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  Exhibit 10.2 SECOND AMENDMENT TO WJ COMMUNICATIONS, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN This Second Amendment to the WJ Communications, Inc. (the “Company”) 2001 Employee Stock Purchase Plan, (the “Stock Purchase Plan”), is made pursuant to Section X of the Stock Purchase Plan. Recitals: WHEREAS, the 2001 Employee Stock Purchase Plan was originally adopted by the Company and approved by the stockholders in 2001; WHEREAS, the 2001 Employee Stock Purchase Plan was first amended by the board of directors on November 1, 2001 to clarify certain terms of the Stock Purchase Plan to reflect the administrators interpretation of such terms and the prior administration of the Stock Purchase Plan; to revise the offering period; to clarify the timing of payroll deductions; to define the Purchase Date as the last day of each offering period and to add provisions to delegate to the Company’s executive committee the authority to amend the Stock Purchase Plan, which modifications were not deemed necessary to submit to stockholders for approval; and WHEREAS, in 2006 in connection with the Company’s annual meeting, the Board of Directors determined a second amendment to the Stock Purchase Plan to increase the shares available under the Stock Purchase Plan from 1,500,000 to 2,250,000; WHEREAS, the Second Amendment was approved by the Company stockholders at the Company’s annual meeting on July 20, 2006. NOW THEREFORE: The section III, titled “STOCK SUBJECT TO PLAN” of the Stock Purchase Plan is hereby amended to delete “1,500,000” and insert “2,250,000” in its place to reflect an increase in the shares reserved for use under the Stock Purchase Plan. All other terms and conditions of the Stock Purchase Plan, as amended remain in full force and effect. The Second Amendment to the Stock Purchase Plan was approved by the Board of Directors on June 1, 2006 and submitted to, and approved by, the Company’s stockholders in connection with the Company’s July 20, 2006 annual meeting. --------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER among AMERICA FIRST APARTMENT INVESTORS, INC., AMERICA FIRST APARTMENT ADVISORY CORPORATION and THE BURLINGTON CAPITAL GROUP LLC Dated as of December 30, 2005                   ARTICLE ITHE MERGER     1           Section 1.01.   The Merger     1   Section 1.02.   Closing     2   Section 1.03.   Effective Time     2   Section 1.04.   Effects of the Merger     2   Section 1.05.   Articles of Incorporation and Bylaws of the Surviving Corporation     2   Section 1.06.   Directors     2   Section 1.07.   Officers     2   ARTICLE IIEXCHANGE OF SHARES FOR MERGER CONSIDERATION     3   Section 2.01.   Effect on Common Stock of the Company     3   Section 2.02.   Exchange of Company Common Stock for Merger Consideration     3   Section 2.03.   Further Assurances     4   ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF THE COMPANY     4   Section 3.01.   Organization and Qualification     5   Section 3.02.   Assumed or Fictitious Names     5   Section 3.03.   Capital Stock     5   Section 3.04.   Subsidiaries     6   Section 3.05.   Corporate Authority Relative to This Agreement; No Violation     6   Section 3.06.   Financial Statements     7   Section 3.07.   Absence of Certain Changes or Events     7   Section 3.08.   Operation of Business     7   Section 3.09.   No Violation of Law; Lawful Operations     8   Section 3.10.   Books and Records     8   Section 3.11.   Title to Assets     8   Section 3.12.   Real Property     8   Section 3.13.   Tangible Assets     8   Section 3.14.   Inventories     8   Section 3.15.   Receivables     8   Section 3.16.   Contracts     9   Section 3.17.   Intellectual Property     9   Section 3.18.   Liabilities     10   Section 3.19.   Environmental Laws and Regulations     10   Section 3.20.   Employees     10   Section 3.21.   Employee Benefit Plans     11   Section 3.22.   Litigation and Investigations     12   Section 3.23.   Tax Matters     13   Section 3.24.   Insurance     14   Section 3.25.   Transactions with Related Parties     14   Section 3.26.   Finders or Brokers     15   Section 3.27.   Powers of Attorney     15   Section 3.28.   Disclosure     15   ARTICLE IVREPRESENTATIONS AND WARRANTIES REGARDING BURLINGTON     15   Section 4.01.   Organization and Qualification     15   Section 4.02.   Authority Relative to This Agreement; No Violation     15   Section 4.03.   Foreign Person     16   Section 4.04.   No Withholding     16   Section 4.05.   Company Common Stock     16   Section 4.06.   Securities Act Representations     17   Section 4.07.   Brokers and Finders     17   ARTICLE VREPRESENTATIONS AND WARRANTIES OF APRO     17   Section 5.01.   Organization and Qualification     18   Section 5.02.   Corporate Authority Relative to This Agreement; No Violation     18   Section 5.03.   Merger Consideration     18   Section 5.04.   Disclosure     19   Section 5.05.   Absence of Certain Changes or Events     19   ARTICLE VICOVENANTS OF THE PARTIES             19   Section 6.01.   General     19   Section 6.02.   Further Investigation and Access to Information     20   Section 6.03.   Conduct of Business by the Company     20   Section 6.04.   Officers and Employees     22   ARTICLE VIIADDITIONAL AGREEMENTS             22   Section 7.01.   Antitakeover Statute     22   Section 7.02.   Public Announcements     22   Section 7.03.   Notices of Certain Events     23   Section 7.04.   Employee Matters     23   Section 7.05.   Tax Matters     23   Section 7.06.   Corporate Name     24   Section 7.07.   Guaranty of Mezzanine Debt     24   Section 7.08.   Payments Under Advisory Agreement     24   Section 7.09.   Real Estate     24   Section 7.10.   License of Certain Software     24   Section 7.11.   Registration Agreement     25   Section 7.12.   Restrictions on Resale of Stock Consideration     25   Section 7.13.   Efforts To Consummate; Further Assurances     25   Section 7.14.   Transition Assistance     25   ARTICLE VIIICONDITIONS TO THE MERGER             25   Section 8.01.   Conditions to the Obligation of APRO     25   Section 8.02.   Conditions to the Obligation of the Company     27   ARTICLE IXTERMINATION             29   Section 9.01.   Termination or Abandonment     29   Section 9.02.   Termination Fee and Expenses     29   ARTICLE XSURVIVAL AND INDEMNIFICATION             29   Section 10.01.   Survival of Representations, Warranties, Covenants and Agreements     29   Section 10.02.   Indemnification     30   ARTICLE XIMISCELLANEOUS             32   Section 11.01.   Counterparts; Effectiveness     32   Section 11.02.   Governing Law     32   Section 11.03.   Jurisdiction     32   Section 11.04.   Notices     32   Section 11.05.   Assignment; Binding Effect     33   Section 11.06.   Severability     33   Section 11.07.   Enforcement of Agreement     33   Section 11.08.   Entire Agreement; No Third-Party Beneficiaries     33   Section 11.09.   Headings     33   Section 11.10.   Amendment     34   Section 11.11.   Waiver     34   Section 11.12.   Expenses     34   ARTICLE XIIDEFINITIONS             34   Section 12.01.   Definitions     34   Section 12.02.   Construction     36   1 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into effective as of December 30, 2005 by and among AMERICA FIRST APARTMENT INVESTORS, INC., a Maryland corporation (“APRO”), AMERICA FIRST APARTMENT ADVISORY CORPORATION, a Maryland corporation (the “Company”) and THE BURLINGTON CAPITAL GROUP LLC, f/k/a America First Companies L.L.C., a Delaware limited liability company (“Burlington”). W I T N E S S E T H : WHEREAS, the Boards of Directors of APRO and the Company each have declared that it is advisable and in the best interest of their respective companies and stockholders that upon the terms and subject to the conditions set forth in this Agreement, the Company will merge with and into APRO, with APRO being the surviving corporation (the “Surviving Corporation”), in a merger (the “Merger”) in accordance with the General Corporation Law of the State of Maryland (the “MGCL”) and upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the parties hereto anticipate that the Merger will further certain of their business objectives including, without limitation, allowing APRO to become an entirely self-administered and self-managed real estate investment trust; WHEREAS, for federal income tax purposes it is intended that the transaction qualify as a reorganization under Section 368(a) of the Code (as hereinafter defined) and that the transaction be exempt from sales and/or use taxation as a casual sale, corporate reorganization, merger, acquisition or otherwise to the extent permitted under applicable law; WHEREAS, the Special Committee (the “Special Committee”) of the independent directors of the Board of Directors of APRO has received a written fairness opinion (the “Fairness Opinion”) from            Cohen & Steers (“Financial Advisor”) as to the fairness of the Merger, including the consideration to be paid in connection therewith, to APRO and its stockholders from a financial point of view; WHEREAS, the Special Committee has recommended the Merger to the Board of Directors of APRO and the Board of Directors (excluding any Affiliate of Burlington) has approved the proposal to approve the Merger (the “Merger Proposal”) and the related transactions; and WHEREAS, the Board of Directors of the Company and Burlington, the sole shareholder of the Company, have unanimously approved the Merger Proposal; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, APRO, the Company and Burlington agree as follows: ARTICLE I THE MERGER Section 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement and in reliance on the representations and warranties contained herein and in accordance with the MGCL, the Company will be merged with and into APRO at the Effective Time (as hereinafter defined) of the Merger, whereupon the separate corporate existence of the Company shall cease. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises, of a public or private nature, of APRO and the Company shall vest in the Surviving Corporation, and all debts, liabilities and duties of APRO and the Company shall become the debts, liabilities and duties of the Surviving Corporation. Section 1.02. Closing. Unless this Agreement is terminated pursuant to Section 9.01 hereof, and subject to the satisfaction or waiver of the conditions set forth in Article VIII, the closing of the Merger (the “Closing”) will take place at 9:00 a.m., Central time, on such date agreed to by the parties; provided that such date will be no later than December 30, 2005 (the “Closing Date”). The Closing will take place at the offices of Burlington in Omaha, Nebraska, unless another place is agreed to in writing by the parties hereto. Section 1.03. Effective Time. The Merger will become effective at the time of filing with, and acceptance by, the State Department of Assessments and Taxation of the State of Maryland of the articles of merger (the “Articles of Merger”) in accordance with the MGCL or at such later time as is agreed to by the parties hereto and set forth in the Articles of Merger (the “Effective Time”). The Articles of Merger will be executed on behalf of APRO and the Company on the Closing Date and will be filed as soon as practicable thereafter along with such other filings or recordings as may be required by the MGCL or otherwise. Section 1.04. Effects of the Merger. The Merger shall have the effects set forth in Section 3-114 of the MGCL. As a result of the Merger, the separate corporate existence of the Company will cease, and APRO will continue as the Surviving Corporation under the name “America First Apartment Investors, Inc.” Section 1.05. Articles of Incorporation and Bylaws of the Surviving Corporation. (a) The Articles of Incorporation of APRO as in effect immediately prior to the Effective Time will become the Articles of Incorporation of the Surviving Corporation after the Effective Time, until thereafter amended as provided by the MGCL and such Articles of Incorporation. (b) The Bylaws of APRO as in effect immediately prior to the Effective Time will become the Bylaws of the Surviving Corporation after the Effective Time, until thereafter amended as provided by the MGCL, the Articles of Incorporation of the Surviving Corporation and such Bylaws. Section 1.06. Directors. The Board of Directors of APRO immediately prior to the Effective Time will become the Board of Directors of the Surviving Corporation, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified. Section 1.07. Officers. The officers of APRO immediately prior to the Effective Time will become the officers of the Surviving Corporation, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified. ARTICLE II EXCHANGE OF SHARES FOR MERGER CONSIDERATION Section 2.01. Effect on Common Stock of the Company. At the Effective Time, by virtue of the Merger and without any additional action on the part of APRO, the Company or the Company Stockholders: (a) Subject to the other provisions of this Section 2.01, the common stock, par value $.01 per share, of the Company (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time, will be converted into the right to receive merger consideration in the aggregate amount of $11,400,000.00, consisting of: (i) 525,000 fully paid and nonassessable shares of the common stock (the “Stock Consideration”), par value $.01 per share, of APRO (“APRO Common Stock”), valued at $14.087 per share, which was the average per share closing price for APRO’s common stock during the 20 trading day period ending December 29, 2005; and (ii) a cash payment of $4,004,325.00 (the “Cash Consideration”). The Stock Consideration and the Cash Consideration shall be jointly referred to herein as the “Merger Consideration.” (b) As of the Effective Time, all shares of Company Common Stock will cease to be outstanding, will automatically be cancelled and retired and will cease to exist. Burlington, as the sole holder of Company Common Stock, shall cease to have any rights with respect to such Company Common Stock, except for the right to receive the Merger Consideration upon the surrender of the certificate(s) representing the Company Common Stock in accordance with the terms hereof. Receipt of the Merger Consideration in accordance with the terms of this Article II will be deemed payment in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such certificates. (c) Prior to the Effective Time, the Company shall not split or combine the Company Common Stock, or pay a stock dividend or other stock distribution in Company Common Stock, or in rights or securities exchangeable or convertible into or exercisable for Company Common Stock, or otherwise change Company Common Stock into, or exchange Company Common Stock for, any other securities (whether pursuant to or as part of a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation of the Company as a result of which Burlington receives cash, stock or other property in exchange for, or in connection with, its Company Common Stock (a “Business Combination”) or otherwise), or make any other dividend or distribution on or of Company Common Stock (other than as contemplated by Section 7.08 hereof), without the parties hereto having first entered into an amendment to this Agreement pursuant to which the Merger Consideration will be adjusted to reflect such split, combination, dividend, distribution, Business Combination or change. (d) No transfers of Company Common Stock shall be made on the stock transfer books of the Company after the date of this Agreement; and Burlington agrees not to transfer any Company Common Stock after the date of this Agreement and before the Closing Date. Section 2.02. Exchange of Company Common Stock for Merger Consideration. (a) At or after the Effective Time, upon surrender by Burlington of the certificate(s) evidencing all of the outstanding shares of Company Common Stock for cancellation to the Surviving Corporation, together with any other documents required by the Surviving Corporation or APRO’s transfer agent and stock registrar, Burlington will be paid the aggregate Cash Consideration and issued a certificate for the Stock Consideration. The certificate(s) evidencing the outstanding shares of Company Common Stock surrendered to the Surviving Corporation in exchange for Merger Consideration will be cancelled. (b) After the Effective Time there will be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. (c) If the Merger Consideration (or any portion thereof) is to be delivered to any Person other than the Person in whose name the certificate formerly representing Company Common Stock surrendered therefor is registered, it shall be a condition to such right to receive such Merger Consideration that the certificate(s) so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person surrendering such Company Common Stock shall pay to the Surviving Corporation any transfer or other Taxes (as hereinafter defined) required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Company Common Stock certificate surrendered, or shall establish to the satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable. (d) If a certificate evidencing shares of Company Common Stock has been lost, stolen or destroyed, the Merger Consideration will be delivered by the Surviving Corporation to the holder thereof if such holder delivers to the Surviving Corporation or its designated transfer agent an affidavit of the holder as to the fact that such certificate has been lost, stolen or destroyed and, if required in the sole discretion of the Surviving Corporation or such transfer agent, the posting by such holder of a bond in such reasonable amount as the Surviving Corporation or such transfer agent may direct as indemnity against any claim that may be made against APRO with respect to such certificate in addition to such other documents as may be requested by the Surviving Corporation or its transfer agent. (e) Neither the Company, APRO, nor the Surviving Corporation will be liable to any Person with respect to any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 2.03. Further Assurances. If at any time the Surviving Corporation shall consider or be advised that any further assignment, conveyance or assurance is necessary or advisable to vest, perfect or confirm of record in the Surviving Corporation the title to any property or right of the Company, or otherwise to carry out the provisions hereof, the proper representatives of Burlington or the Company as of the Effective Time shall execute and deliver any and all proper deeds, assignments and assurances, and do all things necessary and proper to vest, perfect or convey title to such property or right in the Surviving Corporation and otherwise to carry out the provisions hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company and Burlington hereby represent and warrant to APRO that, except as set forth in the disclosure schedule delivered by the Company and Burlington, respectively, to APRO on the date hereof signed by the Chief Executive Officer and Chief Financial Officer of the Company and Burlington, respectively (the “Disclosure Schedule”), the statements made in this Article III are correct and complete as of the date hereof. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Article III. When used herein, the phrases “to the knowledge of the Company” or “to the knowledge of Burlington” means the actual knowledge, after reasonable investigation, of any director or executive officer of the Company or Burlington, as the case may be, and the knowledge of any director or executive officer of the Company or Burlington, as the case may be, that could have been obtained after reasonable investigation by such director or executive officer. Section 3.01. Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification or licensing, each of which is listed in Section 3.01 of the Disclosure Schedule, except for jurisdictions in which the failure to be so qualified and licensed or in good standing would not, individually or in the aggregate, have a Material Adverse Effect (as hereinafter defined) on the Company. True and correct copies of the Company’s Articles of Incorporation and Bylaws have been delivered to APRO and such documents are complete and correct and in full force and effect. The Company is not in default under or in violation of any provision of its Articles of Incorporation or Bylaws. The minute books (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of the Company are correct and complete. Section 3.02. Assumed or Fictitious Names. Set forth in Section 3.02 of the Disclosure Schedule is a list of all assumed or fictitious names under which the Company is doing, or has at any time done, business in any jurisdiction, indicating for each such assumed or fictitious name the jurisdictions in which it is or was used. Except as set forth in Section 3.02 of the Disclosure Schedule, all assumed or fictitious names or similar filings in all appropriate jurisdictions with respect to the assumed or fictitious names used by the Company have been made and are currently in effect. Section 3.03. Capital Stock. (a) The authorized stock of the Company consists of 75,000 shares of common stock and 25,000 shares of preferred stock, each having a par value of $.01 per share, of which 1,000 shares of common stock are issued and outstanding. No shares of the issued common stock of the Company are held in the treasury of the Company as of the date of this Agreement. All of the issued and outstanding shares of Company Common Stock have been duly authorized for issuance and were validly issued and are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws and no class of capital stock of the Company is entitled to preemptive or other similar rights. (b) There are no outstanding subscriptions, options, warrants, convertible securities, conversion rights, preemptive or other rights, arrangements or commitments of any nature obligating the Company to issue any shares of its capital stock and there are no commitments of or on behalf of the Company to issue any such rights. The Company has no outstanding stock appreciation rights, dividend equivalency rights, phantom stock rights or similar rights. No one, other than Burlington, will have any right to receive, or otherwise participate in, the Merger Consideration in proportion to their ownership of Company Common Stock. (c) The Company has no obligation, contingent or otherwise, to purchase, redeem or otherwise reacquire any shares of its outstanding capital stock or other securities or to pay any dividend or make any other distribution in respect of its capital stock, other than pursuant to Section 7.08 hereof. (d) No bonds, debentures, notes or other indebtedness of the Company having the right to vote on any matters on which stockholders may vote are issued or outstanding. Section 3.04. Subsidiaries. The Company’s business is conducted entirely by and through the Company. The Company has no direct or indirect subsidiaries, nor are there any other entities that the Company otherwise directly or indirectly controls or in which it has any ownership or other interest, and the Company does not have the right or obligation to acquire any shares of stock or other interest in any other Person. Neither Burlington nor any of its Affiliates has taken or omitted to take any action which has resulted in, or will result in, the Company being or becoming a party to or bound by, any agreement, arrangement or understanding to which the Company will remain obligated or bound following the Closing, relating to the acquisition by the Company of any entity or all or substantially all of the assets of any Person. Section 3.05. Corporate Authority Relative to This Agreement; No Violation. (a) The Company has the corporate power and authority to enter into this Agreement to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been unanimously approved by the Board of Directors of the Company and by Burlington as sole stockholder of the Company and have been duly authorized by all other necessary corporate action on the part of the Company. The Board of Directors of the Company has determined that the transactions contemplated by this Agreement are in the best interest of the Company and its stockholder. No other corporate proceedings on the part of the Company are necessary to authorize the consummation of the transactions contemplated hereby on behalf of the Company. The Company has delivered to APRO true and correct copies of resolutions adopted by the Board of Director of the Company and the written consent of Burlington as sole stockholder of the Company, approving this Agreement and the transactions contemplated hereby. (b) This Agreement has been duly and validly executed and delivered by a duly authorized officer of the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except that enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (c) No state anti-takeover statute is applicable to the Merger or the other transactions contemplated hereby. (d) The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not and shall not (i) contravene the Articles of Incorporation or By-Laws of the Company or (ii) with or without the giving of notice or the passage of time and subject to obtaining such consents set forth in Section 3.05(d) of the Disclosure Schedule as soon as reasonably practicable following the Closing Date as are necessary, (A) violate, conflict with, or result in a breach of, or a default or loss of rights under, any covenant, agreement, mortgage, lease, instrument, indenture, understanding, permit or license to which the Company is a party or by which any of its assets are bound, or any judgment, order, decree, law, rule or regulation to which the Company or any of its assets are subject, (B) result in the creation of, or give any party the right to create, any Lien or any other right or adverse interest upon any of its assets, (C) terminate or give any party the right to terminate, amend, abandon, or refuse to perform, any agreement, arrangement or commitment to which the Company is a party or by which the Company or any of its respective assets are bound or (D) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which, the Company is to perform any duties or obligations or receive any rights or benefits under any material agreement, arrangement or commitment. (e) Other than in connection with or in compliance with the provisions of the MGCL, no authorization, consent or approval of, or filing with, any Governmental Authority (as hereinafter defined) or any other party is necessary for the consummation by the Company of the transactions contemplated by this Agreement. Section 3.06. Financial Statements. Section 3.06 of the Disclosure Schedules sets forth a true and complete copy of the Company’s unaudited balance sheet as of December 31, 2004 and related unaudited statements of income and cash flows for the year ended December 31, 2004 and its unaudited balance sheet as of November 30, 2005 and related unaudited statements of income and cash flows for the eleven months ended November 30 , 2005 (collectively, the “Financial Statements”). The Financial Statements (including any related notes and schedules) are correct and complete in all material respects, are reconcilable to the books and records of the Company and fairly present the financial position of the Company as of the date thereof and the results of operations, stockholders’ equity and cash flows for the period or as of the date then ended, in accordance with GAAP (as hereinafter defined) consistently applied during the period involved. There are no liabilities or obligations of any nature that are required to be reflected or reserved on a balance sheet or the notes thereto under GAAP that are not shown in the Financial Statements. There is no existing condition, situation or set of circumstances which would reasonably be expected to result in such a liability or obligation. The Company has not declared any dividends that are not paid or are otherwise in arrears. Section 3.07. Absence of Certain Changes or Events. Except as disclosed in Section 3.07 of the Disclosure Schedule, since November 30, 2005, there is not and has not been (a) any Material Adverse Effect with respect to the Company, or (b) any condition, event, or occurrence that could reasonably be expected to prevent or materially delay the Company from consummating the transactions contemplated by this Agreement. Section 3.08. Operation of Business. (a) Since November 30, 2005, the business of the Company has been conducted in the ordinary course consistent with past practice in all material respects and there has been no change having a Material Adverse Effect on the assets, liabilities or financial condition of the Company. (b) The Company has not engaged, and is presently not engaged, in any other business other than the business of managing the operations and investments of APRO, as more particularly described in the Second Amended and Restated Advisory Agreement, dated as of June 3, 2004, and the Addendum thereto, dated September 15, 2005 (the “Advisory Agreement”), between APRO and the Company. (c) The Company is not restricted from carrying out the Company’s business anywhere in the world by any agreement or administrative or judicial order, decree or process. Section 3.09. No Violation of Law; Lawful Operations. (a) The business of the Company has been, and currently is being, conducted in compliance with all applicable statutes, laws, rules, judgments, decrees, regulations, covenants, restrictions and orders of Governmental Authorities, except where the failure to so comply would not have a Material Adverse Effect. The Company has not received any notification from any Governmental Authority of any violation of any applicable statute, law, rule, judgment, decree, ordinance or regulation relating to its business, properties or operations. (b) The Company holds all licenses, permits and other governmental authorizations (each a “Governmental License”) that are required to be maintained by it in connection with the conduct of its the business. Each such Governmental License is valid and in full force and effect and will not be invalidated by consummation of the Merger. The Company has been in full compliance with all of the terms and requirements of each Governmental License, except where the failure to so comply would not have a Material Adverse Effect and there are no disputes, oral agreements or forbearance programs in effect as to any Governmental License. Section 3.10. Books and Records. The books and records of the Company are complete and correct and have been maintained in accordance with good business practices and contain a true and complete record of all accounts and other financial records and the meetings or proceedings of the Board of Directors and its stockholder. The stock ledger of the Company is complete and reflects all issuances, transfers, repurchases and cancellations of shares of capital stock of the Company. Section 3.11. Title to Assets. The Company holds good and valid title to all assets used by it in its business operations, all of which are listed in Section 3.11 of the Disclosure Schedule, free and clear of all Liens, and no financing statement covering all or any portion of its assets and naming the Company as debtor has been filed in any public office, and the Company has not signed any such financing statement or security agreement as debtor or borrower. Section 3.12. Real Property. The Company does not own or lease any real property and has not at any time owned or leased, in whole or in part, any real property. Section 3.13. Tangible Assets. Each item of equipment, machinery or furniture and each fixture, vehicle, trailer, leasehold improvement, tool and any other tangible asset owned or leased by the Company (“Tangible Assets”), all of which are listed on Section 3.13 of the Disclosure Schedule, is suitable for the purpose for which it is intended to be used, is in good operating condition, subject to normal wear and tear, and conforms in all material respects to applicable health, sanitation, fire, environmental (including air and water pollution laws and regulations), safety, labor, zoning and building laws and ordinances. Section 3.14. Inventories. The Company does not maintain any inventories of raw materials, supplies, manufactured and purchased parts, goods in process or finished goods. Section 3.15. Receivables. All receivables (including, without limitation, accounts receivable, loans receivable, notes, advances and receivables due from Affiliates) reflected in the Financial Statements, or, in the case of receivables created subsequent to November 30, 2005, reflected on the Company’s books, represent valid obligations arising from actual transactions in the ordinary course of business. Such receivables are collectible in the ordinary course of business in the full amount thereof or there are adequate reserves established for uncollected receivables and there is no contest, claim or right of set-off with any maker of a receivable relating to the amount or validity of such receivable. No discount or allowance has been granted with respect to any such receivable, and the Company has no obligation to make any allowances to any maker of such receivable. Section 3.16. Contracts. Section 3.16 of the Disclosure Schedule contains an accurate and complete listing of all contracts, leases, agreements or understandings, whether written or oral, to which the Company is a party (“Contracts”). The Contracts are all the contracts required for the operation of the Company’s business or which have a material effect thereon. Each Contract is valid and binding on the Company and is in full force and effect and, to the knowledge of the Company and Burlington is enforceable against the other party thereto, in each case, except as enforceability may be subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of general applicability now or thereafter in effect relating to or affecting creditors’ rights, and to general equity principles (regardless of whether enforcement is sought in a procedure in equity or at law). The Company is and has been in compliance with all applicable terms and requirements of each Contract. To the knowledge of the Company and Burlington, each other party that has or had any obligation or liability under any Contract is and has been in full compliance with all applicable terms and requirements of such contract. To the knowledge of the Company and Burlington, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or breach of, or give the Company or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract. The Company has not given to, or received from, any other Person any notice or other communication (whether oral or written) regarding any actual, alleged, possible or potential violation or breach of, or default under, any Contract. Complete and correct copies of all Contracts (or, if oral, written summaries thereof) have previously been delivered to APRO. Section 3.17. Intellectual Property. (a) Each item of Intellectual Property (as hereinafter defined) owned or used by the Company in connection with, or incident to, its business operation is listed in Section 3.17 of the Disclosure Schedule. The Company holds all right, title and interest in, or a valid and binding license to use, each such item of Intellectual Property and, except as set forth in Section 3.17 of the Disclosure Schedule, has the right to use, free and clear of claims or rights of others, all such Intellectual Property. Each such item of Intellectual Property will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Effective Time. (b) Section 3.17(b) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that the Company uses pursuant to license, sublicense, agreement, or permission. The Company has delivered to APRO correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). The Company is not obligated to pay any royalties, fees or other payments under the terms of any item of Intellectual Property. (c) To the knowledge of the Company and Burlington, none of the Intellectual Property is being infringed by any third party. The conduct of the business of the Company does not infringe or violate any intellectual property rights of any third party and nothing will interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property of third parties as a result of the continued operation of the Company’s business as presently conducted. (d) The Company is not making unlawful use of any confidential information or trade secrets of any past or present employees of the Company and neither the Company nor any of the officers, directors or other key employees of the Company have any agreements or arrangements with former employers of such Persons relating to confidential information or trade secrets of such employers which limit or restrict the ability of such Persons (as hereinafter defined) to perform their responsibilities for the Company. Section 3.18. Liabilities. Except as set forth in Section 3.18 of the Disclosure Schedule, the Company has no accounts payable, notes payable, long-term borrowing and other liabilities, contingent or otherwise that are not specifically set forth in the Financial Statements. All liabilities of the Company were incurred by it in the ordinary course of business. Section 3.19. Environmental Laws and Regulations. (a) The Company has complied, and is currently in compliance with all applicable federal, state and local laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) (collectively, “Environmental Laws”), which compliance includes, but is not limited to, the possession by the Company of all material permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof, except for noncompliance which would not, individually or in the aggregate, have a Material Adverse Effect. (b) The Company has not received written notice of, and is not the subject of, any actions, causes of action, claims, investigations, demands or notices by any Person asserting an obligation to conduct investigations or cleanup activities under Environmental Law or alleging liability under or noncompliance with any Environmental Law (collectively, “Environmental Claims”) that would, individually or in the aggregate, have a Material Adverse Effect. To the knowledge of the Company and Burlington, there are no facts, circumstances or conditions in connection with the operation of its business that are reasonably likely to lead to any Environmental Claims in the future that would, individually or in the aggregate, have a Material Adverse Effect. (c) The execution and delivery of this Agreement will not result in any obligations for site investigation or cleanup, or notification to or consent of government agencies or third parties, pursuant to any of the so-called “transaction-triggered” or “responsible property transfer” Environmental Laws. (d) The Company has not expressly assumed or undertaken any liability, including, without limitation, any obligation for corrective or remedial action, of any other Person relating to Environmental Laws. (e) No facts, events or conditions relating to the present facilities, properties or operations of the Company will prevent, hinder or limit continued compliance with Environmental Laws, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental Laws, or give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws, including without limitation, any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage. (f) The Company and any facilities operated by the Company are not subject to, and have not been subject to, any administrative or judicial proceedings, or any investigations of which the Company has notice, pursuant to any Environmental Laws. (g) No environmental Lien has attached to any portion of the Company or any facilities operated by the Company. Section 3.20. Employees. To the knowledge of Burlington and the Company, no executive officer, key employee, or group of employees currently has any plans to terminate employment with the Company (or Burlington, on behalf of the Company) other than pursuant to Section 7.04 hereof. A true, correct and complete list of all directors, officers and personnel of the Company (or Burlington, on behalf of the Company), and the annual salary and bonuses paid or accrued for the year ended December 31, 2004, and for the period from January 1, 2005 through November 30, 2005, and any commitments by the Company (or Burlington, on behalf of the Company) entered into on or prior to the date hereof to pay any further bonuses for or increase the salary of each such person is set forth in Section 3.20 of the Disclosure Schedule. The Company is not and has not been a party to any collective bargaining (or other similar) agreement, nor is any such agreement presently being negotiated. The Company has not, within the past three years, closed any plant or facility, effectuated any significant or mass layoffs or implemented any early retirement, separation or window program (or announced any such action for the future). There is no labor strike, slowdown, work stoppage, lockout or other labor dispute in effect or threatened against the Company, and the Company has not experienced any such controversy within the last five years. The Company is in compliance with all applicable laws, agreements, policies and obligations relating to employment, wages, hours and terms and conditions of employment. There are no pending or threatened actions or proceedings (whether criminal or civil in nature) alleging a breach of any applicable law with respect to, or otherwise involving, any Employee Plan (as hereinafter defined) of the Company or otherwise with respect to, or otherwise involving, the employment relationship of any current or former employee of, or independent contractor to, the Company, nor, to the best knowledge of the Company, is there any basis for such a claim. Section 3.21. Employee Benefit Plans. (a) Except as disclosed in Section 3.21 of the Disclosure Schedule, neither the Company nor any entity or other person aggregated at any relevant time with the Company under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (an “ERISA Affiliate”) maintains or has ever maintained, or has or has ever had any obligation or liability to or with respect to, any “employee benefit plan” (within the meaning of Section 3(3) of ERISA (as hereinafter defined)), including, but not limited to, pension plans, profit sharing plans, 401(k) plans, severance plans, welfare plans, disability and deferred compensation plans, stock purchase plans, stock option plans, employment plans, change-in-control plans, employee health or dental plans, short-term or long-term disability plans, fringe benefit plans, bonus and incentive plans, whether or not such plans are subject to the provisions of ERISA or whether formal or informal, oral or written. Section 3.21 of the Disclosure Schedule lists all consulting and other independent contractor agreements to which the Company is a party. The plans and agreements required to be disclosed in Section 3.21 of the Disclosure Schedule are referred to herein as the “Company Plans.” (b) Each of the Company Plans is, and its administration (including without limitation, with respect to reporting and disclosure) is and has been, in compliance with, and none of the Company nor any of its ERISA Affiliates has received any claim or notice that any such Company Plan is not in compliance with, its terms and with ERISA, the Code (including, without limitation, all tax rules compliance with which is required for any intended favorable tax treatment is to be obtained) and any and all other applicable law. Each of the Company Plans which is intended to be tax-qualified under Section 401(a) of the Code has been determined by the IRS to be so qualified and such determination has not been modified, revoked or limited, and no circumstances have occurred that would adversely affect the tax-qualified status of any such Company Plan. There is no suit, action, dispute, claim, arbitration or legal, administrative or other proceeding or governmental investigation pending, or threatened, alleging any breach of the terms of any Company Plan or of any fiduciary duties thereunder or violation of any applicable law with respect to any Company Plan. (c) No Company Plan is or has ever been subject to Title IV of ERISA or Section 412 of the Code. No Company Plan is a severance or similar plan. The Company does not provide and has never provided health or welfare benefits for any retired or former employee and is not obligated to provide health or welfare benefits to any active employee following such employee’s retirement or other termination of service. No Company Plan exists which could result in the payment of money or any other property or rights, or accelerate or provide any other rights or benefits, to any current or former employee of the Company (or other current or former service provider thereto) that would not have been required but for the transactions provided for herein. (d) Without limiting any other provision of this Section 3.21, no event has occurred and no condition exists, with respect to any Company Plan, that has subjected or could subject the Company, or any Company Plan or any successor thereto, to any Tax, fine, penalty or other liability (other than a liability arising in the normal course to make contributions or payments, as applicable, when ordinarily due under the Company Plans with respect to employees of the Company). No event has occurred and no condition exists, with respect to any Plan that could subject APRO or any of its Affiliates, or any Employee Plan maintained by APRO or any Affiliate (other than an Affiliate which becomes such pursuant to the transactions contemplated by this Agreement) thereof, to any Tax, fine, penalty or other liability, that would not have been incurred by APRO or any of its Affiliates, or any such Employee Plan, but for the transactions contemplated hereby. No Employee Plan is or will be directly or indirectly binding on APRO by virtue of the transactions contemplated hereby. APRO and its Affiliates (including on and after the Closing, the Company) shall have no liability for, under, with respect to or otherwise in connection with any Employee Plan, which