borrower shall, at Borrower’s sole cost and expense, (i) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the Debt and/or for the better and more   38 -------------------------------------------------------------------------------- effective carrying out of the intents and purposes of the Loan Documents, as Lender may reasonably require from time to time; and (ii) upon Lender’s request therefor given from time to time after the occurrence of any Default or Event of Default pay for (a) reports of UCC, federal tax lien, state tax lien, judgment and pending litigation searches with respect to Borrower and each SPE Party and (b) searches of title to the Property, each such search to be conducted by search firms reasonably designated by Lender in each of the locations reasonably designated by Lender.   5.8 Environmental Matters.   5.8.1 Hazardous Substances. So long as Borrower owns or is in possession of the Property, Borrower shall (i) keep the Property in compliance with all Environmental Laws, (ii) promptly notify Lender if Borrower shall become aware that (A) any Hazardous Substance is on or near the Property, (B) the Property is in violation of any Environmental Laws or (C) any condition on or near the Property shall pose a threat to the health, safety or welfare of humans and (iii) remove such Hazardous Substances and/or cure such violations and/or remove such threats, as applicable, as required by law (or as shall be required by Lender in the case of removal which is not required by law, but in response to the reasonable opinion of a licensed hydrogeologist, licensed environmental engineer or other qualified environmental consulting firm engaged by Lender (“Lender’s Consultant”)), promptly after Borrower becomes aware of same, at Borrower’s sole expense. Nothing herein shall prevent Borrower from recovering such expenses from any other party that may be liable for such removal or cure.   5.8.2 Environmental Monitoring.   (a) Borrower shall give prompt written notice to Lender of (i) any proceeding or inquiry by any party (including any Governmental Authority) with respect to the presence of any Hazardous Substance on, under, from or about the Property, (ii) all claims made or threatened by any third party (including any Governmental Authority) against Borrower or the Property or any party occupying the Property relating to any loss or injury resulting from any Hazardous Substance, and (iii) Borrower’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property to be subject to any investigation or cleanup pursuant to any Environmental Law. Upon becoming aware of the presence of mold or fungus at the Property, Borrower shall (i) undertake an investigation to identify the source(s) of such mold or fungus and shall develop and implement an appropriate remediation plan to eliminate the presence of any Toxic Mold, (ii) perform or cause to be performed all acts reasonably necessary for the remediation of any Toxic Mold (including taking any action necessary to clean and disinfect any portions of the Property affected by Toxic Mold, including providing any necessary moisture control systems at the Property), and (iii) provide evidence reasonably satisfactory to Lender of the foregoing. Borrower shall permit Lender to join and participate in, as a party if it so elects, any legal or administrative proceedings or other actions initiated with respect to the Property in connection with any Environmental Law or Hazardous Substance, and Borrower shall pay all reasonable attorneys’ fees and disbursements incurred by Lender in connection therewith.   (b) Upon Lender’s request, at any time and from time to time (which request Lender shall not make more than once in any 12-month period unless (i) such request is made in   39 -------------------------------------------------------------------------------- connection with a Secondary Market Transaction, or (ii) Lender has a good faith belief that there is a violation of Environmental Laws or a release of Hazardous Substances at the Property), Borrower shall undertake an inspection or audit of the Property prepared by a licensed hydrogeologist, licensed environmental engineer or qualified environmental consulting firm approved by Lender assessing the presence or absence of Hazardous Substances on, in or near the Property, and if Lender in its good faith judgment determines that reasonable cause exists for the performance of such environmental inspection or audit, then the cost and expense of such audit or inspection shall be paid by Borrower. Such inspections and audit may include soil borings and ground water monitoring. If Borrower fails to provide any such inspection or audit within thirty (30) days after such request, Lender may order same, and Borrower hereby grants to Lender and its employees and agents access to the Property and a license to undertake such inspection or audit.   (c) If any environmental site assessment report prepared in connection with such inspection or audit recommends that an operations and maintenance plan be implemented for any Hazardous Substance, whether such Hazardous Substance existed prior to the ownership of the Property by Borrower, or presently exists or is reasonably suspected of existing, Borrower shall cause such operations and maintenance plan to be prepared and implemented at its expense upon request of Lender, and with respect to any Toxic Mold, Borrower shall take all action necessary to clean and disinfect any portions of the Improvements affected by Toxic Mold in or about the Improvements, including providing any necessary moisture control systems at the Property. If any investigation, site monitoring, containment, cleanup, removal, restoration or other work of any kind is reasonably necessary under an applicable Environmental Law (“Remedial Work”), Borrower shall commence all such Remedial Work within thirty (30) days after written demand by Lender and thereafter diligently prosecute to completion all such Remedial Work within such period of time as may be required under applicable law. All Remedial Work shall be performed by licensed contractors reasonably approved in advance by Lender and under the supervision of a consulting engineer reasonably approved by Lender. All costs of such Remedial Work shall be paid by Borrower, including Lender’s reasonable attorneys’ fees and disbursements incurred in connection with the monitoring or review of such Remedial Work. If Borrower does not timely commence and diligently prosecute to completion the Remedial Work, Lender may (but shall not be obligated to) cause such Remedial Work to be performed at Borrower’s expense. Notwithstanding the foregoing, Borrower shall not be required to commence such Remedial Work within the above specified time period: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time period would result in Borrower or such Remedial Work violating any Environmental Law, or (z) if Borrower, at its expense and after prior written notice to Lender, is contesting by appropriate legal, administrative or other proceedings, conducted in good faith and with due diligence, the need to perform Remedial Work. Borrower shall have the right to contest the need to perform such Remedial Work, provided that, (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Property nor any part thereof or interest therein will be sold, forfeited or lost if Borrower fails to promptly perform the Remedial Work being contested, and if Borrower fails to prevail in contest, Borrower would thereafter have the opportunity to perform such Remedial Work, (3) Lender would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Property nor any interest therein would be subject to the   40 -------------------------------------------------------------------------------- imposition of any Lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower’s failure to prevail in such contest in such amount as may be reasonably requested by Lender but in no event less than 125% of the cost of such Remedial Work as estimated by Lender or Lender’s Consultant and any loss or damage that may result from Borrower’s failure to prevail in such contest.   (d) Borrower shall not install or permit to be installed on the Property any underground storage tank.   5.8.3 O & M Program. In the event any environmental report delivered to Lender in connection with the Loan recommends the development of or continued compliance with an operation and maintenance program for the Property (including, without limitation, with respect to the presence of asbestos and/or lead-based paint) (“O & M Program”), Borrower shall develop (or continue to comply with, as the case may be) such O & M Program and shall, during the term of the Loan, including any extension or renewal thereof, comply in all material respects with the terms and conditions of the O & M Program.   5.9 Title to the Property. Borrower will warrant and defend the title to the Property, and the validity and priority of all Liens granted or otherwise given to Lender under the Loan Documents, subject only to Permitted Encumbrances, against the claims of all Persons.   5.10 Leases.   5.10.1 Generally. Upon request, Borrower shall furnish Lender with executed copies of all Leases then in effect. All renewals of Leases (unless provided otherwise by the terms of such Lease) and all proposed leases shall provide for rental rates and terms comparable to existing local market rates and shall be arm’s length transactions with bona fide, independent third-party tenants.   5.10.2 Material Leases. Borrower shall not enter into a proposed Material Lease or a proposed renewal, extension or modification of an existing Material Lease without the prior written consent of Lender, which consent shall not, so long as no Event of Default is continuing, be unreasonably withheld, conditioned or delayed. Prior to seeking Lender’s consent to any Material Lease, Borrower shall deliver to Lender a copy of such proposed lease (a “Proposed Material Lease”) blacklined to show changes from the standard form of Lease approved by Lender and then being used by Borrower. Lender shall approve or disapprove each Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease for which Lender’s approval is required under this Agreement within ten (10) Business Days of the submission by Borrower to Lender of a written request for such approval, accompanied by a final copy of the Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease. If requested by Borrower, Lender will grant conditional approvals of Proposed Material Leases or proposed renewals, extensions or modifications of existing Material Leases at any stage of the leasing process, from initial “term sheet” through negotiated lease drafts, provided that Lender shall retain the right to disapprove any such Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease, if   41 -------------------------------------------------------------------------------- subsequent to any preliminary approval material changes are made to the terms previously approved by Lender, or additional material terms are added that had not previously been considered and approved by Lender in connection with such Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease. Provided that no Event of Default is continuing, if Borrower provides Lender with a written request for approval (which written request shall specifically refer to this Section 5.10.2 and shall explicitly state that failure by Lender to approve or disapprove within ten (10) Business Days will constitute a deemed approval) and Lender fails to reject the request in writing delivered to Borrower within ten (10) Business Days after receipt by Lender of the request, the Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease shall be deemed approved by Lender, and Borrower shall be entitled to enter into such Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease.   5.10.3 Minor Leases. Notwithstanding the provisions of Section 5.10.2 above, provided that no Event of Default is continuing, renewals, amendments and modifications of existing Leases and proposed leases, shall not be subject to the prior approval of Lender provided (i) the proposed lease would be a Minor Lease or the existing Lease as amended or modified or the renewal Lease is a Minor Lease, (ii) the proposed lease shall be written substantially in accordance with the standard form of Lease which shall have been approved by Lender, (iii) the Lease as amended or modified or the renewal Lease or series of leases or proposed lease or series of leases: (a) shall provide for net effective rental rates comparable to existing local market rates, (b) shall have an initial term (exclusive of any renewal options) of not less than three (3) years or greater than ten (10) years, (c) shall provide for automatic self-operative subordination to the Mortgage and, at Lender’s option, attornment to Lender, and (d) shall not contain any option to purchase, any right of first refusal to purchase, any right to terminate (except in the event of the destruction or condemnation of substantially all of the Property), any requirement for a non-disturbance or recognition agreement (other than on Lender’s standard form of non-disturbance or recognition agreement), or any other provision which might adversely affect the rights of Lender under the Loan Documents in any material respect. Borrower shall deliver to Lender copies of all Leases which are entered into pursuant to the preceding sentence together with Borrower’s certification that it has satisfied all of the conditions of the preceding sentence at the time of delivery of the next monthly report required under Section 6.3.4.   5.10.4 Additional Covenants with respect to Leases. Borrower (i) shall observe and perform the material obligations imposed upon the lessor under the Leases and shall do nothing to impair the value of the Leases as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default that Borrower shall send or receive under any Lease; (iii) shall enforce, in accordance with commercially reasonable practices for properties similar to the Property, the terms, covenants and conditions in the Leases to be observed or performed by the lessees, short of termination thereof (except as provided in clause (ix) below); (iv) shall not collect any of the Rents more than one (1) month in advance (other than security deposits); (v) shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Loan Documents); (vi) shall not modify any Lease in a manner inconsistent with the Loan Documents; (vii) shall not convey or transfer or suffer or permit a conveyance or transfer of the Property so as to effect a merger of the estates and rights of, or diminution of the obligations of, lessees under Leases; (viii) shall not consent to any assignment of or subletting under any Material Lease unless required in accordance with its terms without   42 -------------------------------------------------------------------------------- the prior consent of Lender, which, with respect to a subletting, may not, so long as no Event of Default is continuing, be unreasonably withheld or delayed (provided that Lender’s consent shall not be required in connection with (i) an assignment if the assigning tenant (and its guarantor, if applicable) remains primarily liable under the applicable Lease or (ii) a subletting of less than 100,000 square feet); and (ix) shall not cancel or terminate any Lease or accept a surrender thereof (except in the exercise of Borrower’s commercially reasonable judgment in connection with a tenant default under a Minor Lease or if such a termination or cancellation is a condition to leasing, to another tenant which will pay net effective rental rates comparable to existing local market rates, the space subject to the Lease being cancelled or terminated) without the prior consent of Lender, which consent shall not, so long as no Event of Default is continuing, be unreasonably withheld or delayed.   5.10.5 NF Clearing Lease. Provided no Event of Default is continuing, Borrower shall have the right to accept a surrender of or terminate up to 100,000 square feet of the NF Clearing Lease, without first obtaining the prior consent of Lender, subject to the satisfaction of the following conditions precedent: (i) Borrower shall give Lender not less than thirty (30) days prior written notice specifying the date on which Borrower will accept such termination or terminate such portion of the NF Clearing Lease (the “NF Clearing Termination Date”); (ii) prior to the NF Clearing Termination Date, Borrower shall deliver to Lender a true and correct copy of a fully executed Lease covering such portion of the space surrendered (or terminated) under the NF Clearing Lease (the “Replacement Lease”); (iii) the aggregate amount of the sum of (x) the rent and recoveries payable under the Replacement Lease with respect to the period of time through the expiration date of the NF Clearing Lease, plus (y) the Remaining NF Clearing Lease Termination Payment (hereinafter defined), shall be at least equal to the aggregate amount of rent and recoveries payable under the portion of the NF Clearing Lease that is being surrendered or terminated for such period of time; and (iv) the Replacement Lease shall otherwise satisfy the criteria for Minor Leases under Section 5.10.3. As used herein, “Remaining NF Clearing Lease Termination Payment” means the amount of any Lease Termination Payment paid by the tenant under the NF Clearing Lease with respect to the portion of such premises that is being surrendered or terminated, after deducting therefrom the amount of any anticipated expenses (brokerage commissions and tenant improvement work and allowances) payable in connection with the Replacement Lease.   Notwithstanding anything to the contrary contained in Section 3.5 with respect to the application of Lease Termination Payments, Lender agrees that the Remaining NF Clearing Lease Termination Payment shall be disbursed on a monthly basis (over the term of the Replacement Lease) to Borrower, and during the continuance of a Cash Management Period, shall be applied as ordinary Rents towards Borrower’s obligations hereunder (in accordance with the priority of payments set forth in Section 3.11).   5.11 Estoppel Statement. After request by Lender, Borrower shall within ten (10) days furnish Lender with a statement addressed to Lender, its successors and assigns, duly acknowledged and certified, setting forth (i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of interest and/or Principal were last paid, (iv) any offsets or defenses to the payment of the Debt, and (v) that the Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.   43 -------------------------------------------------------------------------------- 5.12 Property Management.   5.12.1 Management Agreement. Borrower shall (i) cause the Property to be managed pursuant to the Management Agreement; (ii) promptly perform and observe all of the covenants required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its rights thereunder; (iii) promptly notify Lender of any default under the Management Agreement of which it is aware; (iv) promptly deliver to Lender a copy of each financial statement, capital expenditure plan, and property improvement plan and any other notice, report and estimate received by Borrower under the Management Agreement; and (v) promptly enforce the performance and observance of all of the covenants required to be performed and observed by Manager under the Management Agreement. Without Lender’s prior written consent, Borrower shall not (a) surrender, terminate, cancel, extend or renew the Management Agreement or otherwise replace the Manager or enter into any other management agreement (except pursuant to Section 5.12.2 below); (b) reduce or consent to the reduction of the term of the Management Agreement; (c) increase or consent to the increase of the amount of any charges under the Management Agreement; (d) otherwise modify, change, supplement, alter or amend in any material respect, or waive or release any of its rights and remedies under, the Management Agreement; or (e) suffer or permit the occurrence and continuance of a default beyond any applicable cure period under the Management Agreement (or any successor management agreement) if such default permits the Manager to terminate the Management Agreement (or such successor management agreement).   5.12.2 Termination of Manager. If (i) an Event of Default shall be continuing, or (ii) Manager is in default under the Management Agreement beyond any applicable notice and cure periods, or (iii) upon the gross negligence, malfeasance or willful misconduct of the Manager, Borrower shall, at the request of Lender, terminate the Management Agreement and replace Manager with a replacement manager acceptable to Lender in Lender’s discretion and the applicable Rating Agencies on terms and conditions satisfactory to Lender and the applicable Rating Agencies. Borrower’s failure to appoint an acceptable manager within thirty (30) days after Lender’s request of Borrower to terminate the Management Agreement (as provided above) shall constitute an immediate Event of Default. Borrower may from time to time appoint a successor manager to manage the Property, provided that such successor manager and Management Agreement shall be approved in writing by Lender in Lender’s discretion and the applicable Rating Agencies (and Lender’s approval may be conditioned upon Borrower delivering a Rating Comfort Letter as to such successor manager and Management Agreement). If at any time Lender consents to the appointment of a new manager, such new manager and Borrower shall, as a condition of Lender’s consent, execute a consent and subordination of management agreement substantially in the form of the Consent and Subordination of Manager of even date herewith executed and delivered by Manager to Lender.   5.13 Special Purpose Bankruptcy Remote Entity. Each of Borrower and each SPE Party shall at all times be a Special Purpose Bankruptcy Remote Entity. Neither Borrower nor any SPE Party shall directly or indirectly make any change, amendment or modification to its or such SPE Party’s organizational documents, or otherwise take any action which could result in Borrower or any SPE Party not being a Special Purpose Bankruptcy Remote Entity. A “Special Purpose Bankruptcy Remote Entity” shall have the meaning set forth on Schedule 5 hereto.   44 -------------------------------------------------------------------------------- 5.14 Assumption in Non-Consolidation Opinion. Borrower and each SPE Party shall each conduct its business so that the assumptions (with respect to each Person) made in that certain substantive non-consolidation opinion letter dated the date hereof delivered by Lender’s counsel in connection with the Loan, shall be true and correct in all respects.   5.15 Change in Business or Operation of Property. Borrower shall not purchase or own any real property other than the Property and shall not enter into any line of business other than the ownership and operation of the Property, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business or otherwise cease to operate the Property as an office property or terminate such business for any reason whatsoever (other than temporary cessation in connection with renovations to the Property).   5.16 Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.   5.17 Affiliate Transactions. Except for the Management and Leasing Agreement by and between Manager and Borrower, Borrower shall not enter into, or be a party to, any transaction with an Affiliate of Borrower or any of the partners of Borrower except in the ordinary course of business and on terms which are fully disclosed to Lender in advance and are no less favorable to Borrower or such Affiliate than would be obtained in a comparable arm’s-length transaction with an unrelated third party.   5.18 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender, such consent not to be unreasonably withheld, conditioned or delayed.   5.19 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of the Property (i) with any other real property constituting a tax lot separate from the Property, and (ii) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property.   5.20 Principal Place of Business. Borrower shall not change its principal place of business or chief executive office without first giving Lender thirty (30) days’ prior notice.   5.21 Change of Name, Identity or Structure. Borrower shall not change its name, identity (including its trade name or names) or Borrower’s corporate, partnership or other structure without notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower’s structure, without first obtaining the prior written consent of Lender. Borrower shall execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Lender to establish or maintain the validity,   45 -------------------------------------------------------------------------------- perfection and priority of the security interest granted herein. At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower intends to operate the Property, and representing and warranting that Borrower does business under no other trade name with respect to the Property.   5.22 Indebtedness. Borrower shall not directly or indirectly create, incur or assume any indebtedness other than (i) the Debt and (ii) unsecured trade payables incurred in the ordinary course of business relating to the ownership and operation of the Property, which in the case of such unsecured trade payables (A) are not evidenced by a note, (B) do not exceed, at any time, a maximum aggregate amount of two percent (2%) of the original amount of the Principal and (C) are paid within sixty (60) days of the date incurred (collectively, “Permitted Indebtedness”).   5.23 Licenses. Borrower shall not Transfer any License required for the operation of the Property.   5.24 Compliance with Restrictive Covenants, Etc. Borrower will not enter into, modify, waive in any material respect or release any Easements, restrictive covenants or other Permitted Encumbrances, or suffer, consent to or permit the foregoing, without Lender’s prior written consent, which consent may be granted or denied in Lender’s sole discretion.   5.25 ERISA.   (1) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.   (2) Borrower shall not permit the assets of Borrower to become “plan assets,” whether by operation of law or under regulations promulgated under ERISA.   (3) Borrower shall deliver to Lender such certifications or other evidence from time to time throughout the Term, as requested by Lender in its sole discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (B) Borrower is not subject to state statutes (or is in compliance with state statutes) regulating investments and fiduciary obligations with respect to governmental plans; and (C) the assets of Borrower do not constitute “plan assets” within the meaning of 29 C.F.R. Section 2510.3-101.   5.26 Prohibited Transfers.   5.26.1 Generally. Borrower shall not directly or indirectly make, suffer or permit the occurrence of any Transfer other than a Permitted Transfer.   46 -------------------------------------------------------------------------------- 5.26.2 Transfer and Assumption.   (a) Notwithstanding the foregoing and subject to the terms and satisfaction of all the conditions precedent set forth in this Section 5.26.2, Borrower shall have the right to Transfer the Property to another party (the “Transferee Borrower”) and have the Transferee Borrower assume all of Borrower’s obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of the indemnitors and guarantors of the Loan Documents (collectively, a “Transfer and Assumption”). Borrower may make a written application to Lender for Lender’s consent to the Transfer and Assumption, subject to the conditions set forth in paragraphs (b) and (c) of this Section 5.26.2. Together with such written application, Borrower will pay to Lender the reasonable review fee then required by Lender. Borrower also shall pay on demand all of the reasonable costs and expenses incurred by Lender, including reasonable attorneys’ fees and expenses, and including the fees and expenses of Rating Agencies and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs.   (b) Lender’s consent, which may be withheld in Lender’s reasonable discretion, to a Transfer and Assumption shall be subject to the following conditions:   (i) No Default or Event of Default has occurred and is continuing;   (ii) Borrower has submitted to Lender true, correct and complete copies of any and all information and documents of any kind reasonably requested by Lender concerning the Property, Transferee Borrower, replacement guarantors and indemnitors and Borrower;   (iii) Evidence reasonably satisfactory to Lender has been provided showing that the Transferee Borrower and such of its Affiliates as shall be designated by Lender comply and will comply with Section 5.13 hereof, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates;   (iv) If the Loan, by itself or together with other loans, has been the subject of a Secondary Market Transaction, then Lender shall have received a Rating Comfort Letter from the applicable Rating Agencies;   (v) If the Loan has not been the subject of a Secondary Market Transaction, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any securities that would be issued in connection with such securitization will be diminished, qualified, or withheld by reason of the Transfer and Assumption;   (vi) Borrower shall have paid all of Lender’s reasonable costs and expenses in connection with considering the Transfer and Assumption, and shall have paid the amount requested by Lender as a deposit against Lender’s costs and expenses in connection with the effecting the Transfer and Assumption;   (vii) Borrower, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably   47 -------------------------------------------------------------------------------- satisfactory to Lender their readiness and ability to satisfy the conditions set forth in subsection (c) below;   (viii) In connection with such Transfer and Assumption, this Agreement shall be modified (and the Transferee Borrower shall have consented thereto) to provide for an ongoing monthly deposit into the Rollover Reserve Subaccount in an amount equal to $1.50 per square foot (or such other amount as may be required by Lender based on its then current underwriting standards);   (ix) The identity, experience, financial condition and creditworthiness of the Transferee Borrower and the replacement guarantors and indemnitors shall be reasonably satisfactory to Lender;   (x) The proposed property manager and proposed Management Agreement shall be reasonably satisfactory to Lender and the applicable Rating Agencies; and   (xi) If any Approved Mezzanine Loan is outstanding at the time of the Transfer and Assumption, the proposed Transfer and Assumption shall not constitute or cause a default under the Approved Mezzanine Loan Documents.   (c) If Lender consents to the Transfer and Assumption, the Transferee Borrower and/or Borrower as the case may be, shall immediately deliver the following to Lender:   (i) Borrower shall deliver to Lender an assumption fee in the amount of 0.50% of the then unpaid Principal;   (ii) Borrower, Transferee Borrower and the original and replacement guarantors and indemnitors shall execute and deliver to Lender any and all documents required by Lender, in form and substance required by Lender, in Lender’s reasonable discretion;   (iii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance satisfactory to Lender as to such matters as Lender shall reasonably require, which may include opinions as to substantially the same matters and were required in connection with the origination of the Loan (including a new substantive non-consolidation opinion with respect to the Transferee Borrower);   (iv) Borrower shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents) to the Title Insurance Policies in form and substance acceptable to Lender, in Lender’s reasonable discretion (the “Endorsement”); and   (v) Borrower shall deliver to Lender a payment in the amount of all remaining unpaid costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to, Lender’s reasonable attorneys fees and expenses, all recording fees, and all fees payable to the title company for the delivery to Lender of the Endorsement.   48 -------------------------------------------------------------------------------- (d) Upon the closing of a Transfer and Assumption, Lender shall release Borrower from all obligations under the Loan Documents arising prior to and after the date of the Transfer and Assumption (but only to the extent that such obligations of Borrower are expressly assumed by the Transferee Borrower, the Replacement Guarantor (if applicable) or any other replacement guarantor, as the case may be, in connection with the Transfer and Assumption).   5.27 Liens. Without Lender’s prior written consent, Borrower shall not create, incur, assume, permit or suffer to exist any Lien on all or any portion of the Property or any direct or indirect legal or beneficial ownership interest in Borrower or any SPE Party, except Liens in favor of Lender and Permitted Encumbrances, unless such Lien is bonded or discharged within thirty (30) days after Borrower first receives notice of such Lien.   5.28 Dissolution. Borrower shall not (i) to the fullest extent permitted by applicable law, engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (ii) engage in any business activity not related to the ownership and operation of the Property or (iii) transfer, lease or sell, in one transaction or any combination of transactions, all or substantially all of the property or assets of Borrower except to the extent expressly permitted by the Loan Documents.   5.29 Expenses. Borrower shall reimburse Lender upon receipt of notice for all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) reasonably incurred by Lender in connection with the Loan (or any portion thereof) (but excluding any costs and expenses incurred by Lender due to Lender’s or its agents’ willful misconduct, gross negligence or breach of its obligations (if any) hereunder), including (i) the preparation, negotiation, execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby and all the costs of furnishing all opinions (other than the non-consolidation opinion prepared by Lender’s counsel) by counsel for Borrower; (ii) Borrower’s ongoing performance under and compliance with the Loan Documents, including confirming compliance with environmental and insurance requirements; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications of or under any Loan Document and any other documents or matters requested by Borrower; (iv) filing and recording of any Loan Documents; (v) title insurance, surveys, inspections and appraisals (provided Lender delivers copies of the same to Borrower); (vi) the creation, perfection or protection of Lender’s Liens in the Property and the Cash Management Accounts (including fees and expenses for title and lien searches, intangibles taxes, personal property taxes, mortgage recording taxes, due diligence expenses, travel expenses, accounting firm fees, costs of appraisals, environmental reports and Lender’s Consultant, surveys and engineering reports); (vii) enforcing or preserving any rights in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, the Loan Documents, the Property, or any other security given for the Loan; (viii) fees charged by Servicer or the Rating Agencies in connection with any modification of the Loan requested by Borrower and (ix) enforcing any obligations of or collecting any payments due from Borrower under any Loan Document or with respect to the Property or in connection with any refinancing or restructuring of the Loan in the nature of a “work-out”, or any insolvency or bankruptcy proceedings. Any costs and expenses due and payable by Borrower hereunder which are not paid by Borrower within ten (10) Business Days after written demand may be paid from any amounts in the Deposit Account, with   49 -------------------------------------------------------------------------------- notice thereof to Borrower. The obligations and liabilities of Borrower under this Section 5.29 shall survive the Term and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Property by foreclosure or a conveyance in lieu of foreclosure.   5.30 Indemnity. Borrower shall defend, indemnify and hold harmless Lender and each of its Affiliates and their respective successors and assigns, including the directors, officers, partners, members, shareholders, participants, employees, professionals and agents of any of the foregoing (including any Servicer) and each other Person, if any, who Controls Lender, its Affiliates or any of the foregoing (each, an “Indemnified Party”), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for an Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Lender shall be designated a party thereto, court costs and costs of appeal at all appellate levels, investigation and laboratory fees, consultant fees and litigation expenses), that may be imposed on, incurred by, or asserted against any Indemnified Party (collectively, the “Indemnified Liabilities”) in any manner, relating to or arising out of or by reason of the Loan, including: (i) any breach by Borrower of its obligations under, or any misrepresentation by Borrower contained in, any Loan Document; (ii) the use or intended use of the proceeds of the Loan; (iii) any information provided by or on behalf of Borrower, or contained in any documentation approved by Borrower; (iv) ownership of the Mortgage, the Property or any interest therein, or receipt of any Rents; (v) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (vi) any use, nonuse or condition in, on or about the Property or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (vii) performance of any labor or services or the furnishing of any materials or other property in respect of the Property; (viii) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Substance on, from or affecting the Property; (ix) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substance; (x) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Substance; (xi) any violation of the Environmental Laws which is based upon or in any way related to such Hazardous Substance, including the costs and expenses of any Remedial Work; (xii) any failure of the Property to comply with any Legal Requirement; (xiii) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Property or any part thereof, or any liability asserted against Lender with respect thereto; and (xiv) the claims of any lessee of any portion of the Property or any Person acting through or under any lessee or otherwise arising under or as a consequence of any Lease; provided, however, that Borrower shall not have any obligation to any Indemnified Party hereunder to the extent that it is finally judicially determined that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party. Any amounts payable to any Indemnified Party by reason of the application of this paragraph shall be payable on demand and shall bear interest at the Default Rate from the date loss or damage is sustained by any Indemnified Party until paid. The obligations and liabilities of Borrower under this Section 5.30 shall survive the Term and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Property by   50 -------------------------------------------------------------------------------- foreclosure or a conveyance in lieu of foreclosure. Notwithstanding the foregoing, however, Borrower shall not be obligated to indemnify any Indemnified Party for any event or condition, that first arises on or after the date on which Lender (or its transferee) acquires title or control of the Property (whether at foreclosure sale, conveyance in lieu of foreclosure or similar transfer) or after a receiver has been appointed for the Property; provided that Borrower’s obligation to indemnify the Indemnified Parties with respect to an event or condition specified in clauses (viii) through (xi) above shall continue in perpetuity after Lender (or its transferee) acquires title or control of the Property unless such specified event or condition occurs during Lender’s period of ownership and provided that Borrower shall bear the burden of proving that such specified event or condition occurred during Lender’s period of ownership.   5.31 Patriot Act Compliance. (a) Borrower will use its good faith and commercially reasonable efforts to comply with the Patriot Act (as defined below) and all applicable requirements of governmental authorities having jurisdiction over Borrower and the Property, including those relating to money laundering and terrorism. Lender shall have the right to audit Borrower’s compliance with the Patriot Act and all applicable requirements of governmental authorities having jurisdiction over Borrower and the Property, including those relating to money laundering and terrorism. In the event that Borrower fails to comply with the Patriot Act or any such requirements of governmental authorities, then Lender may, at its option (after 10 days prior written notice to Borrower), cause Borrower to comply therewith and any and all reasonable costs and expenses incurred by Lender in connection therewith shall be secured by the Mortgage and the other Loan Documents and shall be immediately due and payable. For purposes hereof, the term “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and corresponding provisions of future laws.   (a) Neither Borrower nor any partner in Borrower or member of such partner nor any owner of a direct or indirect interest in Borrower (other than shareholders having less than a twenty-five percent (25%) economic interest in TPG) (a) is listed on any Government Lists (as defined below), (b) is a person who has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC (as defined below) or in any enabling legislation or other Presidential Executive Orders in respect thereof, (c) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense (as defined below), or (d) is currently under investigation by any governmental authority for alleged criminal activity. For purposes hereof, the term “Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (a) the criminal laws against terrorism; (b) the criminal laws against money laundering, (c) the Bank Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as amended, or the (e) Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” means (i) the Specially Designated Nationals and Blocked Persons Lists maintained by Office of Foreign Assets Control (“OFAC”), (ii) any other list of terrorists, terrorist organizations or narcotics   51 -------------------------------------------------------------------------------- traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Lender notified Borrower in writing is now included in “Governmental Lists”, or (iii) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Lender notified Borrower in writing is now included in “Governmental Lists”.   6. NOTICES AND REPORTING   6.1 Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document (a “Notice”) shall be given in writing and shall be effective for all purposes if either hand delivered with receipt acknowledged, or by a nationally recognized overnight delivery service (such as Federal Express), or by certified or registered United States mail, return receipt requested, postage prepaid, or by facsimile and confirmed by facsimile answer back, in each case addressed as follows (or to such other address or Person as a party shall designate from time to time by notice to the other party): If to Lender: Greenwich Capital Financial Products, Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, Attention: Mortgage Loan Department, Telecopier (203) 618-2052, with a copy to: Kaye Scholer LLP, 425 Park Avenue, New York, New York 10022, Attention: Stephen Gliatta, Esq., Telecopier: (212) 836-8689; if to Borrower: c/o Thomas Properties Group, Inc., One Commerce Square, 2005 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103, Attention: Randy Scott, Telecopier: (215) 851-6021, with a copy to: Gilchrist & Rutter Professional Corp., 1299 Ocean Avenue, Suite 900, Santa Monica, CA 90401, Attention: Paul S. Rutter, Esq., Telecopier: (310) 394-4000. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; in the case of overnight delivery, upon the first attempted delivery on a Business Day; or in the case of facsimile, upon the confirmation of such facsimile transmission.   6.2 Borrower Notices and Deliveries. Borrower shall (a) give prompt written notice to Lender of: (i) any litigation, governmental proceedings or claims or investigations pending or threatened against Borrower or any SPE Party which might materially adversely affect Borrower’s or any SPE Party’s condition (financial or otherwise) or business or the Property; (ii) any material adverse change in Borrower’s or any SPE Party’s condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge; and (b) furnish and provide to Lender: (i) any Securities and Exchange Commission or other public filings, if any, of Borrower, any SPE Party, Manager, or any Affiliate of any of the foregoing within two (2) Business Days of such filing and (ii) all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, reasonably requested, from time to time, by Lender. In addition, after request by Lender (but no more frequently than twice in any year), Borrower shall furnish to Lender (x) within ten (10) days, a certificate addressed to Lender, its successors and assigns reaffirming all representations and warranties of Borrower set forth in the Loan Documents as of the date requested by Lender or, to the extent of any changes to any such representations and warranties, so stating such changes, and (y) within thirty (30) days, tenant estoppel certificates addressed to Lender, its successors and assigns from each tenant at the Property in form and substance reasonably satisfactory to Lender.   52 -------------------------------------------------------------------------------- 6.3 Financial Reporting.   6.3.1 Bookkeeping. Borrower shall keep on a calendar year basis, in accordance with GAAP or federal income tax accounting principles, consistently applied, proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense and any services, Equipment or furnishings provided in connection with the operation of the Property, whether such income or expense is realized by Borrower, Manager or any Affiliate of Borrower. Lender shall have the right from time to time during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or other Person maintaining them, and to make such copies or extracts thereof as Lender shall desire. After an Event of Default, Borrower shall pay any costs incurred by Lender to examine such books, records and accounts, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.   6.3.2 Annual Reports. Borrower shall furnish to Lender annually, within 120 days after each calendar year, a complete copy of Borrower’s annual financial statements audited by a “big four” accounting firm or another independent certified public accountant (accompanied by an unqualified opinion from such accounting firm or other independent certified public accountant) reasonably acceptable to Lender, each in accordance with GAAP or federal income tax accounting principles, consistently applied, and containing balance sheets and statements of profit and loss for Borrower and the Property in such detail as Lender may request. Each such statement (x) shall be in form and substance satisfactory to Lender, (y) shall set forth the financial condition and the income and expenses for the Property for the immediately preceding calendar year, including statements of annual Net Operating Income as well as identifying in the footnotes of the financial statements any tenants that account for more than 10% of the reported revenue of the Property and (z) shall be accompanied by an Officer’s Certificate certifying (1) that such statement is true, correct, complete and accurate and presents fairly the financial condition of the Property and has been prepared in accordance with GAAP or federal income tax accounting principles, consistently applied, and (2) whether there exists a Default or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it.   6.3.3 Quarterly Reports. Borrower shall furnish to Lender within 45 days after the end of each calendar quarter (as indicated below) the following items: (i) quarterly and year-to-date operating statements, noting Net Operating Income and other information necessary and sufficient under GAAP or federal income tax accounting principles, consistently applied, to fairly represent the financial position and results of operation of the Property during such calendar month, all in form satisfactory to Lender; (ii) a balance sheet for such calendar quarter; (iii) a comparison of the budgeted income and expenses and the actual income and expenses for the current month and year-to-date for the Property, together with a detailed explanation of any variances of the greater of (x) $10,000 and (y) ten percent (10%) or more between budgeted and actual amounts for such period and year-to-date; (iv) a statement of the actual Capital Expenses made by Borrower during each calendar quarter as of the last day of such calendar quarter; (v) to the extent not already disclosed by operating statements delivered pursuant to this Section 6.3.3, a statement that Borrower has not incurred any indebtedness other than indebtedness permitted hereunder; (vi) an aged receivables report, (vii) rent rolls identifying the leased premises, names of all tenants, units leased, monthly rental and all other charges payable under each Lease, term   53 -------------------------------------------------------------------------------- of Lease and date of expiration, (viii) a year-by-year schedule showing the rentable area of the Improvements and the total base rent attributable to Leases expiring each year. Each such statement shall be accompanied by an Officer’s Certificate certifying (1) that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Property in accordance with GAAP or federal income tax accounting principles, consistently applied, (subject to normal year-end adjustments) and (2) whether there exists a Default or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it and (ix) during a Cash Management Period, a reconciliation of Operating Expenses identifying those funds which were disbursed to Borrower from the Operating Expense Subaccount during the prior calendar quarter which have not been used to pay Approved Operating Expenses.   6.3.4 Monthly Reports. Prior to the securitization of the Loan, Borrower shall furnish to Lender within thirty (30) days after the end of each calendar month, the following items: (i) monthly and year-to-date operating statements, noting Net Operating Income and other information necessary and sufficient under GAAP or federal income tax accounting principles, consistently applied, to fairly represent the financial position and results of operation of the Property during such calendar month, all in form satisfactory to Lender; (ii) an aged receivables report and (iii) rent rolls identifying the leased premises, names of all tenants, units leased, monthly rental and all other charges payable under each Lease, term of Lease and date of expiration. Each such statement shall be accompanied by an Officer’s Certificate certifying (1) that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Property in accordance with GAAP or federal income tax accounting principles, consistently applied, (subject to normal year-end adjustments) and (2) whether there exists a Default or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it.   6.3.5 Other Reports. Borrower shall furnish to Lender, within ten (10) Business Days after request, such further detailed information with respect to the operation of the Property and the financial affairs of Borrower, each SPE Party or Manager as may be reasonably requested by Lender or any applicable Rating Agency.   6.3.6 Annual Budget. Borrower shall prepare and submit (or shall cause Manager to prepare and submit) to Lender within thirty (30) days after a Cash Management Period and by November 30th of each year thereafter during the Term until such Cash Management Period has ended, for approval by Lender, which approval shall not be unreasonably withheld or delayed, a proposed pro forma budget for the Property for the succeeding calendar year (the “Annual Budget”, and each Annual Budget approved (or deemed approved pursuant to the terms of this Section 6.3.6) by Lender is referred to herein as the “Approved Annual Budget”)), and, promptly after preparation thereof, any revisions to such Annual Budget. Lender’s failure to approve or disapprove any Annual Budget or revision within thirty (30) days after Lender’s receipt thereof shall be deemed to constitute Lender’s approval thereof. The Annual Budget shall consist of (i) an operating expense budget showing, on a month-by-month basis, in reasonable detail, each line item of the Borrower’s anticipated operating income and operating expenses (on an accrual basis), including amounts required to establish, maintain and/or increase any monthly payments required hereunder (and once such Annual Budget has been approved (or deemed approved pursuant to the terms of this Section 6.3.6)   54 -------------------------------------------------------------------------------- by Lender, such operating expense budget shall be referred to herein as the “Approved Operating Budget”), and (ii) a Capital Expense budget showing, on a month-by-month basis, in reasonable detail, each line item of anticipated Capital Expenses (and once such Annual Budget has been approved (or deemed approved pursuant to the terms of this Section 6.3.6) by Lender, such Capital Expense budget shall be referred to herein as the “Approved Capital Budget”). Until such time that any Annual Budget has been approved (or deemed to have been approved) by Lender, the prior Approved Annual Budget shall apply for all purposes hereunder (with such adjustments as reasonably determined by Lender (including increases for any non-discretionary expenses)).   6.3.7 Breach. If Borrower fails to provide to Lender or its designee any of the financial statements, certificates, reports or information (the “Required Records”) required by this Article 6 within thirty (30) days after the date upon which such Required Record is due, Borrower shall pay to Lender, at Lender’s option and in its discretion, an amount equal to $200.00 per day for each Required Record that is not delivered; provided Lender has given Borrower at least fifteen (15) days prior notice of such failure. In addition, thirty (30) days after Borrower’s failure to deliver any Required Records, Lender shall have the option, upon fifteen (15) days notice to Borrower to gain access to Borrower’s books and records and prepare or have prepared at Borrower’s expense, any Required Records not delivered by Borrower.   7. INSURANCE; CASUALTY; AND CONDEMNATION   7.1 Insurance.   7.1.1 Coverage. Borrower, at its sole cost, for the mutual benefit of Borrower and Lender, shall obtain and maintain during the Term the following policies of insurance:   (a) Property insurance insuring against loss or damage customarily included under so called “all risk” or “special form” policies including fire, lightning, vandalism, and malicious mischief, boiler and machinery and, if required by Lender, flood and/or earthquake coverage and subject to subsection (j) below, coverage for damage or destruction caused by the acts of “Terrorists” (or such policies shall have no exclusion from coverage with respect thereto) and such other insurable hazards as, under good insurance practices, from time to time are insured against for other property and buildings similar to the premises in nature, use, location, height, and type of construction. Such insurance policy shall also insure for ordinance of law coverage, loss of replacement cost value due to non-conforming use, costs of demolition and increased cost of construction in amounts satisfactory to Lender. Each such insurance policy shall (i) be in an amount equal to 100% of the then replacement cost of the Improvements without deduction for physical depreciation, (ii) have deductibles no greater than the lesser of $50,000 or five percent (5%) of Net Operating Income per occurrence (except for earthquake coverage, if required, and terrorism coverage as described under subsection (j) below, each of which shall have deductibles in an amount satisfactory to Lender), (iii) be paid annually in advance and (iv) be on a replacement cost basis and contain either no coinsurance or, if coinsurance, an agreed amount endorsement, and shall cover, without limitation, all tenant improvements and betterments that Borrower is required to insure on a replacement cost basis. Lender shall be named Mortgagee and Loss Payee on a Standard Mortgagee Endorsement.   55 -------------------------------------------------------------------------------- (b) Flood insurance if any part of the Property is located in an area now or hereafter designated by the Federal Emergency Management Agency as a Zone “A” & “V” Special Hazard Area, or such other Special Hazard Area if Lender so requires in its sole discretion. Such policy shall be in an amount equal to the lesser of (1) $25,000,000 or (2) such other amount as is approved by Lender.   (c) Public liability insurance, including (i) “Commercial General Liability Insurance”, (ii) “Owned”, “Hired” and “Non Owned Auto Liability”; and (iii) umbrella liability coverage for personal injury, bodily injury, death, accident and property damage, such insurance providing in combination no less than containing minimum limits per occurrence of $1,000,000 and $2,000,000 in the aggregate for any policy year with no deductible or self insured retention; together with at least $25,000,000 excess and/or umbrella liability insurance for any and all claims. The policies described in this subsection shall also include coverage for elevators, escalators, independent contractors, “Contractual Liability” (covering, to the maximum extent permitted by law, Borrower’s obligation to indemnify Lender as required under this Agreement and the other Loan Documents), “Products” and “Completed Operations Liability” coverage. Notwithstanding the foregoing, Borrower may elect to convert to a self-insured retention or deductible program for general liability coverage in the future, subject to Lender’s prior approval, not to be unreasonably withheld; provided, however that the self-insured retention or deductible for general liability coverage is not to exceed $100,000 per occurrence subject to a $500,000 maximum, and this deductible to be initially funded with a Letter of Credit in the amount of $200,000, held and administrated by the carrier. Once the first $200,000 is exhausted additional Letters of Credit must be continually posted until the $500,000 maximum deductible is exhausted.   (d) Rental loss and/or business interruption insurance (i) with Lender being named as “Lender Loss Payee”, (ii) in an amount equal to 100% of the projected Rents from the Property during a twelve (12) month period of restoration; and (iii) containing an extended period of indemnity endorsement which provides that after the physical loss to the Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period. The amount of such insurance shall be increased from time to time during the Term as and when the estimated or actual Rents increase.   (e) If the Borrower installs high pressure steam machinery at the Property, comprehensive boiler and machinery insurance covering all mechanical and electrical equipment against physical damage, rent loss and improvements loss and covering, without limitation, all tenant improvements and betterments that Borrower is required to insure pursuant to the leases on a replacement cost basis and in an amount equal to the lesser of (i) $2,000,000 and (ii) 100% of the full replacement cost of the Improvements on such Property (without any deduction for depreciation).   (f) Worker’s compensation and disability insurance with respect to any employees of Borrower, as required by any Legal Requirement.   56 -------------------------------------------------------------------------------- (g) To the extent not covered by the coverage required under Section 7.1.1(a) above, during any period of repair or restoration, builder’s “all-risk” insurance on the so called completed value basis in an amount equal to not less than the full insurable value of the Property, against such risks (including fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request, in form and substance acceptable to Lender.   (h) Coverage to compensate for ordinance of law, loss of replacement cost value due to non-conforming use, the cost of demolition and the increased cost of construction in an amount satisfactory to Lender.   (i) Such other insurance (including earthquake insurance, mine subsidence insurance and windstorm insurance) as may from time to time be reasonably required by Lender in order to protect its interests; provided that such coverage is customarily required by institutional lenders originating first mortgage loans for the securitization market for comparable properties in the same geographic location as the Property.   (j) Notwithstanding anything in subsection (a) above to the contrary, Borrower shall be required to obtain and maintain coverage in its property insurance Policy (or by a separate Policy) against loss or damage by terrorist acts in an amount equal to 100% of the “Full Replacement Cost” of the Property; provided that such coverage is commercially available. In the event that such coverage with respect to terrorist acts is not included as part of the “all risk” property policy required by subsection (a) above, Borrower shall, nevertheless be required to obtain coverage for terrorism (as stand alone coverage) in an amount equal to 100% of the “Full Replacement Cost” of the Property; provided that such coverage is available. Notwithstanding the foregoing, with respect to any such stand-alone policy covering terrorist acts, Borrower shall not be required to pay any Insurance Premiums solely with respect to such terrorism coverage in excess of the Terrorism Premium Cap (hereinafter defined); provided that if the Insurance Premiums payable with respect to such terrorism coverage exceeds the Terrorism Premium Cap, Lender may, at its option (1) purchase such stand-alone terrorism Policy, with Borrower paying such portion of the Insurance Premiums with respect thereto equal to the Terrorism Premium Cap and the Lender paying such portion of the Insurance Premiums in excess of the Terrorism Premium Cap or (2) modify the deductible amounts, policy limits and other required policy terms to reduce the Insurance Premiums payable with respect to such stand-alone terrorism Policy to the Terrorism Premium Cap. As used herein, (i) “Terrorism Premium Cap” means an amount equal to 150% of the aggregate Insurance Premiums payable with respect to all the insurance coverage under Section 7.1.1(a) above for the last policy year in which coverage for terrorism was included as part of the “all risk” (excluding earthquake, tier 1 wind and Flood insurance) property policy required by subsection (a) above, adjusted annually by a percentage equal to the increase in the Consumer Price Index (hereinafter defined) and (ii) “Consumer Price Index” means the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, New York Metropolitan Statistical Area, All Items (1982-84 = 100), or any successor index thereto, approximately adjusted, and in the event that the Consumer Price Index is converted to a different standard reference base or otherwise revised, the determination of adjustments provided for herein shall be made with the use of such conversion factor, formula or table for converting the Consumer Price Index as may be published by the Bureau of Labor Statistics or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice-Hall,   57 -------------------------------------------------------------------------------- Inc., or any other nationally recognized publisher of similar statistical information; and if the Consumer Price Index ceases to be published, and there is no successor thereto (i) such other index as Lender and Borrower shall agree upon in writing or (ii) if Lender and Borrower cannot agree on a substitute index, such other index, as reasonably selected by Lender. Borrower shall obtain the coverage required under this subsection (j) from a carrier which otherwise satisfies the rating criteria specified in Section 7.1.2 below (a “Qualified Carrier”) or in the event that such coverage is not available from a Qualified Carrier, Borrower shall obtain such coverage from the highest rated insurance company providing such coverage.   7.1.2 Policies. All policies of insurance (the “Policies”) required pursuant to Section 7.1.1 above shall (i) be issued by companies approved by Lender and authorized to do business in the State, with a claims paying ability rating of “A-” or better by S&P (and the equivalent by any other Rating Agency) (provided, however for multi-layered policies, (A) if four (4) or less insurance companies issue the Policies, then at least 75% of the insurance coverage represented by the Policies must be provided by insurance companies with a claims paying ability rating of “A-” or better by S&P (and the equivalent by any other Rating Agency), with no carrier below “BBB” (and the equivalent by any other Rating Agency) or (B) if five (5) or more insurance companies issue the Policies, then at least sixty percent (60%) of the insurance coverage represented by the Policies must be provided by insurance companies with a claims paying ability rating of “A-” or better by S&P (and the equivalent by any other Rating Agency), with no carrier below “BBB” (and the equivalent by any other Rating Agency), and a rating of A-:VIII or better in the current Best’s Insurance Reports; (ii) name Lender and its successors and/or assigns as their interest may appear as the mortgagee (in the case of property insurance), loss payee (in the case of business interruption/loss of rents coverage) and an additional insured (in the case of liability insurance); (iii) contain (in the case of property insurance) a Non-Contributory Standard Mortgagee Clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender as the person to which all payments made by such insurance company shall be paid; (iv) contain a waiver of subrogation against Lender; (v) be assigned and carrier certified copies thereof delivered to Lender (within 10 days of Lender request therefor); (vi) contain such provisions as Lender deems reasonably necessary or desirable to protect its interest, including (A) endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under the Policies, (B) that Lender shall receive at least thirty (30) days’ prior written notice of any modification, reduction or cancellation of any of the Policies, (C) providing that Lender is permitted to make payments to effect the continuation of such policy upon notice of cancellation due to non-payment of premiums and (vii) in the event any insurance policy (except for general public and other liability and workers compensation insurance) shall contain breach of warranty provisions, such policy shall provide that with respect to the interest of Lender, such insurance policy shall not be invalidated by and shall insure Lender regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such policy by any named insured, (B) the occupancy or use of the premises for purposes more hazardous than permitted by the terms thereof, or (C) any foreclosure or other action or proceeding taken by Lender pursuant to any provision of the Loan Documents. Borrower shall pay the premiums for such Policies (the “Insurance Premiums”) as the same become due and payable and furnish to Lender evidence of the renewal of each of the Policies together with (unless such Insurance Premiums have been paid by Lender pursuant to Section 3.3 hereof) receipts for or other evidence of the payment of the Insurance Premiums reasonably satisfactory to Lender. If Borrower does not furnish such evidence and receipts at least ten (10)   58 -------------------------------------------------------------------------------- days prior to the expiration of any expiring Policy, then Lender may, but shall not be obligated to, procure such insurance and pay the Insurance Premiums therefor, and Borrower shall reimburse Lender for the cost of such Insurance Premiums promptly on demand, with interest accruing at the Default Rate. Borrower shall deliver to Lender a certified copy of each Policy (or binders with respect to the coverage provided under each such Policy together with Accord Certificates evidencing such coverage) within thirty (30) days after its effective date. Within thirty (30) days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, taking into consideration changes in the value of money over time, changes in liability laws, changes in prudent customs and practices, and the like.   7.2 Casualty.   7.2.1 Notice; Restoration. If the Property is damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice thereof to Lender. Following the occurrence of a Casualty, Borrower, regardless of whether insurance proceeds are available (unless Lender has breached its obligation (if any) to make such insurance proceeds available pursuant to Section 7.4.1), shall promptly proceed to restore, repair, replace or rebuild the Property in accordance with Legal Requirements to be of at least equal value and of substantially the same character as prior to such damage or destruction.   7.2.2 Settlement of Proceeds. If a Casualty covered by any of the Policies (an “Insured Casualty”) occurs where the loss does not exceed $2,000,000, provided no Default or Default or Event of Default has occurred and is continuing, Borrower may settle and adjust any claim without the prior consent of Lender; provided such adjustment is carried out in a competent and timely manner, and Borrower is hereby authorized to collect and receipt for the insurance proceeds (the “Proceeds”). In the event of an Insured Casualty where the loss equals or exceeds $2,000,000 (a “Significant Casualty”), Borrower may settle and adjust any claim with the prior consent of Lender (which consent shall not be unreasonably withheld or delayed) unless an Event of Default has occurred and is continuing, in which case Lender may, in its sole discretion, settle and adjust any claim without the consent of Borrower and agree with the insurer(s) on the amount to be paid on the loss, and the Proceeds shall be due and payable solely to Lender and held by Lender in the Casualty/Condemnation Subaccount and disbursed in accordance herewith. If Borrower or any party other than Lender is a payee on any check representing Proceeds with respect to a Significant Casualty, Borrower shall immediately endorse, and cause all such third parties to endorse, such check payable to the order of Lender. During the continuance of an Event of Default, Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to endorse such check payable to the order of Lender. The actual, out-of-pocket expenses incurred by Lender in the settlement, adjustment and collection of the Proceeds shall become part of the Debt and shall be reimbursed by Borrower to Lender upon demand. Notwithstanding anything to the contrary contained herein, if in connection with a Casualty any insurance carrier makes a payment under a property insurance Policy that Borrower proposes be treated as business or rental interruption insurance, then, notwithstanding any designation (or lack of designation) by the insurance carrier as to the purpose of such payment, as between Lender and Borrower, such payment shall not be treated as business or rental interruption insurance proceeds unless Borrower has demonstrated to Lender’s satisfaction that the remaining net Proceeds that will be received from the property insurance   59 -------------------------------------------------------------------------------- carriers are sufficient to pay 100% of the cost of fully restoring the Improvements or, if such net Proceeds are to be applied to repay the Debt in accordance with the terms hereof, that such remaining net Proceeds will be sufficient to pay the Debt in full.   7.3 Condemnation.   7.3.1 Notice; Restoration. Borrower shall promptly give Lender notice of the actual or threatened commencement of any condemnation or eminent domain proceeding affecting the Property (a “Condemnation”) and shall deliver to Lender copies of any and all papers served in connection with such Condemnation. Following the occurrence of a Condemnation, Borrower, regardless of whether an Award is available (unless Lender has breached its obligation (if any) to make such Award available pursuant to Section 7.4.1), shall promptly proceed to restore, repair, replace or rebuild the Property in accordance with Legal Requirements to the extent practicable to be of at least equal value and of substantially the same character (and to have the same utility) as prior to such Condemnation.   7.3.2 Collection of Award. If a Condemnation occurs where the award or payment in respect thereof (an “Award”) does not exceed $2,000,000, provided no Event of Default has occurred and is continuing, Borrower may make any compromise, adjustment or settlement in connection with such Condemnation with the prior consent of Lender, not to be unreasonably withheld, provided such adjustment is carried out in a competent and timely manner, and Borrower is hereby authorized to collect and receipt for the Award. In the event of a Condemnation where the Award is in excess of $2,000,000, Lender may collect, receive and retain such Award and make any compromise, adjustment or settlement in connection with such Condemnation with the prior consent of Borrower (unless an Event of Default is continuing, in which case, Borrower’s prior consent shall not be required, and Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to take such actions during the continuance of an Event of Default), not to be unreasonably withheld (which shall be deemed consented to if Borrower fails to respond to any request for consent therefor within ten (10) days of request). Notwithstanding any Condemnation (or any transfer made in lieu of or in anticipation of such Condemnation), Borrower shall continue to pay the Debt at the time and in the manner provided for in the Loan Documents, and the Debt shall not be reduced unless and until any Award shall have been actually received and applied by Lender to expenses of collecting the Award and to discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided in the Note. If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of such Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall be recoverable or shall have been sought, recovered or denied, to receive all or a portion of the Award sufficient to pay the Debt. Except as provided in this Section 7.3.2, Borrower shall cause any Award that is payable to Borrower to be paid directly to Lender. Lender shall hold such Award in the Casualty/Condemnation Subaccount and disburse such Award in accordance with the terms hereof.   60 -------------------------------------------------------------------------------- 7.4 Application of Proceeds or Award.   7.4.1 Application to Restoration. If an Insured Casualty or Condemnation occurs where (i) the loss is in an aggregate amount less than the fifteen percent (15%) of the unpaid Principal; (ii) in the reasonable judgment of Lender, the Property can be restored within twelve (12) months, and prior to six (6) months before the Stated Maturity Date and prior to the expiration of the rental or business interruption insurance with respect thereto, to the Property’s pre-existing condition and utility as existed immediately prior to such Insured Casualty or Condemnation and to an economic unit not less valuable and not less useful than the same was immediately prior to the Insured Casualty or Condemnation, and after such restoration will adequately secure the Debt; (iii) less than (x) thirty percent (30%), in the case of an Insured Casualty or (y) fifteen percent (15%), in the case of a Condemnation, of the rentable area of the Improvements has been damaged, destroyed or rendered unusable as a result of such Insured Casualty or Condemnation; (iv) Leases demising in the aggregate at least sixty-five percent (65%) of the total rentable space in the Property and in effect as of the date of the occurrence of such Insured Casualty or Condemnation remain in full force and effect during and after the completion of the Restoration (hereinafter defined); and (v) no Event of Default shall have occurred and be then continuing, then the Proceeds or the Award, as the case may be (after reimbursement of any expenses incurred by Lender), shall be applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Property (the “Restoration”), in the manner set forth herein. Borrower shall commence and diligently prosecute such Restoration. Notwithstanding the foregoing, in no event shall Lender be obligated to apply the Proceeds or Award to reimburse Borrower for the cost of Restoration unless, in addition to satisfaction of the foregoing conditions, both (x) Borrower shall pay (and if required by Lender, Borrower shall deposit with Lender in advance) all costs of such Restoration in excess of the net amount of the Proceeds or the Award made available pursuant to the terms hereof; and (y) Lender shall have received evidence reasonably satisfactory to it that during the period of the Restoration, the Rents (inclusive of proceeds (if any) from business interruption or other loss of income insurance) will be at least equal to the sum of the operating expenses and Debt Service and other reserve payments required hereunder, as reasonably determined by Lender.   7.4.2 Application to Debt. Except as provided in Section 7.4.1 above, any Proceeds and/or Award may, at the option of Lender in its discretion, be applied to the payment of (i) accrued but unpaid interest on the Note, (ii) the unpaid Principal and (iii) other charges due under the Note and/or any of the other Loan Documents, or applied to reimburse Borrower for the cost of any Restoration, in the manner set forth in Section 7.4.3 below. Any such prepayment of the Loan shall be without any Yield Maintenance Premium, unless an Event of Default has occurred and is continuing at the time the Proceeds are received from the insurance company or the Award is received from the condemning authority, as the case may be, in which event Borrower shall pay to Lender an additional amount equal to the Yield Maintenance Premium, if any, that may be required with respect to the amount of the Proceeds or Award applied to the unpaid Principal.   7.4.3 Procedure for Application to Restoration. If Borrower is entitled to reimbursement out of the Proceeds or an Award held by Lender, such Proceeds or Award shall be disbursed from time to time from the Casualty/Condemnation Subaccount upon Lender being furnished with (i) evidence satisfactory to Lender of the estimated cost of completion of the Restoration, (ii) a fixed price or guaranteed maximum cost construction contract for Restoration satisfactory to Lender, (iii) prior to the commencement of Restoration, all immediately available   61 -------------------------------------------------------------------------------- funds in addition to the Proceeds or Award that in Lender’s judgment are required to complete the proposed Restoration, (iv) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey, permits, approvals, licenses and such other documents and items as Lender may reasonably require and approve in Lender’s discretion, and (iv) all plans and specifications for such Restoration, such plans and specifications to be approved by Lender prior to commencement of any work (unless such plans are for rebuilding the Improvements as they existed prior to the Casualty or Condemnation, in which case no Lender approval shall be required). Lender may, at Borrower’s expense, retain a consultant to review and approve all requests for disbursements, which approval shall also be a condition precedent to any disbursement. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the value of the work performed from time to time (until completion of specific trades, which may be paid in full on completion); funds other than the Proceeds or Award shall be disbursed prior to disbursement of such Proceeds or Award; and at all times, the undisbursed balance of such Proceeds or Award remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration, free and clear of all Liens or claims for Lien. Provided no Default or Event of Default then exists, any surplus that remains out of the Proceeds held by Lender after payment of such costs of Restoration shall be paid to Borrower. Any surplus that remains out of the Award received by Lender after payment of such costs of Restoration shall, in the discretion of Lender, be retained by Lender and applied to payment of the Debt (without any Yield Maintenance Premium or any other prepayment premium or penalty) or returned to Borrower.   8. DEFAULTS   8.1 Events of Default. An “Event of Default” shall exist with respect to the Loan if any of the following shall occur:   (a) any portion of the Debt is not paid when due, or Borrower shall fail to pay when due any payment required under Sections 3.3, 3.4, 3.5, 3.6, 3.7 or 3.9 hereof (provided, however, if during a Cash Management Period, adequate funds are available in the Deposit Account for such payments, the failure by the Deposit Bank to allocate such funds into the appropriate Subaccounts shall not constitute an Event of Default);   (b) any of the Taxes are not paid when due (unless Lender is paying such Taxes pursuant to Section 3.3 hereof), subject to Borrower’s right to contest Taxes in accordance with Section 5.2 hereof;   (c) the Policies are not kept in full force and effect, or are not delivered to Lender upon request, as required under Section 7.1.1;   (d) a Transfer other than a Permitted Transfer occurs;   (e) any representation or warranty made by Borrower or in any Loan Document, or by Borrower (or certified by Borrower) in any report, certificate, financial statement or other instrument, agreement or document furnished by Borrower in connection with any Loan   62 -------------------------------------------------------------------------------- Document, shall be false or misleading in any material respect as of the date the representation or warranty was made;   (f) Borrower or any SPE Party shall make an assignment for the benefit of creditors, or shall generally not be paying its debts as they become due;   (g) a receiver, liquidator or trustee shall be appointed for Borrower or any SPE Party; or Borrower or any SPE Party shall be adjudicated a bankrupt or insolvent; or any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower or any SPE Party, as the case may be; or any proceeding for the dissolution or liquidation of Borrower or any SPE Party shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower or any SPE Party, as the case may be, only upon the same not being discharged, stayed or dismissed within sixty (60) days;   (h) Borrower breaches any covenant contained in Section 5.12.1 (a) - (f) hereof which continues for ten (10) days after notice from Lender;   (i) Borrower breaches any covenant contained in Sections 5.13, 5.15, 5.22, 5.25 or 5.28 hereof;   (j) except as expressly permitted hereunder, the alteration, improvement, demolition or removal of all or any portion of the Improvements without the prior written consent of Lender;   (k) an Event of Default as defined or described elsewhere in this Agreement or in any other Loan Document occurs;   (l) a default occurs under any term, covenant or provision set forth herein or in any other Loan Document which specifically contains a notice requirement or grace period and such notice has been given and such grace period has expired without the cure of such default;   (m) any of the assumptions contained in any substantive non-consolidation opinion, delivered to Lender by Lender’s counsel in connection with the Loan or otherwise hereunder, were not true and correct as of the date of such opinion or thereafter became untrue or incorrect in any material respects;   (n) a default shall be continuing under any of the other terms, covenants or conditions of this Agreement or any other Loan Document not otherwise specified in this Section 8.1, for ten (10) days after notice to Borrower from Lender, in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default; provided, however, that if such non-monetary default is susceptible of cure but cannot reasonably be cured within such thirty (30)-day period, and Borrower shall have commenced to cure such default within such thirty (30)-day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30)-day period shall be extended for an additional period of time as is reasonably necessary for Borrower in the exercise of due diligence to cure such default, such additional period not to exceed ninety (90) days.   63 -------------------------------------------------------------------------------- 8.2 Remedies.   8.2.1 Acceleration. Upon the occurrence of an Event of Default (other than an Event of Default described in paragraph (f) or (g) of Section 8.1 above) and at any time and from time to time thereafter, in addition to any other rights or remedies available to it pursuant to the Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to the Property; including declaring the Debt to be immediately due and payable (including unpaid interest), Default Rate interest, Late Payment Charges, Yield Maintenance Premium and any other amounts owing by Borrower), without notice or demand; and upon any Event of Default described in paragraph (f) or (g) of Section 8.1 above, the Debt (including unpaid interest, Default Rate interest, Late Payment Charges, Yield Maintenance Premium and any other amounts owing by Borrower) shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained in any Loan Document to the contrary notwithstanding.   8.2.2 Remedies Cumulative. Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under the Loan Documents or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared, or be automatically, due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth in the Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing, (i) to the extent permitted by applicable law, Lender is not subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Property, the Mortgage has been foreclosed, the Property has been sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full. To the extent permitted by applicable law, nothing contained in any Loan Document shall be construed as requiring Lender to resort to any portion of the Property for the satisfaction of any of the Debt in preference or priority to any other portion, and Lender may seek satisfaction out of the entire Property or any part thereof, in its discretion.   8.2.3 Severance. After the occurrence and during the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations and priorities of payment and liens as Lender shall determine in its discretion for purposes of evidencing and enforcing its rights and remedies. Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement   64 -------------------------------------------------------------------------------- and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect such severance, Borrower ratifying all that such attorney shall do by virtue thereof.   8.2.4 Delay. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default, or the granting of any indulgence or compromise by Lender shall impair any such remedy, right or power hereunder or be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim in connection with the foreclosure of the Mortgage to the extent necessary to foreclose on all or any portion of the Property, the Rents, the Cash Management Accounts or any other collateral, provided that any deficiency judgment obtained by Lender shall be subject to the terms and provisions of Section 10.1 hereof.   8.2.5 Lender’s Right to Perform. If Borrower fails to perform any covenant or obligation contained herein and such failure shall continue for a period of the greater of (a) ten (10) days after Borrower’s receipt of written notice thereof from Lender and (b) any longer notice requirement or grace period (if any) specifically set forth in this Agreement after Borrower’s receipt of written notice thereof from Lender, without in any way limiting Lender’s right to exercise any of its rights, powers or remedies as provided hereunder, or under any of the other Loan Documents, Lender may, but shall have no obligation to, perform, or cause performance of, such covenant or obligation, and all costs, expenses, liabilities, penalties and fines of Lender incurred or paid in connection therewith shall be payable by Borrower to Lender upon demand and if not paid shall be added to the Debt (and to the extent permitted under applicable laws, secured by the Mortgage and other Loan Documents) and shall bear interest thereafter at the Default Rate. Notwithstanding the foregoing, Lender shall have no obligation to send notice to Borrower of any such failure.   9. SPECIAL PROVISIONS   9.1 Sale of Note and Secondary Market Transaction.   9.1.1 General; Borrower Cooperation. Lender shall have the right at any time and from time to time (i) to sell or otherwise transfer the Loan or any portion thereof or the Loan Documents or any interest therein to one or more investors, (ii) to sell participation interests in the Loan to one or more investors or (iii) to securitize the Loan or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities (the “Securities”) secured by or evidencing ownership interests in the Note and the Mortgage (each such sale, assignment, participation and/or securitization is referred to herein as a “Secondary Market Transaction” and the transactions referred to in this subsection (iii) shall be referred to herein as a “Securitization”). In connection with any Secondary Market Transaction, Borrower shall use all reasonable efforts and cooperate fully and in good faith with Lender and otherwise   65 -------------------------------------------------------------------------------- assist Lender in satisfying the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any such Secondary Market Transactions, including: (a) to (i) to provide such financial and other information with respect to the Property, Borrower and its Affiliates, Manager and any tenants of the Property, (ii) provide business plans and budgets relating to the Property and (iii) perform or permit or cause to be performed or permitted such site inspection, appraisals, surveys, market studies, environmental reviews and reports, engineering reports and other due diligence investigations of the Property, as may be reasonably requested from time to time by Lender or the Rating Agencies or as may be necessary or appropriate in connection with a Secondary Market Transaction or Exchange Act requirements (the items provided to Lender pursuant to this paragraph (a) being called the “Provided Information”), together, if customary, with appropriate verification of and/or consents to the Provided Information through letters of auditors or opinions of counsel of independent attorneys acceptable to Lender and the Rating Agencies; (b) cause counsel to render opinions customary in securitization transactions (other than a non-consolidation opinion, which shall be obtained by Lender, at Lender’s expense) with respect to the Property, Borrower and its Affiliates, which counsel and opinions shall be reasonably satisfactory to Lender and the Rating Agencies; (c) make such representations and warranties as of the closing date of any Secondary Market Transaction with respect to the Property, Borrower and the Loan Documents as are customarily provided in such transactions and as may be reasonably requested by Lender or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof, including the representations and warranties made in the Loan Documents; (d) provide current certificates of good standing and qualification with respect to Borrower and each SPE Party from appropriate Governmental Authorities; and (e) execute such amendments to the Loan Documents and Borrower’s organizational documents, as may be reasonably requested by Lender or the Rating Agencies or otherwise to effect a Secondary Market Transaction, provided that nothing contained in this subsection (e) shall result in an adverse economic change or a material increase in Borrower’s non-economic obligations in the transaction. Borrower’s cooperation obligations set forth herein shall continue until the Loan has been paid in full. Notwithstanding anything to the contrary contained in this Section 9.1.1, Borrower shall not be required to incur any out-of-pocket expenses (other than the fees and expenses of Borrower’s attorneys, accountants and consultants) in the performance of its obligations under this Section 9.1.1.   9.1.2 Use of Information. Borrower understands that all or any portion of the Provided Information and the Required Records may be included in disclosure documents in connection with a Secondary Market Transaction, including a prospectus or private placement memorandum (each, a “Disclosure Document”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers or other parties relating to the Secondary Market Transaction; provided that Borrower does not incur any liability as an issuer of securities and is not responsible for any errors or omissions in the statements by Lender or third parties which are inconsistent with the information that has been provided by Borrower. If the Disclosure Document is required to be revised, Borrower shall cooperate with Lender in updating the Provided Information or Required Records for inclusion or summary in the Disclosure Document or for other use reasonably required in connection with a Secondary Market Transaction by   66 -------------------------------------------------------------------------------- providing all current information pertaining to Borrower, Manager and the Property necessary to keep the Disclosure Document accurate and complete in all material respects with respect to such matters. Notwithstanding anything to the contrary contained in this Section 9.1.2, Borrower shall not be required to incur any out-of-pocket expenses (other than the fees and expenses of Borrower’s attorneys, accountants and consultants) in the performance of its obligations under this Section 9.1.2.   9.1.3 Borrower Obligations Regarding Disclosure Documents. In connection with a Disclosure Document, Borrower shall: (a) if requested by Lender, certify in writing that Borrower has carefully examined those portions of such Disclosure Document, pertaining to Borrower, the Property, Manager and the Loan, and that such portions do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (b) indemnify (in a separate instrument of indemnity, if so requested by Lender) (i) any underwriter, syndicate member or placement agent (collectively, the “Underwriters”) retained by Lender or its issuing company affiliate (the “Issuer”) in connection with a Secondary Market Transaction, (ii) Lender and (iii) the Issuer that is named in the Disclosure Document or registration statement relating to a Secondary Market Transaction (the “Registration Statement”), and each of the Issuer’s directors, each of its officers who have signed the Registration Statement and each person or entity who controls the Issuer or the Lender within the meaning of Section 15 of the Securities Act or Section 30 of the Exchange Act (collectively within (iii), the “GCM Group”), and each of its directors and each person who controls each of the Underwriters, within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any losses, claims, damages or liabilities (the “Liabilities”) to which Lender, the GCM Group or the Underwriter Group may become subject (including reimbursing all of them for any legal or other expenses actually incurred in connection with investigating or defending the Liabilities) insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any of the Provided Information or in any of the applicable portions of such sections of the Disclosure Document applicable to Borrower, Manager, the Property or the Loan, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in the applicable portions of such sections or necessary in order to make the statements in the applicable portions of such sections in light of the circumstances under which they were made, not misleading; provided, however, that Borrower shall not be required to indemnify Lender for any Liabilities relating to untrue statements or omissions which Borrower identified to Lender in writing at the time of Borrower’s examination of such Disclosure Document.   9.1.4 Borrower Indemnity Regarding Filings. In connection with filings under the Exchange Act, Borrower shall (i) indemnify Lender, the GCM Group and the Underwriter Group for any Liabilities to which Lender, the GCM Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon the omission or alleged omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the GCM Group or the Underwriter Group for any legal or other expenses actually incurred by Lender, GCM Group or the Underwriter Group in connection with defending or investigating the Liabilities.   67 -------------------------------------------------------------------------------- 9.1.5 Indemnification Procedure. Promptly after receipt by an indemnified party under Section 9.1.3 above or Section 9.1.4 above of notice of the commencement of any action for which a claim for indemnification is to be made against Borrower, such indemnified party shall notify Borrower in writing of such commencement, but the omission to so notify Borrower will not relieve Borrower from any liability that it may have to any indemnified party hereunder except to the extent that failure to notify causes prejudice to Borrower. If any action is brought against any indemnified party, and it notifies Borrower of the commencement thereof, Borrower will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice of commencement, to assume the defense thereof with counsel satisfactory to such indemnified party in its discretion. After notice from Borrower to such indemnified party under this Section 9.1.5, Borrower shall not be responsible for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, if the defendants in any such action include both Borrower and an indemnified party, and any indemnified party shall have reasonably concluded that there are any legal defenses available to it and/or other indemnified parties that are different from or additional to those available to Borrower, then the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Borrower shall not be liable for the expenses of more than one separate counsel unless there are legal defenses available to it that are different from or additional to those available to another indemnified party.   9.1.6 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 9.1.3 above or Section 9.1.4 above is for any reason held to be unenforceable by an indemnified party in respect of any Liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 9.1.3 above or Section 9.1.4 above, Borrower shall contribute to the amount paid or payable by the indemnified party as a result of such Liabilities (or action in respect thereof); provided, however, that 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 not guilty of such fraudulent misrepresentation. In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered: (i) the GCM Group’s and Borrower’s relative knowledge and access to information concerning the matter with respect to which the claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances. Lender and Borrower hereby agree that it may not be equitable if the amount of such contribution were determined by pro rata or per capita allocation.   9.1.7 Rating Surveillance. Lender will retain the Rating Agencies to provide rating surveillance services on Securities. The pro rata expenses of such surveillance will be paid for by Borrower based on the applicable percentage of such expenses determined by dividing the then outstanding Principal by the then aggregate outstanding amount of the pool created in the Secondary Market Transaction which includes the Loan.   68 -------------------------------------------------------------------------------- 9.1.8 Severance of Loan. Lender shall have the right, at any time (whether prior to, in connection with, or after any Secondary Market Transaction), with respect to all or any portion of the Loan, to modify, split and/or sever all or any portion of the Loan as hereinafter provided. Without limiting the foregoing, Lender may (i) cause the Note and the Mortgage to be split into a first and second mortgage loan, (ii) create one more senior and subordinate notes (i.e., an A/B or A/B/C structure), (iii) create multiple components of the Note or Notes (and allocate or reallocate the principal balance of the Loan among such components) or (iv) otherwise sever the Loan into two (2) or more loans secured by mortgages and by a pledge of partnership or membership interests (directly or indirectly) in Borrower (i.e., a senior loan/mezzanine loan structure), in each such case, in whatever proportion and whatever priority Lender determines; provided, however, in each such instance the outstanding principal balance of all the Notes evidencing the Loan (or components of such Notes) immediately after the effective date of such modification equals the outstanding principal balance of the Loan immediately prior to such modification and the weighted average of the interest rates for all such Notes (or components of such Notes) immediately after the effective date of such modification equals the interest rate of the original Note immediately prior to such modification. If requested by Lender, Borrower (and Borrower’s constituent members, if applicable) shall execute within seven (7) Business Days after such request, such documentation as Lender may reasonably request to evidence and/or effectuate any such modification or severance. Borrower shall not be required to incur any out of pocket costs or expenses in connection with the foregoing (other than the fees and expenses of Borrower’s attorneys, accountants and consultants) or to reduce its rights or increase its obligations or decrease its rights in respect of the Loan (or any portion thereof). Notwithstanding anything to the contrary contained in this Section 9.1.8, Borrower shall not be required to incur any out-of-pocket expenses (other than the fees and expenses of Borrower’s attorneys, accountants and consultants) in the performance of its obligations under this Section 9.1.8. Notwithstanding any severance of the Loan into an A/B or A/B/C structure, Lender hereby acknowledges and agrees that Borrower shall only be obligated to obtain any consent and/or approval required under the Loan Documents from, and deliver any notice, financial reports or other items as required under the Loan Documents to, one (1) Person acting as agent designated by Lender, in its sole discretion.   10. MISCELLANEOUS   10.1 Exculpation. The Loan is non-recourse to Borrower and its direct and indirect partners, except as expressly provided below. Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower or against any holder of direct or indirect interests in Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest and rights under the Loan Documents, or in the Property, the Rents or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any other collateral given to Lender, and Lender shall not sue for, seek or demand any deficiency judgment against Borrower or against any holder of direct or indirect interests in Borrower in any such action or proceeding under or by reason of or under or in connection with any Loan Document.   69 -------------------------------------------------------------------------------- The provisions of this Section 10.1 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by any Loan Document; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any of the Loan Documents or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Leases; (vi) constitute a prohibition against Lender to commence any other appropriate action or proceeding in order for Lender to fully realize the security granted by the Mortgage or to exercise its remedies against the Property; or (vii) constitute a waiver of the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including attorneys’ fees and costs reasonably incurred) (but excluding any punitive, consequential or speculative damages) arising out of or in connection with the following (all such liability and obligation of Borrower for any or all of the following being referred to herein as “Borrower’s Recourse Liabilities”):   (a) fraud or intentional misrepresentation by Borrower, or any SPE Party in connection with obtaining the Loan;   (b) intentional physical waste of the Property or any portion thereof by Borrower, any SPE Party or any Affiliate of Borrower or any SPE Party, or after an Event of Default the removal or disposal by Borrower, any SPE Party or any Affiliate of Borrower or any SPE Party of any portion of the Property without replacement;   (c) any Proceeds paid to Borrower or any SPE Party (or any Affiliate of Borrower or any SPE Party) by reason of any Insured Casualty or any Award received in connection with a Condemnation or other sums or payments attributable to the Property not applied by Borrower in accordance with the provisions of the Loan Documents (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments);   (d) all Rents of the Property received or collected by or on behalf of the Borrower after an Event of Default and not deposited into the Deposit Account or applied to payment of Principal and interest due under the Note, and to the payment of actual and reasonable operating expenses of the Property, as they become due or payable (except to the extent that such application of such funds is prevented by bankruptcy, receivership, or similar judicial proceeding in which Borrower is legally prevented from directing the disbursement of such sums);   (e) misappropriation by Borrower or any SPE Party (or any Affiliate of Borrower or any SPE Party) (including failure to turn over to Lender on demand following an Event of Default) of tenant security deposits and rents collected in advance, or of funds held by Borrower for the benefit of another party;   (f) the failure to pay Taxes, provided Borrower shall not be liable (A) to the extent funds to pay such amounts are available in the Tax and Insurance   70 -------------------------------------------------------------------------------- Subaccount and Lender failed to pay same or (B) Rents paid during the tax payment period at issue are insufficient to yield sufficient funds to pay such amounts after the payment of all monthly payments due under the Loan Documents, insurance premiums and other operating and other expenses of the Property; or   (g) the breach of any representation, warranty, covenant or indemnification in any Loan Document concerning Environmental Laws or Hazardous Substances, including Section 4.21 hereof and Section 5.8 hereof, and clauses (viii) through (xi) of Section 5.30 hereof.   Notwithstanding anything to the contrary in this Agreement or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt in accordance with the Loan Documents, and (B) Lender’s agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force and effect, and the Debt shall be fully recourse to Borrower in the event that one or more of the following occurs (each, a “Springing Recourse Event”): (i) an Event of Default described in Section 8.1(d) hereof shall have occurred or (ii) a breach of the covenants set forth in Section 5.13 hereof, or (iii) the occurrence of any condition or event described in either Section 8.1(f) hereof or Section 8.1(g) hereof and, with respect to such condition or event described in Section 8.1(g) hereof, either Borrower, any SPE Party or any Person owning an interest (directly or indirectly) in Borrower or any SPE Party consents to, aids, solicits, supports, or otherwise cooperates or colludes to cause such condition or event or fails to contest such condition or event.   10.2 Brokers and Financial Advisors. (a) Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the Loan other than Secured Capital (“Broker”) whose fees shall be paid by Borrower pursuant to a separate agreement. Borrower shall indemnify and hold Lender harmless from and against any and all claims, liabilities, costs and expenses (including attorneys’ fees, whether incurred in connection with enforcing this indemnity or defending claims of third parties) of any kind in any way relating to or arising from a claim by any Person (including Broker) that such Person acted on behalf of Borrower in connection with the transactions contemplated herein. The provisions of this Section 10.2 shall survive the expiration and termination of this Agreement and the repayment of the Debt.   (b) Notwithstanding anything in Section 10.2(a) above to the contrary, Borrower hereby acknowledges that (i) at Lender’s sole discretion, Broker may receive further consideration from Lender relating to the Loan or any other matter for which Lender may elect to compensate Broker pursuant to a separate agreement between Lender and Broker and (ii) Lender shall have no obligation to disclose to Borrower the existence of any such agreement or the amount of any such additional consideration paid or to be paid to Broker whether in connection with the Loan or otherwise.   10.3 Retention of Servicer. Lender reserves the right to retain the Servicer to act as its agent hereunder with such powers as are specifically delegated to the Servicer by Lender,   71 -------------------------------------------------------------------------------- whether pursuant to the terms of this Agreement, any pooling and servicing agreement or similar agreement entered into as a result of a Secondary Market Transaction, the Deposit Account Agreement or otherwise, together with such other powers as are reasonably incidental thereto. Borrower shall pay any reasonable fees and expenses of the Servicer (i) in connection with a release of the Property (or any portion thereof), (ii) from and after a transfer of the Loan to any “master servicer” or “special servicer” for any reason, including without limitation, as a result of a decline in the occupancy level of the Property, (iii) in connection with an assumption or modification of the Loan, (iv) in connection with the enforcement of the Loan Documents or (v) in connection with any other action or approval taken by Servicer hereunder on behalf of Lender.   10.4 Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as any of the Debt is unpaid or such longer period if expressly set forth in this Agreement. All Borrower’s covenants and agreements in this Agreement shall inure to the benefit of the respective legal representatives, successors and assigns of Lender.   10.5 Lender’s Discretion. Whenever pursuant to this Agreement or any other Loan Document, Lender exercises any right given to it to approve or disapprove, or consent or withhold consent, or any arrangement or term is to be satisfactory to Lender or is to be in Lender’s discretion, except as otherwise specified herein, the decision of Lender to approve or disapprove, to consent or withhold consent, or to decide whether arrangements or terms are satisfactory or not satisfactory, or acceptable or unacceptable or in Lender’s discretion shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.   10.6 Governing Law.   (a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND   72 -------------------------------------------------------------------------------- IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO § 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.   (b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR LENDER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER HEREBY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS AS SET FORTH IN SECTION 6.1 ABOVE, WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SAID SERVICE OF BORROWER MAILED OR DELIVERED TO THE BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (i) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS ADDRESS AND/OR APPOINTED OR CHANGED AUTHORIZED AGENT HEREUNDER, AND (ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE AN AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS).   10.7 Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under any Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under the Loan Documents, or to declare an Event of Default for failure to effect prompt payment of any such other amount.   73 -------------------------------------------------------------------------------- 10.8 Trial by Jury. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.   10.9 Headings/Exhibits. The Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. The Exhibits attached hereto, are hereby incorporated by reference as a part of the Agreement with the same force and effect as if set forth in the body hereof.   10.10 Severability. Wherever 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 shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.   10.11 Preferences. Upon the occurrence and continuance of an Event of Default, Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the Debt. To the extent Borrower makes a payment to Lender, or Lender receives proceeds of any collateral, which is in whole or part subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Debt or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender. This provision shall survive the expiration or termination of this Agreement and the repayment of the Debt.   10.12 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or any other Loan Document specifically and expressly requires the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which no Loan Document specifically and expressly requires the giving of notice by Lender to Borrower.   10.13 Remedies of Borrower. If a claim or adjudication is made that Lender or any of its agents, including Servicer, has acted unreasonably or unreasonably delayed acting in any case where by law or under any Loan Document, Lender or any such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents,   74 -------------------------------------------------------------------------------- including Servicer, shall be liable for any monetary damages, and Borrower’s sole remedy shall be to commence an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Borrower specifically waives any claim against Lender and its agents, including Servicer, with respect to actions taken by Lender or its agents on Borrower’s behalf. Nothing in this Section 10.13 shall limit Borrower’s remedies against Lender under this Agreement to the extent that both (i) Lender’s breach of this Agreement arises from the illegal acts, fraud or willful misconduct of Lender and (ii) as a result of such breach, Borrower incurs liability or actual damages to third parties.   10.14 Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements, understandings and negotiations among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents.   10.15 Offsets, Counterclaims and Defenses. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents, including Servicer, or otherwise offset any obligations to make payments required under the Loan Documents. Any assignee of Lender’s interest in and to the Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which Borrower may otherwise have against any assignor of such documents, and no such offset, counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents, and any such right to interpose or assert any such offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.   10.16 Publicity. All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public, which refers to the Loan Documents, the Loan, Lender or any member of the GCM Group, a purchaser of the Loan, the Servicer or the trustee in a Secondary Market Transaction, shall be subject to the prior reasonable written approval of Lender. Additionally, Lender shall not have the right to issue any of the foregoing (other than as permitted under Article 9) without Borrower’s approval, not to be unreasonably, withheld, conditioned or delayed (and which will be deemed given if no response is given within 3 Business Days following request).   10.17 No Usury. Borrower and Lender intend at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under state law) and that this Section 10.17 shall control every other agreement in the Loan Documents. If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under the Note or any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Debt, or if Lender’s exercise of the option to accelerate the maturity of the Loan or any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Borrower’s and Lender’s express intent that all excess amounts theretofore collected by Lender shall be credited against the unpaid Principal and all other Debt (or, if the Debt has been or would thereby be paid in full, refunded to   75 -------------------------------------------------------------------------------- Borrower), and the provisions of the Loan Documents immediately be deemed reformed and the amounts thereafter collectible thereunder reduced, without the necessity of the execution of any new document, so as to comply with applicable law, but so as to permit the recovery of the fullest amount otherwise called for thereunder. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Loan shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. Notwithstanding anything to the contrary contained in any Loan Document, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.   10.18 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that each is represented by separate counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted them.   10.19 No Third Party Beneficiaries. The Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in any Loan Document shall be deemed to confer upon anyone other than the Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained therein.   10.20 Yield Maintenance Premium. Borrower acknowledges that (a) Lender is making the Loan in consideration of the receipt by Lender of all interest and other benefits intended to be conferred by the Loan Documents and (b) if payments of Principal are made to Lender prior to the Stated Maturity Date, for any reason whatsoever, whether voluntary, as a result of Lender’s acceleration of the Loan after an Event of Default, by operation of law or otherwise, Lender will not receive all such interest and other benefits and may, in addition, incur costs. For these reasons, and to induce Lender to make the Loan, Borrower agrees that, except as expressly provided in Article 7 hereof, all prepayments, if any, whether voluntary or involuntary, will be accompanied by the Yield Maintenance Premium. Such Yield Maintenance Premium shall be required whether payment is made by Borrower, by a Person on behalf of Borrower, or by the purchaser at any foreclosure sale, and may be included in any bid by Lender at such sale. Borrower further acknowledges that (A) it is a knowledgeable real estate developer and/or investor; (B) it fully understands the effect of the provisions of this Section 10.20, as well as the other provisions of the Loan Documents; (C) the making of the Loan by Lender at the Interest Rate and other terms set forth in the Loan Documents are sufficient consideration for Borrower’s obligation to pay a Yield Maintenance Premium (if required); and (D) Lender would not make the Loan on the terms set forth herein without the inclusion of such provisions. Borrower also acknowledges that the provisions of this Agreement limiting the right of prepayment and providing for the payment of the Yield Maintenance Premium and other charges specified herein were independently negotiated and bargained for, and constitute a specific material part of the consideration given by Borrower to Lender for the making of the Loan except as expressly permitted hereunder.   76 -------------------------------------------------------------------------------- 10.21 Assignment. The Loan, the Note, the Loan Documents and/or Lender’s rights, title, obligations and interests therein may be assigned by Lender and any of its successors and assigns to any Person at any time in its discretion, in whole or in part, whether by operation of law (pursuant to a merger or other successor in interest) or otherwise. Upon such assignment, all references to Lender in this Loan Agreement and in any Loan Document shall be deemed to refer to such assignee or successor in interest and such assignee or successor in interest shall thereafter stand in the place of Lender. Except in connection with a Transfer and Assumption, Borrower may not assign its rights, title, interests or obligations under this Loan Agreement or under any of the Loan Documents.   10.22 Certain Additional Rights of Lender. Notwithstanding anything to the contrary which may be contained in this Agreement, Lender shall have:   (i) the right to routinely consult with Borrower’s management regarding the significant business activities and business and financial developments of Borrower, provided, however, that such consultations shall not include discussions of environmental compliance programs or disposal of hazardous substances. Consultation meetings should occur on a regular basis (no less frequently than quarterly) with Lender having the right to call special meetings at any reasonable times;   (ii) the right, in accordance with the terms of this Agreement, to examine the books and records of Borrower at any time upon reasonable notice;   (iii) the right, in accordance with the terms of this Agreement, to receive monthly, quarterly and year-end financial reports of Borrower, including balance sheets, statements of income, shareholder’s equity and cash flow, a management report and schedules of outstanding indebtedness;   (iv) the right, in accordance with the terms of this Agreement, to restrict financing to be obtained with respect to the Property so long as any portion of the Debt remains outstanding;   (v) the right, in accordance with the terms of this Agreement, to restrict, upon the occurrence of an Event of Default, Borrower’s payments of management, consulting, director or similar fees to Affiliates of Borrower from the Rents;   (vi) the right, in accordance with the terms of this Agreement (during the continuance of a Cash Management Period), to approve any operating budget and/or capital budget of Borrower;   (vii) the right, without restricting any other rights of Lender under this Agreement (including any similar right), to approve any acquisition by Borrower of any other significant property (other than personal property required for the day to day operation of the Property);   (viii) the right, in accordance with the terms of this Agreement, to restrict the transfer of interests in Borrower held by its partners, and the right to restrict the transfer of interests in such partners, except for any transfer that is a Permitted Transfer.   77 -------------------------------------------------------------------------------- The rights described above may be exercised directly or indirectly by any Person that owns substantially all of the ownership interests in Lender. The provisions of this Section are intended to satisfy the requirement of management rights for purposes of the Department of Labor “plan assets” regulation 29 C.F.R., Section 2510.3-101.   10.23 Set-Off. In addition to any rights and remedies of Lender provided by this Loan Agreement and by law, upon the occurrence of an Event of Default, Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Lender or any Affiliate thereof to or for the credit or the account of Borrower. Lender agrees promptly to notify Borrower after any such set-off and application made by Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.   10.24 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.   [Remainder of Page Intentionally Left Blank]   78 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.   COMMERCE SQUARE PARTNERS-PHILADELPHIA PLAZA, L.P., a Delaware limited partnership By:   TDP-Commerce Square Gen-Par, LLC, a Delaware limited liability company, its General Partner     By:   TDP-Commerce Square Gen-Par, Inc., a Delaware corporation, its Managing Member         By:   /S/    JAMES A. THOMAS         Name: James A. Thomas         Title: President GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation By:   /S/    ERIC GUNDERSON Name: Eric Gunderson Title: Vice President --------------------------------------------------------------------------------   Schedule 1   Required Repairs   Repair and waterproofing of fountain in the Fountain Court, as more particularly described in that certain Property Condition Report: One Commerce Square, prepared by LandAmerica Assessment Corporation, and dated as of December 12, 2005. --------------------------------------------------------------------------------   Schedule 2   Exceptions to Representations and Warranties   As to Section 4.6: The Center City District tax assessment affects the Property. In addition, there is potential legislation relating to the conversion of Philadelphia tax assessments from partial market value to full market value upon corresponding millage rate reductions.   As to Section 4.7: The prior owner of the Property, Maguire Thomas Partners-Philadelphia Plaza Associates, a Pennsylvania partnership controlled by James A. Thomas (the same party which Controls the Borrower) filed a Chapter 11 petition in 1997. The bankruptcy proceedings were completed when the Borrower refinanced the Property with Goldman Sachs Co. in March 1998.   As to Section 4.12: The contract with Otis Elevator is not terminable on one month’s notice or without cause.   As to Section 4.16(ii): Two tenants at the Property, Hunt Manufacturing and Fiserv Securities, Inc., are not occupying their respective demised premises.   As to Section 4.21(iv): In April 2002, Budget Rent A Car, tenant of nearby property 2101 Market Street, caused a release of approximately 3,500 gallons of gasoline. Budget Rent A Car is no longer a tenant on the property and site remediation pursuant to applicable law is proceeding. Migration to the Property via groundwater appears unlikely, but is not impossible.   As to Section 4.21(vi): No underground storage tanks and Property not used as a landfill: Borrower notes that a diesel fuel storage tank for the emergency generator is located below the bottom concrete slab of the parking garage, in a pit. This tank is registered with the Pennsylvania Department of Environmental Protection.   As to Section 4.22: Borrower uses the trade name One Commerce Square. --------------------------------------------------------------------------------   Schedule 3   Rent Roll --------------------------------------------------------------------------------   Schedule 4   Organization of Borrower --------------------------------------------------------------------------------   Schedule 5   Definition of Special Purpose Bankruptcy Remote Entity   A “Special Purpose Bankruptcy Remote Entity” means (x) a limited liability company that is a Single Member Bankruptcy Remote LLC or (y) a corporation, limited partnership or limited liability company which at all times since its formation and at all times thereafter   (i) was and will be organized solely for the purpose of (A) owning and operating the Property or (B) acting as a general partner of the limited partnership that owns the Property or member of the limited liability company that owns the Property or (C) acting as a general partner or managing member of the Special Purpose Bankruptcy Remote Entity that is the general partner or managing member of the limited partnership or limited liability company that owns the Property;   (ii) has not engaged and will not engage in any business unrelated to (A) the ownership of the Property, (B) acting as general partner of the limited partnership that owns the Property or (C) acting as a member of the limited liability company that owns the Property, or (D) acting as a general partner or managing member of the Special Purpose Bankruptcy Remote Entity that is the general partner or managing member of the limited partnership or limited liability company that owns the Property, as applicable;   (iii) has not had and will not have any assets other than those related to the Property or its partnership or limited liability company interest in the limited partnership or limited liability company that owns the Property, or its membership interest in the limited liability company that is the general partner of the limited partnership that owns the Property, as applicable;   (iv) to the fullest extent permitted by law, has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, asset sale (except as expressly permitted by this Agreement), transfer of partnership or limited liability company interests or the like, or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or limited liability company agreement (as applicable);   (v) if such entity is a limited partnership, has and will have, as its only general partners, Special Purpose Bankruptcy Remote Entities that are corporations or limited liability companies;   (vi) if such entity is a corporation, has and will have at least one Independent Director, and has not caused or allowed and will not cause or allow the board of directors of such entity to take any action requiring the unanimous affirmative vote of 100% of the members of its board of directors unless all of the directors and all Independent Directors shall have participated in such vote;   (vii) if such entity is a limited liability company, has and will have at least one member that has been and will be a Special Purpose Bankruptcy Remote Entity that -------------------------------------------------------------------------------- has been and will be a corporation or limited liability company and such corporation or limited liability company is the managing member of such limited liability company;   (viii) if such entity is a limited liability company, has and will have articles of organization, a certificate of formation and/or an operating agreement, as applicable, providing that (A) such entity will dissolve only upon the bankruptcy of the managing member, (B) the vote of a majority-in-interest of the remaining members is sufficient to continue the life of the limited liability company in the event of such bankruptcy of the managing member and (C) if the vote of a majority-in-interest of the remaining members to continue the life of the limited liability company following the bankruptcy of the managing member is not obtained, the limited liability company may not liquidate the Property without the consent of the applicable Rating Agencies for as long as the Loan is outstanding;   (ix) has not, and without the unanimous consent of all of its partners, directors or members (including all Independent Directors), as applicable, will not, with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest (A) file, or consent to the filing of, a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such entity or for all or any portion of such entity’s properties, (C) make any assignment for the benefit of such entity’s creditors or (D) take any action that might cause such entity to become insolvent;   (x) has remained and will remain solvent and has maintained and will maintain adequate capital in light of its contemplated business operations, provided, however, the foregoing shall not require the making of any additional capital contributions;   (xi) has not failed and will not fail to correct any known misunderstanding regarding the separate identity of such entity;   (xii) has maintained and will maintain its accounts, books and records separate from any other Person and will file its own tax returns;   (xiii) has maintained and will maintain its books, records, resolutions and agreements as official records;   (xiv) has not commingled and will not commingle its funds or assets with those of any other Person;   (xv) has held and will hold its assets in its own name;   (xvi) has conducted and will conduct its business in its name,   (xvii) has maintained and will maintain its financial statements, accounting records and other entity documents separate from any other Person;   Sch. 5-2 -------------------------------------------------------------------------------- (xviii) has paid and will pay its own liabilities, including the salaries of its own employees, out of its own funds and assets, provided, however, the foregoing shall not require the making of any additional capital contributions;   (xix) has observed and will observe all partnership, corporate or limited liability company formalities, as applicable;   (xx) has maintained and will maintain an arm’s-length relationship with its Affiliates;   (xxi) (a) if such entity owns the Property, has and will have no indebtedness other than the Loan and unsecured trade payables in the ordinary course of business relating to the ownership and operation of Property which (1) do not exceed, at any time, a maximum amount of 2% of the original amount of the Principal and (2) are paid within sixty (60) days of the date incurred, or (b) if such entity acts as the general partner of a limited partnership which owns the Property, has and will have no indebtedness other than unsecured trade payables in the ordinary course of business relating to acting as general partner of the limited partnership which owns the Property which (1) do not exceed, at any time, $10,000 and (2) are paid within thirty (30) days of the date incurred, or (c) if such entity acts as a managing member of a limited liability company which owns the Property, has and will have no indebtedness other than unsecured trade payables in the ordinary course of business relating to acting as a member of the limited liability company which owns the Property which (1) do not exceed, at any time, $10,000 and (2) are paid within thirty (30) days of the date incurred;   (xxii) has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except for the Loan;   (xxiii) has not and will not acquire obligations or securities of its partners, members or shareholders;   (xxiv) has allocated and will allocate fairly and reasonably shared expenses, including shared office space, and uses separate stationery, invoices and checks;   (xxv) except in connection with the Loan, has not pledged and will not pledge its assets for the benefit of any other Person;   (xxvi) has held itself out and identified itself and will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other Person;   (xxvii) has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;   (xxviii) has not made and will not make loans to any Person;   Sch. 5-3 -------------------------------------------------------------------------------- (xxix) has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it;   (xxx) has not entered into or been a party to, and will not enter into or be a party to, any transaction with its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are intrinsically fair and are no less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party;   (xxxi) has and will have no obligation to indemnify its partners, officers, directors or members, as the case may be, or has such an obligation that is fully subordinated to the Debt and will not constitute a claim against it if cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation; and   (xxxii) to the fullest extent permitted by law, will consider the interests of its creditors in connection with all corporate, partnership or limited liability actions, as applicable.   “Independent Director” means (x) in the case of a Single Member Bankruptcy Remote LLC: a natural person selected by Borrower and reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment as an Independent Director of the Single Member Bankruptcy Remote LLC, does not thereafter become while serving as an Independent Director (except pursuant to an express provision in the Single Member Bankruptcy Remote LLC’s limited liability company agreement providing for the Independent Director to become a Special Member (defined below) upon the sole member of such Single Member Bankruptcy Remote LLC ceasing to be a member in such Single Member Bankruptcy Remote LLC) and shall not have been at any time during the preceding five (5) years (i) a shareholder/partner/member of, or an officer or employee of, Borrower or any of its shareholders, subsidiaries or Affiliates, (ii) a director (other than as an Independent Director of the Borrower or in a similar capacity with an Affiliate of the Borrower) of any shareholder, subsidiary or Affiliate of Borrower, (iii) a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or Affiliates (other than an Independent Director provided by a company in the business of providing independent directors and other related services), (iv) a Person who Controls any such shareholder, supplier or customer, or (v) a member of the immediate family of any such shareholder/ director/partner/member, officer, employee, supplier or customer or of any director of Borrower (other than as an Independent Director); and (y) in the case of a corporation, an individual selected by Borrower and reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment as a director, does not thereafter become while serving as an Independent Director and shall not have been at any time during the preceding five (5) years (i) a shareholder/partner/member of, or an officer, employee, consultant, agent or advisor of, Borrower or any of its shareholders, subsidiaries, members or Affiliates, (ii) a director of any shareholder, subsidiary, member, or Affiliate of Borrower other than Borrower’s general partner or managing member, (iii) a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or Affiliates that derives more than 10% of its purchases or income from its activities with Borrower or any Affiliate of Borrower, (iv) a Person who Controls any such shareholder, supplier or customer, or (v) a member of the immediate family (including a grandchild or sibling) of any such   Sch. 5-4 -------------------------------------------------------------------------------- shareholder/director/partner/member, officer, employee, supplier or customer or of any other director of Borrower’s general partner or managing member.   “Single Member Bankruptcy Remote LLC” means a limited liability company organized under the laws of the State of Delaware which at all times since its formation and at all times thereafter (i) complies with the following clauses of the definition of Special Purpose Bankruptcy Remote Entity above: (i)(A), (ii)(A), (iii), (iv), (ix), (x), (xi) and (xiii) through (xxxii); (ii) has maintained and will maintain its accounts, books and records separate from any other person; (iii) has and will have a limited liability company agreement which provides that the business and affairs of Borrower shall be managed by or under the direction of a board of one or more directors designated by Sole Member, and at all times there shall be at least one (1) duly appointed Independent Director on the board of directors, and the board of directors will not take any action requiring the unanimous affirmative vote of 100% of the members of its board of directors unless, at the time of such action there are at least one (1) member of the board of directors who are Independent Directors, and all of the directors and all Independent Directors shall have participated in such vote; (iv) has and will have a limited liability company agreement which provides that, as long as any portion of the Debt remains outstanding, (A) upon the occurrence of any event that causes Sole Member to cease to be a member of Borrower (other than upon continuation of the Borrower without dissolution (x) upon an assignment by Sole Member of all of its limited liability company interest in Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of Borrower, or (y) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the organizational documents of Borrower), the person acting as an Independent Director of Borrower shall, without any action of any Person and simultaneously with Sole Member ceasing to be a member of Borrower, automatically be admitted as a member of Borrower (the “Special Member”) and shall preserve and continue the existence of Borrower without dissolution, (B) no Special Member may resign or transfer its rights as Special Member unless (x) a successor Special Member has been admitted to Borrower as a Special Member, and (y) such successor Special Member has also accepted its appointment as an Independent Director, provided, however, the Special Member shall automatically cease to be a member of the Borrower upon the admission to the Borrower of a substitute member and (C) except as expressly permitted pursuant to the terms of this Agreement or the limited liability company agreement of the Borrower, Sole Member may not resign and no additional member shall be admitted to Borrower; (v) has and will have a limited liability company agreement which provides that, as long as any portion of the Debt remains outstanding, (A) Borrower shall be dissolved, and its affairs shall be would up only upon the first to occur of the following: (x) the termination of the legal existence of the last remaining member of Borrower or the occurrence of any other event which terminates the continued membership of the last remaining member of Borrower in Borrower unless the business of Borrower is continued without dissolution in a manner permitted by its limited liability company agreement or the Delaware Limited Liability Company Act (the “Act”) or (y) the entry of a decree of judicial dissolution under Section 18-802 of the Act; (B) upon the occurrence of any event that causes the last remaining member of Borrower to cease to be a member of Borrower or that causes Sole Member to cease to be a member of Borrower (other than (x) upon an assignment by Sole Member of all of its limited liability company interest in Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of Borrower, or (y) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the organizational   Sch. 5-5 -------------------------------------------------------------------------------- documents of Borrower), to the fullest extent permitted by law, the personal representative of such member shall be authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in Borrower, agree in writing to continue the existence of Borrower and to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower, effective as of the occurrence of the event that terminated the continued membership of such member in Borrower; (C) the bankruptcy of Sole Member or a Special Member shall not cause such member or Special Member, respectively, to cease to be a member of Borrower and upon the occurrence of such an event, the business of Borrower shall continue without dissolution; (D) in the event of dissolution of Borrower, Borrower shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of Borrower in an orderly manner), and the assets of Borrower shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act; and (E) to the fullest extent permitted by law, each of Sole Member and the Special Members shall irrevocably waive any right or power that they might have to cause Borrower or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of Borrower, to compel any sale of all or any portion of the assets of Borrower pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of Borrower.   Sch. 5-6

Exhibit 10.8 FIRST FEDERAL BANK CHANGE IN CONTROL AGREEMENT This AGREEMENT is entered into effective and made as of September 27, 2000, by and between First Federal Bank (the “Bank”), a federally chartered savings institution, with its principal administrative offices at 109 East Depot Street, Colchester, Illinois 62326, and First Federal Bancshares, Inc. (the “Holding Company”), a corporation organized under the laws of the State of Delaware and the holding company of the Bank and Mark Tyrpin (“Executive”). WHEREAS, the Bank recognizes the substantial contribution Executive has made to the Bank and wishes to continue to protect Executive’s position with the Bank for the period provided in this Agreement in the event of a Change in Control (as defined in this Agreement); and WHEREAS, Executive has agreed to continue serve in the employ of the Bank. NOW, THEREFORE, in consideration of the contribution and responsibilities of Executive, and upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:   1. TERM OF AGREEMENT. The period of this Agreement shall be deemed to have commenced as of the date first above written and shall continue for a period of twenty-four (24) full calendar months from the date of this Agreement. Commencing on September 27, 2000, and at each anniversary date thereafter, the Board of Directors of the Bank (the “Board”) may extend the term of this Agreement for an additional year so that the remaining term is a full twenty-four (24) calendar months, unless Executive elects not to extend the term of the Agreement by providing written notice to the Board in accordance with Section 5 of the Agreement. The Board will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the term of the Agreement, and the results of such review shall be included in the minutes of the Board’s meeting.   2. CHANGE IN CONTROL. (a) Upon the occurrence of a Change in Control (as defined in paragraph (b) of this Section 2), Executive shall be entitled to the payments and benefits provided for in Section 3 of this Agreement upon Executive’s termination of employment on or after the date the Change in Control occurs due to: (i) Executive’s dismissal at any time during the term of this Agreement; or (ii) Executive’s resignation at any time during the term of this Agreement following any demotion, or loss of title, office or significant authority, or reduction in Executive’s annual compensation or benefits, or relocation of Executive’s principal place of employment by more than 25 miles from its location immediately prior to the Change in Control; provided, however, Executive may consent in writing to any such demotion, loss, reduction or relocation. The effect of any written consent of Executive under this Section 2(a) shall be strictly limited to the terms specified in such written consent. (b) For purposes of this Agreement, a “Change in Control” of the Bank or Holding Company shall mean an event of a nature that: (i) would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the Holding Company within the meaning of the Home Owners’ Loan Act of 1933 and the Rules and Regulations promulgated by the Office of Thrift Supervision (“OTS”) (or -------------------------------------------------------------------------------- its predecessor agency), as in effect on the date hereof (provided, that in applying the definition of change in control or presumptive change in control or acting in concert or presumptive acting in concert as set forth under the Rules and Regulations of the OTS, ownership by a person or group, including a presumptive group, of at least 15% of the voting stock of the Bank or the Holding Company shall be required, and provided further that ownership of stock by a tax qualified employee benefit plan of the Bank or the Holding Company shall not be subject to presumptions of control or acting in concert); or (iii) without limitation such a Change in Control shall be deemed to have occurred at such time as (A) any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or the Holding Company representing 25% or more of the Bank’s or the Holding Company’s outstanding securities except for any securities of the Bank purchased by the Holding Company in connection with the conversion of the Bank to the stock form and any securities purchased by any employee benefit plan of the Bank or the Holding Company, or (B) individuals who constitute the board of directors on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (or members who were nominated by the Incumbent Board), or whose nomination for election by the Holding Company’s stockholders was approved by the same Nominating Committee serving under an Incumbent Board (or members who were nominated by the Incumbent Board), shall be, for purposes of this clause (B), considered as though he were a member of the Incumbent Board, or (C) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Holding Company or similar transaction occurs in which the Bank or Holding Company is not the resulting entity. (c) Notwithstanding any other provision of this Agreement, Executive shall not have the right to receive termination benefits under this Agreement upon Executive’s Termination for Cause. The term “Termination for Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses) or final cease and desist order, or any material breach of this Agreement. In determining incompetence, the acts or omissions shall be measured against standards of professional competence generally prevailing for officers having comparable positions in the savings institutions industry. Notwithstanding the foregoing, Executive shall not be deemed to have been Terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths of the members of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board and which such meeting shall be held not more than 30 days from the date of notice during which period Executive may be suspended with pay), finding that in the good faith opinion of the Board, Executive was guilty of conduct justifying Termination for Cause and specifying the particulars thereof in detail. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause except for compensation or benefits already vested. Any stock options and related limited rights granted to Executive under any stock option plan, or any unvested awards granted to Executive under any restricted stock benefit plan of the Holding Company or its subsidiaries, shall become null and void effective upon Executive’s receipt of a Notice of Termination For Cause pursuant to Section 5 of this Agreement except all benefits shall be deemed to have remained in effect if Executive is reinstated, and shall not be exercisable by or delivered to Executive at any time subsequent to such Termination For Cause.   2 -------------------------------------------------------------------------------- 3. TERMINATION BENEFITS. (a) Upon the occurrence of a Change in Control, followed at any time by the termination of Executive’s employment in accordance with the provisions of Section 2 of this Agreement, the Bank shall be obligated to pay Executive, or in the event of Executive’s subsequent death, Executive’s beneficiary or beneficiaries, or Executive’s estate, as the case may be, a sum equal to two (2) times Executive’s average annual compensation for the five most recently completed taxable years of Executive. For purposes of this Subsection 3(a), annual compensation shall include base salary and any other taxable income, including but not limited to amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses, severance payments, retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, as well as profit sharing, employee stock ownership plan and other retirement contributions or benefits (other than defined benefit pension benefits), including any tax-qualified or non-tax-qualified plan or agreement (whether or not taxable) made or accrued on behalf of Executive for such year. In addition, for purposes of determining his vested accrued benefit, Executive shall be credited either under the defined benefit pension plan maintained by the Bank or, if not permitted under such plan, under a separate arrangement, with the additional “years of service” that he would have earned for vesting and benefit accrual purposes for the remaining term of the Agreement had his employment not terminated. At the election of Executive, which election is to be made prior to or within thirty (30) days of the Date of Termination on or following a Change in Control, such payment may be made in a lump sum (without discount for early payment) on or immediately following the Date of Termination (which may be the date a Change in Control occurs) or paid in equal monthly installments during the twenty-four (24) months following Executive’s termination. In the event that no election is made, payment to Executive will be made on a monthly basis during the remaining twenty-four (24) month term of the Agreement. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment. However, in the event the Bank is not in compliance with its minimum capital requirements or if such payments pursuant to this Section 3 would cause the Bank’s capital to be reduced below its minimum regulatory capital requirements, such payments shall be deferred until such time as the Bank or successor thereto is in capital compliance. (b) Upon the occurrence of a Change in Control and Executive’s termination of employment in accordance with the provisions of Section 2 of this Agreement, the Bank will cause to be continued any life, medical, health and disability or dental insurance plan or arrangement in which Executive participates (each being a “Welfare Benefit Plan”) substantially identical to the benefit coverage maintained by the Bank for Executive and any of his dependents covered under such plans prior to the Change in Control. Such coverage shall cease upon the expiration of thirty-six (36) full calendar months following the Date of Termination. In the event Executive’s or Executive’s covered dependent’s participation in any such plan or program is barred, the Holding Company shall arrange to provide Executive and his dependents with benefits coverage substantially similar to those which Executive and his dependents would otherwise have been entitled to receive under such plans and programs by operation of this provision or provide their economic equivalent to Executive and Executive’s dependents.   4. CHANGE IN CONTROL RELATED PROVISIONS. Notwithstanding the preceding paragraphs of Section 3, in no event shall the aggregate payments or benefits to be made or afforded to Executive under this Agreement (the “Termination   3 -------------------------------------------------------------------------------- Benefits”) constitute an “excess parachute payment” under Section 280G of the Code or any successor thereto, and in order to avoid such a result the Termination Benefits will be reduced, if necessary, to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The allocation of any reduction required with respect to the Termination Benefits shall be determined by Executive.   5. NOTICE OF TERMINATION. (a) Any purported termination by the Bank, or by Executive, shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in detail the facts and circumstances claimed to provide a basis for termination of Executive”s employment under the provision so indicated. (b) “Date of Termination” shall mean the date specified in the Notice of Termination (which, in the case of Termination for Cause, shall not be less than thirty (30) days from the date such Notice of Termination is given). (c) If, within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a reasonable dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected) and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank will continue to pay Executive’s base salary and continue to cover Executive under each Welfare Benefit Plan in which Executive participated when the notice giving rise to the dispute was given until the dispute is finally resolved in accordance with this Agreement. Amounts paid under this Section 5(c) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.   6. SOURCE OF PAYMENTS. The parties to this Agreement intend that all payments provided for in this Agreement shall be paid in cash, check or other mutually agreed upon method from the general funds of the Bank. Further, the Holding Company guarantees such payment and provision of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Holding Company.   4 -------------------------------------------------------------------------------- 7. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS. This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to Executive without reference to this Agreement. Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Bank or shall impose on the Bank or its subsidiaries any obligation to employ or retain Executive in its employ for any period.   8. NO ATTACHMENT. (a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank and their respective successors and assigns.   9. MODIFICATION AND WAIVER. (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.   10. REQUIRED REGULATORY PROVISIONS. (a) The Board may terminate Executive’s employment at any time, but any termination by the board of directors, other than Termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 2 of this Agreement. (b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. §1818(e)(3) or (g)(1)), the Bank’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part   5 -------------------------------------------------------------------------------- of the compensation withheld while their contract obligations were suspended and (ii) reinstate (in whole or in part) any of the benefit obligations which were suspended. (c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. §1818(c)(4) or (g)(1)), all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected. (d) If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties. (e) All obligations under this contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the institution: (i) by the Director of the Office of Thrift Supervision (or his or her designee) at the time the Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act; or (ii) by the Director of the Office of Thrift Supervision (or his or her designee) at the time the Director (or his or her designee) approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. (f) Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon compliance with 12 U.S.C. §1828(k) and any rules and regulations promulgated thereunder.   11. REINSTATEMENT OF BENEFITS UNDER BANK AGREEMENT. In the event Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice described in Section 10(b) of this Agreement (the “Notice”) during the term of this Agreement and a Change in Control, as defined herein, occurs, the Bank will assume its obligation to pay and Executive will be entitled to receive all of the termination benefits provided for under Section 3 of this Agreement upon the Bank’s receipt of a dismissal of charges in the Notice of Termination.   12. SEVERABILITY. If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.   6 -------------------------------------------------------------------------------- 13. HEADINGS FOR REFERENCE ONLY. The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. In addition, references herein to the masculine shall apply to both the masculine and the feminine.   14. GOVERNING LAW. The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Illinois.   15. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.   16. PAYMENT OF LEGAL FEES. All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank if Executive is successful pursuant to a legal judgment, arbitration or settlement.   17. INDEMNIFICATION. The Bank shall provide Executive (including his or her legal representatives, successors and assigns) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (including his or her legal representatives, successors and assigns) for reasonable costs and expenses incurred by Executive in defending or settling any judicial or administrative proceeding, or threatened proceeding, whether civil, criminal or otherwise, including any appeal or other proceeding for review. Indemnification by the Bank shall be made only upon the final judgment on the merits in the favor of Executive, in case of settlement, in case of final judgment against Executive or in the case of final judgment in favor of Executive other than on the merits, if a majority of the disinterested directors of the Bank determine Executive was acting in good faith within the scope of Executive’s employment or authority in accordance with 12 C.F.R. Section 545.121(c)(iii). Any such indemnification of Executive must conform with the notice provisions of 12 C.F.R. Section 545.121(c)(iii) to indemnify Executive to the fullest for such expenses and liabilities to include, but not to be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in his or her capacity as an officer or director of the Bank, however, shall not extend to matters as to which Executive is finally adjudged to be liable for willful misconduct in the performance of his or her duties.   7 -------------------------------------------------------------------------------- 18. SUCCESSOR TO THE BANK. The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place.   8 -------------------------------------------------------------------------------- SIGNATURES IN WITNESS WHEREOF, First Federal Bank and First Federal Bancshares, Inc. have caused this Agreement, to be executed by their duly authorized officers, and Executive has signed this Agreement on November 13, 2000.   ATTEST:     FIRST FEDERAL BANK /s/ Ronald A. Feld     /s/ James J. Stebor Ronald A. Feld     For the Entire Board of Directors Secretary     SEAL     ATTEST:     FIRST FEDERAL BANCSHARES, INC.     (Guarantor) /s/ Ronald A. Feld   By:   /s/ James J. Stebor Ronald A. Feld     For the Entire Board of Directors Secretary     SEAL     WITNESS:     EXECUTIVE /s/ Cathy D. Pendell     /s/ Mark Tyrpin     Mark Tyrpin   9

Exhibit 10(q) AGREEMENT OF LEASE THIS AGREEMENT OF LEASE is made as of ____________, 2005, by and between ___________________, a _______________ with principal place of business at _____________________________ (“Lessor”) and DNB FIRST, NATIONAL ASSOCIATION (formerly known as Downingtown National Bank), with principal place of business at 4 Brandywine Avenue, Downingtown, PA 19335 ("Lessee"). W I T N E S S E T H : 1. Demise and Lease; Permitted Use.  (a) Lessor, for and in consideration of the payment of the rentals hereinafter specified, and the performance of the terms, covenants and agreements herein contained, hereby demises and leases unto Lessee and Lessee hereby lets from the Lessor certain premises comprising approximately 0.9 acres of ground, with improvements, known as Tax Map Parcel Nos. 1108004900, 1108005000 and 1108005001, situate on Brandywine Avenue, in the Borough of Downingtown, Chester County, Commonwealth of Pennsylvania (the “Leased Premises”). Lessee’s use of the Leased Premises is subject to the burdens of and entitles the Lessee to the benefits of, the Parking Easement Agreement among Lessee, Lessor and Papermill Brandywine Company, LLC, dated contemporaneously herewith, the form of which is attached hereto as Exhibit A, and intended to be filed of public record (the “Parking Easement Agreement”). (b) Lessee shall be authorized to use the Leased Premises for: (i) general administrative office use; a financial services center; loan production; customer meetings; a bank, and all uses necessary or incidental to the foregoing (including, without limitation, the sale of mutual funds, securities and other financial and insurance products), maintenance of automated teller machine(s) ("ATMs") to the extend permitted under other provisions of this Lease, safe deposit facilities and office and office related uses, (ii) commercial and professional office use to the extent permitted by applicable law from time to time, and (iii) subject to the prior written consent of the Lessor, which shall not be unreasonably withheld, any other lawful use permitted by applicable law from time to time at the Leased Premises (collectively, the “Permitted Uses”). Lessee shall have the right, in order to maintain proper security and maintenance for the operation of its business, to have pickups or deliveries made from or to the Leased Premises by carriers of cash, securities, instruments, records or other materials commonly transported by such carriers and to permit the use of such portions of the Leased Premises as shall be reasonably required for such purposes. 2. Term; Lessee’s Early Termination Option; Renewal Options. (a) Subject to Lessee’s “Early Termination Option” as provided in subsection (c) of this Section, this Lease shall be for a period (the “Initial Term”) beginning on the date of this Lease ending on December 1, 2010.       -1- --------------------------------------------------------------------------------     (b) Lessee shall have separate options to renew this Lease for three (3) additional, successive terms of five (5) years each (each, a “Renewal Term”), with each Renewal Term commencing consecutively upon the expiration of the Term as it may have been previously extended (the Initial Term and any Renewal Terms are sometimes herein referred to collectively as the “Term.”) All of the terms and conditions applicable to the Term of this Lease shall also apply during each Renewal Term, except that during each Renewal Term, the Base Rent shall be a fair market rental taking into account all of the terms and conditions of this Lease, but in no event shall the Base Rent decrease below the amount payable during the immediately prior year. Each renewal option shall be exercisable by written notice to Lessor at least 180 days prior to the end of the then current Term, so long as Lessee is not then in Default hereunder on the notice date or at the commencement of the renewal term. If, within 15 days after Lessee’s written notice of exercise of the option, Lessee and Lessor shall not have agreed in writing on the amount and rate of Base Rent for the ensuing Renewal Term, the parties shall, within 30 days after Lessee’s written notice, submit the dispute to binding determination by two licensed Pennsylvania real estate appraisers each having a minimum of ten (10) years experience in appraising commercial real estate in Chester County, Pennsylvania, one to be appointed by each of the parties. If the two appraisers cannot agree on the fair market rent, they shall promptly select a third Pennsylvania real estate appraiser having a minimum of ten (10) years experience in appraising commercial real estate in Chester County, Pennsylvania. The appraisers shall submit to Lessor and Lessee, within 120 days after Lessee’s written notice (not less than 60 days prior to the commencement of the Renewal Term), a written determination as to the fair market rent for a Base Rent taking into account all of the terms and conditions of this Lease, which shall be final and binding on Lessor and Lessee. The cost of such determination shall be shared equally between the parties. (c) Notwithstanding any other provision of this Lease, Lessee shall have the option (the “Early Termination Option”) to terminate this Lease at any time during the Initial Term or any Renewal Term by written notice to Lessor, whereupon this Lease shall terminate on the date specified in Lessee’s notice, which shall be not less than one hundred twenty (120) days after the date of the notice, and upon such termination Lessee have no further obligations to pay rent or any other sum or perform any obligations beyond the termination date of this Lease (other than such as may have accrued prior to such termination or which survive the termination hereof), and shall vacate the Leased Premises. 3. Rent. During the initial Term beginning on the date hereof and ending on December 1, 2010, Lessee shall pay to Lessor as base rent (“Base Rent”) for the Leased Premises the sum of $175,842.00 per year (apportioned for partial Lease years), at the place designated by Lessor in writing, in equal, consecutive monthly installments of $14,653.50, each such installment to be due and payable in advance on the first day of each calendar month during the Term. The Base Rent for any Renewal Term shall be the amount set forth in Section 2(b) hereinabove, and shall be payable in accordance with the terms and conditions set forth herein. In the event the Term shall begin or end other than on the first day and last day, respectively, of a calendar month, the rental for such partial month shall be adjusted utilizing the number of days of the Term actually contained in the calendar month during which the Term begins and ends, respectively. All Base Rent shall be paid in advance on the first day of each calendar month without set off or any demand therefor. 4. Utilities; Janitorial. Lessee shall pay all telephone, communication, electric, gas, heating, air conditioning and other utility charges in connection with the use of the Leased Premises during the Term. Lessee shall provide at its own expense, janitorial and cleaning services to the Leased Premises, including, without limitation, the removal of all trash and rubbish therefrom.       -2- --------------------------------------------------------------------------------     5. Expenses. Lessee shall pay all real estate taxes and assessments with respect to the Leased Premises, as well as all expenses for the maintenance and such repair of the Leased Premises as Lessee is responsible for conducting under this Lease. Without limiting the foregoing, Lessee shall pay or reimburse Lessor for Lessor’s “Percentage Share” of all “Parking Area Costs” for any “Parking Area Work” (as those terms are defined in Section 5 of the Parking Easement Agreement) that is completed during and pertains to periods during the term of this Lease. 6. Improvements; Fixtures and Equipment.  (a) Lessee accepts the Leased Premises in an AS IS condition. Lessee shall, at Lessee's expense, perform or cause to be performed such non-structural tenant improvements as it may determine from time to time, without Lessor’s prior approval. Lessee shall obtain Lessor’s prior written approval for any structural or exterior improvements that Lessee proposes to make, which approval will not be unreasonably withheld. All improvements shall be performed in a good and workmanlike manner and shall be conditioned on receipt of all required permits from the governmental authorities having jurisdiction and shall be in accordance with the terms of such permits and in strict compliance with all applicable laws, ordinances, regulations, building codes and the like, as well as any approval of Lessor as required hereunder. In the event that Lessee proposes improvements that (i) Lessee wants the option to remove, or (ii) Lessor reasonably determines by written notice at or prior to the time of Lessor’s consent thereto are reasonably likely to reduce the rental value of the Leased Premises, Lessor and Lessee shall mutually agree on identifying such improvements in writing as “Identified Improvements.” Upon termination of the tenancy created hereby, Lessee shall at Lessor’s option (to be exercised by written notice to Lessee not less than ninety (90) days prior to the expiration or earlier termination of this Lease), or otherwise at Lessee’s option, remove such Identified Improvements at Lessee’s sole cost and expense and repair all damages created thereby. Otherwise, any improvements that are not Identified Improvements, and any Identified Improvements as to which neither Lessor nor Lessee has exercised the option for removal, shall be left in the Leased Premises at the expiration or earlier termination of the Term and shall become the property of Lessor. (b) All trade fixtures, decorations and equipment installed in the Leased Premises shall be installed by Lessee at Lessee’s sole cost and expense. All such trade fixtures, decorations and equipment shall remain the sole property of Lessee. At the termination of the tenancy created hereby, Lessee shall have the right to remove such items from the Leased Premises, provided Lessee repairs any damage to the Leased Premises resulting from such removal. Any trade fixtures, decorations and equipment that are not removed on or prior to the expiration or earlier termination of this Lease shall be deemed abandoned by Lessee, and Lessor shall either keep such items, or remove them at Lessee's sole cost and expense.   7. Repairs and Replacements. (a) Lessee shall, during the Term, at its cost and expense, maintain, repair and replace (if necessary) the non-structural portions of the improvements on the Leased Premises, the heating, ventilation and air-conditioning system and the sanitary, electrical, and other systems for all portions of the Leased Premises in at least as good condition as at the time of commencement of this Lease. The foregoing shall include without limitation painting, interior and exterior repairs, building maintenance and other service contracts. However, (i) Lessee shall not be obligated to make any structural repairs or to construct or replace any improvements, and (ii) Lessee agrees to make routine roof repairs, but shall not be obligated to replace the roof or parts thereof.       -3- --------------------------------------------------------------------------------     (b) Lessee shall make all repairs to the Leased Premises that are necessitated by Lessee’s negligence, willful misconduct or failure to comply with the terms of this Lease, or in the installation or removal of any of Lessee’s fixtures, signs or improvements. Lessee shall replace all broken glass in the Leased Premises. 8. Insurance. Lessee shall, at its sole cost and expense, maintain, during the Term, comprehensive public liability insurance, and contractual liability insurance for personal injury, death and damage or destruction of property occurring upon, in or about the Leased Premises, consistent with the certificate of coverage attached hereto as Exhibit B and made part hereof (the “Insurance Requirements”) and shall maintain Lessor and its mortgagee as an additional insured on all such policies; provided, however, that Lessee shall have no obligation to obtain or maintain, and it shall be Lessor’s sole responsibility to obtain and maintain, any flood insurance for the improvements on the Leased Premises. Lessee shall also insure the improvements on the Leased Premises at Lessee’s expense during the Term at their full insurable value on terms consistent with the Insurance Requirements. Lessee, at its option, may obtain insurance on the value of its personal property, contents, furniture, fixtures, equipment or inventory maintained or located on the Leased Premises and Lessor shall have no responsibility or liability with respect to the foregoing. Lessee shall hereafter obtain and deliver to Lessor a certificate evidencing the insurance required under this Lease annually upon or immediately after the policy renewal date. Each policy of insurance shall contain an agreement by the insurer that it will not cancel or amend or fail to renew such policy or reduce the coverage thereunder except after thirty (30) days prior written notice to Lessor. 9. Lessee's Covenants. In addition to Lessee’s other covenants and obligations hereunder, Lessee agrees during the Term and for so long as Lessee's occupancy continues: (a) To pay when due the Base Rent and additional expenses as set forth herein, to maintain the Leased Premises in good condition and repair, reasonable wear and tear excepted and to promptly perform all items of maintenance and repair which Lessee is obligated to perform pursuant to this Lease; (b) To permit Lessor to have access to the Leased Premises, with prior notice, during Lessee's normal operating hours provided any such entry does not interfere with Lessee’s business or operations, and in the event of an emergency at other times, for the purpose of inspection of the same and to assure Lessor with regard to the performance by Lessee of the terms and conditions hereof, and, during the 6 months prior to expiration of the Term, to show the Leased Premises to prospective purchasers and tenants; provided, however, in recognition of Lessee's security needs and obligations as a bank, Lessor shall not exercise any right it has to enter into any secure area within the Leased Premises or to enter the Leased Premises outside Lessee’s normal operating hours without Lessee’s prior consent and under reasonable security conditions, accompanied by an officer or authorized representative of Lessee. Notwithstanding the foregoing, Lessor may exercise its right to enter the Leased Premises without Lessee’s prior consent in emergency situations threatening life or property in which case Lessor will make reasonable attempts to contact Lessee and will contact local police prior to any such entry;       -4- --------------------------------------------------------------------------------     (c) At the expiration or earlier termination of the Term, promptly to yield up the Leased Premises and all improvements, alterations and additions thereto (unless required to be removed) in broom clean condition, and all fixtures and equipment servicing the Leased Premises; and to remove Lessee's signs, goods and effects and any fixtures and equipment used in the conduct of Lessee's business not serving the Leased Premises; and (d) Comply with all governmental requirements and regulations respecting Lessee's use and occupancy of the Leased Premises in a timely manner and be solely responsible for all tax levies, assessments, licenses or fines arising from the conduct of Lessee's business. 10. Lessor's Covenants and Warranties. Lessor represents, warrants and covenants as follows: the accuracy of which Lessor acknowledges and agrees are conditions to this Lease and material inducements to Lessee to enter into this Lease: (a) Lessor is the sole owner of the Leased Premises, and has not subjected the Leased Premises to any liens, leases or other agreements (other than the Mortgage Loan) that will have priority over or conflict with this Lease after the date hereof; (b) The only mortgage(s) burdening the Leased Premises as of the date of this Lease is a mortgage given by Lessor, as borrower, in favor of Lessee, as lender, to secure purchase money financing provided by Lessee for Lessor’s acquisition of the Leased Premises (the “Mortgage Loan”); (c) Lessor has full right and power to execute and perform this Lease and to grant the estate demised herein; (d) Lessor is not aware of any legal proceeding, claim, taking, proposed taking, administrative or judicial order or agreement with any third party that will or is likely to conflict with or result in a claim against the validity of this Lease, Lessee’s taking occupancy of the Leased Premises on the Commencement Date, or Lessee’s using the Leased Premises for any Permitted Uses; and (e) Upon payment of the rent and performance of all of the other terms and conditions to be performed by Lessee herein, Lessee shall be entitled to peaceably and quietly hold and enjoy the Leased Premises for the Term (including without limitation any applicable Renewal Term). 11. Signage. Lessee may erect any signs on or visible from the exterior of the Leased Premises, provided the same shall comply with applicable legal requirements and are approved by Lessor in writing (such approval not to be unreasonably withheld, conditioned or delayed). Subject to applicable law, Lessor agrees that Lessee may install and utilize throughout the Term the signs presently existing at the Leased Premises. During the Term, Lessee shall be permitted to change its signage from time to time only with the prior written consent or approval of Lessor (such consent not to be unreasonably withheld, conditioned or delayed), provided all modifications to the signage shall be in compliance with applicable laws. Lessee shall, at its sole cost and expense, remove any signage upon the expiration or earlier termination of this Lease and repair any damage caused by such removal.       -5- --------------------------------------------------------------------------------     12. Destruction and Damage; Application of Insurance Proceeds. If any or all of the improvements on the Leased Premises should be damaged by fire, flood or other casualty, this Lease shall not terminate as a result thereof, but Lessee shall retain the right to exercise its Early Termination Option. Except as provided in Section 2(c) hereinabove, no damage or destruction shall relieve Lessee from paying, nor abate in whole or part, the Base Rent and other rent provided under this Lease. Lessee shall only be obligated to repair or replace any damaged or destroyed improvements to the extent of available insurance proceeds (or to the extent of insurance proceeds had Lessee complied with the insurance requirements hereunder). If Lessee exercises its Early Termination Option after damage or destruction and before expenditure of all of the insurance proceeds for completion of the restoration or repair of the damaged or destroyed improvements, Lessee shall pay over to the Lessor any unexpended insurance proceeds to the extent required to complete reasonable restoration or repair. Notwithstanding the foregoing, the provisions of this Lease for application of any insurance proceeds shall at all times be subject to the terms of the Mortgage Loan. Also, notwithstanding anything to the contrary set forth in this Lease: (i) Lessor shall have no obligation to repair or replace any damage to the Leased Premises resulting from fire, flood or other casualty; and (ii) Lessee shall have no obligation to repair or replace any damage to the Leased Premises due to any casualty beyond any insurance proceeds that are available therefor (or that would have been available had Lessee complied with the insurance requirements hereunder). 13. Liability. (a) Damage in General. Lessee agrees that Lessor and its members, partners, employees and agents, shall not be liable to Lessee and Lessee hereby releases said parties from any liability for any personal injury, loss of income or damage to loss of persons or property in or about the Leased Premises from any cause whatsoever unless and to the extent such damage, loss or injury results from the negligence, willful misconduct or breach of law or regulation or the terms of this Lease of or by Lessor, its members, partners, employees or agents. Lessor and its respective members, partners, employees and agents shall not be liable to Lessee for any such damage or loss, whether or not such damage or loss results from such negligence, to the extent Lessee is compensated therefor by Lessee’s insurance or should have been compensated by Lessee's insurance if Lessee failed to maintain the insurance required under Section 8 hereinabove. Further, notwithstanding anything to the contrary contained in this Lease, Lessee agrees that Lessee shall look solely to the estate and property of Lessor in the Leased Premises for the collection of any judgment (or other judicial process) requiring the payment of money by Lessor in the event of any default or breach by Lessor with respect to any of the terms, covenants and conditions of this Lease, to be observed or performed by Lessor, and no other assets or property of Lessor shall be subject to levy, execution or other procedures for the satisfaction of Lessee’s remedies; provided, however, that notwithstanding the foregoing provisions limiting Lessee’s remedies and recourse against Lessor, such provisions shall be personal to Lessor and shall not apply to any of Lessor’s successors or assigns, and shall apply only so long as Lessor remains the sole owner of the Leased Premises.       -6- --------------------------------------------------------------------------------     (b) Indemnity.  (i) Lessee shall defend, indemnify and hold harmless Lessor and its members, partners, agents and employees from and against all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys’ fees, which may be incurred by or asserted by reason of any of the following that shall occur during the Term: (A) any work or act done, in or about the Leased Premises or any part thereof at the direction of Lessee, its agents, contractors, subcontractors, servants, employees, licensees or invitees; (B) any negligence or other wrongful act or omission on the part of Lessee or any of its agents, contractors, subcontractors, servants, employees, sub-tenants, licensees or invitees; (C) any accident, injury or damage to any person or property occurring in, on or about the Leased Premises or any part thereof, unless and to the extent caused by the negligence, willful misconduct or breach of law, regulation or the terms of this Lease of or by Lessor, its employees or agents; and/or   (D) any failure on the part of Lessee to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations contained in this Lease on its part to be performed or complied with.   (ii) Lessor shall defend, indemnify and hold harmless Lessee and its affiliates, shareholders, directors, agents and employees from and against all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys’ fees, which may be incurred by or asserted by reason of any of the following which shall occur during the Term of this Lease: (A) any work or act done, in or about the Leased Premises or any part thereof at the direction of Lessor or any of its agents, contractors, subcontractors, servants or employees or any of its licensees or invitees that are not the Lessee or Lessee’s licensees or invitees; (B) any negligence or other wrongful act or omission on the part of Lessor or any of its agents, contractors, subcontractors, servants or employees or any of its licensees or invitees that are not the Lessee or Lessee’s licensees or invitees; (C) any accident, injury or damage to any person or property occurring in, on or about any portion of the Leased Premises to the extent caused by the negligence, willful misconduct or breach of law, regulation or the terms of this Lease of or by Lessor, its employees or agents; and/or (D) any failure on the part of Lessor to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations contained in this Lease on its part to be performed or complied with.       -7- --------------------------------------------------------------------------------     (c) Survival. The provisions of this Section shall survive termination and any other expiration of this Agreement. 14. Assignment and Subletting.   (a) Lessee may at any time, and from time to time, assign its interest in this Lease, or sublease, or permit the occupancy of, all or any part of the Leased Premises without Lessor's consent to any successor in interest of Lessee or to any present or future parent, affiliated or subsidiary corporation or other entity, whether arising pursuant to a sale of stock, sale of assets, merger, consolidation or otherwise, or in the ordinary course of business as required to facilitate any joint marketing of banking or other financial products or services (the aforesaid permitted assignees, sublessees, and licensees are hereinafter collectively referred to as the ''Related Parties"), provided that: (i) any such transfer shall be subject to the terms and conditions of this Lease; (ii) the original Lessee named hereunder shall remain fully liable for all of the terms and conditions of this Lease; (iii) if Lessee proposes to assign its rights under this Lease to someone other than by operation of law, the Lessee and all parties (if any) guarantying the terms and conditions of this Lease shall have a combined tangible net worth (not including goodwill) equal to or greater than the tangible net worth (not including goodwill) of the original Lessee named hereunder as of the commencement of the Term or immediately prior to such transfer (whichever is greater); and (iv) the term of any rights of any Related Parties shall not exceed the then remaining Term (including any Renewal Term) of this Lease. Lessee agrees to promptly notify Lessor in writing of any such assignment or subletting and provide evidence to Lessor of such transfer and that Lessee has complied with the terms and conditions set forth herein. (b) Except for subleases, licenses and assignments to Related Parties, as permitted above, Lessee agrees not to assign, mortgage or otherwise transfer its interest in this Lease or in the Leased Premises or to sublease all or any part of the Leased Premises to any third party without first obtaining Lessor's written consent. The parties agree that it would be unreasonable for Lessor to withhold its consent to a sublease or assignment unless (i) Lessor reasonably believes that the use of the Leased Premises may not continue to comply with the terms and conditions of this Lease, or (ii) the proposed assignee’s financial condition and/or business experience are not reasonably acceptable to Lessor, or (iii) Lessee is then in default under this Lease beyond applicable cure periods.   15. Default; Remedies.  (a) Lessee's Default. Lessee will be in "Default" if (i) Lessee fails to pay Base Rent, additional expenses or any other amount owning hereunder when due, and such failure continues for ten (10) days after written notice to Lessee of such failure; (ii) Lessee fails to perform any other material covenant or agreement contained in this Lease within thirty (30) days after written notice of the failure from Lessor; provided, however if the failure is of such a nature that it cannot be cured within said thirty (30) day period, Lessee will not be deemed in default provided Lessee commences to cure the default within said thirty (30) day period and thereafter continuously prosecutes such cure to completion; and/or (iii) Lessee vacates or abandons the Leased Premises or removes or manifests an intention to remove Lessee’s goods and property from the Leased Premises other than in the ordinary course of its business; and/or (iv) Lessee is adjudicated a bankrupt in a proceeding initiated by or against it or a receiver for Lessee or for all or a substantial part of its property is appointed, or a court order is entered approving a petition seeking reorganization or an arrangement under the Bankruptcy Code, and any such adjudication, appointment or order is not vacated, set aside or otherwise terminated or stayed within sixty (60) days from the date of its entry.       -8- --------------------------------------------------------------------------------     (b) Remedies. Upon the occurrence of a Default, Lessor may, at any time thereafter and in addition to all other available legal or equitable rights and remedies, do any one or more of the following (but nothing in this Lease or the following provisions shall relieve Lessor of any obligation to mitigate damages Lessor may have under applicable law); provided, however, in no event shall Lessor be required to (i) accept a below market rental rate for the Leased Premises; (ii) accept any tenant whose creditworthiness is unsatisfactory to Lessor in its sole discretion; or (iii) accept any tenant whose business violates any exclusives or restrictions imposed upon the Leased Premises) (Lessee shall also pay to Lessor all reasonable attorney’s fees, costs and expenses incurred by Lessor as a result of an occurrence of Default by Lessee): (i) Demand, sue and recover from Lessee any and all installments of rent already due and payable and in arrears, or any other charge, expenses or cost herein agreed to be paid by Lessee which may be due and payable and in arrears, as of the time of the date of the Default. (ii) Demand, sue and recover from Lessee liquidated damages in an amount (if any) equal to any positive difference obtained by subtracting (i) the fair rental value of the Leased Premises for a period of 120 days from and after the date of the Default (ii) the Base Rent then payable under this Lease for a period of 120 days from the date of the Default.   (iii) Terminate this Lease and repossess and enjoy the Leased Premises. 16. Subordination; Nondisturbance. This Lease is and shall be subject and subordinate to the lien and mortgage securing the Mortgage Loan and to any and all renewals, modifications, consolidations, replacements and extensions thereof, on the condition that each holder of an interest in any mortgage or other lien shall have delivered to Lessee a written nondisturbance agreement providing that, so long as Lessee is in compliance with Lessee’s obligations under this Lease, such party agrees (a) to recognize Lessee's rights, tenancy and occupancy under this Lease, and (b) not to disturb Lessee's occupancy of the Leased Premises, notwithstanding any termination of any such lease or foreclosure of any such mortgage. This paragraph shall be self-operative and no further instrument of subordination shall be required by any mortgagee, but in confirmation of such subordination, Lessee shall execute within fifteen (15) days after being so requested, any certificate that Lessor may reasonably require, acknowledging such subordination. 17. Estoppel Statement. Lessee and Lessor, from time to time, within ten (10) days after request by the other party, shall execute, acknowledge and deliver to the other party a statement, which may be relied upon the other party or any proposed assignee of its interest in this Lease or any existing or proposed mortgagee or ground lessor or purchaser of the Leased Premises, certifying that this Lease is unmodified and in full force and effect (or that the same is in full force and effect as modified and listing the instruments of modification), the dates to which rent and other charges have been paid whether or not Lessor (in the case of a certificate by Lessee) or Lessee (in the case of a certificate by Lessor is in default hereunder or whether the certifying party has any claims or demands against the other party (and, if so, the default, claim and/or demand shall be specified) and certifying as to such other matters as the other party may reasonably request. Lessee and Lessor each acknowledges that any such statement so delivered by it may be relied upon by the requesting party and any such assignee, any landlord under any ground or underlying lease or by any perspective purchaser, mortgagee or any assignee of any mortgage.       -9- --------------------------------------------------------------------------------     18.   Condemnation.  (a) If the whole of the Leased Premises is condemned for any public use or purpose by any legally constituted authority (or is sold to such authority in lieu of condemnation), this Lease shall cease from the date of such taking or sale and rental shall be accounted for between Lessor and Lessee as of the date of the surrender of possession. (b) If only a portion of the Leased Premises is so taken or sold then from and after the date of taking or sale, so long as Lessee shall not have exercised its Early Termination Option, Lessee shall remain on the remaining portion of the Leased Premises, under the terms and conditions of this Lease, provided, however, that the rental shall be proportionately reduced to reflect the portion of the Leased Premises so taken or sold, subject to the terms of the Mortgage Loan. (c) No condemnation or condemnation award shall prejudice the rights of either Lessor or Lessee to recover compensation from the condemnation. 19. Holding Over. If Lessee remains in possession of the Leased Premises or any part thereof after the expiration or earlier termination of the Term, such occupancy shall be a tenancy at sufferance at a Base Rent in the amount of one hundred fifty percent (150%) of the Base Rent payable in the last month of the Term, plus all other charges payable hereunder, and Lessee shall be responsible for any and all damages resulting from such holding over. 20. Lessor Nonpayment or Nonperformance. In the event of Lessor's failure to pay any sum or sums or perform any obligation which Lessor is obligated to pay or perform and such nonpayment or nonperformance may result in a lien, charge or encumbrance upon the Leased Premises or interferes with the conduct of Lessee's business in the Leased Premises, Lessee shall have the right, but not the obligation, to pay or perform the same to the extent necessary to prevent any such lien, charge or encumbrance or to address any such interference, but only after Lessee shall have given Lessor thirty (30) days’ prior written notice of Lessee’s intention to do so and Lessor shall have failed to cure such nonpayment or nonperformance within such thirty (30) day period (or, as to any breach other than one that interferes with the conduct of Lessee’s business in the Leased Premises, such longer period of time provided that Lessor commences to cure such default within such thirty (30) day period and diligently completes such cure to completion). Lessor shall, within thirty (30) days after demand, reimburse Lessee for the reasonable costs and expenses incurred by Lessee in making such payment or performing such obligation as aforesaid, including reasonable attorneys' fees. Except if due to a bona fide dispute by Lessor, if Lessor fails timely to make such payment to Lessee, Lessee shall have the right to deduct such sums from the next installments of Base Rent due under this Lease.       -10- --------------------------------------------------------------------------------     21. Disputes; Payment or Performance “Under Protest.”  Except in connection with the non-payment of rent by Lessee against which Lessee has no claim of set-off or abatement, in the event of an unresolved dispute between Lessor and Lessee regarding the performance by either party of an obligation or condition of this Lease, as a condition precedent to the filing of litigation, authorized representatives of Lessor and Lessee shall use reasonable efforts to resolve said dispute within 30 days after receipt of a default notice. In addition, if at any time a dispute shall arise as to any sum of money to be paid by one party to the other under the provisions hereof or as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation is asserted shall have the right, in addition to any other rights provided under this Lease, to make payment or perform such work “under protest”, in which event such payment or performance shall not be regarded as voluntary payment or performance and that party shall not be deemed to have waived any rights by tendering payment or performance and, to the extent a determination is later made that such party was not obligated to make such payment or performance, such party shall retain a right to repayment of that portion of such sum or of the cost of such performance that it is determined not to have been obligated to tender. 22. Mechanic's Liens. At all times during the term of this Lease, Lessee shall keep the Leased Premises free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Leased Premises at the direction or order of Lessee. Lessee shall discharge or cause the Premises to be released from any such lien or claim of lien within the lesser of (i) 60 days after notification to Lessee of perfection or recordation of the lien or (ii) such period as may be required under Lessor’s mortgage. In addition, prior to the commencement of any lienable work at the Leased Premises, Lessee shall obtain a waiver of liens certificate binding on each contractor, subcontractor and materialmen in a form reasonably acceptable to Lessor and Lessee shall cause such waiver of liens to be recorded in the applicable governmental office. 23. Hazardous Materials. Lessee shall not use or knowingly permit any third party to use any “Hazardous Substances” (as defined below) in, on or near the Leased Premises except in accordance with applicable laws and regulations. Lessee shall indemnify and hold Lessor harmless from and against any and all claims, loss, liability, judgments, suits, actions, proceedings, costs, expenses and damages (including, but not limited to, reasonable attorneys’ fees) and the cost of repairs and improvements necessary to return the Leased Premises to the physical condition existing prior to undertaking any activity in violation of the covenant in the preceding sentence. As used herein, "Hazardous Substances" shall mean any petroleum, hazardous, toxic or dangerous waste, substance or material defined as such in, or for purposes of the Comprehensive Environmental Response, Compensation and Liability Act, any so called “superfund or superlien” law or any other federal, state or local statute, law, ordinance, code, rule, regulations, order, decree or other requirement of any governmental authority regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material as now in effect and applicable to the Premises. This indemnity shall survive the expiration or earlier termination of this Lease. 24. Miscellaneous.  (a) Examination or review of this Lease by or on behalf of either Lessor or Lessee shall not be construed as approval or acceptance hereof and this Lease shall not be effective until executed by duly authorized signatories of both Lessor and Lessee. Because each party has been separately represented by counsel and has had an adequate opportunity to review and propose revisions to drafts of this Lease, neither party shall assert or have the benefit of any legal doctrine providing presumptions against the other party as a drafter of this Lease. This Lease may not be amended or modified except by a writing signed by Lessor and Lessee.       -11- --------------------------------------------------------------------------------     (b) No consent or waiver, express or implied, by Lessor or Lessee to or of any breach of any agreement or duty to the other shall be construed as a consent or waiver of any other breach of the same or any other agreement or duty. (c) All notices, requests and demands hereunder shall be deemed to have been given on the date received or the date such receipt is refused provided that the notice is given by hand delivered, overnight courier, or United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed as follows: If to Lessee: DNB First, National Association   4 Brandywine Avenue   Downingtown, PA 19335   Attention: William J. Hieb, President     With a copy to: David F. Scranton, Esquire   Stradley, Ronon, Stevens & Young, LLP   30 Valley Stream Parkway   Malvern, PA 19355   If to Lessor: __________________   __________________     With a copy to: Scott C. Butler, Esquire   Kaplin Stewart Meloff Reiter & Stein   Building 640, 350 Sentry Parkway   P.O. Box 3037   Blue Bell, PA 19422-0765   (d) The invalidity or unenforceability of any provision of this Lease shall not affect or render invalid or unenforceable any other provision hereof. (e) This Lease shall be construed under the internal laws of the Commonwealth of Pennsylvania, without reference to rules of choice of law or conflicts of law, and by any pre-empting federal law.   (f) This Lease shall not be recorded in whole or in memorandum form by Lessee without the prior written consent of Lessor.       -12- --------------------------------------------------------------------------------     (g) Lessor and Lessee represent and warrant to each other that they have not consulted or contacted any agent, broker, or finder in connection with this Lease. Lessor and Lessee agree to defend, indemnify and hold the other harmless from any and all claims for compensation or commission, or any portion thereof, in connection with this Lease by any broker, agent, or finder (other than Broker) claiming to have dealt with the indemnifying party. The provisions of this Section shall survive termination and any other expiration of this Agreement. (h) Time is of the essence with regard to each and every provision of this Lease. -- -13- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the day and year first above written. Attest:       ________________________________ (Assistant) Secretary Lessee: DNB FIRST, NATIONAL ASSOCIATION     By: ____________________________ William J. Hieb President Attest:       Sign: ________________________________ Print Name: _______________________ Title: _______________________ Lessor: ________________________________     By: ________________________________ Print Name: _______________________ Title: _______________________ -14- -------------------------------------------------------------------------------- EXHIBIT A Parking Easement -------------------------------------------------------------------------------- EXHIBIT B Insurance Requirements See attached.