liability arises under ERISA or the Code, by virtue of the Company being aggregated in a controlled group or affiliated service group with any ERISA Affiliate for purposes of ERISA or the Code at any relevant time prior to the Closing. Section 3.22. Litigation and Investigations. (a) There are no actions, lawsuits, arbitrations or other proceedings or investigations before any federal, state, local or foreign court or Governmental Authority that are pending or threatened against or affecting the Company or any of its officers or directors, in their capacities as such, or any of its assets, either at law or in equity. To the knowledge of the Company and Burlington, there are no facts, events or occurrences that could reasonably form the basis of such an action, lawsuit or other proceeding against or affecting the Company. (b) There is no investigation or review being undertaken or that is pending by any Governmental Authority with respect to the Company that would have a (i) Material Adverse Effect or (ii) prevent the consummation of any of the transactions contemplated herein, nor has any Governmental Authority notified the Company of an intention to conduct such an investigation or review and, to the knowledge of the Company and Burlington, there are no facts, events or occurrences that could reasonably form the basis of such an investigation or review with respect to the Company. (c) No event has occurred or circumstance exists that may (with or without notice or lapse of time) (i) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental License or Material Contract, or (ii) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Governmental License. The Company has not received any notice or other communication from any Governmental Authority or any other Person regarding (i) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental License or any failure to obtain any required Governmental License or Material Contract, or (ii) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental License or Material Contract. (d) There is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator other Governmental Authority, board, agency, commission or instrumentality, against or affecting the Company or the Company’s business. Section 3.23. Tax Matters. (a) The Company has timely filed all Tax Returns (as hereinafter defined) that it was required to file. All such Tax Returns were, and continue to be, true, correct and complete in all material respects. The Company is currently not the beneficiary of any extension of time in which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. (b) Neither the Company nor Burlington expects any Governmental Authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax liability of the Company either (a) claimed or raised by any Governmental Authority in writing or (b) as to which any of the Company or Burlington has knowledge. Section 3.23 of the Disclosure Schedule lists all jurisdictions in which federal, state, local and foreign Tax Returns are filed with respect to the Company and indicates any Tax Returns that have been audited or that are currently the subject of audit. The Company has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other entity) of any statute of limitations relating to the payment of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (c) All Taxes owed by the Company have been paid whether or not reflected on any Tax Return. The charges, accruals and reserves with respect to Taxes on the books of the Company were determined in accordance with GAAP consistently applied and are adequate to cover any Taxes of the Company that have accrued but are not yet due and payable. All Taxes that the Company is or was required by law to withhold or collect in connection with amounts owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected and, to the extent required, have been paid to the appropriate Governmental Authority. There are no Liens with respect to Taxes upon any of the properties or assets, real or personal, tangible or intangible, of the Company (except Liens for Taxes not yet due). (d) The Company has not made any elections pursuant to the Code (other than elections that relate solely to methods of accounting, depreciation or amortization). (e) There are no closing agreements, requests for rulings or requests for technical advice, in respect of any Taxes, pending between the Company and any Governmental Authority. (f) No consent to the application of Code Section 341(f)(2) has ever been filed with respect to any property or assets held or acquired or to be acquired by the Company. (g) The Company (x) is not a party to any Tax-sharing or similar agreement that may or will require that any payment be made by or to the Company or (y) does not have any liability for the Taxes of any Person under Treasury Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. (h) The Company has not agreed to and is not required to make any adjustment pursuant to Section 481(a) of the Code, nor has the Internal Revenue Service or any other Governmental Authority proposed any such adjustment or change in accounting method with respect to the Company. The Company does not have any application pending with any Governmental Authority requesting permission for any change in accounting method. (i) There is no contract, agreement, plan or arrangement covering any Person that, individually or collectively, as a consequence of this transaction or otherwise could give rise to the payment of any amount that would not be deductible by APRO, the Surviving Corporation or the Company by reason of Sections 162(m) or 280G of the Code or otherwise could be an “excess parachute payment” thereunder. (j) The Company does not own an interest in any (i) domestic international sales corporation, (ii) foreign sales corporation, (iii) controlled foreign corporation, or (iv) passive foreign investment company. (k) The Company is not, nor has it ever been, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (l) None of the assets of the Company directly or indirectly secure any debt the interest on which is tax-exempt under Section 103(a) of the Code. (m) The Company does not, and will not as of the Effective Time, have any earnings or profits within the meaning of the Code. (n) The Company has disclosed on its federal income Tax Returns all positions taken that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. Section 3.24. Insurance. Section 3.24 of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers’ compensation coverage and bond and surety arrangements) to which the Company is a party, a named insured, or otherwise the beneficiary of coverage: (i) the name, address, and telephone number of the agent; (ii) the name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; (iv) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage; and (v) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each such insurance policy (A) the policy is legal, valid, binding, enforceable, and in full force and effect; (B) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) neither the Company nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; and (D) no party to the policy has repudiated any provision thereof. Section 3.24 of the Disclosure Schedule describes any self-insurance arrangements affecting the Company. The Company has received no notice of termination of any such policies or that the limits of any policy have been exhausted, and the Company and are not aware of any contemplated termination, or reduction in the limits or coverage, of any of the Company’s insurance policies or any increase in, or adjustment of, the amount of the premiums therefor. The Company has not been refused any insurance by an insurance carrier to which it has applied for insurance during the last three years. Since its formation, the Company has been covered by insurance in scope and amount customary and reasonable for the businesses in which it has engaged. Section 3.25. Transactions with Related Parties. There is no (i) loan outstanding from or to the Company from or to any employee, officer, director or Affiliate of the Company, (ii) agreement between the Company and any employee, officer, director or Affiliate that is not reflected in Section 3.16 of the Disclosure Schedule, (iii) agreement requiring payments to be made on a change of control or otherwise as a result of the consummation of the Merger or any of the other transactions contemplated by this Agreement with respect to any employee, officer or director of the Company or (iv) agreement to appoint or nominate any person as a director of the Company. Neither Burlington, nor any director, member, officer or key employee of the Company or any of their respective Affiliates (as hereinafter defined) or relatives owns any direct or indirect interest (other than an ownership interest of up to 1% of the voting securities of any corporation, the securities of which are publicly traded) in any corporation, partnership or other entity (other than APRO) that (a) competes with the Company, (b) sells or purchases products or services to or from the Company, (c) leases real or personal property to or from the Company or (d) otherwise does business with the Company. Section 3.26. Finders or Brokers. The Company has not employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to any fee or any commission in connection with, or upon consummation of, the Merger. Section 3.27. Powers of Attorney. Set forth in Section 3.27 of the Disclosure Schedule is a true and complete list of the names of all persons holding powers of attorney from the Company or who are otherwise authorized to act on behalf of the Company with respect to any matter and a summary of the terms of such powers or authorizations. Section 3.28. Disclosure. (a) No representation or warranty of the Company or Burlington contained in this Agreement or any certificate furnished or to be furnished to APRO at Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. (b) None of the information supplied or to be supplied in writing by the Company or Burlington for inclusion in any document to be filed by APRO with the SEC (as hereinafter defined) or any other Governmental Authority will, at the time of any such filing or at the Effective Time, contain 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 are made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING BURLINGTON Burlington hereby represents and warrants to APRO that as of the date hereof: Section 4.01. Organization and Qualification. Burlington is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the organizational power and authority to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification or licensing, except for jurisdictions in which the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Material Adverse Effect. Section 4.02. Authority Relative to This Agreement; No Violation. (a) Burlington has all requisite power and authority to enter into this Agreement and to carry out the provisions hereof and consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Burlington. No other organizational proceedings on the part of Burlington are necessary to authorize the consummation of the transactions contemplated hereby on behalf of Burlington. (b) This Agreement has been duly and validly executed and delivered by Burlington and constitutes a valid and binding agreement of Burlington, enforceable against it in accordance with its terms, except that enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (c) Burlington is not subject to, or obligated under, any charter, bylaw or contractual provision or any license, franchise or permit, or subject to any statute, regulation, rule, injunction, ruling, order or decree or other restriction, that, by its terms, would be breached or violated or would result in a default under (with or without notice or lapse of time or both), or result in the imposition of a Lien or would accelerate any payment or obligation, trigger any right of first refusal or other purchase right as a result of Burlington executing or carrying out the transactions contemplated by this Agreement, except for any breaches or violations that would not, individually or in the aggregate, have a Material Adverse Effect on the Company or substantially impair or delay the consummation of the transactions contemplated hereby. Other than in connection with or in compliance with the provisions of the MGCL, no authorization, consent or approval of, or filing with, any Governmental Authority or third party is necessary for the consummation by Burlington of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals or filings the failure to obtain or make which would not, individually or in the aggregate, have a Material Adverse Effect on the Company or substantially impair or delay the consummation of the transactions contemplated hereby. (d) The execution and delivery of this Agreement by Burlington and the consummation of the transactions contemplated hereby do not and shall not, with or without the giving of notice or the passage of time, (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which Burlington is a party or by which Burlington or any of its shares of Company Common Stock are bound, or any judgment, order, decree, law, rule or regulation to which Burlington or such shares are subject or (ii) result in the creation of, or give any party any right to create, any Lien or any other right or adverse interest upon any of such shares. Section 4.03. Foreign Person. Burlington is a United States person within the meaning of Section 7701(a)(30) of the Code. Section 4.04. No Withholding. The transaction contemplated hereby is not, insofar as concerns Burlington, subject to the Tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of law. Section 4.05. Company Common Stock. All of the outstanding capital stock of the Company is owned by Burlington as set forth in Section 4.05 of the Disclosure Schedule. The number of shares of Company Common Stock set forth opposite Burlington’s name in Section 4.05 of the Disclosure Schedule includes all the shares of capital stock of the Company owned, beneficially or directly, by it on the date hereof. Except as set forth in Section 4.05 of the Disclosure Schedule, Burlington holds such shares of the Company Common Stock, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act (as hereinafter defined) and state securities laws), Taxes, Liens, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Burlington is not a party to any option, warrant, purchase right, or other contract or commitment that could require it to sell, transfer, or otherwise dispose of any the shares of the Company Common Stock (other than pursuant to this Agreement) or is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any of the shares of the Company Common Stock. Section 4.06. Securities Act Representations. (a) Burlington represents that it understands that the Stock Consideration will not be registered pursuant to the registration requirements of the Securities Act (as hereinafter defined) and that the resale of such shares is subject to certain restrictions hereunder and under federal and state securities laws. Burlington represents that it is acquiring such shares for its own account, not as a nominee or agent, and not with a view to the distribution thereof in violation of applicable securities laws. Burlington further represents that it has been advised and understands that since such APRO Common Stock has not been registered under the Securities Act, such APRO Common Stock must be held indefinitely unless (A) the distribution of such APRO Common Stock has been registered under the Securities Act, (B) a sale of such APRO Common Stock is made in conformity with the holding period, volume and other limitations of Rule 144 promulgated by the SEC under the Securities Act, or (C) in the opinion of counsel reasonably acceptable to APRO, some other exemption from registration is available with respect to any proposed sale, transfer or other disposition of such APRO Common Stock. (b) Burlington represents that it has been advised and understands that, subject to applicable securities laws, stop transfer instructions will be given to APRO’s transfer agent with respect to such shares of APRO Common Stock and that a legend setting forth the following restrictions on transfer will be set forth on the certificates for such shares of APRO Common Stock or any substitutions therefor: “THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. NEITHER THE SHARES EVIDENCED BY THIS CERTIFICATE NOR ANY INTEREST THEREIN MAY BE SOLD OR OTHERWISE PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF (i) REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR (ii) A VALID EXEMPTION THEREFROM.” (c) Burlington is an “accredited investor” (as such term is defined in Regulation D under the Securities Act) with respect to APRO. Section 4.07. Brokers and Finders. Burlington has not entered into any contract, arrangement or understanding with any Person or firm which may result in the obligation of the Company or APRO to pay any investment banking fees, finder’s fees, brokerage or agent’s commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. ARTICLE V REPRESENTATIONS AND WARRANTIES OF APRO APRO hereby represents and warrants to the Company and Burlington that the statements made in this Article V are correct and complete as of the date of this Agreement. Section 5.01. Organization and Qualification. APRO is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification or licensing, except for jurisdictions in which the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Material Adverse Effect. Section 5.02. Corporate Authority Relative to This Agreement; No Violation. (a) APRO has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Special Committee of the Board of Directors of APRO and by the Board of Directors of APRO. No other corporate proceedings on the part of APRO are necessary to authorize the consummation of the transactions contemplated hereby. The Special Committee of the Board of Directors of APRO and the Board of Directors of APRO have each determined that the transactions contemplated by this Agreement are in the best interest of APRO and its stockholders. (b) This Agreement has been duly and validly executed and delivered by a duly authorized officer of APRO and, assuming this Agreement constitutes a valid and binding agreement of the other parties hereto, this Agreement constitutes a valid and binding agreement of APRO, enforceable against APRO in accordance with its terms, except that enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (c) APRO is not subject to or obligated under any charter, bylaw or contract provision or any license, franchise or permit, or subject to any statute, regulation, rule, injunction, ruling order or decree, or other restriction which, by its terms, would be breached or violated or would result in a default under (with or without notice or lapse of time or both), or result in the imposition of a Lien or would accelerate any payment or obligation, trigger any right of first refusal or other purchase right as a result of APRO executing or carrying out the transactions contemplated by this Agreement. Other than such filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act, the Exchange Act, the rules and regulations of the Nasdaq National Market (“Nasdaq”), state takeover laws, state securities or “blue sky” laws and the filing and recordation of the Articles of Merger as required by the MGCL, no authorization, consent or approval of, or filing with, any Governmental Authority is necessary for the consummation by APRO of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals or filings the failure to obtain or make which would not, individually or in the aggregate, substantially impair or delay the consummation of the transactions contemplated hereby. Section 5.03. Merger Consideration. APRO has authorized and reserved, and shall keep available, for issuance and delivery, the number of shares of APRO Common Stock issuable in connection with the Merger. All shares of APRO Common Stock issued as part of Merger Consideration, upon the issuance thereof in accordance with the provisions of this Agreement, will be duly authorized and validly issued and fully paid and nonassessable shares of APRO Common Stock and will have been issued in compliance with all applicable federal and state securities laws. Section 5.04. Disclosure. No representation or warranty of APRO contained in this Agreement or in any certificate furnished or to be furnished to the Company at Closing contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. APRO has filed all required reports, schedules, forms, statements, and other documents with the SEC (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the “APRO SEC Documents”). As of their respective dates, the APRO SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such APRO SEC Documents. As of their respective dates, none of the APRO SEC Documents (including any and all financial statements therein) contained any untrue statement of a material fact or failed to state any 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. The consolidated financial statements of APRO included in the APRO SEC Documents (the “APRO Financial Statements”) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the period involved (except as may be indicated in the notes thereto), and present fairly, in all material respects, the consolidated financial position of APRO and its subsidiaries at the respective dates thereof and the consolidated results of operations and cash flows for the periods specified (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments). Except as reflected or reserved against in the APRO Financial Statements, APRO and its subsidiaries have no material liabilities or other obligations (including contingent liabilities and obligations) except, (i) since the date of the most recent audited balance sheet included in the APRO Financial Statements, liabilities and obligations incurred in the ordinary course of business or (ii) that would not be required to be reflected or reserved against in the consolidated balance sheet of APRO and its subsidiaries prepared in accordance with GAAP. Section 5.05. Absence of Certain Changes or Events. Except as disclosed in the APRO SEC Documents, since the date of the most recent audited balance sheet included in the APRO SEC Documents, there is not and has not been (a) any material adverse change to APRO, or (b) any condition, event, or occurrence that could reasonably be expected to prevent or materially delay APRO from consummating the transactions contemplated by this Agreement. ARTICLE VI COVENANTS OF THE PARTIES Section 6.01. General. (a) Each of the parties will use his or its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Article VIII below) and to cooperate with each other party in so doing. (b) Each of the parties shall use its reasonable best efforts not to, and shall use its commercially reasonable best efforts to cause its respective subsidiaries not to take any action that would result in (i) any of the representations and warranties of such party (without giving effect to any “knowledge” qualification) set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties (without giving effect to any “knowledge” qualification) that are not so qualified becoming untrue in any material respect or (iii) any of the conditions to the Merger set forth in Article VIII not being satisfied. Section 6.02. Further Investigation and Access to Information. Each of Burlington and the Company will afford APRO and its officers, employees, accountants, counsel and other authorized representatives full and complete access to its offices and other properties and all books and records, contracts or other documents relating to the business of the Company and of Burlington (as it relates to the business of the Company) (the “Due Diligence Information”), will promptly provide to APRO such additional information relating to the Company and its businesses and properties as APRO or its duly authorized representatives may from time to time reasonably request and will instruct the Company’s or Burlington’s, as the case may be, employees, counsel and financial advisors to cooperate with APRO in its investigation of the business of the Company. APRO will use the Due Diligence Information solely for the purpose of its investigation of the Company’s business relating to the Merger and will keep the Due Diligence Information strictly confidential. APRO may disclose the Due Diligence Information only (a) to those Affiliates, directors, officers, employees, advisors and agents who need to know such information for the purpose of consummating the Merger and (b) in connection with obtaining any required governmental or third-party consents. In the event that the Merger is not consummated, APRO will return any materials delivered to it containing Due Diligence Information to the Company or will certify, in writing, that all such materials or copies of such materials have been destroyed. Any investigation conducted by APRO will not affect the representations and warranties of the Company or Burlington. Due Diligence Information shall be deemed to exclude information that is (a) public or becomes public (other than by breach of this provision), (b) lawfully disclosed to APRO by a third party or (c) developed by APRO without use of confidentiality information provided by the Company or Burlington. Section 6.03. Conduct of Business by the Company. From and after the date hereof and prior to the Effective Time or such earlier date on which this Agreement is terminated as provided in Section 9.01 hereof (the “Termination Date”), and except as may be (i) required by law (provided that before availing itself of such exception, the Company must first consult with APRO), (ii) consented to in writing by APRO, or (iii) expressly permitted pursuant to this Agreement, the Company: (a) will conduct its operations according to its ordinary and usual course of business in substantially the same manner as heretofore conducted and will use commercially reasonable efforts to preserve intact its business organization and goodwill, prevent any adverse change in the financial condition, liabilities, assets, business, operating results or prospects of the Company and prevent the destruction or damage to or loss of any asset of the Company that would have a Material Adverse Effect; (b) will use commercially reasonable efforts to keep available the services of its current officers and other key employees and to preserve its relationships with those Persons having business dealings with the Company; (c) will comply in all respects with (i) all laws and orders of all Governmental Authorities applicable to it and (ii) all Material Contracts; (d) will not declare, set aside or pay any dividends on, except pursuant to Section 7.08, or make any distribution with respect to, or redeem or purchase any outstanding shares of its capital stock; (e) will not authorize or issue any shares of capital stock or other securities convertible into or in lieu of or in substitution for shares of its capital stock (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise); (f) will not redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of its outstanding securities or any capital stock or other ownership interest of any other Person; (g) will not authorize or effect any acquisition or disposition of any assets or release or relinquish any rights under a Material Contract; (h) will not propose or adopt any amendments to its Articles of Incorporation or Bylaws; (i) will not (i) make capital expenditures or incur or assume any additional indebtedness; (ii) incur any long-term indebtedness, (iii) create, or allow to be imposed, any Lien on its assets, (iv) make any loans, advances or capital contributions to, or investments in, any other Person, or (v) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise); (j) will not make any loans, advances or other payments to any third party, including any officer or director of the Company or any Affiliate of such Persons; (k) will not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization (other than the Merger); (l) will not make any acquisition, by means of merger, consolidation or otherwise, of any direct or indirect ownership interest in or assets comprising any business enterprise or operation; (m) will not authorize or enter into any agreement providing for management services to be provided by the Company to any third-party or an increase in management fees paid by any third-party under existing management agreements; (n) enter into any other contract, arrangement or understanding; (o) will not (i) make any Tax election or settle or compromise any Tax liability, (ii) change its fiscal year, or (iii) revalue any of its assets or (iv) change its methods of accounting (including, without limitation, make any material write-off or reduction in the carrying value of any assets) in effect at December 31, 2004, except as required by changes in GAAP; (p) will not grant any increases in the compensation of any of its directors, officers or employees, except in the ordinary course of business consistent with past practice; (q) will not pay or agree to pay any pension retirement allowance or other employee benefit not required or contemplated by any Employee Plan as in effect on the date hereof to any such director, officer or employee, whether past or present, (i) enter into any new or amend any existing employment or severance agreement with any such director, officer or employee, except as approved by APRO in its sole discretion, (ii) pay or agree to pay any bonus to any director, officer or employee (whether in the form of cash, capital stock or otherwise) except as approved by the Special Committee or pursuant to Section 7.04 hereof, or (iii) except as may be required to comply with applicable law, amend any existing, or become obligated under any new Employee Plan; (r) will not engage in the conduct of any business the nature of which is materially different from the business in which the Company is currently engaged; (s) will not forgive any indebtedness owed to the Company or convert or contribute by way of capital contribution any such indebtedness owed; (t) will not settle or compromise, or agree to settle or compromise, any claim, suit or other litigation or matter in an arbitration proceeding; (u) except as may be required as a result of a change in law or in GAAP, will not change any of the accounting principles or practices used by it and maintain its books and records other than in accordance with GAAP consistently applied; (v) will not modify the Company’s insurance coverage; and (w) will not agree, in writing or otherwise, to take any of the foregoing actions. None of APRO, Burlington or the Company shall take any action that would result in (i) any of their respective representations and warranties (without giving effect to any “knowledge” qualification) set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties (without giving effect to any “knowledge qualification) that are not so qualified becoming untrue in any material respect or (c) any of the conditions set forth in Article 8 not being satisfied, except as set forth in Section 9.01. Notwithstanding anything in this Section 6.03, APRO will not have, directly or indirectly, any right to control or direct the Company’s operations prior to the Effective Time and, prior to the Effective Time, the Company will exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations. Section 6.04. Officers and Employees. Each of the Company and Burlington severally agrees that prior to the Effective Time it will use its reasonable efforts to encourage the officers and employees of the Company, to the extent they are in good standing, to become employees of APRO, as determined by APRO in its sole discretion. ARTICLE VII ADDITIONAL AGREEMENTS Section 7.01. Antitakeover Statute. If any “fair price,” “moratorium,” “control share acquisition” or other form of antitakeover statute or regulation will become applicable to the transactions contemplated hereby, each of the Company, APRO and Burlington and the members of their respective Boards of Directors, if applicable, will grant such approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on the transactions contemplated hereby. Section 7.02. Public Announcements. The Company and APRO will consult with and provide each other the opportunity to review and comment upon any press release or other public statement or comment prior to the issuance of such press release or other public statement or comment relating to this Agreement or the transactions contemplated herein and will not issue any such press release or other public statement or comment without the prior approval of the other party, which consent will not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such other public statement as required by law or Nasdaq if it has (a) used its reasonable best efforts to consult with the other party and to obtain such party’s consent but has been unable to do so in a timely manner and (b) faxed a copy of such release or public statement to such other party at a reasonable time prior to issuing such release or making such statement. Section 7.03. Notices of Certain Events. (a) Each party will promptly notify any other party of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; and (ii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement. (b) Each party will promptly notify the other parties of any proceedings commenced or threatened against such party or any of its subsidiaries that relate to the consummation of the transactions contemplated by this Agreement. (c) The Company and Burlington shall give prompt notice to APRO and APRO shall give prompt notice to the Company and Burlington, if (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becomes untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becomes untrue or inaccurate in any material respect or (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. Section 7.04. Employee Matters. At the Effective Time, Burlington will assign to APRO, and APRO will assume from Burlington, the existing employment agreements with John Cassidy, James Egan and Paul Beldin. Nothing in this provision shall be interpreted to provide any such employee with a guarantee of employment or any contractual right hereunder against APRO with respect to ongoing employment or to otherwise limit APRO’s ability to terminate or change the nature of the employment agreement with such employee after the Effective Time. Section 7.05. Tax Matters. (a) Each of Burlington, the Company and APRO agrees to report the Merger on all Tax Returns and, if applicable, other filings as a reorganization under Section 368(a) of the Code to the extent permitted by law. (b) Burlington shall prepare or cause to be prepared and filed on behalf of the Company on or before the due date therefor, at its sole cost and expense, any Tax Returns required to be filed with respect to any short taxable year of the Company ending as of the Effective Time and shall pay or cause the Company to pay all Taxes due with respect to such Tax Returns. Such Tax Returns shall be prepared in accordance with the most recent Tax practices as to elections and accounting methods. (c) Between the date hereof and the Effective Time, to the extent the Company or Burlington has knowledge of the commencement or scheduling of any Tax audit, the assessment of any Tax, the issuance of any notice of Tax due or any bill for collection of any Tax due or the commencement or scheduling of any other administrative or judicial proceeding with respect to the determination, assessment or collection of any Tax of the Company, the Company or Burlington shall provide prompt notice to APRO of such matters, setting forth information (to the extent known) describing any asserted Tax liability in reasonable detail and including copies of any notice or other documentation received from the applicable Tax authority with respect to such matter. (d) APRO will make a valid and effective election under Internal Revenue Service Notice 88-19 1988-1 C.B. 486 and/or Treasury Regulation Section 1.337(d)-5T to be subject to rules similar to those set forth in Section 1374 of the code with respect to assets acquired from the Company in connection with the Merger. (e) The parties agree to take such steps as are reasonable and necessary to cause the transactions contemplated by this Agreement to be exempt from sales and/or use Tax as a casual sale, corporate reorganization, merger or acquisition or otherwise, to the extent permitted, under applicable law. Notwithstanding the foregoing, any sales, use, transfer, recording and similar Taxes arising out of or in connection with the transactions effected pursuant to this Agreement shall be borne by Burlington. Section 7.06. Corporate Name. After the Effective Time, Burlington shall permit APRO and the Surviving Corporation will be authorized to continue to use the name “America First Apartment Investors, Inc.” and “America First Apartment Advisory Corporation,” respectively. No other license to use the name “America First” in any other context will be granted by virtue of this Agreement or the transactions contemplated hereby. Section 7.07. Guaranty of Mezzanine Debt. To replace the collateral provided pursuant to the Addendum to the Second Amended and Restated Advisory Agreement dated September 15, 2005, Burlington shall provide a guaranty (the “Guaranty”), in a form reasonably satisfactory to APRO, of the indebtedness of America First Communities Offutt Developer, LLC (the “Offutt Developer”) pursuant to that certain Promissory Note as governed by the Loan and Security Agreement executed by the Offutt Developer and APRO dated September 15, 2005 (the “Mezzanine Debt”). Section 7.08. Payments Under Advisory Agreement. APRO shall pay to the Company all fees and accrued and unpaid and reimbursable expenses payable to the Company under the Advisory Agreement in respect of periods up to the Effective Time. The Company will use such proceeds to pay all liabilities outstanding at such time (including any wages or bonuses due to its employees. Section 7.09. Real Estate. From the Effective Time until the expiration of the lease (the “Lease”) at 101 East 52nd Street, 25th Floor, New York, New York 10022 (the “Facility”), in which Burlington is the lessee, subject to the landlord’s consent (which Burlington shall use its commercially reasonably efforts to obtain following the Closing), Burlington shall permit APRO to utilize such portion of the Facility as APRO occupies as of the date hereof. In consideration of such use, APRO shall reimburse Burlington for 66% of Burlington’s actual, documented Lease expenses incurred with respect to the Facility; provided, however, that APRO’s maximum liability to Burlington in any year during the Lease term shall be $100,000; and further provided, that in the event the APRO vacates the Facility at any time during the remaining term of the Lease, APRO’s liability to Burlington pursuant to this Section shall be $100,000 for the year during which APRO vacates the Facility. Section 7.10. License of Certain Software. APRO agrees to grant and deliver to Burlington at the Closing, a perpetual, non-exclusive, non-transferable enterprise-wide license to use the MRI software acquired by APRO in connection with the Merger, including, but not limited to, all software, manuals, handbooks, business forms, and other manifestations thereof (the “MRI Software”). Burlington may use the MRI Software, including any software relating to same, at any site at which Burlington conducts business operations either currently or in the future. Promptly following the Closing, Burlington and APRO will use their commercially reasonable efforts to obtain such consents from any third party as may be required pursuant to the terms of any license related to any component of the MRI Software that be necessary to allow the transfer of such license to APRO in connection with the Merger and the granting of a sublicense to Burlington pursuant to this Section. Section 7.11. Registration Agreement. APRO and Burlington shall, on or prior to the Closing Date, enter into a registration agreement in a form acceptable to APRO and Burlington (the “Registration Agreement”) . APRO agrees to pay all costs associated with the registration of such shares under the Securities Act and the listing of such shares on Nasdaq. Section 7.12. Restrictions on Resale of Stock Consideration. Without the prior written consent of APRO, Burlington will not sell, pledge or otherwise transfer any portion of the Stock Consideration for a period of 3 months commencing on the Closing Date. Thereafter, Burlington may sell, pledge or otherwise transfer up to 125,000 shares of the Stock Consideration without restriction, except as otherwise provided in the Registration Agreement; provided, however, that Burlington may not sell, pledge or otherwise transfer the remaining 400,000 shares of the Stock Consideration without the prior written consent of APRO until the date which is 12 months following the Closing Date. Section 7.13. Efforts To Consummate; Further Assurances. Subject to the terms and conditions of this Agreement, the parties hereto will use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to consummate the transactions contemplated herein. The parties hereto agree to execute and deliver promptly such other documents, certificates, agreements, instruments and other writings (including any amendments or supplements thereto) and to take, or cause to be taken, such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated hereby. Each party hereto shall take all reasonable actions necessary to cause the transaction contemplated by this Agreement to qualify as a reorganization under the provisions of Section 368(a) of the Code to the extent permitted by law. Section 7.14. Transition Assistance. For a period of 6 months following the Effective Time (which period may be extended at APRO’s option for up to an additional 6 months), Burlington shall provide reasonable transition assistance to APRO to permit the services provided by the Advisor to APRO prior to the Effective Time to be performed by APRO after the Effective Time without undue restriction, burden or delay. Such transition assistance may include, but shall not be limited to, assistance with human resources, information technology and investor relations. Until the earlier of the termination of such transition assistance at the request of APRO or the end of the transition assistance period, APRO shall reimburse Burlington for its expenses incurred based on the number of full-time equivalent employees providing such assistance, as set forth in the 2006 budget which has been approved by both Burlington and APRO. Additionally, software currently used by the Company in its operations shall remain available for use by APRO during the period of transition assistance at no additional cost. ARTICLE VIII CONDITIONS TO THE MERGER Section 8.01. Conditions to the Obligation of APRO. The obligations of APRO to effect the Merger are subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, the compliance with which, or the occurrence of which, may be waived prior to the Closing Date in writing by APRO, in its sole discretion. (a) Continued Accuracy of Representations and Warranties. All representations and warranties of the Company and Burlington contained in this Agreement remain correct and complete as of the Closing Date. (b) Performance of Agreements. The Company and Burlington shall have performed, complied with and satisfied all covenants of the Company and Burlington that are required by this Agreement to be performed or satisfied by them at or prior to the Closing Date. (c) The Company’s and Burlington’s Closing Certificates. Each of the Company and Burlington shall have delivered a certificate, dated the Closing Date, addressed to APRO and signed by its respective Chief Executive Officer, to the effect that the conditions specified in this Section 8.01 have been satisfied. (d) Secretary’s Certificate. Each of the Company and Burlington shall have furnished a certificate of its corporate Secretary certifying as to: (i) the resolutions of its Board of Directors authorizing the execution, delivery and performance of this Agreement by the Company or Burlington, as the case may be, and the execution, delivery and performance of all documents to be executed, delivered and performed by the Company or Burlington, as the case may be, at Closing; and (ii) the incumbency of its officers executing this Agreement and the documents delivered at Closing. (e) No Injunctions, Orders or Restraints; Illegality. No preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a Governmental Authority nor any statute, rule, regulation or executive order promulgated or enacted by any Governmental Authority will be in effect which would (i) make the consummation of the Merger illegal, or (ii) otherwise prevent or prohibit the consummation of the transactions contemplated in this Agreement, including the Merger; provided, however, that prior to invoking this condition, APRO will use its reasonable best efforts to have any such injunction vacated. (f) Consents and Authorizations. Other than the filing required under Section 1.03 and those consents to be obtained following the Closing pursuant to Sections 3.05(d), 7.09 or 7.11 hereof, all notices, filings, consents, approvals, including regulatory approvals, permits, authorizations or orders of, and all registrations, declarations or filings with, third parties, including creditors, lessors, licensors, contract parties or Governmental Authorities, necessary for the authorization, execution and delivery of or performance under this Agreement by the Company or Burlington or the consummation by the Company or Burlington of the transactions contemplated by this Agreement have been made or obtained. (g) Fairness Opinion. APRO shall have received an opinion from its Financial Advisor to the effect that the terms of the Merger are fair to APRO and its stockholders from a financial point of view. (h) Opinion of Counsel. APRO shall have received an opinion of Kutak Rock LLP, dated as of the Closing