Exhibit 10.1 SOFTWARE LICENSE AGREEMENT THIS SOFTWARE LICENSE AGREEMENT (this “Agreement”), effective as of June 8, 2006 (the “Effective Date”) is made and entered into by and between Global Directory Solutions, LLC, a Delaware limited liability company (“Licensor”), and Scientigo, Inc., a Delaware corporation (“Licensee”). The parties hereto agree as follows: 1.                  DEFINITIONS:        AS USED HEREIN, EXCEPT AS EXPRESSLY SET FORTH HEREIN OTHERWISE, THE FOLLOWING TERMS SHALL HAVE THE MEANING SET FORTH BELOW: 1.1              “PROGRAMS” MEANS THE WEB-BASED LOGISTICS MANAGEMENT SOFTWARE KNOWN AS THE FMS SOFTWARE, DESCRIBED IN DETAIL ON SCHEDULE A.  NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT TO THE CONTRARY, THE PROGRAMS EXCLUDE ANY THIRD PARTY SOFTWARE MODULES WHICH ARE SEPARATELY LICENSED FROM THIRD PARTIES AND USED IN CONJUNCTION WITH THE LICENSED SOFTWARE AND MODULES. 1.2              “OBJECT CODE” MEANS THE PROGRAMS ASSEMBLED OR COMPILED IN MAGNETIC OR ELECTRONIC BINARY FORM ON SOFTWARE MEDIA, WHICH ARE READABLE AND USABLE BY MACHINES, BUT NOT GENERALLY READABLE BY HUMANS WITHOUT REVERSE ASSEMBLY, REVERSE COMPILING, OR REVERSE ENGINEERING. 1.3              “SOURCE CODE” MEANS THE PROGRAMS WRITTEN IN A FORM INTELLIGIBLE TO A TRAINED PROGRAMMER AND CAPABLE OF BEING TRANSLATED INTO OBJECT CODE FOR OPERATION ON COMPUTER EQUIPMENT THROUGH ASSEMBLY OR COMPILING, AND ACCOMPANIED BY DOCUMENTATION, INCLUDING FLOW CHARTS, SCHEMATICS, STATEMENTS OF PRINCIPLES OF OPERATIONS, AND ARCHITECTURE STANDARDS, DESCRIBING THE DATA FLOWS, DATA STRUCTURES, AND CONTROL LOGIC OF THE PROGRAMS IN SUFFICIENT DETAIL TO ENABLE A TRAINED PROGRAMMER THROUGH THE STUDY OF SUCH DOCUMENTATION TO MAINTAIN AND/OR MODIFY THE PROGRAMS WITHOUT UNDUE EXPERIMENTATION. 1.4              “DERIVATIVE WORK” SHALL HAVE THE MEANING SET FORTH IN 17 U.S.C. § 101.  FOR PURPOSES HEREIN, A COMPILATION THAT INCORPORATES THE PROGRAMS OR TECHNICAL MATERIALS SHALL CONSTITUTE A DERIVATIVE WORK OF THE PROGRAMS OR TECHNICAL MATERIALS. 1.5              “TECHNICAL MATERIALS” MEANS DOCUMENTATION THAT DESCRIBES THE FUNCTION AND USE OF THE PROGRAMS IN SUFFICIENT DETAIL TO PERMIT ITS USE, INCLUDING TECHNICAL SPECIFICATIONS AND END-USER MATERIALS. 1.6              “INTELLECTUAL PROPERTY” MEANS ANY OR ALL OF THE FOLLOWING AND ALL RIGHTS, ARISING OUT OF OR ASSOCIATED THEREWITH:  (I) ALL UNITED STATES, INTERNATIONAL AND FOREIGN  PATENTS AND APPLICATIONS THEREFORE AND ALL REISSUES, DIVISIONS, RENEWALS, EXTENSIONS, PROVISIONALS, CONTINUATIONS AND CONTINUATIONS-IN-PART THEREOF; (II) ALL INVENTIONS (WHETHER PATENTABLE OR NOT), INVENTION DISCLOSURES, IMPROVEMENTS, TRADE SECRETS, PROPRIETARY INFORMATION, KNOW-HOW, TECHNOLOGY, TECHNICAL DATA AND CUSTOMER LISTS, AND ALL DOCUMENTATION RELATING TO ANY OF THE FOREGOING THROUGHOUT THE WORLD (III) ALL COPYRIGHTS, --------------------------------------------------------------------------------   COPYRIGHT REGISTRATIONS AND APPLICATIONS THEREFORE, AND ALL OTHER RIGHTS CORRESPONDING THERETO THROUGHOUT THE WORLD; (IV) ALL INDUSTRIAL DESIGNS AND ANY REGISTRATIONS AND APPLICATIONS THEREFORE THROUGHOUT THE WORLD; (V) ALL URLS, DOMAIN NAMES, TRADE NAMES, LOGOS, SLOGANS, DESIGNS, COMMON LAW TRADEMARKS AND SERVICE MARKS, TRADEMARK AND SERVICE MARK REGISTRATIONS AND APPLICATIONS THEREFORE THROUGHOUT THE WORLD; (VI) ALL DATABASES AND DATA COLLECTIONS AND ALL RIGHTS THEREIN THROUGHOUT THE WORLD; (VII) ALL MORAL AND ECONOMIC RIGHTS OF AUTHORS AND INVENTORS, HOWEVER, DENOMINATED, THROUGHOUT THE WORLD; AND (VIII) ANY SIMILAR OR EQUIVALENT RIGHTS TO ANY OF THE FOREGOING ANYWHERE IN THE WORLD. 1.7       “Combined Product” shall have the meaning described in Section 2.1 below. 2.         Grant of License. 2.1              SOFTWARE.  SUBJECT TO SECTION 2.3 BELOW, LICENSOR HEREBY GRANTS TO LICENSEE, AND LICENSEE ACCEPTS A PERPETUAL, IRREVOCABLE, WORLDWIDE, EXCLUSIVE, TRANSFERABLE, SUBLICENSABLE, ROYALTY-FREE, FULLY PAID LICENSE TO:  (A)  REPRODUCE; (B) DISTRIBUTE; (C) PREPARE DERIVATIVE WORKS OF IN ANY MANNER, INCLUDING CUSTOMIZING FOR CLIENTS, UPDATING, REVISING OR MODIFYING THE PROGRAMS IN ANY WAY, OR COMBINING WITH LICENSEE’S INTELLECTUAL PROPERTY AND/OR THIRD PARTY INTELLECTUAL PROPERTY INTO A SINGLE COMBINED PRODUCT WHICH WILL SUBSUME THE PROGRAMS (THE “COMBINED PRODUCT”); (D) PUBLICLY DISPLAY; AND (E) PUBLICLY PERFORM THE PROGRAMS, IN SOURCE CODE OR OBJECT CODE FORMS, INCLUDING, BUT NOT LIMITED TO THE RIGHT TO (I) INSTALL, USE, REPRODUCE, MAINTAIN AND SUPPORT THE PROGRAMS; (II) HOST, REPRODUCE, DISTRIBUTE, SUBLICENSE AND MAKE AVAILABLE TO LICENSEE’S CUSTOMERS THE PROGRAMS VIA REMOTE COMMUNICATIONS MEDIA; (III) TO INSTALL AND LICENSE ACCESS TO AND USE OF THE SOFTWARE TO CUSTOMERS AND THEIR AFFILIATES, CLIENTS, AND CONTRACTORS WITHIN THE UNITED STATES, WHEN MARKETED AND RESOLD AS A DERIVATIVE WORK OR IN A COMBINED PRODUCT; AND (IV) AUTHORIZE SUBCONTRACTORS TO DO ANY OF THE FOREGOING ON BEHALF OF LICENSEE.  LICENSOR ALSO GRANTS TO LICENSEE, AND LICENSEE ACCEPTS A PERPETUAL, WORLDWIDE, EXCLUSIVE TRANSFERABLE, SUB LICENSABLE, ROYALTY-FREE, FULLY PAID LICENSE TO REPRODUCE, MODIFY, DISPLAY, DISTRIBUTE, AND PREPARE DERIVATIVE WORKS OF THE TECHNICAL MATERIALS FOR THE PURPOSE OF INSTALLING, USING, REPRODUCING, MAINTAINING, SUPPORTING, HOSTING, SUBLICENSING, CUSTOMIZING AND DISTRIBUTING THE PROGRAMS AND ANY COMBINED PRODUCTS. 2.2              INTELLECTUAL PROPERTY.  SUBJECT TO SECTION 2.3 BELOW, LICENSOR HEREBY GRANTS TO LICENSEE, AND LICENSEE ACCEPTS A PERPETUAL, IRREVOCABLE, WORLDWIDE, EXCLUSIVE, TRANSFERABLE, SUB LICENSABLE LICENSE TO USE THE INTELLECTUAL PROPERTY IN CONNECTION WITH THE RIGHTS GRANTED UNDER SECTION 2.1. 2.3              EXCEPTION TO EXCLUSIVE LICENSE GRANT.  THE PARTIES AGREE AND ACKNOWLEDGE THAT THE EXCLUSIVE NATURE OF THE LICENSES GRANTED PURSUANT TO SECTIONS 2.1 AND 2.2 ABOVE ARE SUBJECT TO THE RIGHTS AND LICENSES PREVIOUSLY GRANTED BY LICENSOR TO INFOCALL, INC. ONLY.  LICENSOR REPRESENTS AND WARRANTS THAT EXCEPT AS EXPRESSLY STATED IN THIS SECTION 2.3, IT HAS NOT GRANTED TO ANY THIRD PARTIES ANY RIGHTS OR INTERESTS TO THE PROGRAMS, TECHNICAL MATERIALS AND INTELLECTUAL PROPERTY. --------------------------------------------------------------------------------   3.                  OWNERSHIP RIGHTS.  LICENSEE SHALL HAVE SOLE AND EXCLUSIVE OWNERSHIP OF ALL RIGHT, TITLE AND INTEREST IN AND TO ANY COMBINED PRODUCTS, DERIVATIVE WORKS OF THE PROGRAMS AND TECHNICAL MATERIALS PREPARED BY, OR AT THE DIRECTION OF, LICENSEE, ALL COPIES THEREOF, AND ALL COPYRIGHTS AND OTHER INTELLECTUAL PROPERTY RIGHTS PERTAINING THERETO.  NO RIGHTS OR LICENSES TO SUCH COMBINED PRODUCTS OR DERIVATIVE WORKS ARE GRANTED TO LICENSOR HEREUNDER BY IMPLICATION, ESTOPPELS OR OTHERWISE. 4.                  LIMITED LICENSE.  THIS AGREEMENT DOES NOT PROVIDE LICENSEE WITH TITLE OR OWNERSHIP OF THE PROGRAMS OR TECHNICAL MATERIALS.  THIS AGREEMENT PROVIDES A RIGHT OF LIMITED USE UNDER THE LICENSE EXPRESSLY GRANTED IN SECTION 2, WITH NO RIGHTS OR LICENSES GRANTED BY LICENSOR HEREUNDER BY IMPLICATION, ESTOPPELS, OR OTHERWISE. 5.                  PAYMENT AND SHARES.    AS CONSIDERATION FOR THE LICENSE GRANTS STATE ABOVE, LICENSEE SHALL PAY LICENSOR THE SUM OF ONE HUNDRED FORTY FIVE THOUSAND DOLLARS ($145,000.00) IN FIFTEEN PAYMENTS AS STATED IN SCHEDULE B PLUS THE FOLLOWING ISSUANCE OF SHARES IN LICENSEE. Within thirty (30) days following the execution of this Agreement, Licensee will issue to Licensor one hundred eighty-one thousand two hundred fifty (181,250) shares of its common stock (the “Shares”).  Licensee agrees to file all reports under the Securities and Exchange Commission and take all other actions as may be required to permit Licensor to sell all of the Shares after the first anniversary of the date of issuance or transfer to the Shares to Licensor pursuant to Rule 144 under the Securities Act of 1933. 6.                  Maintenance and Support.  Licensor is not required to provide maintenance, support or training with respect to the Programs or Documentation.  Licensor is not required to develop or release future versions or revisions of the Programs or Documentation, and if any such future release, upgrade or version is developed by the Licensor, Licensee must negotiated with Licensor and Licensor may, in its own discretion decide to grant or not to grant, any rights in these future releases, upgrades or versions of the Programs and/or Documentation. 7.                  LIMITATION OF LIABILITY.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OF PROFITS NOR FOR ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF THE POSSIBILITY OF SUCH LOSS OF PROFITS AND/OR SUCH DAMAGES IS DEEMED TO BE FORESEEABLE. 8.                  TERM AND TERMINATION.  THIS AGREEMENT SHALL COMMENCE ON THE EFFECTIVE DATE AND SHALL REMAIN IN FULL FORCE AND EFFECT PERPETUALLY.  EITHER PARTY MAY TERMINATE THIS AGREEMENT FOR CAUSE BY A WRITING CONVEYED TO THE OTHER PARTY IF THE BREACHING PARTY IS NOTIFIED IN WRITING OF ITS BREACH AND DOES NOT CURE THE BREACH WITHIN THIRTY DAYS OF RECEIPT OF THE NOTICE OF BREACH.  THE LICENSES GRANTED IN THIS AGREEMENT SHALL NOT END OR BE REVOKED FOR ANY REASON, EVEN UPON BREACH, AND THE LICENSOR MAY LOOK TO THE COURTS FOR FINANCIAL COMPENSATION FOR ANY LICENSOR BREACH. --------------------------------------------------------------------------------   9.                  WAIVER.  THE FAILURE OF EITHER PARTY TO ENFORCE ANY OF THE PROVISIONS OF THIS AGREEMENT OR TO EXERCISE ANY RIGHTS HEREIN PROVIDED SHALL NOT BE CONSIDERED A WAIVER THEREOF OR AFFECT SUCH PARTY’S RIGHT TO ENFORCE ANY AND ALL OF THE PROVISIONS HEREOF OR EXERCISE ANY OR ALL RIGHTS HEREIN PROVIDED. 10.              CONTROLLING LAW; AMENDMENT.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES.  THIS AGREEMENT MAY NOT BE AMENDED, MODIFIED OR SUPPLEMENTED EXCEPT BY WRITTEN AGREEMENT OF THE PARTIES. 11.              PROTECTION OF VALUE OF LICENSE. 11.1          LICENSEE SHALL PROMPTLY NOTIFY LICENSOR OF ANY INFRINGEMENT OR POTENTIAL INFRINGEMENT OF INTELLECTUAL PROPERTY IN THE PROGRAMS OR TECHNICAL MATERIALS OR ANY UNAUTHORIZED USE OR MISUSE OF THE PROGRAMS OR TECHNICAL MATERIALS THAT COMES TO ITS ATTENTION, AND SHALL COOPERATE WITH LICENSOR, AT LICENSOR’S SOLE EXPENSE, IN TAKING STEPS TO TERMINATE SUCH INFRINGEMENT, UNAUTHORIZED USE, OR MISUSE IF DIRECTED BY LICENSOR. 11.2          LICENSEE AGREES TO COMPLY WITH ALL NOTICE AND MARKING REQUIREMENTS OF ANY LAW OR REGULATION APPLICABLE FOR THE PROTECTION OF THE INTELLECTUAL PROPERTY LICENSED UNDER THIS AGREEMENT. 12.              CONFIDENTIALITY.  SUBJECT TO LICENSEE’S ABILITY TO SUBLICENSE AND TRANSFER PURSUANT TO THE TERMS OF THIS AGREEMENT, LICENSEE AGREES (A) TO MAINTAIN IN CONFIDENCE THE SOURCE CODE VERSION OF THE PROGRAMS, DERIVATIVE WORKS OF THE SOURCE CODE VERSION OF THE PROGRAMS, AND CONFIDENTIAL TECHNICAL INFORMATION; AND (B) NOT TO DISCLOSE THE SOURCE CODE VERSION OF THE PROGRAMS, DERIVATIVE WORKS OF THE SOURCE CODE VERSION OF THE PROGRAMS, CONFIDENTIAL TECHNICAL INFORMATION, AND ANY ASPECTS THEREOF, TO ANYONE OTHER THAN EMPLOYEES OR SUBCONTRACTORS WHO HAVE A NEED TO KNOW OR OBTAIN ACCESS TO SUCH INFORMATION IN ORDER TO SUPPORT LICENSEE’S AUTHORIZED USE OF THE PROGRAMS AND HAVE AGREED IN WRITING TO PROTECT SUCH INFORMATION AGAINST ANY OTHER USE OR DISCLOSURE.  THE OBLIGATIONS UNDER THIS SECTION 12 SHALL NOT PROHIBIT THE LICENSEE FROM ENTERING INTO ANY ESCROW AGREEMENT WITH RESPECT TO THE SOURCE CODE VERSION OF THE PROGRAMS; PROVIDED, THAT THE PARTIES THAT MAY RECEIVE THE SOURCE CODE VERSION OF THE PROGRAMS AS A RESULT OF A RELEASE UNDER SUCH ESCROW AGREEMENT SHALL BE OBLIGATED (I) TO MAINTAIN IN CONFIDENCE THE SOURCE CODE VERSION OF THE PROGRAMS AND TO PROTECT CONFIDENTIAL TECHNICAL INFORMATION AND DOCUMENTATION; AND (II) NOT TO DISCLOSE, DISTRIBUTE, SELL, OR OTHERWISE MAKE AVAILABLE THE TECHNICAL MATERIALS OR THE SOURCE CODE VERSION OF THE PROGRAMS, OR ANY ASPECTS THEREOF, TO ANYONE OTHER THAN EMPLOYEES WHO HAVE A NEED TO KNOW, USE, OR OBTAIN ACCESS TO SUCH INFORMATION IN ORDER TO SUPPORT AUTHORIZED USE OF THE PROGRAMS.  THE OBLIGATIONS UNDER THIS SECTION 12 SHALL NOT APPLY TO ANY INFORMATION GENERALLY AVAILABLE TO THE PUBLIC, INDEPENDENTLY DEVELOPED AFTER THE EFFECTIVE DATE OR OBTAINED WITHOUT RELIANCE ON LICENSOR’S INFORMATION IN THE PROGRAMS, OR APPROVED IN WRITING FOR RELEASE BY LICENSOR WITHOUT RESTRICTION.  THIS SECTION 12 SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THIS AGREEMENT. --------------------------------------------------------------------------------   13.              WARRANTIES; DISCLAIMERS. 13.1          EACH PARTY REPRESENTS AND WARRANTS TO THE OTHER THAT IT HAS THE AUTHORITY TO ENTER INTO THIS AGREEMENT ACCORDING TO ITS TERMS AND CONDITIONS. 13.2           EXCEPT AS SPECIFIED IN SECTION 13.1 ABOVE, NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUCTED AS: A WARRANTY WHETHER STATUTORY, EXPRESS, OR IMPLIED; A WARRANTY OF MERCHANTABILITY; A WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; A WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OR TRADE; OR A WARRANTY THAT ANY USE OF THE PROGRAMS OR TECHNICAL MATERIALS WILL BE FREE FROM INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. 14.              INDEMNIFICATION. LICENSOR SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LICENSEE FROM AND AGAINST ANY LOSS, EXPENSE OR LIABILITY (INCLUDING REASONABLE ATTORNEY’S FEES) FINALLY AWARDED AGAINST LICENSEE, TO THE EXTENT THAT SUCH LOSS, EXPENSE OR LIABILITY AROSE UNDER, OR IN CONNECTION WITH, A CLAIM THAT THE PROGRAMS OR TECHNICAL MATERIALS FURNISHED, AND RIGHTLY USED BY LICENSEE WITHIN THE SCOPE OF THIS AGREEMENT, INFRINGED OR VIOLATED ANY THIRD-PARTY’S INTELLECTUAL PROPERTY RIGHT, PROVIDED THAT: (A) LICENSEE PROMPTLY NOTIFIES LICENSOR IN WRITING UPON BECOMING AWARE OF ANY SUCH CLAIM; (B) LICENSEE GRANTS LICENSOR SOLE CONTROL OF THE DEFENSE AND ALL RELATED SETTLEMENT NEGOTIATIONS; AND (C) LICENSEE PROVIDES LICENSOR WITH THE REASONABLE ASSISTANCE, INFORMATION AND AUTHORITY NECESSARY TO PERFORM LICENSOR’S OBLIGATIONS UNDER THIS SECTION.  REASONABLE OUT-OF-POCKET EXPENSES INCURRED BY LICENSEE IN PROVIDING SUCH REASONABLE ASSISTANCE TO LICENSOR WILL BE REIMBURSED TO LICENSEE BY LICENSOR.  THIS SECTION 14 SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THIS AGREEMENT. 15.              SEVERABILITY.  IF ANY PARAGRAPH OR PROVISION OF THIS AGREEMENT IS FOUND TO BE INVALID OR UNENFORCEABLE BY A COURT OF COMPETENT JURISDICTION, SUCH PARAGRAPH OR PROVISION SHALL BE CONSIDERED DELETED FROM THIS AGREEMENT AND THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT WITHOUT SUCH PARAGRAPH OR PROVISION EXCEPT WHERE THE ECONOMIC EQUITY OF BOTH PARTIES HERETO IS MATERIALLY AFFECTED BY SUCH INVALIDITY OR UNENFORCEABILITY. 16.              TRANSFERABILITY.  THIS AGREEMENT SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LICENSOR ACKNOWLEDGES AND AGREES THAT ANY SALE OR TRANSFER OF ITS RIGHT, TITLE AND INTEREST IN AND TO THE PROGRAMS OR TECHNICAL MATERIALS SHALL BE SUBJECT TO THE LICENSES GRANTED TO LICENSEE PURSUANT TO SECTION 2 OF THIS AGREEMENT. 17.              ENTIRE AGREEMENT.  THE TERMS AND CONDITIONS CONTAINED HEREIN CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SHALL SUPERSEDE ALL PREVIOUS COMMUNICATIONS, EITHER ORAL OR WRITTEN, BETWEEN THE PARTIES WITH RESPECT TO SUCH SUBJECT MATTER.  NO ORAL EXPLANATION OR ORAL INFORMATION BY EITHER --------------------------------------------------------------------------------   PARTY HERETO SHALL ALTER THE MEANING OR INTERPRETATION OF THIS AGREEMENT.  NO MODIFICATION, ALTERATION, ADDITION, OR CHANGE IN THE TERMS HEREOF SHALL BE BINDING ON EITHER PARTY HERETO UNLESS REDUCED TO WRITING AND DULY EXECUTED BY THE PARTIES. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date stated above. SCIENTIGO, INC.   By: /s/ Doyal Bryant   Name: Doyal Bryant   Title: Chief Executive Officer         Date: June 8, 2006       GLOBAL DIRECTORY SOLUTIONS, LLC.       By: /s/ Harry J. Pettit   Name: Harry J. Pettit   Title: President         Date: June 8, 2006   --------------------------------------------------------------------------------   SCHEDULE A PROGRAMS --------------------------------------------------------------------------------   SCHEDULE B PAYMENTS Licensee will pay the following to Licensor:             1.         Fourteen (14) monthly payments of Ten Thousand Dollars ($10,000.00) each, commencing on the first day of the first calendar month following the Licensee’s receipt of outside financing of at least $3 Million is received and following at the beginning of each of the next thirteen (13) calendar months.             2.         A final payment of Five thousand Dollars ($5,000.00) on the first day of the fifteenth month following the Effective Date.   --------------------------------------------------------------------------------

Exhibit 10.9 STOCK PLEDGE AGREEMENT         This Stock Pledge Agreement (as the same may be amended, restated, modified and/or supplemented from time to time, this “Agreement”), dated as of June 30, 2006, among Laurus Master Fund, Ltd. (the “Pledgee”), TRUEYOU.COM INC., a Delaware corporation (the “Company”), and each of the direct and indirect Subsidiaries of the Company signatory hereto (other than the Pledgee) (the Company and each such other undersigned party, a “Pledgor” and collectively, the “Pledgors”). BACKGROUND         The Company has entered into a Securities Purchase Agreement, dated as of June 30, 2006 (as amended, modified, restated or supplemented from time to time, the “Purchase Agreement”), pursuant to which the Pledgee provides or will provide certain financial accommodations to the Company and certain subsidiaries of the Company.         In order to induce the Pledgee to provide or continue to provide the financial accommodations described in the Purchase Agreement, each Pledgor has agreed to pledge and grant a security interest in the collateral described herein to the Pledgee on the terms and conditions set forth herein.         NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:         1.    Defined Terms.   All capitalized terms used herein which are not defined shall have the meanings given to them in the Purchase Agreement.         2.    Pledge and Grant of Security Interest.   To secure the full and punctual payment and performance of (the following clauses (a) and (b), collectively, the “Obligations”) (a) the obligations under (i) the Purchase Agreement, (ii) that certain Secured Term Note dated as of the date hereof issued by the Company to Pledgee (as amended, modified restated and/or supplemented from time to time in the manner provided therein, the “Note”), (iii) that certain Subsidiary Guaranty dated as of the date hereof by and among the Pledgors (other than the Company) and Pledgee (as amended, modified restated and/or supplemented from time to time in the manner provided therein, the “Subsidiary Guaranty”), and (iv) the other Related Agreements referred to (and as defined in) the Purchase Agreement (the Purchase Agreement, the Note, the Subsidiary Guaranty and each other Related Agreement, as each may be amended, modified, restated or supplemented from time to time, collectively, the “Documents”) and (b) all other obligations and liabilities of each Pledgor to the Pledgee whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due, and under, pursuant to or evidenced by any related note, agreement, guaranty, instrument or otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of such in any case commenced by or against any Pledgor under Title 11, United States Code, including, without limitation, obligations of each Pledgor for post-petition interest, fees, costs and charges that would have accrued or been added -------------------------------------------------------------------------------- to the Obligations but for the commencement of such case), each Pledgor hereby pledges, assigns, hypothecates, transfers and grants a security interest to Pledgee in all of the following (the “Collateral”):                 (a)     the shares of stock or other equity interests of each direct and indirect Subsidiary of the Company, whether now existing or hereafter acquired or created (each an “Issuer”), including (without limitation) the Issuers and interests set forth on Schedule A annexed hereto and expressly made a part hereof (together with any additional shares of stock or other equity interests in any Issuer acquired by any Pledgor, the “Pledged Stock”), the certificates representing the Pledged Stock and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Stock;                 (b)     all additional shares of stock or other equity interests of any Issuer of the Pledged Stock from time to time acquired by any Pledgor in any manner, including, without limitation, stock dividends or a distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off (which shares shall be deemed to be part of the Collateral), and the certificates representing such additional shares, and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and                 (c)     all options and rights, whether as an addition to, in substitution of or in exchange for any shares of any Pledged Stock and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such options and rights.         3.    Delivery of Collateral.   All certificates representing or evidencing the Pledged Stock shall be delivered to and held by or on behalf of Pledgee pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignments in blank, all in form and substance satisfactory to Pledgee. Each Pledgor hereby authorizes the Issuer upon demand by the Pledgee to deliver any certificates, instruments or other distributions issued in connection with the Collateral directly to the Pledgee, in each case to be held by the Pledgee, subject to the terms hereof. Upon the occurrence and during the continuance of an Event of Default (as defined below), the Pledgee shall have the right, during such time in its discretion and without notice to the Pledgor, to transfer to or to register in the name of the Pledgee or any of its nominees any or all of the Pledged Stock. In addition, the Pledgee shall have the right at such time to exchange certificates or instruments representing or evidencing Pledged Stock for certificates or instruments of smaller or larger denominations.         4.    Representations and Warranties of each Pledgor.   Each Pledgor jointly and severally represents and warrants to the Pledgee (which representations and warranties shall be deemed to continue to be made as of the date hereof until all of the Obligations have been paid in full and each Document and each agreement and instrument entered into in connection therewith has been irrevocably terminated) that: -2- --------------------------------------------------------------------------------                 (a)     the execution, delivery and performance by each Pledgor of this Agreement and the pledge of the Collateral hereunder do not and will not result in any violation of any agreement, indenture, instrument, license, judgment, decree, order, law, statute, ordinance or other governmental rule or regulation applicable to any Pledgor;                 (b)     this Agreement constitutes the legal, valid, and binding obligation of each Pledgor enforceable against each Pledgor in accordance with its terms, except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and (ii) general principles of equity that restrict the availability of equitable or legal remedies;                 (c)     all Pledged Stock owned by each Pledgor is set forth on Schedule A hereto and (ii) each referenced Pledgor is the direct and beneficial owner of each share of the Pledged Stock;                 (d)     all of the shares of the Pledged Stock have been duly authorized, validly issued and are fully paid and nonassessable;                 (e)     no consent or approval of any person, corporation, governmental body, regulatory authority or other entity, is or will be necessary for (i) the execution, delivery and performance of this Agreement, (ii) except for compliance with any applicable requirements of the UCC, the exercise by the Pledgee of any rights with respect to the Collateral or (iii) the pledge and assignment of, and the grant of a security interest in, the Collateral hereunder;                 (f)     there are no pending or, to the Pledgor’s knowledge, threatened actions or proceedings before any court, judicial body, administrative agency or arbitrator which may materially adversely affect the Collateral;                 (g)     each Pledgor has the requisite corporate, partnership or limited liability company (as applicable) power and authority to enter into this Agreement and to pledge and assign the Collateral to the Pledgee in accordance with the terms of this Agreement;                 (h)     each Pledgor owns each item of the Collateral and, except for the pledge and security interest granted to Pledgee hereunder, the Collateral shall be, immediately following the closing of the transactions contemplated by the Documents, free and clear of any other security interest, mortgage, pledge, claim, lien, charge, hypothecation, assignment, offset or encumbrance whatsoever (collectively, “Liens”) other than a Permitted Encumbrance (as defined in the Purchase Agreement);                 (i)     there are no restrictions on transfer of the Pledged Stock contained in the certificate of incorporation or by-laws (or equivalent organizational documents) of the Issuer or -3- -------------------------------------------------------------------------------- otherwise which have not otherwise been enforceably and legally waived by the necessary parties, other than the provisions of applicable securities laws and the UCC that cannot be currently waived;                 (j)     none of the Pledged Stock has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;                 (k)     the pledge and assignment of the Collateral and the grant of a security interest under this Agreement vest in the Pledgee all rights of each Pledgor in the Collateral as contemplated by this Agreement; and                 (l)     the Pledged Stock constitutes one hundred percent (100%) of the issued and outstanding shares of capital stock of each Issuer.         5.    Covenants.   Each Pledgor jointly and severally covenants that, until the Obligations shall be indefeasibly satisfied in full and each Document and each agreement and instrument entered into in connection therewith is irrevocably terminated:                 (a)     No Pledgor will sell, assign, transfer, convey, or otherwise dispose of its rights in or to the Collateral or any interest therein; nor will any Pledgor create, incur or permit to exist any Lien whatsoever with respect to any of the Collateral or the proceeds thereof other than that created or permitted pursuant to any Document or any Permitted Encumbrance.                 (b)     Each Pledgor will, at its expense, defend Pledgee’s right, title and security interest in and to the Collateral against the claims of any other party.                 (c)     Each Pledgor shall at any time, and from time to time, upon the written request of Pledgee, execute and deliver such further documents and do such further acts and things as Pledgee may reasonably request in order to effectuate the purposes of this Agreement, including, but without limitation, delivering to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies in respect of the Collateral in form satisfactory to Pledgee. Until receipt thereof, upon an Event of Default that has occurred and is continuing beyond any applicable grace period, this Agreement shall constitute Pledgor’s proxy to Pledgee or its nominee to vote all shares of Collateral then registered in each Pledgor’s name.                 (d)     No Pledgor will consent to or approve the issuance of (i) any additional shares of any class of capital stock or other equity interests of the Issuer; or (ii) any securities convertible either voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or any securities exchangeable for, any such shares, unless, in either case, such shares are pledged as Collateral pursuant to this Agreement.                 (e)     Each Pledgor agrees to execute and deliver to each Issuer that is a limited liability company or a limited partnership a control acknowledgment (“Control Acknowledgement”) substantially in the form of Exhibit A hereto. Each Pledgor shall cause -4- -------------------------------------------------------------------------------- each such Issuer to acknowledge in writing its receipt and acceptance thereof. Such Control Acknowledgement shall instruct such Issuer to follow instructions from Pledgee without any Pledgor’s consultation or consent upon the occurrence of and during the continuance of an Event of Default.         6.    Voting Rights and Dividends.   In addition to the Pledgee’s rights and remedies set forth in Section 8 hereof, in case an Event of Default shall have occurred and be continuing, beyond any applicable cure period, the Pledgee shall: (i) be entitled to vote the Collateral; (ii) be entitled to give consents, waivers and ratifications in respect of the Collateral (each Pledgor hereby irrevocably constituting and appointing the Pledgee, with full power of substitution, the proxy and attorney-in-fact of each Pledgor for such purposes); and (iii) be entitled to collect and receive for its own use cash dividends paid on the Collateral. No Pledgor shall be permitted to exercise or refrain from exercising any voting rights or other powers if, in the reasonable judgment of the Pledgee, such action would have a material adverse effect on the value of the Collateral or any part thereof; and, provided, further, that each Pledgor shall give at least five (5) days’ written notice of the manner in which such Pledgor intends to exercise, or the reasons for refraining from exercising, any voting rights or other powers other than with respect to any election of directors, and voting or approvals with respect to any incidental matters. Following the occurrence of an Event of Default, all dividends and all other distributions in respect of any of the Collateral, shall be delivered to the Pledgee to hold as Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Pledgee, be segregated from the other property or funds of any other Pledgor, and be forthwith delivered to the Pledgee as Collateral in the same form as so received (with any necessary endorsement).         7.    Event of Default.   An “Event of Default” under this Agreement shall occur upon the happening of any of the following events:                 (a)     An “Event of Default” under (and as defined in) any Document or any agreement or note related to any Document shall be continuing beyond any applicable cure period;                 (b)     Any representation or warranty of any Pledgor made herein shall be or have been false or misleading in any material respect as of the date made or deemed made;                 (c)     Any portion of the Collateral is subjected to a levy of execution, attachment, distraint or other judicial process for any amount in excess of $500,000 or any portion of the Collateral is the subject of a claim (other than by the Pledgee) of a Lien or other right or interest in or to the Collateral in excess of $500,000 (other than Permitted Encumbrances) and such levy or claim shall not be cured, disputed or stayed within a period of fifteen (15) business days after the occurrence thereof; or                 (d)     Any Pledgor shall (i) apply for, consent to, or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or other fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy -5- -------------------------------------------------------------------------------- laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, without challenge within ten (10) business days of receipt of the notice of the filing thereof, or fail to have dismissed or effectively stayed to the satisfaction of the Pledgee, within sixty (60) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing.         8.    Remedies.   In case an Event of Default shall have occurred and is continuing, the Pledgee may:                 (a)     Transfer any or all of the Collateral into its name, or into the name of its nominee or nominees;                 (b)     Exercise all corporate rights with respect to the Collateral, including, without limitation, all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any shares of the Collateral as if it were the absolute owner thereof, including, but without limitation, the right to exchange, at its discretion, any or all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the Issuer thereof, or upon the exercise by the Issuer of any right, privilege or option pertaining to any of the Collateral, and, in connection therewith, to deposit and deliver any and all of the Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine, all without liability except to account for property actually received by it; and                 (c)     Subject to any requirement of applicable law, sell, assign and deliver the whole or, from time to time, any part of the Collateral at the time held by the Pledgee, at any private sale or at public auction, with or without demand, advertisement or notice of the time or place of sale or adjournment thereof or otherwise (all of which are hereby waived, except such notice as is required by applicable law and cannot be waived), for cash or credit or for other property for immediate or future delivery, and for such price or prices and on such terms as the Pledgee in its sole discretion may determine, or as may be required by applicable law.                  (d)     Each Pledgor hereby waives and releases any and all right or equity of redemption, whether before or after sale hereunder. At any such sale, unless prohibited by applicable law, the Pledgee may bid for and purchase the whole or any part of the Collateral so sold free from any such right or equity of redemption. All moneys received by the Pledgee hereunder, whether upon sale of the Collateral or any part thereof or otherwise, shall be held by the Pledgee and applied by it as provided in Section 10 hereof. No failure or delay on the part of the Pledgee in exercising any rights hereunder shall operate as a waiver of any such rights nor shall any single or partial exercise of any such rights preclude any other or future exercise thereof or the exercise of any other rights hereunder. The Pledgee shall have no duty as to the collection or protection of the Collateral or any income thereon nor any duty as to preservation of any rights pertaining thereto, except to apply the funds in accordance with the requirements of Section 10 hereof. The Pledgee may exercise its rights with respect to property held hereunder without resort to other security for or sources of reimbursement for the Obligations. In addition -6- -------------------------------------------------------------------------------- to the foregoing, Pledgee shall have all of the rights, remedies and privileges of a secured party under the Uniform Commercial Code of New York (the “UCC”) regardless of the jurisdiction in which enforcement hereof is sought.         9.    Private Sale.   Each Pledgor recognizes that the Pledgee may be unable to effect (or to do so only after delay which would adversely affect the value that might be realized from the Collateral) a public sale of all or part of the Collateral by reason of certain prohibitions contained in the Securities Act, and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor agrees that any such private sale may be at prices and on terms less favorable to the seller than if sold at public sales and that such private sales shall be deemed to have been made in a commercially reasonable manner. Each Pledgor agrees that the Pledgee has no obligation to delay sale of any Collateral for the period of time necessary to permit the Issuer to register the Collateral for public sale under the Securities Act.         10.    Proceeds of Sale.   The proceeds of any collection, recovery, receipt, appropriation, realization or sale of the Collateral shall be applied by the Pledgee as follows:                 (a)     First, to the payment of all costs, reasonable expenses and charges of the Pledgee and to the reimbursement of the Pledgee for the prior payment of such costs, reasonable expenses and charges incurred in connection with the care and safekeeping of the Collateral (including, without limitation, the reasonable expenses of any sale or any other disposition of any of the Collateral), attorneys’ fees and reasonable expenses, court costs, any other fees or expenses incurred or expenditures or advances made by Pledgee in the protection, enforcement or exercise of its rights, powers or remedies hereunder;                 (b)     Second, to the payment of the Obligations, in whole or in part, in such order as the Pledgee may elect, whether or not such Obligations is then due;                 (c)     Third, to such persons, firms, corporations or other entities as required by applicable law including, without limitation, Section 9-615(a)(3) of the UCC; and                 (d)     Fourth, to the extent of any surplus to the Pledgors or as a court of competent jurisdiction may direct.                 In the event that the proceeds of any collection, recovery, receipt, appropriation, realization or sale are insufficient to satisfy the Obligations, each Pledgor shall be jointly and severally liable for the deficiency plus the costs and fees of any attorneys employed by Pledgee to collect such deficiency.         11.    Waiver of Marshaling.   Each Pledgor hereby waives any right to compel any marshaling of any of the Collateral.         12.    No Waiver.   Any and all of the Pledgee’s rights with respect to the Liens granted under this Agreement shall continue unimpaired, and Pledgor shall be and remain obligated in -7- -------------------------------------------------------------------------------- accordance with the terms hereof, notwithstanding (a) the bankruptcy, insolvency or reorganization of any Pledgor, (b) the release or substitution of any item of the Collateral at any time, or of any rights or interests therein, or (c) any delay, extension of time, renewal, compromise or other indulgence granted by the Pledgee in reference to any of the Obligations. Each Pledgor hereby waives all notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consents to be bound hereby as fully and effectively as if such Pledgor had expressly agreed thereto in advance. No delay or extension of time by the Pledgee in exercising any power of sale, option or other right or remedy hereunder, and no failure by the Pledgee to give notice or make demand, shall constitute a waiver thereof, or limit, impair or prejudice the Pledgee’s right to take any action against any Pledgor or to exercise any other power of sale, option or any other right or remedy.         13.    Expenses.   The Collateral shall secure, and each Pledgor shall pay to Pledgee on demand, from time to time, all reasonable costs and expenses, (including but not limited to, reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing and other charges) of, or incidental to, the custody, care, transfer, administration of the Collateral or any other collateral, or in any way relating to the enforcement, protection or preservation of the rights or remedies of the Pledgee under this Agreement or with respect to any of the Obligations.         14.    The Pledgee Appointed Attorney-In-Fact and Performance by the Pledgee.   Upon the occurrence and during the continuance of an Event of Default, each Pledgor hereby irrevocably constitutes and appoints the Pledgee as such Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to do in such Pledgor’s name, place and stead, all such acts, things and deeds for and on behalf of and in the name of such Pledgor, which such Pledgor could or might do or which the Pledgee may deem necessary, desirable or convenient to accomplish the purposes of this Agreement, including, without limitation, to execute such instruments of assignment or transfer or orders and to register, convey or otherwise transfer title to the Collateral into the Pledgee’s name. Each Pledgor hereby ratifies and confirms all that said attorney-in-fact may so do and hereby declares this power of attorney to be coupled with an interest and irrevocable. If any Pledgor fails to perform any agreement herein contained, the Pledgee may itself perform or cause performance thereof, and any costs and expenses of the Pledgee incurred in connection therewith shall be paid by the Pledgors as provided in Section 10 hereof.         15.    Waivers.   THE PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO. -8- --------------------------------------------------------------------------------         16.     Recapture.   Notwithstanding anything to the contrary in this Agreement, if the Pledgee receives any payment or payments on account of the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver, or any other party under the United States Bankruptcy Code, as amended, or any other federal or state bankruptcy, reorganization, moratorium or insolvency law relating to or affecting the enforcement of creditors’ rights generally, common law or equitable doctrine, then to the extent of any sum not finally retained by the Pledgee, each Pledgor’s obligations to the Pledgee shall be reinstated and this Agreement shall remain in full force and effect (or be reinstated) until payment shall have been made to Pledgee, which payment shall be due on demand.         17.    Captions.   All captions in this Agreement are included herein for convenience of reference only and shall not constitute part of this Agreement for any other purpose.         18.    Miscellaneous.                 (a)     This Agreement may not be supplemented, modified, amended, restated, waived, extended, discharged or terminated orally. This Agreement may only be (i) supplemented, modified, amended or restated in a writing signed by the Pledgors and the Pledgee and (ii) waived, extended, discharged or terminated in a writing signed by the Pledgee.                 (b)     No waiver of any term or condition of this Agreement, whether by delay, omission or otherwise, shall be effective unless in writing and signed by the party sought to be charged, and then such waiver shall be effective only in the specific instance and for the purpose for which given.                 (c)     In the event that any provision of this Agreement or the application thereof to any Pledgor or any circumstance in any jurisdiction governing this Agreement shall, to any extent, be finally determined to be invalid or unenforceable under any applicable statute, regulation, or rule of law, such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute, regulation or rule of law, and the remainder of this Agreement and the application of any such invalid or unenforceable provision to parties, jurisdictions, or circumstances other than to whom or to which it is held invalid or unenforceable shall not be affected thereby, nor shall same affect the validity or enforceability of any other provision of this Agreement.                 (d)     This Agreement shall be binding upon each Pledgor, and each Pledgor’s successors and assigns, and shall inure to the benefit of the Pledgee and its successors and assigns.                 (e)     Any notice or other communication required or permitted pursuant to this Agreement shall be given in accordance with the Purchase Agreement; and if to any Pledgor at the address for the Company as provided therein. -9- --------------------------------------------------------------------------------                 (f)      THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO THE RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE APPLICABLE LAWS OF (A) THE STATE IN WHICH THE APPLICABLE COMPANY OR SUBSIDIARY IS ORGANIZED IN THE CASE OF TYPES OF COLLATERAL IN WHICH SECURITY INTERESTS CAN BE PERFECTED BY THE FILING OF UCC FINANCING STATEMENTS IN THAT STATE OR (B) IN ALL OTHER CASES THE STATE IN WHICH THE APPLICABLE ASSET OR PROPERTY IS LOCATED OR DEEMED LOCATED.                 (g)     EACH PLEDGOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS H LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY PLEDGOR, ON THE ONE HAND, AND THE PLEDGEE, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS, PROVIDED, THAT EACH PLEDGOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHERPROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PLEDGEE FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE INDEBTEDNESS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PLEDGEE. EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY FEDERAL EXPRESS OR REGISTERED OR CERTIFIED MAIL DELIVERED TO SUCH PLEDGOR AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PLEDGOR’S ACTUAL RECEIPT THEREOF OR FOUR (4) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS FOR DELIVERY BY SUCH MAIL AND PROPER POSTAGE PREPAID. -10- --------------------------------------------------------------------------------                 (h)     It is understood and agreed that any person or entity that desires to become a Pledgor hereunder, or is required to execute a counterpart of this Agreement after the date hereof pursuant to the requirements of any Document, shall become a Pledgor hereunder by (x) executing a Joinder Agreement in form and substance satisfactory to the Pledgee, (y) delivering supplements to such exhibits and annexes to such Documents as the Pledgee shall reasonably request and/or set forth in such joinder agreement and (z) taking all actions as specified in this Agreement as would have been taken by such Pledgor had it been an original party to this Agreement, in each case with all documents required above to be delivered to the Pledgee and with all documents and actions required above to be taken to the reasonable satisfaction of the Pledgee.                 (i)     This Agreement may be executed in one or more counterparts of the entire document or of the signature pages hereto, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed an original signature hereto.         19.    Provisions of the Purchase Agreement.   This Agreement is the Stock Pledge Agreement referred to in the Purchase Agreement and other Documents.         20.     Entire Agreement.   This Agreement and the Master Security Agreement and the exhibits and schedules hereto and thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and supersede and completely replace any and all (and no party shall be liable or bound to any other in any manner by any) prior or other representations, warranties, covenants, promises, assurances or other agreements or understandings (whether written, oral, express, implied or otherwise) with regard to the subjects hereof and thereof except as specifically set forth herein and therein. [Remainder of Page Intentionally Left Blank] -11- --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first written above. TRUEYOU.COM INC. By:________________________________ Name: Title KLINGER ADVANCED AESTETICS, INC. By:________________________________ Name: Title ADVANCED AESTETICS SUB, INC. By:________________________________ Name: Title ADVANCED AESTETICS, LLC By:________________________________ Name: Title ANUSHKA PBG, LLC By:________________________________ Name: Title ANUSHKA BOCA, LLC By:________________________________ Name: Title: -12- -------------------------------------------------------------------------------- WILD HARE, LLC By:________________________________ Name: Title LAURUS MASTER FUND, LTD. By:________________________________ Name: Title -13- -------------------------------------------------------------------------------- EXHIBIT A FORM OF CONTROL ACKNOWLEDGMENT ISSUER MEMBERSHIP INTEREST OWNERS: [Issuer] [Pledgor] ________________________         Reference is hereby made to that certain Stock Pledge Agreement, dated as of June __, 2006 (as the same may be amended, restated, modified and/or supplemented from time to time, the “Pledge Agreement”), between the above-referenced members (“Pledgors”) of ____________, a ___________ [limited liability company][limited partnership], (a “[Issuer]”) and Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Pledge Agreement.     [Issuer]        is hereby instructed by Pledgors that all of Pledgors’ right, title and interest in and to all of Pledgors’ rights in connection with any [membership][partnership] interests in [Issuer] now and hereafter owned by Pledgors are subject to a pledge and security interest in favor of Laurus. Pledgors hereby instructs [Issuer] to act upon any instruction delivered to it by the Laurus with respect to the Collateral without seeking further instruction from Pledgors, and, by its execution hereof, [Issuer] agrees to do so.         [Issuer], by its written acknowledgment and acceptance hereof, hereby acknowledges receipt of a copy of the aforementioned Pledge Agreement and agrees promptly to note on its books the security interest granted under such Pledge Agreement. [Issuer] also waives any rights or requirements at any time hereafter to receive a copy of such Pledge Agreement in connection with the registration of any Collateral in the name of the Laurus or its nominee or the exercise of voting rights by the Laurus or its nominee. [Remainder of this page intentionally left blank] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Pledgors have caused this Control Acknowledgment to be duly signed and delivered by its officer duly authorized as of this _____ day of June 2006. PLEDGOR. By:_______________________________ Name:_____________________________ Title:____________________________ Acknowledged and accepted this ______ day of June 2006. [ISSUER] By:_______________________________ Name:_____________________________ Title:____________________________ -------------------------------------------------------------------------------- SCHEDULE A to the Stock Pledge Agreement Pledged Stock --------------------------------------------------------------------------------      Pledgor  Issuer  Class of Stock  Number  Stock Certificate Par Value  Number of Shares  % of outstanding Shares  --------------------------------------------------------------------------------  [Insert Pledgors  and Pledged Stock]  -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

  OLD LINE BANK Salary Continuation Agreement   Exhibit 10.8 OLD LINE BANK SALARY CONTINUATION AGREEMENT      THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 3rd day of January, 2006, by and between OLD LINE BANK, a state-chartered commercial bank located in Waldorf, Maryland (the “Bank”) and CHRISTINE RUSH (the “Executive”). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time. Article 1 Definitions      Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1   “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.   1.2   “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.   1.3   “Board” means the Board of Directors of the Bank as from time to time constituted.   1.4   “Change in Control” means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.   1.5   “Code” means the Internal Revenue Code of 1986, as amended.   1.6   “Disability” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank. Upon the request of the Plan Administrator, the   --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement     Executive must submit proof to the Plan Administrator of the Social Security Administration’s or provider’s determination.   1.7   “Early Termination” means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control.   1.8   “Effective Date” means January 1, 2006.   1.9   “Normal Retirement Age” means the Executive attaining age sixty-five (65).   1.10   “Normal Retirement Date” means the later of Normal Retirement Age or Separation from Service.   1.11   “Plan Administrator” means the plan administrator described in Article 6.   1.12   “Plan Year” means each twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31.   1.13   “Schedule A” means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.   1.14   “Separation from Service” means the termination of the Executive’s employment with the Bank for reasons other than death or Disability. Whether a Separation form Service takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A termination of employment will not be considered a Separation from Service if:   (a)   the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or     (b)   the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period). 1 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement 1.15   “Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank if any stock of the Bank is publicly traded on an established securities market or otherwise.   1.16   “Termination for Cause” means Separation from Service for:   (a)   Gross negligence or gross neglect of duties to the Bank; or     (b)   Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or     (c)   Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Bank. Article 2 Distributions During Lifetime 2.1   Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.   2.1.1   Amount of Benefit. The annual benefit under this Section 2.1 is Fifty Six Thousand Six Hundred Fifty-Eight Dollars ($56,658).     2.1.2   Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Normal Retirement Date. The annual benefit shall be distributed to the Executive for fifteen (15) years. 2.2   Early Termination Benefit. Upon the Executive’s Early Termination, the Bank shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.   2.2.1   Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year in which Separation from Service occurs.     2.2.2   Distribution of Benefit. The Bank shall distribute the benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Normal Retirement Age. The annual benefit shall be distributed to the Executive for fifteen (15) years. 2.3   Disability Benefit. If the Executive’s Disability results in Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article. 2 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement   2.3.1   Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year in which the Separation from Service occurs.     2.3.2   Distribution of Benefit. The Bank shall distribute the benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Normal Retirement Age. The annual benefit shall be distributed to the Executive for fifteen (15) years. 2.4   Change in Control Benefit. Upon a Change in Control followed by the Executive’s Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.   2.4.1   Amount of Benefit. The annual benefit under this Section 2.4 is the Change of Control Benefit set forth on Schedule A for the Plan Year in which the Separation from Service occurs.     2.4.2   Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.     2.4.3   Excess Parachute Payment Gross-up. If any benefit payable under this Agreement would create an excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall pay to the Executive an additional amount (the “Gross-up”) equal to: the Executive’s excise penalty tax amount divided by the sum of (one minus the sum of the penalty tax rate plus the Executive’s marginal income tax rate) The Gross-up shall be paid in equal annual payments for fifteen years. 2.5   Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified. 3 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement 2.6   Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the account value into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive’s vested account value, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.   2.7   Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:   (a)   may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder;     (b)   must, for benefits distributable under Article 2, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and     (c)   must take effect not less than twelve months after the amendment is executed. Article 3 Distribution at Death 3.1   Death During Active Service. If the Executive dies while in the active service of the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.   3.1.1   Amount of Benefit. The benefit under this Section 3.1 is the benefit set forth on Schedule A for the Plan Year in which the Executive’s death occurs.     3.1.2   Distribution of Benefit. The Bank shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing within sixty (60) days following receipt by the Bank of the Executive’s death certificate. The annual benefit shall be distributed to the Beneficiary for a period of fifteen (15) years. 3.2   Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Executive had the Executive survived.   3.3   Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit 4 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement     distributions shall commence within thirty (30) days following receipt by the Bank of the Executive’s death certificate. Article 4 Beneficiaries 4.1   Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.   4.2   Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death.   4.3   Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.   4.4   No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate.   4.5   Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount. 5 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement Article 5 General Limitations 5.1   Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment with the Bank is terminated due to a Termination for Cause.   5.2   Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason.   5.3   Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act. Article 6 Administration of Agreement 6.1   Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.   6.2   Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.   6.3   Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.   6.4   Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the 6 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement     members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.   6.5   Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.   6.6   Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement. Article 7 Claims And Review Procedures 7.1   Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:   7.1.1   Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.     7.1.2   Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.     7.1.3   Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:   (a)   The specific reasons for the denial;     (b)   A reference to the specific provisions of the Agreement on which the 7 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement       denial is based;     (c)   A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;     (d)   An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and     (e)   A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. 7.2   Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:   7.2.1   Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.     7.2.2   Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.     7.2.3   Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.     7.2.4   Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.     7.2.5   Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:   (a)   The specific reasons for the denial;     (b)   A reference to the specific provisions of the Agreement on which the denial is based; 8 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement   (c)   A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and     (d)   A statement of the claimant’s right to bring a civil action under ERISA Section 502(a). Article 8 Amendments and Termination 8.1   Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.   8.2   Plan Termination Generally. The Bank may unilaterally terminate this Agreement at any time. The benefit shall be the Accrual Balance as of the date the Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.   8.3   Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:   (a)   Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;     (b)   Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practical; or     (c)   Upon the Bank’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination; 9 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement     the Bank may distribute the Deferral Account balance, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms. Article 9 Miscellaneous 9.1   Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.   9.2   No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.   9.3   Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.   9.4   Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.   9.5   Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Maryland, except to the extent preempted by the laws of the United States of America.   9.6   Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.   9.7   Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the success or 10 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement     survivor bank.   9.8   Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.   9.9   Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.   9.10   Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.   9.11   Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.   9.12   Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.   9.13   Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Chief Financial Officer Old Line Bank P.O. Box 1890 Waldorf, Md. 20604     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 on the receipt for registration or certification.       Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.   9.14   Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement. 11 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement 9.15   Rescissions. Any modification to the terms of this Agreement that would inadvertently result in an additional tax liability on the part of the Executive, shall have no effect to the extent the change in the terms of the plan is rescinded by the earlier of a date before the right is exercised (if the change grants a discretionary right) and the last day of the calendar year during which such change occurred.      IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.               EXECUTIVE:   BANK:                       OLD LINE BANK                   /s/ Christine M. Rush   By   /s/ James W. Cornelsen                   Christine Rush                 Title   President     12 --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement BENEFICIARY DESIGNATION FORM { } New Designation { } Change in Designation I, ______, designate the following as Beneficiary under the Agreement:                 Primary:                                               %                                                   %                                           Contingent:                                               %                                                   %                                   Notes:   •   Please PRINT CLEARLY or TYPE the names of the beneficiaries.     •   To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.     •   To name your estate as Beneficiary, please write “Estate of _[your name]_”.     •   Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you. I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.           Name:   Christine M. Rush               Signature:   /s/ Christine M. Rush   Date: 01/03/06           Received by the Plan Administrator this 3rd day of January  , 2006           By:   /s/ James W. Cornelsen                         Title:   President       --------------------------------------------------------------------------------   OLD LINE BANK Salary Continuation Agreement SCHEDULE A OLD LINE BANK SALARY CONTINUATION PLAN AGREEMENT Christine Rush                                                       Early Termination   Disability   Change in   Pre-Retirement Separation           Annual Benefit   Annual Benefit   Control Annual   Annual Death Occurring After   Age   (1)   (1)   Benefit (2)   Benefit 1/1/2006     49     $ 0     $ 0     $ 27,033     $ 56,658   1/1/2007     50     $ 3,696     $ 3,696     $ 28,384     $ 56,658   1/1/2008     51     $ 7,392     $ 7,392     $ 29,804     $ 56,658   1/1/2009     52     $ 11,088     $ 11,088     $ 31,294     $ 56,658   1/1/2010     53     $ 14,784     $ 14,784     $ 32,858     $ 56,658   1/1/2011     54     $ 18,480     $ 18,480     $ 34,501     $ 56,658   1/1/2012     55     $ 22,176     $ 22,176     $ 36,226     $ 56,658   1/1/2013     56     $ 25,872     $ 25,872     $ 38,038     $ 56,658   1/1/2014     57     $ 29,568     $ 29,568     $ 39,940     $ 56,658   1/1/2015     58     $ 33,264     $ 33,264     $ 41,937     $ 56,658   1/1/2016     59     $ 36,960     $ 36,960     $ 44,033     $ 56,658   1/1/2017     60     $ 40,656     $ 40,656     $ 46,235     $ 56,658   1/1/2018     61     $ 44,352     $ 44,352     $ 48,547     $ 56,658   1/1/2019     62     $ 48,048     $ 48,048     $ 50,974     $ 56,658   1/1/2020     63     $ 51,744     $ 51,744     $ 53,523     $ 56,658   1/1/2021     64     $ 55,440     $ 55,440     $ 56,199     $ 56,658   3/6/2021 (3)     65     $ 56,658     $ 56,658     $ 56,658     $ 56,658     (1)   Payments are made in 180 equal monthly installments commencing within 60 days following Normal Retirement Age. Refer to Section 2.2 for Early Termination, and 2.3 for Disability.   (2)   Payments are made in 180 equal monthly installments commencing at Separation of Service. Refer to Section 2.4 for Change in Control.   (3)   This is the date the Executive reaches Normal Retirement Age. 1

Exhibit 10.55 First Amendment to Lease Termination and Mutual Release Agreement with NBP, 131-133-141, LLC   [ex1055_1.gif] [ex1055_2.gif] [ex1055_3.gif]

Exhibit 10.3 Lock-Up Agreement ----------------- The undersigned is the beneficial owner of shares of common stock, $0.01 par value per share (the "COMMON STOCK") of SWMX, Inc., a Delaware corporation (the "COMPANY"). Such securities owned by the undersigned are subject to this Agreement. The undersigned understands that the Company intends to enter into a private placement of up to 4,000,000 shares of Common Stock for an aggregate purchase price of $12,000,000 (the "FUNDING TRANSACTION"), as may be revised by the Company without effect on the terms of this Agreement or obligations of the undersigned hereunder. In recognition of the benefit that the Funding Transaction will confer upon the undersigned, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees, for the benefit of the Company, and each investor in the Funding Transaction, that, during the period commencing on the initial closing date of the Funding Transaction and ending nine (9) months after the closing of the Funding Transactions (the "LOCK UP PERIOD"), the undersigned will not, without the prior written consent of the Company and investors holding at least a majority of the Common Stock issued in the Funding Transaction other than including the 866,666 shares of Common Stock issued to Alowex, LLC and Remnant Media, LLC, in exchange for the accrued liabilities owed to such entities directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future), any shares of Common Stock, or securities convertible into or exchangeable for Common Stock, beneficially owned (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the undersigned during the Lock Up Period or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock, in cash or otherwise. In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this agreement. Notwithstanding the foregoing, the undersigned may transfer Common Stock if such transfer occurs by operation of law, such as rules of descent and distribution, statutes governing the effects of a merger or a qualified domestic order, provided that prior to such transfer the transferee executes an agreement stating that the transferee is receiving and holding the shares subject to the provisions of this agreement. Notwithstanding the foregoing, each of the undersigned beneficial owners may sell up to one percent (1%) of the shares of Common Stock owned by such beneficial owner beginning six (6) months after the initial closing date of the Funding Transaction. The undersigned understands that the Company and the investors will proceed with the Funding Transaction in reliance on this agreement. Whether or not the Funding Transactions are consummated depends on a number of factors, including market conditions. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. [REMAINDER OF PAGE INTENTIONALLY BLANK] 2 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Alowex LLC By: /s/ Joshua Wexler ------------------------------------ Name: Joshua Wexler Title: Member [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Wex Holdings LLC By: /s/ Joshua Wexler ------------------------------------ Name: Joshua Wexler Title: Member 2 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Christine Wexler /s/ Christine Wexler ---------------------------------------- 3 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Wexler Family Trust By: /s/ Stephen J. Donovan ------------------------------------ Name: Stephen J. Donovan Title: Trustee 4 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Joshua Wexler /s/ Joshua Wexler ---------------------------------------- 5 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. 84 Limited LLC By: /s/ Michael Capiro ------------------------------------ Name: Michael Capiro Title: Member 6 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Caprio Family Health & Educational Trust By: /s/ Erik DeMicco ------------------------------------ Name: Erik DeMicco Title: Trustee 7 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Michael Caprio /s/ Michael Caprio ---------------------------------------- 8 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Suzanne Keay /s/ Suzanne Keay ---------------------------------------- 9 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Keay Family LLC By: /s/ John I. Keay, Jr. ------------------------------------ Name: John I. Keay, Jr. Title: Member 10 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Hunter Kent Keay Trust By: /s/ Anthony Fasolino ------------------------------------ Name: Anthony Fasolino Title: Trustee 11 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Morgan Gaines Keay Trust By: /s/ Anthony Fasolino ------------------------------------ Name: Anthony Fasolino Title: Trustee 12 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. John I. Keay, Jr. /s/ John I. Keay, Jr. ---------------------------------------- 13 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Aloizos Family LLC By: /s/ Stavros Aloizos ------------------------------------ Name: Stavros Aloizos Title: Member 14 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Doreen Aloizos /s/ Doreen Aloizos ---------------------------------------- 15 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Aloizos Family Trust By: /s/ Stavros Aloizos ------------------------------------ Name: Stavros Aloizos Title: Member 16 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Stavros Aloizos /s/ Stavros Aloizos ---------------------------------------- 17 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Aloizos AAU Fund LLC By: /s/ Stavros Aloizos ------------------------------------ Name: Stavros Aloizos Title: Member 18 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Laurence and Bonnie Gershman JTWROS /s/ Laurence Gershman ---------------------------------------- /s/ Bonnie Gershman ---------------------------------------- 19 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Bonnie Geller IRA /s/ Bonnie Geller ---------------------------------------- 20 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Laurence Gershman IRA /s/ Laurence Gershman ---------------------------------------- 21 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Amy Gershman /s/ Amy Gershman ---------------------------------------- 22 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Jonathan Gershman /s/ Jonathan Gershman ---------------------------------------- 23 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Omphalius Family LLC By: /s/ Charles Omphalius ------------------------------------ Name: Charles Omphalius Title: Member 24 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Trust for Kimberly Omphalius By: /s/ W. Whitfield Wells ------------------------------------ Name: W. Whitfield Wells Title: Trustee 25 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Omphalius Family Health & Educational Trust By: /s/ W. Whitfield Wells ------------------------------------ Name: W. Whitfield Wells Title: Trustee 26 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Daniel Leger Trust By: /s/ W. Whitfield Wells ------------------------------------ Name: W. Whitfield Wells Title: Trustee 27 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Trust for Alecia Leger By: /s/ W. Whitfield Wells ------------------------------------ Name: W. Whitfield Wells Title: Trustee 28 [SIGNATURE PAGE TO LOCK-UP AGREEMENT] IN WITNESS WHEREOF, the undersigned has caused this Lock-Up Agreement to be executed as of the 26th day of July 2006. Charles Omphalius /s/ Charles Omphalius ---------------------------------------- 29

Exhibit 10.10   VIASYS HEALTHCARE INC.   CHANGE IN CONTROL EXECUTIVE RETENTION AGREEMENT                   THIS AGREEMENT by and between VIASYS Healthcare Inc., a Delaware corporation (the “Company”), and Scott Hurley (the “Executive”) made and entered into as of September 26, 2005 (the “Effective Date”).                 WHEREAS, the Company recognizes that the possibility of a change in control of the Company exists and that such possibility, and the uncertainty and questions that it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company and its stockholders; and                 WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Company’s Vice President, Corporate Controller, without distraction from the possibility of a change in control of the Company and related events and circumstances; and                 WHEREAS, this Agreement will replace and supersede all prior severance agreements between the Executive and the Company or its subsidiaries, including, without limitation, the portion of the letter from the Company to the Executive, dated March 10, 2005, that relates to severance payments (the “Offer Letter Severance Commitment”).                 NOW, THEREFORE, as an inducement for and in consideration of the Executive’s remaining in its employ, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event the Executive’s employment with the Company is terminated under the circumstances described below subsequent to a Change in Control (as defined in Section 1.1). 1.             KEY DEFINITIONS. As used herein, the following terms shall have the following respective meanings: 1.1           “CHANGE IN CONTROL” means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection): (a)           the acquisition by an 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 of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) forty percent (40%) or more of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”), or (ii) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i)            any acquisition by the Company, or (ii)           any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (b)           the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (i) who was a member of the Board on the date of the execution of this Agreement or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred 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 Board; (c)           the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company in one or a series of transactions (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries); or (d)           approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 1.2           “CHANGE IN CONTROL DATE” means the date on which a Change in Control occurs. 1.3           “CAUSE” means (i) repeated failure to comply with reasonable directives of relevant senior officers, (ii) commission of a felony that is materially   2 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   detrimental to the Company or its successor organization, or (iii) continued gross neglect of the Executive’s duties with the Company or its successor organization (other than as a result of physical or mental incapacity or illness). 2.             LENGTH OF AGREEMENT.  This Agreement, and all rights and obligations of the parties hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of (a) the date that is twelve (12) months after the Change in Control Date, if the Executive is still employed by the Company or its successor organization as of such later date, or (b) the fulfillment by the Company or its successor organization of all of its obligations under Section 4 if the Executive’s employment is terminated by the Company or its successor organization without Cause within twelve (12) months following the Change in Control Date. 3.             NOT AN EMPLOYMENT CONTRACT. The Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company or its successor organization any obligation to retain the Executive as an employee, and that this Agreement does not prevent the Executive from terminating employment at any time. 4.             BENEFITS TO EXECUTIVE. 4.1           SEVERANCE.  If the Executive’s employment is terminated by the Company or its successor organization without Cause upon or within twelve (12) months following a Change in Control of the Company, the Company or its successor organization shall pay to the Executive in a lump sum within sixty (60) days after the date of termination an amount equal to twelve (12) months of base pay.  Base pay shall mean the Executive’s rate of wages or salary on the date of termination, excluding all extra pay such as incentive bonuses, car allowances or other allowances.  Severance benefits shall not be considered compensation or continuing employment for purposes of determining benefits that are provided under any plans maintained by the Company or its successor organization, including, without limitation, the Company’s or its successor organization’s retirement plan(s) and equity compensation plan(s). 4.2           OTHER BENEFITS.  To the extent not previously paid or provided, the Executive or the Executive’s estate or beneficiaries, as the case may be, shall also be entitled to the balance of any base pay or incentive awards due the Executive but not yet paid (including, without limitation, awards due for performance periods that have been completed, but have not yet been paid), any vacation pay accrued but not yet paid, any expense reimbursements due the Executive, and other benefits, if any, in accordance with applicable plans or programs of or contracts or agreements of the Executive with the Company.  In addition, unless indicated otherwise in this Agreement, the treatment of any options granted to the Executive shall be governed by the terms of the VIASYS Equity Incentive Plan or other relevant equity compensation plan or any associated stock option agreement. 4.3           MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided in this Section 4 by seeking other employment or otherwise. Further, the amount of any payment provided in this Section 4 shall not be   3 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   reduced by any compensation earned by the Executive as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or its successor organization, or otherwise. 5.             TERMINATION AGREEMENT AND RELEASE.  The payment to the Executive under Section 4 shall be conditioned upon the Executive’s execution of an agreement not to disparage the Company or its successor organization, or otherwise take any action that could reasonably be expected to adversely affect the reputation of the Company or its successor organization, and generally to release and waive claims against the Company or its successor organization, such agreement to be in a form satisfactory to the Company or its successor organization in its sole discretion, within ten (10) business days of the Executive’s date of termination, or within such longer period required by law for enforceability of the agreement and release.  The payment under Section 4 of this Agreement shall not become due until such time as the Executive has executed the agreement and release referred to in the previous sentence.  In addition, the Executive’s right to payment under this Agreement shall cease upon the Executive’s rescission or material breach of the agreement. 6.             DISPUTES. Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration, to be held in Philadelphia, Pennsylvania, in accordance with the rules and procedures of the American Arbitration Association.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 7.             SUCCESSORS. 7.1           SUCCESSOR TO COMPANY. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement. 7.2           SUCCESSOR TO EXECUTIVE. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive or the Executive’s family hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate. 8.             NOTICE. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the Company or its successor organization, at 227 Washington Street, Suite 200, Conshohocken, PA 19428 and to the Executive at the Executive’s principal residence as currently reflected on the Company’s or its successor organization’s records   4 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   (or to such other address as either the Company or its successor organization, or the Executive may have furnished to the other in writing in accordance herewith).  Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communication hereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly delivered unless and until it actually is received by the party for whom it is intended. 9.             MISCELLANEOUS. 9.1           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, which shall remain in full force and effect. 9.2           GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles. 9.3           WAIVERS. No waiver by the Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company or its successor organization shall be deemed a waiver of that or any other provision at any subsequent time. 9.4           COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument. 9.5           TAX WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state or local law. 9.6           ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein, including without limitation the Offer Letter Severance Commitment; and any prior agreement of the parties hereto in respect of the subject matter contained herein, including without limitation the Offer Letter Severance Commitment, is hereby terminated and cancelled. 9.7           AMENDMENTS. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive. [Remainder of Page Intentionally Left Blank]   5 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------                   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.           VIASYS HEALTHCARE INC.                                   By: /s/ RANDY H. THURMAN           Name: Randy H. Thurman           Title: Chief Executive Officer                                               EXECUTIVE                       /s/ SCOTT HURLEY           Scott Hurley   6 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------

FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT       THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of March 1, 2005 is among HEARTLAND FINANCIAL USA, INC., a corporation formed under the laws of the State of Delaware (the "Borrower"), each of the banks party hereto (individually, a "Bank" and collectively, the "Banks") and THE NORTHERN TRUST COMPANY, as agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent").       WHEREAS, the Borrower, the Agent and the Banks have entered into a Credit Agreement dated as of January 31, 2004 (as hereto amended, the "Credit Agreement"); and       WHEREAS, the Borrower, the Agent and the Banks wish to extend the maturity of the Credit Agreement and make certain other amendments to the Credit Agreement;       NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:       1.  Definitions. Terms defined in the Credit Agreement and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement and terms defined in the introductory paragraphs or other provisions of this Amendment shall have the respective meanings attributed to them therein. In addition, the following terms shall have the following meanings (terms defined in the singular having a correlative meaning when used in the plural and vice versa):       "Effective Date" shall mean March 1, 2005, if (i) this Amendment shall have been executed and delivered by the Borrower, the Agent and the Banks and (ii) the Borrower shall have performed its obligations under Section 4 hereof.       2.  Return on Assets. Section 7.4(e) of the Credit Agreement is hereby amended to state in its entirety as follows:       "(e) Return on Average Assets -Borrower. The Borrower's consolidated income shall be at least 0.70% of its average assets, calculated as at the last day of each fiscal quarter for the four fiscal quarter period ending on that date."       3.  Indebtedness. Section 7.5 of the Credit Agreement is hereby amended to state in its entirety as follows:           "7.5 Indebtedness, Liens And Taxes, The Borrower and each Subsidiary shall:       (a) Indebtedness,. Not incur, permit to remain outstanding, assume or in any way become committed for Indebtedness (specifically including but not limited to Indebtedness in respect of money borrowed from financial institutions but excluding deposits), except: (i) in the case of the Borrower, Indebtedness incurred hereunder, and in the case of the Guarantors, under their respective Guaranty Agreement; (ii) Indebtedness existing on the date of this Agreement and described on Schedule 7.5(a) hereof; (iii) Indebtedness of any Subsidiary arising in the ordinary course of the business of such Subsidiary; (iv) in the case of ULTEA, the US Bank Indebtedness outstanding on the date hereof in the principal amount of $11,418,871.69, less the aggregate amount of all repayments thereunder after the date of this Agreement; (v) in the case of CFC, Indebtedness under commercial paper issued by CFC which, together with any other commercial paper identified on Schedule 7,5(a) hereto, shall not exceed an aggregate principal amount of $20,000,000; (vu) in the case of the Borrower, Trust Indebtedness and Trust Guarantees, and in the case of any Trust Issuer, Trust Preferred Securities, provided, that the aggregate of such Trust Indebtedness (and the related Trust Guarantees and Trust Preferred Securities) shall not exceed $88,000,000 at any time outstanding; (vii) in the event any transfer or contribution of accounts receivable of ULTEA to a special purpose vehicle in accordance with Section 7,1(d is deemed to constitute a secured financing, Indebtedness of ULTEA to such special purpose vehicle, secured by the account receivables and related rights transferred to such special purpose vehicle only (the "Factored Receivables"), provided, that such Indebtedness shall not exceed an amount equal to $30,000,000 in the aggregate during the term of this Agreement; (viii) in the case of the Borrower, Indebtedness to the City of Dubuque, Iowa, in an amount not to exceed $300,000 to be used for the purpose 6f funding building improvements; (ix) in the case of the Borrower, Indebtedness in an aggregate amount not in excess of $2,750,000 under the Agreement to Organize and Stockholder Agreement dated February 1, 2003 and the Supplemental Initial Investor Agreement dated February I, 2003 and (x) additional Indebtedness not to exceed $1,000,00 at any time outstanding.       4.     Revolving Credit Termination Date. The definition of "Revolving Credit Commitment Termination Date" is hereby amended by the deletion of the date "March 1, 2005" and the substitution of the date "February 28, 2006" thereof.       5.     Conditions to Effective Date. The occurrence of the Effective Date shall be subject to the satisfaction of the following conditions precedent:           (a)  The Borrower, the Agent and. the Banks shall have . executed and delivered, this Amendment.           (b)  No Default shall have occurred and be continuing under the Credit Agreement, and the representations and warranties of the Borrower in Section 6 of the Credit Agreement and in Section 7 hereof shall be true and correct on and as of the Effective Date and the Borrower shall have provided to the Agent a certificate of a senior officer of the Borrower to that effect.           (e)   Each Guarantor shall acknowledge and consent to this Amendment for purposes of its Guaranty Agreement as evidenced by its signed acknowledgment of this Amendment on the signature page hereof,         (d)    The Borrower shall have delivered to the Agent, on behalf of the Banks, such other documents as the Agent may reasonably request.       6.    Effective Date Notice. Promptly following the occurrence of the Effective Date, the Agent shall give notice to the parties of the occurrence of' the Effective Date, which notice shall be conclusive, and the parties may rely thereon; provided, that such notice shall not waive or otherwise limit any right or remedy of the Agent or the Banks arising out of any failure of any condition precedent set forth in Section 5 to be satisfied.       7.      Ratification, The parties agree that the Credit Agreement, as amended hereby, and the notes have not lapsed or terminated, are in full force and effect, and are and from and after the Effective Date shall remain binding in accordance with their terms.       8.     Representations and Warranties. The Borrower represents and warrants to the Agent and the Banks that:           (a)  No Breach. The execution, delivery and performance of this Amendment will not conflict with or result in a breach of, or cause the creation of a Lien or require any consent under, the articles of incorporation or bylaws of the Borrower, or any applicable law or regulation, or any order, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Borrower is a party or by which it or its property is bound.           (b)  Power and Action, Binding Effect. The Borrower has been duly incorporated and is validly existing as a corporation under the laws of the State of Delaware and has all necessary power and authority to execute, deliver and perform its obligations under this Amendment and the Credit Agreement, as amended by this Amendment; the execution, delivery and performance by the Borrower of this Amendment and the Credit Agreement, as amended by this Amendment, have been duly authorized by all necessary action on its part; and this Amendment and the Credit Agreement, as amended by this Amendment, have been duly and validly executed and delivered by the Borrower and constitute legal, valid and binding obligations, enforceable in accordance with their respective terms.           (c)  Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency or any other person are necessary for the execution, delivery or performance by the Borrower of this Amendment or the Credit Agreement, as amended by this Amendment, or for the validity or enforceability thereof.       9.    Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the Borrower, the Agent and the Banks and their respective successors and assigns, except that the Borrower may not transfer or assign any of its rights or interest hereunder.       10.    Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Illinois.       11.    Counterparts,. This Amendment may be executed in any number of counterparts and each party hereto may execute any one or more of such. counterparts, all of which shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telecopy shall be as effective as delivery of a manually executed counterpart of this amendment.       12.    Expenses. Whether or not the effective date shall occur, without limiting the obligations of the Borrower under the Credit Agreement, the Borrower agrees to pay, or to reimburse on demand, all reasonable costs and expenses incurred by the Agent in connection with the negotiation, preparation, execution, delivery, modi e Lion, amendment or enforcement of this Amendment, the Credit Agreement and the other agreements, documents and instruments referred to herein, including the reasonable fees and expenses of Mayer, Brown, Rowe & Maw LLP, special counsel to the Agent, and any other counsel engaged by the Agent, [Signature Page Follows]         --------------------------------------------------------------------------------   IN WITNESS WHEREOF, this Amendment has been executed as of the date first above written. HEARTLAND FINANCIAL USA, INC. By: /s/ John K. Schmidt Name: John K. Schmidt Title: EVP, CFO, COO THE NORTHERN TRUST COMPANY As Agent By: /s/ Thomas E. Bernhardt Name: Thomas E. Bernhardt Title: Vice President BANKS: THE NORTHERN TRUST COMPANY By: /s/ Thomas E. Bernhardt Name: Thomas E. Bernhardt Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Michael S. Cameli Name: Michael S. Cameli Title: Vice President U.S. BANK NATIONAL ASSOCIATION By: /s/ Jay Strunk Name: Jay Strunk Title: Assistant Vice President     --------------------------------------------------------------------------------   GUARANTOR ACKNOWLEDGEMENT Each of the undersigned Guarantors hereby acknowledges and consents to the Borrower’s execution of this Amendment. CITIZENS FINANCE CO.                ULTEA, INC. By: /s/ John K. Schmidt                     By: /s/ John K. Schmidt Title: Treasurer                       Title: Treasurer     --------------------------------------------------------------------------------   CERTIFICATE   The undersigned as Executive Vice President, Chief Financial Officer and Chief Operating Officer of Heartland Financial USA, Inc., hereby certifies as follows:   1.  No Default, as defined in the Credit Agreement among Heartland Financial USA, Inc. (the "Borrower"), certain banks and The Northern Trust Company as agent, as amended ("Credit Agreement") has occurred and is continuing. 2.  The representations and warranties of the Borrower in Section 6 of the Credit Agreement and in Section 7 of the Fourth Amendment and Waiver to Credit Agreement dated as of March 1, 2005, are true and correct on and as of the date hereof.   IN WITNESS WHEREOF, the undersigned has executed this Certificate as of March 1, 2005. HEARTLAND FINANCIAL USA, INC. By: /s/ John K. Schmidt Name: John K. Schmidt Title: EVP, CFO, COO    

-------------------------------------------------------------------------------- EXCHANGE AND VOTING TRUST AGREEMENT MEMORANDUM OF AGREEMENT made as of the 29TH day of September, 2006 BETWEEN : FC FINANCIAL SERVICES INC., a corporation existing under the laws of the State of Nevada,       (hereinafter referred to as the “Parent”)     AND : 1260491 ALBERTA INC., a corporation existing under the laws of Alberta,       (hereinafter referred to as the “Exchangeco”)     AND: EQUITY TRANSFER & TRUST COMPANY, a corporation existing under the laws of Canada,       (hereinafter referred to as the “Voting Trustee”)     AND: SASS PERESS of the District of Montreal,       (hereinafter referred to as “Peress”)     AND: JOEL COHEN, of the District of Montreal,       (hereinafter referred to as “Cohen”)     AND: ARLENE ADES, of the District of Montreal       (hereinafter referred to as “Ades”)     AND: THE SASS PERESS FAMILY TRUST, a trust established under the laws of the Province of Quebec       (hereinafter referred to as “Trust I”)     AND: THE PERESS FAMILY TRUST, a trust established under the laws of the Province of Quebec       (hereinafter referred to as “Trust II”) -------------------------------------------------------------------------------- - 2 - AND: EASTERN LIQUIDITY PARTNERS LTD., a corporation existing under the laws of Canada       (hereinafter referred to as “Eastern Liquidity”)     (Peress, Cohen, Ades. Trust I, Trust II and Eastern Liquidity being collectively referred to as the “ICP Shareholders”)     AND: TARAS CHEBOUNTCHAK,       (hereinafter referred to as “Chebountchak”)     AND: ORIT STOLYAR,       (hereinafter referred to as “Stolyar”)     (Chebountchak and Stolyar being collectively referred to as the “Depositing Shareholders”) WHEREAS pursuant to a share purchase agreement (the “Share Purchase Agreement”) dated as of September 28, 2006, between the Parent, Exchangeco, the ICP Shareholders and the Depositing Shareholders, Exchangeco is to issue exchangeable shares (the “Exchangeable Shares”) to certain holders of Class A shares of ICP Solar Technologies Inc. (the “Corporation”); WHEREAS the ICP Shareholders were, prior to the execution of the Share Purchase Agreement, the owners of all of the issued and outstanding Class A shares of the Corporation; WHEREAS pursuant to the Share Purchase Agreement, the Parent and Exchangeco have agreed to execute a voting and exchange trust agreement substantially in the form of this Agreement; AND WHEREAS the Share Purchase Agreement provides, inter alia, that certain shareholders of the Parent shall deposit with the Voting Trustee 20,000,000 Parent Common Shares held by the Depositing Shareholders (such shares and any other shares in respect of which share certificates are deposited with the Voting Trustee pursuant to the provisions of this Agreement being collectively hereafter referred to as the “Deposited Shares”); -------------------------------------------------------------------------------- - 3 - NOW THEREFORE in consideration of the respective covenants and agreement provided in this Agreement and for other valuable consideration (the receipt and sufficiency of which are acknowledged), the parties agree as follows. ARTICLE 1 - DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Agreement, the following terms shall have the following meanings: “Affiliate” of any person means any other person directly or indirectly controlled by, or under common control of, that person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control of”), as applied to any person, means the possession by another person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned person, whether through the ownership of voting securities, by contract or otherwise; “Agreement” means this Voting and Exchange Trust Agreement and any amendments, supplements or addendums hereto; “Authorized Person” has the meaning ascribed thereto in section 5.15; “Automatic Exchange Rights” means the benefit of the obligation of the Parent to effect the automatic exchange of Parent Common Shares for Exchangeable Shares pursuant to section 5.13; “Board of Directors” means the Board of Directors of Exchangeco; “Business Day” means any day on which commercial banks are open for business in New York, New York, and Montreal, Quebec, other than a Saturday, a Sunday or a day observed as a holiday in Montreal, Quebec under the laws of the province of Quebec or the federal laws of Canada or in New York, New York under the laws of the State of New York or the federal laws of the United States of America; “Canadian Dollar Equivalent” means, in respect of an amount expressed in a currency other than Canadian Dollars (the “Foreign Currency Amount”) at any date, the product obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such exchange rate on such date be deemed by the Board of Directors to be appropriate for such purpose; -------------------------------------------------------------------------------- - 4 - “Current Market Value” shall have the meaning attributed to such term in the Exchangeable Share Provisions; “Deposited Shares” has the meaning attributed thereto in the preamble hereof; “Exchangeable Share Provisions” means the rights, privileges, restrictions and conditions attached to the Exchangeable Shares in its Articles of Incorporation; “Exchangeable Shares” means the non-voting exchangeable shares in the capital of Exchangeco; “Insolvency Event” means the institution by Exchangeco of any proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the consent of Exchangeco to the institution of bankruptcy, insolvency or winding-up proceedings against it, or the filing of a petition, answer or consent seeking dissolution or winding-up under any bankruptcy, insolvency or analogous laws, including without limitation the Companies Creditor’s Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by Exchangeco to contest in good faith any such proceedings commenced in respect of Exchangeco within 30 days of becoming aware thereof, or the consent by Exchangeco to the filing of any such petition or to the appointment of a receiver, or the making by Exchangeco of a general assignment for the benefit of creditors, or the admission in writing by Exchangeco of its inability to pay its debts generally as they become due; “Insolvency Exchange Right” has the meaning ascribed thereto in Section 5.1; “Liquidation Call Right” has the meaning ascribed thereto in the Exchangeable Share Provisions; “Notice Event” has the meaning ascribed thereto in section 8.17; “Officer’s Certificate” means, with respect to the Parent or Exchangeco, as the case may be, a certificate signed by any officer of the Parent or Exchangeco, as the case may be; “Parent Affiliates” means Affiliates of the Parent; “Parent Common Share” means the share of common stock, par value U.S. $0.00001, in the capital stock of the Parent; “Parent Consent” has the meaning ascribed thereto in section 4.2; “Parent Meeting” has the meaning ascribed thereto in section 4.2; -------------------------------------------------------------------------------- - 5 - “Parent Successor” has the meaning ascribed thereto in section 12.1(a);     “Person” includes any individual, partnership, corporation, company, unincorporated syndicate or organization, trust, trustee, executor, administrator and other legal representative;     “Redemption Call Right” has the meaning ascribed thereto in the Exchangeable Share Provisions;     “Retracted Shares” has the meaning ascribed thereto in section 5.7;     “Retraction Call Right” has the meaning ascribed thereto in the Exchangeable Share Provisions;     “Share Purchase Agreement” has the meaning attributed thereto in the preamble hereof;     “Support Agreement” means that certain Exchangeable Support Agreement made as of even date herewith between Exchangeco, the Voting Trust Beneficiaries, the Parent and the Voting Trustee;     “Trust Estate” means the Deposited Shares, any other securities, the Exchange Right, the Automatic Exchange Rights and any money or other property which may be held by the Voting Trustee from time to time pursuant to this Agreement;     “Voting Trust” means the trust created by this Agreement;     “Voting Trust Beneficiaries” means the registered holders from time to time of Exchangeable Shares, other than the Parent and its Affiliates, and “Voting Trust Beneficiary” means one of the Voting Trust Beneficiaries;     “Voting Trust Beneficiary Votes” has the meaning ascribed thereto in section 4.2;     “Voting Trustee” means Equity Transfer & Trust Company and, subject to the provisions of ARTICLE 11, includes any successor trustee; and     “Voting Rights” means the voting rights attached to the Deposited Shares.     1.2 Interpretation Not Affected by Headings, etc.     The division of this Agreement into Articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless otherwise indicated, all references to an “Article” or “section” followed by a number and/or a letter refer to the specified Article or section of this agreement. The terms “this trust -------------------------------------------------------------------------------- - 6 - agreement”, “hereof”, “herein” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.   1.3 Number, Gender, etc.   Words importing the singular number only shall include the plural and vice versa. Words importing any gender shall include all genders.   1.4 Date for any Action   If any date on which any action is required to be taken under this Agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day. ARTICLE 2 – PURPOSE OF AGREEMENT 2.1 Establishment of Voting Trust     The purpose of this Agreement is to create the Voting Trust for the benefit of the Voting Trust Beneficiaries, as herein provided. The Voting Trustee will hold the Deposited Shares to enable the Voting Trustee to exercise the Voting Rights, hold the Insolvency Exchange Right and Automatic Exchange Rights and enable the Voting Trustee to exercise such rights, in each case as trustee for and on behalf of the Voting Trust Beneficiaries as provided in this Agreement. ARTICLE 3 – DEPOSIT OF TRUST SHARES 3.1 Deposit of Share Certificates     The Depositing Shareholders have deposited or shall deposit concurrently herewith with the Voting Trustee certificates registered to them representing the Deposited Shares. All certificates representing Deposited Shares (“Deposited Share Certificates”) shall be registered in the name of the Voting Trustee, and this Agreement shall be the equivalent of voting trust certificates for the Depositing Shareholders and shall evidence their beneficial title to their respective Deposited Shares.     The Voting Trustee shall issue a receipt for the Deposited Shares and shall issue its receipt for any additional shares deposited by the Depositing Shareholders. Any consolidations, sub-divisions or stock dividends affecting or accruing to the Deposited Shares shall be governed by the provisions of this Agreement, and certificates representing the appropriate number of shares shall be deposited by the Depositing Shareholders with the Voting Trustee. -------------------------------------------------------------------------------- - 7 - The Voting Trustee shall retain possession of the Deposited Share Certificates and documentation on behalf of the Depositing Shareholders.   Neither the Depositing Shareholders, nor the Voting Trustee nor the ICP Shareholders shall be entitled to receive any dividend payments in respect of the Deposited Shares. The Depositing Shareholders hereby waive any rights to receive any dividends in respect of the Deposited Shares.   The Depositing Shareholder shall not, during the term of the present Agreement, sell, transfer, assign, pledge, hypothecate or otherwise encumber any of the Deposited Shares to, or in favour of, a third party.   3.2 Legended Share Certificates   Exchangeco will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Voting Trust Beneficiaries of their right to instruct the Voting Trustee with respect to the exercise of the Voting Rights in respect of the Exchangeable Shares of the Voting Trust Beneficiaries. ARTICLE 4– EXERCISE OF VOTING RIGHTS 4.1 Voting Rights     The Voting Trustee, as the holder of record of the Deposited Shares, shall be entitled to all of the Voting Rights, including the right to vote in person or by proxy the Deposited Shares on any matters, questions, proposals or propositions whatsoever that may properly come before the Voting Trust Beneficiaries of the Parent at a Parent Meeting or in connection with a Parent Consent. The Voting Rights shall be and remain vested in and exercised by the Voting Trustee. Subject to section 8.15:   (a) the Voting Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this ARTICLE 4 from Voting Trust Beneficiaries entitled to instruct the Voting Trustee as to the voting thereof at the time at which the Parent Meeting is held; and         (b) to the extent that no instructions are received from a Voting Trust Beneficiary with respect to the Voting Rights to which such Voting Trust Beneficiary is entitled, the Voting Trustee shall not exercise or permit the exercise of such Voting Rights. -------------------------------------------------------------------------------- - 8 - 4.2 Number of Votes     With respect to all meetings of shareholders of the Parent at which holders of Parent Common Shares are entitled to vote (each, a “Parent Meeting”) and with respect to all written consents sought by the Parent from its Voting Trust Beneficiaries (each, a “Parent Consent”), each Voting Trust Beneficiary shall be entitled to instruct the Voting Trustee to cast and exercise one of the votes comprised in the Voting Rights for each Exchangeable Share owned of record by such Voting Trust Beneficiary on the record date established by the Parent or by applicable law for such Parent Meeting or Parent Consent, as the case may be (the “Voting Trust Beneficiary Votes”), in respect of each matter, question, proposal or proposition to be voted on at such Parent Meeting or in connection with such Parent Consent.     4.3 Safekeeping of Certificates     The certificates representing the Deposited Shares shall at all times be held in safekeeping by the Voting Trustee or its agent.     4.4 Mailings to Voting Trust Beneficiaries of Exchangeable Shares     With respect to each Parent Meeting and Parent Consent, the Parent will mail or cause to be mailed (or otherwise communicate in the same manner as the Parent utilizes in communications to holders of Parent Common Shares) to each of the Voting Trust Beneficiaries named in the List (as defined below) on the same day as the initial mailing or notice (or other communication) with respect thereto is commenced by the Parent to its stockholders:   (a) a copy of such notice, together with any proxy or information statement and related materials to be provided to stockholders of the Parent;           (b) a statement that such Voting Trust Beneficiary is entitled to instruct the Voting Trustee as to the exercise of the Voting Trust Beneficiary Votes with respect to such Parent Meeting or Parent Consent, as the case may be, or pursuant to Section 4.9, to attend such Parent Meeting and to exercise personally the Voting Trust Beneficiary Votes thereat as the proxy of the Voting Trustee;           (c) a statement as to the manner in which such instructions may be given to the Voting Trustee, including an express indication that instructions may be given to the Voting Trustee to give:           (i) a proxy to such Voting Trust Beneficiary or his designee to exercise personally the Voting Trust Beneficiary Votes; or -------------------------------------------------------------------------------- - 9 -   (ii) a proxy to a designated agent or other representative of the management of the Parent to exercise such Voting Trust Beneficiary Votes;   (d) a statement that if no such instructions are received from the Voting Trust Beneficiary, the Voting Trust Beneficiary Votes to which such Voting Trust Beneficiary is entitled will not be exercised;         (e) a form of direction whereby the Voting Trust Beneficiary may so direct and instruct the Voting Trustee as contemplated herein; and         (f) a statement of: (i) the time and date by which such instructions must be received by the Voting Trustee in order to be binding upon it, which in the case of a Parent Meeting shall not be earlier than the close of business on the second Business Day prior to such meeting; and (ii) the method for revoking or amending such instructions. For the purpose of determining Voting Trust Beneficiary Votes to which a Voting Trust Beneficiary is entitled in respect of any Parent Meeting or Parent Consent, the number of Exchangeable Shares owned of record by the Voting Trust Beneficiary shall be determined at the close of business on the record date established by the Parent or by applicable law for purposes of determining stockholders entitled to vote at such Parent Meeting or to give written consent in connection with such Parent Consent.   4.5 Copies of Stockholder Information   The Parent will deliver to the Voting Trust Beneficiaries copies of all proxy materials (including notices of Parent Meetings), information statements, reports (including without limitation all interim and annual financial statements) and other written communications that are to be distributed from time to time to holders of Parent Common Shares.   4.6 Other Materials   Immediately after receipt by the Parent of any material sent or given generally to the holders of Parent Common Shares by or on behalf of a third party, including, without limitation, dissident proxy and information circulars (and related information and material) and tender and exchange offer circulars (and related information and material), the Parent shall use its best efforts to obtain and deliver copies thereof to each Voting Trust Beneficiary as soon as possible thereafter. -------------------------------------------------------------------------------- - 10 - 4.7 List of Persons Entitled to Vote     Exchangeco shall (a) prior to each annual, general and special Parent Meeting or the seeking of any Parent Consent and (b) forthwith upon each request made at any time by the Voting Trustee or the Parent in writing, prepare or cause to be prepared a list (a “List”) of the names and addresses of the Voting Trust Beneficiaries arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Voting Trust Beneficiary, in each case at the close of business on the date specified by the Voting Trustee or the Parent in such request or, in the case of a List prepared in connection with a Parent Meeting or a Parent Consent, at the close of business on the record date established by the Parent or pursuant to applicable law for determining the holders of Parent Common Shares entitled to receive notice of and/or to vote at such Parent Meeting or to give consent in connection with such Parent Consent. Each such List shall be delivered to the Voting Trustee or the Parent promptly after receipt by Exchangeco of such request or the record date for such meeting or seeking of consent, as the case may be, and in any event within sufficient time as to enable the Parent to perform its obligations under this Agreement. The Parent agrees to give Exchangeco written notice (with a copy to the Voting Trustee) of the calling of any Parent Meeting or the seeking of any Parent Consent, together with the record dates therefore, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable Exchangeco to perform its obligations under this Section 4.7.   4.8 Entitlement to Direct Votes   Any Voting Trust Beneficiary named in a List prepared in connection with any Parent Meeting or Parent Consent will be entitled (a) to instruct the Voting Trustee in the manner described in Section 4.4 with respect to the exercise of the Voting Trust Beneficiary Votes to which such Voting Trust Beneficiary is entitled or (b) to attend such meeting and personally exercise thereat, as the proxy of the Voting Trustee, the Voting Trust Beneficiary Votes to which such Voting Trust Beneficiary is entitled.     4.9 Voting by Voting Trustee, and Attendance of Voting Trustee Representative at Meeting   (a) In connection with each Parent Meeting and Parent Consent, the Voting Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Voting Trust Beneficiary pursuant to Section 4.4, the Voting Trust Beneficiary Votes as to which such Voting Trust Beneficiary is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that -------------------------------------------------------------------------------- - 11 -   such written instructions are received by the Voting Trustee from the Voting Trust Beneficiary prior to the time and date fixed by the Voting Trustee for receipt of such instructions in the notice given by the Parent to the Voting Trust Beneficiary pursuant to Section 4.4;         (b) The Voting Trustee shall cause a representative who is empowered by it to sign and deliver, on behalf of the Voting Trustee, proxies for Voting Rights to attend each Parent Meeting. Upon submission by a Voting Trust Beneficiary (or its designee) of identification satisfactory to the Voting Trustee’s representative, and at the Voting Trust Beneficiary’s request, such representative shall sign and deliver to such Voting Trust Beneficiary (or its designee) a proxy to exercise personally the Voting Trust Beneficiary Votes as to which such Voting Trust Beneficiary is otherwise entitled hereunder to direct the vote, if such Voting Trust Beneficiary either (i) has not previously given the Voting Trustee instructions pursuant to Section 4.5 in respect of such meeting or (ii) submits to such representative written revocation of any such previous instructions. At such meeting, the Voting Trust Beneficiary exercising such Voting Trust Beneficiary Votes shall have the same rights as the Voting Trustee to speak at the meeting in favour of any matter, question, proposal or proposition, to vote by way of ballot at the meeting in respect of any matter, question, proposal or proposition, and to vote at such meeting by way of a show of hands in respect of any matter question or proposition. 4.10 Distribution of Written Materials   Any written materials to be distributed by the Parent to the Voting Trust Beneficiaries pursuant to this Agreement shall be delivered or sent by mail (or otherwise communicated in the same manner as the Parent utilizes in communications to holders of Parent Common Shares) to each Voting Trust Beneficiary at its address as shown on the books of Exchangeco. Exchangeco shall provide or cause to be provided to the Parent for this purpose, on a timely basis, and without charge or other expense a current List of the Voting Trust Beneficiaries.   4.11 Termination of Voting Rights   All of the rights of a Voting Trust Beneficiary with respect to the Voting Trust Beneficiary Votes exercisable in respect of the Exchangeable Shares held by such Voting Trust Beneficiary, including the right to instruct the Voting Trustee as to the voting of or to vote personally, such Voting Trust Beneficiary Votes, shall be deemed to be surrendered by the Voting Trust Beneficiary and such Voting Trust Beneficiary Votes and the Voting Rights represented thereby shall cease -------------------------------------------------------------------------------- - 12 - immediately upon the delivery by such holder to the Voting Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Voting Trust Beneficiary of the Exchange Right or the occurrence of the automatic exchange of Exchangeable Shares for Parent Common Shares, as specified in ARTICLE 5 (unless, in either case, the Parent shall not have delivered the requisite Parent Common Shares issuable in exchange therefore to the Voting Trustee for delivery to the Voting Trust Beneficiaries), or upon the redemption of Exchangeable Shares pursuant to sections III 5 or III 6 of the Exchangeable Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of Exchangeco pursuant to section III 2 of the Exchangeable Share Provisions. ARTICLE 5 – INSOLVENCY EXCHANGE RIGHT AND AUTOMATIC EXCHANGE 5.1 Grant and Ownership of the Insolvency Exchange Right       The Parent hereby grants to the Voting Trustee as trustee for and on behalf of, and for the use and benefit of, the Voting Trust Beneficiaries the right (the “Insolvency Exchange Right”), upon the occurrence and during the continuance of an Insolvency Event, to require the Parent to purchase from each or any Voting Trust Beneficiary all or any part of the Exchangeable Shares held by the Voting Trust Beneficiary and the Automatic Exchange Rights, all in accordance with the provisions of this Agreement. The Parent hereby acknowledges receipt from the Voting Trustee as trustee for and on behalf of the Voting Trust Beneficiaries of valuable consideration (and the adequacy thereof) for the grant of the Insolvency Exchange Right and the Automatic Exchange Rights by the Parent to the Voting Trustee. During the term of the Voting Trust and subject to the terms and conditions of this Agreement, the Voting Trustee shall possess and be vested with full legal ownership of the Insolvency Exchange Right and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Insolvency Exchange Right and the Automatic Exchange Rights, provided that the Voting Trustee shall:       (a) hold the Insolvency Exchange Right and the Automatic Exchange Rights and the legal title thereto as trustee solely for the use and benefit of the Voting Trust Beneficiaries in accordance with the provisions of this Agreement; and       (b) except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Insolvency Exchange Right or the Automatic Exchange Rights, and the Voting Trustee shall not exercise any such rights for any purpose other than the purposes for -------------------------------------------------------------------------------- - 13 - which the Voting Trust is created pursuant to this Agreement and shall not assign or transfer such rights except to a successor trustee hereunder. 5.2 Legended Share Certificates       Exchangeco will cause each certificate representing Exchangeable Shares to bear appropriate legends notifying the Voting Trust Beneficiaries of:       (a) their right to instruct the Voting Trustee with respect to the exercise of the Exchange right in respect of the Exchangeable Shares held by a Voting Trust Beneficiary; and       (b) the Automatic Exchange Rights. 5.3 General Exercise of Insolvency Exchange Right     The Insolvency Exchange Right and the Automatic Exchange Rights shall be and remain vested in and exercisable by the Voting Trustee. Subject to section 8.15, the Voting Trustee shall exercise the Insolvency Exchange Right only on the basis of instructions received pursuant to this ARTICLE 5 from Voting Trust Beneficiaries entitled to instruct the Voting Trustee as to the exercise thereof. To the extent that no instructions are received from a Voting Trust Beneficiary with respect to the Insolvency Exchange Right, the Voting Trustee shall not exercise or permit the exercise of the Insolvency Exchange Right.     5.4 Purchase Price.     The purchase price payable by the Parent for each Exchangeable Share to be purchased by the Parent under the Insolvency Exchange Right shall be an amount per share equal to (a) the Current Market Price of a Parent Common Share on the last Business Day prior to the day of closing of the purchase and sale of such Exchangeable Share under the Insolvency Exchange Right, which shall be satisfied in full by the Parent causing to be sent to such holder one Parent Common Share, plus (b) to the extent not paid by Exchangeco, an additional amount equivalent to the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the closing of the purchase and sale. In connection with each exercise of the Insolvency Exchange Right, the Parent will provide to the Voting Trustee, as trustee for and on behalf of the Voting Trust Beneficiaries, an Officer’s Certificate setting forth the calculation of the purchase price for each Exchangeable Share. The purchase price for each such Exchangeable Share to purchased may be satisfied only by the Parent issuing and delivering or causing to be delivered to the Voting Trustee, on behalf of the relevant Voting Trust Beneficiary, one Parent Common Share and on the -------------------------------------------------------------------------------- - 14 - applicable payment date a cheque for the balance, if any, of the purchase price without interest (but less any amounts withheld pursuant to section 5.14. 5.5 Exercise Instructions     Subject to the terms and conditions herein set forth, a Voting Trust Beneficiary shall be entitled, upon the occurrence and during the continuance of any Insolvency Event, to instruct the Voting Trustee to exercise the Insolvency Exchange Right with respect to all or any part of the Exchangeable Shares registered in the name of such Voting Trust Beneficiary on the books of Exchangeco. To cause the exercise of the Insolvency Exchange Right by the Voting Trustee, the Voting Trust Beneficiary shall deliver to the Voting Trustee, in person or by certified or registered mail, at its principal corporate trust office in Toronto, Ontario or at such other places in Canada as the Voting Trustee may from time to time designate by written notice to the Voting Trust Beneficiaries, the certificates representing the Exchangeable Shares which such Voting Trust Beneficiary desires the Parent to purchase, duly endorsed in blank for transfer, and accompanied by such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Business Corporations Act (Alberta) and the by-laws of Exchangeco and such additional documents and instrument as the Voting Trustee may reasonably require together with (a) a duly completed form of notice of exercise of the Insolvency Exchange Right, contained on the reverse of or attached to the Exchangeable Share certificates, stating (i) that the Voting Trust Beneficiary thereby instructs the Voting Trustee to exercise the Insolvency Exchange Right so as to require the Parent to purchase from the Voting Trust Beneficiary the number of Exchangeable Shares specified therein, (ii) that such Voting Trust Beneficiary has good title to, and owns all, such Exchangeable Shares to be acquired by the Parent free and clear of all liens, claims and encumbrances, (iii) the names in which the certificates representing Parent Common Shares issuable in connection with the exercise of the Insolvency Exchange Right are to be issued and (iv) the names and addresses of the persons to whom such new certificates should be delivered and (b) payment (or evidence satisfactory to the Voting Trustee, Exchangeco and the Parent of payment) of the taxes (if any) payable as contemplated by section 5.8 of this Agreement. If only a part of the Exchangeable Shares represented by any certificate or certificates delivered to the Voting Trustee are to be purchased by the Parent under the Insolvency Exchange Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of Exchangeco.     5.6 Delivery of Parent Common Shares; Effect of Exercise -------------------------------------------------------------------------------- - 15 - Promptly after receipt of the certificates representing the Exchangeable Shares which the Voting Trust Beneficiary desires the Parent to purchase under the Insolvency Exchange Right, together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Insolvency Exchange Right (and payment of taxes, if any, payable as contemplated by section 5.8 or evidence thereof), duly endorsed for transfer to the Parent, the Voting Trustee shall notify the Parent and Exchangeco of its receipt of the same, which notice to the Parent and Exchangeco shall constitute exercise of the Insolvency Exchange Right by the Voting Trustee on behalf of the holder of such Exchangeable Shares, and the Parent shall promptly thereafter deliver or cause to be delivered to the Voting Trustee, for delivery to the Voting Trust Beneficiary of such Exchangeable Shares (or to such other persons, if any, properly designated by such Voting Trust Beneficiary) the number of Parent Common Shares issuable in connection with the exercise of the Insolvency Exchange Right, and on the applicable payment date cheques for the balance, if any, of the total purchase price therefore without interest (but less any amounts withheld pursuant to section 5.14); provided, however, that no such delivery shall be made unless and until the Voting Trust Beneficiary requesting the same shall have paid (or provided evidence satisfactory to the Voting Trustee, Exchangeco and the Parent of the payment of) the taxes (if any) payable as contemplated by section 5.8 of this Agreement. Immediately upon the giving of notice by the Voting Trustee to the Parent and Exchangeco of the exercise of the Insolvency Exchange Right as provided in this section 5.6, the closing of the transaction of purchase and sale contemplated by the Insolvency Exchange Right shall be deemed to have occurred and the holder of such Exchangeable Shares shall be deemed to have transferred to the Parent all of such holder’s right, title and interest in and to such Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive the purchase price therefore, unless the purchase price is not delivered by the Parent to the Voting Trustee within five (5) Business Days of the date of the giving of such notice by the Voting Trustee, in which case the rights of the Voting Trust Beneficiary shall remain unaffected until the purchase price is so delivered by the Parent. Upon delivery by the Parent to the Voting Trustee of such purchase price, the Voting Trustee shall deliver such purchase price to such Voting Trust Beneficiary (or to such other person, if any, properly designated by such Voting Trust Beneficiary). Concurrently with such Voting Trust Beneficiary ceasing to be a holder of Exchangeable Shares, the Voting Trust Beneficiary shall be considered and deemed for all purposes to be the holder of the Parent Common Shares delivered to it pursuant to the Insolvency Exchange Right. 5.7 Exercise of Insolvency Exchange Right Subsequent to Retraction -------------------------------------------------------------------------------- - 16 - In the event that a Voting Trust Beneficiary has exercised its right under section III 5 of the Exchangeable Share Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares held by the Voting Trust Beneficiary (the “Retracted Shares”) and is notified by Exchangeco pursuant to paragraph III 5(g) of the Exchangeable Share Provisions that Exchangeco will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, and provided that Parent shall not have exercised a Retraction Call Right with respect to the Retracted Shares and that the Voting Trust Beneficiary has not revoked a retraction request delivered by the Voting Trust Beneficiary to Exchangeco pursuant to paragraph III 5(d) of the Exchangeable Share Provisions, the Retraction Request will constitute and will be deemed to constitute notice from the Voting Trust Beneficiary to the Voting Trustee instructing the Voting Trustee to exercise the Insolvency Exchange Right with respect to those Retracted Shares that Exchangeco is unable to redeem. In any such event, Exchangeco hereby agrees with the Voting Trustee and in favour of the Voting Trust Beneficiary promptly to forward or cause to be forwarded to the Voting Trustee all relevant materials delivered by the Voting Trust Beneficiary to Exchangeco or to the transfer agent of the Exchangeable Shares (including without limitation, a copy of the retraction request delivered pursuant to section III 5 of the Exchangeable Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Voting Trustee will thereupon exercise the Insolvency Exchange Right with respect to the Retracted Shares that Exchangeco is not permitted to redeem and will require the Parent to purchase such shares in accordance with the provisions of this ARTICLE 5. 5.8 Stamp or Other Transfer Taxes     Upon any sale of Exchangeable Shares to the Parent pursuant to the Insolvency Exchange Right or the Automatic Exchange Rights, the share certificate or certificates representing Parent Common Shares to be delivered in connection with the payment of the total purchase price therefore shall be issued in the name of the Voting Trust Beneficiary of the Exchangeable Shares so sold or in such names as such Voting Trust Beneficiary may otherwise direct in writing without charge to the holder of the Exchangeable Shares so sold; provided, however, that such Voting Trust Beneficiary (a) shall pay (and none of the Parent, Exchangeco or the Voting Trustee shall be required to pay) any documentary, stamp, transfer or other taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Voting Trust Beneficiary or (b) shall have evidenced to the satisfaction of the Voting Trustee, the Parent and Exchangeco that such taxes, if any, have been paid. -------------------------------------------------------------------------------- - 17 - 5.9 Notice of Insolvency Event     As soon as practicable following the occurrence of an Insolvency Event or any event that with the giving of notice or the passage of time or both would be an Insolvency Event, Exchangeco and the Parent shall give written notice thereof to the Voting Trustee. As soon as practicable following the receipt of notice from Exchangeco and the Parent of the occurrence of an Insolvency Event, or upon the Voting Trustee becoming aware of an Insolvency Event, the Voting Trustee will mail to each Voting Trust Beneficiary, at the expense of the Parent, a notice of such Insolvency Event, which notice shall contain a brief statement of the rights of the Voting Trust Beneficiaries with respect to the Insolvency Exchange Right, as provided for in ARTICLE 5 of this Agreement.   5.10 Qualification of Parent Common Shares   The Parent represents and warrants that it has taken all actions and done all things as are necessary under any United States or Canadian federal, provincial or state law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfillment of any other legal requirement (collectively, the “Applicable Laws”) as they exist on the date hereof and will in good faith expeditiously take all such actions to do all such things as are necessary under Applicable Laws as they may exist in the future to cause the Parent Common Shares to be issued and delivered, or transferred and delivered as the case may be, pursuant to the Exchangeable Share Provisions, the Insolvency Exchange Right or the Automatic Exchange Rights.   5.11 Refusal to Issue Parent Common Shares   Notwithstanding any of the provisions of this Agreement, the Parent will refuse to issue any Parent Common Shares to holders of Exchangeable Shares not made in accordance with the provisions of Regulation S of the Securities Act of 1933 or pursuant to registrations under the Securities Act of 1933, an applicable exemption from registration, an applicable exemption under Canadian securities laws or this Agreement.   5.12 Parent Common Shares   The Parent hereby represents and warrants that it has irrevocably reserved for issuance such number of Parent Common Shares as is equal to the number of Exchangeable Shares outstanding at the date hereof and covenants that it will at all times keep available free from pre-emptive and other rights, such number of Parent Common Shares (or other shares or securities into which Parent Common Shares may be reclassified or changed) as is necessary to enable the -------------------------------------------------------------------------------- - 18 - Parent and Exchangeco to perform their respective obligations pursuant to this Agreement, the Exchangeable Share Provisions and the Support Agreement. 5.13 Automatic Exchange on Liquidation of the Parent         (a) The Parent will give the Voting Trustee notice of each of the following events at the time set forth below:         (i) in the event of any determination by the Board of Directors of the Parent to institute voluntary liquidation, dissolution or winding-up proceedings with respect to the Parent or to effect any other distribution of assets of the Parent among its Voting Trust Beneficiaries for the purpose of winding up its affairs, at least sixty (60) days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and         (ii) as soon as is practicable following the earlier of (A) receipt by the Parent of notice of, and (B) the Parent otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of the Parent or to effect any other distribution of assets of the Parent among its Voting Trust Beneficiaries for the purpose of winding up its affairs, in each case where the Parent has failed to contest in good faith any such proceeding commenced in respect of the Parent within thirty (30) days of becoming aware thereof;         (b) As soon as is practicable following receipt by the Voting Trustee from the Parent of notice of any event (a “Liquidation Event”) contemplated by section 5.13(a)(i) or (ii) above, the Voting Trustee, at the expense of the Parent, will give notice thereof to the Voting Trust Beneficiaries. Such notice shall include a brief description of the automatic exchange of Exchangeable Shares for Parent Common Shares provided for in section 5.13(c);         (c) In order that the Voting Trust Beneficiaries will be able to participate on a pro rata basis with the holders of Parent Common Shares in the distribution of assets of the Parent in connection with a Liquidation Event, on the fifth (5th ) Business Day prior to the effective date (the “Liquidation Event Effective Date”) of a Liquidation Event all of the then outstanding Exchangeable Shares shall be automatically exchanged for Parent Common Shares. To effect such automatic exchange, the Parent shall purchase on the fifth (5th ) Business Day prior to the Liquidation Event Effective Date each Exchangeable Share then outstanding and held by -------------------------------------------------------------------------------- - 19 -   Voting Trust Beneficiaries, and each Voting Trust Beneficiary shall sell the Exchangeable Shares held by it at such time, for a purchase price per share equal to (a) the Current Market Price of a Parent Common Share on the fifth (5th ) Business Day prior to the Liquidation Event Effective Date, which shall be satisfied in full by the Parent issuing to the Voting Trust Beneficiary one Parent Common Share, and (b) to the extent not paid by Exchangeco, an additional amount equivalent to the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the date of the exchange;         (d) On the fifth (5th ) Business Day prior to the Liquidation Event Effective Date, the closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for Parent Common Shares shall be deemed to have occurred, and each Voting Trust Beneficiary shall be deemed to have transferred to the Parent all of the Voting Trust Beneficiary’s right, title and interest in and to such Voting Trust Beneficiary’s Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and the Parent shall issue to the Voting Trust Beneficiary the Parent Common Shares issuable upon the automatic exchange of Exchangeable Shares for Parent Common Shares and on the applicable payment date shall deliver to the Voting Trustee for delivery to the Voting Trust Beneficiary a cheque for the balance, if any, of the total purchase price for such Exchangeable Shares without interest but less any amounts withheld pursuant to section 5.14. Concurrently with such Voting Trust Beneficiary ceasing to be a holder of Exchangeable Shares, the Voting Trust Beneficiary shall be considered and deemed for all purposes to be the holder of the Parent Common Shares issued pursuant to the automatic exchange of Exchangeable Shares for Parent Common Shares and the certificates held by the Voting Trust Beneficiary previously representing the Exchangeable Shares exchanged by the Voting Trust Beneficiary with the Parent pursuant to such automatic exchange shall thereafter be deemed to represent Parent Common Shares issued to the Voting Trust Beneficiary by the Parent pursuant to such automatic exchange. Upon the request of a Voting Trust Beneficiary and the surrender by the Voting Trust Beneficiary of Exchangeable Share certificates deemed to represent Parent Common Shares, duly endorsed in blank and accompanied by such instruments of transfer as the Parent may reasonably require, the Parent shall deliver or cause to be delivered to the Voting Trust Beneficiary certificates representing Parent Common Shares of which the Voting Trust Beneficiary is the holder. -------------------------------------------------------------------------------- - 20 - 5.14 Withholding Rights     The Parent, Exchangeco and the Voting Trustee shall be entitled to deduct and withhold from any consideration otherwise payable under this Agreement to any holder of Exchangeable Shares or Parent Common Shares such amounts as the Parent, Exchangeco or the Voting Trustee is required or permitted to deduct and withhold with respect to such payment under the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or any provision of provincial, state, local or foreign tax law, in each case as amended or succeeded. The Parent shall instruct the Voting Trustee as to what amounts, if any, it shall be required to give up and withhold pursuant to United States tax laws. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, the Parent, Exchangeco and the Voting Trustee are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to the Parent, Exchangeco or the Voting Trustee, as the case may be, to enable it to comply with such deduction or withholding requirement and the Parent, Exchangeco or the Voting Trustee shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale. Prior to making any distribution to holders of Exchangeable Shares or Parent Common Shares, the Parent or Exchangeco, as the case may be, shall ensure that the Voting Trustee has access to sufficient funds (by directly providing, if necessary, such funds to the Voting Trustee) to enable the Voting Trustee to comply with any applicable withholding taxes in connection with such consideration. The Parent represents and warrants that, based upon facts currently known to it, it has no current intention, as at the date of this Agreement, to deduct or withhold from any dividend paid to holders of Exchangeable Shares any amounts under the United States Internal Revenue Code of 1986.   5.15 Incumbency Certificate   Each of the Parent and Exchangeco shall file with the Voting Trustee a certificate of incumbency setting forth the names of the individuals authorized to give instructions, directions or other instruments to the Voting Trustee (each an “Authorized Person”), together with specimen signatures of such persons, and the Voting Trustee shall be entitled to rely on the latest certificate of incumbency filed with it unless it receives notice, in accordance with section 15.3 of this -------------------------------------------------------------------------------- - 21 - Agreement, of a change in Authorized Persons with updated specimen signatures. ARTICLE 6 – DIVIDENDS 6.1 Participation in Dividends     The holders of Exchangeable Shares will be entitled to participate in all dividends declared by Exchangeco, in accordance with the provisions of the Exchangeable Share Provisions and the Support Agreement.     6.2 Additional Rights     For clarity, the Voting Rights and Exchange Rights granted by the Parent hereunder to the Voting Trustee, as trustee for and on behalf of, and for the use and benefit of, the Voting Trust Beneficiaries do not in any manner confer any additional rights to the Voting Trustee or the Voting Trust Beneficiaries, including, but subject to the provisions of the Support Agreement, any rights to receive or participate in dividends declared or paid by the Parent. ARTICLE 7 – SUPPORT PROVISIONS 7.1 Application of Deposited Shares     At such time as either Exchangeco or the Parent acquires Exchangeable Shares from a Voting Trust Beneficiary, it shall provide the Voting Trustee with an Officer’s Certificate specifying: (i) the former Voting Trust Beneficiary; (ii) the number of Exchangeable Shares acquired; (iii) the form of the acquisition, designated by the provision of the applicable agreement (Exchangeable Share Provisions, Support Agreement or this Agreement); and (iv) the date of such acquisition. If such certification is made, the Voting Trustee shall deliver to the Parent a number of Deposited Shares equal to the number of Exchangeable Shares so acquired by the Parent, and the Parent shall forthwith cancel such Deposited Shares in accordance with the provisions of the Share Purchase Agreement. The Voting Trustee shall forward the share certificates to the Parent’s transfer agent, namely Select Fidelity Transfer Services Ltd. or such replacement transfer agent as the Parent may direct. for the purpose of dividing same into certificates for the appropriate number of shares to be retained by the Voting Trustee or to be remitted to the Parent in accordance with the foregoing. ARTICLE 8 – CONCERNING THE TRUSTEE 8.1 Powers and Duties of the Voting Trustee -------------------------------------------------------------------------------- - 22 - The rights, powers, duties and authorities of the Voting Trustee under this Agreement, in its capacity as Voting Trustee of the Voting Trust, shall include:   (a) receipt and deposit of the Deposited Shares from the Parent as Voting Trustee for and on behalf of the Voting Trust Beneficiaries in accordance with the provisions of this Agreement;         (b) granting proxies and distributing materials to the Voting Trust Beneficiaries as provided in this Agreement;         (c) voting the Voting Trust Beneficiary Votes in accordance with the provisions of this Agreement;         (d) receiving the grant of the Exchange Right and the Automatic Exchange Rights from the Parent as Voting Trustee for and on behalf of the Voting Trust Beneficiaries in accordance with the provisions of this Agreement;         (e) exercising the Exchange Right and enforcing the benefit of the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement, and in connection therewith receiving from Voting Trust Beneficiaries Exchangeable Shares and other requisite documents and distributing to such Voting Trust Beneficiaries’ Parent Common Shares and cheques, if any, to which such Voting Trust Beneficiaries are entitled upon the exercise of the Exchange Right or pursuant to the Automatic Exchange Rights, as the case may be;         (f) holding title to the Trust Estate;         (g) investing any moneys forming from time to time, a part of the Trust Estate as provided in this Agreement;         (h) taking action on its own initiative or at the direction of a Voting Trust Beneficiary or Voting Trust Beneficiaries to enforce the obligations of the Parent and Exchangeco under this Agreement; and         (i) taking such other actions and doing such other things as are specifically provided in this Agreement. In the exercise of such rights, powers, duties and authorities the Voting Trustee shall have (and is granted) such incidental and additional rights, powers, duties and authority not in conflict with any of the provisions of this Agreement as the Voting Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Voting Trust. Any exercise of such discretionary rights, powers, duties and -------------------------------------------------------------------------------- - 23 - authorities by the Voting Trustee shall be final, conclusive and binding upon all persons.   The duties and obligations of the Voting Trustee shall be determined solely by the provisions hereof and, accordingly, the Voting Trustee shall only be responsible for the performance of such duties and obligations as it has undertaken herein. The Voting Trustee shall retain the right not to act and shall not be held liable for refusing to act unless it has received clear and reasonable documentation which complies with the terms of this Agreement. Such documentation must not require exercise of any discretion or independent judgment on the part of the Voting Trustee.   The Voting Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Voting Trust Beneficiaries and shall exercise in comparable circumstances such care as a reasonably prudent trustee would under similar circumstances.   8.2 No Conflict of Interest   The Voting Trustee represents to the Parent and Exchangeco that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Voting Trustee as a fiduciary hereunder and the role of the Voting Trustee in any other capacity. The Voting Trustee shall, within ninety (90) days after it becomes aware that such material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in ARTICLE 11. If, notwithstanding the foregoing provisions of this section 8.2, the Voting Trustee has such a material conflict of interest, the validity and enforceability of this Agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Voting Trustee contravenes the foregoing provisions of this section 8.2, any interested party may apply to the Superior Court of Quebec for an order that the Voting Trustee be replaced as Voting Trustee hereunder.   8.3 Dealings with Transfer Agents, Registrars, etc.   The Parent and Exchangeco irrevocably authorize the Voting Trustee, from time to time, to:   (a) consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the Exchangeable Shares and Parent Common Shares; and -------------------------------------------------------------------------------- - 24 -   (b) requisition, from time to time, (i) from any such registrar or transfer agent any information readily available from the records maintained by it which the Voting Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement and (ii) from the transfer agent of Parent Common Shares, and any subsequent transfer agent of such shares, the share certificates issuable upon the exercise from time to time of the Exchange Right and pursuant to the Automatic Exchange Rights. The Parent and Exchangeco irrevocably authorize their respective registrars and transfer agents to comply with all such requests. The Parent covenants that it will supply its transfer agent with duly executed share certificates for the purpose of completing the exercise from time to time of the Exchange Right and the Automatic Exchange Rights.   8.4 Books and Records   The Voting Trustees shall keep available for inspection by the Parent and Exchangeco at the Voting Trustee’s principal corporate trust office in Toronto, Ontario correct and complete books and records of account relating to the Voting Trust created by this Agreement, including without limitation, all relevant data relating to mailings and instructions to and from Voting Trust Beneficiaries and all transactions pursuant to the Exchange Right and the Automatic Exchange Rights. On or before December 31, 2006, and on or before December 31 in every year thereafter, so long as the Deposited Shares are on deposit with the Voting Trustee, the Voting Trustee shall transmit to the Parent and Exchangeco a brief report, dated as of the preceding month-end, with respect to:   (a) the property and funds comprising the Trust Estate as of that date;         (b) the number of exercises of the Exchange Right, if any, and the aggregate number of Exchangeable Shares received by the Voting Trustee on behalf of Voting Trust Beneficiaries in consideration of the issuance by the Parent of Parent Common Shares in connection with the Exchange Right, during the calendar year ended on such date; and         (c) any action taken by the Voting Trustee in the performance of its duties under this Agreement which it had not previously reported and which, in the Voting Trustee’s opinion, materially affects the Trust Estate. 8.5 Returns and Reports     The Voting Trustee shall, to the extent necessary, prepare and file on behalf of the Voting Trust appropriate United States and Canadian returns and any other returns or reports as may be required by applicable law, including, without -------------------------------------------------------------------------------- - 25 - limitation, all returns required under the United States Internal Revenue Code of 1986 and the Income Tax Act (Canada), or pursuant to the rules and regulations of any securities exchange or other trading system through which the Exchangeable Shares are traded, as may be directed by the Parent, and, in connection therewith, the Voting Trustee may obtain the advice and assistance of accountants, legal counsel or other experts as the Voting Trustee may consider necessary or desirable, and may add the costs of same to its fees and expenses as determined in section 9.1 of this Agreement. If requested by the Voting Trustee, the Parent shall retain such experts for purposes of providing such advice and assistance.   8.6 Indemnification Prior to Certain Actions by Voting Trustee   The Voting Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Voting Trust Beneficiary upon such Voting Trust Beneficiary furnishing to the Voting Trustee reasonable security or indemnity, to its reasonable satisfaction, against the costs, expenses and liabilities which may be incurred by the Voting Trustee therein or thereby, provided that no Voting Trust Beneficiary shall be obligated to furnish to the Voting Trustee any such security or indemnity in connection with the exercise by the Voting Trustee of any of its rights, duties, powers and authorities with respect to the Deposited Shares pursuant to ARTICLE 4, subject to section 8.15 and with respect to the Exchange Right pursuant to ARTICLE 5, subject to section 8.15, and with respect to the Automatic Exchange Rights pursuant to ARTICLE 5.   None of the provisions contained in this Agreement shall require the Voting Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties, or authorities unless funded, given security and indemnified as aforesaid.   8.7 Action of Voting Trust Beneficiaries   The Voting Trust Beneficiaries shall be entitled to take proceedings in a court of competent jurisdiction to enforce their legal rights hereunder as against Exchangeco and the Parent.   8.8 Reliance Upon Declaration   The Voting Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon statutory declarations, certificates, opinions or reports furnished pursuant to the provisions hereof or required by the Voting Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities -------------------------------------------------------------------------------- - 26 - hereunder if such statutory declarations, certificates, opinions or reports comply with the provisions of section 8.9, if applicable, and with any other applicable provisions of this Agreement.   8.9 Evidence and Authority to Voting Trustee   The Parent and/or Exchangeco shall furnish to the Voting Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by the Parent and/or Exchangeco or the Voting Trustee under this Agreement or as a result of any obligation imposed under this Agreement, including, without limitation, in respect of the Voting Rights or the Exchange Right or the Automatic Exchange Rights and the taking of any other action to be taken by the Voting Trustee at the request of or on the application of the Parent and/or Exchangeco promptly if and when:   (a) such evidence is required by any other section of this Agreement to be furnished to the Voting Trustee in accordance with the terms of this section 8.9; or         (b) the Voting Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement, gives the Parent and/or Exchangeco written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice. Such evidence shall consist of an Officer’s Certificate of the Parent and/or Exchangeco or a statutory declaration or a certificate made by persons entitled to sign an Officer’s Certificate stating that any such conditions have been complied with in accordance with the terms of this Agreement. Whenever such evidence relates to a matter other than the Voting Rights or the Exchange right or the Automatic Exchange Rights or the taking of any other action to be taken by the Voting Trustee at the request or on the application of the Parent and/or Exchangeco, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of the Parent and/or Exchangeco it shall be in the form of an Officer’s Certificate or a statutory declaration. Each statutory declaration, Officer’s Certificate, opinion or report furnished to the Voting Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence: -------------------------------------------------------------------------------- - 27 -   (i) declaring that he has read and understands the provisions of this Agreement relating to the condition in question;         (ii) describing the nature and scope of the examination or investigation upon which he based the statutory declaration, certificate, statement or opinion; and         (iii) declaring that he has made such examination or investigation as he believes is necessary to enable him to make the statements or give the opinions contained or expressed therein. 8.10 Experts, Advisers and Agents       The Voting Trustee may:   (a) in relation to these presents act and rely on the opinion or advice of or information obtained from any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert, whether retained by the Voting Trustee or by the Parent and/or Exchangeco or otherwise, and may employ such assistants as may be necessary to the proper discharge of its powers and duties and determination of its rights hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid; and         (b) employ such agents and other assistants as it may reasonably require for the proper discharge of its powers and duties hereunder, and may pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Voting Trust. 8.11 Investment of Moneys held by Voting Trustee     Unless otherwise provided in this Agreement, any moneys held by or on behalf of the Voting Trustee which under the terms of this Agreement may or ought to be invested or which may be on deposit with the Voting Trustee or which may be in the hands of the Voting Trustee shall be invested and reinvested in the name or under the control of the Voting Trustee in securities in which, under the laws of the Province of Ontario, trustees are authorized to invest trust moneys, provided that (i) such securities are stated to mature within two (2) years after their purchase by the Voting Trustee, and (ii) the Voting Trustee is acting at the written direction of Exchangeco. Pending the investment of any moneys as hereinbefore -------------------------------------------------------------------------------- - 28 - provided, such moneys shall be deposited in the name of the Voting Trustee in an interest-bearing segregated trust account or, at the direction of Exchangeco, in the deposit department of the Voting Trustee’s financial institution at the rate of interest then current on similar deposits. 8.12 Voting Trustee Not Required to Give Security   The Voting Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement or otherwise in respect of the premises.   8.13 Voting Trustee Not Bound to Act on Request   Except as in this Agreement otherwise specifically provided, the Voting Trustee shall not be bound to act in accordance with any direction or request of the Parent and/or Exchangeco or of the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Voting Trustee, and the Voting Trustee shall be empowered to act upon any such purporting to be authenticated and believed by the Voting Trustee to be genuine.   8.14 Authority to Carry on Business   The Voting Trustee represents to the Parent and Exchangeco that at the date of execution and delivery by it of this Agreement it is authorized to carry on the business of a trust company in the Province of Ontario but if, notwithstanding the provisions of this section 8.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Agreement and the Voting Rights, the Exchange Right and the Automatic Exchange Rights shall not be affected in any manner whatsoever by reason only of such event but the Voting Trustee shall, within ninety (90) days after ceasing to be authorized to carry on the business of a trust company in the Province of Ontario, either become so authorized or resign in the manner and with the effect specified in Article 10.   8.15 Conflicting Claims   If conflicting claims or demands are made or asserted with respect to any interest of any Voting Trust Beneficiary in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Voting Trust Beneficiary in any Exchangeable Shares, resulting in conflicting claims or demands being made in connection with such interest, then the Voting Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claims or demands. In so refusing, the Voting Trustee may elect not to exercise any Voting Rights, -------------------------------------------------------------------------------- - 29 - Exchange Rights or Automatic Exchange Rights subject to such conflicting claims or demands and, in so doing, the Voting Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Voting Trustee shall be entitled to continue to refrain from acting and to refuse to act until:   (a) the rights of all adverse claimants with respect to the Voting Rights, Exchange right or Automatic Exchange Rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or         (b) all differences with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Voting Trustee shall have been furnished with an executed copy of such agreement certified to be in full force and effect. If the Voting Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Voting Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands.   8.16 Acceptance of Voting Trust   The Voting Trustee hereby accepts the Voting Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Voting Trust Beneficiaries, subject to all the terms and conditions herein set forth.   8.17 Notice to Voting Trustee   The Voting Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall have been required so to do under the terms hereof, nor shall the Voting Trustee be required to take any action in connection with any prohibition against Exchangeco redeeming any Retracted Shares as set out in section 5.7 or of any Insolvency Event as set out in section 5.9 or Liquidation Event as set out in section 5.13 (collectively, a “Notice Event”), unless and until notified in writing of such Notice Event. Such notice shall distinctly specify the Notice Event desired to be brought to the attention of the Voting Trustee, and in the absence of any such notice the Voting Trustee may for all purposes of this Agreement -------------------------------------------------------------------------------- - 30 - conclusively assume that no such Notice Event has occurred. Any such notice shall in no way limit any discretion herein given to the Voting Trustee to determine whether or not the Voting Trustee shall take action with respect to any Notice Event. 8.18 Merger or Consolidation of Voting Trustee     Any corporation into or with which the Voting Trustee may be merged or consolidated or amalgamated, or any corporation resulting therefrom, or any corporation succeeding to the trust business of the Voting Trustee shall be the successor to the Voting Trustee under this Agreement without any further act on its part or any of the parties hereto, provided that such corporation would be eligible for appointment as a successor trustee under the provisions of this Agreement.   8.19 Validity of Certificates   If at any time in the performance of its duties under this Agreement, it shall be necessary for the Voting Trustee to receive, accept, act or rely upon any certificate, notice, request, waiver, consent, receipt, direction, affidavit or other paper, writing or document furnished to it and purporting to have been executed or issued by the Purchaser, the Parent or the Voting Trust Beneficiary or their authorized officers or attorneys, the Voting Trustee shall be entitled to rely and act upon the genuineness and authenticity of any such writing submitted to it. It shall not be necessary for the Voting Trustee to ascertain whether or not the persons who have executed, signed or otherwise issued, authenticated or receipted such papers, writings or documents have authority to do so or that they are the same persons named therein or otherwise to pass upon any requirement of such papers, writing or documents that may be essential for their validity or effectiveness or upon the truth and acceptability of any information contained therein which the Voting Trustee in good faith believes to be genuine. ARTICLE 9 – COMPENSATION 9.1 Fees and Expenses of the Voting Trustee     The Parent and Exchangeco jointly and severally agree to pay the Voting Trustee reasonable compensation for all of the services rendered by it under this Agreement and will reimburse the Voting Trustee for all reasonable expenses (including taxes other than taxes based on the net income of the Voting Trustee) and disbursements, including the cost and expense of any suit or litigation of any character and any proceedings before any governmental agency reasonably incurred by the Voting Trustee in connection with its duties under this Agreement; provided that the Parent and Exchangeco shall have no obligation to reimburse -------------------------------------------------------------------------------- - 31 - the Voting Trustee for any expenses or disbursements paid, incurred or suffered by the Voting Trustee in any suit or litigation in which the Voting Trustee is determined to have acted in bad faith or with gross negligence, recklessness or willful misconduct. Invoices for services rendered by the Voting Trustee shall be provided to the Parent on behalf of the Parent and Exchangeco at the addresses set forth in section 15.3 of this Agreement. Any amount owing and unpaid after thirty (30) days from the invoice date will bear interest at a rate per annum, from the expiration of such thirty (30) day period, equal to the then current rate charged by the Voting Trustee and shall be payable on demand. The obligations of the Parent and Exchangeco under this section 9.1 shall survive the resignation or removal of the Voting Trustee. ARTICLE 10 – INDEMNIFICATION AND LIMITATION OF LIABILITY 10.1 Indemnification of the Voting Trustee     The Parent and Exchangeco jointly and severally agree to indemnify and hold harmless the Voting Trustee and each of its directors, officers, employees and agents appointed and acting in accordance with this Agreement (collectively, the “Indemnified Parties”) against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Voting Trustee’s legal counsel) which, without fraud, gross negligence, recklessness, willful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason or as a result of the Voting Trustee’s acceptance or administration of the Voting Trust, its compliance with its duties set forth in this Agreement, or any written or oral instruction delivered to the Voting Trustee by the Parent or Exchangeco pursuant hereto.   In no case shall the Parent or Exchangeco be liable under this indemnity for any claim against any of the Indemnified Parties unless the Parent and Exchangeco shall be notified by the Voting Trustee of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Subject to (ii) below, the Parent and Exchangeco shall be entitled to participate at their own expense in the defence and, if the Parent and Exchangeco so elect at any time after receipt of such notice, either of them may assume the defence of any suit brought to enforce any such claim. The Voting Trustee shall have the right to employ separate counsel in any such suit and participate in the defence thereof but the fees and expenses of such counsel shall be at the expense of the Voting Trustee unless: (i) the employment of such counsel has been authorized by the Parent or -------------------------------------------------------------------------------- - 32 - Exchangeco; or (ii) the names parties to any such suit include both the Voting Trustee and the Parent or Exchangeco and the Voting Trustee shall have been advised by counsel acceptable to the Parent or Exchangeco that there may be one or more legal defences available to the Voting Trustee that are different from or in addition to those available to the Parent or Exchangeco and that, in the judgment of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case the Parent and Exchangeco shall not have the right to assume the defence of such suit on behalf of the Voting Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Voting Trustee). The obligations of the Parent and Exchangeco under this section 10.1 shall survive the resignation or removal of the Voting Trustee. 10.2 Limitation of Liability     The Voting Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement, except to the extent that such loss is attributable to the fraud, gross negligence, recklessness, willful misconduct or bad faith on the part of the Voting Trustee. ARTICLE 11 – CHANGE OF TRUSTEE 11.1 Resignation     The Voting Trustee, or any successor trustee hereafter appointed, may at any time resign by giving written notice of such resignation to the Parent and Exchangeco specifying the date on which it desires to resign, provided that such notice shall not be given less than one month before such desired resignation date unless the Parent and Exchangeco otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, the Parent and Exchangeco shall promptly appoint a successor trustee by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing acceptance by a successor trustee of such appointment, a successor trustee may be appointed by an order of the Superior Court of Ontario (District of Toronto) upon application of one or more of the parties hereto, at the expense of the Parent and Exchangeco. Upon the failure of the parties to appoint a successor trustee or the failure of a successor trustee to accept appointment, the resigning trustee shall cease its functions at the expiration of the period specified in its written notice of resignation and may retain any and all property in its possession hereunder on a safekeeping basis, at a reasonable fee to be determined by the resigning trustee. -------------------------------------------------------------------------------- - 33 - 11.2 Removal   The Voting Trustee, or any successor trustee hereafter appointed, may (provided a successor trustee is appointed) be removed at any time on not less than thirty (30) days’ prior notice by written instrument executed by the Parent and Exchangeco, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee.   11.3 Successor Voting Trustee   Any successor trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to the Parent and Exchangeco and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with the like effect as if originally named as trustee in this Agreement. However, on the written request of the Parent and Exchangeco or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any successor trustee, the Parent, Exchangeco and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers.   11.4 Notice of Successor Voting Trustee   Upon acceptance of appointment by a successor trustee as provided herein, the Parent and Exchangeco shall cause to be mailed notice of the succession of such trustee hereunder to each Voting Trust Beneficiary specified in a List. If the Parent or Exchangeco shall fail to cause such notice to be mailed within ten (10) days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Parent and Exchangeco. ARTICLE 12 – PARENT SUCCESSORS 12.1 Certain Requirements in Respect of Combination, etc.     The Parent shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets -------------------------------------------------------------------------------- - 34 - would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if:   (a) such other person or continuing corporation (herein called the “Parent Successor”), by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, a trust agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Voting Trustee, acting reasonably, and in the opinion of legal counsel to the Voting Trustee are reasonably necessary or advisable to evidence the assumption by the Parent Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Parent Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of the Parent under this Agreement; and         (b) such transaction shall, to the satisfaction of the Voting Trustee, acting reasonably, and in the opinion of legal counsel to the Voting Trustee, be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the Voting Trustee or of the Voting Trust Beneficiaries hereunder. 12.2 Vesting of Powers in Successor     Whenever the conditions of section 12.1 have been duly observed and performed, the Voting Trustee and, if required by section 12.1, the Parent Successor and Exchangeco shall execute and deliver the supplemental trust agreement provided for in ARTICLE 13 and thereupon the Parent Successor shall possess and from time to time may exercise each and every right and power of the Parent under this Agreement in the name of the Parent or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of the Parent or any officers of the Parent may be done and performed with like force and effect by the directors or officers of such Parent Successor.   12.3 Wholly-Owned Subsidiaries   Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned direct or indirect subsidiary of the Parent with or into the Parent or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of the Parent provided that all of the assets of such subsidiary are transferred to the Parent or another wholly-owned direct or indirect subsidiary of -------------------------------------------------------------------------------- - 35 - the Parent and any such transactions are expressly permitted by this ARTICLE 12. ARTICLE 13 – AMENDMENTS AND SUPPLEMENTAL VOTING TRUST AGREEMENT 13.1 Amendments, Modifications, etc.     This Agreement may not be amended or modified except by an agreement in writing executed by the Parent, Exchangeco and the Voting Trustee and approved by the Voting Trust Beneficiaries in accordance with paragraph III 7(e) of the Exchangeable Share Provisions.   13.2 Meeting to Consider Amendments   Exchangeco, at the request of the Parent, shall call a meeting or meetings of the Voting Trust Beneficiaries for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of Exchangeco, the Exchangeable Share Provisions and all applicable laws.   13.3 Changes in Capital of the Parent and Exchangeco   At all times after occurrence of any event contemplated pursuant to section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which Parent Common Shares and/or Exchangeable Shares are in any way changed, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Parent Common Shares and/or Exchangeable Shares are so changed and the parties hereto shall execute and deliver a supplemental voting trust agreement giving effect to and evidencing such necessary amendments and modifications.   13.4 Execution of Supplemental Voting Trust Agreements   No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. From time to time Exchangeco (when authorized by a resolution of its Board of Directors), the Parent (when authorized by a resolution of its Board of Directors) and the Voting Trustee may, subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes: -------------------------------------------------------------------------------- - 36 -   (a) evidencing the succession of Parent Successors and the covenants of and obligations assumed by each such Parent Successor in accordance with the provisions of ARTICLE 12;         (b) making any additions to, deletions from or alterations of the provisions of this Agreement or the Voting Rights, the Exchange Right or the Automatic Exchange Rights which, in the opinion of the Voting Trustee on advice of counsel, will not be prejudicial to the interests of the Voting Trust Beneficiaries or are, in the opinion of counsel to the Voting Trustee, necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to the Parent, Exchangeco, the Voting Trustee or this Agreement; and         (c) for any other purposes not inconsistent with the provisions of this Agreement, including without limitation, to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Voting Trustee, on advice of counsel, the rights of the Voting Trustee and Voting Trust Beneficiaries will not be prejudiced thereby. ARTICLE 14 – TERMINATION 14.1 Term     The Voting Trust created by this Agreement shall continue until the earliest to occur of the following events:     (a) no outstanding Exchangeable Shares are held by a Voting Trust Beneficiary; and     (b) each of the Parent and Exchangeco elects in writing to terminate the Voting Trust and such termination is approved by the Voting Trust Beneficiaries in accordance with paragraph III 7(e) of the Exchangeable Share Provisions.     14.2 Survival of Agreement     This Agreement shall survive any termination of the Voting Trust and shall continue until there are no Exchangeable Shares outstanding held by a Voting Trust Beneficiary; provided, however, that the provisions of ARTICLE 9 and ARTICLE 10 shall survive any such termination of this Agreement. -------------------------------------------------------------------------------- - 37 - ARTICLE 15- GENERAL 15.1 Severability     If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and the agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.   15.2 Enurement   This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns and to the benefit of the Voting Trust Beneficiaries.   15.3 Notices to Parties   All notices and other communications between the parties hereunder shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for any such party as shall be specified in like notice): if to the Parent: Taras Chebountchak   President   c/o 110 Jardin Drive   Suite 13   Concord, Ontario, Canada   L4K 2T7       Telecopier: (905) 761-1095 -------------------------------------------------------------------------------- - 38 - if to Exchangeco: c/o Witten LLP   2500 Canadian Western Bank Place   10,303 Jasper Avenue   Edmonton, Alberta   T5J 3N6       Telecopier: ?     With copy to: Spiegel Sohmer Inc.   5 Place Ville Marie   Suite 1203   Montreal, Quebec   H3B 2G2       Attention: Mr. Robert Raich       Telecopier: (514) 875-8237     if to the Voting Trustee: 120 Adelaide Street West   Suite 420   Toronto, Ontario   M5H 4C3       Attention: Corporate Trust Department       Telecopier: (416) 361-0470     if to the ICP Shareholders: c/o Mr. Sass Peress   6995 Jeanne-Mance   Montreal, Quebec   H3N 1W5       Telecopier: (514) ?     if to the Depositing Shareholders: c/o Taras Chebountchak   110 Jardin Drive   Suite 13   Concord, Ontario, Canada   L4K 2T7       Telecopier: (905) 761-1095 -------------------------------------------------------------------------------- - 39 - Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of confirmed receipt thereof unless such day is not a Business Day in which case it shall be deemed to have been given and received upon the immediately following Business Day. 15.4 Notice to Voting Trust Beneficiaries     Any and all notices to be given and any documents to be sent to any Voting Trust Beneficiaries may be given or sent to the address of such Voting Trust Beneficiary shown on the register of holders of Exchangeable Shares in any manner permitted by the by-laws of Exchangeco from time to time in force in respect of notices to Voting Trust Beneficiaries and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Voting Trust Beneficiaries.   15.5 Counterparts   This agreement may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.   15.6 Jurisdiction   This agreement shall be construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.   15.7 Attornment   The Parent agrees that any action or proceeding arising out of or relating to this agreement may be instituted in the courts of Quebec, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction and hereby appoints Exchangeco at its registered office in the Province of Alberta as attorney for service of process. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date first above written. FC FINANCIAL SERVICES INC.                           Per: /s/ Taras Chebountchak   Per: /s/ Sass Peress   “Parent”     “Exchangeco”                     EQUITY TRANSFER & TRUST COMPANY                 Per: /s/ Carol Mikos                         Per: /s/ Rosa Vieira     /s/ Sass Peress   “Voting Trustee”     SASS PERESS         “Peress”                       /s/ Joel Cohen     /s/ Arlene Ades   JOEL COHEN     ARLENE ADES   “Cohen”     “Ades”                     THE SASS PERESS FAMILY TRUST             THE PERESS FAMILY TRUST Per: /s/ Sass Peress   Per:         /s/ Sass Peress   “Trust I”     “Trust II”           EASTERN LIQUIDITY PARTNERS LTD.                Per: /s/ Sass Peress     /s/ Taras Chebountchak   “Eastern Liquidity”     ARAS CHEBOUNTCHAK                       /s/ Orit Stolyar         ORIT STOLYAR       --------------------------------------------------------------------------------

Exhibit No. 10   SEVERANCE PAY AGREEMENT   This Severance Pay Agreement (the “Agreement”), dated ___________, 20__ (the “date first set forth above”) between United Retail Incorporated, a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662 (the “Company”) and the undersigned officer of the Company (the “Executive”).   WHEREAS, the availability of severance pay and certain other post-employment benefits will encourage those entitled to them to remain in the Company’s employ;   WHEREAS, this Agreement was reviewed and approved by the Company’s Board of Directors on the date first set forth above; and   WHEREAS, the Company is a wholly owned subsidiary of United Retail Group, Inc.   NOW, THEREFORE, in consideration of the Executive’s continued employment with the Company and other good and valuable consideration, the parties, intending to be legally bound, hereby agree as follows:     1. Definitions.   (a)          By-laws shall mean the By-laws of the Company as in force on the date first set forth above.   (b)          Cause shall mean the occurrence after the date first set forth above of one or more of the following events:   (i)           a judgment of conviction against the Executive or a plea of guilty has been entered for any felony which is both based on his or her personal actions (excluding liability imputed by reason of his or her position as an associate of the Company) and involves common law fraud, embezzlement, breach of duty as a fiduciary, willful dishonesty or moral turpitude (the entry of a judgment or plea being the only event or circumstance sufficient to constitute Cause under this clause (i)), provided, however, that any felony an essential element of which is predicated on the operation of a vehicle shall be deemed not to involve moral turpitude;   (ii)          the Executive has willfully and continuously failed to perform his or her duties to the Company in any material respect, except in the case of Short Term Disability, and material economic harm to the Company has resulted;   (over)   (iii)        the Executive has willfully failed in any material respect to follow specific directions of the President of the Company in the performance of his or her duties, except in the case of Short Term Disability;   (iv)         there has been a breach in any material respect of any of the provisions of Section 7; or   (v)          the Executive has willfully failed to report promptly in writing to the Senior Vice President-General Counsel of United Retail Group, Inc. any fraud of which he or she is aware, or has reasonable grounds to suspect, on the part of any officer of United Retail Group, Inc. or the Company that involves United Retail Group, Inc. or the Company, whether or not the fraud is material and whether it occurred before or after the date first set forth above;   provided, however, that the judgment of conviction or a plea of guilty referred to in clause (i), the failure of performance referred to in clause (ii) and (iii) and the breach referred to in clause (iv) shall constitute Cause for a maximum of only 90 days after the judgment of conviction or plea of guilty was entered, the material economic harm commenced, the directions were not followed or the breach first took place, as the case may be. For purposes of determining Cause, no act or omission by the Executive shall be considered “willful” unless it is done or omitted 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 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. Termination of employment shall be deemed to be for Cause only if the Company sends the Executive by certified mail to his or her residence before the termination of employment a notice of termination for Cause specifying in reasonable detail the circumstance that is the basis for termination. Short Term Disability shall not be a basis for termination of employment.           (c)          Protected Information shall mean trade secrets, confidential or proprietary information, and all other knowledge, know-how, information, documents or materials, owned or developed by the Company, or otherwise in the possession of the Company, whether in tangible or intangible form, pertaining to the business of the Company, the confidentiality of which the Company takes reasonable measures to protect, including, but not limited to, the Company’s research and development, store operating results, identities and habits of customers and prospective customers, suppliers, business relationships, products (including prices, costs, sales or content), processes, techniques, machinery, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models, operating procedures, knowledge of the organization, and other information owned, developed or possessed by the Company; provided, however, that Protected Information shall not include information that shall become generally known to the public or the trade without violation of Section 7.     (d) Severance Pay shall have the meaning set forth in Section 2(b).   (e)          Short Term Disability shall mean the inability of the Executive to substantially perform his or her duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of less than six months.     (f) Successor shall have the meaning set forth in Section 10(b).   (g)          Termination Without Cause shall have the meaning set forth in Section 2(a).   (h)          Unauthorized shall mean: (i) in contravention of the Company’s policies or procedures; (ii) otherwise inconsistent with the Company’s measures to protect its interests in its Protected Information; or (iii) in contravention of any duty existing under law or contract, provided, however, that the Executive in his or her discretion may disclose Protected Information to the extent necessary in the performance of his or her duties on behalf of the Company.       (over)   2. Severance Pay.     (a) If, while this Agreement remains in force, either:   (i)           the Company unilaterally terminates the Executive’s employment without Cause;   (ii)        the Executive’s base salary, incentive compensation or group benefits are reduced materially by the Company, and the Executive, within 15 days after first learning of the reduction sends a notice of resignation to the Company at its address first set forth above to the attention of the Associate Services Dept. by certified mail; or   (iii)        the Company fails to obtain the consent of a Successor required pursuant to Section 10(c);   then Termination Without Cause shall have occurred.   (b)          If Termination Without Cause shall occur and within 21 days thereafter the Executive shall send to the Company’s Senior Vice President-Human Resources a general release in form and substance satisfactory to the Company, then the Company shall remit Severance Pay equivalent to ___ weeks’ base pay at the higher of the rate paid on the date first set forth above or on the date on which Termination Without Cause occurred. Severance Pay shall be remitted to the Executive’s residence in ___ equal weekly installments commencing on the fourth Thursday following Termination Without Cause. No grace period shall be allowed for remittance of Severance Pay, time being of the essence.     (c) In the event Severance Pay is due:   (i)           the Executive shall use reasonable efforts to seek other employment and keep the Company informed of all remuneration from employment received during the period Severance Pay is otherwise due;   (ii)          there shall be set off against each weekly installment of Severance Pay otherwise due all remuneration from employment that the Executive may have obtained during the previous week; and   (iii)        the Executive shall be entitled to the following additional payments:   (A)         any base salary accrued or incentive compensation vested but not yet paid;     (B) pay for any vacation days not taken; and   (C)        reimbursement for business expenses incurred, but not paid, prior to termination of employment.   (d)          Payments made pursuant to this Section 2 shall be final and the Company shall not seek to recover all or any part of such payments from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever other than the Executive’s breach in any material respect of the provisions of Section 7.   3.            Deductions and Withholding. The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all Federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect.     4. Group Benefits.   (a)          Subject to Section 4(c), for ___ months after Termination Without Cause, the Company shall remit to the Executive monthly an amount equal to the excess of the monthly life insurance premium for a converted policy issued to the Executive over the premium previously paid by the Executive for his or her group life insurance.   (b)          The Company shall make available to the Executive and his or her dependents health, dental and prescription drug benefits in accordance with COBRA regulations. Subject to Section 4(c), for ___ months after Termination Without Cause, the Company shall remit to the Executive monthly an amount equal to the excess of the monthly premium for COBRA coverage over the payroll withholding previously paid by the Executive for group health benefits.   (c)          The premium reimbursements provided in Section 4(a) and (b) shall be available upon submission to the Company of evidence of payment of the premiums by the Executive.       (over)     5. Indemnification.   (a)          The Company shall indemnify the Executive as provided in the By-laws.   (b)          The Company shall use reasonable efforts to continue the existing directors’ and officers’ liability policies covering officers of the Company for $20 million and to maintain the policies during the Term, whether or not the Executive shall be in the Company’s employ.   (c)          The provisions of this Section 5 shall survive the termination of the Executive’s employment, irrespective of the reason therefor.     6. Death.   In the event of the death of the Executive, all Severance Pay and other benefits under this Agreement shall automatically terminate.     7. Restrictive Covenants and Confidentiality.   (a)          Until the termination of this Agreement and for 12 months thereafter, the Executive shall not solicit, raid, entice, encourage or induce any person who at any time in the prior year shall have been an associate of the Company to become employed by any person, firm or corporation, and the Executive shall not approach any such associate for such purpose or authorize or knowingly approve the taking of such actions by any other person, firm or corporation or assist any such person, firm or corporation in taking such action.   (b)          Until the termination of this Agreemetn and for 12 months thereafter, the Executive will not use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any Protected Information in any Unauthorized manner or for any Unauthorized purpose, provided, however, that in the event that the Executive is required to disclose any Protected Information by court order or decree or in compliance with the rules and regulations of a governmental agency or in compliance with law, the Executive will provide the Company with prompt notice of such required disclosure so that the Company may seek an appropriate protective order and/or waive the Executive’s compliance with the provisions of this Section 7(b) and provided, further, that if, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is advised by his or her counsel that such disclosure is necessary to comply with such court order, decree, rules, regulation or law, the Executive may disclose such information without liability hereunder.   (c)          Until the termination of this Agreement and for any period afterwards for which Severance Pay is owing, the Executive shall report promptly in writing to the Senior Vice President-General Counsel of United Retail Group, Inc. any fraud of which he or she is aware, or has reasonable grounds to suspect, on the part of any officer of United Retail Group, Inc. or the Company that involves United Retail Group, Inc. or the Company, whether or not the fraud is material.   (d)          The Executive agrees that all processes, techniques, know-how, inventions, plans, products, and devices developed, made or invented by the Executive, alone or with others in connection with the Executive’s employment with the Company shall become and be the sole property of the Company.   (e)          Neither the Company nor the Executive shall publicly disparge the other either before or after the termination of this Agreement.   (f)           The provisions of this Section 7 shall survive the termination of the Executive’s employment with the Company, irrespective of the reason therefor.     8. Enforcement; Interest.   (a)          If any amount owing to the Executive under this Agreement is not paid by the Company, or on its behalf, within 15 days after a written demand, claim or request for payment has been sent to the Company to the attention of its Associate Services Dept. by certified mail, time being of the essence, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount and interest thereon and, if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit, including reasonable attorneys’ fees. Interest shall be payable from the date any amount is first due and payable to the Executive at a rate equal to the highest rate payable on any of the Company’s indebtedness after the date first set forth above but in no event at a rate higher than the maximum rate then permitted by law.   (b)          The provisions of this Section 8 shall survive the termination of the Executive’s employment hereunder, irrespective of the reason therefor.     (over)       9. Governing Law.   This Agreement shall be subject to, and governed by, the internal laws of the State of New Jersey, without regard to conflicts of laws.     10. Assignability.   (a)          The obligations of the Executive may not be delegated and, except as to the designation of beneficiaries of insurance and similar benefits, the Executive may not, without the Company’s written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of benefits under this Agreement. Any such attempted delegation or disposition shall be null and void ab initio and without effect.   (b)          This Agreement and all of the Company’s rights and obligations hereunder may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any subsidiary of the Company or any Successor to the Company, but any such assignment shall not relieve the assigning party of any of its obligations hereunder. Except as provided in this Section 10(b), this Agreement may not otherwise be assigned by the Company. (The term “Successor” shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or substantially all of the assets of the Company or such subsidiary.)   (c)          The Company shall obtain the agreement of any Successor that the Successor shall assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession. Failure of the Company to obtain the agreement of any Successor to assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.     11. Amendment and Termination of Agreement.   This Agreement may be amended or terminated by the Company without liability to the Executive upon one year’s prior written notice to the Executive. The rights of the Executive under this Agreement shall be vested irrevocably until expiration of the notice period referred to in the preceding sentence. However, this Agreement shall not confer any right to continued employment on the Executive.     IN WITNESS WHEREOF, the parties have subscribed their names, in Rochelle Park, New Jersey, in the case of the Company by an officer thereunto duly authorized.     _______________________________   (Please sign your name)     _______________________________   (Please print your name)     UNITED RETAIL INCORPORATED     By: ____________________________   Vice President       URI Severance Pay Agreement    

--------------------------------------------------------------------------------   Exhibit 10.26 April 26, 2006 Re:         Notice of Award under Anheuser-Busch Companies, Inc. 2006 Restricted Stock Plan for Non-Employee Directors   Dear [Name of Director]:   Under the terms of the Company’s 2006 Restricted Stock Plan for Non-Employee Directors, you have been awarded the following shares of Restricted Stock:   Restricted Stock Awarded 500 shares Award Date April 26, 2006 Vesting Schedule (dates when Restricted Stock becomes non-forfeitable and freely transferable) 167 on date of 2007 Annual Meeting 167 on date of 2008 Annual Meeting 166 on date of 2009 Annual Meeting   These shares of Restricted Stock are subject to the terms and conditions provided in the Plan. A copy of the Plan and an Information Memorandum are enclosed. Please read these documents carefully. The Mexican tax treatment of these awards may be different from that indicated in the Information Memorandum and you may want to consult your tax advisors. Because you are a citizen of Mexico, the U.S. tax rules require tax withholding on dividends and stock awards in accordance with the U.S. - Mexico Income Tax Treaty (currently 30%). Restricted Stock generally will be taxable in the U.S. in the amount of the fair market value of the shares on the date when the restrictions lapse. In order to meet the withholding requirements for Restricted Stock awards, shares of Restricted Stock will be withheld at the applicable rate.   By signing and returning this Award Letter to me, you acknowledge and agree (i) to be bound by all of the terms, provisions and limitations of the Plan, (ii) that you appoint Mellon Investor Services, LLC as agent for the purpose of receiving the Restricted Stock awarded to you, (iii) that you direct Mellon to hold the Restricted Stock in book entry form under the terms and conditions of the Plan, (iv) that the transfer of the Restricted Stock to Mellon constitutes the legal equivalent of delivery to you, and (v) that Mellon shall be empowered to take any action necessary to retransfer to the Company any shares of forfeited Restricted Stock pursuant to the terms of the Plan.     --------------------------------------------------------------------------------   My office will keep track of the Restricted Stock awarded to you under the Plan. As soon as practicable after the lapse of restrictions set forth in the Plan (and subject to applicable tax withholding, if any), we will send the certificates for the unrestricted shares to you.   If you need information about the shares of Restricted Stock, or if you need additional copies of the Plan, the Information Memorandum, or other documents, please contact my office at (314) 577-3314.   Very truly yours,   Acknowledged and Agreed: ____________________________ Date: ___________________________ Enclosures       --------------------------------------------------------------------------------   INFORMATION MEMORANDUM                                                    April 26, 2006     [ablogo.jpg]     ANHEUSER-BUSCH COMPANIES 2006 Restricted Stock Plan for Non-Employee Directors   -------------------------------------------------------------------------------- TABLE OF CONTENTS   Definitions of Terms 2 The Plan 2 General Information 2 Administration 3 Numerical Award Limits 3 Terms of Restricted Stock and Restricted Stock Units 3 Vesting of Awards 4 Effect if You Cease to be a Non-Employee Director - Forfeiture 5 Federal Income Tax Consequences 5 General 5 Parachute Payments 6  Reporting Requirements and Restrictions on Sales and Purchases 6  Additional Restrictions on Sales 7       -------------------------------------------------------------------------------- We are providing this Information Memorandum, including any appendices, to all Non-Employee Directors who receive Awards under the Plan. This Information Memorandum helps explain what the Awards are, how they work, and what limitations and restrictions are imposed on them. The information in this Information Memorandum is only a summary, and not a complete recitation, of those provisions of the Plan which are important to you as a recipient of Awards. You should read the entire Plan to understand all of its provisions. If any of the descriptions in this Information Memorandum are inconsistent with the Plan, the provisions of the Plan are legally controlling.   Capitalized terms used in this Information Memorandum have special meanings which are important to your understanding of this document. Most definitions (or appropriate cross-references) are collected in the section captioned “Definitions of Terms” beginning at page 2.   The delivery of this Information Memorandum does not imply that the information contained in it is correct as of any time later than the date above.     -------------------------------------------------------------------------------- DEFINITIONS OF TERMS   The following terms are important to understanding this Information Memorandum:   Acceleration Date. An Acceleration Date occurs when any of the following happens: (i) ownership by persons or groups of more than 30% of the Company’s then outstanding voting securities; (ii) certain substantial changes in the composition of the Company’s Board of Directors; and (iii) stockholder approval of certain plans of merger, consolidation, liquidation, or dissolution, or of the sale or disposition of substantially all of the Company’s assets.   Annual Meeting. Annual Meeting of Stockholders of the Company.   Annual Awards. This term is defined below in “The Plan - General Information.”   Awards. Shares of Restricted Stock or Restricted Stock Units.   Board. The Company’s Board of Directors.   Board Appointment Award. This term is defined below in “The Plan - General Information.”   Code. The U.S. Internal Revenue Code of 1986 as in effect from time to time.   Committee. The committee of directors of the Company which administers the Plan. See “The Plan—Administration” below beginning at page 3.   Company. Anheuser-Busch Companies, Inc.   Disability/Disabled. A “Disability” is the condition of being “Disabled” within the meaning of Section 422(c)(6) of the Code.   Exchange Act. The Securities Exchange Act of 1934 as in effect from time to time.   Fair Market Value. In general, the average of the highest and lowest selling prices per share of Stock reported on the New York Stock Exchange Composite Tape for any date.   IRS. Internal Revenue Service.   Non-Employee Director. An active or advisory director of the Company who is not an employee of the Company or its subsidiaries.   Plan. The Company’s 2006 Restricted Stock Plan for Non-Employee Directors.   Restricted Stock. Stock issued to a Non-Employee Director which is nontransferable and is subject to forfeiture upon the failure of the shares to Vest under the terms of the Plan.   Restricted Stock Unit. The right to receive a lump sum cash payment in an amount equal to the Fair Market Value of one share of Stock upon Vesting. The right is nontransferable and is subject to forfeiture upon the failure of the Units to Vest as set forth under the Plan.   SEC. Securities and Exchange Commission.   Securities Act. The Securities Act of 1933 as in effect from time to time.   Stock. Shares of the Company’s common stock, par value $1.00 per share.   Vest. Awards Vest when they become non-forfeitable and freely transferable.   THE PLAN   General Information   The Plan provides for the automatic, annual award of 500 shares of Restricted Stock on the date of the Annual Meeting to each Non-Employee Director then in office who is first elected or is re-elected by the stockholders of the Company at, or who continues in office after, any Annual Meeting. Also, the Board may make a discretionary award (not to exceed 500 Shares of Restricted Stock) to any person who first becomes a Non-Employee Director by Board appointment between Annual Meetings or who is first appointed an advisory director by the Board, effective on the date of appointment. Non-Employee Directors who are not employees of the Company or its subsidiaries, are the only individuals who are eligible to receive Awards.   Restricted Stock will not be awarded to a Non-Employee Director who, on the effective date of an Award, is not a stockholder and is not permitted   2 -------------------------------------------------------------------------------- to be a stockholder in accordance with the Company’s Bylaws. Instead (and only in such circumstances), 500 Restricted Stock Units will be automatically awarded to such directors who are first elected and subsequently reelected at an Annual Meeting and up to 500 Restricted Stock Units may be awarded to such directors who first are appointed as directors by the Board between Annual Meetings and to persons who are first appointed by the Board as advisory directors.   Awards made automatically at Annual Meetings are referred to as “Annual Awards.” Awards made at the discretion of the Board to persons appointed by the Board as Non-Employee Directors (including advisory directors) between Annual Meetings are referred to as “Board Appointment Awards.”   The purpose of the Plan is to attract and retain highly-qualified individuals who are not current employees of the Company or any of its subsidiaries to serve on the Company’s Board of Directors or as advisory directors. The award of Restricted Stock (or Restricted Stock Units if required as discussed herein), is intended to align the financial interests of the Non-Employee Directors with those of the Company’s stockholders.   The Plan has no expiration date. The Board has reserved the right to amend or terminate the Plan at any time; however, your outstanding Awards cannot be amended unilaterally by the Board. Certain substantive changes to the Plan, such as increasing the number of shares of Stock subject to Awards, or changing the numerical award limits, for example, would require the approval of the Company’s stockholders under the rules of the New York Stock Exchange.   The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (commonly known as ERISA), and is not a qualified pension, profit-sharing, or stock bonus plan under Section 401(a) of the Code.   Administration   The Plan is administered by the Compensation Committee of the Board. The members of the Compensation Committee are selected by the Board. The Compensation Committee members have no formal term of office, and the Board may remove members and fill vacancies on that committee. The current members of the Compensation Committee are: Vernon R. Loucks (Chairman), James J. Forese, Vilma S. Martinez, and William Porter Payne. The membership of the Compensation Committee is reported each year in the Company’s proxy statement.   The Company’s Corporate Secretary will maintain records showing the number of outstanding shares of Restricted Stock and Restricted Stock Units awarded to each Non-Employee Director along with the award dates, vesting status with respect to each Annual Award and Board Appointment Award and any other data the Corporate Secretary deems significant. Any questions about the Plan, the Awards or requests for additional copies of the Plan or this Information Memorandum should be directed to JoBeth G. Brown, Vice President and Secretary, Anheuser-Busch Companies, Inc., One Busch Place, St. Louis, Missouri 63118 (314-577-3314).   Numerical Award Limits   At present 100,000 shares of Stock are reserved and set aside in the Company’s treasury for issuance pursuant to Awards of Restricted Stock under the Plan. The overall limit, as well as the 500 Restricted Stock/Restricted Stock Unit per person Annual Award rate are subject to adjustment to reflect stock splits, stock dividends or similar events.   Terms of Restricted Stock and Restricted Stock Units   Restricted Stock and Restricted Stock Units are governed by the Plan. When you accept Restricted Stock (or Restricted Stock Units if applicable) you accept them subject to the terms and conditions set out in the Plan.   Restricted Stock   As a recipient of Restricted Stock, you will be subject to the following rights and restrictions:     · You will be a stockholder of record with respect to all Restricted Stock awarded to you under the Plan.     ° You will have the right to vote such Stock at any meeting of the stockholders of the Company.   3 --------------------------------------------------------------------------------   ° You will have the right to receive all dividends declared and paid with respect to such Stock.     · You may not sell, transfer, assign, pledge or otherwise alienate or hypothecate any Restricted Stock unless and until the Restricted Stock Vests. See “Vesting of Awards” below. After the Restricted Stock Vests (i.e. the restrictions lapse) you will own the Stock without risk of forfeiture and the transfer will be restricted only to the extent required by the federal securities laws. See “Reporting Requirements and Restrictions on Sales and Purchases” on page 6 and “Additional Restrictions on Sales” on page 7.     The Company will deliver to you a Notice of Award with respect to each Award made to you. Each Notice of Award will set forth the number of shares of Restricted Stock or Restricted Stock Units (if applicable) awarded and the Vesting dates. The Notice of Award will indicate that the Restricted Stock is awarded to you in “book entry” form so you will not receive a certificate representing the Restricted Stock awarded to you.     · By signing the Notice of Award:     ° you appoint Mellon Investor Services, LLC as your agent for:   → receiving the Restricted Stock Awarded to you; and   → holding the Restricted Stock in book entry form.     ° you acknowledge and agree that transfer of the Restricted Stock to Mellon Investor Services, LLC constitutes the legal equivalent of delivery to you; and     ° You empower Mellon Investor Services, LLC to take any action to retransfer any Restricted Stock that is forfeited under the terms of the Plan. See “Effect if You Cease to be a Non-Employee Director - Forfeiture” on page 5.   Restricted Stock Units   If you are awarded Restricted Stock Units in lieu of Restricted Stock (for the reasons described elsewhere in this Information Memorandum), you will not be a stockholder of the Company with respect to the Restricted Stock Units awarded to you.     · Accordingly, you will not have the right to vote or receive dividends on the Restricted Stock Units awarded to you.     · You will have the right to receive payment in lieu of a dividend in an amount equal to the dividend on one share of Stock for each Restricted Stock Unit at such times as dividends are paid on Stock.     · You may not sell, transfer, assign, pledge or otherwise alienate or hypothecate any Restricted Stock Units.   See “Vesting of Awards” below.   Vesting of Awards   Restricted Stock     · When shares of Restricted Stock “Vest,” the restrictions lapse - i.e., they become non-forfeitable and freely transferable Stock, subject only to restrictions under federal securities laws.     · The restrictions on Restricted Stock awarded at an Annual Meeting lapse in three equal installments on the dates of the first three Annual Meetings following the Annual Meeting at which the Restricted Stock was awarded.     · The restrictions on Restricted Stock awarded as Board Appointment Awards lapse in three equal installments on the first three anniversaries of the date of the Award.   Restricted Stock Units     · When Restricted Stock Units Vest, they entitle you to receive a lump sum cash payment in an amount equal to the Fair Market Value of a like number of shares of Stock on the date they Vest.   4 --------------------------------------------------------------------------------   · Restricted Stock Units awarded at an Annual Meeting Vest in three equal installments on the dates of the first three Annual Meetings following the Annual Meeting at which the Restricted Stock Units were awarded.     · The restrictions on Restricted Stock Units awarded as Board Appointment Awards lapse in three equal installments on the first three anniversaries of the date of the Award.   In order for the shares of Restricted Stock or Restricted Stock Units awarded to you to Vest incrementally as set forth above, you must remain an active or advisory director:     · Immediately following the Annual Meeting in the year in which the portion of the Award eligible for Vesting occurs with respect to Annual Awards; and     · On each anniversary of the date of the Award in the year in which the portion of the Award eligible for Vesting occurs, with respect to Board Appointment Awards.   However, Vesting of the Restricted Stock or Restricted Stock Units may be accelerated in the following circumstances:     · In the event of your death or Disability while serving as an active or advisory director.     · The occurrence of an Acceleration Date.   Effect if You Cease to Be a Non-Employee Director - Forfeiture     · If you cease to be an active or advisory director prior to any Award becoming fully Vested, you will forfeit all such shares of Restricted Stock and Restricted Stock Units which are not then Vested.   °     The forfeited Stock automatically reverts to the Company as of the date of forfeiture.   °     You will no longer have any rights as a stockholder with respect to the forfeited Stock.     § You will have no right to vote the forfeited Stock.     § You will have no right to receive dividends on the Restricted Stock or payment in lieu of dividends on Restricted Stock Units.   FEDERAL INCOME TAX CONSEQUENCES   General The following is merely a summary of some of the principal tax factors applicable to Restricted Shares and Restricted Stock Units. All discussions of federal income tax consequences contained in this summary are based on the law in effect at the time of its preparation. Such laws may be changed before the taxable events described in this summary actually occur. Because of the complexity, possibility of change and importance of the federal income tax laws applicable to the respective benefits offered, and because different circumstances potentially could cause different tax results, you should consult your own tax advisors to ascertain the income tax consequences to you of Restricted Shares and Restricted Stock Units. If you are not a citizen of the United States (or a resident alien), a review with your tax advisors is particularly necessary.  The Company (and its subsidiaries and affiliates) cannot guarantee that any particular tax treatment will apply or be available to you.   Restricted Stock. You generally will not recognize income for federal income tax purposes at the time Restricted Stock is awarded to you. An amount equal to the fair market value of Restricted Stock at the time the restrictions lapse generally is includible in your gross income as ordinary income for each year in which the restrictions lapse. Gain or loss realized upon disposition of Restricted Stock after the restrictions lapse will be taxed as capital gain or loss. Your basis in the shares of   5 -------------------------------------------------------------------------------- Stock will equal the amount includible in your gross income when the restrictions lapse.   You may elect to include in your gross income the fair market value of the Restricted Stock on the date of the Award, provided such an election is made within thirty (30) days of that date by filing a written election statement with the IRS and submitting a copy of the election statement to the Company. This election is called a “Section 83(b) Election.”   If you receive dividends prior to the time restrictions lapse on Restricted Stock for which you have not made a Section 83(b) Election, the dividends received will be taxable to you as ordinary income, rather than as dividend income.   The Company will be entitled to a federal income tax deduction equal to the amount of ordinary income you recognize with respect to Restricted Stock.   Restricted Stock Units. You will not recognize income for federal income tax purposes at the time Restricted Stock Units are awarded to you. An amount equal to the amount of cash received at the time you receive payment, whether upon vesting or as a dividend equivalent, will be ordinary income to you. The Company will be entitled to a federal income tax deduction equal to the amount of income you recognize with respect to Restricted Stock Units.   Parachute Payments   Payments of compensation to certain shareholders or highly compensated individuals which are contingent on a change of ownership or effective control of a corporation (a “Change In Control”) constitute “parachute payments” within the meaning of Section 280G of the Code in their entirety if they exceed 300% of the individual’s base amount, which is the individual’s average annual compensation during a prescribed period, subject to certain exceptions not here relevant. The result of classification of payments as parachute payments is (i) to subject the recipient to a nondeductible excise tax equal to 20% of the excess of the amount treated as parachute payments over 100% of the base amount and (ii) to render such excess parachute payments nondeductible by the Company.   An event causing an Acceleration Date will cause the acceleration of the lapse of restrictions on Restricted Stock and of the time of payment with respect to Restricted Stock Units. Many of the events causing an Acceleration Date to occur would constitute a Change In Control for purposes of the parachute payment provisions. Acceleration upon a Change In Control will constitute a “payment” contingent on a Change In Control, triggering the 20% excise tax and making the payment non-deductible for the Company to the extent the payment is an excess payment.   A fraction (as determined under IRS regulations) of the value of the Restricted Stock or Restricted Stock Units which Vests upon a Change In Control would be treated as contingent on the Change In Control. Restricted Stock or Restricted Stock Units on which the restrictions have already lapsed on the date of a Change In Control do not come within the parachute payment provisions.   REPORTING REQUIREMENTS AND RESTRICTIONS ON SALES AND PURCHASES   General   The Exchange Act requires all directors of the Company to file reports with the SEC of any changes in their beneficial ownership of Stock, including acquisition of Restricted Stock and Restricted Stock Units under this Plan. Under the Exchange Act, you generally are liable to the Company for so-called “short-swing” profits resulting from any purchase and sale, or sale and purchase, of Stock within any period of less than six months. If certain requirements are met, an SEC rule provides an exemption from short-swing profit liability for many actions involving Awards as discussed below.   Restricted Stock   SEC rules currently provide that Awards of Restricted Stock are treated as exempt     6 -------------------------------------------------------------------------------- acquisitions. The lapsing of restrictions is a non-event. Forfeitures are treated as exempt dispositions. A sale of Stock after the restrictions lapse, however, would not be exempt from the short-swing profit liability provisions of the Exchange Act and therefore could be matched against any non-exempt purchase occurring six months before or after the sale.   Restricted Stock Units   The Award of Restricted Stock Units is an exempt acquisition and the lapsing of restrictions or the Vesting of the units is also exempt from the short-swing profit liability provisions of the Exchange Act. The forfeiture of Restricted Stock Units is an exempt disposition.   ADDITIONAL RESTRICTIONS ON SALES The Securities Act imposes certain restrictions on the sale of any securities of the Company acquired by persons who are “affiliates” of the Company. Generally, directors are considered affiliates of the Company. Thus, you will have to register with the SEC any Stock acquired under this Plan which you intend to sell after the restrictions have lapsed, unless an exemption from registration is applicable. Ordinarily, an exemption will be available upon fulfillment of the conditions of Rule 144 under the Securities Act which include filing a Form 144 with the SEC prior to the sale.   Certain other legal restrictions on the sale of Stock are imposed on you under the Exchange Act. See “Reporting Requirements and Restrictions on Sales and Purchases” on page 6.     7    