Date, in a form reasonably agreeable to APRO. (i) Due Diligence. APRO shall have completed to its reasonable satisfaction a due diligence review of the Company. (j) Registration Agreement. The Registration Agreement shall have been executed and delivered by Burlington. (k) Liabilities. There shall be no liabilities of the Company, contingent or otherwise, except as provided in Section 7.08. (l) Termination of Bonus Plans. All bonus and incentive plans of the Company shall be terminated as contemplated by Section 7.04. (m) Articles of Merger. The Company shall have delivered to APRO fully executed Articles of Merger. (n) Material Adverse Effect. Since the date of this Agreement, no event shall have occurred or circumstance arisen that, indirectly or taken together with all other acts, circumstances or events is reasonably likely to have a Material Adverse Effect on the Company. (o) No Suspension of Trading, Etc. At the Effective Time, there shall be no suspension of trading in, or limitation on prices for, securities generally on Nasdaq, declaration of a banking moratorium by federal or state authorities or any suspension of payments by banks in the United States (whether mandatory or not) or of the extension of credit by lending institutions in the United States, or commencement of war, armed hostility, or other international or national calamity directly or indirectly involving the United States, which war, hostility or calamity (or any material acceleration or worsening thereof), in the sole judgment of APRO, would have a Material Adverse Effect on the Company. (p) Other Documents. The Company shall have delivered to APRO all other documents reasonably requested by APRO and contemplated by this Agreement or required to be delivered by the Company to APRO pursuant to this Agreement and not previously delivered. Section 8.02. Conditions to the Obligation of the Company. The obligation of the Company to effect the Merger is subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, the compliance with which, or the occurrence of which, may be waived prior to the Closing Date in writing by the Company in its sole discretion. (a) Continued Accuracy of Representations and Warranties. All representations and warranties of APRO contained in this Agreement remain correct and complete as of the Closing Date. (b) Performance of Agreements. APRO shall have performed, complied with and satisfied all covenants of APRO that are required by this Agreement to be performed or satisfied by them at or prior to the Closing Date. (c) APRO Closing Certificate. APRO shall have delivered a certificate, dated the Closing Date, addressed to the Company and signed by APRO’s Chief Executive Officer or President, to the effect that the conditions specified in this Section 8.02 have been satisfied. (d) Secretary’s Certificate. APRO shall have furnished a certificate of its corporate Secretary certifying as to: (i) the resolutions of such company’s Board of Directors authorizing the execution, delivery and performance of this Agreement by APRO; and (ii) the incumbency of its officers executing this Agreement and the documents delivered at Closing. (e) No Injunctions, Orders or Restraints; Illegality. No preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a Governmental Authority nor any statute, rule, regulation or executive order promulgated or enacted by any Governmental Authority will be in effect which would (i) make the consummation of the Merger illegal, or (ii) otherwise prevent or prohibit the consummation of the transactions contemplated in this Agreement, including the Merger; provided, however, that prior to invoking this condition, the Company will use its reasonable best efforts to have any such injunction vacated. (f) Consents and Authorizations. Other than the filing required under Section 1.03 and those consents to be obtained following the Closing pursuant to Sections 3.05(d), 7.09 or 7.11 hereof, all notices, filings, consents, approvals, including regulatory approvals, permits, authorizations or orders of, and all registrations, declarations or filings with, third parties, including creditors, lessors, licensors, contract parties or Governmental Authorities, necessary for the authorization, execution and delivery of or performance under this Agreement by APRO or the consummation by APRO of the transactions contemplated by this Agreement have been made or obtained. (g) Opinion of Counsel. The Company and Burlington shall have received an opinion of Kutak Rock LLP, dated as of the Closing Date, in a form reasonably agreeable to the Company and Burlington. (h) Merger Consideration. APRO shall have reserved for issuance a sufficient number of  shares of APRO Common Stock to allow for the issuance of all Stock Consideration pursuant to Article II hereof, and APRO have sufficient immediately available funds in cash to pay the Cash Consideration. (i) Registration Agreement. The Registration Agreement shall have been executed and delivered by APRO. (j) Material Adverse Effect. Since the date of this Agreement, no event shall have occurred or circumstance arisen that, indirectly or taken together with all other acts, circumstances or events is reasonably likely to have a Material Adverse Effect on APRO. (k) No Suspension of Trading, Etc. At the Effective Time, there shall be no suspension of trading in, or limitation on prices for, securities generally on Nasdaq, declaration of a banking moratorium by federal or state authorities or any suspension of payments by banks in the United States (whether mandatory or not) or of the extension of credit by lending institutions in the United States, or commencement of war, armed hostility, or other international or national calamity directly or indirectly involving the United States, which war, hostility or calamity (or any material acceleration or worsening thereof), in the sole judgment of Burlington, would have a Material Adverse Effect on APRO. (l) Other Documents. APRO shall have delivered to the Company all other documents reasonably requested by the Company and contemplated by this Agreement or required to be delivered by the Company to APRO pursuant to this Agreement and not previously delivered. ARTICLE IX TERMINATION Section 9.01. Termination or Abandonment. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated and abandoned at any time prior to the Effective Time: (a) by the mutual written consent of the Company and APRO; (b) by APRO or the Company if the Effective Time has not occurred on or before December 30, 2005, as long as the party seeking to terminate the Agreement has not breached in any material respect its obligations under this Agreement in any manner that will have proximately contributed to the failure to consummate the Merger on or before such date; (c) by either APRO or the Company if (i) a statute, rule, regulation or executive order will have been enacted, entered or promulgated prohibiting the consummation of the Merger substantially on the terms contemplated hereby or (ii) an order, decree, ruling or injunction will have been entered permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger substantially on the terms contemplated hereby and such order, decree, ruling or injunction will have become final and nonappealable and the party seeking to terminate this Agreement pursuant to this Section 9.01(c) will have used its reasonable best efforts to remove or prevent such injunction, order or decree; (d) by either the Company or APRO if there will have been a material breach by the other of any of its representations, warranties, covenants or agreements contained in this Agreement, which if not cured would cause the respective conditions set forth in Article VIII, as the case may be, not to be satisfied, and such breach is incapable of being cured or will not have been cured within 15 days after notice thereof will have been received by the party alleged to be in breach. In the event of termination of this Agreement pursuant to this Section 9.01, this Agreement will terminate (except for the confidentiality provisions of Section 6.02 and the provisions of Sections 9.02 and Section 10.01), and there will be no other liability on the part of the Company or APRO to the other except liability arising out of an intentional breach of this Agreement. Section 9.02. Termination Fee and Expenses. If this Agreement is terminated by any party for any reason set forth in Section 9.01 hereof, then (i) each party shall be responsible for the payment of the expenses and fees incurred by it in connection with or related to the Merger and the transactions contemplated hereby and (ii) the Advisory Agreement will remain in full force and effect. ARTICLE X SURVIVAL AND INDEMNIFICATION Section 10.01. Survival of Representations, Warranties, Covenants and Agreements. The provisions of Section 6.02 relating to the treatment of confidential information, Section 9.02, and this Section 10.01 will survive any termination of this Agreement and such provisions along with Section 10.02 will survive the Merger. All representations and warranties and statements made by Burlington and the Company in this Agreement or in any document or certificate delivered pursuant hereto shall survive the Closing Date (a) with respect to representations and warranties set forth in Section 3.23 or otherwise related to Taxes applicable to any taxable period of the Company ended prior to or ending with the Effective Time, until 60 days after the expiration of the statute of limitations set forth in Section 6501(a) of the Code, as such period may be extended by action taken prior to the expiration thereof, (b) with respect to representations and warranties in Section 3.21, for a period of three years from the Closing Date or (c) with respect to all other representations and warranties, exclusive of Sections 3.03 and 4.05, for a period of 18 months from the Closing Date, and in each case shall be unaffected by any investigation made by or on behalf of any party hereto, by knowledge obtained as a result thereof or otherwise or by any notice of breach of, or failure to perform under, this Agreement which is not effectively waived in accordance herewith. Notwithstanding the preceding sentence, any representation, warranty or statement in respect of which indemnity may be sought pursuant to Section 10.02 shall survive the time at which it would otherwise terminate pursuant to the preceding sentence if a notice of indemnification shall have been given prior to such time to the party against whom such indemnity may be sought pursuant to Section 10.02(d). Section 10.02. Indemnification. (a) Subject to Section 10.01, Burlington agrees to indemnify and hold harmless APRO, and its directors, officers, employees, Affiliates, agents and permitted assigns, without duplication, from and against: (i) any and all Damages (as hereinafter defined) asserted against, imposed upon or incurred or suffered by any of them, directly or indirectly, as a result of, or based upon or arising from any inaccuracy in or breach or non-fulfillment of any of the representations, warranties or covenants or agreements made by the Company or Burlington in this Agreement; (ii)(A) any Taxes payable by or on behalf of the Company for, or attributable to, any taxable period ended or ending prior to or at the Effective Time, (except as provided in Section 7.05(e)), (B) Taxes of any member of a consolidated or combined tax group of which the Company is, or was at any time, part, for which the Company is jointly or severally liable as a result of its inclusion in such group on or prior to the Effective Time, (C) any claim or demand for reimbursement or indemnification resulting from any transfer of tax benefits or credits by the Company to any other Person, and (D) any Taxes payable by APRO as a result of any breach of any representation or warranty contained in Section 3.23; (iii)(A) any Damages arising out of or relating to any Employee Plan maintained or sponsored by the Company or any ERISA Affiliate and (B) any Damages (including liabilities arising under Title IV of ERISA or Section 412 of the Code) relating to or arising out of any employee benefit plan maintained by the Company, Burlington or any ERISA Affiliate which is not an Employee Plan; and (iv) liabilities arising out of the operation of the Company, whether pursuant to the Advisory Agreement or otherwise, prior to the Effective Time. (b) Notwithstanding anything in paragraph (a) of this Section 10.02, any claim or recourse against Burlington for indemnification for Damages hereunder will be limited to the amount of the Merger Consideration. (c) Subject to Section 10.01, from and after the Effective Time, APRO will, and will cause the Surviving Corporation to, indemnify and hold harmless the Company, Burlington and each present and former director and officer of the Company determined as of the Effective Time against any and all Damages, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under the MGCL as a result of, or based upon or arising from any inaccuracy in or breach or non-fulfillment of any of the representations, warranties or covenants or agreements made by APRO in this Agreement. (d) Indemnification Procedure: (i) A party seeking indemnification hereunder (an “Indemnified Party”) shall give notice thereof to the party from whom indemnification is required (an “Indemnifying Party”) as promptly as practicable, provided that the rights of the Indemnified Party shall not be affected by any delay in providing such notice except to the extent that the Indemnified Party is actually prejudiced thereby. (ii) Upon receipt of a notice of indemnification arising pursuant to Section 10.02(a) or (c), the Indemnifying Party shall have 20 days in which to dispute the claim asserted by sending written notice thereof to Indemnified Party (a “Dispute Notice”). An Indemnifying Party shall not be entitled to dispute a claim based on a final judgment or order of a court of competent jurisdiction. If no Dispute Notice is received prior to the expiration of the 20-day period, the Indemnified Party shall be entitled to receive full payment of the amount of the claim, subject to the limitations set forth in Sections 10.02(b) and (g). If a Dispute Notice is received prior to the expiration of the 20-day period, the Indemnified Party and the Indemnifying Party shall negotiate in good faith to resolve the dispute. Upon resolving the dispute, the Indemnified Party shall be entitled to receive the amount agreed upon, subject to the limitations set forth in Sections 10.02(b) and (g). If the Indemnified Party and the Indemnifying Party are unable to resolve the dispute within 30 days of the receipt of the Dispute Notice, the dispute shall be submitted to arbitration. Such arbitration shall be conducted according to the applicable rules of the American Arbitration Association and shall take place in New York, New York before a single arbitrator, who shall be jointly designated by the Indemnified Party and the Indemnifying Party, or, if they are unable to agree within 10 days after the dispute is submitted to arbitration, by the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties hereto. (iii) With respect to any claim, demand, action, suit, proceeding or investigation involving an Indemnified Party and a third party, including any Taxing authority or other Governmental Authority, in respect of which the Indemnified Party is entitled to indemnification, the Indemnifying Party shall have the right to participate in, and, with the consent of the Indemnified Party, which consent shall not be unreasonably withheld unless it shall adversely affect the Indemnified Party’s business, to control the defense of any such claim with counsel reasonably acceptable to the Indemnified Party at the Indemnifying Party’s own cost and expense, including the cost and expense of reasonable attorneys’ fees and disbursements in connection with such defense. No settlement of any such claim or payment in connection with any such settlement shall be made without the prior consent of the Indemnifying Party, which consent shall not be unreasonably withheld. (e) If APRO, Burlington or any of their respective successors or assigns (i) consolidates with or merges into any other corporation or entity and will not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any individual, corporation or other entity, then and in each such case, proper provisions will be made so that the successors and assigns of APRO or Burlington, as the case may be, will assume all of the obligations set forth in this Section 10.02. (f) The provisions of this Section 10.02 are intended to be for the benefit of, and will be enforceable by, each of the Indemnified Parties, their heirs and their representatives. (g) In case any event shall occur which would otherwise entitle any party to assert any claim for indemnification hereunder, no Damages shall be deemed to have been sustained by such party to the extent of (i) the value of any tax savings actually realized or to be realized by such party with respect thereto (including savings attributable to an increase in the tax basis of an asset held by such party), but only to the extent such Tax savings result in an actual reduction of Taxes in the year of the claim for such indemnification or (ii) any proceeds received by such party from any insurance policies maintained by the Indemnified Party with respect thereto, net of any increase in premiums or other costs associated with such insurance recovery. (h) The rights of the parties for indemnification relating to this Agreement or the transactions contemplated hereby shall be strictly limited to those contained in this Section 10.02, and such indemnification rights shall be the exclusive remedies of the parties with respect to any matter in any way relating to this Agreement or arising in connection therewith. ARTICLE XI MISCELLANEOUS Section 11.01. Counterparts; Effectiveness. This Agreement may be executed in two or more counterparts, each of which will be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and will become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other parties. Section 11.02. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Maryland, without regard to the principles of conflicts of laws thereof. Section 11.03. Jurisdiction. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any federal court located in the State of Maryland or any Maryland state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. Section 11.04. Notices. All notices and other communications hereunder will be in writing (including telecopy or similar writing) and will be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 11.04 and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section 11.04:           To APRO:   America First Apartment Investors, Inc.     101 East 52nd Street, 25th Floor     New York, New York 10022,     Attention: Jack Cassidy     Telephone: (202) 935-8760     Facsimile: (202) 935-8765 with a copy to:   McGrath, North, Mullin & Kratz, PC LLO     First National Tower, Suite 3700     1601 Dodge Street     Omaha, NE 68102     Attention: David Hefflinger     Telephone: (402) 341-3070     Facsimile: (402) 341-0216 2           To the Company:   America First Apartment Advisory Corporation     Suite 400     1004 Farnam Street     Omaha, NE 68102     Attention: Lisa Roskens     Telephone: (402) 444-1600     Facsimile: (402) 930-3066 3           with a copy to:   Kutak Rock LLP     1650 Farnam Street     Omaha, NE 68102     Attention: Steven P. Amen     Telephone: (402) 346-6000     Facsimile: (402) 346-1148 Section 11.05. Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon and will inure to the benefit of the parties hereto and their respective successors and assigns. Section 11.06. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision will be interpreted to be only so broad as is enforceable. Section 11.07. Enforcement of Agreement. The parties hereto agree that money damages or other remedy at law would not be a sufficient or adequate remedy for any breach or violation of, or a default under, this Agreement by them and that in addition to all other remedies available to them, each of them will be entitled to the fullest extent permitted by law to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including, without limitation, specific performance, without bond or other security being required. Section 11.08. Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof and thereof and, except for the provisions of Section 10.02 hereof, is not intended to and will not confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 11.09. Headings. Headings of the Articles and Sections of this Agreement are for convenience of the parties only and will be given no substantive or interpretive effect whatsoever. Section 11.10. Amendment. This Agreement may be amended at any time by written agreement signed by APRO, the Company (provided that the signature of the Company shall only be required for amendments prior to the Effective Time) and Burlington. Section 11.11. Waiver. Any party to this Agreement may extend the time for the performance of any of the obligations or other acts of any other party hereto, or waive compliance with any of the agreements of any other party or with any condition to the obligations hereunder, in any case only to the extent that such obligations, agreements and conditions are intended for its benefit. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such provision. Section 11.12. Expenses. Except as otherwise expressly provided herein, each party shall bear its own expenses, including the fees and expenses of any attorneys, accountants, investment bankers, brokers, finders or other intermediaries or other Persons engaged by it, incurred in connection with this Agreement and the transactions contemplated hereby. ARTICLE XII DEFINITIONS Section 12.01. Definitions. In addition to the other terms defined herein, the following terms used herein will have the meanings herein specified (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Affiliate” means, with respect to any Person or entity, another Person or entity that controls, is controlled by or under common control with such Person. "Authorization” means any consent, approval or authorization of, expiration or termination of any waiting period requirement (including pursuant to the HSR Act) by, or filing, registration, qualification, declaration or designation with, any Governmental Authority. "Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder and references to the Code herein shall also include any corresponding and applicable provisions of state, local or foreign Tax law. "Damages” means any loss, liability, damage, Tax, demand, claim, action, judgment or cause of action, assessment, cost, obligation or expense (including, without limitation, interest, penalties, reasonable costs of investigation, defense and prosecution of litigation and reasonable attorneys’ and accountants’ fees) incurred by APRO or Burlington, as the case may be, subject in all events to Section 10.02(g). "Employee Plan” means any employment, bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, equity (or equity-based) leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, workmen’s compensation or other insurance, severance, separation, termination, change of control or other benefit plan, agreement (including any collective bargaining agreement), practice, policy or arrangement of any kind, whether written or oral, and whether or not subject to ERISA, including, but not limited to, any “employee benefit plan” within the meaning of Section 3(3) of ERISA. "ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Exchange Act” means the Securities Exchange Act of 1934, as amended. "GAAP” means accounting principles generally accepted in the United States as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority” means any department, division, branch, office or official of a duly elected or appointed governmental office of any country, state, province, county, parish or municipality. "HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property” means all patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); all trademarks, service marks, trade dress, trade names and corporate names and all goodwill associated therewith; all copyrights; all registrations, applications and renewals for any of the foregoing; all product formulations, trade secrets, confidential information, ideas, know-how, production processes and techniques, research information, drawings, specifications, designs, plans, improvements, technical and computer data, documentation and software, financial, business and marketing plans, customer and supplier lists and related information and all other proprietary rights; and all copies and tangible embodiments of the foregoing. "Liens” means pledge, lien, security interest, mortgage, agreement, charge, encumbrance, claim, assessment or restriction of any kind or nature. "Material Adverse Effect” means negative change or effect on or with respect to the Company or APRO, or their respective subsidiaries, as the case may be, (i) that has had, or would reasonably be expected to have, individually, an adverse effect of at least $10,000 (with respect to the Company) or $100,000 (with respect to APRO) on the assets, business, results of operations, prospects or financial or other condition thereof, or (ii) would otherwise be detrimental to the ability of the Company or APRO or their respective subsidiaries to conduct their business or perform their obligations in accordance with past business practices. "Person” means any individual or corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind. "SEC” means the United States Securities and Exchange Commission. "Securities Act” means the Securities Act of 1933, as amended. "Tax” or “Taxes” means any (A) federal, state, local or foreign income, gross receipt, franchise, estimated, alternative minimum, add-on-minimum, property, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, disability, payroll, license, employment or other withholding, or other Taxes, levies, imports, duties, license and registration fees, charges, assessments or withholdings of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; (B) liability for the payment of any amounts of the type described in clause (A) arising as result of being (or ceasing to be) a member of any affiliated group (as defined in Section 1504 of the Code)(or being included (or required to be included) in any combined or consolidated Tax Return relating thereto); and (C) liability for the payment of any amounts of the type described in clause (A) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. "Tax Returns” means any returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of Taxes of any party or the administration of any laws, regulations or administrative requirements relating to any Taxes. Section 12.02. Construction. All capitalized words or terms herein have the meaning ascribed to them as immediately thereafter. The captions or headings in this Agreement are for convenience of reference only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Agreement. All references in this Agreement to particular Articles or Sections are references to the Articles or Sections of this Agreement, unless some other references are clearly indicated. All accounting terms not specifically defined in this Agreement will be construed in accordance with the generally accepted accounting principles as in effect on the date hereof. In this Agreement, unless the context otherwise requires, (a) words describing the singular number will include the plural and vice versa, (b) words denoting any gender will include all genders and (c) the word “including” will mean “including, without limitation.” This Agreement and the other instruments and documents to be delivered pursuant hereto will not be construed more favorably against one party than the other based on who drafted the same, it being acknowledged that all parties hereto contributed meaningfully to the drafting of this Agreement. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.     AMERICA FIRST APARTMENT INVESTORS, INC. By /s/ John H. Cassidy   Name: John H. Cassidy Title: President and Chief Executive Officer   AMERICA FIRST APARTMENT ADVISORY CORPORATION By /s/ John H. Cassidy   Name: John H. Cassidy Title: President and Chief Executive Officer   THE BURLINGTON CAPITAL GROUP LLC By /s/ Lisa Y. Roskens   Name: Lisa Y. Roskens Title: President and Chief Executive Officer   5

Exhibit 10.6 QUEST DIAGNOSTICS INCORPORATED NON-QUALIFIED STOCK OPTION AGREEMENT This Non-Qualified Stock Option Agreement (the “Option Agreement”), dated as of February 15, 2006 (the “Grant Date”), is by and between Quest Diagnostics Incorporated, 1290 Wall Street West, Lyndhurst, New Jersey 07071 (the “Corporation”) and Peters, Robert E. (the “Optionee”) [address].     1. Conditions. This Option Agreement is subject in all respects to the Corporation’s Amended and Restated Long-Term Employee Incentive Plan, which is incorporated herein by reference. The Optionee acknowledges that he/she has read the terms of the Amended and Restated Long-Term Employee Incentive Plan and that those terms shall govern in the event of any conflict between them and those of this Option Agreement.       In consideration of the grant of the option provided pursuant to this Option Agreement and by accepting the terms of this Agreement, the Optionee agrees that all options granted to the Optionee by the Corporation prior to the date hereof (the “Prior Options”) shall be subject to forfeiture pursuant to paragraph 4(b)(ii) of this Option Agreement (for false attestation under the Executive Share Ownership Guidelines of the Corporation (the “ Minimum Share Ownership Policy”)), the Shares obtained on exercise of such Prior Options after the date hereof shall be subject to the Minimum Share Ownership Policy pursuant to paragraph 5(b) of this Option Agreement and the terms of paragraphs 4(b)(ii) and 5(b) hereof are made a part of the terms of each of the Prior Options.       In consideration of the grant of the option provided pursuant to this Option Agreement and by accepting the terms of this Agreement, the Optionee agrees that this Option shall be subject to forfeiture pursuant to paragraph 4(b)(iii) of this Agreement.       This Option Agreement shall become effective only after the Optionee has executed and returned to the Executive Compensation Department (to the attention of Lisa Zajac (1290 Wall Street West – 5th Floor, Lyndhurst, NJ 07071) a signed copy of this Option Agreement and shall be revoked if not executed and returned to Lisa Zajac within thirty (30) days of receipt by the Optionee.     2. [Award of Option. The Corporation hereby awards to the Optionee an option (the “Option”) to purchase from the Corporation such number of shares of the Corporation’s common stock (the “Shares”) at the exercise price set forth in this Option Agreement (the “Exercise Price”) below. This option shall vest equally over a three-year period. If the foregoing results in a fractional number of Shares subject to the Option vesting on any vesting date, the number of Shares subject to the Option vesting on the first and second vesting dates shall be rounded down to the previous whole number of Shares and the Shares subject to the Option vesting on the third vesting date shall be rounded up to the next whole number of Shares, as shall be necessary in order to result in a vesting of 100% of the Shares subject to the Option. The Compensation Committee of the Corporation may, in its sole discretion, convert this Option at any time to a stock settled stock appreciation grant.         Number of Shares Subject to Option: 50,000       Exercise Price per Share: $52.235       Expiration Date: February 15, 2013 Vesting Schedule:                               Number of Shares Subject to Option           -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Vesting Dates   % of Grant   Incremental   Cumulative   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- February 15, 2007   33.33 %   16,666     16,666     February 15, 2008   33.33 %   16,667     33,333     February 15, 2009   33.34 %   16,667     50,000     This option shall expire, and no shares may be purchased pursuant to this Option, after the expiration date set forth above (the “Expiration Date”). Page 1 of 9 EOAgmt -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 2.         3. Not An Incentive Stock Option. This Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and this Agreement shall be construed and interpreted in accordance with such intention.     4. Vesting. Except as otherwise provided below, the Option shall vest and become exercisable as to the percentage of Shares subject to the Option on the vesting dates [set forth above][set forth on the “Summary Grant” page at the Smith Barney website] (the “Vesting Dates”).       (a) Termination. Unless the Optionee’s employment is terminated for one of the reasons set forth in Section 4(b) through (i), at the Optionee’s termination of employment prior to the third anniversary of the date of this Agreement, the Optionee will vest in and have the right to purchase a percentage of the Shares subject to this Option determined by dividing (i) the number of whole months from the most recent anniversary of the grant date (February 15) to the termination date of the Optionee’s employment by (ii) 36, and the Option will cease to be exercisable and will be cancelled for the balance of the Shares subject to this Option.           Notwithstanding anything to the contrary contained herein, if the Optionee is on a leave of absence approved by the Corporation for medical, personal, educational and/or other permissible purposes pursuant to policies of the Corporation as in effect on the date hereof, for a consecutive twelve-month period, such Optionee will be deemed terminated for purposes of this Agreement on the twelve month anniversary of the commencement of such leave of absence and this Option shall cease to vest at the end of such twelve-month period and the Optionee will forfeit any unvested portion of the Option.     (b) Cause, Dereliction of Duties or Harmful Acts; Breach of Share Ownership Guidelines; Loss of Equity Award Eligibility Status. (i) If the Optionee shall cause the Corporation to suffer financial harm or damage to its reputation (either before or after termination of employment) through (x) dishonesty, (y) violation of law in the course of the Optionee’s employment or violation of the Corporation’s Corporate Compliance Manual and compliance bulletins or other written policies, or (z) material deviation from the duties owed the Corporation by the Optionee, this Option, whether or not vested, shall expire and be cancelled to the extent it has not been exercised and be of no further force or effect.       (ii) If the Optionee is subject to the Minimum Share Ownership Policy, any false attestation made under the Minimum Share Ownership Policy may result in the immediate cancellation of this Option and all Prior Options (to the extent not exercised), whether or not vested.           (iii) If the Optionee’s employment status in the Corporation is changed such that the Optionee will no longer be eligible to receive options pursuant to the Equity Award Eligibility Policy of the Corporation as in effect on the date hereof and attached as Annex A to this Agreement and such changed status continues for a consecutive 90 day period, this Option shall cease to vest at the end of such 90-day period (and the Optionee will then vest in and have the right to purchase a percentage of the Shares subject to this Option determined by dividing (i) the number of whole months from the most recent anniversary of the grant date (February 15) to the end of such 90-day period by (ii) 36), and the Optionee will immediately forfeit any unvested portion of the Option.         (c) Death. If the Optionee shall die while employed, this Option shall vest as to all Shares subject to the Option on the date of the Optionee’s death.         (d) Disability. If the Optionee’s employment shall terminate as a result of disability (as defined in Section 22(e)(3) of the Code), this Option shall vest as to all Shares subject to the Option on the date of the Optionee’s termination of employment.         (e) Change of Control. This Option shall vest as to all shares immediately on the effective date of a change of control, provided the Optionee was actively employed by the Corporation on such date. For purposes of this Agreement the term “change of control” shall mean and shall be deemed to occur if and when:           (i) Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 40% of more of the combined voting power of the Corporation’s then outstanding securities; or page 2 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 3.             (ii) The individuals who, as of the Grant Date, constituted the Corporation’s Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual (other than any individual whose initial assumption of office is in connection with an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation A promulgated under the Securities Exchange Act of 1934)), becoming a director subsequent to the Grant Date, whose election, or nomination for election by the stockholders of the Corporation, 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 was a member of the Incumbent Board; or             (iii) Shareholders of the Corporation approve an agreement, providing for (a) a transaction in which the Corporation will cease to be an independent publicly owned corporation, or (b) the sale or other disposition of all or substantially all of the Corporation’s assets, or (c) a plan of partial or complete liquidation of the Corporation.           (f) Involuntary Termination with Severance. If prior to the third anniversary of the date of this Agreement, the Optionee’s employment is terminated by the Corporation and, as a result, the Optionee becomes eligible for severance benefits under one of the Corporation’s Severance Plans, the Optionee will immediately vest in and have the right to purchase a percentage of the Shares subject to this Option determined by dividing (i) the number of whole months from the most recent anniversary of the grant date (February 15) to the date that is twelve months after the termination date of the Optionee’s employment by (ii) 36, and the Option will cease to be exercisable and will be cancelled for the balance of the Shares subject to this Option.         (g) Divestiture. If prior to the third anniversary of the date of this Agreement, the Optionee’s employment is terminated by the Corporation due to a divestiture and the Optionee is employed by the purchasing entity, then the Optionee will immediately vest in a percentage of the Shares subject to this Option determined by dividing (i) the number of whole months from the most recent anniversary of the grant date (February 15) to the date that is twelve months after the termination date of the Optionee’s employment by (ii) 36, and the Option will cease to be exercisable and will be cancelled for the balance of the Shares subject to this Option.         (h) Transfers. If the Optionee shall be transferred from the Corporation to a subsidiary company (being a 50% owned entity within the meaning of Section 425(f) of the Code), or joint venture or similar entity existing as of the date of this Agreement in which the Corporation has at least a 33.33% interest (“joint venture”) or vice versa or from one subsidiary company (or joint venture) to another, the Optionee’s employment shall not be deemed to have terminated. If, while the Optionee is employed by such a subsidiary company or joint venture, such subsidiary company or joint venture shall cease to be a subsidiary company or joint venture as described above and the Optionee is not thereupon transferred to and employed by the Corporation or another subsidiary company or joint venture as described above, then the Optionee’s employment will be treated as a termination due to a divestiture under clause (g) above as of the date that the Optionee’s employer ceases to be such a subsidiary company or joint venture of the Corporation.         (i) Retirement. If the Optionee’s employment shall terminate with the consent of the Corporation on or after the Optionee’s attaining age 60, this Option shall vest and be exercisable as to all Shares subject to this Option on the effective termination date of the Optionee’s employment.       5. Non-Transferability.       a) The rights under this Option Agreement shall not be transferable other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Optionee only by the Optionee except to the extent of a disability (as defined in Section 22(e)(3) of the Code), in which case the Option may be exercised by the Optionee’s legal representative.         b) If the Optionee is subject to the Minimum Share Ownership Policy, the Optionee agrees that any shares issued hereunder or pursuant to any Prior Option shall be subject to the restrictions set forth in the Minimum Share Ownership Policy. If the Optionee is not in compliance with the Minimum Share Ownership Policy, the Corporation may terminate the employment of such Optionee and/or the Option shall immediately terminate and cease to be exercisable. The Optionee hereby acknowledges and agrees that the investment risk associated with the retention of any Shares, whether pursuant to the Minimum Share Ownership Policy or otherwise, is the sole responsibility of the Optionee and Optionee hereby holds the Corporation harmless against any claim of loss related to the retention of the Shares.       6. Exercise. The purchase price of Shares purchased hereunder shall be paid in full with, or in a combination of, (a) cash or (b) shares of the Corporation’s Common Stock that have been owned by the Optionee, and have been fully vested and freely transferable by the Optionee, for at least six months preceding the date of exercise of the Option, duly endorsed or accompanied by stock powers executed in blank. However, the Corporation in its discretion may permit the Optionee (if the Page 3 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 4.       Optionee owns shares that have been owned by the Optionee, and have been fully vested and fully transferable by the Optionee, for at least six months preceding the date of exercise) to “attest” to his ownership of the number of shares required to pay all or part of the purchase price (and not require delivery of the shares), in which case the Corporation will deliver to the Optionee the number of shares to which the Optionee is entitled, net of the “attested” shares. If payment is made in whole or in part with shares of the Corporation’s Common Stock, the value of such Common Stock shall be the mean between its high and low prices on the day of purchase as reported by The New York Times following the close of business on the date of exercise. No “reload” or other option will be granted by reason of any such exercise. The Optionee agrees that, notwithstanding the terms of any pre-existing agreement between the Corporation and the Optionee, any shares of the Corporation’s Common Stock surrendered (or “attested” to) for payment of the exercise price of any options previously granted by the Corporation to the Optionee (whether granted under the terms of the Amended and Restated Employee Long-Term Incentive Plan or any predecessor program) shall be valued in the manner provided in the preceding sentence except to the extent otherwise expressly provided by the terms of the program document.         7. Exercise After Termination of Employment, Death or Disability. The provisions covering the exercise of this Option following termination of employment are as follows:       (a) Termination in General. If the Optionee shall terminate his employment for any reason other than those described in Section 7(b) through (f), all of the vested percentage of the Option may be exercised for ninety (90) days following such termination (but not beyond the Expiration Date) and the Option shall thereafter expire and cease to be exercisable;         (b) Death. If the Optionee shall die while employed, the Option may be exercised through the Expiration Date in respect of all of the Shares subject to the Option. If the Optionee shall die after termination of employment but while the Option is still exercisable, it shall remain exercisable to the same extent through the first anniversary of the date of death but not beyond the Expiration Date;         (c) Disability. If the Optionee’s employment shall terminate as a result of disability (as defined in Section 22(e)(3) of the Code), the Option shall remain exercisable through the Expiration Date;         (d) Involuntary Termination with Severance. If the Optionee’s employment is terminated by the Corporation and, as a result, the Optionee becomes eligible for severance benefits under the Corporation’s Severance Plans, then to the extent this Option is vested and exercisable (and becomes vested and exercisable under Section 4(f)), it may be exercised through the first anniversary of the date of termination (but not beyond the Expiration Date) and shall thereafter expire.         (e) Divestiture. If prior to the third anniversary of the date of this Agreement, the Optionee’s employment is terminated by the Corporation due to a divestiture and the Optionee is employed by the purchasing entity, then to the extent this Option is vested and exercisable (and becomes vested and exercisable under Section 4(g)), it may be exercised through the first anniversary of the date of termination (but not beyond the Expiration Date) and shall thereafter expire.         (f) Retirement. If the Optionee’s employment shall terminate as a result of Retirement as defined in Section 4(i) of this Option, all of the Option may be exercised as to all of the Shares subject to the Option through the Expiration Date.         