  Exhibit 10.1     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   AMENDED AND RESTATED CREDIT AGREEMENT   dated as of   February 3, 2006,   among   METALDYNE CORPORATION,   METALDYNE COMPANY LLC,   The Foreign Subsidiary Borrowers Party Hereto,   The Lenders Party Hereto,   JPMORGAN CHASE BANK, as Administrative Agent and Collateral Agent   CREDIT SUISSE FIRST BOSTON, as Syndication Agent   COMERICA BANK, as Documentation Agent   FIRST UNION NATIONAL BANK, as Documentation Agent   NATIONAL CITY BANK, as Documentation Agent   and   BANK ONE, NA, as Documentation Agent ___________________________   J.P. MORGAN SECURITIES INC.,   and   CREDIT SUISSE   as   Joint Bookrunners and Joint Lead Arrangers     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   TABLE OF CONTENTS   Page           ARTICLE I   Definitions   SECTION 1.01. Defined Terms   1 SECTION 1.02. Classification of Loans and Borrowings 44 SECTION 1.03. Terms Generally 44 SECTION 1.04. Accounting Terms; GAAP 44 SECTION 1.05. Exchange Rates 45 SECTION 1.06. Redenomination of Certain Foreign Currencies 45   ARTICLE II   The Credits   SECTION 2.01. Commitments 46 SECTION 2.02. Loans and Borrowings 46 SECTION 2.03. Requests for Borrowings 47 SECTION 2.04. Swingline Loans 48 SECTION 2.05. Letters of Credit 49 SECTION 2.06. Funding of Borrowings 55 SECTION 2.07. Interest Elections 55 SECTION 2.08. Termination and Reduction of Commitments 57 SECTION 2.09. Repayment of Loans; Evidence of Debt 58 SECTION 2.10. Amortization of Term Loans 59 SECTION 2.11. Prepayment of Loans 60 SECTION 2.12. Fees 62 SECTION 2.13. Interest 63 SECTION 2.14. Alternate Rate of Interest 64 SECTION 2.15. Increased Costs 64 SECTION 2.16. Break Funding Payments 65 SECTION 2.17. Taxes 66 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 68 SECTION 2.19. Mitigation Obligations; Replacement of Lenders 70 SECTION 2.20. Additional Reserve Costs 70 SECTION 2.21. Designation of Foreign Subsidiary Borrowers 71 SECTION 2.22. Foreign Subsidiary Borrower Costs 71 --------------------------------------------------------------------------------     ARTICLE III   Representations and Warranties   SECTION 3.01. Organization; Powers 72 SECTION 3.02. Authorization; Enforceability 72 SECTION 3.03. Governmental Approvals; No Conflicts 73 SECTION 3.04. Financial Condition; No Material Adverse Change 73 SECTION 3.05. Properties 74 SECTION 3.06. Litigation and Environmental Matters 74 SECTION 3.07. Compliance with Laws and Agreements 75 SECTION 3.08. Investment and Holding Company Status 75 SECTION 3.09. Taxes 75 SECTION 3.10. ERISA 75 SECTION 3.11. Disclosure 75 SECTION 3.12. Subsidiaries 76 SECTION 3.13. Insurance 76 SECTION 3.14. Labor Matters 76 SECTION 3.15. Solvency 76 SECTION 3.16. Senior Indebtedness 76 SECTION 3.17. Security Documents 77 SECTION 3.18. Federal Reserve Regulations 78   ARTICLE IV   Conditions   SECTION 4.01. [intentionally omitted]. 78 SECTION 4.02. Each Credit Event 78 SECTION 4.03. Credit Events Relating to Foreign Subsidiary Borrowers 79   ARTICLE V   Affirmative Covenants   SECTION 5.01. Financial Statements and Other Information 79 SECTION 5.02. Notices of Material Events 81 SECTION 5.03. Information Regarding Collateral 82 SECTION 5.04. Existence; Conduct of Business 83 SECTION 5.05. Payment of Obligations 83 SECTION 5.06. Maintenance of Properties 83 SECTION 5.07. Insurance 83 SECTION 5.08. Casualty and Condemnation 84 SECTION 5.09. Books and Records; Inspection and Audit Rights 84 SECTION 5.10. Compliance with Laws 84 -ii-   -------------------------------------------------------------------------------- SECTION 5.11. Use of Proceeds and Letters of Credit 84 SECTION 5.12. Additional Subsidiaries 85 SECTION 5.13. Further Assurances 85 SECTION 5.14. [intentionally omitted]. 85 SECTION 5.15. Available Funds; Additional Equity 85 SECTION 5.16. North American Forging Sale 92     ARTICLE VI   Negative Covenants   SECTION 6.01. Indebtedness; Certain Equity Securities 86 SECTION 6.02. Liens 89 SECTION 6.03. Fundamental Changes 90 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions 92 SECTION 6.05. Asset Sales 93 SECTION 6.06. Sale and Leaseback Transactions 95 SECTION 6.07. Hedging Agreements 95 SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness 95 SECTION 6.09. Transactions with Affiliates 97 SECTION 6.10. Restrictive Agreements 98 SECTION 6.11. Amendment of Material Documents 99 SECTION 6.12. Convertible Debentures 99 SECTION 6.13. Interest Expense Coverage Ratio 99 SECTION 6.14. Leverage Ratio 100 SECTION 6.15. Capital Expenditures 100 SECTION 6.16. Consolidated Lease Expense 101   ARTICLE VII   Events of Default     ARTICLE VIII   The Administrative Agent     ARTICLE IX   Collection Allocation Mechanism   SECTION 9.01. Implementation of CAM 106 -iii- --------------------------------------------------------------------------------   SECTION 9.02. Letters of Credit 107   ARTICLE X   Miscellaneous   SECTION 10.01. Notices 109 SECTION 10.02. Waivers; Amendments 109 SECTION 10.03. Expenses; Indemnity; Damage Waiver 111 SECTION 10.04. Successors and Assigns 113 SECTION 10.05. Survival 116 SECTION 10.06. Counterparts; Integration; Effectiveness 116 SECTION 10.07. Severability 116 SECTION 10.08. Right of Setoff 116 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process 117 SECTION 10.10. WAIVER OF JURY TRIAL 117 SECTION 10.11. Headings 118 SECTION 10.12. Confidentiality 118 SECTION 10.13. Interest Rate Limitation 119 SECTION 10.14. Judgment Currency 119 SECTION 10.15. Effectiveness of the Amendment and Restatement; Original Credit Agreement 120 SCHEDULES:   Schedule 1.01(a) -- Existing Letters of Credit Schedule 2.01 -- Commitments Schedule 3.12 -- Subsidiaries Schedule 3.17(d)   -- Mortgage Filing Offices   EXHIBITS:   Exhibit A -- Form of Assignment and Acceptance Exhibit B -- Form of Debenture Account Exhibit C -- Form of Foreign Subsidiary Borrowing       Agreement Exhibit D -- Form of Guarantee Agreement Exhibit E -- Form of Indemnity, Subrogation and       Contribution Agreement Exhibit F -- Form of Mortgage Exhibit G -- Form of Pledge Agreement Exhibit H -- Form of Security Agreement Exhibit I -- Mandatory Costs Rate -iv- --------------------------------------------------------------------------------     AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 3, 2006, among METALDYNE CORPORATION, METALDYNE COMPANY LLC, the FOREIGN SUBSIDIARY BORROWERS party hereto, the LENDERS party hereto, JPMORGAN CHASE BANK, as Administrative Agent and Collateral Agent, FIRST UNION NATIONAL BANK, as Documentation Agent, CREDIT SUISSE, as Syndication Agent, COMERICA BANK, as Documentation Agent, NATIONAL CITY BANK, as Documentation Agent and BANK ONE, NA, as Documentation Agent.   The Parent Borrower desires to amend and restate the terms and provisions of the Credit Agreement dated as of November 28, 2000, as amended and restated as of June 20, 2002 and as further amended as of July 15, 2003, May 26, 2004, September 29, 2004, December 21, 2004 and May 16, 2005 (the "Original Credit Agreement"), among Holdings, the Parent Borrower, the existing lenders thereunder and JPMorgan Chase Bank, as the administrative agent in the form hereof.   The Lenders are willing to amend and restate the Original Credit Agreement and are willing to extend credit to the Parent Borrower and the Foreign Subsidiary Borrowers, in each case upon the terms and subject to the conditions set forth herein and in the Amendment and Restatement Agreement. Accordingly, the parties hereto agree as follows:     ARTICLE I   Definitions   SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:   "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.   "Acquired Assets" means (a) with respect to any fiscal year, the consolidated tangible assets acquired pursuant to a Permitted Acquisition during such fiscal year determined in accordance with GAAP (the "Specified Amount"), provided that if such Permitted Acquisition is not consummated during the first quarter of such fiscal year, Acquired Assets shall be determined for purposes of this clause (a) by multiplying the Specified Amount by (i) .75 if such Permitted Acquisition is consummated during the second quarter of such fiscal year, (ii) .50 if such Permitted Acquisition is consummated during the third quarter of such fiscal year and (iii) .25 if such Permitted Acquisition is consummated during the fourth quarter of such fiscal year and (b) with respect to any fiscal year thereafter, the Specified Amount.   --------------------------------------------------------------------------------   2   "Acquisition Lease Financing" means any sale or transfer by the Parent Borrower or any Subsidiary of any Specified Acquired Property that is rented or leased by the Parent Borrower or such Subsidiary so long as (a) the proceeds from such transaction consist solely of cash, (b) such transaction is consummated within 90 days after the completion of the applicable Permitted Acquisition and (c) the proceeds from such transaction are applied as contemplated by Section 2.11(e).   "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.   "Administrative Agent" means Chase, in its capacity as administrative agent for the Lenders hereunder. With respect to Foreign Currency Borrowings, the Administrative Agent may be an Affiliate of Chase for purposes of administering such Borrowings, and all references herein to the term "Administrative Agent" shall be deemed to refer to the Administrative Agent in respect of the applicable Borrowing or to all Administrative Agents, as the context requires.   "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.   "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.   "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.   "Amendment and Restatement Agreement" means the Amendment and Restatement Agreement dated as of February 3, 2006, among Holdings, the Parent Borrower, the Foreign Subsidiary Borrowers party thereto, the Lenders party thereto and the Administrative Agent.   "Amendment No. 1" means the Amendment No. 1 to this Agreement dated as of July 15, 2003, among Holdings, the Borrowers listed on Schedule 1 thereto and the Lenders party thereto.   "Amendment Date" means the Amendment Date as defined in Amendment No. 1.   "Applicable Percentage" means, with respect to any Revolving Lender, the percentage of the total Revolving Commitments represented by such Lender's Revolving   -------------------------------------------------------------------------------- 3   Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments.   "Applicable Rate" means, for any day (a) with respect to any Tranche D Term Loan, (i) 3.75% per annum (or, if the Leverage Ratio is less than or equal to 4.25 to 1.00, 3.50% per annum) in the case of an ABR Loan, or (ii) 4.50% per annum (or, if the Leverage Ratio is less than or equal to 4.25 to 1.00, 4.25% per annum) in the case of a Eurocurrency Loan, and (b) with respect to any ABR Loan or Eurocurrency Loan that is a Revolving Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurocurrency Spread" or "Commitment Fee Rate", as the case may be, based upon the Leverage Ratio as of the most recent determination date:   Leverage Ratio: ABR Spread Eurocurrency Spread Commitment Fee Rate Category 1 Greater than 4.25 to 1.00   3.50%   4.50%   1.00%   Category 2 Less than or equal to 4.25 to 1.00 but greater than 3.75 to 1.00   3.25%   4.25%   1.00%   Category 3 Less than or equal to 3.75 to 1.00 but greater than 3.50 to 1.00 2.75%   3.75%   1.00%   Category 4 Less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00   2.25%   3.25%   1.00%   Category 5 Less than or equal to 3.00 to 1.00   2.00%   3.00%   1.00%     For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Parent Borrower's fiscal year based upon Holdings' consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 (A) at any time that an Event of Default has occurred and is continuing or (B) if the Parent Borrower   --------------------------------------------------------------------------------  4   fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered.   "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders.   "Asset Dropdown" means (a) the contribution by Holdings to the Parent Borrower of all of its assets (other than Saturn, the Saturn Subsidiary, the Specified Assets and the Specified Cash and other assets approved by the Administrative Agent) and (b) immediately after completion of such contribution, the execution of the Supplemental Indenture by the parties thereto.   "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.   "Assumed Preferred Stock" means any preferred stock or preferred equity interests of any Person that becomes a Subsidiary after the date hereof; provided that (a) such preferred stock or preferred equity interests exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (b) the aggregate liquidation value of all such outstanding preferred stock and preferred equity interests shall not exceed $25,000,000 at any time outstanding, less the aggregate principal amount of Indebtedness incurred pursuant to Section 6.01(a)(xiii).   "Available Funds" means collectively, at any time, (a) the amount of unused Revolving Commitments designated by the Parent Borrower at such time for availability to repurchase, redeem, repay or otherwise retire Convertible Debentures pursuant to Section 5.15(b) and (b) the amount of cash in the Debenture Account at such time.   "Available Funds Reserve Amount" means, at any time, an amount equal to the aggregate face amount of all Convertible Debentures outstanding at such time, provided that the Available Funds Reserve Amount shall in no event exceed $100,000,000.   -------------------------------------------------------------------------------- 5   "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.   "Board" means the Board of Governors of the Federal Reserve System of the United States of America.   "Borrowing" means (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.   "Borrowing Request" means a request by the Parent Borrower or a Foreign Subsidiary Borrower, as the case may be, for a Borrowing in accordance with Section 2.03.   "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that (a) when used in connection with any Eurocurrency Loan denominated in dollars or Sterling, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market and (b) when used in connection with any Revolving Loan denominated in Euro, the term "Business Day" shall also exclude any day on which the TARGET payment system is not open for the settlement of payment in Euro.   "Calculation Date" means (a) each date on which a Revolving Borrowing is made and (b) the last Business Day of each calendar month.   "CAM" shall mean the mechanism for the allocation and exchange of interests in the Credit Facilities and collections thereunder established under Article IX.   "CAM Exchange" shall mean the exchange of the Lender's interests provided for in Section 9.01.   "CAM Exchange Date" shall mean the date on which (a) any event referred to in paragraph (h) or (i) of Article VII shall occur in respect of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower or (b) an acceleration of the maturity of the Loans pursuant to Article VII shall occur.   "CAM Percentage" shall mean, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Equivalent (determined on the basis of Exchange Rates prevailing on the CAM Exchange Date) of the Specified Obligations owed to such Lender and such Lender's participation in undrawn amounts of Letters of Credit immediately prior to the CAM Exchange Date and (b) the denominator shall be the aggregate Dollar Equivalent (as so determined) of the Specified Obligations owed to all the Lenders and the aggregate undrawn amount of outstanding Letters of Credit immediately prior to such CAM Exchange Date.   "Capital Expenditures" means, for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of Holdings, the   -------------------------------------------------------------------------------- 6   Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) that are (or would be) set forth in a consolidated statement of cash flows of Holdings for such period prepared in accordance with GAAP (other than payments made in connection with the termination of obligations in respect of operating leases and acquiring related real property subject to such leases contemplated by Section 5.16) and (b) Capital Lease Obligations incurred by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) during such period.   "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.   "Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person other than Holdings of any Equity Interest in the Parent Borrower; (b) prior to the date of an IPO, either (i) Heartland, together with its Affiliates and the HIP Co-Investors (together with such HIP Co-Investors' Permitted Transferees (as such terms are defined in the Shareholder Agreement as in effect on the date hereof)), shall cease to beneficially own, directly or indirectly, Equity Interests in Holdings representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings, (ii) Heartland and its Affiliates shall cease to beneficially own, directly or indirectly, Equity Interests in Holdings representing at least 30% of each of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings or (iii) 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 Heartland and its Affiliates shall beneficially own at any time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by Heartland and its Affiliates), a greater percentage of the aggregate ordinary voting power of Holdings than the aggregate ordinary voting power of Holdings that is beneficially owned at such time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by such Person), by Heartland and its Affiliates; (c) on or after an IPO, the acquisition of beneficial ownership, directly or indirectly, 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 Heartland and its Affiliates, of Equity Interests representing more than 25% of either the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings and such Person or group beneficially owns at such time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by Heartland and its Affiliates), a greater percentage of the aggregate ordinary voting power of Holdings than the aggregate ordinary voting power of Holdings that is beneficially owned at such time, directly or indirectly, (without giving effect, for avoidance of doubt, to shares owned by such Person), by Heartland and its Affiliates; (d) occupation of a majority of the seats on the board of directors of Holdings by Persons who were not nominated by Heartland and its Affiliates; or (e) the occurrence of any change in control (or similar event, however denominated) with respect to Holdings or the Parent Borrower under (i) any indenture or agreement in respect of Material Indebtedness to which Holdings, the Parent Borrower or     -------------------------------------------------------------------------------- 7   any Subsidiary is a party,(ii) any instrument governing any preferred stock of Holdings, the Parent Borrower or any Subsidiary having a liquidation value or redemption value in excess of $15,000,000 or (iii) the Permitted Receivables Financing.   "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.   "Chase" means JPMorgan Chase Bank.   "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche D Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or Tranche D Commitment.   "Code" means the Internal Revenue Code of 1986, as amended from time to time.   "Collateral" means any and all "Collateral", as defined in any applicable Security Document.   "Collateral Agent" means Chase, in its capacity as collateral agent for the Lenders under the Security Documents. With respect to Foreign Currency Borrowings, the Collateral Agent may be an Affiliate of Chase, for purposes of administering the collateralization of such Borrowings, and all references herein to the term "Collateral Agent" shall be deemed to refer to the Collateral Agent in respect of the applicable Borrowing or to all Collateral Agents, as the context requires.   "Collateral and Guarantee Requirement" means the requirement that:   (a) the Collateral Agent shall have received from each party thereto (other than the Collateral Agent) either (i) a counterpart of (A) the Guarantee Agreement, (B) the Indemnity, Subrogation and Contribution Agreement, (C) the Pledge Agreement and (D) the Security Agreement, in each case duly executed and delivered on behalf of such Loan Party or (ii) in the case of any Person that becomes a Loan Party after the Effective Date, a supplement to each of the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, the Pledge Agreement and the Security Agreement, in each case in the form specified therein, duly executed and delivered on behalf of such Loan Party;   (b) all outstanding Equity Interests of the Parent Borrower and each Subsidiary (including the Receivables Subsidiary) owned by or on behalf of any     -------------------------------------------------------------------------------- 8   Loan Party shall have been pledged pursuant to the Pledge Agreement (except that the Loan Parties shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary, it being understood that this exception shall not limit the application of the Foreign Security Collateral and Guarantee Requirement) and the Collateral Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;   (c) all Indebtedness of Holdings, the Parent Borrower and each Subsidiary in an aggregate principal amount that exceeds $500,000 that is owing to any Loan Party shall be evidenced by a promissory note and shall have been pledged pursuant to the Pledge Agreement and the Collateral Agent shall have received all such promissory notes, together with instruments of transfer with respect thereto endorsed in blank;   (d) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Agreement and the Pledge Agreement and perfect such Liens to the extent required by, and with the priority required by, the Security Agreement and the Pledge Agreement shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;   (e) the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the Administrative Agent or the Required Lenders may reasonably request, and (iii) such surveys, abstracts, appraisals, legal opinions and other documents as the Administrative Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; provided that with respect to any Mortgaged Property as to which a Mortgage was recorded prior to the Effective Date, the requirements of this paragraph shall be limited to such supplements, amendments and bring-downs as the Collateral Agent shall reasonably request; and   (f) each Loan Party (other than the Foreign Subsidiary Borrowers) shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder.     -------------------------------------------------------------------------------- 9   "Commitment" means a Revolving Commitment or Tranche D Commitment, or a combination thereof (as the context requires).   "Compac Event" means the damage to any property owned by Compac Corporation and its subsidiaries resulting from floods occurring in August, 2000.   "Consolidated Cash Interest Expense" means, for any period, the excess of (a) the sum, without duplication, of (i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations) of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP, plus (iii) any cash payments made during such period in respect of obligations referred to in clause (b)(iii) below that were amortized or accrued in a previous period, plus (iv) interest-equivalent costs associated with any Permitted Receivables Financing, whether accounted for as interest expense or loss on the sale of receivables minus (b) the sum of, without duplication, (i) interest income of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period, determined on a consolidated basis in accordance with GAAP, (ii) to the extent included in such consolidated interest expense for such period, noncash amounts attributable to amortization of financing costs paid in a previous period, plus (iii) to the extent included in such consolidated interest expense for such period, noncash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period, plus (iv) to the extent included in such consolidated interest expense for such period, all financing fees incurred in connection with the Transactions. For purposes of calculating Consolidated Cash Interest Expense for each of the four-fiscal-quarter periods ending December 31, 2000, March 31, 2001 and June 30, 2001, Consolidated Cash Interest Expense for such four-fiscal-quarter period shall equal Consolidated Cash Interest Expense for the period commencing October 1, 2000 and ending on (a) December 31, 2000, multiplied by 4, (b) March 31, 2001, multiplied by 2 and (c) June 30, 2001, multiplied by 4/3. Notwithstanding the foregoing, the defined term "Consolidated Cash Interest Expense" shall not include any interest expense in respect of $205,000,000 aggregate principal amount of Convertible Debentures during the 90-day period following the consummation of the TriMas Transaction.   "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period (including all single business tax expenses imposed by state law), (iii) all amounts attributable to depreciation and amortization for such period, (iv) any extraordinary noncash charges for such period, (v) all management fees and other fees paid during such period to Heartland and/or its Affiliates pursuant to the Heartland Management Agreement to the extent permitted by Section 6.09, (vi) all payments made during and expenses recorded in such period in respect of the Restricted Stock Obligation and all items expensed at the Recapitalization   -------------------------------------------------------------------------------- 10   Date in respect of Restricted Stock Awards, (vii) any losses incurred during such period in connection with the sale of receivables pursuant to the Permitted Receivables Financing, (viii) all extraordinary losses during such period, (ix) noncash expenses during such period resulting from the grant of Equity Interests to management and employees of Holdings, the Parent Borrower or any of the Subsidiaries, (x) the aggregate amount of deferred financing expenses for such period, (xi) all other noncash expenses or losses of Holdings, the Parent Borrower or any of the Subsidiaries for such period (excluding any such charge that constitutes an accrual of or a reserve for cash charges for any future period), (xii) any nonrecurring fees, expenses or charges realized by Holdings, the Parent Borrower or any of the Subsidiaries for such period related to any offering of Equity Interests or incurrence of Indebtedness, (xiii) with respect to any four-fiscal-quarter period ending prior to or on December 31, 2001, operating expense and other expense reductions and other synergistic benefits relating to the Recapitalization Transactions, not to exceed the applicable Excluded Amount for such period, (xiv) Excluded Severance Charges for such period, (xv) fees and expenses in connection with the Transactions and fees and expenses of Holdings, the Parent Borrower and its Subsidiaries (excluding TriMas and the subsidiaries of TriMas) in connection with the TriMas Transaction, (xvi) any nonrecurring costs and expenses arising from the integration of any business acquired pursuant to any Permitted Acquisition (other than the New Castle Acquisition), (xvii) solely for purposes of determining compliance with Section 6.14, fees paid pursuant to Section 18 of Amendment No. 1 to the Original Credit Agreement; provided that the aggregate amount of costs and expenses that may be included in Consolidated EBITDA pursuant to this clause (xvii) during the term of this Agreement shall not exceed $5,000,000, (xviii) for all purposes hereunder, other than the defined term "Applicable Rate", the New Castle Specified EBITDA, (xix) solely for purposes of determining compliance with Section 6.14, fees paid pursuant to Section 14 of this Amendment No. 1, (xx) solely for purposes of determining compliance with Section 6.13 and Section 6.14 and the use of the defined term Senior Leverage Ratio, fees and expenses paid in connection with the Internal Evaluation (as defined in the Waiver and Amendment No. 2 to this Agreement dated as of May 26, 2004) and as a consequence thereof, (xxi) nonrecurring charges and expenses in an aggregate amount not to exceed $8,000,000 related primarily to headcount reductions during the period from and including the first day of the first fiscal quarter of 2005 to and including the last day of the first fiscal quarter of 2006, (xxii) charges not to exceed in the aggregate $2,500,000 (calculated by the Parent Borrower in its reasonable judgment and good faith) incurred in connection with the Parent Borrower's accelerated collection programs wound down and/or terminated after June 30, 2004, to the extent such charges are not offset by accounts receivable being included in, or such programs being replaced by, another financing program of the Parent Borrower", (xxiii) any charges or losses incurred in connection with the termination of leases and the purchase of related lease property and (xxiv) any lease payments made during the last twelve months with respect to operating leases terminated in accordance with Section 5.16 or otherwise and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any extraordinary gains for such period, all determined on a consolidated basis in accordance with GAAP. For purposes of determining the Leverage Ratio, Senior Leverage Ratio and Senior Secured Leverage Ratio, if the Parent Borrower or any Subsidiary has made any   -------------------------------------------------------------------------------- 11   Permitted Acquisition or any sale, transfer, lease or other disposition of assets outside of the ordinary course of business permitted by Section 6.05 during the relevant period for determining the Leverage Ratio, Senior Leverage Ratio and Senior Secured Leverage Ratio, Consolidated EBITDA for the relevant period shall be calculated only for purposes of determining Leverage Ratio, Senior Leverage Ratio and Senior Secured Leverage Ratio, after giving pro forma effect thereto, as if such Permitted Acquisition or sale, transfer, lease or other disposition of assets (and, in each case, any related incurrence, repayment or assumption of Indebtedness, with any new Indebtedness being deemed to be amortized over the relevant period in accordance with its terms, and assuming that any Revolving Loans borrowed in connection with such acquisition are repaid with excess cash balances when available) had occurred on the first day of the relevant period for determining Consolidated EBITDA. Any such pro forma calculations may include operating and other expense reductions and other adjustments for such period resulting from any Permitted Acquisition (other than the New Castle Acquisition, except to the extent of any calculation of the Applicable Rate) that is being given pro forma effect to the extent that such operating and other expense reductions and other adjustments (a) would be permitted pursuant to Article XI of Regulation S-X under the Securities Act of 1933 or (b) are reasonably consistent with the purpose of Regulation S-X as determined in good faith by the Parent Borrower in consultation with the Administration Agent. For the purpose of calculating Consolidated EBITDA for the four quarter periods ending December 31, 2004, March 31, 2005, June 30, 2005, September 30, 2005 and December 31, 2005, Consolidated EBITDA shall be additionally increased by $1,500,000, $2,700,000, $1,900,000, $1,300,000 and $500,000, respectively.   "Consolidated Lease Expense" shall mean, for any period, all rental expenses of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) during such period under operating leases for real or personal property, excluding real estate taxes, insurance costs and common area maintenance charges and net of sublease income, other than Capitalized Lease Obligations, all as determined on a consolidated basis in accordance with GAAP.   "Consolidated Net Income" means, for any period, the net income or loss of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person (other than the Parent Borrower) in which any other Person (other than the Parent Borrower or any Subsidiary or any director holding qualifying shares in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Parent Borrower or any of the Subsidiaries during such period, and (b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Parent Borrower or any Subsidiary or the date that such Person's assets are acquired by the Parent Borrower or any Subsidiary.   "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   -------------------------------------------------------------------------------- 12   the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.   "Conversion Right" means the right of the Debenture Holders after the Merger to convert their Convertible Debentures into the amount of cash that the Debenture Holders would have received if such Convertible Debentures had been converted into common stock of Holdings immediately prior to the Merger, as provided in Section 3.06 of the Convertible Debentures Indenture.   "Convertible Debentures" means the 4½% Convertible Subordinated Debentures of Holdings issued under the Convertible Debentures Indenture in an aggregate principal amount not greater than $305,000,000, which after the Asset Dropdown became joint and several obligations of the Parent Borrower and Holdings.   "Convertible Debentures Indenture" means the Indenture dated as of November 1, 1986, between Holdings and Morgan Guaranty Trust Company of New York, as amended by the two Supplemental Indentures dated the Recapitalization Date.   "Credit Facility" means a category of Commitments and extensions of credit thereunder.   "Debenture Account" means an account established with the Administrative Agent in the name of the Administrative Agent and for the benefit of the Lenders having the terms specified in Exhibit B, all proceeds in which will be used to defease, redeem, repay or repurchase or otherwise retire Convertible Debentures as specified in this Agreement.   "Debenture Holders" means the holders of record, from time to time, of the Convertible Debentures.   "Debenture Maturity Date" means December 15, 2003.   "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.   "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06 to the Original Credit Agreement.   "dollars" or "$" refers to lawful money of the United States of America.   "Dollar Equivalent" means, on any date of determination, (a) with respect to any amount in dollars, such amount, and (b) with respect to any amount in any Foreign Currency, the equivalent in dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05(b) using the Exchange Rate with respect to such Foreign Currency at the time in effect under the provisions of such Section.     -------------------------------------------------------------------------------- 13   "Domestic Loan Party" means any Loan Party, other than the Foreign Subsidiary Borrowers.   "Effective Date" means June 20, 2002.   "EMU Legislation" means the legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states.   "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters.   "Environmental Liability" means any liabilities, obligations, damages, losses, claims, actions, suits, judgments, or orders, contingent or otherwise (including any liability for damages, costs of environmental remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) directly or indirectly resulting from or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.   "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person or any warrants, options or other rights to acquire such interests.   "Equity Rollover" means the issuance of common stock of Holdings on the Recapitalization Date to the Continuing Shareholders (as defined in the Recapitalization Agreement) or their permitted transferees under the Exchange and Voting Agreement (as defined in the Recapitalization Agreement), in each case pursuant to and in accordance with Section 2.04(d) of the Recapitalization Agreement.   "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.   "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Parent Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.     -------------------------------------------------------------------------------- 14   "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Parent Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Parent Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Parent Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.   "Euro" or "€" means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation.   "Eurocurrency", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.   "Event of Default" has the meaning assigned to such term in Article VII.   "Excess Cash Flow" means, for any fiscal year, the sum (without duplication) of:   (a) the consolidated net income (or loss) of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) for such fiscal year, adjusted to exclude any gains or losses attributable to Prepayment Events; plus   (b) the excess, if any, of the Net Proceeds received during such fiscal year by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) in respect of any Prepayment Events over the aggregate principal amount of Term Loans prepaid pursuant to Section 2.11(d) (and, as applicable to such fiscal year, Existing Term Loans prepaid pursuant to Section 2.11(d) of the Original Credit Agreement) in respect of such Net Proceeds; plus   (c) depreciation, amortization and other noncash charges or losses deducted in determining such consolidated net income (or loss) for such fiscal year; plus     -------------------------------------------------------------------------------- 15   (d) the sum of (i) the amount, if any, by which Net Working Capital (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year plus (ii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year plus (iii) the net amount, if any, by which the consolidated accrued long-term asset accounts of Holdings, Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year; minus   (e) the sum of (i) any noncash gains included in determining such consolidated net income (or loss) for such fiscal year plus (ii) the amount, if any, by which Net Working Capital (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year plus (iii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year plus (iv) the net amount, if any, by which the consolidated accrued long-term asset accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year; minus   (f) the sum of (i) Capital Expenditures for such fiscal year (except to the extent attributable to the incurrence of Capital Lease Obligations or otherwise financed by incurring Long-Term Indebtedness) plus (ii) cash consideration paid during such fiscal year to make acquisitions or other capital investments (except to the extent financed by incurring Long-Term Indebtedness); minus   (g) the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) during such fiscal year, excluding (i) Indebtedness in respect of Revolving Loans and Letters of Credit, (ii) Term Loans prepaid pursuant to Section 2.11(d) or (f) (and, as applicable to such fiscal year, Existing Term Loans prepaid pursuant to Section 2.11(d) or (f) of the Original Credit Agreement) and (iii) repayments or prepayments of Long-Term Indebtedness financed by incurring other Long-Term Indebtedness; minus   (h) [intentionally omitted];   (i) the noncash impact of currency translations and other adjustments to the equity account, including adjustments to the carrying value of marketable securities and to pension liabilities, in each case to the extent such items would otherwise constitute Excess Cash Flow.     -------------------------------------------------------------------------------- 16   "Exchange Rate" means on any day, with respect to any Foreign Currency, the rate at which such Foreign Currency may be exchanged into dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters World Currency Page for such Foreign Currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Parent Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase of dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Parent Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.   "Excluded Amount" means, with respect to any fiscal period ending on the date specified below, the amount set forth opposite such date: Date   Amount   December 31, 2000   $15,000,000   March 31, 2001   $15,000,000   June 30, 2001   $12,500,000   September 20, 2001   $10,000,000   December 31, 2001   $ 7,500,000   "Excluded Severance Charges" means any nonrecurring severance or similar costs relating to the termination of employment of any employees arising during any four-fiscal-quarter period ending on or prior to December 31, 2003, not to exceed in the aggregate for all such periods $12,500,000.   "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Parent Borrower or any Foreign Subsidiary Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Parent Borrower under Section 2.19(b)), (i) any United States withholding Tax that is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending     -------------------------------------------------------------------------------- 17   office (or assignment), to receive additional amounts from the Parent Borrower with respect to any United States withholding Tax pursuant to Section 2.17(a) and (ii) any withholding Tax that is attributable to such Foreign Lenders' failure to comply with Section 2.17(e).   "Existing Letters of Credit" means the letters of credit issued under the Original Credit Agreement and outstanding as of the Effective Date, which are listed on Schedule 1.01(a).   "Existing Subordinated Notes" means the 11% Subordinated Notes of Holdings due 2012 in the aggregate principal amount of $250,000,000 (including the Exchange Notes issued in exchange for the initial Existing Subordinated Notes as contemplated by the registration rights agreement related thereto) and the Indebtedness represented thereby.   "Existing Subordinated Notes Documents" means the Existing Subordinated Notes, the indenture under which the Existing Subordinated Notes are issued and all other documents evidencing, guaranteeing or otherwise governing the terms of the Existing Subordinated Notes.   "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.   "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Parent Borrower.   "Foreign Currencies" means Euro and Sterling.   "Foreign Currency Commitment" means, with respect to each Revolving Lender, the commitment of such Revolving Lender to make Foreign Currency Loans and to acquire participations in Foreign Currency Letters of Credit, expressed as an amount representing the maximum aggregate amount of such Revolving Lender's Foreign Currency Exposure hereunder, as such commitment may be reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Revolving Lender pursuant to Section 10.04. The initial amount of each Revolving Lender's Foreign Currency Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Revolving Lender shall have assumed its Foreign Currency Commitment, as applicable. The initial aggregate amount of the Revolving Lenders' Foreign Currency Commitments is the Dollar Equivalent of $75,000,000.     -------------------------------------------------------------------------------- 18   "Foreign Currency Exposure" means, with respect to any Revolving Lender at any time, the Dollar Equivalent of the sum of the outstanding principal amount of such Lender's Foreign Currency Loans and its Foreign Currency LC Exposure at such time.   "Foreign Currency LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Foreign Currency Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of Foreign Currency Letters of Credit that have not yet been reimbursed by or on behalf of the Foreign Subsidiary Borrowers at such time. The Foreign Currency LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total Foreign Currency LC Exposure at such time.   "Foreign Currency Letter of Credit" means a Letter of Credit denominated in a Foreign Currency.   "Foreign Currency Loan" means a Revolving Loan denominated in a Foreign Currency.   "Foreign Factoring Arrangement" means any factoring arrangements entered into by any Foreign Subsidiary with respect to accounts receivable of such entity that are held in Europe, Mexico or Canada pursuant to customary terms, provided that the aggregate recourse and exposure in respect thereof shall not at any time exceed $15,000,000.   "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.   "Foreign Security Collateral and Guarantee Requirement" means the requirement that:   (a) the Collateral Agent shall have received from the applicable Foreign Subsidiary Borrower and its subsidiaries a counterpart of each Foreign Security Document relating to the assets (including the capital stock of its subsidiaries) of such Foreign Subsidiary Borrower, excluding assets as to which the Collateral Agent shall determine in its reasonable discretion, after consultation with the Parent Borrower, that the costs and burdens of obtaining a security interest are excessive in relation to the value of the security afforded thereby;   (b) all documents and instruments (including legal opinions) required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created over the assets specified in clause (a) above and perfect such Liens to the extent required by, and with priority required by, such Foreign Security Documents, shall have been filed,     -------------------------------------------------------------------------------- 19   registered or recorded or delivered to the Collateral Agent for filing, registration or recording;   (c) such Foreign Subsidiary Borrower and its subsidiaries shall become a guarantor of the obligations under the Loan Documents of other Foreign Subsidiary Borrowers, if any, under a guarantee agreement reasonably acceptable to the Collateral Agent, in either case duly executed and delivered on behalf of such Foreign Subsidiary Borrower and such subsidiaries, except that such guarantee shall not be required if the Collateral Agent shall determine in its reasonable discretion, after consultation with the Parent Borrower, that the benefits of such a guarantee are limited and such limited benefits are not justified in relation to the burdens imposed by such guarantee on the Parent Borrower and its Subsidiaries; and   (d) such Foreign Subsidiary Borrower shall have obtained all consents and approvals required to be obtained by it in connection with the execution of such Foreign Security Documents, the performance and obligations thereunder and the granting by it of the Liens thereunder.   "Foreign Security Documents" means any agreement or instrument entered into by any Foreign Subsidiary Borrower that is reasonably requested by the Collateral Agent providing for a Lien over the assets (including shares of other Subsidiaries) of such Foreign Subsidiary Borrower.   "Foreign Subsidiary" means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.   "Foreign Subsidiary Borrowers" means any wholly owned Foreign Subsidiary of the Parent Borrower organized under the laws of England and Wales, any member nation of the European Union or any other nation in Europe reasonably acceptable to the Collateral Agent that becomes a party to this Agreement pursuant to Section 2.21.   "Foreign Subsidiary Borrowing Agreement" means an agreement substantially in the form of Exhibit C.   "GAAP" means generally accepted accounting principles in the United States of America.   "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.   "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of     -------------------------------------------------------------------------------- 20   guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.   "Guarantee Agreement" means the Guarantee Agreement, substantially in the form of Exhibit D, made by Holdings, the Parent Borrower and the Subsidiary Loan Parties party thereto in favor of the Collateral Agent for the benefit of the Secured Parties.   "Hazardous Materials" means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.   "Heartland" means Heartland Industrial Partners, L.P., a Delaware limited partnership.   "Heartland Management Agreement" means the monitoring agreement dated as of the Recapitalization Date between Heartland and Holdings.   "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.   "HIP Co-Investor" means a shareholder of Holdings that is a limited partner, or an Affiliate of a limited partner, in Heartland or in any other fund or investment vehicle established or managed by Heartland or an Affiliate of Heartland and shall in any event include those Persons constituting HIP Co-Investors under the Shareholder Agreement on the Recapitalization Date.   "Holdings" means Metaldyne Corporation, formerly known as MascoTech, Inc., a Delaware corporation.   "Holdings Preferred Dividends" means (a) dividend payments due in respect of the Holdings Preferred Stock pursuant to Article 4(c)(2) of Holdings' Certificate of Designation and (b) any cash dividend payments in respect of any Qualified Holdings Preferred Stock.     -------------------------------------------------------------------------------- 21   "Holdings Preferred Stock" means the Series A Preferred Stock issued by Holdings, having an aggregate liquidation value of $36,100,100 and the other terms specified in Holdings' Certificate of Incorporation.   "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person (other than lease obligations that are Capital Lease Obligations solely because of a Guarantee), (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding anything to the contrary in this paragraph, the term "Indebtedness" shall not include (a) the Restricted Stock Obligation, (b) any obligation in respect of the Saturn Proceeds Distribution, (c) any obligations in respect of options or other Equity Interests held by the Pre-Merger Stockholders to the extent surviving the Recapitalization Transactions, (d) agreements providing for indemnification, purchase price adjustments or similar obligations incurred or assumed in connection with the acquisition or disposition of assets or capital stock and (e) trade payables and accrued expenses in each case arising in the ordinary course of business.   "Indemnified Taxes" means Taxes other than Excluded Taxes.   "Indemnity, Subrogation and Contribution Agreement" means the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit E, among the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent.   "Information Memorandum" means the Confidential Information Memorandum dated June, 2002, relating to the Parent Borrower and the Transactions.   "Intercompany Transfer" means the dividend or other intercompany distribution by the Parent Borrower to Holdings, all of which was used by Holdings as payment, in part, of the Merger Consideration.     -------------------------------------------------------------------------------- 22   "Intercreditor Agreement" means an intercreditor agreement among Holdings, the Parent Borrower, the Administrative Agent (or other agent acting on behalf of the Lenders) and the trustee or agent on behalf of the holders of the applicable Permitted Senior Notes, which such agreement shall (i) provide that the Liens in respect of such Permitted Senior Notes are subordinated to the Liens under the Collateral Documents, (ii) limit the ability of such trustee or agent and the holders of the Permitted Senior Notes to take actions with respect to, or enforce, such Liens and (iii) have such other terms as are satisfactory to the Administrative Agent.   "Interest Election Request" means a request by the Parent Borrower or a Foreign Subsidiary Borrower, as the case may be, to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.07.   "Interest Payment Date" means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.   "Interest Period" means, with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or nine or twelve months thereafter if, at the time of the relevant Borrowing, all Lenders participating therein agree to make an interest period of such duration available), as the Parent Borrower or a Foreign Subsidiary Borrower, as the case may be, may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.   "Investors" means Heartland, its Affiliates and the other entities identified by Heartland as "Investors" to the Administrative Agent prior to the Recapitalization Date.   "IPO" means an underwritten public offering by Holdings of Equity Interests of Holdings pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933.     -------------------------------------------------------------------------------- 23   "Issuing Bank" means Chase, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, including with respect to Foreign Currency Letters of Credit, and in each such case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. In the event that there is more than one Issuing Bank at any time, references herein and in the other Loan Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in respect of the applicable Letter of Credit or to all Issuing Banks, as the context requires. Notwithstanding the foregoing, each institution listed in Schedule 1.01(a) shall be deemed to be an Issuing Bank with respect to the Existing Letters of Credit issued by it.   "Judgment Currency" has the meaning set forth in Section 10.14.   "Judgment Currency Conversion Date" has the meaning set forth in Section 10.14.   "LC Disbursement" means a payment made by the Issuing Bank pursuant to a Letter of Credit.   "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Parent Borrower or the Foreign Subsidiary Borrowers, as the case may be, at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.   "LC Reserve Account" has the meaning set forth in Section 9.02(a).   "Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund that invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.   "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender.   "Letter of Credit" means any letter of credit issued pursuant to this Agreement. Each Existing Letter of Credit shall be deemed to constitute a Letter of Credit issued hereunder on the Effective Date for all purposes of the Loan Documents.     -------------------------------------------------------------------------------- 24   "Leverage Ratio" means, on any date, the ratio of (a) Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of Holdings most recently ended prior to such date for which financial statements are available).   "LIBO Rate" means, with respect to any Eurocurrency Borrowing (other than such Borrowings denominated in a Foreign Currency) for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. With respect to Eurocurrency Borrowings denominated in a Foreign Currency, the LIBO Rate for any Interest Period shall be determined by the Administrative Agent at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in the currency of such Borrowing (as reflected on the applicable Telerate screen) for a period equal to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in the applicable currency for the Dollar Equivalent of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.   "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.   "Loan Documents" means this Agreement and the Security Documents.   "Loan Parties" means Holdings, the Parent Borrower, the Foreign Subsidiary Borrowers and the other Subsidiary Loan Parties.   "Loans" means the loans made by the Lenders to the Parent Borrower and the Foreign Subsidiary Borrowers pursuant to this Agreement.     -------------------------------------------------------------------------------- 25   "Long-Term Indebtedness" means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability, including the current portion of any Long-Term Indebtedness.   "Margin Stock" shall have the meaning assigned to such term in Regulation U.   "Masco" means Masco Corporation, a Delaware corporation, or any successor thereto.   "Material Adverse Effect" means a material adverse effect on (a) the business, operations, properties, assets, financial condition, contingent or otherwise, or material agreements of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary), taken as a whole (it being understood that any effect on the business, operations, properties, assets, financial condition, contingent or otherwise or material agreements of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) resulting from the Asset Dropdown will not constitute a material adverse effect for purposes of this clause (a)), (b) the ability of any Loan Party in any material respect to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document.   "Material Agreements" means (a) any agreements or instruments relating to Material Indebtedness and (b) the Heartland Management Agreement.   "Material Indebtedness" means (a) Indebtedness in respect of the Existing Subordinated Notes, Convertible Debentures, the Permitted Subordinated Notes and the Permitted Senior Notes, (b) obligations in respect of the Permitted Receivables Financing and (c) any other Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Parent Borrower and its Subsidiaries evidencing an aggregate outstanding principal amount exceeding $15,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of Holdings, the Parent Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Parent Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.   "Merger" means the merger of Merger Subsidiary with and into Holdings, with respect to which Holdings was the surviving entity as contemplated by the Recapitalization Agreement.   "Merger Consideration" means the cash payment to the Pre-Merger Stockholders in accordance with the Recapitalization Agreement in an amount not exceeding $609,200,000.   "Merger Subsidiary" means Riverside Acquisition Corporation, a Delaware corporation, all the Equity Interests of which are owned by Heartland, its Affiliate and the other Investors.     -------------------------------------------------------------------------------- 26   "Moody's" means Moody's Investors Service, Inc.   "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be substantially in the form of Exhibit F with such changes as are necessary under applicable local law.   "Mortgaged Property" means, initially, each parcel of real property and the improvements thereto owned by a Loan Party as of the Effective Date, and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13 and any property subject to an operating lease which is terminated in accordance with Section 5.16.   "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.   "Net Proceeds" means, with respect to any event (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any noncash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds in excess of $1,000,000 (excluding proceeds arising from the Compac Event), and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses and premiums paid by Holdings, the Parent Borrower and the Subsidiaries in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made by Holdings, the Parent Borrower and the Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, and (iii) the amount of all Taxes paid (or reasonably estimated to be payable) by Holdings, the Parent Borrower and the Subsidiaries, and the amount of any reserves established by Holdings, the Parent Borrower and the Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the 24-month period immediately following such event and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of Holdings or the Parent Borrower) to the extent such liabilities are actually paid within such applicable time periods. Notwithstanding anything to the contrary set forth above, (i) the proceeds of any sale, transfer or other disposition of receivables (or any interest therein) pursuant to any Permitted Receivables Financing shall not be deemed to constitute Net Proceeds and (ii) the proceeds of any sale, transfer or other disposition of receivables (or any interest therein) pursuant to any Foreign Factoring Arrangement shall constitute Net Proceeds only to the extent such proceeds can be repatriated to the United States without adverse tax consequences to the Parent Borrower or any Subsidiary.   "Net Working Capital" means, at any date, (a) the consolidated current assets of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of Holdings, the Parent Borrower and its     -------------------------------------------------------------------------------- 27   consolidated Subsidiaries (including the Receivables Subsidiary) as of such date (excluding current liabilities in respect of Indebtedness). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.   "New Castle Acquisition" means the acquisition by the Parent Borrower or a Subsidiary of all the remaining Equity Interests of NC-M Chassis Systems, LLC not then owned by the Parent Borrower or a Subsidiary or all, or substantially all, of the assets of NC-M Chassis Systems, LLC so long as (a) the total consideration (excluding fees, expenses and assumed liabilities) for such remaining Equity Interests or assets shall not exceed $215,000,000, (b) such acquisition shall be financed with (i) the issuance of Equity Interests by Holdings of not less than $64,000,000, (ii) Permitted Senior Notes to the extent contemplated by the defined term "Permitted Senior Notes", (iii) New Castle Seller Debt, (iv) Revolving Loans, Permitted Receivables Financing or, subject to Section 6.06, the New Castle Sale and Leaseback, or any combination thereof, in an aggregate amount not to exceed $120,000,000, or (v) any combination of the foregoing, (c) such acquisition is consummated within 180 days of the Amendment Date, (d) after giving effect to such acquisition (and any related incurrence of or repayment of Indebtedness), (i) the Senior Secured Leverage Ratio is less than 2.75 to 1.00 and (ii) the Leverage Ratio is less than 4.75 to 1.00, and (e) immediately after giving effect thereto, (i) no Default has occurred and is continuing or would result therefrom, (ii) all transactions related thereto are consummated in all material respects in accordance with applicable laws, (iii) all the Equity Interests (other than Assumed Preferred Stock) of each Subsidiary formed for the purpose of or resulting from such acquisition shall be owned directly by the Parent Borrower or a Subsidiary and all actions required to be taken under Sections 5.12 and 5.13 have been taken, (iv) Holdings, the Parent Borrower and its Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisition, with the covenants contained in Sections 6.13 and 6.14 recomputed as at the last day of the most recently ended fiscal quarter of Holdings for which financial statements are available, as if such acquisition (and any related incurrence or repayment of Indebtedness) had occurred on the first day of each relevant period for testing such compliance, (v) any Indebtedness or any preferred stock that is incurred, acquired or assumed in connection with such acquisition shall be in compliance with Section 6.01 and (vi) the Parent Borrower has delivered to the Administrative Agent an officers' certificate to the effect set forth in clauses (a), (b), (c) and (d) (i) through (v) above, together with all relevant financial information for the Person or assets to be acquired.   "New Castle Sale and Leaseback" shall mean any sale or transfer not later than 30 days of the New Castle Acquisition by the Parent Borrower or any Subsidiary of fixed or capital assets acquired pursuant to the New Castle Acquisition that is made for cash consideration in an aggregate amount not less than an amount equal to 85% of the orderly liquidation value of such fixed or capital assets not to exceed $120,000,000 in the aggregate during the term of this Agreement, and promptly thereafter rented or leased by the Parent Borrower or such Subsidiary; provided that, notwithstanding the foregoing, in connection with any New Castle Sale and Leaseback, Parent Borrower or any Subsidiary may elect to (1) retain ownership of any portion of the fixed or capital assets that could     -------------------------------------------------------------------------------- 28   otherwise have been made the subject of the New Castle Sale and Leaseback and (2) pledge such retained assets as collateral security for any obligations in favor of the lessor(s) under any of the sale and leasing arrangements with respect to the assets that were not so retained (with such security interests of the lessor(s) being limited to the retained assets and the proceeds thereof), so long as (A) the cash proceeds received by the Parent Borrower and any Subsidiary from any such transaction exceeds 85% of the orderly liquidation value of all fixed and capital assets that have been made the subject of a sale and leaseback and the collateral security arrangements and (B) in the good faith judgment of the Parent Borrower, the financial terms of any such transaction are no less favorable to the Parent Borrower and any Subsidiary, taken as a whole, than would have been the case had the election set forth in this proviso not been utilized.   "New Castle Seller Debt" means subordinated notes issued by Holdings to the seller in the New Castle Acquisition in an aggregate principal amount not less than $31,000,000, which such notes shall rank pari passu and shall be subject to the subordination and other terms that are no more favorable to the holders or obligees thereof in any material respect than the subordination and other terms of the Subordinated Debt.   "New Castle Specified EBITDA" means, if the New Castle Acquisition has been consummated, the total of the amounts for any period prior to consummation of the New Castle Acquisition identified below that is included within the period for which Consolidated EBITDA is being calculated: (i) for the fiscal quarters ended December 31, 2002 and December 31, 2003, $11,046,443, (ii) for the fiscal quarters ended March 31, 2003 and March 31, 2004, $10,693,298, (iii) for the fiscal quarter ended June 30, 2003, $12,030,358 and (iv) for the fiscal quarter ending September 30, 2003, $13,729,901; provided, however, that (A) to the extent the New Castle Acquisition has occurred during a particular quarter, the amount to be included for such quarter shall be determined by taking a proportionate amount of the quarter (based on actual days elapsed); and (B) following the completion of the New Castle Sale and Leaseback, New Castle Specified EBITDA for any fiscal period calculated thereafter shall be reduced by the total pro forma lease expense for such fiscal period as if such expense had occurred on the first day of the relevant period for determining New Castle Specified EBITDA (it being understood that no earlier calculation of Consolidated EBITDA shall be affected thereby).   "North American Forging Sale" means the sale by the Parent Borrower and certain of its subsidiaries of certain assets comprising the Parent Borrower's North American forging business, pursuant to the North American Forging Sale Agreement.   "North American Forging Sale Agreement" means the Asset Purchase Agreement dated as of January 7, 2006, among Holdings, the Parent Borrower, Metaldyne Precision Forming—Fort Wayne Inc. and Forming Technologies, Inc., as the same may be revised prior to the closing of the North American Forging Sale in a manner not adverse to the Lenders.     -------------------------------------------------------------------------------- 29   "Obligations" has the meaning assigned to such term in the Security Agreement.   "Other Taxes" means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies imposed by any Governmental Authority arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, other than Excluded Taxes.   "Parent Borrower" means Metaldyne Company LLC, formerly known as Metalync Company LLC, a Delaware limited liability company.   "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.   "Perfection Certificate" means a certificate in the form of Annex I to the Security Agreement or any other form approved by the Collateral Agent.   "Permitted Acquisition" means (a) the New Castle Acquisition and (b) any acquisition, whether by purchase, merger, consolidation or otherwise, by the Parent Borrower or a Subsidiary of all or substantially all the assets of, or all the Equity Interests in, a Person or a division, line of business or other business unit of a Person so long as (i) such acquisition shall not have been preceded by a tender offer that has not been approved or otherwise recommended by the board of directors of such Person, (ii) such assets are to be used in, or such Person so acquired is engaged in, as the case may be, a business of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement or in a business reasonably related thereto, (iii) such acquisition shall be financed with proceeds from (A) Revolving Loans (subject to Section 6.01(a)(i)), the Permitted Subordinated Notes to the extent the issuance thereof is permitted under the defined term "Permitted Subordinated Notes" and/or Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock, (B) Permitted Receivables Financing (subject to Section 6.01(a)(ii)), (C) any lease financing permitted hereunder the proceeds of which are not required to prepay Term Borrowings here-under, (D) the issuance of Equity Interests by Holdings, (E) Excess Cash Flow not required to be used to prepay Term Loans pursuant to Section 2.11(f), (F) proceeds from sales of assets permitted by Section 6.05 that are not required to be applied toward the repayment of Term Borrowings hereunder or (G) any combination thereof and (iv) immediately after giving effect thereto, (A) no Default has occurred and is continuing or would result there-from, (B) all transactions related thereto are consummated in all material respects in accordance with applicable laws, (C) all the Equity Interests (other than Assumed Preferred Stock) of each Subsidiary formed for the purpose of or resulting from such acquisition shall be owned directly by the Parent Borrower or a Subsidiary and all actions required to be taken under Sections 5.12 and 5.13 have been taken, (D) Holdings, the Parent Borrower and its Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisition, with the covenants contained in Sections 6.13 and 6.14 recomputed as at the last day of the most recently ended fiscal quarter of Holdings for which financial     -------------------------------------------------------------------------------- 30   statements are available, as if such acquisition (and any related incurrence or repayment of Indebtedness) had occurred on the first day of each relevant period for testing such compliance (provided that any acquisition that occurs prior to the first testing period under such Sections shall be deemed to have occurred during such first testing period), (E) any Indebtedness or any preferred stock that is incurred, acquired or assumed in connection with such acquisition shall be in compliance with Section 6.01 and (F) the Parent Borrower has delivered to the Administrative Agent an officers' certificate to the effect set forth in clauses (i), (ii), (iii) and (iv) (A) through (F) above, together with all relevant financial information for the Person or assets to be acquired.   "Permitted Capital Expenditure Amount" means the sum of (i) the Base Amount for such fiscal year as specified below, (ii) 20% of Acquired Assets (the "Acquired Assets Amount") and (iii) for each fiscal year after any Acquired Assets Amount are initially included in clause (ii) above, 5% of such Acquired Assets Amount, calculated on a cumulative basis.   Fiscal Year Ended   Base Amount   2001   $120,000,000   2002   $115,000,000   2003   $100,000,000   2004   $110,000,000   2005   $115,000,000   2006   $80,000,000   2007   $90,000,000   2008   2009   $95,000,000   $95,000,000   "Permitted Encumbrances" means:   (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05;   (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05;   (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations;     -------------------------------------------------------------------------------- 31   (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;   (e) judgment Liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII;   (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary;   (g) ground leases in respect of real property on which facilities owned or leased by the Parent Borrower or any of the Subsidiaries are located, other than any Mortgaged Property;   (h) Liens in favor or customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;   (i) Leases or subleases granted to other Persons and not interfering in any material respect with the business of Holdings, the Parent Borrower and the Subsidiaries, taken as a whole;   (j) banker's liens, rights of set-off or similar rights, in each case arising by operation of law; and   (k) Liens in favor of a landlord on leasehold improvements in leased premises;   provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness.   "Permitted Investments" means:   (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;   (b) investments in commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;   (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or     -------------------------------------------------------------------------------- 32   guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;   (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;   (e) securities issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof having maturities of not more than six months from the date of acquisition thereof and, at the time of acquisition, having the highest credit rating obtainable from S&P or from Moody's;   (f) securities issued by any foreign government or any political subdivision of any foreign government or any public instrumentality thereof having maturities of not more than six months from the date of acquisition thereof and, at the time of acquisition, having the highest credit rating obtainable from S&P or from Moody's;   (g) investments of the quality as those identified on Schedule 6.04 to the Original Credit Agreement as "Qualified Foreign Investments" made in the ordinary course of business;   (h) cash; and   (i) investments in funds that invest solely in one or more types of securities described in clauses (a), (e) and (f) above.   "Permitted Receivables Documents" means the Receivable Purchase Agreement, the Receivables Transfer Agreement and all other documents and agreements relating to the Permitted Receivables Financing.   "Permitted Receivables Financing" means the sale by the Parent Borrower and certain Subsidiaries (other than Foreign Subsidiaries) of accounts receivables (i)(a) to the Receivables Subsidiary pursuant to the Receivables Sale Agreement and (b) the sale of such accounts receivable (or participation therein) by the Receivables Subsidiary to certain purchasers pursuant to the Receivables Transfer Agreement and (ii) directly (or indirectly through a special purpose subsidiary) to third-parties pursuant to third-party financing agreements in transactions constituting "true sales", provided that the aggregate net investment of the purchasers under the Receivables Transfer Agreement and such third-party financing agreements in such accounts receivable so sold by the Parent Borrower and such Subsidiaries shall not exceed in the aggregate $175,000,000 and, provided further that any such receivables financing described in clause (ii) above shall be satisfactory to the Administrative Agent and the administrative agent under the Receivables Transfer Agreement.     -------------------------------------------------------------------------------- 33   "Permitted Senior Notes" means any Indebtedness of Holdings or the Parent Borrower, provided that (a) to the extent such Indebtedness and any related Guarantees are secured by any Lien, such Liens are second-priority Liens and the trustee or agent thereunder shall have entered into the Intercreditor Agreement, (b) the proceeds resulting from the initial $150,000,000 aggregate principal amount of such Indebtedness shall be used (i) to prepay Term Borrowings pursuant to Section 2.11(a), (ii) to repurchase, redeem or otherwise retire the Convertible Debentures, (iii) if such Indebtedness is incurred contemporaneously with the New Castle Acquisition in order to effect the New Castle Acquisition or (iv) any combination of the foregoing, (c) any proceeds resulting from the aggregate principal amount of such Indebtedness that exceeds $150,000,000 shall be used to prepay Term Borrowings pursuant to Section 2.11(d)(1), (d) such Indebtedness shall not have any principal payments due prior to the date that is 12 months after the Tranche D Maturity Date, whether at maturity or other-wise, except upon the occurrence of a change of control or similar event (including asset sales), in each case so long as the provisions relating to change of control or similar events (including asset sales) included in the governing instrument of such Indebtedness provide that the provisions of this Agreement must be satisfied prior to the satisfaction of such provisions of such Indebtedness and (d) such Indebtedness bears interest at a fixed rate, which rate shall be, in the good faith judgment of the Parent Borrower's board of directors, consistent with the market at the time of issuance for similar Indebtedness for comparable issuers or borrowers. The Parent Borrower may designate by notice to the Administrative Agent any Permitted Subordinated Notes as Permitted Senior Notes so long as such notice is delivered immediately prior to the issuance of such Notes, and following such designation such Permitted Subordinated Notes shall be "Permitted Senior Notes" for purposes of this Agreement.   "Permitted Subordinated Notes" means Indebtedness of Holdings or the Parent Borrower, provided that (a) such Indebtedness and any related Guarantees shall not be secured by any Lien, (b) such Indebtedness shall be subject to subordination and inter-creditor provisions that are no more favorable to the holders or obligees thereof than the subordination or inter-creditor provisions of the Existing Subordinated Notes in any material respect, (c) the proceeds from such Indebtedness shall be used (i) to repurchase, redeem, repay or otherwise retire the Convertible Debentures, (ii) to repay (subject to Section 6.01(a)(vii)) Revolving Borrowings or obligations arising in respect of the Permitted Receivables Financing, (iii) to prepay Term Borrowings pursuant to Section 2.11(a) or (iv) if after giving effect to the incurrence of such Indebtedness, the Senior Leverage Ratio is less than 2.75 to 1.00, to effect Permitted Acquisitions (provided that the aggregate principal amount of Permitted Subordinated Notes that can be used for financing Permitted Acquisitions pursuant to this clause (iv) shall not exceed $100,000,000, (d) such Indebtedness shall not have any principal payments due prior to the date that is 12 months after the Tranche D Maturity Date, whether at maturity or otherwise, except upon the occurrence of a change of control or similar event (including asset sales), in each case so long as the provisions relating to change of control or similar events (including asset sales) included in the governing instrument of such Indebtedness provide that the provisions of this Agreement must be satisfied prior to the satisfaction of such provisions of such Indebtedness and (e) such Indebtedness bears interest at a fixed rate, which rate shall be, in the good faith judgment of the Parent Borrower's board of     -------------------------------------------------------------------------------- 34   directors, consistent with the market at the time of issuance for similar Indebtedness for comparable issuers or borrowers. Notwithstanding the foregoing, for purposes of this Agreement, the Existing Subordinated Notes and the New Castle Seller Debt shall be Permitted Subordinated Indebtedness.   "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.   "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Parent Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.   "Pledge Agreement" means the Pledge Agreement, substantially in the form of Exhibit G, among Holdings, the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent for the benefit of the Secured Parties.   "Pre-Merger Stockholders" means the common stockholders of Holdings and holders of options to acquire common stock of Holdings immediately prior to the Merger.   "Prepayment Event" means:   (a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of Holdings, the Parent Borrower or any Subsidiary for consideration that exceeds $10,000,000, other than dispositions described in clauses (a), (b), (c), (d), (e), (f)(ii), (f)(iii), (g), (h), (i), (k), (l) and (m) of Section 6.05; or   (b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of Holdings, the Parent Borrower or any Subsidiary having a book value or fair market value in excess of $1,000,000 (other than damage arising from the Compac Event), but only to the extent that the Net Proceeds therefrom have not been applied to repair, restore or replace such property or asset within 365 days after such event; or   (c) the incurrence by Holdings, the Parent Borrower or any Subsidiary of any Indebtedness, other than Indebtedness permitted by Section 6.01(a); or   (d) the incurrence of any Permitted Senior Notes (unless the Net Proceeds thereof are used as permitted by clause (b) under the defined term "Permitted Senior Notes");   notwithstanding anything to the contrary, the sale, transfer or other disposition of the Saturn Subsidiary or the Saturn Sale shall not constitute a Prepayment Event.     -------------------------------------------------------------------------------- 35   "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.   "Qualified Holdings Preferred Stock" means any preferred capital stock or preferred equity interest of Holdings (a)(i) that does not provide for any cash dividend payments or other cash distributions in respect thereof prior to the Tranche D Term Loan Maturity Date and (ii) that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event does not (A)(x) mature or become mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (y) become convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock that is not Qualified Holdings Preferred Stock; or (z) become redeemable at the option of the holder thereof (other than as a result of a change of control event), in whole or in part, in each case on or prior to the first anniversary of the Tranche D Term Loan Maturity Date and (B) provide holders thereunder with any rights upon the occurrence of a "change of control" event prior to the repayment of the Obligations under the Loan Documents or (b) with respect to which Holdings has delivered a notice to the Administrative Agent that it has issued preferred stock or preferred equity interest in lieu of incurring Indebtedness otherwise permitted by clauses (vii) or (xv) under Section 6.01(a) and, in the case of clause (vii), whether such preferred stock or preferred equity interests relate to any Permitted Subordinated Notes or any Permitted Senior Notes, with such notice specifying the applicable clause; provided that (i) the aggregate liquidation value of all such preferred stock or preferred equity interest issued pursuant to this clause (b) shall not exceed at any time the dollar limitation specified in such applicable clause, less the aggregate principal amount of Indebtedness outstanding pursuant to such paragraph and (ii) the terms of such preferred stock or preferred equity interests (x) shall provide that upon a default thereof, the remedies of the holders thereof shall be limited to the right to additional representation on the board of directors of Holdings and (y) shall otherwise be no less favorable to the Lenders, in the aggregate, than the terms of any Indebtedness that may be incurred pursuant to such paragraph.   "Quotation Day" means, with respect to any Eurocurrency Borrowing denominated in a Foreign Currency and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days.   "Ramos Sale and Leaseback" shall mean any sale or transfer by the Parent Borrower or any Subsidiary of fixed or capital assets of the Ramos facility that is made for cash consideration in the aggregate amount not less than an amount equal to 85% of the orderly liquidation value of such fixed or capital assets not to exceed $30,000,000 in the aggregate during the term of this Agreement, and promptly thereafter rented or leased by the Parent Borrower or such Subsidiary.     -------------------------------------------------------------------------------- 36   "Recapitalization" means the recapitalization of Holdings effected pursuant to the Merger as contemplated by the Recapitalization Agreement.   "Recapitalization Agreement" means the Recapitalization Agreement dated as of August 1, 2000, between Holdings and Merger Subsidiary, as amended.   "Recapitalization Date" means November 28, 2000.   "Recapitalization Documents" means the Recapitalization Agreement and the other agreements and documents relating to the Recapitalization Transactions.   "Recapitalization Transactions" means (a) the Recapitalization, (b) the Specified Asset Sales, (c) the Saturn Sale, (d) the Asset Dropdown, (e) the Restricted Stock Award and the performance of the Restricted Stock Obligation, (f) the Intercompany Transfer, (g) the payment of the Merger Consideration and the Saturn Proceeds Distribution, (h) the issuance of the Holdings Preferred Stock to Masco, (i) the repayment of certain Indebtedness, (j) the Equity Rollover, (k) the execution of the Subordinated Loan Agreement dated as of the Recapitalization Date between Masco and Holdings, as amended, by the parties thereto and (l) the other transactions contemplated by the Recapitalization Agreement.   "Receivables Purchase Agreement" means (a) the Receivables Purchase Agreement dated as of the Recapitalization Date among the Receivables Subsidiary, Holdings, the Parent Borrower and the Subsidiaries party thereto, related to the Permitted Receivables Financing, as may be amended, supplemented or otherwise modified to the extent permitted by Section 6.11 and (b) any agreement replacing such Receivables Purchase Agreement, provided that such replacing agreement contains terms that are substantially similar to such Receivables Purchase Agreement and that are otherwise no more adverse to the Lenders than the applicable terms of such Receivables Purchase Agreement.   "Receivables Subsidiary" means MTSPC, Inc., a Delaware corporation, MRFC, Inc., a Delaware corporation, or any special purpose subsidiary referred to in clause (ii) of the definition Permitted Receivables Financing.   "Receivables Transfer Agreement" means (a) the Receivables Transfer Agreement dated as of the Recapitalization Date, among the Receivables Subsidiary, Holdings and the purchasers party thereto, relating to the Permitted Receivables Financing, as may be amended, supplemented or otherwise modified to the extent permitted by Section 6.11 and (b) any agreement replacing such Receivables Transfer Agreement, provided that such replacing agreement contains terms that are substantially similar to such Receivables Transfer Agreement and that are otherwise no more adverse to the Lenders than the applicable terms of such Receivables Transfer Agreement.   "Register" has the meaning set forth in Section 10.04.   "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.     -------------------------------------------------------------------------------- 37   "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.   "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.   "Release" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.   "Required Lenders" means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing more than 50% of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at such time.   "Restatement Effective Date" shall have the meaning specified in the Amendment and Restatement Agreement.   "Restricted Indebtedness" means Indebtedness of Holdings, the Parent Borrower or any Subsidiary, the payment, prepayment, redemption, repurchase or defeasance of which is restricted under Section 6.08(b).   "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary), or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) or any option, warrant or other right to acquire any such Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary).   "Restricted Stock Award" means the grant of restricted stock awards (including phantom restricted stock awards) of Holdings in connection with the Recapitalization, having the terms set forth in the Recapitalization Agreement, in substitution of restricted stock awards (including phantom restricted stock awards) of Holdings existing immediately prior to the Recapitalization Date.   "Restricted Stock Obligation" means the obligation following the Recapitalization Date of Holdings to make deferred cash payments in an aggregate amount not to exceed $47,500,000 over a 38 month period, plus (i) any accretion thereto and (ii) any deferred payments required to be made in connection with the Saturn Sale, in each case in accordance with the Recapitalization Agreement following the Recapitalization Date, pursuant to the terms of the new restricted stock granted pursuant to the Restricted Stock Award.     -------------------------------------------------------------------------------- 38   "Revolving Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments.   "Revolving Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans, including Foreign Currency Loans, and to acquire participations in Letters of Credit, including Foreign Currency Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Exposure, including Foreign Currency Exposure, hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Commitments is $200,000,000.   "Revolving Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure and Swingline Exposure at such time.   "Revolving Lender" means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.   "Revolving Loan" means a Loan made pursuant to clause (iii) of Section 2.01(a).   "Revolving Maturity Date" means May 28, 2007, or, if such day is not a Business Day, the first Business Day thereafter.   "S&P" means Standard & Poor's.   "Saturn" means Saturn Electronics and Engineering Inc. or any successor thereto by merger or otherwise.   "Saturn Proceeds Distribution" means the cash payments to be made as a result of any Saturn Sale in an amount based upon the net proceeds resulting from the Saturn Sale and determined in accordance with and pursuant to the Recapitalization Agreement.   "Saturn Sale" means one or more sales by the Saturn Subsidiary of any Equity Interests (or other property received in respect thereof) in Saturn.   "Saturn Subsidiary" means a special purpose wholly owned subsidiary of Holdings which will hold any Equity Interests (or other property received in respect thereof) in Saturn pending the completion of the Saturn Sale and any other special purpose wholly owned subsidiary of Holdings that holds any proceeds from the Saturn     -------------------------------------------------------------------------------- 39   Sale not required to be paid to Pre-Merger Stockholders or on account of taxes from any Saturn Sale.   "Secured Parties" has the meaning assigned to such term in the Security Agreement.   "Security Agreement" means the Security Agreement, substantially in the form of Exhibit H, among Holdings, the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent for the benefit of the Secured Parties.   "Security Documents" means the Security Agreement, the Pledge Agreement, the Mortgages, the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, each Foreign Security Document entered into pursuant to Section 2.21 and Section 4.03 and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations.   "Senior Indebtedness" means (a) the sum of Total Indebtedness plus the obligations outstanding under the Permitted Receivables Financing minus (b) Subordinated Debt.   "Senior Leverage Ratio" means, on any date, the ratio of (a) Senior Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of Holdings most recently ended prior to such date for which financial statements are available).   "Senior Secured Leverage Ratio" means, on any date, the ratio of (a) Senior Indebtedness as of such date that is secured by any first-priority Lien to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of Holdings most recently ended prior to such date for which financial statements are available).   "Shareholder Agreement" means the Shareholders Agreement dated as of the Recapitalization Date, among Holdings, Heartland and the other parties thereto, as amended from time to time.   "Specified Acquired Property" means any property, real or personal, (a) that is acquired pursuant to a Permitted Acquisition or (b) that is owned by the Parent Borrower or any Subsidiary immediately prior to such Permitted Acquisition and that is combined with any such acquired property for purposes of any Acquisition Lease Financing, provided that the fair value of the property described in this clause (b) shall not exceed in the aggregate during the term of this Agreement, $25,000,000.   "Specified Asset Sales" means the sale by Holdings of its equity investments in the Specified Assets.     -------------------------------------------------------------------------------- 40   "Specified Assets" means Advanced Accessories Systems LLC, Titan International Inc., Delco Remy International Inc., MSX International Inc., Innovative Coatings Technology, Inc., Qualitor, Inc. and Tower Automotive Inc.   "Specified Cash" means the cash held by Holdings on the Recapitalization Date in an amount equal to $3,700,000.   "Specified Obligations" means Obligations consisting of the principal and interest on Loans, reimbursement obligations in respect of LC Disbursements and fees.   "Specified Prepayment Event" means any sale, transfer or other disposition constituting an Acquisition Lease Financing.   "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board (or in the case of Foreign Currency Borrowings, the applicable Governmental Authority) to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.   "Sterling" or "£" means the lawful money of the United Kingdom.   "Subordinated Debt" means, without duplication, (a) the Convertible Debentures, (b) the Existing Subordinated Notes and (c) any other subordinated Indebtedness of Holdings, the Parent Borrower or any Subsidiary (including the Permitted Subordinated Notes).   "Subordinated Debt Documents" means (a) the Convertible Debentures Indenture, (b) the Existing Subordinated Notes Documents and (c) any indenture or other instruments under which any other Subordinated Debt is issued or incurred.   "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the     -------------------------------------------------------------------------------- 41   case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.   "Subsidiary" means any subsidiary of the Parent Borrower or Holdings, as the context requires, including the Foreign Subsidiary Borrowers. Unless expressly otherwise provided, the term "Subsidiary" shall not include (a) the Receivables Subsidiary, (b) the Saturn Subsidiary, (c) for so long as Acme Office Group, Inc. ("Acme") is inactive, holds no assets and conducts no business, Acme and (d) TriMas.   "Subsidiary Loan Party" means (a) any Subsidiary that is not a Foreign Subsidiary (other than the Foreign Subsidiary Borrowers) and (b) any Foreign Subsidiary Borrower and any other Foreign Subsidiary that executes a guarantee agreement pursuant to paragraph (c) of the Collateral and Guarantee Requirement.   "Supplemental Indenture" means the supplement to the Convertible Debenture Indenture among the Parent Borrower, Holdings and Morgan Guaranty Trust Company of New York, as trustee, pursuant to which the Parent Borrower will become a co-obligor (together with Holdings) under Convertible Debenture Indenture.   "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.   "Swingline Lender" means Chase, in its capacity as lender of Swingline Loans hereunder , and Comerica Bank, in its capacity as lender of Swingline Loans hereunder. References herein and in the other Loan Documents to the Swingline Lender shall be deemed to refer to the Swingline Lender in respect of the applicable Swingline Loan or to all Swingline Lenders, as the context requires.   "Swingline Loan" means a Loan made pursuant to Section 2.04.   "Synthetic Purchase Agreement" means any swap, derivative or other agreement or combination of agreements pursuant to which Holdings, the Parent Borrower or a Subsidiary is or may become obligated to make (i) any payment (other than in the form of Equity Interests of Holdings) in connection with a purchase by a third party from a Person other than Holdings, the Parent Borrower or a Subsidiary of any Equity Interest or Restricted Indebtedness or (ii) any payment (other than on account of a permitted purchase by it of any Equity Interest or any Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no Restricted Stock Award and no phantom stock or similar plan providing for payments only to current or former directors, officers, consultants, advisors or employees of Holdings, the Parent Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be Synthetic Purchase Agreement.     -------------------------------------------------------------------------------- 42   "Taxes" means any and all present or future taxes (of any nature whatsoever), levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.   "Term Loans" means Tranche D-1 Term Loans and Tranche D-2 Term Loans.   "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it.   "Total Indebtedness" means, as of any date, the sum of, without duplication, (a) the aggregate principal amount of Indebtedness of Holdings, the Parent Borrower and the Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP, plus (b) the aggregate principal amount of Indebtedness of Holdings, the Parent Borrower and the Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance with GAAP, determined on a consolidated basis, plus (c) obligations arising in respect of the Permitted Receivables Financing; provided that, for purposes of clause (b) above, the term "Indebtedness" shall not include (i) contingent obligations of Holdings, the Parent Borrower or any Subsidiary as an account party in respect of any letter of credit or letter of guaranty unless, without duplication, such letter of credit or letter of guaranty supports an obligation that constitutes Indebtedness and (ii) Indebtedness described in Section 6.01(a)(xiv); and provided further that "Total Indebtedness" shall not include (i) the Convertible Debentures to the extent that a redemption notice has been delivered in respect thereof and proceeds sufficient to effect such redemption have deposited with the trustee or agent thereof and (ii) the TriMas Notes.   "Tranche D Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to (a) make a Tranche D-1 Term Loan hereunder on the Effective Date or (b) make a Tranche D-2 Term Loan on the Restatement Effective Date, in each case expressed as an amount representing the maximum principal amount of the Tranche D Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Tranche D Commitment is set forth     -------------------------------------------------------------------------------- 43   on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche D Commitment, as applicable.   "Tranche D Lender" means a Tranche D-1 Lender or a Tranche D-2 Lender.   "Tranche D Maturity Date" means December 31, 2009, or if such day is not a Business Day, the first Business Day thereafter.   "Tranche D Term Loan" means a Tranche D-1 Term Loan or a Tranche D-2 Term Loan.   "Tranche D-1 Term Loan" means a Loan made on the Effective Date pursuant to clause (i) of Section 2.01(a).   "Tranche D-1 Lender" means a Lender with a Tranche D-1 Commitment or an outstanding Tranche D-1 Term Loan.   "Tranche D-2 Term Loan" means a Loan made on the Restatement Effective Date pursuant to clause (ii) of Section 2.01(a).   "Tranche D-2 Lender" means a Lender with a Tranche D-2 Commitment or an outstanding Tranche D-2 Term Loan.   "Transactions" means (a) the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder and (b) the other transactions contemplated hereby.   "TriMas" means TriMas Corporation, a Delaware corporation.   "TriMas Affiliate Agreements" means the Stock Purchase Agreement, the Corporate Services Agreement, the Warrant, the Shareholders Agreement and each agreement and transaction contemplated by any of the foregoing and entered into in connection with the TriMas Transactions.   "TriMas Available Proceeds" means the Net Proceeds received by the Parent Borrower from the TriMas Transaction, less the TriMas Specified Proceeds.   "TriMas Interest" means, at any time, the Equity Interest of TriMas held by the Parent Borrower or any Subsidiary.   "TriMas Notes" means the senior subordinated notes of TriMas issued in contemplation of the TriMas Transaction.   "TriMas Specified Proceeds" means the Net Proceeds received by the Parent Borrower from the TriMas Transaction in an amount equal to the sum of (x) $255,000,000 and (y) the amount by which obligations under the Permitted     -------------------------------------------------------------------------------- 44   Receivables Financing are required to be repaid in connection with the reduction of borrowing base capacity thereunder as a result of the TriMas Transaction.   "TriMas Transaction" means the transactions contemplated by the Stock Purchase Agreement dated as of May 17, 2002 among Holdings, the Parent Borrower and Heartland Industrial Partners, L.P. and the related documentation.   "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.   "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.   SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing").   SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.   SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Parent Borrower notifies the Administrative Agent that the Parent Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision     -------------------------------------------------------------------------------- 45   (or if the Administrative Agent notifies the Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.   SECTION 1.05. Exchange Rates. (a)  Not later than 1:00 p.m., New York City time, on each Calculation Date beginning with the date on which the initial Foreign Currency Borrowing is made or the initial Foreign Currency Letter of Credit is issued, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to each Foreign Currency and (ii) give notice thereof to the Revolving Lenders and the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers). The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Recalculation Date"), shall remain effective until the next succeeding Recalculation Date, and shall for all purposes of this Agreement (other than Section 9.01, Section 10.14 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between dollars and Foreign Currencies.   (b) Not later than 5:00 p.m., New York City time, on each Recalculation Date and each date on which Revolving Loans denominated in any Foreign Currency are made, the Administrative Agent shall (i) determine the aggregate amount of the Dollar Equivalents of (A) the principal amounts of the Foreign Currency Loans then outstanding (after giving effect to any Foreign Currency Loans made or repaid on such date) (B) the face value of outstanding Foreign Currency Letters of Credit and (C) unreimbursed drawings in respect of Foreign Currency Letters of Credit and (ii) notify the Revolving Lenders and the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) of the results of such determination.   SECTION 1.06. Redenomination of Certain Foreign Currencies. (a)  Each obligation of any party to this Agreement to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Foreign Currency Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Foreign Currency Borrowing, at the end of the then current Interest Period.   (b) Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time     -------------------------------------------------------------------------------- 46   specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.     ARTICLE II   The Credits   SECTION 2.01. Commitments. (a)  (i) Each Tranche D-1 Lender made a Tranche D-1 Term Loan to the Parent Borrower on the Effective Date in a principal amount not exceeding its Tranche D-1 Commitment, (ii) subject to the terms and conditions set forth herein and in the Amendment and Restatement Agreement, each Tranche D-2 Lender agrees to make a Tranche D-2 Term Loan to the Parent Borrower on the Restatement Effective Date in a principal amount not exceeding its Tranche D-2 Commitment and (iii) each Lender agrees to make Revolving Loans to the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender's (A) Revolving Exposure exceeding such Lender's Revolving Commitment or (B) Foreign Currency Exposure exceeding such Lender's Foreign Currency Commitment.   (b) Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, may borrow, prepay and reborrow Revolving Loans. Amounts repaid in respect of Term Loans may not be reborrowed.   SECTION 2.02. Loans and Borrowings. (a)  Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required.   (b) Subject to Section 2.14, each Revolving Borrowing (other than Foreign Currency Borrowings) and Term Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Parent Borrower may request in accordance herewith; provided that all Borrowings made on the Effective Date must be made as ABR Borrowings. All Foreign Currency Borrowings shall be comprised entirely of Eurocurrency Loans. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement.   (c) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an     -------------------------------------------------------------------------------- 47   integral multiple of $1,000,000 (or 1,000,000 units of the applicable Foreign Currency) and not less than $5,000,000 (or 5,000,000 units in the applicable Foreign Currency. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that (i) an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments and (ii) an ABR Revolving Borrowing or a Eurocurrency Revolving Borrowing, in the case of Foreign Currency Letters of Credit, may be in an aggregate amount that is equal to the amount that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 12 Eurocurrency Borrowings outstanding.   (d) Notwithstanding any other provision of this Agreement, none of the Parent Borrower or any Foreign Subsidiary Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date or the Tranche D Maturity Date, as applicable.   SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Parent Borrower or, in the case of a Foreign Currency Borrowing, the applicable Foreign Subsidiary Borrower, shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Parent Borrower and, in the case of a Foreign Currency Borrowing, the applicable Foreign Subsidiary Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:   (i) whether the requested Borrowing is to be a Revolving Borrowing or a Tranche D Term Borrowing;   (ii) the aggregate amount of such Borrowing;   (iii) the date of such Borrowing, which shall be a Business Day;   (iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing, unless such Borrowing is a Foreign Currency Borrowing;     -------------------------------------------------------------------------------- 48   (v) if such Borrowing is a Foreign Currency Borrowing, the relevant Foreign Currency;   (vi) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and   (vii) the location and number of the Parent Borrower's or the applicable Foreign Subsidiary Borrower's, as the case may be, account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.   If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing, unless such Borrowing is a Foreign Currency Borrowing, in which case such Borrowing shall be a Eurocurrency Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Parent Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.   SECTION 2.04. Swingline Loans. (a)  Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Parent Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000 or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower may borrow, prepay and reborrow Swingline Loans.   (b) To request a Swingline Loan, the Parent Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Parent Borrower. The Swingline Lender shall make each Swingline Loan available to the Parent Borrower by means of a credit to the general deposit account of the Parent Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.   (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all     -------------------------------------------------------------------------------- 49   or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (provided that such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Parent Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Parent Borrower (or other party on behalf of the Parent Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Parent Borrower of any default in the payment thereof.   SECTION 2.05. Letters of Credit. (a)  General. Subject to the terms and conditions set forth herein, the Parent Borrower may request the issuance of Letters of Credit for its own account or the account of a Subsidiary and any Foreign Subsidiary Borrower may request the issuance of Foreign Currency Letters of Credit for its own account or the account of a Subsidiary of such Foreign Subsidiary Borrower, in each case in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (provided that the Parent Borrower or a Foreign Subsidiary Borrower, as the case may be, shall be a co-applicant with respect to each Letter of Credit issued for the account of or in favor of a Subsidiary that is not a Foreign Subsidiary Borrower). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, to, or entered into by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, with, the Issuing     -------------------------------------------------------------------------------- 50   Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.   (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $95,000,000 (provided that no more than $20,000,000 of LC Exposure may be used to support Indebtedness incurred outside of the United States), (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments and (iii) the total Foreign Currency Exposures shall not exceed the total Foreign Currency Commitments.   (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date.   (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Parent     -------------------------------------------------------------------------------- 51   Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.   (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time or London time (in the case of Foreign Currency Letters of Credit), on such date, or, if such notice has not been received by the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, prior to such time on such date, then not later than 12:00 noon, New York City time or London time (in the case of Foreign Currency Letters of Credit), on (i) the Business Day that the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, receives such notice, if such notice is received prior to 10:00 a.m., New York City time or London time (in the case of Foreign Currency Letters of Credit), on the day of receipt, or (ii) the Business Day immediately following the day that the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, receives such notice, if such notice is not received prior to such time on the day of receipt; provided that (i) the Parent Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Parent Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan and (ii) such Foreign Subsidiary Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Eurocurrency Revolving Borrowing in an equivalent amount in the applicable Foreign Currency and, to the extent so financed, such Foreign Subsidiary Borrower's obligation to make such payment shall be discharged and replaced by the resulting Eurocurrency Revolving Borrowing. If the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, in respect thereof and such Lender's Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the unreimbursed LC Disbursement in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received     -------------------------------------------------------------------------------- 52   by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The obligation of the Parent Borrower or any Foreign Subsidiary Borrower to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of the Parent Borrower or any Foreign Subsidiary Borrower hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, to the extent permitted by applicable law) suffered by the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their     -------------------------------------------------------------------------------- 53   face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.   (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such reimbursement obligation set forth in Section 2.05(e)).   (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.   (i) Replacement of the Issuing Bank; Additional Issuing Banks. The Issuing Bank may be replaced at any time by written agreement among the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers), the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. One or more Lenders may be appointed as additional Issuing Banks by written agreement among the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers), the Administrative Agent (whose consent will not be unreasonably withheld) and the Lender that is to be so appointed. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such replacement shall become effective, the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect     -------------------------------------------------------------------------------- 54   to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit.   (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Parent Borrower or any Foreign Subsidiary Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash in the applicable currency equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Parent Borrower or any Foreign Subsidiary Borrower described in clause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Parent Borrower and the Foreign Subsidiary Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the risk and expense of the Parent Borrower and the Foreign Subsidiary Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Parent Borrower and the Foreign Subsidiary Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Parent Borrower and the Foreign Subsidiary Borrower under this Agreement. If the Parent Borrower or any Foreign Subsidiary Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount plus any accrued interest or realized profits of such amounts (to the extent not applied as aforesaid) shall be returned to the Parent Borrower or such Foreign Subsidiary Borrower within three Business Days after all Events of Default have been cured or waived. If the Parent Borrower is required to provide an amount of such collateral hereunder pursuant to Section 2.11(b), such amount plus any accrued interest or     -------------------------------------------------------------------------------- 55   realized profits on account of such amount (to the extent not applied as aforesaid) shall be returned to the Parent Borrower as and to the extent that, after giving effect to such return, the Parent Borrower would remain in compliance with Section 2.11(b) and no Default or Event of Default shall have occurred and be continuing.   SECTION 2.06. Funding of Borrowings. (a)  Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, or in the case of Foreign Currency Borrowings, London time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, by promptly crediting the amounts so received, in like funds, to an account of the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, maintained with the Administrative Agent in New York City, or in the case of Foreign Currency Borrowings, London, and designated by the Parent Borrower or such Foreign Subsidiary Borrower, in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank.   (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of (x) the Federal Funds Effective Rate and (y) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, except with respect to Foreign Currency Borrowings, the applicable rate shall be determined as specified in clause (y) above, or (ii) in the case of the Parent Borrower or any Foreign Subsidiary Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing.   SECTION 2.07. Interest Elections. (a)  Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Parent Borrower or the     -------------------------------------------------------------------------------- 56   applicable Foreign Subsidiary Borrower, as the case may be, may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.   (b) To make an election pursuant to this Section, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, were requesting a Revolving Borrowing or Term Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be.   (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:   (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);   (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;   (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and   (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".   If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall be deemed to have selected an Interest Period of one month's duration.     -------------------------------------------------------------------------------- 57   (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.   (e) If an Interest Election Request with respect to a Eurocurrency Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing (unless such Borrowing is a Foreign Currency Borrowing, in which case such Borrowing shall become due and payable on the last day of such Interest Period). Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers), then, so long as an Event of Default is continuing (i) no outstanding Borrowing (other than a Foreign Currency Borrowing) may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing (other than a Foreign Currency Borrowing) shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.   SECTION 2.08. Termination and Reduction of Commitments. (a)  Unless previously terminated, (i) the Tranche D-1 Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date, (ii) the Tranche D-2 Commitments shall terminate at 5:00 p.m., New York City time, on the Restatement Effective Date and (iii) the Revolving Commitments shall terminate on the Revolving Maturity Date.   (b) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) may at any time terminate, or from time to time reduce, the Commitments of any Class (it being understood that reductions of Revolving Commitments will automatically reduce Foreign Currency Commitments on a pro rata basis); provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the sum of the Revolving Exposures would exceed the total Revolving Commitments. In addition, in the event the proceeds from Permitted Senior Notes issued after the Amendment Date are used to repurchase, redeem or otherwise retire then outstanding Convertible Debentures, immediately following such repurchase, redemption or retirement (i) the Parent Borrower shall make any prepayment required pursuant to Section 2.11 as a result of such reduction and (ii) the total Revolving Commitments shall be automatically reduced in an amount equal to the amount used to effect such repurchase, redemption or retirement (together with a pro rata reduction of Foreign Currency Commitments) without any action on the part of any party, provided that, the total reduction to the Revolving Commitments under this clause (ii) shall not exceed $50,000,000.   (c) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall notify the Administrative Agent of any election to terminate     -------------------------------------------------------------------------------- 58   or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) may state that such notice is conditioned upon the effectiveness of other credit facilities or the occurrence of another transaction, in which case such notice may be revoked by the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.   SECTION 2.09. Repayment of Loans; Evidence of Debt. (a)  The Parent Borrower and each Foreign Subsidiary Borrower (with respect to Foreign Currency Loans made to such Foreign Subsidiary Borrower) hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a Revolving Borrowing (other than a Foreign Currency Borrowing) is made, the Parent Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested.   (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Parent Borrower and the Foreign Subsidiary Borrowers to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.   (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Parent Borrower and the Foreign Subsidiary Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof.   (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and     -------------------------------------------------------------------------------- 59   amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Parent Borrower and the Foreign Subsidiary Borrowers to repay the Loans in accordance with the terms of this Agreement.   (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).   SECTION 2.10. Amortization of Term Loans.    (a)  Subject to adjustment pursuant to paragraph (c) of this Section, the Parent Borrower shall repay Tranche D Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date:   Date   Amount   December 31, 2002   $500,000   June 30, 2003   $500,000   December 31, 2003   $500,000   June 30, 2004   $500,000   December 31, 2004   $500,000   June 30, 2005   $500,000   December 31, 2005   $500,000   June 30, 2006   $525,000   December 31, 2006   $525,000   June 30, 2007   $525,000   December 31, 2007   $525,000   June 30, 2008   $525,000   December 31, 2008   $525,000   June 30, 2009   $525,000   Tranche D Maturity Date   $442,825,000   (b) To the extent not previously paid, all Tranche D Term Loans shall be due and payable on the Tranche D Maturity Date.     -------------------------------------------------------------------------------- 60   (c) Any prepayment of a Term Borrowing shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings to be made pursuant to this Section ratably. Notwithstanding the foregoing, any prepayment of Eurocurrency Term Borrowings made pursuant to Section 2.11(a) on a date that is (x) the last day of an Interest Period and (y) no more than five days prior to a scheduled amortization payment pursuant to this Section shall be applied, first, to reduce such scheduled payment, and any excess shall be applied as required by the first sentence of this Section 2.10(c).   (d) Prior to any repayment of any Term Borrowings hereunder, the Parent Borrower shall select the Borrowing or Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment. Each repayment of a Borrowing shall be applied ratably to the Loans included in the repaid Borrowing. Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid.   SECTION 2.11. Prepayment of Loans. (a)  The Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.   (b) In the event and on such occasion that the sum of the Revolving Exposures exceeds the total Revolving Commitments, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, shall prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.   (c) In the event that the sum of the Foreign Currency Exposures exceeds (i) 105% of the total Foreign Currency Commitments solely as a result of currency fluctuations or (ii) the total Foreign Currency Commitments (other than as a result of currency fluctuations), the Foreign Subsidiary Borrowers shall prepay Foreign Currency Borrowings (or if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) in an amount equal to the amount by which the sum of Foreign Currency Exposures exceed the total Foreign Currency Commitments no later than in the case of clause (i) above the next Interest Payment Date and in the case of clause (ii), the first Business Day that such excess exists.   (d) (1) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Parent Borrower or any Subsidiary in respect of any Prepayment Event (other than TriMas Available Proceeds and TriMas Specified Proceeds), the Parent Borrower shall, within three Business Days after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to such Net Proceeds.     -------------------------------------------------------------------------------- 61   (2) In the event that $205,000,000 of the TriMas Specified Proceeds are not applied to repurchase, redeem, repay or otherwise retire the Convertible Debentures or an irrevocable notice of redemption and deposit of such proceeds has not been delivered to the trustee thereunder within 90 days of the date that the TriMas Transaction is consummated, the Parent Borrower shall promptly thereafter apply the amount of TriMas Specified Proceeds not so used to prepay Term Borrowings.   (e) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Parent Borrower or any Subsidiary in respect of any Specified Prepayment Event, the Parent Borrower shall, within three Business Days after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to such Net Proceeds.   (f) Following the end of each fiscal year of the Parent Borrower, commencing with the fiscal year ending December 31, 2001, the Parent Borrower shall prepay Term Borrowings in an aggregate amount equal to 75% of Excess Cash Flow for such fiscal year; provided that such percentage shall be reduced from 75% to 50% with respect to the prepayment under this paragraph (f), if the Parent Borrower's Leverage Ratio as of the last fiscal quarter preceding the applicable prepayment date is less than 3.00 to 1.00. Each prepayment pursuant to this paragraph shall be made on or before the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 95 days after the end of such fiscal year).   (g) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (h) of this Section.   (h) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that       -------------------------------------------------------------------------------- 62     would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13.   SECTION 2.12. Fees. (a)  The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of each Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears (i) in the case of commitment fees in respect of the Revolving Commitments, on the last day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof and (ii) in the case of commitment fees in respect of the Tranche D Term Commitments, on the Effective Date or any earlier date on which such Commitments terminate. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).   (b) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurocurrency Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a     --------------------------------------------------------------------------------  63   year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).   (c) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Parent Borrower and the Administrative Agent.   (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.   SECTION 2.13. Interest. (a)  The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.   (b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.   (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Parent Borrower or the Foreign Subsidiary Borrowers, as the case may be, hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.   (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.   (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest on a Foreign Currency Borrowing denominated in Sterling and (ii) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the     -------------------------------------------------------------------------------- 64   actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.   SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency:   (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or   (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;   then the Administrative Agent shall give notice thereof to the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing denominated in such currency to, or continuation of any Borrowing denominated in such currency as, a Eurocurrency Borrowing shall be ineffective, and any Eurocurrency Borrowing denominated in such currency that is requested to be continued (A) if such currency is the dollar, shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto and (B) if such currency is a Foreign Currency, shall be repaid on the last day of the Interest Period applicable thereto and (ii) if any Borrowing Request requests a Eurocurrency Borrowing denominated in such currency (A) if such currency is the dollar, such Borrowing shall be made as an ABR Borrowing and (B) if such currency is a Foreign Currency, such Borrowing Request shall be ineffective.   SECTION 2.15. Increased Costs. (a)  If any Change in Law shall:   (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or   (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein;   and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum     -------------------------------------------------------------------------------- 65   received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Parent Borrower or the applicable Foreign Subsidiary Borrowers, as the case may be, will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.   (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Parent Borrower or the applicable Foreign Subsidiary Borrowers, as the case may be, will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered.   (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) and shall be conclusive absent manifest error. The Parent Borrower or the applicable Foreign Subsidiary Borrowers, as the case may be, shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.   (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that neither the Parent Borrower nor any Foreign Subsidiary Borrower shall be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.   SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the     -------------------------------------------------------------------------------- 66   conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(h) and is revoked in accordance therewith) or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Parent Borrower or any Foreign Subsidiary Borrower pursuant to Section 2.19, then, in any such event, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) and shall be conclusive absent manifest error. The Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.   SECTION 2.17. Taxes. (a)  Any and all payments by or on account of any obligation of the Parent Borrower or any Foreign Subsidiary Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Parent Borrower or any Foreign Subsidiary Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, shall make such deductions and (iii) the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.   (b) In addition, the Parent Borrower and each Foreign Subsidiary Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.   (c) The Parent Borrower and each Foreign Subsidiary Borrower, as the case may be, shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any     -------------------------------------------------------------------------------- 67   Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Parent Borrower and each Foreign Subsidiary Borrower, as the case may be, hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.   (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Parent Borrower or any Foreign Subsidiary Borrower to a Governmental Authority, the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.   (e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) as will permit such payments to be made without withholding or at a reduced rate.   (f) If the Administrative Agent or a Lender (or a transferee) determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Parent Borrower or any Foreign Subsidiary Borrower or with respect to which the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Parent Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Parent Borrower or any Foreign Subsidiary Borrower under this Section 2.17 with respect to the Taxes or the Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (or Transferee) and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Parent Borrower or any Foreign Subsidiary Borrower, upon the request of the Administrative Agent or such Lender (or Transferee), agrees to repay the amount paid over to the Parent Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such     -------------------------------------------------------------------------------- 68   Lender (or Transferee) in the event the Administrative Agent or such Lender (or Transferee) is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.17(f) shall require the Administrative Agent or any Lender to make available its tax returns or any other information relating to its taxes which it deems confidential to the Parent Borrower or any other person.   SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a)  The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 12:00 noon, New York City time, or if the applicable Loan is a Foreign Currency Loan, London time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York (unless otherwise instructed in the case of Foreign Currency Loans), except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Subject to Section 9.01, all payments under each Loan Document of principal or interest in respect of any Loan or LC Disbursement shall be made in the currency of such Loan or LC Disbursement; all other payments hereunder and under each other Loan Document shall be made in dollars.   (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.   (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or     -------------------------------------------------------------------------------- 69   Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Parent Borrower or any Foreign Subsidiary Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Parent Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Parent Borrower and each Foreign Subsidiary Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Parent Borrower or such Foreign Subsidiary Borrower in the amount of such participation.   (d) Unless the Administrative Agent shall have received notice from the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, will not make such payment, the Administrative Agent may assume that the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Parent Borrower or such Foreign Subsidiary Borrower, as the case may be, has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.   (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 10.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision     -------------------------------------------------------------------------------- 70   hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.   SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a)  If any Lender requests compensation under Section 2.15, or if the Parent Borrower or any Foreign Subsidiary Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.   (b) If any Lender requests compensation under Section 2.15, or if the Parent Borrower or any Foreign Subsidiary Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee selected by the Parent Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Parent Borrower and the Foreign Subsidiary Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Parent Borrower or any Foreign Subsidiary Borrower to require such assignment and delegation cease to apply.   SECTION 2.20. Additional Reserve Costs. (a)  If and so long as any Revolving Lender is required to make special deposits with the Bank of England, to     -------------------------------------------------------------------------------- 71   maintain reserve asset ratios or to pay fees, in each case in respect of such Revolving Lender's Foreign Currency Loans, such Revolving Lender may require the relevant Foreign Subsidiary Borrower to pay, contemporaneously with each payment of interest on each of such Foreign Currency Loans, additional interest on such Foreign Currency Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit I hereto.   (b) If and so long as any Revolving Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserve Rate or the Mandatory Costs Rate) in respect of any of such Revolving Lender's Foreign Currency Loans, such Revolving Lender may require the relevant Foreign Subsidiary Borrower to pay, contemporaneously with each payment of interest on each of such Revolving Lender's Foreign Currency Loans subject to such requirements, additional interest on such Foreign Currency Loan at a rate per annum specified by such Revolving Lender to be the cost to such Revolving Lender of complying with such requirements in relation to such Foreign Currency Loan.   (c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Revolving Lender, which determination shall be conclusive absent manifest error, and notified to the Parent Borrower (on behalf of the relevant Foreign Subsidiary Borrower) (with a copy to the Administrative Agent)) at least five Business Days before each date on which interest is payable for the relevant Foreign Currency Loan, and such additional interest so notified by such Revolving Lender shall be payable to the Administrative Agent for the account of such Revolving Lender on each date on which interest is payable for such Foreign Currency Loan.   SECTION 2.21. Designation of Foreign Subsidiary Borrowers. The Parent Borrower may at any time and from time to time designate any Foreign Subsidiary as a Foreign Subsidiary Borrower, by delivery to the Administrative Agent of a Foreign Subsidiary Borrowing Agreement executed by such Foreign Subsidiary and the Parent Borrower, and upon such delivery such Foreign Subsidiary shall for all purposes of this Agreement and the other Loan Documents be a Foreign Subsidiary Borrower until the Parent Borrower shall terminate such designation pursuant to a termination agreement satisfactory to the Administrative Agent, whereupon such Foreign Subsidiary shall cease to be a Foreign Subsidiary Borrower and a party to this Agreement and any other applicable Loan Documents. Notwithstanding the preceding sentence, no such termination will become effective as to any Foreign Subsidiary Borrower at a time when any principal of or interest on any Loan to such Foreign Subsidiary Borrower is outstanding. As soon as practicable upon receipt of a Foreign Subsidiary Borrowing Agreement, the Administrative Agent shall send a copy thereof to each Lender.   SECTION 2.22. Foreign Subsidiary Borrower Costs. (a)  If the cost to any Revolving Lender of making or maintaining any Foreign Currency Loan to a Foreign Subsidiary Borrower is increased (or the amount of any sum received or receivable by any Revolving Lender (or its applicable lending office) is reduced) by an     -------------------------------------------------------------------------------- 72   amount deemed in good faith by such Revolving Lender to be material, by reason of the fact that such Foreign Subsidiary Borrower is incorporated in, or conducts business in, a jurisdiction outside the United States, such Foreign Subsidiary Borrower shall indemnify such Revolving Lender for such increased cost or reduction within 15 days after demand by such Revolving Lender (with a copy to the Administrative Agent). A certificate of such Revolving Lender claiming compensation under this paragraph and setting forth the additional amount or amounts to be paid to it hereunder (and the basis for the calculation of such amount or amounts) shall be conclusive in the absence of manifest error.   (b) Each Revolving Lender will promptly notify the Parent Borrower (on behalf of the relevant Foreign Subsidiary Borrower) and the Administrative Agent of any event of which it has knowledge that will entitle such Revolving Lender to additional interest or payments pursuant to paragraph (a) above, but in any event within 45 days after such Revolving Lender obtains actual knowledge thereof; provided that (i) if any Revolving Lender fails to give such notice within 45 days after it obtains actual knowledge of such an event, such Revolving Lender shall, with respect to compensation payable pursuant to this Section 2.21 in respect of any costs resulting from such event, only be entitled to payment under this Section 2.21 for costs incurred from and after the date 45 days prior to the date that such Revolving Lender does give such notice and (ii) each Revolving Lender will designate a different applicable lending office, if, in the judgment of such Revolving Lender, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Revolving Lender.   ARTICLE III   Representations and Warranties   Each of Holdings, the Parent Borrower and each Foreign Subsidiary Borrower (as to itself only) represents and warrants to the Lenders that:   SECTION 3.01. Organization; Powers. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.   SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by each of Holdings and the Parent Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered     -------------------------------------------------------------------------------- 73   by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Parent Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.   SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (x) such as have been obtained or made and are in full force and effect, (y) filings necessary to perfect Liens created under the Loan Documents and (z) consents, approvals, registrations, filings or actions the failure of which to obtain or perform could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) or its assets, or give rise to a right thereunder to require any payment to be made by Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary), except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary), except Liens created under the Loan Documents and Liens permitted by Section 6.02.   SECTION 3.04. Financial Condition; No Material Adverse Change. (a)  Holdings has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended January 2, 2005, reported on by KPMG LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2005, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of Holdings and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.   (b) Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum, except for the Disclosed Matters and except for liabilities arising as a result of the Transactions, after giving effect to the Transactions, none of Holdings, the Parent Borrower or the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary) has, as of the Restatement Effective Date, any contingent liabilities that would be material to Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary), taken as a whole.     -------------------------------------------------------------------------------- 74   (c) Since December 31, 2004, there has been no event, change or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect.   SECTION 3.05. Properties. (a)  Each of Holdings, the Parent Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.   (b) Each of Holdings, the Parent Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by Holdings, the Parent Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.   (c) As of the Restatement Effective Date, neither Holdings, the Parent Borrower nor any of its Subsidiaries has received written notice of any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.   SECTION 3.06. Litigation and Environmental Matters. (a)  There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings or the Parent Borrower, threatened against or affecting Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan Documents or the Transactions.   (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither Holdings, the Parent Borrower nor any of its Subsidiaries (including the Receivables Subsidiary) (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.   (c) Since the date of the Original Credit Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.       -------------------------------------------------------------------------------- 75   SECTION 3.07. Compliance with Laws and Agreements. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.   SECTION 3.08. Investment and Holding Company Status. Neither Holdings, the Parent Borrower nor any of its Subsidiaries (including the Receivables Subsidiary) is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.   SECTION 3.09. Taxes. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Parent Borrower or such Subsidiary (including the Receivables Subsidiaries), as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.   SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. As of the Recapitalization Date, the present value of all accumulated benefit obligations under any one Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $23,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $40,000,000 the fair market value of the assets of all such underfunded Plans.   SECTION 3.11. Disclosure. Each of Holdings and the Parent Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contained as of its date any material misstatement of fact or omits to state any material fact necessary to make the     -------------------------------------------------------------------------------- 76   statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, Holdings and the Parent Borrower represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time such projections were prepared.   SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries other than the Parent Borrower, the Saturn Subsidiary and the Parent Borrower's Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Parent Borrower in, each Subsidiary of the Parent Borrower and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.   SECTION 3.13. Insurance. As of the Effective Date, all premiums due in respect of material insurance policies maintained by or on behalf of Holdings, the Parent Borrower and the Subsidiaries as of the Effective Date have been paid.   SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against Holdings, the Parent Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Parent Borrower, threatened that could reasonably be expected to have a Material Adverse Effect. All payments due from Holdings, the Parent Borrower or any Subsidiary, or for which any claim may be made against Holdings, the Parent Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, the Parent Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Parent Borrower or any Subsidiary is bound.   SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, on a consolidated basis, will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Date.   SECTION 3.16. Senior Indebtedness. To the extent any Subordinated Debt is outstanding, the Obligations constitute "Senior Indebtedness" under and as defined in the Subordinated Debt Documents.       -------------------------------------------------------------------------------- 77   SECTION 3.17. Security Documents. (a)  The Pledge Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when such Collateral is delivered to the Collateral Agent and for so long as the Collateral Agent remains in possession of such Collateral, the security interest created by the Pledge Agreement shall constitute a perfected first priority security interest in all right, title and interest of the pledgor thereunder in such Collateral, in each case prior and superior in right to any other Person.   (b) The Security Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the security interest created by the Security Agreement shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Security Agreement)), in each case prior and superior in right to any other Person, other than with respect to Liens permitted by Section 6.02.   (c) When the Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office and the financing statements referred to in Section 3.17(b) above are appropriately filed, the security interest created by the Security Agreement shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office and subsequent UCC filings may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Effective Date), other than with respect to Liens permitted by Section 6.02.   (d) The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the applicable mortgagor's right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.17(d), the Lien created by each Mortgage shall constitute a perfected Lien on all right, title and interest of the applicable mortgagor in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens permitted by Section 6.02.   (e) Following the execution of any Foreign Security Document pursuant to Section 4.03, each Foreign Security Document shall be effective to create in     -------------------------------------------------------------------------------- 78   favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the applicable collateral covered by such Foreign Security Document, and when the actions specified in such Foreign Security Document, if any, are completed, the security interest created by such Foreign Security Document shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in such collateral to the full extent possible under the laws of the applicable foreign jurisdiction, in each case prior and superior in right to any other Person, other than with respect to Liens permitted by Section 6.02.   SECTION 3.18. Federal Reserve Regulations. (a)  None of Holdings, the Parent Borrower or any of the Subsidiaries (including the Receivables Subsidiary) is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.   (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of the provisions of the Regulations of the Board, including Regulation U or X.     ARTICLE IV   Conditions   SECTION 4.01. [intentionally omitted].   SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (other than (i) any Revolving Borrowing made pursuant to Section 2.05(d) and (ii) any continuation or conversion of a Borrowing pursuant to the terms hereof that does not result in the increase of the aggregate principal amount of the Borrowings then outstanding), and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:   (a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable.   (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.   Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by Holdings and the Parent Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.       -------------------------------------------------------------------------------- 79   SECTION 4.03. Credit Events Relating to Foreign Subsidiary Borrowers. The obligation of each Lender to make Loans to any Foreign Subsidiary Borrower is subject to the satisfaction of the following conditions:   (a) With respect to the initial Credit Event relating to such Foreign Subsidiary Borrower;   (i) the Administrative Agent (or its counsel) shall have received such Foreign Subsidiary Borrower's Foreign Subsidiary Borrowing Agreement duly executed by all parties thereto; and   (ii) the Administrative Agent shall have received such documents (including legal opinions) and certificates as the Administrative Agent or its counsel may reasonably request relating to the formation, existence and good standing of such Foreign Subsidiary Borrower, the authorization of the Foreign Currency Borrowings as they relate to such Foreign Subsidiary Borrower and any other legal matters relating to such Foreign Subsidiary Borrower or its Foreign Subsidiary Borrowing Agreement, all in form and substance satisfactory to the Administrative Agent and its counsel.   (b) With respect to any Credit Event following which (x) such Foreign Subsidiary Borrower will have borrowed more than the Dollar Equivalent of $5,000,000 of Foreign Currency Borrowings or (y) the aggregate amount of outstanding Foreign Currency Borrowings exceeds the Dollar Equivalent of $15,000,000, the Administrative Agent shall be satisfied that the Foreign Security Collateral and Guarantee Agreement shall be satisfied with respect to such Foreign Subsidiary Borrower in the case of clause (x) and all Foreign Subsidiary Borrowers in the case of clause (y).     ARTICLE V   Affirmative Covenants   Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings, the Parent Borrower and each Foreign Subsidiary Borrower (as to itself only) covenants and agrees with the Lenders that:   SECTION 5.01. Financial Statements and Other Information. Holdings or the Parent Borrower will furnish to the Administrative Agent and each Lender:   (a) within 95 days after the end of each fiscal year of Holdings, its audited consolidated and unaudited consolidating balance sheet and related statements of     -------------------------------------------------------------------------------- 80   operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PriceWaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied, other than any change in the application of GAAP due solely to Holdings', the Parent Borrower's and the Subsidiaries' transition from "recapitalization accounting" to "purchase accounting" (it is understood that such financial statements shall also present separately financial information with respect to the Receivables Subsidiary and the Saturn Subsidiary);   (b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year of Holdings, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of Holdings and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it is understood that such financial statements shall also present separately financial information with respect to the Receivables Subsidiary and the Saturn Subsidiary);   (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of Holdings or the Parent Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.13, 6.14 and 6.15, (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of Holdings' audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate and (iv) identifying all Subsidiaries existing on the date of such certificate and indicating, for each such Subsidiary, whether such Subsidiary is a Subsidiary Loan Party or a Foreign Subsidiary and whether such Subsidiary was formed or acquired since the end of the previous fiscal quarter;   (d) concurrently with any delivery of financial statements under clause (a) above, (i) a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their     -------------------------------------------------------------------------------- 81   examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines) and (ii) a certificate of a Financial Officer of Holdings or the Parent Borrower (A) identifying any parcels of real property or improvements thereto with a value exceeding $750,000 that have been acquired by any Loan Party since the end of the previous fiscal year, (B) identifying any changes of the type described in Section 5.03(a) that have not been previously reported by the Parent Borrower, (C) identifying any Permitted Acquisitions that have been consummated since the end of the previous fiscal year, including the date on which each such Permitted Acquisition was consummated and the consideration therefor, (D) identifying any Intellectual Property (as defined in the Security Agreement) with respect to which a notice is required to be delivered under the Security Agreement and has not been previously delivered and (E) identifying any Prepayment Events that have occurred since the end of the previous fiscal year and setting forth a reasonably detailed calculation of the Net Proceeds received from Prepayment Events since the end of such previous fiscal year;   (e) within 30 days from the commencement of each fiscal year of Holdings (commencing with the fiscal year ending December 31, 2002), a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any material revisions of such budget that have been approved by senior management of Holdings;   (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Parent Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be; and   (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, the Parent Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.   SECTION 5.02. Notices of Material Events. Holdings and the Parent Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:   (a) the occurrence of any Default;   (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Holdings,     -------------------------------------------------------------------------------- 82   the Parent Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;   (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings, the Parent Borrower and its Subsidiaries in an aggregate amount exceeding $10,000,000; and   (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.   Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.   SECTION 5.03. Information Regarding Collateral. (a)  The Parent Borrower will furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party's legal name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of any Loan Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in any Loan Party's identity or structure or (iv) in any Loan Party's Federal Taxpayer Identification Number. The Parent Borrower agrees not to effect or permit any change referred to in the preceding sentence unless written notice has been delivered to the Collateral Agent, together with all applicable information to enable the Administrative Agent to make all filings under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent (on behalf of the Secured Parties) to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral.   (b) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, Holdings (on behalf of itself and the other Loan Parties) shall deliver to the Administrative Agent a certificate of a Financial Officer of Holdings (i) setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Collateral Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).       -------------------------------------------------------------------------------- 83   SECTION 5.04. Existence; Conduct of Business. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names the loss of which would have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or disposition by Section 6.05. Holdings and the Parent Borrower will cause all the Equity Interests of the Foreign Subsidiary Borrowers to be owned, directly or indirectly, by the Parent Borrower or any Subsidiary.   SECTION 5.05. Payment of Obligations. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary) to, pay its Indebtedness and other obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Parent Borrower the Foreign Subsidiary Borrowers or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation and (d) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.   SECTION 5.06. Maintenance of Properties. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, keep and maintain all property material to the conduct of their business, taken as a whole, in good working order and condition, ordinary wear and tear excepted; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or disposition by Section 6.05.   SECTION 5.07. Insurance. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, maintain insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Such insurance shall be maintained with financially sound and reputable insurance companies, except that a portion of such insurance program (not to exceed that which is customary in the case of companies engaged in the same or similar business or having similar properties similarly situated) may be effected through self-insurance, provided adequate reserves therefor, in accordance with GAAP, are maintained. In addition, each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of its Subsidiaries to, maintain all insurance required to be maintained pursuant to the Security Documents. The Parent Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. All insurance policies or certificates (or certified copies thereof) with respect to such insurance shall be endorsed to the Collateral Agent's reasonable satisfaction for     -------------------------------------------------------------------------------- 84   the benefit of the Lenders (including, without limitation, by naming the Collateral Agent as loss payee or additional insured, as appropriate).   SECTION 5.08. Casualty and Condemnation. The Parent Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of casualty or other insured damage to any material portion of any Collateral having a book value or fair market value of $1,000,000 or more or the commencement of any action or proceeding for the taking of any Collateral having a book value or fair market value of $1,000,000 or more or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Security Documents.   SECTION 5.09. Books and Records; Inspection and Audit Rights. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.   SECTION 5.10. Compliance with Laws. Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.   SECTION 5.11. Use of Proceeds and Letters of Credit. The Parent Borrower will use on the Restatement Effective Date the proceeds from the Tranche D-2 Term Loans to repay not less than $25,000,000 of Tranche D-1 Term Loans. The Parent Borrower may use any remaining available proceeds from the Tranche D-2 Term Loans to reduce Revolving Borrowings or otherwise to replace liquidity under the Permitted Receivables Documents reduced by reason of the North American Forging Sale in accordance with past practices or, to the extent that the North American Forging Sale has not occurred, for general corporate purposes. The proceeds of the Revolving Loans and Swingline Loans will be used, subject to Sections 5.15 and 6.12, only for general corporate purposes and to the extent permitted by Section 6.01(a)(i), Permitted Acquisitions. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.       -------------------------------------------------------------------------------- 85   SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date, the Parent Borrower will, within five Business Days after such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and, within five Business Days after such Subsidiary is formed or acquired, cause the Collateral and Guarantee Requirement to be satisfied with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.   SECTION 5.13. Further Assurances. (a)  Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust, landlord waivers and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties. Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers also agree to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.   (b) If any assets (including any real property or improvements thereto or any interest therein) having a book value or fair market value of $1,000,000 or more in the aggregate are acquired by the Parent Borrower or any Subsidiary Loan Party after the Effective Date or through the acquisition of a Subsidiary Loan Party under Section 5.12 (other than, in each case, assets constituting Collateral under the Security Agreement or the Pledge Agreement that become subject to the Lien of the Security Agreement or the Pledge Agreement upon acquisition thereof), the Parent Borrower or, if applicable, the relevant Foreign Subsidiary Borrower will notify the Administrative Agent and the Lenders thereof, and, if reasonably requested by the Administrative Agent or the Required Lenders, the Parent Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties.   SECTION 5.14. [intentionally omitted].   SECTION 5.15. Available Funds; Additional Equity. (a)  Promptly following the consummation of the TriMas Transaction, the Parent Borrower shall deposit $205,000,000 of the TriMas Specified Proceeds in an interest bearing money market account with the Administrative Agent. The proceeds of such account shall be distributed to the Parent Borrower in order to enable the Parent Borrower to (i) repurchase, redeem, repay, or otherwise retire the Convertible Debentures within 90 days of the consummation of the TriMas Transaction or deliver an irrevocable notice of redemption and deposit such proceeds to the trustee thereunder within such 90-day     -------------------------------------------------------------------------------- 86   period or (ii) thereafter, to satisfy its obligations under the last sentence of Section 2.11(d)(2).   (b) Until the date that the Convertible Debentures have been irrevocably repurchased, redeemed, repaid or otherwise retired in full, the Parent Borrower will designate as available for the repurchase, redemption, repayment or retirement of Convertible Debentures an amount of unused Revolving Commitments equal to the Available Funds Reserve Amount, less the amount of cash in the Debenture Account.   SECTION 5.16. North American Forging Sale. Within 60 days following the completion of the North American Forging Sale, the Parent Borrower shall use the Net Proceeds from the North American Forging Sale to terminate obligations in respect of operating leases and acquire related real property subject to such leases using an aggregate amount of not less than $45,000,000; provided, that (a) the Parent Borrower shall satisfy the Collateral and Guarantee Requirement with respect to the property subject to operating leases terminated in accordance with this Section 5.16 within 60 days of such termination, (b) if the Parent Borrower is unable to use the Net Proceeds from the North American Forging Sale to terminate obligations in respect of operating leases and acquire related real property subject to such leases using an aggregate amount of $45,000,000 within 60 days following the completion of the North American Forging Sale, any shortfall of application of the Net Proceeds from the North American Forging Sale may be cured by using the Net Proceeds from the North American Forging Sale to prepay Tranche D Term Loan Borrowings pursuant to Section 2.11(a) in an aggregate principal amount equal to such shortfall on or before the 60th day following the completion of the North American Forging Sale and (c) any Net Proceeds of the North American Forging Sale not applied in accordance with clauses (a) and (b) above shall be used to reduce Revolving Borrowings and/or otherwise replace liquidity under the Permitted Receivables Financing reduced by reason of the North American Forging Sale in accordance with past practices.     ARTICLE VI   Negative Covenants   Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings, the Parent Borrower and each Foreign Subsidiary Borrower (as to itself only) covenants and agrees with the Lenders that:   SECTION 6.01. Indebtedness; Certain Equity Securities. (a)  None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:     -------------------------------------------------------------------------------- 87   (i)  Indebtedness created under the Loan Documents and Indebtedness not exceeding $20,000,000 incurred outside the United States that are supported by Letters of Credit; provided that (x)(A) Revolving Loans may only be used to (1) finance a Permitted Acquisition (other than the New Castle Acquisition) if, in addition to the satisfaction of all other requirements necessary to effect such Permitted Acquisition set forth herein, after giving effect to such Permitted Acquisition (and any related incurrence or repayment of Indebtedness), the Senior Leverage Ratio is less than 2.00 to 1.00 and the amount of Revolving Commitments available for general corporate purposes (other than Permitted Acquisitions) at such time shall be at least $100,000,000 and (2) finance the New Castle Acquisition to the extent permitted under the defined term "New Castle Acquisition" and (B) the amount of Revolving Loans used to finance Permitted Acquisitions (other than the New Castle Acquisition) outstanding at any time shall not exceed $50,000,000 less the amount of Permitted Receivables Financing outstanding under Section 6.01(a)(ii) to finance Permitted Acquisitions and (y) until the Convertible Debentures have been irrevocably repurchased, redeemed, repaid or otherwise retired in full, Revolving Loans outstanding may not exceed the aggregate Revolving Commitments less the amount designated as available for the repurchase, redemption, repayment or retirement of Convertible Debentures pursuant to Section 5.15(b);   (ii)  the Permitted Receivables Financing; provided that (x) the Permitted Receivables Financing may only be used to finance a Permitted Acquisition (other than the New Castle Acquisition) if, in addition to the satisfaction of all other requirements necessary to effect such Permitted Acquisition set forth herein, after giving effect to such Permitted Acquisition (and any related incurrence or repayment of Indebtedness), the Senior Leverage Ratio is less than 2.00 to 1.00 and the amount of Revolving Commitments available for general corporate purposes (other than Permitted Acquisitions) at such time shall be at least $100,000,000 and (y) the amount of Permitted Receivables Financing used to finance Permitted Acquisitions (other than the New Castle Acquisition) outstanding at any one time shall not exceed $50,000,000 less the amount of Revolving Loans outstanding under Section 6.01(a)(i) to finance Permitted Acquisitions;   (iii)  [intentionally omitted];   (iv)  Indebtedness existing on the date hereof and set forth in Schedule 6.01 to the Original Credit Agreement and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount as specified on such Schedule 6.01 or result in an earlier maturity date or decreased weighted average life thereof;   (v)  the Convertible Debentures;   (vi)  the Existing Subordinated Notes;     -------------------------------------------------------------------------------- 88   (vii)  the Permitted Subordinated Notes and the Permitted Senior Notes; provided that (x) Permitted Subordinated Notes may only be used for the repayment of Revolving Borrowings and obligations arising in respect of the Permitted Receivables Financing if, after giving effect to the incurrence of such Permitted Subordinated Notes, the Senior Leverage Ratio is less than 2.75 to 1.00 and (y) the aggregate amount of proceeds of Permitted Subordinated Notes used for the repayment of Revolving Borrowings and obligations arising in respect of the Permitted Receivables Financing may not exceed $100,000,000;   (viii)  Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any other Subsidiary; provided that Indebtedness of any Subsidiary that is not a Domestic Loan Party to the Parent Borrower or any Subsidiary Loan Party shall be subject to Section 6.04;   (ix)  Guarantees by the Parent Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Parent Borrower or any other Subsidiary; provided that (a) Guarantees by the Parent Borrower or any Subsidiary Loan Party of Indebtedness of any Subsidiary that is not a Domestic Loan Party shall be subject to Section 6.04 and (b) this clause (ix) shall not apply to Guarantees of the Existing Subordinated Notes, Permitted Subordinated Notes, the Permitted Senior Notes or the TriMas Notes;   (x)  Guarantees by Holdings, the Parent Borrower or any Subsidiary, as the case may be, in respect of the Existing Subordinated Notes, Permitted Subordinated Notes and the Permitted Senior Notes; provided that none of Holdings, the Parent Borrower or any Subsidiary, as the case may be, shall Guarantee the Existing Subordinated Notes, the Permitted Subordinated Notes or the Permitted Senior Notes unless (A) it also has Guaranteed the Obligations pursuant to the Guarantee Agreement and (B) such Guarantee of the Existing Subordinated Notes or the Permitted Subordinated Notes is subordinated to such Guarantee of the Obligations on terms no less favorable to the Lenders than the subordination provisions of the Existing Subordinated Notes;   (xi)  Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof; provided that (A) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (xi) shall not exceed $50,000,000 at any time outstanding;   (xii)  Indebtedness arising as a result of an Acquisition Lease Financing;       -------------------------------------------------------------------------------- 89   (xiii) Indebtedness of any Person that becomes a Subsidiary after the date hereof; provided that (A) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (B) the aggregate principal amount of Indebtedness permitted by this clause (xiii) shall not exceed $25,000,000 at any time outstanding, less the liquidation value of any outstanding Assumed Preferred Stock;   (xiv) Indebtedness of Holdings, the Parent Borrower or any Subsidiary in respect of workers' compensation claims, self-insurance obligations, performance bonds, surety appeal or similar bonds and completion guarantees provided by Holdings, the Parent Borrower and the Subsidiaries in the ordinary course of their business; and   (xv) other unsecured Indebtedness of Holdings, the Parent Borrower or any Subsidiary in an aggregate principal amount not exceeding $20,000,000 at any time outstanding, less the liquidation value of any applicable Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock.   (b) None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, issue any preferred stock or other preferred Equity Interests, except (i) Holdings Preferred Stock, (ii) Qualified Holdings Preferred Stock, (iii) Assumed Preferred Stock and (iv) preferred stock or preferred Equity Interests held by Holdings, the Parent Borrower or any Subsidiary.   SECTION 6.02. Liens. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:   (a) Liens created under the Loan Documents;   (b) Permitted Encumbrances;   (c) (i) Liens in respect of the Permitted Receivables Financing and the Foreign Factoring Arrangement, (ii) second priority Liens in respect of the Permitted Senior Notes, so long as the trustee or agent thereunder has entered into the Intercreditor Agreement and (iii) Liens in respect of the New Castle Sale and Leaseback as contemplated in the definition of "New Castle Sale and Leaseback";   (d) any Lien on any property or asset of the Parent Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02 to the Original Credit Agreement; provided that (i) such Lien shall not apply to any other property or asset of the Parent Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and     -------------------------------------------------------------------------------- 90   extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;   (e) any Lien existing on any property or asset prior to the acquisition thereof by the Parent Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (A) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary , as the case may be, (B) such Lien shall not apply to any other property or assets of the Parent Borrower or any Subsidiary and (C) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be;   (f) Liens on fixed or capital assets acquired, constructed or improved by, or in respect of Capital Lease Obligations of, the Parent Borrower or any Subsidiary; provided that (A) such security interests secure Indebtedness permitted by clause (xi) of Section 6.01(a), (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (C) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (D) such security interests shall not apply to any other property or assets of the Parent Borrower or any Subsidiary;   (g) Liens, with respect to any Mortgaged Property, described in Schedule B-2 of the title policy covering such Mortgaged Property;   (h) other Liens securing liabilities permitted hereunder in an aggregate amount not exceeding (i) in respect of consensual Liens, $15,000,000 and (ii) in respect of all such Liens, $20,000,000, in each case at any time outstanding; and   (i) Liens on equipment with an orderly liquidation value of not more than $13,000,000 securing obligations under leases expressly permitted under Section 6.06(b)(ii); provided that, with respect to each such lease, such equipment and its aggregate orderly liquidation value shall be specified on a schedule delivered to the Administrative Agent by the Parent Borrower no later than three Business Days prior to the Parent Borrower's or any Subsidiary's entering into such lease.   SECTION 6.03. Fundamental Changes. (a)  None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving corporation, (ii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary and (if any party to such merger is a Subsidiary Loan Party) is a Subsidiary Loan Party (provided that, with respect to any such mergers involving the Foreign Subsidiary     -------------------------------------------------------------------------------- 91   Borrower, the surviving entity of such mergers shall be a Subsidiary Borrower or a Foreign Subsidiary Borrower, as the case may be) and (iii) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Parent Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Parent Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.   (b) The Parent Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto.   (c) Holdings will not engage in any business or activity other than (i) the ownership of all the outstanding shares of capital stock of the Parent Borrower and the Saturn Subsidiary, (ii) performing its obligations in respect of the Restricted Stock Award, (iii) performing its obligations (A) under the Loan Documents, (B) as co-obligor with the Parent Borrower in respect of the Convertible Debentures and (C) under the Permitted Receivables Financing, (iv) activities incidental thereto and to Holdings' existence, (v) activities related to the performance of all its obligations under the Recapitalization Agreement and in respect of the Transactions, (vi) performing its obligations under guarantees in respect of sale and leaseback transactions permitted by Section 6.06 and (vii) other activities (including the incurrence of Indebtedness and the issuance of its Equity Interests) that are permitted by this Agreement. Holdings will not own or acquire any assets (other than shares of capital stock of the Parent Borrower and the Saturn Subsidiary, any immaterial assets not subject to the Asset Dropdown, cash and Permitted Investments) or incur any liabilities (other than liabilities imposed by law, including tax liabilities, liabilities related to its existence and permitted business and activities specified in the immediately preceding sentence).   (d) The Saturn Subsidiary will not engage in any business or business activity other than (i) holding Equity Interests in Saturn held on the date of the execution of this Agreement and any property received in respect thereof, (ii) performing its obligations in respect of the Saturn Sale and the Saturn Proceeds Distribution, (iii) activities permitted by its certificate of incorporation and (iv) activities incidental thereto and to the Saturn Subsidiary's existence. The Saturn Subsidiary will not own or acquire any assets (other than such equity investments in Saturn) or incur any liabilities (other than liabilities imposed by law, including tax liabilities, and other liabilities related to its existence and permitted business and activities specified in the immediately preceding sentence).   (e) The Receivables Subsidiary will not engage in any business or business activity other than the activities related to the Permitted Receivables Financing and its existence. The Receivables Subsidiary will not own or acquire any assets (other than the receivables subject to the Permitted Receivables Financing) or incur any liabilities (other than the liabilities imposed by law including tax liabilities, and other liabilities related to its existence and permitted business and activities specified in the     -------------------------------------------------------------------------------- 92   immediately preceding sentence, including liabilities arising under the Permitted Receivables Financing).   SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. None of the Parent Borrower, any Subsidiary Loan Party or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:   (a) Permitted Investments;   (b) investments existing on the date hereof and set forth on Schedule 6.04 to the Original Credit Agreement and investments in TriMas and its subsidiaries existing immediately after the consummation of the TriMas Transaction;   (c) Permitted Acquisitions;   (d) investments by the Parent Borrower and the Subsidiaries in Equity Interests in their respective Subsidiaries that exist immediately prior to any applicable transaction; provided that (i) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Pledge Agreement or any applicable Foreign Security Documents, as the case may be, to the extent required by this Agreement and (ii) the aggregate amount of investments (excluding any such investments, loans, advances and Guaranties to such Subsidiaries that are assumed and exist on the date any Permitted Acquisition is consummated and that are not made, incurred or created in contemplation of or in connection with such Permitted Acquisition) by Loan Parties in, and loans and advances by Loan Parties to, and Guarantees by Loan Parties of Indebtedness of, Subsidiaries that are not Domestic Loan Parties made after the Effective Date shall not exceed 5% of Holdings' consolidated total assets determined in accordance with GAAP at any time outstanding;   (e) loans or advances made by the Parent Borrower to any Subsidiary and made by any Subsidiary to the Parent Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Pledge Agreement and (ii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (d) above;   (f) Guarantees permitted by Section 6.01(a)(x);   (g) investments arising as a result of the Permitted Receivables Financing;     -------------------------------------------------------------------------------- 93   (h) investments constituting permitted Capital Expenditures under Section 6.15;   (i) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;   (j) any investments in or loans to any other Person received as noncash consideration for sales, transfers, leases and other dispositions permitted by Section 6.05;   (k) Guarantees by the Parent Borrower and the Subsidiaries of leases entered into by any Subsidiary as lessee; provided that the amount of such Guarantees made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (d) above;   (l) extensions of credit in the nature of accounts receivable or notes receivable in the ordinary course of business;   (m) loans or advances to employees made in the ordinary course of business consistent with prudent business practice and not exceeding $5,000,000 in the aggregate outstanding at any one time;   (n) investments in the form of Hedging Agreements permitted under Section 6.07;   (o) investments by the Parent Borrower or any Subsidiary in (i) the capital stock of a Receivables Subsidiary and (ii) other interests in a Receivables Subsidiary, in each case to the extent required by the terms of the Permitted Receivables Financing;   (p) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; and   (q) investments, loans or advances in addition to those permitted by clauses (a) through (p) above not exceeding in the aggregate $25,000,000 at any time outstanding.   SECTION 6.05. Asset Sales. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will they permit any Subsidiary to issue any additional Equity Interest in such Subsidiary, except:   (a) sales, transfers, leases and other dispositions of inventory, used or surplus equipment, Permitted Investments and Investments referred to in Section 6.04(i) in the ordinary course of business;     -------------------------------------------------------------------------------- 94   (b) sales, transfers and dispositions to the Parent Borrower or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Domestic Loan Party shall be made in compliance with Section 6.09;   (c) the Saturn Sale or the disposition of Equity Interests in the Saturn Subsidiary in lieu thereof;   (d) sales of accounts receivables and related assets pursuant to the Permitted Receivables Financing;   (e) the creation of Liens permitted by Section 6.02 and dispositions as a result thereof;   (f) (i) sales or transfers that are permitted sale and leaseback transactions pursuant to Section 6.06(a) and (b), (ii) sales and transfers pursuant to the New Castle Sale and Leaseback and Ramos Sale and Leaseback, and (iii) sales and transfers of the TriMas Interest;   (g) sales and transfers that constitute part of an Acquisition Lease Financing;   (h) Restricted Payments permitted by Section 6.08;   (i) transfers and dispositions constituting investments permitted under Section 6.04;   (j) sales, transfers and other dispositions of property identified on Schedule 6.05 to the Original Credit Agreement;   (k) sales, transfers and other dispositions of assets (other than Equity Interests in a Subsidiary) that are not permitted by any other clause of this Section; provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (k) shall not exceed $15,000,000 during any fiscal year of the Parent Borrower; provided that such amount shall be increased, in respect of the fiscal year ending on December 31, 2002, and each fiscal year thereafter by an amount equal to the total unused amount of such permitted sales, transfers and other dispositions for the immediately preceding fiscal year (without giving effect to the amount of any unused permitted sales, transfers and other dispositions that were carried forward to such preceding fiscal year);   (l) sales of accounts receivable and related assets pursuant to a Foreign Factoring Arrangement; and   (m) the North American Forging Sale.   -------------------------------------------------------------------------------- 95   provided that (x) all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clause (b) above) shall be made for fair value and (y) all sales, transfers, leases and other dispositions permitted by clauses (j) and (k) above shall be for at least 85% cash consideration.   SECTION 6.06. Sale and Leaseback Transactions. From and after the Restatement Effective Date, none of the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for, solely with respect to property not owned as of the Restatement Effective Date (other than property which becomes or is required to become Collateral as a result of the termination of operating leases pursuant to Section 5.16), any such sale of any fixed or capital assets that is made for cash consideration in an amount not less than the cost of such fixed or capital asset and is consummated within 180 days after the Parent Borrower, such Foreign Subsidiary Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset, so long as the Capital Lease Obligations associated therewith are permitted by Section 6.01(a)(xi).   SECTION 6.07. Hedging Agreements. None of the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business and which are not speculative in nature to hedge or mitigate risks to which the Parent Borrower or any Subsidiary is exposed in the conduct of its business or the management of its assets or liabilities.   SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. (a)  None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:   (i) Holdings may (x) declare and pay dividends with respect to its Equity Interests payable solely in additional Equity Interests of Holdings, (y) repurchase Equity Interests not to exceed $10,000,000 from former shareholders of its existing or former Subsidiaries that received such Equity Interests of Holdings prior to the date hereof and (z) repurchase the preferred stock of Holdings in an aggregate amount not to exceed $20,000,000, provided that, at the time of such repurchase and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and Holdings and the Parent Borrower are in compliance with Sections 6.13 and 6.14;   (ii) Subsidiaries may declare and pay dividends ratably with respect to their capital stock;     -------------------------------------------------------------------------------- 96   (iii) the Parent Borrower may make payments to Holdings to permit it to make, and Holdings may make, Restricted Payments, not exceeding $2,000,000 during any fiscal year (provided that such amount shall be increased, in respect of the fiscal year ending on December 31, 2002, and each fiscal year thereafter by an amount equal to the total unused amount of such Restricted Payments for the immediately preceding fiscal year (without giving effect to the amount of any unused amounts that were carried forward to such preceding fiscal year) not to exceed in the aggregate $16,000,000), in each case pursuant to and in accordance with stock option plans, equity purchase programs or agreements or other benefit plans, in each case for management or employees or former employees of the Parent Borrower and the Subsidiaries;   (iv) the Parent Borrower may pay dividends to Holdings at such times and in such amounts (A) as shall be necessary to enable Holdings to make payments permitted by clause (z) of Section 6.08(a)(i) and Sections 6.08(a)(v) and (vi) and (B) as shall be necessary to permit Holdings to discharge its other permitted liabilities;   (v) Holdings may pay Holdings Preferred Dividends and interest in respect of its Indebtedness permitted hereunder, provided that, at the time of such payment and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and Holdings and the Parent Borrower are in compliance with Sections 6.13 and 6.14;   (vi) Holdings may make payments to the extent contemplated by the Recapitalization Agreement, including payments in respect of the restricted stock granted pursuant to the Restricted Stock Obligation (including payments in respect of the Restricted Stock Obligation after the date such payments were scheduled to have been made), provided that, at the time of such payment in respect of the Restricted Stock Obligation and after giving effect thereto, no Event of Default shall have occurred and be continuing;   (vii) Holdings may (x) pay the Saturn Proceeds Distribution and (y) repurchase, redeem, repay or otherwise retire the Convertible Debentures with Available Funds, proceeds from Permitted Senior Notes (to the extent permitted by such defined term), Permitted Subordinated Notes or issuances or sales of capital stock of Holdings; and   (viii) Parent Borrower may make payments to Holdings to permit it to make, and Holdings may make payments permitted by Sections 6.09(f), (g), (h) and (i); provided that, at the time of such payment and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and Holdings and the Parent Borrower are in compliance with Sections 6.13 and 6.14; provided, further that any payments that are prohibited because of the immediately preceding proviso shall accrue and may be made as so accrued upon the curing or waiver of such Default, Event of Default or noncompliance.     -------------------------------------------------------------------------------- 97   (b) None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except:   (i) payment of Indebtedness created under the Loan Documents;   (ii) the repurchase, redemption, repayment or other retirement of the Convertible Debentures as permitted by Section 6.08(a)(vii);   (iii) payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness, other than payments in respect of the subordinated Indebtedness prohibited by the subordination provisions thereof;   (iv) refinancings of Indebtedness to the extent permitted by Section 6.01;   (v) payment of secured Indebtedness out of the proceeds of any sale or transfer of the property or assets securing such Indebtedness; and   (vi) payment of Indebtedness or other obligations made pursuant to Section 5.16.   (c) None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into or be party to, or make any payment under, any Synthetic Purchase Agreement unless (i) in the case of any Synthetic Purchase Agreement related to any Equity Interest of Holdings, the payments required to be made by Holdings are limited to amounts permitted to be paid under Section 6.08(a), (ii) in the case of any Synthetic Purchase Agreement related to any Restricted Indebtedness, the payments required to be made by Holdings, the Parent Borrower or the Subsidiaries thereunder are limited to the amount permitted under Section 6.08(b) and (iii) in the case of any Synthetic Purchase Agreement, the obligations of Holdings, the Parent Borrower and the Subsidiaries thereunder are subordinated to the Obligations on terms satisfactory to the Required Lenders.   SECTION 6.09. Transactions with Affiliates. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except:   (a) transactions that do not involve Holdings and are at prices and on terms and conditions not less favorable to the Parent Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties;     -------------------------------------------------------------------------------- 98   (b) transactions between or among the Parent Borrower and the Subsidiaries not involving any other Affiliate (to the extent not otherwise prohibited by other provisions of this Agreement);   (c) any Restricted Payment permitted by Section 6.08;   (d) transactions pursuant to agreements in effect on the Effective Date and listed on Schedule 6.09 to the Original Credit Agreement (provided that this clause (d) shall not apply to any extension, or renewal of, or any amendment or modification of such agreements that is less favorable to the Parent Borrower or the applicable Subsidiaries, as the case may be);   (e) (i) the Transactions and (ii) the TriMas Transactions and the TriMas Affiliate Agreements (provided that this clause (e)(ii) shall not apply to any extension, or renewal of, or any amendment or modification of such agreements that is less favorable in any material respect, taken as a whole, to the Parent Borrower or the applicable Subsidiaries, as the case may be);   (f) the payment, on a quarterly basis, of management fees to Heartland and/or its Affiliates in accordance with the Heartland Management Agreement, provided that the annual amount of such management fees shall not exceed $4,000,000;   (g) the reimbursement of Heartland and/or its Affiliates for their reasonable out-of-pocket expenses incurred by them in connection with the Transactions and performing management services to Holdings, the Parent Borrower and the Subsidiaries, pursuant to the Heartland Management Agreement;   (h) the payment of one time fees to Heartland and/or its Affiliates in connection with any Permitted Acquisition, such fees to be payable at the time of each such acquisition and not to exceed the percentage of the aggregate consideration paid by Holdings, the Parent Borrower and its Subsidiaries for any such acquisition as specified in the Heartland Management Agreement; and   (i) payments to Heartland and/or its Affiliates for any financial advisor, underwriter or placement services or other investment banking activities rendered to Holdings, the Parent Borrower or the Subsidiaries, pursuant to the Heartland Management Agreement.   SECTION 6.10. Restrictive Agreements. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings, the Parent Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Parent Borrower or any other Subsidiary or to     -------------------------------------------------------------------------------- 99   Guarantee Indebtedness of the Parent Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any (A) Loan Document or Permitted Receivables Document or (B) any Existing Subordinated Notes, Permitted Subordinated Notes and Permitted Senior Notes that are customary, in the reasonable judgment of the board of directors thereof, for the market in which such Indebtedness is issued so long as such restrictions do not prevent, impede or impair (x) the creation of Liens and Guarantees in favor of the Lenders under the Loan Documents or (y) the satisfaction of the obligations of the Loan Parties under the Loan Documents, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.10 to the Original Credit Agreement (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided, further, that such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other agreements restricting the assignment thereof.   SECTION 6.11. Amendment of Material Documents. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents, (b) the Recapitalization Documents and (c) any Material Agreement, in each case to the extent such amendment, modification or waiver is adverse to the Lenders.   SECTION 6.12. Convertible Debentures.  Holdings shall not repurchase, redeem, repay or otherwise retire any Convertible Debentures except as permitted by Section 6.08(a)(vii).   SECTION 6.13. Interest Expense Coverage Ratio. Neither Holdings nor the Parent Borrower will permit the ratio of (a) Consolidated EBITDA to (b) the sum of (i) Consolidated Cash Interest Expense and (ii) Holdings Preferred Dividends, in each case for any period of four consecutive fiscal quarters ending on the last date of any fiscal quarter set forth below, to be less than the ratio set forth below opposite such period:   Period   Ratio   First Fiscal Quarter of 2005   2.10 to 1.00   Second Fiscal Quarter of 2005   2.15 to 1.00   Third Fiscal Quarter of 2005   2.20 to 1.00   Fourth Fiscal Quarter of 2005   2.20 to 1.00     -------------------------------------------------------------------------------- 100   Period   Ratio   First Fiscal Quarter of 2006 to the Fourth Fiscal Quarter of 2006   1.75 to 1.00   First Fiscal Quarter of 2007 to the Fourth Fiscal Quarter of 2007   2.00 to 1.00   First Fiscal Quarter of 2008 to the Fourth Fiscal Quarter of 2008   2.25 to 1.00   First Fiscal Quarter of 2009 and thereafter   2.50 to 1.00   SECTION 6.14. Leverage Ratio. Neither Holdings nor the Parent Borrower will permit the Leverage Ratio as of the last date of any fiscal quarter set forth below to exceed the ratio set forth opposite such period:   Period   Ratio   First and Second Fiscal Quarters of 2005   5.25 to 1.00   Third Fiscal Quarter of 2005   5.00 to 1.00   Fourth Fiscal Quarter of 2005   4.75 to 1.00   First Fiscal Quarter of 2006 to the Fourth Fiscal Quarter of 2006   5.25 to 1.00   First Fiscal Quarter of 2007 to the Fourth Fiscal Quarter of 2007   5.00 to 1.00   First Fiscal Quarter of 2008 to the Fourth Fiscal Quarter of 2008   4.50 to 1.00   First Fiscal Quarter of 2009 and each fiscal quarter thereafter   4.00 to 1.00   SECTION 6.15. Capital Expenditures. (a)  Neither Holdings nor the Parent Borrower will permit the aggregate amount of Capital Expenditures for any period to exceed the applicable Permitted Capital Expenditure Amount for such period, provided that for any fiscal year during which the North American forging business is owned by the Parent Borrower, the Parent Borrower shall be entitled to spend an additional $15,000,000 per fiscal year, pro rated for ownership for a portion of the fiscal year.   (b) Notwithstanding the foregoing, the Parent Borrower may in respect of the fiscal year ending on December 31, 2007, and each fiscal year thereafter, increase the amount of Capital Expenditures permitted to be made during such fiscal year pursuant to Section 6.15(a) by an amount equal to the total unused amount of permitted Capital Expenditures for the immediately preceding fiscal year (without giving effect to the amount of any unused permitted Capital Expenditures that were carried forward to such preceding fiscal year).       -------------------------------------------------------------------------------- 101   SECTION 6.16. Consolidated Lease Expense. Neither Holdings nor the Parent Borrower will permit Consolidated Lease Expense associated with Capital Expenditures to exceed 30% of Capital Expenditures for such fiscal year.     ARTICLE VII   Events of Default   If any of the following events ("Events of Default") shall occur:   (a) the Parent Borrower or any Foreign Subsidiary Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;   (b) the Parent Borrower or any Foreign Subsidiary Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days;   (c) any representation or warranty made or deemed made by or on behalf of Holdings, the Parent Borrower, any Foreign Subsidiary Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;   (d) Holdings, the Parent Borrower or any Foreign Subsidiary Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the existence of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower and ownership of the Foreign Subsidiary Borrowers), 5.11, 5.15 or 5.16 or in Article VI;   (e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be given at the request of any Lender);   (f) Holdings, the Parent Borrower or any Subsidiary shall fail to make any payment of principal or interest in respect of any Material Indebtedness, when and as the same shall become due and payable after giving effect to any applicable grace period with respect thereto;     -------------------------------------------------------------------------------- 102   (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;   (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Parent Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;   (i) Holdings, the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Parent Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;   (j) Holdings, the Parent Borrower or any Subsidiary shall become unable, admit in writing in a court proceeding its inability or fail generally to pay its debts as they become due;   (k) one or more judgments for the payment of money in an aggregate amount in excess of $15,000,000 shall be rendered against Holdings, the Parent Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Holdings, the Parent Borrower or any Subsidiary to enforce any such judgment;   (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have       -------------------------------------------------------------------------------- 103   occurred, could reasonably be expected to result in a Material Adverse Effect on Holdings, the Parent Borrower and its Subsidiaries;   (m) any Lien covering property having a book value or fair market value of $1,000,000 or more purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Administrative Agent's failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Collateral Agreement;   (n) the Guarantee Agreement shall cease to be, or shall have been asserted not to be, in full force and effect;   (o) the Parent Borrower, Holdings or any Subsidiary shall challenge the subordination provisions of the Subordinated Debt or assert that such provisions are invalid or unenforceable or that the Obligations of the Parent Borrower or any Foreign Subsidiary Borrower, or the Obligations of Holdings or any Subsidiary under the Guarantee Agreement, are not senior indebtedness under the subordination provisions of the Subordinated Debt, or any court, tribunal or government authority of competent jurisdiction shall judge the subordination provisions of the Subordinated Debt to be invalid or unenforceable or such Obligations to be not senior indebtedness under such subordination provisions or otherwise cease to be, or shall be asserted not to be, legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms; or   (p) a Change in Control shall occur;   then, and in every such event (other than an event with respect to the Parent Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Parent Borrower or any Foreign Subsidiary Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Parent Borrower and the Foreign Subsidiary Borrowers; and in case of any event with respect to the Parent Borrower or any Foreign Subsidiary Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Parent Borrower or any Foreign Subsidiary Borrower accrued hereunder, shall automatically become due and     -------------------------------------------------------------------------------- 104   payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Parent Borrower and the Foreign Subsidiary Borrowers.     ARTICLE VIII   The Administrative Agent   Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent (it being understood that reference in this Article VIII to the Administrative Agent shall be deemed to include the Collateral Agent) as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.   The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Holdings, the Parent Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.   The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Parent Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall not be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by Holdings, the Parent Borrower, a Foreign Subsidiary Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants,     -------------------------------------------------------------------------------- 105   agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.   The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Parent Borrower or any Foreign Subsidiary Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.   The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.   Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers). Upon any such resignation, the Required Lenders shall have the right, in consultation with the Parent Borrower and, if applicable, the relevant Foreign Subsidiary Borrower, to appoint a successor from among the Lenders. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related     -------------------------------------------------------------------------------- 106   Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.   Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.   The Lenders identified in this Agreement as the Syndication Agent and the Documentation Agents shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Without limiting the foregoing, none of the Syndication Agent or the Documentation Agents shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to the Syndication Agent and the Documentation Agents as it makes with respect to the Administrative Agent or any other Lender in this Article VIII.     ARTICLE IX   Collection Allocation Mechanism   SECTION 9.01. Implementation of CAM.  (a)  On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in Article VII, (ii) all Foreign Currency Borrowings and the Commitments to make Foreign Currency Loans shall be converted into, and all such amounts due thereunder shall accrue and be payable in, dollars at the Exchange Rate on such date and (iii) the Lenders shall automatically and without further act (and without regard to the provisions of Section 10.04) be deemed to have exchanged interests in the Credit Facilities such that in lieu of the interest of each Lender in each Credit Facility in which it shall participate as of such date (including such Lender's interest in the Specified Obligations of each Loan Party in respect of each such Credit Facility), such Lender shall hold an interest in every one of the Credit Facilities (including the Specified Obligations of each Loan Party in respect of each such Credit Facility and each LC Reserve Account established pursuant to Section 9.02 below), whether or not such Lender shall previously have participated therein, equal to such Lender's CAM Percentage thereof. Each Lender and each Loan Party hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any person that acquires a participation in its interests in any Credit Facility. Each Loan Party agrees from time to time to execute and deliver to the Administrative Agent all promissory notes and other instruments and documents as the Administrative Agent shall     -------------------------------------------------------------------------------- 107   reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of new promissory notes evidencing its interests in the Credit Facilities; provided, however, that the failure of any Loan Party to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.   (b) As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by the Administrative Agent or the Collateral Agent pursuant to any Loan Document in respect of the Specified Obligations, and each distribution made by the Collateral Agent pursuant to any Security Documents in respect of the Specified Obligations, shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages. Any direct payment received by a Lender upon or after the CAM Exchange Date, including by way of setoff, in respect of a Specified Obligation shall be paid over to the Administrative Agent for distribution to the Lenders in accordance herewith.   SECTION 9.02. Letters of Credit.  (a)  In the event that on the CAM Exchange Date any Letter of Credit shall be outstanding and undrawn in whole or in part, or any amount drawn under a Letter of Credit shall not have been reimbursed either by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, or with the proceeds of a Revolving Borrowing, each Revolving Lender shall promptly pay over to the Administrative Agent, in immediately available funds and in the currency that such Letters of Credit are denominated, an amount equal to such Revolving Lender's Applicable Percentage (as notified to such Lender by the Administrative Agent) of such Letter of Credit's undrawn face amount or (to the extent it has not already done so) such Letter of Credit's unreimbursed drawing, together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the Administrative Agent at the rate that would be applicable at the time to an ABR Revolving Loan in a principal amount equal to such amount, as the case may be. The Administrative Agent shall establish a separate account or accounts for each Lender (each, an "LC Reserve Account") for the amounts received with respect to each such Letter of Credit pursuant to the preceding sentence. The Administrative Agent shall deposit in each Lender's LC Reserve Account such Lender's CAM Percentage of the amounts received from the Revolving Lenders as provided above. The Administrative Agent shall have sole dominion and control over each LC Reserve Account, and the amounts deposited in each LC Reserve Account shall be held in such LC Reserve Account until withdrawn as provided in paragraph (b), (c), (d) or (e) below. The Administrative Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the LC Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender's CAM Percentage. The amounts held in each Lender's LC Reserve Account shall be held as a reserve against the LC Exposure, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Loan Party and shall not give rise to any obligation on the part of the Parent Borrower or the Foreign Subsidiary Borrowers to pay interest to such Lender, it being agreed that the reimbursement obligations in respect of Letters of       -------------------------------------------------------------------------------- 108   Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.05.   (b) In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit, the Administrative Agent shall, at the request of the Issuing Bank withdraw from the LC Reserve Account of each Lender any amounts, up to the amount of such Lender's CAM Percentage of such drawing, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to the Issuing Bank in satisfaction of the reimbursement obligations of the Revolving Lenders under Section 2.05(e) (but not of the Parent Borrower and the Foreign Subsidiary Borrowers under Section 2.05(f), respectively). In the event any Revolving Lender shall default on its obligation to pay over any amount to the Administrative Agent in respect of any Letter of Credit as provided in this Section 9.02, the Issuing Bank shall, in the event of a drawing thereunder, have a claim against such Revolving Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.05(e), but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of interests in the reimbursement obligations pursuant to Section 9.01. Each other Lender shall have a claim against such defaulting Revolving Lender for any damages sustained by it as a result of such default, including, in the event such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount.   (c) In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the Administrative Agent shall withdraw from the LC Reserve Account of each Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender.   (d) With the prior written approval of the Administrative Agent and the Issuing Bank, any Lender may withdraw the amount held in its LC Reserve Account in respect of the undrawn amount of any Letter of Credit. Any Lender making such a withdrawal shall be unconditionally obligated, in the event there shall subsequently be a drawing under such Letter of Credit, to pay over to the Administrative Agent, for the account of the Issuing Bank on demand, its CAM Percentage of such drawing.   (e) Pending the withdrawal by any Lender of any amounts from its LC Reserve Account as contemplated by the above paragraphs, the Administrative Agent will, at the direction of such Lender and subject to such rules as the Administrative Agent may prescribe for the avoidance of inconvenience, invest such amounts in Permitted Investments. Each Lender that has not withdrawn its CAM Percentage of amounts in its LC Reserve Account as provided in paragraph (d) above shall have the right, at intervals reasonably specified by the Administrative Agent, to withdraw the earnings on investments so made by the Administrative Agent with amounts in its LC Reserve Account and to retain such earnings for its own account.     -------------------------------------------------------------------------------- 109     ARTICLE X   Miscellaneous   SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:   (a) if to Holdings, the Parent Borrower or any Foreign Subsidiary Borrower, to the Parent Borrower (on behalf of itself, Holdings and any Foreign Subsidiary Borrower) at Metaldyne Corporation, 21001 Van Born Road, Taylor, Michigan 48180, Attention of David Liner, Esq. (Telecopy No. (313) 792-6136),   with a copy to   Jonathan A. Schaffzin, Esq. Cahill Gordon & Reindel 80 Pine Street New York, New York (Telecopy No. (212) 269-5420);   (b) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 1111 Fannin Street, 10th Floor, Houston, Texas 77002, Attention of Alice Telles (Telecopy No. (713) 750-2938), with a copy to JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017, Attention of Richard Duker (Telecopy No. 212-270-5127);   (c) if to the Issuing Bank, to it at 10420 Highland Mn Dr-BL2, Tampa, Florida 33610, Attention of James Alonzo (Telecopy No. (813) 432-5161), and in the event that there is more than one Issuing Bank, to such other Issuing Bank at its address (or telecopy number) set forth in its Administrative Questionnaire;   (d) if to the Swingline Lender, to it at 1111 Fannin Street, 10th Floor, Houston, Texas 77002, Attention of Alice Telles (Telecopy No. (713) 750-2938); and   (e) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.   Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.   SECTION 10.02. Waivers; Amendments. (a)  No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or     -------------------------------------------------------------------------------- 110   power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.   (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Parent Borrower, each Foreign Subsidiary Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower) and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Term Loan under Section 2.10, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment or postpone the scheduled date of expiration of any Letter of Credit beyond the Revolving Maturity Date, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change the percentage set forth in the definition of "Required Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release Holdings or any Subsidiary Loan Party from its Guarantee under the Guarantee Agreement (except as expressly provided in the Guarantee Agreement), or limit its liability in respect of such Guarantee, without the written consent of each Lender, (vii) release all or substantially all of the Collateral from the Liens of the Security Documents, without the written consent of each Lender or (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class     -------------------------------------------------------------------------------- 111   differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Tranche D Lenders) or the Tranche D Lenders (but not the Revolving Lenders), may be effected by an agreement or agreements in writing entered into by Holdings, the Parent Borrower, each Foreign Subsidiary Parent Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower) and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Holdings, the Parent Borrower, each Foreign Subsidiary Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower), the Required Lenders and the Administrative Agent (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.   SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a)  Holdings, the Parent Borrower and each Foreign Subsidiary Borrower, jointly and severally, shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of one counsel in each applicable jurisdiction for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, due diligence investigation, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.   (b) Holdings, the Parent Borrower and each Foreign Subsidiary Borrower, jointly and severally, shall indemnify the Administrative Agent, the Issuing     -------------------------------------------------------------------------------- 112   Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the Parent Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Parent Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee.   (c) To the extent that Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers fail to pay any amount required to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at the time.   (d) To the extent permitted by applicable law, none of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.   (e) All amounts due under this Section shall be payable promptly after written demand therefor.     -------------------------------------------------------------------------------- 113   (f) Neither Heartland nor any director, officer, employee, stockholder or member, as such, of any Loan Party or Heartland shall have any liability for the Obligations or for any claim based on, in respect of or by reason of the Obligations or their creation; provided that the foregoing shall not be construed to relieve any Loan Party of its Obligations under any Loan Document.   SECTION 10.04. Successors and Assigns. (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that none of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Parent Borrower or any Foreign Subsidiary Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.   (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or a Lender Affiliate, each of the Parent Borrower, each Foreign Subsidiary Borrower (but only to the extent such assignment relates to Foreign Currency Commitments or Foreign Currency Loans relating to such Foreign Subsidiary Borrower) and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or a Lender Affiliate or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) in the case of Revolving Commitments and Revolving Loans, $5,000,000, and (y) in the case of Tranche D Commitments and Tranche D Loans, $1,000,000 unless each of the Parent Borrower, each Foreign Subsidiary Borrower (but only to the extent such assignment relates to Foreign Currency Commitments or Foreign Currency Loans relating to such Foreign Subsidiary Borrower) and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans, (iv) notwithstanding anything to the contrary, assignments by any Revolving Lender of any portion of its Revolving Commitments or     -------------------------------------------------------------------------------- 114   any portion of Revolving Loans must include a ratable portion of its Foreign Currency Commitments and ratable portion of its Foreign Currency Loans and visa versa, (v) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (vi) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Parent Borrower or any Foreign Subsidiary Borrower otherwise required under this paragraph shall not be required if an Event of Default under Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement (provided that any liability of the Parent Borrower or any Foreign Subsidiary Borrower to such assignee under Section 2.15, 2.16 or 2.17 shall be limited to the amount, if any, that would have been payable thereunder by the Parent Borrower or any Foreign Subsidiary Borrower in the absence of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.   (c) The Administrative Agent, acting for this purpose as an agent of the Parent Borrower and the Foreign Subsidiary Borrowers, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and Holdings, the Parent Borrower, the Foreign Subsidiary Borrowers, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Parent Borrower, the Foreign Subsidiary Borrowers, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.   (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for     -------------------------------------------------------------------------------- 115   purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.   (e) Any Lender may, without the consent of the Parent Borrower or any Foreign Subsidiary Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Holdings, the Parent Borrower, the Foreign Subsidiary Borrowers, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Parent Borrower and the Foreign Subsidiary Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.   (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the prior written consent of the Parent Borrower and, to the extent applicable, each relevant Foreign Subsidiary Borrower. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Parent Borrower and, to the extent applicable, each relevant Foreign Subsidiary Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Parent Borrower and, to the extent applicable, each relevant Foreign Subsidiary Borrower, to comply with Section 2.17(e) as though it were a Lender.   (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.       -------------------------------------------------------------------------------- 116   SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.   SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.   SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.   SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates 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 obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Parent Borrower or any Foreign Subsidiary Borrower against     -------------------------------------------------------------------------------- 117   any of and all the obligations of the Parent Borrower or any Foreign Subsidiary Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.   SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a)  This Agreement shall be construed in accordance with and governed by the law of the State of New York.   (b) Each of Holdings, the Parent Borrower and each Foreign Subsidiary Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Holdings, the Parent Borrower, any of the Foreign Subsidiary Borrowers or their properties in the courts of any jurisdiction.   (c) Each of Holdings, the Parent Borrower and each Foreign Subsidiary Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.   (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.   SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE     -------------------------------------------------------------------------------- 118   TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.   SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.   SECTION 10.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Lender Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent Borrower, any Foreign Subsidiary Borrower and their respective obligations or (iii) any direct or indirect contractual counterparty (or its advisors) to any swap transaction relating to a Lender's obligations hereunder, (g) with the consent of the Parent Borrower or (h) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary). For the purposes of this Section, "Information" means all information received from Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) relating to Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary); provided that, in the case of information received from Holdings, the Parent Borrower or any     -------------------------------------------------------------------------------- 119   Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.   SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.   SECTION 10.14. Judgment Currency. (a)  The obligations hereunder of the Parent Borrower and the Foreign Subsidiary Borrowers and under the other Loan Documents to make payments in Dollars or in the Foreign Currencies, as the case may be, (the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent, the Collateral Agent or a Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent, Collateral Agent or Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against the Parent Borrower, any Foreign Subsidiary Borrower or any other Loan Party in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made, at the Dollar Equivalent of such amount, in each case, as of the date immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date").   (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Parent Borrower and each Foreign Subsidiary Borrower, as the case may be, covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been     -------------------------------------------------------------------------------- 120   purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date.   (c) For purposes of determining the Dollar Equivalent, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency.   SECTION 10.15. Effectiveness of the Amendment and Restatement; Original Credit Agreement. This Agreement shall become effective on the Restatement Effective Date, and thereafter shall be binding upon and inure to the benefit of the parties hereto and the parties to the Original Credit Agreement and their respective successors and assigns. Until this Agreement becomes effective, the Original Credit Agreement shall remain in full force and effect and shall not be affected hereby. After the Restatement Effective Date, all obligations of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers under the Original Credit Agreement shall become obligations of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers hereunder, secured by the Liens granted under the Security Documents, and the provisions of the Original Credit Agreement shall be superseded by the provisions hereof. Except as otherwise expressly stated hereunder, the term of this Agreement is for all purposes deemed to have commenced on the Restatement Effective Date.      

  Exhibit 10.7 EMPLOYMENT AGREEMENT      This Employment Agreement (the “Agreement”) is made effective as of July 6, 2006 between Kaiser Aluminum Corporation, a Delaware corporation (the “Company”), and Daniel D. Maddox (the “Executive”).      WHEREAS, the parties acknowledge and affirm that Executive is a participant in the Kaiser Aluminum & Chemical Corporation Key Employee Retention Plan and Retention Agreement for Executive, both effective September 3, 2002 (collectively, the “KERP”), Severance Agreement and Plan, both effective September 3, 2002 (collectively, the “Severance Plan”), the Kaiser Aluminum & Chemical Corporation Change in Control Severance Plan and Change in Control Severance Agreement dated November 18, 2002 (collectively “CIC Agreement”), and the Long Term Incentive Plan (“LTI Plan”), each of which have been assigned by Kaiser Aluminum & Chemical Corporation to the Company’s subsidiary, Kaiser Aluminum Fabricated Products, LLC, a Delaware limited liability company (“KAFP”);      WHEREAS, the KERP, Severance Plan, CIC Agreement and LTI Plan have not been “materially modified” (as that term is defined in Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and guidance existing on the date of this Agreement) after October 3, 2004;      WHEREAS, it is contemplated that Executive will be a participant in the Kaiser Aluminum Corporation 2006 Equity and Performance Incentive Plan (the “2006 Incentive Plan”) and that Executive will be awarded restricted shares under the 2006 Incentive Plan pursuant to the terms of Executive’s Kaiser Aluminum Corporation 2006 Equity and Performance Incentive Plan Restricted Stock Award Agreement (the “Award Agreement”); and      WHEREAS, the Company desires to secure the continuing services of Executive as Vice President and Controller of the Company, and Executive desires to perform such services for the Company, on the terms and conditions as set forth herein.      NOW THEREFORE, in consideration of the premises and of the covenants and agreements set forth below, it is mutually agreed as follows:      1.     Effective Date, Term and Duties. The term of this Agreement shall begin on the effective date set forth above and unless earlier terminated pursuant to Section 4, continue through the earlier of (a) a mutually agreed termination date, or (b) March 31, 2007 (the “Employment Period”).      1.1     Executive shall have such duties as the Company may from time to time prescribe consistent with his position as Vice President and Controller of the Company and its affiliates (the “Services”).      1.2     Executive shall report directly to the Company’s Chief Financial Officer.   --------------------------------------------------------------------------------        1.3     Executive shall devote his full time, attention, energies and best efforts to the business of the Company, including the training of Executive’s successor and the transition of responsibilities to the Company’s designee before the expiration of the terms of this Agreement.      1.4     The Company shall maintain an office for Executive in Houston, Texas, if requested by Executive; provided, however that Executive agrees and acknowledges that routine travel to the Company’s headquarters will be required at least one or more times monthly.      2.     Compensation. The Company shall pay and Executive shall accept as full consideration for the Services, compensation and benefits described in this Agreement.      2.1     Base Salary. An annual base salary of $225,000, payable in installments in accordance with the Company’s normal payroll practices. The foregoing adjustment to Executive base salary shall be effective as of February 1, 2006.      2.2     Short Term Incentive. An annual short term incentive bonus target of $75,000 pro-rated for partial years. The annual short term incentive bonus will be paid at the same time that all executive annual short term incentive bonus amounts are paid (but in no event later than March 31 of the following year) and will be based on a formula resulting from performance similar to the formula used with other senior executive incentives.      2.3     Long-Term Incentive. A long term incentive award upon emergence in the form of 11,334 shares of restricted common stock of the Company issued under the 2006 Incentive Program. Such shares shall vest upon Executive’s termination of employment for any reason other than termination by the Company for “Cause” as defined in the Severance Plan and CIC Agreement. In all other respects, the terms of such grant of restricted shares of the Company’s common stock under Executive’s Award Agreement will be consistent with the terms of emergence grants made to other executives under the Company’s post-emergence equity incentive program.      3.     Benefits and other Perquisites during Employment Period. Executive will be eligible to participate in the Company’s employee benefit plans of general application, including, without limitation, those plans covering retirement, 401(k) savings, medical, disability, sick leave and life insurance in accordance with the rules established for individual participation in any such plan and under applicable law. Executive will receive such other benefits as the Company or its subsidiaries generally provides to other employees of comparable position and experience, including the continuation of Executive’s car allowance.      4.     Termination of Employment.      4.1     This Agreement may be terminated by the Company for Cause. Upon termination for Cause, Executive shall not be entitled to any further benefits under this Agreement.      4.2     At the end of the end of the Employment Period, Executive may terminate his employment. Executive’s termination of employment (other than by death or disability or by the Company for Cause) at the expiration of the Employment Period will be considered a termination by Executive for “Good Reason” (as that term is defined in the Severance Plan 2 --------------------------------------------------------------------------------   and/or CIC Agreement, as applicable and the Award Agreement) under the Severance Plan and/or CIC Agreement, as applicable, and the Award Agreement.      4.3     Upon Executive’s termination of employment, Executive will be entitled to receive all payments and benefits prescribed under the terms of the KERP, Severance Plan, CIC Agreement and/or LTI Plan. If for any reason, a “Change-in-Control” as defined in the CIC Agreement has not occurred or is not otherwise deemed to have occurred upon the emergence of KAC from Chapter 11, Executive will be receive the benefits Executive would have otherwise received had such a Change-in-Control occurred prior to Executive’s termination of his employment under Section 4.2. These payments and benefits will be in lieu of any other severance or termination payment or benefits provided in the Company’s benefit plans and policies.      5.     Compliance with Section 409A.      5.1     This Agreement shall be construed and interpreted in accordance with Section 409A and is intended to comply with Section 409A. It is the understanding of the Company and Executive that the Company intends to amend or modify and administer each of the Company’s existing employment, compensation and benefits arrangements, including this Agreement, in compliance with Section 409A to avoid adverse tax consequences to the participants; however, the Company is not responsible for any such consequences should they occur. To the extent that any benefit under this Agreement is subject to Section 409A, it shall be paid in a manner that will comply with Section 409A, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto (the “Guidance”). Any provision of this Agreement that would cause any benefit under this Agreement to fail to satisfy Section 409A shall have no force and effect until amended to comply with Section 409A (which amendment may be retroactive to the extent permitted by the Guidance). Any cash payment delayed under this Section will accrue interest during the period the payment is delayed equal to the average prime rate of JP Morgan Chase & Co. for the period of such delay.      5.1     No adjustment or amendment to this Agreement will be undertaken which would result in (a) any reduction of the amount or value of any payments or benefits to be received by Executive under this Agreement or (b) a “material modification” of this Agreement as provided in Section 409A or the Guidance, unless specifically agreed to in writing by Executive.      6.     Termination by Reason of Death or Disability. The Executive’s employment shall terminate automatically upon Executive’s death during the Employment Period. If during the term of this Agreement, Executive is unable to perform his job due to disability (as determined under the Company’s long-term disability insurance program) for 6 months in any 12 month period, the Company may, at its discretion, terminate Executive’s employment. In the event of Executive’s death or disability during the Employment Period, the Company shall pay to Executive or Executive’s estate any base salary, pro-rated guaranteed bonus and unpaid vacation accrued as of the date of Executive’s death or disability and any other benefits payable under the Company’s then existing benefit plans and policies in accordance with such plans and policies in effect on the date of death or disability and in accordance with applicable law, including but not 3 --------------------------------------------------------------------------------   limited to those payments and benefits available to Executive under the KERP, the Severance Plan, the CIC Agreement and/or the LTI Plan.      7.     Dispute Resolution. The Company and Executive agree that any dispute regarding the interpretation or enforcement of this Agreement shall be decided by a confidential, final and binding arbitration conducted by Judicial Arbitration and Mediation Services (“JAMS”) under the then existing JAMS rules, rather than by litigation in court, trial by jury, administrative proceeding or in any other forum.      8.     Cooperation with the Company After Termination of the Employment Period. Following termination of the Employment Period by Executive, Executive shall fully cooperate with the Company in all matters relating to the winding up of his pending work on behalf of the Company and the orderly transfer of any such pending work to other employees of the Company or its subsidiaries as may be designated by the Company.      9.     General      9.1     Waiver. Neither party shall, by mere lapse of time, without giving notice or taking action hereunder, be deemed to have waived any breach by the other of any of the provisions of this Agreement. Further, the waiver by either party of a particular breach of this Agreement by the other shall neither be construed as, nor constitute, a continuing waiver of such breach or of other breaches by the same or any other provision of this Agreement.      9.2     Severability. If for any reason a court of competent jurisdiction or arbitrator finds any provision of this Agreement to be unenforceable, the provision shall be deemed amended as necessary to conform to applicable laws or regulations, or if it cannot be so amended without materially altering the intention of the parties, the remainder of the Agreement shall continue in full force and effect as if the offending provision were not contained herein.      9.3     No Mitigation. Executive shall have no duty to mitigate, by seeking other employment following a termination of his employment, the obligations of the Company or its subsidiaries with respect to any termination or other payments made to Executive under the terms of this Agreement (the KERP, Severance Plan, CIC Agreement or LTI Plan), nor shall such payments be subject to offset or reductions by reason of any compensation received by Executive from such other employment. The obligations of the Company to make payments under this Agreement (or of the Company or its subsidiaries under the KERP, Severance Plan, CIC Agreement or LTI Plan) shall not terminate or otherwise be affected in the event Executive accepts other full-time employment.      9.4     Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be considered effective upon personal service or upon depositing such notice in the U.S. Mail, postage prepaid, return receipt requested and addressed to the General Counsel of the Company at its principal corporate address, and to Executive at his most recent address shown on the Company’s corporate records, or at any other address which he may specify in any appropriate notice to the Company.      9.5     Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together constitutes one and the 4 --------------------------------------------------------------------------------   same instrument and in making proof hereof it shall not be necessary to produce or account for more than one such counterpart.      9.6     Entire Agreement. The parties hereto acknowledge that each has read this Agreement, understands it, and agrees to be bound by its terms. The parties further agree that this Agreement (combined with the KERP, Severance Plan, CIC Agreement and LTI Plan, as those agreements have been made applicable to Executive in the individual agreements executed by Executive) constitute the complete and exclusive statement of the agreement between the parties and supercede all proposals (oral or written), understandings, representations, conditions, covenants and all other communications between the parties relating to the subject matter hereof. For the avoidance of doubt, nothing contained in this Agreement shall be deemed to modify or amend the provisions of the KERP, Severance Plan, CIC Agreement or LTI Plan and in the event of any conflict with the terms of this Agreement, the terms of the KERP, Severance Plan, CIC Agreement and LTI Plan will control.      9.7     Governing Law. This Agreement shall be governed by the laws of the State of California.      9.8     Assignment. This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive, nor may the Executive pledge, encumber or anticipate any payments or benefits due hereunder, by operation of law or otherwise. The Company may assign its rights, together with its obligations, hereunder (i) to any affiliate or (ii) to a third party in connection with any sale, transfer or other disposition of all or substantially all of any business to which the Executive’s services are then principally devoted, provided that no assignment pursuant to clause (ii) shall relieve the Company from its obligations hereunder to the extent the same are not timely discharged by such assignee. In this regard, the parties acknowledge that Executive shall be employed by KAFP, and that while Executive is employed by KAFP, KAFP shall assume the payment obligations of the Company under this Agreement subject to the proviso set forth above in the preceding sentence which states that the Company shall not be relieved of its obligations hereunder to the extent that the obligations assumed by KAFP are not timely discharged by KAFP.      9.9     Subsidiaries; Affiliates; and Benefits. As used herein, the term “subsidiary” shall mean any corporation or other business entity controlled directly or indirectly by the corporation or other business entity in question; the term “affiliate” shall mean and include any corporation or other business entity directly or indirectly controlling, controlled by or under common control with the corporation or other business entity in question; and references to “benefits” and “benefit plans” shall include the benefits provided by the Company and the Company’s subsidiaries from time to time to senior executives of the Company generally and the underlying plans and policies.      9.10     Authority to Execute. The person executing this Agreement on behalf of the Company warrants and represents his/her authority to execute this Agreement and bind the Company, its successors and assigns. 5 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.             KAISER ALUMINUM CORPORATION       By:   /s/ John M. Donnan         Name:   John M. Donnan        Title: Vice President, Secretary & General Counsel                  EXECUTIVE       By:   /s/ Daniel D. Maddox         Daniel D. Maddox              6

  EXHIBIT 10.8 INDEMNITY AGREEMENT February 15, 2006      This agreement is between Triple Crown Media, Inc., a Delaware corporation (the “Company”) and George E. Nicholson (the “Indemnitee”). RECITALS      A. Indemnitee is a director of the Company.      B. Both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies in today’s environment.      C. The Certificate of Incorporation of the Company (the “Certificate of Incorporation”) and the By-laws of the Company (the “By-laws”) require the Company to indemnify and advance expenses to its directors and officers to the fullest extent permitted by law and the Indemnitee has been serving and continues to serve as a director of the Company in part in reliance on such provisions.      D. Section 145(f) of the Delaware General Corporation Law (the “DGCL”) expressly recognizes that the indemnification provisions of the DGCL are not exclusive of any other rights to which a person seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, and this Agreement is being entered into pursuant to such provisions.      E. In recognition of Indemnitee’s need for substantial protection against any potential personal liability in order to assure Indemnitee’s continued service to the Company in an effective manner and Indemnitee’s reliance on the provisions of the Certificate of Incorporation and By-laws and in part to provide Indemnitee with specific contractual assurance that the protection promised by the Certificate of Incorporation and By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of any provision of the Company’s Certificate of Incorporation or By-laws or any change in the composition of the Company’s Board of Directors or any acquisition of the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of the Indemnitee under the Company’s directors’ and officers’ liability insurance policies.      The parties hereto agree as follows:      1. Certain Definitions.           (a) “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as 1 --------------------------------------------------------------------------------   amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation 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 said Act), directly or indirectly, of securities of the Company representing 35% or more of the total voting power represented by the Company’s then outstanding voting securities, or (ii) during any period of 24 consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors 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 a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation or entity, other than a merger or consolidation that 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) at least 80% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or 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, in one transaction or a series of transactions, of all or substantially all the Company’s assets.           (b) “Proceeding” shall mean any completed, actual, pending or threatened action, suit, claim, inquiry or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Company) and whether formal or informal.           (c) “Expenses” means all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of- pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, defense or appeal of or being a witness in, participating in or preparing to defend a Proceeding or establishing or enforcing a right to (i) indemnification or advancement of expenses under this Agreement, the Certificate of Incorporation, the By-laws, the DGCL or otherwise or (ii) directors’ and officers’ liability insurance coverage; provided, however, that Expenses shall not include any judgments, fines or penalties or amounts paid in settlement of a Proceeding.           (d) “Indemnifiable Event” is any event or occurrence related to the fact that Indemnitee is or was a director of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust, nonprofit entity or other entity (including service with respect to employee benefit plans), or by reason of anything done or not done by Indemnitee in any such capacity.           (e) “Indemnification Period” shall be such period as the Indemnitee shall continue to serve as a director of the Company, or shall continue at the request of the Company to serve as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust, nonprofit entity or other entity, and thereafter so long as the Indemnitee shall be subject to any possible Proceeding arising out of the Indemnitee’s tenure in the foregoing positions. 2 --------------------------------------------------------------------------------             (f) “Losses” are any judgments, fines, penalties and amounts paid in settlement (including all interest assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties or amounts paid in settlement) of any Proceeding.           (g) “Reviewing Party” shall mean (i) the Board of Directors (provided that a majority of directors are not parties to the Proceeding), (ii) a person or body selected by the Board of Directors or (iii) if there has been a Change in Control, the special independent counsel referred to in Section 5.      2. Indemnification and Advancement of Expenses. Subject to the limitations set forth in Section 4:           (a) Indemnification. The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, as soon as practicable after written demand is presented to the Company, in the event Indemnitee was or is made or is threatened to be made a party to or witness in or is otherwise involved in a Proceeding by reason, in whole or in part, of an Indemnifiable Event against all Expenses and Losses incurred by Indemnitee in connection with such Proceeding. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule regarding the right of a Delaware corporation to indemnify a member of its Board of Directors, such change, to the extent it would expand Indemnitee’s rights under this Agreement, shall be included within Indemnitee’s rights and the Company’s obligations under this Agreement, and, to the extent it would narrow Indemnitee’s rights or the Company’s obligations under this Agreement, shall be excluded from this Agreement; provided, however, that any change required by applicable laws, statutes or rules to be applied to this Agreement shall be so applied regardless of whether the effect of such change is to narrow Indemnitee’s rights or the Company’s obligations under this Agreement.           (b) Advancement of Expenses. The Company shall to the fullest extent not prohibited by applicable law pay the Expenses incurred by Indemnitee as soon as practicable after written demand is presented to the Company in the event Indemnitee was or is made or is threatened to be made a party to or witness in or is otherwise involved in a Proceeding by reason, in whole or in part, of an Indemnifiable Event in advance of its final disposition; provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnitee to repay all amounts advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Agreement, the DGCL or otherwise.           (c) Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Losses or Expenses, but not, however, for all of the total amount thereof, the Company shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 3 --------------------------------------------------------------------------------             (d) Contribution. If the indemnification provided in Section 2(a) for any reason is held by a court of competent jurisdiction to be unavailable to the Indemnitee, then in respect of any Indemnifiable Event, the Company shall contribute to the amount of Expenses and Losses paid in settlement actually incurred and paid or payable by the Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such Expenses and Losses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 2(d) were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.           (e) Enforcement. If a claim for indemnification (following the final disposition of such Proceeding) under Section 2(a) or advancement of Expenses under Section 2(b) is not paid in full within thirty days after a written claim therefor by the Indemnitee has been presented to the Company, the Indemnitee may file suit against the Company to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In addition, Indemnitee may file suit against the Company to establish a right to indemnification or advancement of Expenses arising under this Agreement, the Certificate of Incorporation, the By-laws, the DGCL or otherwise. In any such action the Company shall have the burden of proving by clear and convincing evidence that the Indemnitee is not entitled to the requested indemnification or advancement of Expenses under applicable law.      3. Notification and Defense of Proceeding. Promptly after receipt by Indemnitee of notice of the commencement of or threat of the commencement of any Proceeding, Indemnitee shall, if a request for indemnification in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the failure to notify the Company will not relieve the Company from any liability which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such omission can be shown to have prejudiced the Company’s ability to defend the Proceeding. Except as otherwise provided below, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld). After notice from the Company to Indemnitee of its election to assume the defense thereof, the Company will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of such Proceeding or (iii) the Company shall not in fact have employed counsel to assume the defense 4 --------------------------------------------------------------------------------   of such Proceeding, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee shall have made the conclusion provided for in clause (ii) of this Section 3. The Company shall not settle any Proceeding in any manner, which would impose any penalty, limitation, admission, loss or Expense on the Indemnitee without the Indemnitee’s prior written consent. Neither the Company nor the Indemnitee will unreasonably withhold its consent to any proposed settlement, provided that Indemnitee may, in Indemnitee’s sole discretion, withhold consent to any proposed settlement that would impose any penalty, limitation, admission, loss or Expense on the Indemnitee.      4. Limitation on Indemnification. Notwithstanding the terms of Section 2:           (a) the obligations of the Company set forth in Section 2 shall be subject to the condition that the Reviewing Party shall not have determined (based on a written opinion of outside counsel in all cases) that Indemnitee would not be permitted to be so indemnified under applicable law; 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 Reviewing Party 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 advancement 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) and the Company shall not be obligated to indemnify or advance to Indemnitee any additional amounts covered by such Reviewing Party determination (unless there has been a determination by a court of competent jurisdiction that the Indemnitee would be permitted to be so indemnified under applicable law);           (b) the Company shall not be required to indemnify or advance Expenses to the Indemnitee with respect to a Proceeding (or part thereof) by the Indemnitee (and not by way of defense), except if the commencement of such Proceeding (i) was authorized in the specific case by the Board of Directors or (ii) brought to establish or enforce a right to indemnification and/or advancement of Expenses arising under this Agreement, the Certificate of Incorporation, the By-laws, the DGCL or otherwise;           (c) the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee for any amounts paid in settlement of a Proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld;           (d) the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section l6(b) of the Securities Exchange Act of 1934, as amended or similar provisions of any federal, state or local statutory law; 5 --------------------------------------------------------------------------------             (e) the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful; and           (f) the Company shall not be obligated pursuant to the terms of this Agreement to make any payment in connection with any Proceeding to the extent Indemnitee has otherwise actually received payment (under any insurance policy or otherwise) of the amounts otherwise indemnifiable under this Agreement.      5. Change in Control of Company. The Company agrees that if there is a Change in Control of the Company, then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense advances under this Agreement, any other agreements, the Certificate of Incorporation or the By-laws now or hereafter in effect relating to Proceedings for Indemnifiable Events, the Company shall seek legal advice only from special independent counsel selected by Indemnitee and approved by the Company’s Board of Directors (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company (other than in connection with such matters) or Indemnitee. Without limiting the Company’s obligation not to unreasonably withhold its consent, in the event that Indemnitee and the Company are unable to agree on the selection of the special independent counsel, such special independent counsel shall be selected by lot from among at least five nationally recognized law firms each in New York City, New York, each having no less than 250 lawyers. Such selection shall be made in the presence of Indemnitee (and his legal counsel or either of them, as Indemnitee may elect). Such special independent counsel, among other things, shall determine whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law and shall render its written opinion to the Company and Indemnitee to such effect. The Company agrees to pay the reasonable fees of the special independent counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), Proceedings, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant to this Agreement.      6. Subrogation. In the event of payment to Indemnitee 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 shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.      7. No Presumptions. For purposes of this Agreement, the termination of any Proceeding against Indemnitee by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief shall be a defense to Indemnitee’s Proceeding for indemnification or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief shall be a defense to Indemnitee’s Proceeding for 6 --------------------------------------------------------------------------------   indemnification or create a presumption that Indemnitee has not a met any particular standard of conduct or did not have a particular belief.      8. Non-Exclusivity. The rights conferred on the Indemnitee by this Agreement shall not be exclusive of any other rights which the Indemnitee may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-laws, agreement, vote of stockholders or disinterested directors or otherwise, and to the extent that during the Indemnification Period such rights are more favorable than the rights currently provided under this Agreement to Indemnitee, Indemnitee shall be entitled to the full benefits of such more favorable rights to the extent permitted by law. Other than as set forth in this Section 8, in the case of any inconsistency between the indemnification provisions of this Agreement and any other agreement relating to the indemnification of an Indemnitee, the indemnification provisions of this Agreement shall control.      9. Liability Insurance. The Company shall, to the extent that the Board of Directors in good faith determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance, on such terms conditions as may be approved by the Board of Directors. To the extent the Company maintains directors’ and officers’ liability insurance, the Indemnitee shall be covered by such policy in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors. Notice of any termination or failure to renew such policy shall be provided to Indemnitee promptly upon the Company’s becoming aware of such termination or failure to renew. The Company shall provide the Indemnittee with copies of all such insurance policies and any endorsements thereto whenever such documents have been provided to the Company.      10. Amendment/Waiver. No supplement, modification 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 of this Agreement (whether or not similar) nor shall such waiver constitute a continuing waiver. Any waiver to this Agreement shall be in writing.      11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives.      12. Survival. This Agreement shall continue in effect during the Indemnification Period, regardless of whether Indemnitee continues to serve as a director of the Company or of any other enterprise at the Company’s request.      13. Severability. The provisions of this Agreement shall be severable in the event that any provision of this Agreement (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. 7 --------------------------------------------------------------------------------        14. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.                   TRIPLE CROWN MEDIA, INC.                       By:   /s/ ROBERT S. PRATHER, JR.   Name: Robert S. Prather, Jr.             Title: Chairman                   INDEMNITEE                   /s/ GEORGE E. NICHOLSON   Name: George E. Nicholson         Title: Director     8

  Exhibit 10.8 ABM DEFERRED COMPENSATION PLAN Effective July 1, 1993 As Amended October 19, 2000   --------------------------------------------------------------------------------   TABLE OF CONTENTS           Article I DEFINITIONS     1   1.01 “Account”     1   1.02 “Administrative Committee” or “Committee”     1   1.03 “Beneficiary”     1   1.04 “Compensation”     1   1.05 “Deferral”     1   1.06 “Effective Date”     1   1.07 “Eligible Employee”     1   1.08 “Employer”     1   1.09 “ERISA”     1   1.10 “Highly Paid Participant”     1   1.11 “Internal Revenue Code” or “Code”     2   1.12 “Participant”     2   1.13 “Person”     2   1.14 “Plan”     2   1.15 “Plan Administrator”     2   1.16 “Plan Year”     2   1.17 “Valuation Date”     2             Article II ELIGIBILITY FOR PARTICIPATION     3   2.01 Eligibility Requirements     3   2.02 Participation Rules Upon Reemployment     3   2.03 Change in Employment Status     3   2.04 Determination of Eligibility     3             Article III CONTRIBUTIONS     4   3.01 Deferrals     4   3.02 Elective Deferral Election     4             Article IV ACCOUNTS. FUNDING AND VALUATION     5   4.01 Establishment of Account     5   4.02 Valuation of Account     5             Article V PARTICIPANTS’ VESTED INTERESTS     6   5.01 Vesting     6             Article VI DISTRIBUTION OF BENEFITS     7   6.01 Distribution of Benefits     7   6.02 Retirement and Termination     7   6.03 Unforeseeable Emergency Withdrawals     7   6.04 Form of Distribution     8             Article VII DEATH     9   7.01 Death     9   i --------------------------------------------------------------------------------             Article VIII THE ADMINISTRATIVE COMMITTEE     10   8.01 Designation and Acceptance     10   8.02 Resignation and Removal; Appointment of Successor     10   8.03 Allocation and Delegation of Responsibilities     10   8.04 Duties and Responsibility     10   8.05 Expenses and Compensation     11   8.06 Information from Employer     11   8.07 Administrative Committee; Signature     11             Article IX PARTICIPANTS’ RIGHTS     13   9.01 Special Disclosures     13   9.02 Filing a Claim for Benefits     13   9.03 Denial of a Claim     13   9.04 Limitation of Rights     13             Article X AMENDMENT AND TERMINATION     14   10.01 Amendment or Termination     14   10.02 Procedure Upon Termination of the Plan     14             Article XI MISCELLANEOUS     15   11.01 Execution of Receipts and Releases     15   11.02 Notice and Unclaimed Benefits     15   11.03 Non-Alienation of Benefits     15   11.04 Loans to Participants     16   11.05 Benefits Payable to Incompetents     16   11.06 Applicable Law     16   11.07 Headings as Guide     16   11.08 Pronouns     16   11.09 Reference to Laws     16   11.10 Agent Designated for Service of Process     16   11.11 Participant’s Rights Unsecured     17   ii --------------------------------------------------------------------------------   Article I DEFINITIONS           The following terms as used herein shall have the meaning hereinafter set forth unless the context clearly indicates a different meaning is required. Whenever in these definitions a word or phrase not previously defined is used, such word or phrase shall have the meaning thereafter given to it in Article I unless otherwise specified. 1.01   “Account” means the account established and maintained by the Administrative Committee for each Participant.   1.02   “Administrative Committee” or “Committee” means those individuals designated by the Board of Directors of the Employer to administer the Plan, and any successors appointed in accordance with Section 8.02 of the Plan.   1.03   “Beneficiary” means the Person last designated by a Participant on a form provided by the Administrative Committee or by the terms of the Plan to receive any amounts payable under the Plan following the death of the Participant. A Participant may change the Beneficiary from time to time on a form provided by the Administrative Committee.   1.04   “Compensation” means all amounts (including bonuses) paid by the Employer to the Employee while a Participant with respect to services rendered during the Plan Year, including all Deferrals elected by the Participant during the Plan Year.   1.05   “Deferral” means an amount that a Participant has elected to defer under Article III.   1.06   “Effective Date” means July 1, 1993.   1.07   “Eligible Employee” means any individual, including an officer of the Employer, who is employed (other than as a director) by the Employer, who is not an hourly manual employee, who is not in a unit of employees covered by a collective bargaining agreement, and who is determined to be a Highly Paid Employee as defined in Article 1.10 during the Plan Year.   1.08   “Employer” means American Building Maintenance Industries, Inc., its subsidiaries (within the meaning of Section 414(b) and (c) of the Internal Revenue Code), and its successors or assigns.   1.09   “ERISA” means Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.   1.10   “Highly Paid Employee” means any Employee whose annualized base rate of pay is greater than the amount specified for determining a highly compensated employee by Internal Revenue Code Section 414(q) (as adjusted from time to time by the Internal Revenue Service, and is $85,000 for the calendar year, 2001). 1 --------------------------------------------------------------------------------   1.11   “Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as amended from time to time.   1.12   “Participant” means any Eligible Employee or former Employee who has satisfied the eligibility requirements of Section 2.01 who is, or may become, eligible to receive a benefit or whose Beneficiary may be eligible to receive a benefit under the Plan.   1.13   “Person” means any individual, partnership, joint venture, corporation, mutual company, joint stock company, trust, estate, unincorporated organization, association, or employee organization, and shall, where appropriate, include two or more of the above.   1.14   “Plan” means the ABM Deferred Compensation Plan, which is intended to be an unfunded plan for the. benefit of a select group of management or highly compensated individuals, as such are defined in ERISA.   1.15   “Plan Administrator” means the Employer.   1.16   “Plan Year” means the twelve (12) month period commencing January 1 and ending on the following December 31.   1.17   “Valuation Date” means March 31, June 30, September 30 and December 31 of each Plan Year. 2 --------------------------------------------------------------------------------   Article II ELIGIBILITY FOR PARTICIPATION 2.01   Eligibility Requirements       Each Eligible Employee of the Employer may become a Participant under the Plan as of any January 1, and any newly hired Eligible Employee may become a Participant during a year by executing the appropriate forms specified by the Administrative Committee and filing the executed forms with the Administrative Committee within 30 days of the Eligible Employee’s date of hire.   2.02   Participation Rules Upon Reemployment       A Participant who terminates employment with the Employer and who later returns to the employ of the Employer shall be eligible to participate the January 1st coincident with or immediately following the date on which he resumes employment.   2.03   Change in Employment Status       A Participant’s participation in the Plan shall terminate immediately as of the date on which he ceases to be an Eligible Employee as defined under the terms of the Plan, except that the Participant shall retain the right to receive his Account. He shall again become eligible to participate in the Plan as of the January 1st coincident with or immediately following the date on which he regains the status of an Eligible Employee under the Plan.   2.04   Determination of Eligibility       The Administrative Committee shall determine whether each Eligible Employee has satisfied the eligibility requirements for participation in the Plan. The Committee’s determination shall be conclusive and binding upon all persons. 3 --------------------------------------------------------------------------------   Article III CONTRIBUTIONS 3.01   Deferrals       For each Plan Year, a Participant may elect to defer receipt of a portion of his Compensation that he would otherwise receive from the Employer. The amount of the Deferral must equal (a) a whole percentage not exceeding twenty percent (20%) of the amount of the Participant’s Compensation.   3.02   Elective Deferral Election       For each Plan Year, a Participant (or any Eligible Employee who is expected to become eligible to participate in the Plan) may make an election described in Section 3.01 by filing an election form with the Administrative Committee within a reasonable period of time, as specified by the Committee, before the beginning of the Plan Year to which the Deferral election applies. A Deferral election may not be changed during the Plan Year that it is effective; provided, that with the consent of the Administrative Committee, a Participant may at any time revoke his Deferral election with respect to Compensation he has not yet earned during the Plan Year. A Participant who revokes his Deferral election may not again make an election to defer the receipt of Compensation effective before the beginning of the next Plan Year. 4 --------------------------------------------------------------------------------   Article IV ACCOUNTS. FUNDING AND VALUATION 4.01   Establishment of Account       The Administrative Committee shall open and maintain a separate Account for each Participant. Such Account shall be credited with all Deferrals for the Participant. As soon as reasonably possible after each Valuation Date, each Participant shall be notified of the value of his Account.   4.02   Valuation of Account   (a)   Interest shall be credited to each Participant’s Account as of each Valuation Date equal to the product of   (1)   the amount credited to the Participant’s Account as of the last preceding Valuation Date, less any distributions or withdrawals and plus one-half (1/2) of Deferrals, if any, since the last preceding Valuation Date, multiplied by     (2)   the applicable interest rate.   (b)   On each Valuation Date, each Participant’s Account will be credited with interest. The amount of interest will be derived from the prime interest rate published in The Wall Street Journal on the last business day coinciding with or next preceding the Valuation Date. Any prime rate up to 6% will be considered in full and 1/2 of any prime rate over 6% will be considered. The amount credited will be a proration of the prime rate considered taking into consideration the period of time elapsed since the last Valuation Date. For example, if the Plan is valued quarterly and on March 31, the prime rate is 7%, the rate credited will be (1/4 x 6%) + (1/4 x 1/2 x 1%) or 1.625%. 5 --------------------------------------------------------------------------------   Article V PARTICIPANTS’ VESTED INTERESTS 5.01   Vesting       Each Participant shall always be one hundred percent (100%) vested in the portion of his Account attributable to Deferrals. 6 --------------------------------------------------------------------------------   Article VI DISTRIBUTION OF BENEFITS 6.01   Distribution of Benefits       Except as provided in Article 6.03 below, a Participant’s Account may not be distributed to a Participant or his Beneficiary before the date the Participant terminates employment with the Employer.   6.02   Retirement and Termination   (a)   If a Participant terminates employment, his Account shall be distributed, or distribution shall commence, as soon as administratively feasible. The amount in his Account shall be determined as of the Valuation Date that last precedes the date of distribution, plus Deferrals and less any withdrawals or distributions, if any, for the period from the last preceding Valuation to the date of distribution.   (b)   The distribution shall be made in the form elected by the Participant under Section 6.04. If the Participant made no election at the time specified in Section 6.04, his benefit shall be paid as a lump sum. 6.03   Unforeseeable Emergency Withdrawals   (a)   A Participant may withdraw up to one hundred percent (100%) of the amount in his Deferral Account in the event of an unforeseeable emergency to the extent provided in this Section 6.03.     (b)   For purposes of this Section 6.03, unforeseeable emergency means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control.     (c)   The withdrawal under the Section 6.03 may not exceed the amount reasonably necessary to satisfy the financial need (including the amount of any federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal). The withdrawal may not be made to the extent the need may be satisfied (1) through reimbursement or compensation by insurance or otherwise, (2) by liquidation of the Participant’s assets, to the extent the liquidation of the assets would not itself cause severe financial hardship, or (3) by ceasing Deferrals under the Plan.     (d)   A Participant who wishes to withdraw any amount pursuant to this Section 6.03 must submit, on a form provided by the Administrative Committee, a written request by the Participant that states: 7 --------------------------------------------------------------------------------     (1)   The unforeseeable emergency for which the withdrawal is requested;     (2)   The amount needed to satisfy the financial need, which amount may include any federal, state, or local income taxes or penalties reasonably anticipated to result from the withdrawal;     (3)   A representation that the need cannot be satisfied in any of the ways stated in the second sentence of subsection (c);     (4)   The date the funds are required; and     (5)   Any other information the Administrative Committee deems necessary.   (e)   The Administrative Committee will determine if an unforeseeable emergency withdrawal will be, allowed by applying the standards set forth in subsections (b) and (c).     (f)   A withdrawal from a Participant’s Account under Section 6.03 shall be paid in a lump sum. 6.04   Form of Distribution       A Participant may elect in writing, on a form prescribed by the Administrative Committee, to have his or her benefit (other than an unforeseen emergency withdrawal) paid (a) as a lump sum, (b) partially as a lump sum and partially in substantially equal, annual installments over a period of years (not to exceed 10) chosen by the Participant, or (c) entirely in substantially equal, annual installments over a number of years (not to exceed 10) chosen by the Participant. No election made by a Participant on or after the January 1 of the first Plan Year in which the Participant is a Participant shall be effective unless it is made at least six (6) full calendar months before the month the Participant’s employment with the Employer terminates. Absent any timely election by the Participant, his or her benefit shall be paid as a lump sum as soon as administratively possible following termination from employment with the Employer. 8 --------------------------------------------------------------------------------   Article VII DEATH 7.01   Death       If a Participant dies before distribution of his Account has begun or been completed, the remaining portion of the Participant’s Account shall constitute a Death Benefit and shall be payable to the Participant’s Beneficiary in a lump sum as soon as administratively feasible after the date of death. The value of the Participant’s Account shall be determined in accordance with the rules set forth in Section 6.02. 9 --------------------------------------------------------------------------------   Article VIII THE ADMINISTRATIVE COMMITTEE 8.01   Designation and Acceptance       The Employer shall designate the persons to serve as the Administrative Committee who shall each signify acceptance of this responsibility by joining in the execution of the documents creating or amending this Plan or by acceptance in writing as provided in Section 8.02.   8.02   Resignation and Removal; Appointment of Successor       Any member of the Administrative Committee may resign at any time by delivering to the Employer a written notice of resignation, to take effect at a date specified therein, which shall not be less than thirty (30) days after the delivery thereof, unless such notice shall be waived.       Any member of the Administrative Committee may be removed with or without cause by the Employer by delivery of written notice of removal, to take effect at a date specified therein, which shall be not less than thirty (30) days after delivery thereof, unless such notice shall be waived.       The Employer, upon receipt of or giving notice of the resignation or removal of a member of the Administrative Committee, shall promptly designate a successor administrator who must signify acceptance of this position in writing. In the event no successor is appointed, the remaining member(s) or, if none, the Board of Directors of the Employer will function as the Administrative Committee until vacancies have been filled.   8.03   Allocation and Delegation of Responsibilities       The Administrative Committee may engage agents to assist in carrying out the Administrative Committee’s functions hereunder.   8.04   Duties and Responsibility       The Committee shall administer the Plan and shall have full discretionary authority to construe this Plan and to determine all questions of interpretation or policy in a manner not inconsistent with the Plan and the Administrative Committee’s construction or determination in good faith shall be final and conclusive and binding on all parties including but not limited to the Employer and any Participant or Beneficiary, except as otherwise provided by law. The Administrative Committee may correct any defect, supply any omission, or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of the Plan, provided, however, that any interpretation or construction shall be done in a nondiscriminatory manner and shall be consistent with the intent that the Plan shall be an unfunded plan for the benefit of a select group of management or highly compensated individuals for 10 --------------------------------------------------------------------------------   purposes of the Code and ERISA. The Administrative Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. The Administrative Committee shall be charged with the duties of the general administration of the Plan, including but not limited to, the following:   (a)   To determine all questions relating to the eligibility of employees to participate in or remain a Participant hereunder;     (b)   To maintain all the necessary records for the administration of the Plan;     (c)   To interpret the provisions of the Plan and to make and publish such rules for regulation of the Plan as are not inconsistent with the terms hereof;     (d)   To make any adjustments in the allocations, to Accounts under the Plan necessary to comply with any provision of law;     (e)   To compute and certify to the Employer initially and from time to time the sums of money necessary to be contributed to the Trust;     (f)   To advise, counsel and assist any Participant regarding any rights, benefits or elections available under the Plan.     The Administrative Committee shall also be responsible for preparing and filing such annual disclosure reports as may be required by law.       Whenever it is determined by the Administrative Committee to be in the best interest of the Plan and its Participants and Beneficiaries, the Administrative Committee may request such variances, deferrals, extensions, or exemptions or make such elections for the Plan as may be available under the law.   8.05   Expenses and Compensation       The expenses necessary to administer the Plan and the expenses incurred by the Administrative Committee shall be paid by the Employer.   8.06   Information from Employer       The Employer shall supply full and timely information to the Administrative Committee on all matters relating to the compensation of all Participants, their continuous regular employment, their retirement, death, disability or termination of employment, and such other pertinent facts as the Administrative Committee may require.   8.07   Administrative Committee; Signature       The signature of one member of the Administrative Committee may be accepted by any interested party as conclusive evidence that the Administrative Committee has duly authorized the action therein set forth. No person receiving documents or written 11 --------------------------------------------------------------------------------       instructions and acting in good faith and in reliance thereon shall be obliged to ascertain the validity of such action under the terms of this Agreement. The Administrative Committee shall act by a majority of its members at the time in office and such action may be taken either by a vote at a meeting or in writing without a meeting. 12 --------------------------------------------------------------------------------   Article IX PARTICIPANTS’ RIGHTS 9.01   Special Disclosures       The Administrative Committee shall furnish at least every six (6) months each Participant or Beneficiary with a written statement, based on the latest available Information, indicating his total benefits accrued.       Upon termination of employment, a Participant in the Plan is entitled to a written explanation of and accounting for his Account and of any applicable options regarding the disposition of such Account.   9.02   Filing a Claim for Benefits       A Participant or Beneficiary or the Employer acting in his behalf shall notify the Administrative Committee of a claim for benefits under the Plan. Such request may be in any form acceptable to the Administrative Committee and shall set forth the basis of such claim and shall authorize the Administrative Committee to conduct such examinations as may be necessary to determine the validity of the claim and to take such steps as may be necessary to facilitate the payment of any benefits to which the Participant or Beneficiary may be entitled under the terms of the Plan. The procedures for review of any claim for benefits shall be consistent with the requirements of § 2560.503-1 of the regulations of the Department of Labor.   9.03   Denial of a Claim       Whenever a claim for benefits by any Participant or Beneficiary has been denied, a written notice, prepared in a manner calculated to be understood by the Participant or Beneficiary must be provided, setting forth the specific reasons for the denial and explaining the procedure for an appeal and review of the decision by the Administrative Committee. The procedures for an appeal and review of any decision of the Administrative Committee shall be consistent with the requirements of § 2560.503-1 of the regulations of the Department of Labor.   9.04   Limitation of Rights       Participation hereunder shall not grant any Participant the right to be retained in the service of the Employer or any rights or interest other than those specifically herein set forth. 13 --------------------------------------------------------------------------------   Article X AMENDMENT AND TERMINATION 10.01   Amendment or Termination       The Employer may at any time and from time to time amend or terminate this Plan in whole or in part (including retroactively). The Employer shall promptly deliver to the Administrative Committee a written copy of the document amending or terminating the Plan. The Employer shall not have the right to amend or terminate the Plan retroactively in such a manner as to deprive any Participant or Beneficiary of any benefit to which he was entitled under the Plan by reason of Deferrals or Employer Contributions allocated by the Employer prior to the amendment or termination.   10.02   Procedure Upon Termination of the Plan       Upon complete termination of the Plan, Participants shall fully vest in their Accounts, and the amount in their Account shall be distributed to them as soon as administratively feasible. 14 --------------------------------------------------------------------------------   Article XI MISCELLANEOUS 11.01   Execution of Receipts and Releases       Any payment to any Participant or Beneficiary, in accordance with the provisions of this Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Plan, and the Administrative Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release therefor in such form as the Administrative Committee shall determine.   11.02   Notice and Unclaimed Benefits       Each Participant and Beneficiary must file with the Employer from time to time in writing his post office address and each change of post office address. Any communication, statement, or notice addressed to a Participant or Beneficiary at his last post office address filed with the Employer (or if no address was filed with the Employer, then at his last post office address shown on his “Employer’s Records”) will be binding on the Participant and his Beneficiary for all purposes of the Plan. Neither the Employer, Administrative Committee, nor any insurance company providing annuity contracts under the Plan shall be obliged to search for or ascertain the whereabouts of any Participant or Beneficiary. For the purpose of this Section, “Employer Records” means the payroll records maintained by an Employer. Such records shall be conclusive, unless shown to the Employer’s satisfaction to be incorrect.       The Committee shall notify any Participant or Beneficiary when a distribution is required under the Plan. The Committee may also request the Social Security Administration to notify the Participant or Beneficiary in accordance with any procedures the Administration has established for this purpose. In the event that the Participant or Beneficiary shall fail to respond to any notice from the Committee, the amount in his Account shall be forfeited.   11.03   Non-Alienation of Benefits       Except in the case of a qualified domestic relations order, as defined in Code § 414(p):   (a)   No Participant or Beneficiary, and no creditor of a Participant or Beneficiary shall have any right to assign, pledge, sell, hypothecate, anticipate or in any way create a lien upon his benefits under the Plan by operation of law or otherwise, and any attempt to do so shall be void; nor shall any such benefits in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefits.     (b)   No interest in the Plan shall be subject to assignment or transfer or otherwise be alienable, either by voluntary or involuntary act or by operation of law or equity, or subject to attachment, execution, garnishment, sequestration, levy or other 15 --------------------------------------------------------------------------------         seizure under any legal, equitable or other process, or be liable in any way for the debts or defaults of Participants and Beneficiaries. 11.04   Loans to Participants       A Participant may not receive a loan from the Plan of any portion of his Account.   11.05   Benefits Payable to Incompetents       Each individual receiving benefit payments under the Plan shall be conclusively presumed to have been legally competent until the date upon which the Administrative Committee shall have received written notice in the form and manner acceptable to it that such individual is an incompetent for whom a guardian or other person legally vested with his care shall have been appointed. From and after the date of receipt of such notice by Administrative Committee, all future benefit payments to which such individual is entitled under the Plan shall be payable to his guardian or other person legally vested with his care, until such time as the Administrative, Committee shall be furnished with evidence satisfactory to it that such individual is legally competent.   11.06   Applicable Law       This Plan shall be governed and construed under the laws of the State of California and to the extent applicable, ERISA and regulations thereunder.   11.07   Headings as Guide       The headings of this Plan are inserted for convenience of reference only and are not to be considered in construction of the provisions hereof.   11.08   Pronouns       When necessary to the meaning hereof, either the masculine or the neuter pronoun shall be deemed to include the masculine, the feminine, and the neuter, and the singular shall be deemed to include the plural.   11.09   Reference to Laws       Any reference to any section or regulation under the Internal Revenue Code or ERISA or to any other statute or law shall be deemed to include any successor law of similar import.   11.10   Agent Designated for Service of Process       The designated person upon whom service of process may be made in any action involving the Plan shall be any member of the Administrative Committee. 16 --------------------------------------------------------------------------------   11.11   Participant’s Rights Unsecured       The right of the Participant or his designated Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Corporation, and neither the Participant nor his designated beneficiary shall have any rights in or against any amount credited to his Account or any other specific assets of the Corporation. All amounts credited to an Account shall constitute general assets of the Corporation and may be disposed of by the Corporation at such time and for such purposes as it may deem appropriate. An Account may not be encumbered or assigned by a Participant or any Beneficiary. 17 --------------------------------------------------------------------------------             Executed at this 25th day of June, 1993 to be effective as of July 1, 1993.                   EMPLOYER:                       AMERICAN BUILDING MAINTENANCE INDUSTRIES, INC.                   By                       18

Exhibit 10.1 AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is dated as of September 29, 2006, and is by and among FEDERATED INVESTORS, INC., a Pennsylvania corporation (the “Borrower”), the BANKS set forth herein (collectively, the “Banks”), and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (the “Agent”). WHEREAS, the Borrower, the Banks and the Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of January 22, 2002, as amended by Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of April 8, 2002, Amendment No. 2 to Second Amended and Restated Credit Agreement dated as of January 20, 2003, Amendment No. 3 to Second Amended and Restated Credit Agreement dated as of January 16, 2004, Amendment No. 4 to Second Amended and Restated Credit Agreement and Amendment to Guaranty Agreement dated as of January 14, 2005, and Amendment No. 5 to Second Amended and Restated Credit Agreement dated as of November 22, 2005 (as amended, the “Credit Agreement”); WHEREAS, the Borrower, the Banks and the Agent wish to amend the Credit Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereto, intending to be legally bound, agree as follows: 1. Definitions. Capitalized terms used herein unless otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement as amended by this Amendment. 2. Amendment of Credit Agreement. Section 8.2(i) [Dividends and Related Distributions] of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (i) Intentionally omitted. 3. Conditions of Effectiveness of Amendment of Credit Agreement. The effectiveness of this Amendment of the Credit Agreement is expressly conditioned upon satisfaction of each of the following conditions precedent on the date hereof: (a) Representations and Warranties; No Defaults. The representations and warranties of the Borrower contained in Article VI of the Credit Agreement shall be true and accurate on the date hereof with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely -------------------------------------------------------------------------------- to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and the Borrower shall have performed and complied with all covenants and conditions under the Senior Loan Documents and hereof; and no Event of Default or Potential Default under the Credit Agreement or the other Senior Loan Documents shall have occurred and be continuing or shall exist. (b) Authorization and Incumbency. There shall be delivered to the Agent for the benefit of each Bank a certificate, dated as of the date hereof, and signed by the Secretary or an Assistant Secretary of the Borrower, certifying as appropriate as to:     (i) all action taken by the Borrower in connection with this Amendment and the other Senior Loan Documents; and     (ii) the names of the officer or officers authorized to sign this Amendment and any other documents executed and delivered in connection herewith and described in this Section 3 and the true signatures of such officer or officers. (c) Acknowledgment. There shall be delivered to the Agent for the benefit of each Bank the Confirmation in the form attached hereto as Exhibit 1 hereto executed by each of the Loan Parties (other than the Borrower). (d) Legal Details; Counterparts. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance satisfactory to the Agent. The Agent shall have received from the Borrower and the Required Banks an executed original of this Amendment. Each of this Amendment and the Confirmation may be executed by the parties hereto or thereto in any number of separate counterparts, each of which when taken together shall constitute one and the same instrument. 4. Fees and Expenses. The Borrower hereby agrees to reimburse the Agent and the Banks on demand for all legal costs, expenses and disbursements relating to this Amendment which are payable by the Borrower as provided in Sections 10.5 and 11.3 of the Credit Agreement. 5. Force and Effect. Except as expressly modified by this Amendment, the Credit Agreement and the other Senior Loan Documents are hereby ratified and confirmed and shall remain in full force and effect after the date hereof. 6. Governing Law. This Amendment shall be deemed to be a contract under the laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. [SIGNATURE PAGES FOLLOW]   - 2 - -------------------------------------------------------------------------------- SIGNATURE PAGE 1 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amendment No. 6 to Second Amended and Restated Credit Agreement as of the date first above written.   FEDERATED INVESTORS, INC. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 2 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   PNC BANK, NATIONAL ASSOCIATION individually and as Agent By:   /s/ Edward Chidiac Name:   Edward Chidiac Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 3 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   BANK OF AMERICA, NATIONAL ASSOCIATION By:   /s/ Jorge Gil Name:   Jorge Gil Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 4 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   STATE STREET BANK AND TRUST COMPANY By:   /s/ John T. Daley Name:   John T. Daley Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 5 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   JPMORGAN CHASE BANK By:   /s/ Jeanne O’Connell Horn Name:   Jeanne O’Connell Horn Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 6 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   CITIBANK, N.A. By:   /s/ Matthew Nicholls Name:   Matthew Nicholls Title:   Managing Director -------------------------------------------------------------------------------- SIGNATURE PAGE 7 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   FIFTH THIRD BANK By:   /s/ James Janovsky Name:   James Janovsky Title:   Vice President -------------------------------------------------------------------------------- SIGNATURE PAGE 8 OF 8 TO AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED CREDIT   CITIZENS BANK OF PENNSYLVANIA By:   /s/ Dwayne Finney Name:   Dwayne Finney Title:   Senior Vice President -------------------------------------------------------------------------------- Exhibit 1 CONFIRMATION Reference is hereby made to that certain Second Amended and Restated Credit Agreement by and between FEDERATED INVESTORS, INC., the BANKS set forth therein, and PNC BANK, NATIONAL ASSOCIATION, as Agent for the Banks, dated as of January 22, 2002, as amended by Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of April 8, 2002, Amendment No. 2 to Second Amended and Restated Credit Agreement dated as of January 20, 2003, Amendment No. 3 to Second Amended and Restated Credit Agreement dated as of January 16, 2004, Amendment No. 4 to Second Amended and Restated Credit Agreement and Amendment to Guaranty Agreement dated as of January 14, 2005, and Amendment No. 5 to Second Amended and Restated Credit Agreement dated as of November 22, 2005 (as amended, the “Credit Agreement”). All terms used herein unless otherwise defined herein shall have the meanings given to them in the Credit Agreement. On the date hereof, the Borrower, the Banks and the Agent are entering into that certain Amendment No. 6 to Second Amended and Restated Credit Agreement (the “Amendment”), a copy of which has been provided to the undersigned. This Confirmation is delivered to the Bank pursuant to Section 3(c) of the Amendment. Pursuant to the Credit Agreement, (i) the Guarantors are party to that certain Continuing Agreement of Guaranty and Suretyship dated as of January 22, 2002 in favor of the Agent for the benefit of the Banks, as amended by Amendment No. 4 to Second Amended and Restated Credit Agreement and Amendment to Guaranty Agreement dated as of January 14, 2005 (as amended, the “Guaranty Agreement”) and (ii) the Borrower and its Subsidiaries are party to that certain Intercompany Subordination Agreement dated as of January 22, 2002 in favor of the Agent for the benefit of the Banks (the “Intercompany Subordination Agreement”). This Confirmation will confirm to the Agent and the Banks that the undersigned Guarantors and Subsidiaries of the Borrower have read and understand the Amendment which provides for, among other things and subject to certain conditions set forth in the Amendment, the deletion of the covenant contained in Section 8.2(i) [Dividends and Related Distributions] of the Credit Agreement. The Guarantors hereby ratify and confirm the Guaranty Agreement. The Subsidiaries of the Borrower hereby ratify and confirm the Intercompany Subordination Agreement. This Confirmation is dated as of September 29, 2006. [SIGNATURE PAGES FOLLOW] -------------------------------------------------------------------------------- [SIGNATURE PAGE 1 OF 6 OF CONFIRMATION] IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned, by their duly authorized officers, have executed this Confirmation as of the date set forth above.   EDGEWOOD SERVICES, INC. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer FEDERATED ADMINISTRATIVE SERVICES By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Senior Vice President FEDERATED ADMINISTRATIVE SERVICES, INC. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Senior Vice President FEDERATED INVESTMENT MANAGEMENT COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer -------------------------------------------------------------------------------- [SIGNATURE PAGE 2 OF 6 OF CONFIRMATION]   FEDERATED INVESTORS TRUST COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer SOUTHPOINTE DISTRIBUTION SERVICES, INC. (formerly known as Federated Financial Services, Inc.) By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer FEDERATED INTERNATIONAL MANAGEMENT LIMITED By:   /s/ J. Christopher Donahue Name:   J. Christopher Donahue Title:   Director FEDERATED INVESTORS, INC By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Vice President -------------------------------------------------------------------------------- [SIGNATURE PAGE 3 OF 6 OF CONFIRMATION]   FEDERATED INVESTORS MANAGEMENT COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Senior Vice President FEDERATED INVESTMENT COUNSELING By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer FEDERATED SECURITIES CORP. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer FEDERATED SERVICES COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Senior Vice President FEDERATED SHAREHOLDER SERVICES COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   President -------------------------------------------------------------------------------- [SIGNATURE PAGE 4 OF 6 OF CONFIRMATION]   FII HOLDINGS, INC. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Vice President PASSPORT RESEARCH, LTD. By:   Federated Investment Management Company, its general partner By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer FEDERATED INTERNATIONAL HOLDINGS BV By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Director FEDERATED INTERNATIONAL - EUROPE GMBH By:   /s/ J. Christopher Donahue Name:   J. Christopher Donahue Title:   Director FEDERATED ASSET MANAGEMENT GMBH By:   /s/ J. Christopher Donahue Name:   J. Christopher Donahue Title:   Authorized by Shareholder Resolution -------------------------------------------------------------------------------- [SIGNATURE PAGE 5 OF 6 OF CONFIRMATION]   FEDERATED PRIVATE ASSET MANAGEMENT, INC. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer RETIREMENT PLAN SERVICE COMPANY OF AMERICA By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer FEDERATED ADVISORY SERVICES COMPANY By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer FEDERATED EQUITY MANAGEMENT COMPANY OF PENNSYLVANIA By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Assistant Treasurer -------------------------------------------------------------------------------- [SIGNATURE PAGE 6 OF 6 OF CONFIRMATION]   FEDERATED INVESTORS (UK) LTD. By:   /s/ J. Christopher Donahue Name:   J. Christopher Donahue Title:   Director FEDERATED MDTA TRUST By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer HBSS ACQUISITION CO. By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer FEDERATED MDTA LLC By:   /s/ Denis McAuley III Name:   Denis McAuley III Title:   Treasurer

Exhibit 10.4 OPTION AGREEMENT FOR NONQUALIFIED STOCK OPTION (EMPLOYEE)      This Option Agreement evidences the grant of a Nonqualified Stock Option (the "Option") to Participant under the West Coast Bancorp 2002 Stock Incentive Plan (the "Plan").      Capitalized terms used below but not defined in the Notice of Grant of Stock Options (the "Notice") are defined in the Plan. 1. Option Vesting and Exercise      The Option is on terms set forth in the Notice and is subject to all applicable provisions of the Plan and to the following terms and conditions:       1.1       Nonqualified Stock Option. The Option is not intended to qualify as an incentive stock option meeting the requirements of Internal Revenue Code § 422.   1.2 Exercisability. The Option shall become vested and exercisable, unless the Option is earlier terminated or canceled or the exercisability of the Option is accelerated in accordance with this Agreement or the Plan, in accordance with the vesting schedule set forth in the Notice.   1.3 Exercise of an Option.                   1.3.1       Notice of Exercise. The Option, or any portion thereof, may be exercised, to the extent it has become exercisable pursuant to this Agreement, by delivery of written notice to the Company stating the number of Shares being purchased.   1.3.2 Payment. The Exercise Price for the Shares purchased upon exercise of the Option must be paid in full at the time of exercise by one or a combination of the following:                              (a)       Payment in cash or certified check or bank draft payable to the order of the Company;   (b) Delivery of previously acquired Shares having a Fair Market Value equal to the Exercise Price; or   (c) By delivery (in a form approved by the Company) of an irrevocable direction to a securities broker to sell Shares acquired upon exercise of the Option and remit to the Company a sufficient portion of the sales proceeds to the Company in payment of the Exercise Price and any tax withholding resulting from such exercise. --------------------------------------------------------------------------------                 1.3.3       Previously Acquired Shares. Delivery of previously acquired Shares in full or partial payment for the exercise of the Option is subject to the following conditions:                              (a)       The Shares tendered must be in good delivery form;   (b) Any Shares remaining after satisfying the payment for the Option will be reissued in the same manner as the Shares tendered;   (c) No fractional Shares will be issued and whenever payment of the full Exercise Price with Shares would require delivery of a fractional Share, Participant must deliver the next lower whole number of Shares and make a cash payment to the Company for the balance of the Exercise Price;   (d) Shares must have been held for at least six months prior to tender to the Company; and   (e) Shares may be tendered in full or partial payment of the Exercise Price only in connection with the exercise of an Option with respect to at least 2,000 Shares. 2. Retirement      For purposes of this Option, pursuant to authority granted under the Plan and notwithstanding Section 1(x) of the Plan, “Retirement” means retirement from active employment with the Company, a Subsidiary or Affiliate at a time when (a) the Participant is age 62 or older, and (b) the sum of Participant’s age plus Participant’s years of employment service with the Company, or a Subsidiary or Affiliate, is equal to or greater than 70. 3. Effect of Termination      Except as otherwise provided in paragraph 2 above or determined by the Company after the date of this Agreement, the Option will expire and vesting will be affected by Termination of Employment as described in the Plan. 4. Taxes and Withholding      No later than the date as of which an amount first becomes includable in the gross income of the Participant for federal income tax purposes, the Participant shall pay to the Company or make arrangements satisfactory to the Company regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option. The Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to Participant, federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option, as provided in Section 3.4 of the Plan. -------------------------------------------------------------------------------- 5. Conflicts and Interpretation      The Option is subject to the provisions of the Plan, which are hereby incorporated by reference. In the event of any conflict between this Agreement and the Plan, the Plan shall control. In the event of any ambiguity in this Agreement, any term which is not defined in this Agreement, or any matters as to which this Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan, (ii) prescribe, amend and rescind the rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan. 6. Successorship      Subject to restrictions on transferability set forth in Section 3, this Agreement will be binding upon and benefit the parties, their successors and assigns. 7. Notices      Any notices under this Option must be in writing and will be effective when actually delivered personally or, if mailed, when deposited as registered or certified mail directed to the address set forth in the Company's records or to such other address as a party may certify by notice to the other party. 8. Arbitration Any dispute or claim that arises out of or that relates to this Agreement or to the interpretation, breach, or enforcement of this Agreement, must be resolved by mandatory arbitration before a single arbitrator in Portland, Oregon, in accordance with the then effective arbitration rules of Arbitration Service of Portland, Inc., and any judgment upon the award rendered pursuant to such arbitration may be entered in any court having jurisdiction thereof. --------------------------------------------------------------------------------

Exhibit 10.1   SEPARATION AND GENERAL RELEASE AGREEMENT   This Separation and General Release Agreement (the “Agreement”) is entered into as of this 10th day of January, 2006 between Robert A. Boyce (“Executive”) and UAP Distribution, Inc. (“the Company”).   WHEREAS, Executive was employed as President, Verdicon at the Company; and   WHEREAS, the Company desires to terminate Executive’s employment with the Company, and Executive and the Company mutually desire to set forth the parties’ rights and obligations upon such termination.   NOW, THEREFORE, in consideration of the covenants, promises, releases, and payments set forth herein, Executive and the Company each agree to the following terms, conditions, and releases:   1. Termination. Executive’s employment with the Company and its parents, subsidiaries and affiliated businesses in any other capacity, is hereby terminated effective October 18, 2005 (the “Termination Date”). For purposes of clarity, Executive irrevocably resigns effective as of the Termination Date from each and every office and position (including, without limitation, as a director) he has held at any time with the Company, UAP Holding Corp. (“UAPH”), United Agri Products, Inc. (“UAP”), or any of their respective parents, subsidiaries or affiliates. Except as otherwise provided in this Agreement, all benefits of employment will cease as of the Termination Date.   2. Acknowledgement of Payment of all Wages. Except for those obligations arising out of this Agreement for which receipt has not been acknowledged, and except as expressly provided below in this Section 2, Executive acknowledges that he has received from the Company, UAPH, UAP, and each of their respective parents, subsidiaries, and affiliates, all amounts owed for his regular and usual salary (including, but not limited to, any severance, bonus, commissions, deferred compensation (including, without limitation, deferred UAPH stock) or other wages), incentive compensation (including, without limitation, under any and all equity incentive plans and agreements of or with the Company or UAPH including, without limitation, UAPH stock options, restricted stock, stock units, and stock appreciation rights), and benefits through the Termination Date (except for Executive’s base salary from the Company at his existing rate for the period from the start of pay period currently in effect through the Termination Date, and his accrued but unused vacation through the Termination Date of approximately 20 days, which will be paid by the Company in Executive’s final pay check on the next regularly scheduled Company pay date).     a. Stock Options. As of the date of this Agreement, Executive holds vested options issued under the UAP Holding Corp. 2003 Stock Option Plan (the “Stock Option Plan”) which entitle Executive to acquire 332,483 shares of UAPH common stock (the “Stock Options”). Pursuant to Executive’s Nonqualified Stock Option Agreement dated as of November 23, 2003 (the “Option Agreement”), to the extent Executive desires to exercise such Stock Options he must do so before the 90th day following the Termination Date, or such options will terminate and --------------------------------------------------------------------------------   become null and void and Executive will have no further rights with respect thereto or in respect thereof. For purposes of clarity and without limiting the generality of the first paragraph of this Section 2, Executive has no further rights or interests in or with respect to any stock options or other equity-based awards granted by the Company, UAP or UAPH other than such Stock Options and the deferred compensation payment referred to in Section 2.b below.     b. Deferred Compensation. Executive is entitled to a distribution from the UAP Holding Corp. 2003 Deferred Compensation Plan (the “DCP”) on or as soon as reasonably practical after the Termination Date equal to 219,859 shares of UAPH common stock, subject to tax withholding.     c. Restricted Stock Units. The restricted stock units awarded to Executive under the UAPH 2004 Long-Term Incentive Plan (the “LTIP”) shall terminate on the Termination Date and Executive shall have no further rights or interest in or with respect to such units; except that any dividend equivalents accumulated with respect to such units during 2005 and on or before the Termination Date shall be paid to Executive in January 2006 in accordance with the terms of the award.     d. Restrictions on Sale of Stock and Other Provisions. Any shares of UAPH common stock that Executive may hold or in the future acquire (including, without limitation, upon exercise of the Stock Options or in connection with the benefit payment from the DCP referred to in Section 2.b above) are (except as expressly provided in Section 3.c below) subject to any and all resale and other restrictions set forth in the Management Incentive Agreement (“MIA”) to which Executive is a party, the Stock Option Plan, the DCP, and the UAPH insider trading policy, and any sale of such shares is further subject to compliance with all applicable laws and regulations (including, without limitation, Federal securities law requirements and insider trading restrictions). Executive agrees to satisfy any and all tax withholding obligations arising in connection with the exercise of the Stock Options and the benefit payment from the DCP as required or contemplated, as the case may be, by the applicable provisions of the Stock Option Plan, the DCP, and the MIA. Executive agrees that UAPH shall have no obligation (to issue or deliver any shares of its common stock or otherwise) in respect of an exercise of the Stock Options or the benefit payment from the DCP unless and until it has received in cash from Executive the amount of taxes required to be withheld with respect to such exercise or payment, as applicable, or Executive has otherwise entered into arrangements satisfactory with UAPH to provide for such withholding. From the date hereof through October 17, 2006, Executive agrees that any and all UAPH securities that he is otherwise permitted to sell and desires to sell must be sold to and through arrangements with Goldman Sachs and that he will not otherwise sell, assign, transfer, pledge or otherwise dispose of, alienate or encumber, either voluntarily or involuntarily, any UAPH securities or any interest therein (except a transfer upon his death to his estate or beneficiaries pursuant to his will or the laws of descent and distribution, which transferee shall take such securities subject to the same transfer restrictions). Any certificates UAPH issues representing shares of UAPH stock subject to the   -2- --------------------------------------------------------------------------------   foregoing transfer restrictions will be legended, to the extent UAPH determines to be necessary or advisable, to evidence such limitations.   3. Consideration. Provided that Executive executes this Agreement, (i) is not in breach or default of this Agreement, and (ii) complies with all of his obligations under this Agreement, the Company agrees to do the following:     a. Salary Continuation. The Company agrees to pay Executive a salary continuation as severance pay of TEN THOUSAND SEVEN HUNDRED SIXTY NINE DOLLARS AND TWENTY THREE CENTS ($10,769.23), less standard withholding and authorized deductions, bi-weekly in accordance with the Company’s usual pay practices for a period of thirty five (35) weeks commencing with the Termination Date (the “Salary Continuation Period”). For purposes of clarity, the maximum aggregate amount to be paid by the Company to Executive pursuant to this Section 2.a is ONE HUNDRED EIGHTY EIGHT THOUSAND FOUR HUNDRED SIXTY ONE DOLLARS AND FIFTY TWO CENTS ($188,461.52) (which reflects the total salary continuation for 35 weeks).     b. Benefit Continuation. Executive will be offered COBRA in accordance with COBRA and the regulations thereunder. If Executive elects COBRA, during the Salary Continuation Period, his COBRA premiums shall be the same as the active rates for the coverage he had for himself and his covered dependents immediately prior to the Termination Date. For any period following the Salary Continuation Period during which the Executive remains covered by COBRA, he shall be required to pay 100% of the applicable COBRA premiums. In all cases, coverage will terminate at the earliest time permitted under COBRA.     c. Exercise of Stock Options. UAPH has approved, as an exception to the restrictions on the transfer of UAPH securities set forth in Section 1.1 of the MIA, the sale by Executive in connection with the exercise of the Stock Options a sufficient number of shares of UAPH common stock to pay the exercise price of such Stock Options or to otherwise satisfy any applicable financing of such exercise price; provided that such sale of UAPH common stock must be made to and through arrangements with Goldman Sachs as contemplated by Section 2.d. Such exception shall take effect on the date that this Agreement becomes irrevocable by Executive pursuant to applicable law.     d. Piggy Back Rights. In the event that one or more Non-Apollo Group Holders’ (as defined in the MIA) accounts under the DCP are distributed and able to be sold pursuant to Section 1.2(b) of the MIA, UAPH has approved, as an exception to the restrictions on transfer of UAPH securities set forth in Section 1.1 of the MIA, the sale by Executive pursuant to Article VII and Section 1.2(b) of the MIA, of that number of shares of UAPH common stock that the Executive would have been able to sell had Executive been an employee of UAP Distribution, Inc. on the date of such distribution. For the purposes of this paragraph, Executive will be considered to have an account under the DCP equal to that number of UAPH common stock directly attributable to his account under the DCP less (i) those   -3- --------------------------------------------------------------------------------   shares of UAPH common stock previously released from the restrictions contained in Section 1.1 of the MIA pursuant to Section 1.2(e) of the MIA, and (ii) those shares of UAPH common stock available for sale pursuant to Section 1.2(c)(i) of the MIA, provided that such shares of common stock first shall be considered to be shares of UAPH common stock issued upon the exercise of Executive’s Stock Option, if Executive chooses to exercise his Stock Option, prior to decreasing the number of shares of UAPH common stock attributable to Executives account under the DCP as provided in this paragraph.   4. Release.   a. General Release. Except for obligations arising out of or created by this Agreement, Executive hereby acknowledges complete satisfaction of and hereby releases, absolves, discharges, and covenants not to sue the Company and its past and present parent, successors, assigns, subsidiaries, divisions, affiliated corporations, trustees, directors, officers, shareholders, agents, employees, representatives, attorneys and insurers (including, without limitation, UAP and UAPH) (collectively referred to herein as “Releasees”), from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, wages, obligations, debts, expenses, attorneys’ fees, damages, judgments, penalties, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which Executive now has, had, or may have against said Releasees, or any of them, from the beginning of time through the date of this Agreement, including specifically but not exclusively and without limiting the generality of the foregoing, any and all claims, demands, liens, agreements, obligations, contracts, covenants, actions, suits, causes of action, wages, debts, expenses, attorneys’ fees, damages, judgments, orders, and liabilities: (1) arising out of or in any way connected with any transactions, occurrences, acts or omissions set forth, or facts alleged, in any and all charges, complaints, claims or pleadings filed by Executive against any Releasee prior to the date hereof with any city, county, state or federal agency, commission, office or tribunal whatsoever; (2) arising out of or relating in any way to Executive’s employment with and/or termination from the Company; or (3) arising out of or in any way connected with any transactions, occurrences, acts or omissions occurring prior to the date hereof, including specifically without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (“ADEA”), the Americans with Disabilities Act, or any claim for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health and medical insurance or any other fringe benefit, or disability.   b. Release of ADEA Claims: Executive expressly acknowledges and agrees that, by entering into this Agreement, Executive is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended, which have arisen on or before the date of execution of this Agreement. Executive also expressly acknowledges and agrees that:     i. In return for this Agreement, Executive will receive consideration, i.e., something of value, beyond that to which he was already entitled before entering into this Agreement;   -4- --------------------------------------------------------------------------------   ii. Executive is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement;     iii. When given a copy of this Agreement, Executive was informed that he had 21 days within which to consider it; and     iv. Executive was informed that he has seven (7) days following the date he executes the Agreement in which to revoke it.   c. Waiver of Unknown or Unsuspected Claims. This Agreement is intended to be effective as a general release of and bar to all claims as stated above. Executive acknowledges that he later may discover claims or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives any claims that might arise as a result of such different or additional claims or facts and waives any rights conferred by any statute relating to unknown or unsuspected claims.   5. Denial of Liability. This Agreement does not constitute an admission by the Company of any violation of federal, state or local law, ordinance or regulation or of any violation of the Company’s policies or procedures or of any liability or wrongdoing whatsoever. Neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of liability or wrongdoing by the Company. This Agreement may be introduced, however, in any proceeding to enforce the Agreement. Such introduction shall be pursuant to an order protecting its confidentiality.   6. Workers’ Compensation. Executive warrants and represents that he has not suffered any workplace injury during his employment with the Company or any of its parents, subsidiaries, or affiliates. Executive warrants and represents that he has not filed a claim for workers’ compensation benefits with any state agency related to his employment with the Company or any of its parents, subsidiaries, or affiliates.   7. Warranty Regarding Non-Assignment. Executive warrants and represents that he has not assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof. Executive shall defend, indemnify and hold the Company and each of the other Releasees harmless from and against any claim (including the payment of attorneys’ fees and costs whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.   8. Termination of Relationship. Executive and the Company acknowledge that any employment or contractual relationship between them terminated on the Termination Date, and that they have no further employment or contractual relationship as of the date hereof except as may arise out of this Agreement and except for the Non-Integrated Documents to the extent provided in Section 15. Executive agrees that as of the Termination Date he was not a party to and had no rights under any other contract with any parent, subsidiary or other affiliate of UAP, except for the Non-Integrated Documents to the extent provided in Section 15.   -5- -------------------------------------------------------------------------------- 9. Warranty Regarding Taxes. Executive shall be exclusively liable for the payment of any federal and state taxes which may be due as the result of the consideration received pursuant to and the other benefits contemplated by this Agreement. In addition, Executive hereby agrees fully to defend, indemnify and hold Releasees harmless from payment of taxes, interest, penalties, damages and/or attorneys’ fees that are incurred or required of them by any government agency at any time as the result of payment of the consideration set forth in and other benefits contemplated by this Agreement. Executive has not relied upon any advice from Releasees and/or their attorneys as to the taxability of the payment hereunder or other benefit contemplated hereby, whether pursuant to federal, state or local income tax statutes or otherwise. Executive acknowledges that Releasees and their respective attorneys and tax advisors do not make and have not made any representations regarding the taxability of any payment or other benefit to Executive, and Executive has not relied upon any representation or advice by Releasees or any of their respective attorneys and tax advisors.   10. Return of the Company Property and Information. Executive warrants and represents that he has returned to the Company, all property of the Company and its parents, subsidiaries, and affiliates, including but not limited to (i) any records reflecting Proprietary Information or copies thereof, whether or not originated by the Company or any of its parents, subsidiaries, or affiliates, and (ii) keys, tapes, cellular telephones, computers, electronic files or other materials. Records reflecting Proprietary Information include, but are not limited to, all memoranda, notes, records, reports, manuals, drawings, blueprints, customer lists, employee lists, investor lists, software programs, rolodexes, address books, notebooks, and any other documents of a confidential nature belonging to the Company, its parents, subsidiaries and affiliates, or any of them, or reflecting Proprietary Information of the Company, its parents, subsidiaries, and affiliates, or any of them, including all copies of such materials that Executive may have in his possession or under his control. Executive agrees to expunge any computer software and files containing the Proprietary Information of the Company, its parents, subsidiaries, and affiliates, or any of them, that are in electronic form from any personal computer, word-processor or other similar device that is within his possession and control regardless of whether it may be at home or otherwise. For purposes of this Agreement, “Proprietary Information” shall include the Company’s modes and methods of conducting its business and marketing activities, its trade secrets, customer lists, investor lists, vendor lists, copyrighted and non-copyrighted or non-protected computer software programs, techniques of operation, financial structure and information, inventions, improvements, technical developments, trademarks, designs, formulae, processes, computer programs, know-how, techniques, data, discoveries, copyrightable works, business plans and other information or documents regarding the business or technology of the Company, whether or not developed or created by the Company. Proprietary Information shall also include any of the above-described information with respect to any parent, subsidiary or affiliate of the Company.   11. Proprietary Information and Assignment. Executive acknowledges that by reason of his position with the Company and its affiliates, he has been given access to Proprietary Information. Executive represents that he has held all such information confidential and will continue to do so, and that he will not use such information for any purpose or otherwise disclose such information in any way without the express prior written consent of an officer of the Company, unless and to the extent that disclosure of such information is compelled by subpoena or other court order. Executive agrees to notify the General Counsel for the Company within a   -6- -------------------------------------------------------------------------------- reasonable period of time after he has learned of such subpoena or other court order. For the purposes of this Agreement, “reasonable period of time” means sufficiently in advance of the date on which Executive must respond to such subpoena or other court order to allow the Company to intervene to challenge or quash such subpoena or other court order. Without limiting the generality of the foregoing, Executive shall remain bound by that certain Employee Agreement signed by Executive on June 18, 1990 (“Invention Agreement”), a copy of which is attached hereto as Exhibit A.   12. Nondisparagement. Executive agrees that he shall not make any disparaging remarks, or any remarks that could reasonably be construed as disparaging, orally or in writing, regarding the Company, its parent, subsidiaries, or affiliates, or any of their respective officers, directors, trustees, employees, affiliates, or shareholders in any manner that is intended to be harmful to them or their business, business reputation or personal reputation, including but not limited to statements to the public, the media and former and present employees of the Company, its parents, subsidiaries, and affiliates or causing anyone else to take any action or provide information including but not limited to statements to the public, the media and former and present employees of the Company, its parents, subsidiaries, and affiliates. Company agrees that it shall not make any disparaging remarks, or any remarks that could reasonably be construed as disparaging, orally or in writing, regarding the Executive in any manner that is intended to be harmful to him or his business, business reputation or personal reputation, including but not limited to statements to the public or the media or causing anyone else to take any action or provide information including but not limited to statements to the public or the media.   13. Soliciting Customers. Executive promises and agrees that he will not, for a period of one year after the Termination Date, influence or attempt to influence any customers of the Company or any of its parents, subsidiaries, or affiliates, either directly or indirectly, to divert their business to any business, individual, partnership, firm, corporation or other entity which is currently or at that particular point in time in competition with (or has plans to engage in business which would be in competition with) the business of the Company or any of its parents, subsidiaries, or affiliates. (For purposes of this Separation Agreement, a business in competition with the Company or any of its parents, subsidiaries, or affiliates will be deemed to include (without limiting any other business in competition with the Company or any of its parents, subsidiaries, or affiliates) any business which is engaged in the distribution of agricultural and non-crop inputs (including, without limitation, chemicals, seeds and fertilizers to growers and/or regional dealers), crop management, crop biotechnology advisory services, custom blending, crop inventory management, and/or custom applications of crop inputs, or any combination thereof, in the United States and/or Canada.) Executive acknowledges and agrees that this restriction is necessary in order for the Company and its parents, subsidiaries, and affiliates to preserve and protect its and their legitimate proprietary interest in the Proprietary Information to which Executive has had access.   14. Soliciting Employees. Executive promises and agrees that he will not, for a period of one year after the Termination Date, directly or indirectly solicit any employee of the Company or any of its parents, subsidiaries, or affiliates who earned annually $25,000 or more as an employee of such entity during the last six months of his or her own employment to work for any business, individual, partnership, firm, corporation or other entity.   -7- -------------------------------------------------------------------------------- 15. Integration Clause. This Agreement (including the attached exhibits) constitutes and contains the entire agreement and final understanding concerning Executive’s employment with and termination from the Company and the other subject matters addressed herein between the parties. This Agreement is intended by the parties as a complete and exclusive statement of the terms of their agreement. Except as to the Non-Integrated Documents, this Agreement supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matter hereof. Any representation, promise or agreement not specifically included in this Agreement or the Non-Integrated Documents shall not be binding upon or enforceable against either party. This Agreement, along with the Non-Integrated Documents, is a fully-integrated agreement. The Non-Integrated Documents are the following: (1) the Invention Agreement; (2) the MIA, but only as to the Executive’s obligations thereunder, UAPH’s rights thereunder, and the applicable restrictions imposed thereunder on any shares of UAPH stock held by Executive; (3) the applicable provisions of the Stock Option Plan and the Option Agreement as to the Stock Options; (4) the applicable provisions of the DCP as to Executive’s benefit thereunder as referred to in Section 2.b; and (5) the applicable provisions of the LTIP and Executive’s Restricted Stock Unit Award Agreement as to the dividend equivalents payable to him in January 2006 as contemplated by Section 2.c.   16. Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or application and to this end the provisions of this Agreement are declared to be severable.   17. Choice of Law. This Agreement shall be deemed to have been executed and delivered within the State of Texas, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of Texas without regard to principles of conflict of laws.   18. Drafting of Agreement. Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.   19. Counterparts. This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Photographic and facsimile copies of such signed counterparts may be used in lieu of the originals for any purpose.   20. Non-Waiver; Amendment. No waiver of any breach of any term or provision of this Agreement shall be construed to be, or shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach. No modification of this Agreement shall be binding upon the party against which such modification is asserted unless signed in writing by that party.   21. Representation. In entering into this Agreement, the parties represent that they have obtained the advice of their attorneys, who are attorneys of their own choice, and that the terms of this Agreement have been completely read and explained to them by their attorneys, and that those terms are fully understood and voluntarily accepted by them. Executive represents and acknowledges that he is not required, nor has he been encouraged, to purchase or sell any shares   -8- -------------------------------------------------------------------------------- of UAPH stock, or to exercise or exercise any options, and that if he chooses to sell shares of UAPH stock to cover tax withholding obligations or the exercise price of any options (to the extent he is otherwise permitted to do so), and if he chooses to exercise any options, he does so at his own discretion.   22. Warranty of No Pending Actions. Executive represents and agrees that he has neither filed nor authorized the filing on his behalf of any claims against any of the Releasees with any state, federal, or local agency or court or in any other forum or tribunal with respect to anything that has happened up through the date of this Agreement. Should any government agency or other third party pursue any actions or other claims on Executive’s behalf, Executive hereby agrees to waive any right to recovery or monetary award from such actions or proceedings, except to the extent, if any, such waiver is prohibited by law.   23. Cooperation. All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms.   24. Business Assistance. During the Salary Continuation Period, Executive agrees to make himself reasonably available to the Company, without additional payment, to provide assistance and information to the Company concerning any Company matter of which he is knowledgeable as a result of his employment with the Company.   25. Litigation Assistance. Executive agrees to notify the Company’s General Counsel within a reasonable period of time after he has learned of any subpoena or other court order seeking to compel his testimony in any proceeding involving the Company. Executive also agrees to cooperate with the Company in any actual or threatened litigation that arises against or brought by the Company that relates to, or involves, Executive’s employment with the Company, including but not limited to participating in interviews with the Company’s counsel to assist the Company in any such litigation. Executive shall not assist, cooperate or otherwise participate in the assertion of any claims of any kind against the Company by any other person or entity, provided, however, that it shall not be a breach of this provision for Executive to testify truthfully if compelled by subpoena or other court order.   26. Headings. The headings in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions of this Agreement.   27. Attorneys’ Fees. If either party commences any litigation or other legal proceedings relating to or to interpret or enforce the terms of this Agreement, the substantially prevailing party, in addition to any other relief awarded by the court, shall be awarded its reasonable attorneys’ fees, costs and expenses incurred in such proceeding.   28. Third Party Beneficiaries. UAPH, UAP and each of the other Releasees are third party beneficiaries of this Agreement.   [Signatures to follow on next page.]   -9- -------------------------------------------------------------------------------- I have read the foregoing Agreement. I accept and agree to the provisions it contains and hereby execute it voluntarily with full understanding of its consequences.           “Executive”         ROBERT A. BOYCE     Dated: 1/10/06       /S/ ROBERT A. BOYCE         “The Company”         UAP DISTRIBUTION, INC.     Dated: 1/10/06       By:   /S/ KENT MCDANIEL             Its:   VICE PRESIDENT   -10- -------------------------------------------------------------------------------- ACKNOWLEDGMENT AND WAIVER   I, Robert A. Boyce, hereby acknowledge that I was given 21 days to consider the foregoing Agreement and voluntarily chose to sign the Agreement prior to the expiration of the 21-day period.   I declare under penalty of perjury under the laws of the State of Texas that the foregoing is true and correct.   EXECUTED this 10 day of January 2006, at Dallas County, Texas.   /S/ ROBERT A. BOYCE

EXHIBIT 10.28 CONFIDENTIAL TREATMENT PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMMISSION PURSUANT TO THE REGISTRANT’S APPLICATION OBJECTING TO DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2; THE OMITTED PORTIONS HAVE BEEN MARKED WITH BRACKETS. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. WARRANT AGREEMENT To Purchase Shares of Voting Common Stock, par value $.10 per share of RADNOR HOLDINGS CORPORATION Dated as of October 27, 2005 (the “Effective Date”) WHEREAS, Radnor Holdings Corporation, a Delaware corporation (the “Company”), has entered into a Purchase Agreement dated as of the date hereof (the “Purchase Agreement”) with Special Value Expansion Fund, LLC, a Delaware limited liability company and Special Value Opportunities Fund, LLC, a Delaware limited liability company, and such purchasers are entitled to receive warrants to purchase a number of shares equal to at least 6.875%, but not more than 15.625% of the shares outstanding (on a Fully Diluted Basis) as of the date hereof of the Company’s outstanding Voting Common Stock; and WHEREAS, the Company desires to grant to Warrantholder, in consideration for its commitment under the Purchase Agreement, the right to purchase shares of the Company’s Voting Common Stock, $.10 par value per share (the “Voting Common Stock”). NOW, THEREFORE, in consideration of the Warrantholder’s execution of the Purchase Agreement and providing the financial accommodations provided for therein, and the mutual covenants and agreements contained herein, the Company and the Warrantholder agree as follows: 1. GRANT OF THE RIGHT TO PURCHASE VOTING COMMON STOCK. The Company hereby grants to Special Value Opportunities Fund, LLC (the “Warrantholder”), and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, at a purchase price per share equal to $0.01 (the “Exercise Price”) under this Warrant Agreement (“Warrant Agreement” or this “Warrant”): (a) From the date hereof until the Warrant Adjustment Date, thirty-seven (37) fully paid and non-assessable shares of the Voting Common Stock (the “Initial Share Amount”); -------------------------------------------------------------------------------- (b) On the Warrant Adjustment Date, the Initial Share Amount shall be adjusted upward or downward to a number of fully paid and non-assessable shares of the Voting Common Stock, at the Exercise Price, equal to the following (the “2006 Adjusted Share Amount”): [                                        ] (c) If the Warrantholder exercises this Warrant at any time prior to the Warrant Adjustment Date, such exercise is for an amount of shares of Voting Common Stock greater than 6.875% of the Effective Date Voting Common Stock and a downward adjustment is required as set forth in Section 1(b)(i) or (ii) above, then the Warrantholder agrees promptly to return to the Company the number of shares of Voting Common Stock in excess of the 2006 Adjusted Share Amount (and the Company agrees promptly to return the Exercise Price paid for such returned shares of Voting Common Stock after their return). (d) Notwithstanding the foregoing, if the Company has not delivered its 2006 Audited Financial Statements to the Warrantholder by the Warrant Adjustment Date, thereafter, the 2006 Adjusted Share Amount shall equal 15.625% of the Effective Date Voting Common Stock. If the Company delivers the 2006 Audited Financial Statements to the Warrantholder prior to June 30, 2007, Section 1(b) will again be applicable. If the Company fails to deliver the 2006 Audited Financial Statements by the Warrant Adjustment Date, but does deliver such financial statements by June 30, 2007, the Warrantholder shall return to the Company shares of Voting Common Stock received upon exercise of the Warrant during the Default Period to the extent such shares exceed the 2006 Adjusted Share Amount (and the Company agrees promptly to return the Exercise Price paid for such returned shares of Voting Common Stock after their return). (e) The number of shares and Exercise Price for such shares set forth in subsections (a), (b) and (d) above are subject to adjustment as provided in Section 8 hereof. 2. TERM OF THE WARRANT AGREEMENT. Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Voting Common Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period ending on the seventh (7th) anniversary of the Effective Date. 3. EXERCISE OF THE PURCHASE RIGHTS. (a) Exercise. The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the Exercise Price in accordance with the terms set forth below, and in no event later than five (5) business days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Voting Common Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases, if any. Notwithstanding the foregoing, in the event that the Warrantholder elects to effect a Net Issuance (as defined below), the Company and the Warrantholder shall execute, and shall effect such Net Issuance pursuant to, an exchange agreement in the form attached hereto as Exhibit III (the “Exchange Agreement”). The Exercise Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) at any time on or after the Company completes a registered public offering of its common stock (the “Common Stock”), by surrender of Warrants (“Net Issuance”) as determined below.   2 -------------------------------------------------------------------------------- If the Warrantholder elects the Net Issuance method, the Company will issue Voting Common Stock in accordance with the following formula:   X   =    Y(A-B)          A   Where:   X =        the number of shares of Voting Common Stock to be issued to the Warrantholder.   Y =        the number of shares of Voting Common Stock requested to be exercised under this Warrant Agreement.   A =        the fair market value of one (1) share of Common Stock at the time the net issuance election is made.   B =        the Exercise Price. For purposes of the above calculation, current fair market value of Common Stock shall mean with respect to each share of Common Stock: (i) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the initial “Price to Public” of the Common Stock specified in the final prospectus with respect to the offering; (ii) if this Warrant is exercised after, and not in connection with the Company’s initial public offering, and: (a) if the Common Stock is traded on a securities exchange, the fair market value shall be deemed to be the average of the closing prices over a ten (10) day period ending three days before the day the current fair market value of the Voting Common Stock is being determined; or (b) if the Common Stock is traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the ten (10) day period ending three days before the day the current fair market value of the Voting Common Stock is being determined. (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ system or over-the-counter market, then the Exercise Price may be paid only by cash or check. Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to, the Effective Date hereof. (b) Exercise Prior to Expiration. Notwithstanding any other provision of this Warrant Agreement and to the extent this Warrant is not previously exercised as to all Voting Common Stock subject hereto, and if the fair market value of one share of Common Stock, calculated as set forth above, is greater than the Exercise Price then in effect, this Warrant shall be deemed automatically exercised by Net Issuance pursuant to Section 3(a) above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 3(a) above. To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Voting Common Stock the Warrantholder is to receive by reason of such automatic exercise. 4. RESERVATION OF SHARES. During the term of this Warrant Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Voting Common Stock to provide for the exercise of the rights to purchase Voting Common Stock as provided for herein.   3 -------------------------------------------------------------------------------- 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect. 6. NO RIGHTS AS STOCKHOLDER. This Warrant Agreement alone does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the exercise of the Warrant. 7. WARRANTHOLDER REGISTRY. The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement. 8. ADJUSTMENT RIGHTS. The purchase price per share and the number of shares of Voting Common Stock purchasable hereunder are subject to adjustment, as follows: (a) Merger and Sale of Assets. If at any time there shall be a capital reorganization of the shares of the Company’s stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation whether or not the Company is the surviving corporation, or the sale of all or substantially all of the Company’s properties and assets to any other person (hereinafter referred to as a “Merger Event”), then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of stock, property, money or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of shares of Voting Common Stock purchasable) shall be applicable to the greatest extent possible. (b) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. (c) Subdivision or Combination of Shares. If the Company at any time shall combine its Voting Common Stock, the number of shares exercisable under this Warrant Agreement shall be proportionately decreased and the Exercise Price shall be proportionately increased, and if the Company at any time shall subdivide its Voting Common Stock, the number of shares exercisable under this Warrant Agreement shall be proportionately increased and the Exercise Price shall be proportionately decreased. (d) Stock Dividends. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing subsections (a) or (b) or a distribution payable in cash or any other property other than capital stock) on the Company’s Voting Common Stock, then the number of shares exercisable under this Warrant Agreement shall be adjusted, from and after the record date of such dividend or distribution, to that number and type of shares that would have been received by the holder of this Warrant had the Warrantholder exercised this Warrant immediately prior to the payment of such dividend or distribution. After such adjustment, such adjusted number of shares receivable upon exercise of this Warrant shall be further adjusted from time as set forth in this Section 8. (e) Notice of Amendments. The Company shall promptly provide the Warrantholder with any restatement, amendment, modification or waiver of the Company’s Certificate of Incorporation that pertains to the Voting Common Stock. (f) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in cash, property, stock or other securities; (ii) the Company shall offer for subscription prorata to the   4 -------------------------------------------------------------------------------- holders of any class of its stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) there shall be an initial public offering; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) no later than the date such notice, if any, is provided to the Company’s stockholders, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Voting Common Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, no later than the date such notice, if any, is provided to the Company’s stockholders, written notice of the date when the same shall take place (and specifying the date on which the holders of Voting Common Stock shall be entitled to exchange their Voting Common Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder no later than the date such notice, if any, is provided to the Company’s stockholders, written notice prior to the effective date thereof. To the extent the foregoing provisions conflict with any term of the Investor Rights Agreement (as defined below), the Investor Rights Agreement shall control. Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company. (g) Timely Notice. Failure to timely provide such notice required by subsection (f) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . (a) Reservation of Common Stock. The Voting Common Stock issuable upon exercise of the Warrantholder’s rights has been duly and validly reserved and, when issued in accordance with the provisions of this Warrant Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, however, that the Voting Common Stock issuable pursuant to this Warrant Agreement may be subject to restrictions on transfer under state and/or Federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and Bylaws, as amended. The issuance of certificates for shares of Voting Common Stock upon exercise of the Warrant Agreement shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Voting Common Stock. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved and the issuance and delivery of any certificate in a name other than that of the Warrantholder. (b) Due Authority. The execution and delivery by the Company of this Warrant Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Voting Common Stock, have been duly authorized by all necessary corporate action on the part of the Company, and this Warrant Agreement is not inconsistent with the Company’s Charter or Bylaws, does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, shareholders agreement, registration rights agreement or other instrument to which it is a party or by which it is bound, and constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. 10. TRANSFERS. Subject to the terms and conditions contained in the Investor Rights Agreement dated as of even date herewith (as amended from time to time, the “Investor Rights Agreement”) among the Company, the Warrantholder and other holders of the Company’s securities, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit IV (the “Transfer Notice”), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.   5 -------------------------------------------------------------------------------- 11. Registration Rights. Warrantholder shall be entitled, with respect to the shares of Voting Common Stock issued upon exercise hereof or the shares of Common Stock or other securities issued upon conversion of such Voting Common Stock as the case may be, to all of the registration rights set forth in the Investor Rights Agreement. 12. DEFINITIONS. (a) For the purposes of this Warrant Agreement, the following terms shall have the meanings indicated: “Acknowledgment of Exercise” shall have the meaning given thereto in Section 3(a) hereof. “Capital Stock” means, with respect to any Person, any common stock, preferred stock and any other capital stock of such Person and shares, interests, participations or other ownership interest (however designated), of any Person and any rights (other than debt securities convertible into, or exchangeable for, capital stock), warrants or options to purchase any of the foregoing, including (without limitation) each class of common stock and preferred stock of such Person if such Person is a corporation and each general and limited partnership interest of such Person if such Person is a partnership. “Capitalized Lease Obligation” means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. “Common Stock” shall have the meaning given thereto in Section 3(a) hereof. “Company” shall have the meaning given thereto in the preambles hereof. “Consolidated Interest Expense” means, for any period, the total interest expense of the Company and the Subsidiaries, on a consolidated basis, plus, to the extent not included in such interest expense, (i) interest expense attributable to Capitalized Lease Obligations, (ii) amortization of debt discount and debt issuance cost, (iii) non-cash interest expense, (iv) commissions, discounts and other fees and charges owed, in each case, with respect to letters of credit and bankers’ acceptance financing, (v) interest actually paid by the Company or any such Subsidiary under any guarantee of Indebtedness, (vi) net costs associated with Hedging Obligations (including fees and amortization of discounts), and (vii) preferred stock dividends in respect of all redeemable stock of the Company held by Persons other than the Company or a Subsidiary (to the extent reflected on the Company’s statement of income or operations for such period). “Consolidated Net Income” means, for any period, the aggregate net income (loss) of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary of the Company but that is consolidated with the Company or a consolidated Subsidiary or is accounted for by the Company or a consolidated Subsidiary by the equity method of accounting shall be included only to the extent of the amount of cash dividends or cash distributions actually paid to the Company or a consolidated Subsidiary, (ii) all gains and losses that are extraordinary or are either unusual or nonrecurring (including any gain or loss realized upon the termination of any employee pension benefit plan and any gain or loss from the sale or other disposition of assets other than in the ordinary course of business or from the issuance or sale of any Equity Interests) shall be excluded; and (iii) the net income from any entity acquired (whether by assets acquisition, merger, share purchase or otherwise) by the Company or any of the consolidated Subsidiaries from the date hereof until December 31, 2006 shall be excluded. “Default Period” shall having the meaning given thereto in Section 1(d) hereof. “Effective Date” shall have the meaning given thereto in the heading of this Warrant Agreement. “Effective Date Voting Common Stock” shall mean the Voting Common Stock of the Company outstanding as of the date hereof, calculated on a Fully Diluted Basis; provided that (i) in the event of any combination, reclassification, exchange or subdivision of or affecting the Voting Common Stock, the Effective Date Voting Common Stock shall thereafter mean such number and kind of securities as the Effective Date Voting Common Stock would represent upon such combination, reclassification, exchange, subdivision or other change, (ii) upon a Merger Event, the Effective Date Voting Common Stock shall thereafter mean such number of shares of stock, property, money or other securities of the successor corporation resulting from such Merger Event as the Effective Date Voting Common Stock would represent upon giving effect to such Merger Event, and (iii) in the event that the Company at any time shall make a distribution or pay a dividend payable in the Company’s Voting Common Stock or any other Capital Stock of the Company, then the Effective Date Voting Common Stock shall thereafter   6 -------------------------------------------------------------------------------- mean such number and kind of securities as the Effective Date Voting Common Stock would represent upon payment of such dividend or distribution. “Equity Interests” means shares, interests, participations or other equivalents (however designated) of Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). “Exchange Agreement” shall have the meaning given thereto in Section 3(a) hereof. “Exercise Price” shall have the meaning given thereto in Section 1 hereof. “Fully Diluted Basis” means, as of any date of determination, the sum of (a) the number of shares of Voting Common Stock outstanding as of such date of determination plus (b) the number of shares of Voting Common Stock issuable upon the exercise, conversion or exchange of all then-outstanding warrants, options, or other rights exercisable for, directly or indirectly, shares of Voting Common Stock, whether at the time of issue or upon the passage of time or upon the occurrence of some future event, and whether or not in the money as of such date of determination; provided that the Voting Common Stock issuable upon conversion of any other class of the Company’s Capital Stock pursuant to the Company’s Certificate of Incorporation shall not be included in the foregoing calculation. “GAAP” means accounting principles generally accepted in the United States of America. “Hedging Obligations” means the obligations of any Person or entity pursuant to any swap or cap agreement, exchange agreement, collar agreement, option, futures or forward hedging contract or other similar agreement or arrangement designed to protect such Person or entity against fluctuations in interest rates. “Indebtedness” with respect to any Person means, at any time, without duplication, (i) all liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable preferred stock, (ii) all liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property), (iii) all synthetic lease obligations and all liabilities appearing on its balance sheet in accordance with GAAP in respect of capital leases, (iv) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (v) all liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money). Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (i) through (v) of the foregoing sentence to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless such Indebtedness is, by its terms, non-recourse to the assets of such Person other than as a result of customary exclusions. “Initial Share Amount” shall have the meaning given thereto in Section 1(a) hereof. “Investor Rights Agreement” shall have the meaning given thereto in Section 10 hereof. “Merger Event” shall have the meaning given thereto in Section 8(a) hereof. “Net Issuance” shall have the meaning given thereto in Section 3(a) hereof. “Notice of Exercise” shall have the meaning given thereto in Section 3(a) hereof. “Person” means any individual, corporation, partnership, limited partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. “Purchase Agreement” shall have the meaning given thereto in the preambles hereof. “Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more   7 -------------------------------------------------------------------------------- than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries. Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company. “Transfer Notice” shall have the meaning given thereto in Section 10 hereof. “2006 Adjusted Share Amount” shall have the meaning given thereto in Section 1(b) hereof. “2006 Audited Financial Statements” means the audited consolidated financial statements of the Company and its consolidated Subsidiaries for the fiscal year ended December 29, 2006, duly certified by the Chief Financial Officer of the Company. “2006 EBITDA” means the Consolidated Net Income of the Company and the Subsidiaries for the fiscal year ended December 29, 2006, plus, without duplication, the following to the extent included in calculating such Consolidated Net Income: (i) Consolidated Interest Expense, (ii) consolidated income tax expense and (iii) consolidated depreciation and amortization expense. 2006 EBITDA shall be calculated based on the 2006 Audited Financial Statements. “Voting Common Stock” shall have the meaning given thereto in the preambles hereof. “Warrant” or “Warrant Agreement” shall have the meaning given thereto in Section 1 hereof. “Warrant Adjustment Date” means the earlier of (i) the date that the Company delivers the 2006 Audited Financial Statements to the Warrantholder (which delivery shall be deemed to have occurred upon the Company’s filing of an annual report on Form 10-K containing the 2006 Audited Financial Statements with the United States Securities and Exchange Commission), and (ii) March 31, 2007. “Warrantholder” shall have the meaning given thereto in Section 1 hereof. (b) Capitalized terms used but not defined herein shall have the respective meanings given thereto in the Purchase Agreement. 13. MISCELLANEOUS. (a) Effective Date. The provisions of this Warrant Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant Agreement shall be binding upon any successors or assigns of the Company. (b) Attorneys’ Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Warrant Agreement. (c) Governing Law. This Warrant Agreement shall be governed by and construed for all purposes under and in accordance with the laws of the State of New York. (d) Counterparts. This Warrant 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. (e) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, facsimile transmission (provided that the original is sent by personal delivery or mail as hereinafter set forth) or seven (7) days after deposit in the United States mail, by registered or certified mail, addressed (i) to the Warrantholder at 2951 28th Street, Suite 1000, Santa Monica, CA 90405 (and/or, if by facsimile, (310) 566-1010); and (ii) to the Company at Radnor Financial Center, Suite 300, 150 Radnor Chester Road, Radnor, Pennsylvania 19087, Attention: Michael T. Kennedy (Fax: (610) 995-2697), with a copy to Duane Morris LLP, 30 South 17th Street, Philadelphia, Pennsylvania 19103-4196, Attention: Thomas G. Spencer (Fax: (215) 979-1020); or at such other address as any such party may subsequently designate by written notice to the other party. (f) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where   8 -------------------------------------------------------------------------------- Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Warrant Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Warrant Agreement. (g) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment. The foregoing notwithstanding, the Company shall not be deemed to have impaired the Warrantholder’s rights hereunder if it amends its Charter, or the holders of the Voting Common Stock waive rights thereunder, in a manner that does not affect the Warrantholder in a manner different from the effect that such amendments or waivers have on the rights of the holders of the Voting Common Stock. (h) Survival. The representations, warranties, covenants and conditions of the respective parties contained herein or made pursuant to this Warrant Agreement shall survive the execution and delivery of this Warrant Agreement. (i) Severability. In the event any one or more of the provisions of this Warrant Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision. (j) Amendments. Any provision of this Warrant Agreement may be amended or waived by a written instrument signed by the Company and by the Warrantholder, except as may otherwise be provided in the Purchase Agreement.   9 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.   COMPANY:     RADNOR HOLDINGS CORPORATION       By:   /s/ Michael T. Kennedy       Title:   President and CEO WARRANTHOLDER:     SPECIAL VALUE OPPORTUNITIES FUND, LLC       By:   /s/ David Hollander       Title:   Authorized Person   10 --------------------------------------------------------------------------------             [EXHIBITS OMITTED]