In no event may any portion of the Option be exercised after the Expiration Date.     8. Consideration. In consideration for the Option granted by this Option Agreement, the Optionee hereby agrees to be bound by the Nondisclosure and Nonsolicitation provisions set forth in Sections 9 and 10 of this Option Agreement and the non-compete obligations set forth in the agreement between the Optionee and the Corporation or otherwise pursuant to any written policy of the Corporation. For purposes of Sections 9 and 10, the term “Company” shall mean the Corporation, its affiliates, divisions and subsidiaries, or any other entity in which the Corporation, directly or indirectly, controls or has an ownership or equity interest equal to or greater than 25.0% of the combined voting power of the entity’s then outstanding securities, and their respective successors and assigns.     9. Nondisclosure of Confidential Information.     (a) For purposes of this Option Agreement, the term “Confidential Information” shall mean all ideas, inventions, data, databases, know-how, processes, methods, practices, specifications, raw materials and preparations, compositions, designs, devices, fabrication techniques, technical plans, algorithms, computer programs, protocols, client information, medical records, documentation, customer names and lists, supplier names and lists, price lists, supplier names and lists, apparatus, business plans, marketing plans, financial information, chemical and biological reagents, business methods and systems, literary and graphical and audiovisual works and sound recordings, mask works, page 4 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 5.           computer programs, and the like, and potential trade names, trademarks, and logos, in whatever form or medium and which have commercial value, and whether or not designated or marked “Confidential” or the like, which the Optionee learns, acquires, conceives, creates, develops, or improves while employed by the Company and which (1) relate to the past, current, or prospective business of the Company or its subsidiaries and (a) which have not previously been publicly disclosed without restrictions on use by the Company, or (b) which Optionee knows or has good reason to know are not generally publicly known; or (2) are received by the Company from a third party under an obligation of confidentiality to the third party         (b) The Optionee recognizes and acknowledges that during his or her employment with the Company, the Optionee may be given access to or develop Confidential Information. The Optionee shall not use or disclose (directly or indirectly) any Confidential Information (whether or not developed by the Optionee) at any time or in any manner, except as authorized and required in the course of employment with the Company. The Optionee shall not disclose to the Company or use on behalf of the Company any Confidential Information obtained from any former employer or any other third party. All documents and things embodying Confidential Information, whether prepared by the Optionee or otherwise coming into the Optionee’s possession, are the exclusive property of the Company, and must not be removed from any of its premises except as required in the course of employment with the Company. All such documents and things shall be promptly returned by the Optionee to the Company upon the request of the Company and on any termination of employment with the Company. The Optionee will not remove any Confidential Information such as documents or things or retain them in whole or part in any manner. The Optionee shall ensure that any export of Confidential Information undertaken by the Optionee or with his/her knowledge or approval shall be in compliance with all applicable laws.         (c) The Optionee shall promptly disclose to the Company all Confidential Information which the Optionee creates, conceives, develops, or improves (either alone or with others) referred to below as a “Creation” while in the employment of the Company, if the Creation either: (1) relates to any actual or demonstrably contemplated business, or research or development project, of the Company or its subsidiaries, or to any reasonable extension or variation thereof; or (2) results from any work performed by the Optionee for the Company; or (3) was created utilizing any of the Company’s equipment, supplies, facilities, time, or Confidential Information. The Optionee shall keep complete, accurate, and authentic records on all Creations in the manner and form requested by the Company. The Optionee shall promptly disclose to the Company, in confidence, all patent, copyright, and trademark applications filed by the Optionee within one (1) year after termination of employment with the Company and which relate to any field in which the Optionee worked at the Company. The Optionee agrees that any such application for a patent, copyright registration, trademark registration, mask work registration, or similar right filed within one (1) year after termination of employment with the Company shall be presumed to relate to a Creation of the Optionee created during employment at the Company, unless the Optionee can prove otherwise.         (d) The Optionee hereby assigns to the Company all of the Optionee’s rights in all of the above-described Creations. All such Creations that are subject to copyright or mask work protection are explicitly considered by the Optionee and the Company to be works made for hire to the extent permitted by law. To the extent that any such Creations are subject to copyright protection and are not works made for hire, any and all of the Optionee’s copyright and mask work interest therein are hereby assigned by the Optionee to the Company, and are the exclusive property of the Company.         (e) The Optionee agrees to assist the Company in obtaining and/or maintaining patents, copyrights, trademarks, mask work rights, and similar rights to any Creations assigned by the Optionee to the Company, if and to the extent that the Company, in its sole discretion, requests such assistance, the Optionee shall sign all documents and do all other things deemed necessary by the Company, at the Company’s expense, to obtain and/or maintain such rights, to provide confirmatory evidence of the Optionee’s assignment of such Creations to the Company, to defend them from invalidation, and to protect them against infringement by other parties. The obligations of this paragraph are continuing and survive the termination of the Optionee’s employment with the Company. The Optionee irrevocably appoints the Chief Executive Officer of the Company (with powers of delegation) to act as the Optionee’s agent and attorney-in-fact to perform all acts as the Optionee’s agent and to file, prosecute, and maintain applications and registrations for patents, trademarks, copyrights, mask work rights, and similar rights to any Creations assigned by the Optionee to the Company under this Option Agreement, such appointment being effective both during the Optionee’s employment by Company, and thereafter if the Optionee (1) refuses to perform those acts, or (2) is unavailable, within the meaning of any applicable laws. The Optionee acknowledges that the grant of the foregoing power of attorney is coupled with an interest, is irrevocable, and shall survive his/her death or disability. Page 5 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 6.         10. Nonsolicitation       (a) For a period of one (1) year following the termination of the Optionee’s employment for any reason, the Optionee will not directly or indirectly solicit the Business of any customer of the Company of whom the Optionee acquired knowledge and/or had direct or indirect contact during the one (1) year period prior to the termination of the Optionee’s employment relationship with the Company for any purpose other than to obtain, maintain and/or service the customer’s Business for the Company.         (b) For a period of one (1) year following the termination of the Optionee’s employment for any reason, the Optionee agrees not to, directly or indirectly, recruit or solicit any employees of the Company to work for the Optionee or any other person or entity.         (c) As used in this Option Agreement, the following terms shall have these respective definitions:           (i) “Current Business” shall mean and include: providing clinical testing information services for the diagnosis, monitoring, and treatment of disease; providing clinical laboratory management services; providing medical informatics services (i.e., the statistical analysis of medical information) and consulting services based on such analysis; providing data analysis, medical information services, and database management services for the health care industry; providing clinical testing information services in support of clinical trials, and clinical testing products for use in clinical trials; providing services of storage, retrieval, and communication of medical information via interactive computer networks; providing to managed care organizations, hospitals, employers, and other institutional healthcare providers access to a network of clinical diagnostic laboratories providing services of processing requests for diagnostic tests, performing tests, reporting test results, and paying claims to network laboratories; providing quality and utilization management; providing consolidated chronological reports in graphical and/or numerical form, representing the results of clinical diagnostic tests performed on individual patients and groups of patients over monitored periods of time, together with analysis of the results; and manufacturing and selling clinical diagnostic assay kits, apparatus, and reagents.             (ii) “Business” shall include the Current Business and any other product or service which the Company provided during the one (1) year period prior to the Optionee’s termination of employment and during the one (1) year period following the Optionee’s termination of employment, but the restriction on products and services introduced after the Optionee’s termination of employment shall exclude products and services that were not planned, discussed, or contemplated prior to the Optionee’s termination of employment.             (iii) “Indirectly Solicit” shall include, but is not be limited to, providing the Company’s Confidential Information to another individual, or entity, allowing the use of the Optionee’s name by any company (or any employees of any other company) other than the Company, in the solicitation of the Business of Company’s customers.         11. Damages and Injunctive Relief. The Optionee understands that if the terms of Section 9 and/or 10 of this Option Agreement are violated, the Corporation would be seriously and irreparably damaged, and agrees that the Corporation will be entitled to seek appropriate remedies for those damages, including, without limitation, injunctive relief to enforce any provision of this Agreement and all reasonable attorney’s fees incurred by the Corporation to enforce the terms of these Sections.     12. Forfeiture. The Optionee will immediately forfeit any unexercised portion of the Option for any violations of (i) the terms of Sections 9 and/or 10 of this Agreement and/or (ii) the non-compete obligations set forth in the agreement between the Optionee and the Corporation or otherwise pursuant to any written policy of the Corporation, in addition to any equitable and legal rights the Corporation has or may have. The Optionee understands that the forfeiture of any unexercised portion of the Option is only one element of the damages potentially sustained by the Corporation for a violation of Sections 9 and/or 10 of this Agreement or the non-compete obligation described above, and such forfeiture shall not constitute a release of any claim that the Company may have for damages, past, present, or future. Page 6 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 7.     13. (a) Consent Requirement. If the Corporation shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of this Option, the issuance or purchase of Shares or other rights hereunder, or the taking of any other action hereunder (a “Plan Action”), then no such Plan Action shall be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Corporation.       (b) Definition of Consent. The term “consent” as used herein with respect to any action referred to in Section 13(a) means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii) any and all written agreements and representations by the Optionee with respect to the disposition of Shares, or with respect to any other matter, which the Corporation shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made, (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies, and (iv) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or otherwise required by the Corporation. Nothing herein shall require the Corporation to list, register or qualify the Shares of its common stock on any securities exchange.     14. Invalidity and Enforcement. If any provision of this Agreement is deemed invalid or unenforceable, either in whole or in part, this Option Agreement will be deemed amended to delete or to modify, as set forth in this Section, the offending provision or provisions and to alter the bounds of this Agreement in order to render it valid and enforceable. The Corporation and the Optionee specifically request that any court having jurisdiction over any dispute relating to this Option Agreement modify, if possible, any offending provision so that such provision will be enforceable to the maximum extent permitted by State law.     15. Employee at Will. The Optionee understands that his/her employment with the Corporation is at will and that it can be terminated at any time by the Optionee and/or the Corporation.     16. Enforcement by Successors and Assigns. The Corporation and any of its successors or assignees may enforce the Corporation’s rights under this Option Agreement.     17. Entire Agreement. The Agreement supersedes any prior agreement or understandings between the Optionee and the Company with respect to nonsolicitation, nonuse, and non-disclosure and constitutes the entire agreement between the Corporation and the Optionee. No modification of this Option Agreement will have any force or effect unless such modification is in writing, signed by the Chief Executive Officer of the Corporation and the Optionee, and expressly indicates an intent to modify this Option Agreement.     18. Interpretation. Any dispute, disagreement or matter of interpretation which shall arise under this Agreement shall be finally determined by the Corporation’s Compensation Committee in its absolute discretion.     19. Notice of Exercise. The Optionee may exercise the Option, in accordance with the procedures specified by the Corporation from time to time.     20. Rights Prior to Exercise. The Optionee shall not have any rights as a stockholder with respect to any Shares subject to this Option prior to the date on which he/she is recorded as the holder of such Shares on the records of the Corporation.     21. Taxes. The Corporation may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all federal, state, local and other taxes required by law to be withheld with respect to this Option.     22. Governing Law. This Option Agreement and all rights hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the state of New Jersey applicable to contracts made and to be performed entirely within such state.     23. Acknowledgements. By execution of this Non-Qualified Stock Option Grant Agreement, the Optionee agrees that he/she has received and reviewed a copy of:       (a) the Prospectus (link to Prospectus:   http://questnet1.qdx.com/Business_Groups/Legal/policies/stock_option/stock_option.htm)   relating to the Corporation’s Employee Equity Participation Program and;       (b) the Quest Diagnostics Incorporated 2005 Annual Report (link to 2005 Annual Report:   http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=DGX&script=700 to Shareholders and Form 10-K);       (c) the Corporation’s Policy for Purchasing and Selling Securities (“the Policy”) (link to Trading Policy: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm.) The Optionee further agrees to fully comply with the terms of the Policy; Page 7 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 8.       (d) the Corporation’s Executive Share Ownership Guidelines (link to guidelines: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm); and       (e) the Corporation’s Equity Award Eligibility Policy attached hereto as Annex A.               OPTIONEE:           By: --------------------------------------------------------------------------------     Peters, Robert E.   Page 8 of 9 -------------------------------------------------------------------------------- Non-Qualified Stock Option Agreement February 15, 2006 page 9. Annex A Quest Diagnostics Incorporated “Equity Award Eligibility Policy” Option Eligibility       • Unreduced Work Schedule • One of the following salary grades:   • Corporate VP or Higher   • Salary Grade 53 or Higher   • Research & Development - Grade RD6 or Higher   • Medical Director - Grade MD2 For employees whose salary is administered outside the standard Quest structure (i.e., MedPlus, International, Clinical Trials Europe), a Quest Diagnostics salary grade has been assigned consistent with the above requirements. This grade is stored within the Company’s Stock Administration System. IMPORTANT: Meeting the criteria for “Option Eligibility” does not guarantee an award. All grants are subject to a separate approval process. Page 9 of 9 --------------------------------------------------------------------------------

EXHIBIT 10.60   EMPLOYMENT AGREEMENT   This Employment Agreement (“Agreement”) made and entered into effective as of January 12, 2006 (the “Effective Date”), by and between FuelCell Energy, Inc. (the “Corporation”), a Delaware corporation with its principal office at 3 Great Pasture Road, Danbury, Connecticut, 06813, and R. Daniel Brdar (“Executive”), an individual who resides at 109 Lake Ridge Road, Southbury, Connecticut 06488.   WHEREAS, the Corporation desires to promote Executive to the position of President and Chief Executive Officer and the Executive desires to accept such promotion, commencing as of the Effective Date; and   WHEREAS, the Corporation and Executive desire to enter into this Agreement to set forth the terms and conditions of their employment relationship; and   WHEREAS, Executive acknowledges that by executing and delivering this Agreement, he will obtain certain rights, compensation, and benefits greater than those that he previously received from the Corporation and that, accordingly, such rights, compensation, and benefits constitute valid consideration to Executive.   NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:   1. Employment. The Corporation shall employ Executive in the capacity of President and Chief Executive Officer (“President & CEO”) of the Corporation during the term of this Agreement, and Executive hereby accepts such employment on the terms and conditions set forth in this Agreement. Executive represents that his employment by the Corporation pursuant to this Agreement does not violate any other agreement, covenant or obligation to which he is a party or by which he is bound. 2. Duties. During the term of this Agreement, Executive shall perform all duties, consistent with his position as President & CEO in order to advance the Corporation’s affairs and related business efforts, assigned or delegated to him by the Board of Directors of the Corporation (the “Board”) and normally associated with the position of President & CEO. He shall devote all of his full business time, attention, energies, skills, and efforts to the advancement of the interests and business of the Corporation. Following the Effective Date of this Agreement, Executive shall become a member of the Board and its Executive Committee.   3. Term. The term of this Agreement shall begin on the Effective Date, and shall expire on December 31, 2006, unless earlier terminated as provided in this Agreement (the “Initial Term”). Upon expiration of the Initial Term and any subsequent term or extension thereof, this Agreement shall automatically be extended for an additional term of one (1) year, unless Executive or the Corporation elect to terminate this Agreement in accordance with the provisions of Section 12 of this Agreement (the “Initial Term,” together with any subsequent terms or extensions, until termination or expiration in accordance with the provisions of this Agreement, shall be referred to as the “Employment Term”). -------------------------------------------------------------------------------- 4. Compensation. As compensation for any and all services to be rendered by Executive to the Corporation pursuant to this Agreement, the Corporation shall pay Executive and provide Executive with the following compensation and benefits, which Executive agrees to accept in full satisfaction for his services:   a. Base Salary. The Corporation shall pay Executive a Base Salary, payable in equal installments at such payment intervals as are the usual payroll practices of the Corporation, at an initial annual rate of $350,000, less such deductions or amounts to be withheld as shall be required by applicable law or as may be allowed at the request of Executive (the “Base Salary”). The Base Salary shall be reviewed at least annually by the Compensation Committee of the Board after the end of each fiscal year of the Corporation and shall be adjusted by such amount, if any, as Compensation Committee of the Board, in its sole discretion, shall determine and approve. Any such adjustment of Base Salary shall be made effective on the date set by the Compensation Committee of the Board.   b. Bonus. Provided Executive first meets the Corporation’s expectations for his performance during the Employment Term and remains employed on the date of payment, Executive shall be eligible for a discretionary bonus (a “Discretionary Bonus”) of up to fifty percent (50%) of his Base Salary as determined and approved by the Board in its sole discretion based upon Executive’s achievements in meeting his performance goals and those of the Corporation for its most recently ended fiscal year. Goals shall be established after the commencement of the Employment Term and then in the first quarter of any subsequent fiscal year. Any such Discretionary Bonus may be payable in cash, stock options, and/or restricted stock upon such terms and conditions as determined by the Board. The Corporation shall pay any such Discretionary Bonus by the end of the first quarter of the following fiscal year. As any bonus paid to Executive is discretionary, the payment of any bonus in a year must not be construed as requiring the payment of a bonus in any other year.   c. Benefits.   (i) Executive shall be entitled to participate, to the extent he is eligible, in all group insurance programs, health, medical, dental, and disability plans (including, without limitations, the Corporation’s 401(k) plan), and other employee benefit plans which the Corporation may hereafter in its sole and absolute discretion make available generally to its senior executives (other than any incentive compensation or equity ownership plan), but the Corporation shall not be required to establish or maintain any such program or plan.   2 -------------------------------------------------------------------------------- (ii) Executive shall be entitled to four (4) weeks paid vacation during each calendar year, in accordance with the Corporation’s vacation policies. Such vacation may be taken at such time or times as is reasonably consistent with the Corporation’s vacation policies and the performance by Executive of his duties and responsibilities under this Agreement. Up to one week of unused vacation time in one year may be carried over and used in the subsequent year.   (iii) Executive shall be entitled to participate in the Corporation’s Stock Option Plan (the “Plan”) and the Compensation Committee of the Board has previously granted Executive options to purchase 250,000 shares of the Corporation’s common stock. The Option shall not be subject to accelerated vesting in the event Executive is terminated for Cause pursuant to Section 12c hereof. Executive understands and agrees that any stock rights granted to Executive shall be subject to the provisions of the Plan and any separate written agreements embodying the grant of the rights that are required by the Plan. The rights shall be set forth in a separate agreement embodying the grant of the rights which shall be otherwise in the form stipulated in the Plan. To the extent that there is any conflict between the vesting provisions of this Agreement and the provisions of the Plan, the provisions of this Agreement shall govern.   d. Taxes. All compensation and benefits are subject to applicable withholding taxes, federal, state, and local, and any other proper deductions.   e. Benefit Plans. Executive understands that the Corporation may amend, change, or cancel its employment policies and benefit plans at any time as allowed by law or by any applicable plan documents.   5. Business Expenses. The Corporation shall pay, or reimburse Executive for, the reasonable and necessary business expenses of Executive incurred in the performance of his duties under this Agreement, provided Executive provides timely and reasonable documentation of those expenses in accordance with the rules and regulations of the Corporation.   6. Compliance with Policies. Executive acknowledges and agrees that, except as set forth in this Agreement, compliance with the Corporation’s policies, practices and procedures is a term and condition of his employment under this Agreement.   7. Intellectual Property, Inventions and Improvements. Executive acknowledges, covenants and agrees that the Corporation shall be the sole owner of all the fruits and proceeds of Executive’s services to the Corporation, including but not limited to all writings, inventions, discoveries, designs, systems, processes, software or other improvements relating to the business or products of the Corporation, whether or not patentable, registerable, or copyrightable, which Executive may, alone or with others, conceive, create, develop, produce or make during or as a result of his employment with the Corporation (collectively, the “Invention”), free and clear of any claims by Executive of any kind or character whatsoever other than Executive’s rights to compensation under this Agreement. Executive agrees that he shall disclose each of the Inventions promptly and completely to the Corporation, and shall, at the request of the Board, execute such assignments, certificates or other instruments as the Board or the Corporation from time to time deem necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend the Corporation’s right, title and interest in or to any or all of the Inventions. Executive acknowledges that all works of authorship (including, without limitation, works of authorship that contain software program code) relating to the business of the Corporation and produced during Executive’s employment with the Corporation, whether they are or are not created on the Corporation’s premises or during regular working hours, are works made for hire and are the property of the Corporation, and that copyrights in those works of authorship are the property of the Corporation. If for any reason the Corporation is not the author of any such work of authorship for copyright purposes, Executive hereby expressly assigns all of his rights in and to that work to the Corporation and agrees to sign any instrument of specific assignment requested. Executive, whether or not still employed by the Corporation, agrees to supply evidence, give testimony, sign and execute all papers, and do all other legal and proper things that the Corporation may deem reasonably necessary for obtaining, maintaining, and enforcing patents for such Inventions and for vesting in the Corporation full title. If Executive is no longer employed by the Corporation at such time, then Corporation shall pay Executive his reasonable out-of-pocket expenses incurred in connection with his providing the services rendered by him in the previous sentence.   3 -------------------------------------------------------------------------------- 8. Non-Disclosure of Confidential Information.   a. Executive acknowledges that, in and as a result of his employment by the Corporation, he will be making use of, acquiring and/or adding to the Corporation’s Confidential Information (as defined below). As a material inducement to the Corporation to employ Executive and to pay Executive the compensation and benefits set forth in this Agreement, Executive covenants and agrees that he shall not, at any time during or following the term of his employment with the Corporation, directly or indirectly divulge or disclose for any purposes whatsoever, any Confidential Information that has been obtained by, or disclosed to, him as a result of his employment with the Corporation. For purposes of this Agreement, “Confidential Information” means, collectively, all confidential matters and materials of the Corporation, including without limitation, (i) the Corporation’s proprietary information, inventions, trade secrets, knowledge, data, know-how, intellectual property, systems, procedures, manuals, pricing policies, operational methods and information relating to the Corporation’s products, processes, formulae, business plans, marketing plans and strategies, pricing strategies, customer lists, and all other subject matters pertaining to the business and/or financial affairs of the Corporation; (ii) the Corporation’s information regarding plans and strategies for research, development, new products, future business plans, budgets and unpublished financial statements, licenses, prices and costs; (iii) information regarding the skills and compensation of other employees of the Corporation; and (iv) information disclosed in confidence to the Corporation by a third party with a duty on the Corporation to maintain the confidentiality of such information. The term “Confidential Information” shall not include any information that (x) has been made available generally to the public either by the Corporation or by a third party with the Corporation’s consent, unless such information became available as a result of any action by Executive in violation of this Agreement, any other agreement, or his obligations under law, or (y) has been made available as a result of a final award, order, or ruling by an arbitration tribunal or a court of competent jurisdiction that has determined that such Confidential Information may be disclosed.   b. If Executive is required by a court, arbitration tribunal, or governmental agency (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation demand or similar process) to disclose any Confidential Information, Executive may disclose such Information to such court, tribunal, or agency without liability hereunder, provided, that Executive first provides the Corporation with notice of any such requirement(s) as promptly as practicable, but in any case with sufficient timeliness to enable the Corporation to seek an appropriate protective order and/or waive its compliance with the relevant provisions of this Agreement.   4 -------------------------------------------------------------------------------- 9. Covenants Against Competition.   a. Non-Solicitation of Employees. While employed by the Corporation and for a period of one (1) year, followed by a second period of one (1) year, for a total period of two (2) years, from the date of termination of Executive’s Employment Term with the Corporation for any reason, Executive shall not directly or indirectly solicit, induce or encourage any of the Corporation’s employees to terminate their employment with the Corporation or to accept employment with any competitor, supplier, client, agent or broker of the Corporation, nor shall Executive cooperate with any others in doing or attempting to do so. As used in this paragraph, the term “solicit, induce or encourage” includes, but is not limited to, (i) initiating communications with any employee of the Corporation relating to possible employment or independent contractor relationship, (ii) offering bonuses or additional compensation to encourage any employee of the Corporation to terminate his or her employment with the Corporation and accept employment with a competitor, supplier, client, agent or broker of the Corporation, or (iii) referring any employee of the Corporation to recruiters, personnel or agents employed by competitors, suppliers, clients, agents or brokers of the Corporation. Notwithstanding the foregoing, the term "solicit, induce or encourage", as used in this Section 9a, specifically excludes any action by the Executive related to any of the Corporation's employees where it is in the Corporation's best interest to terminate any such employees as in the case of a planned reduction in force by the Corporation.   b. Non-Compete. While Executive is employed by the Corporation and for a period of one (1) year, followed by a second period of one (1) year, for a total period of two (2) years, from the date of termination of Executive’s Employment Term for any reason, Executive shall not directly or indirectly, as a principal, agent, contractor, employee, employer, partner, shareholder, proprietor, investor, member, director, officer or consultant or in any other capacity, engage in or perform any managerial or executive services (a) for any corporation, partnership, individual or entity which is engaged in a business competitive with the Corporation or affiliate of the Corporation, or (b) to any customer of the Corporation or affiliate of the Corporation.   c. For the purposes of this Agreement:   5 -------------------------------------------------------------------------------- (i) The term “engaged in a business competitive with the Corporation” means directly or indirectly engaging in the business of researching, developing, designing, manufacturing, selling or distributing fuel cells or batteries or engaging in the same or any substantially similar business as the Corporation or any of its affiliates in any manner whatsoever within any geographic area in which the Corporation’s products or services are offered or distributed. Executive understands and agrees that, because the Corporation is engaged in business throughout the world, the geographic area covered by this noncompete covenant extends throughout North America, South America, Europe, Asia and Africa;     (ii) The term “affiliate” means any legal entity that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with the Corporation; and   (iii) The term “customer” means any business, company, person, and any other entity to whom the Corporation or any of its affiliates has provided any product or service, whether or not for compensation, within a period of two (2) years prior to the time Executive ceases to be employed by the Corporation.   d. Exclusion for Investments. None of the provisions of this Section 9 shall prohibit Executive from investing in securities (i) listed on a national securities exchange or actively traded over-the-counter so long as such investments are not greater than five percent (5%) of the outstanding securities of any issuer of the same class or issue or (ii) of entities engaged in a business competitive with the Corporation so long as any such entity was not engaged in a business competitive with the Corporation at the time Executive made such investment.   10. Reasonableness of Restrictions.   a. Executive has carefully read and considered the provisions of Section 8 and Section 9, and, having done so, agrees that:   (i) The restrictions set forth in Section 8 and Section 9, including but not limited to the character, duration, and geographical area of restriction, are fair and reasonable and are reasonably required for the protection of the good will and other legitimate business interests of the Corporation and its affiliates, officers, directors, shareholders, and other employees;   (ii) Executive has received, or is entitled to receive, adequate consideration for such obligations; and   (iii) Such obligations do not prevent Executive from earning a livelihood.   b. If, notwithstanding the foregoing, any of the provisions of Section 8 or Section 9 shall be held to be invalid or unenforceable, the remaining provisions thereof shall nevertheless continue to be valid and enforceable as though the invalid and unenforceable parts had not been included therein. If any provision of Section 8 or Section 9 is determined by a court of competent jurisdiction that the character, duration, geographical scope, or related aspects are unreasonable in light of the circumstances as they then exist, then it is the intention of the parties that Section 8 and/or Section 9 shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive that are reasonable in light of the circumstances as they then exist and as are necessary to assure the Corporation of the intended benefit of this Agreement and such restrictions, as so modified, shall become and thereafter be the maximum restriction in such regard, and the restriction shall remain enforceable to the fullest extent deemed reasonable by such court.   6 -------------------------------------------------------------------------------- 11. Remedies for Breach of Executive’s Covenants of Non-Disclosure and Non-Competition. Executive recognizes and agrees that the Corporation’s remedy at law for any breach of Section 8 or Section 9 would be inadequate as such a breach would cause irreparable harm to the Corporation, and he agrees that, for any actual or threatened breach of such provisions, the Corporation shall, in addition to such other remedies as may be available to it at law or in equity, be entitled to injunctive relief and to enforce its rights by an action for specific performance. All of the Corporation’s remedies for any breach of this Agreement shall be cumulative and the pursuit of any one remedy shall not exclude the Corporation’s pursuit of any other remedies.   12. Termination and Severance.   a. Death. In the event that Executive dies during the Employment Term, this Agreement shall terminate automatically upon his death, upon which event Executive’s legal representatives shall be entitled to receive, and the Corporation shall pay or cause to be paid to Executive’s legal representatives, any Base Salary and other compensation or benefits accrued but as yet unpaid on the date of Executive’s death.   b. Incapacity or Disability. If during the Employment Term, Executive is prevented from performing the duties or fulfilling responsibilities of his employment under this Agreement by reason of any incapacity or disability for a continuous period of six (6) months, as determined by an independent qualified physician selected by the Corporation and reasonably acceptable to Executive (or his representative), then the Corporation may terminate Executive’s employment hereunder, but Executive shall continue to be eligible to receive any benefits to which he may be entitled under the terms of any long-term disability plan or insurance policy maintained by the Corporation for its employees generally or for Executive specifically. In the event of such incapacity or disability, the Corporation shall continue to pay full compensation to Executive in accordance with the terms of this Agreement until the date of such termination.   c. By Corporation for Cause. The Corporation may, upon written notice to Executive, terminate Executive’s employment hereunder for Cause (as defined hereafter); provided that the Corporation shall first provide Executive with an opportunity to be heard by the Board on any proposed termination for Cause by the Board. For purposes of this Agreement, the term “Cause” shall mean (i) Executive’s material breach of this Agreement if the Corporation has notified Executive of such breach and he has not cured such breach within 15 days of having received such notice; (ii) Executive’s material failure to adhere to any policy of the Corporation generally applicable to employees of the Corporation if Executive has been given a reasonable opportunity to comply with such policy or cure his failure to comply; (iii) Executive’s appropriation (or attempted appropriation) of a business opportunity of the Corporation, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Corporation; (iv) Executive’s misappropriation (or attempted misappropriation) of any of the Corporation’s funds or property; (v) Executive’s conviction of, or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or of a lesser crime having as its predicate element fraud, dishonesty or misappropriation of property of the Corporation; (vi) Executive’s willful misconduct or insubordination; (vii) Executive’s physical or mental disability or other inability to perform the essential functions of his position for a consecutive six (6) month period, with or without reasonable accommodation, as determined by an independent qualified physician selected by the Corporation and reasonably acceptable to Executive (or his representative) if Executive is not eligible for benefits under the terms of any long-term disability policy or insurance policy maintained by the Corporation for its employees generally or for Executive specifically; (viii) Executive’s engaging in bad faith or gross negligence in the performance of his duties under this Agreement as determined in good faith by the Board; or (ix) any other conduct of Executive sufficiently detrimental to the Corporation so as to warrant immediate termination of Executive’s employment with the Corporation.   7 -------------------------------------------------------------------------------- In the event of termination for Cause of Executive’s employment, Executive’s right to receive compensation and other benefits hereunder (other than any Base Salary and any vacation accrued but as yet unpaid on the effective date of such termination) shall terminate on the effective date of such termination, and Executive shall not be entitled to any severance payments or other benefits.   d. Termination by the Corporation without Cause. The Corporation may elect to terminate Executive’s employment at any time without Cause upon written notice to Executive. In the event of such termination without Cause, Executive shall be entitled to a severance payment in an amount equal to two (2) years of (i) Executive’s Base Salary as of the date of termination plus (ii) the average of the bonuses paid Employee since the inception of the Agreement; such payment to be made in equal installments over a six (6) month period on the Corporation’s usual pay periods during that period of time; provided, however, that in order to be eligible to receive such severance payment, Executive must sign a waiver of any claims against the Corporation on a waiver and release form approved by the Corporation at that time.   e. Nonrenewal of Agreement. The Corporation may elect to not renew or extend this Agreement at any time without cause upon written notice to Executive not later than thirty (30) days prior to the end of any Initial Term or any extended Employment Term. In the event of a nonrenewal or non-extension pursuant to this Paragraph, Executive’s rights to receive compensation and other benefits (other than any Base Salary and vacation accrued but as yet unpaid on the effective date of such termination) shall terminate at the expiration of the Initial Term or Employment Term. In the event of such termination, Executive shall be entitled to a severance payment following the end of such Initial Term or Employment Term in an amount equal to the amounts specified in Section 12(d).   8 -------------------------------------------------------------------------------- f. By Executive for Certain Reasons. Executive may, at his option, upon at least thirty (30) days written notice to the Corporation, terminate his employment hereunder, if the Corporation, without Executive’s express written consent, (i) removes him as an officer of the Corporation, (ii) demotes him from President and CEO, (iii) assigns him duties materially inconsistent with the position and/or duties described in Sections 1 or 2, (iv) materially diminishes his responsibilities and/or duties described in Sections 1 or 2, or (v) breaches any material obligations to Executive under this Agreement. Upon any termination by Executive under this Paragraph the Corporation shall be obligated to pay Executive the severance payments specified in Section 12(d).   g. By Executive Following Change of Control. Executive may, at his option, upon thirty (30) days written notice to the Corporation, terminate his employment hereunder for Good Reason (as hereinafter defined) following a Change of Control of the Corporation. Upon any termination by Executive under this Paragraph, the Corporation shall be obligated to pay Executive the amounts specified in Section 12(d). Termination by Executive pursuant to this paragraph shall not be deemed a voluntary termination by Executive pursuant to Section 12k hereof.    h. Good Reason Defined. For purposes of this Agreement, the term “Good Reason” means, during the thirty (30) day period prior to or the twelve (12) month period following a Change of Control, without Executive’s express written consent, the occurrence of any of the following circumstances:     (i) the assignment to Executive of any duties inconsistent (except in the nature of a promotion) with the position in the Corporation that he held immediately prior to the Change of Control or substantial adverse alteration in the nature or status of his position or responsibilities or the conditions of his employment from those in effect immediately prior to the Change of Control;         (ii) a reduction, other than a de minimis reduction, by the Corporation in Executive’s annual Base Salary as in effect on the date hereof, as the same may be increased from time to time;         (iii)   the failure by the Corporation to continue in effect any material compensation or benefit plan in which Executive participates immediately prior to the Change of Control unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of his participation relative to other participants, than existed immediately prior to the Change of Control; or         (iv) the failure by the Corporation or its successor or any surviving entity to maintain Executive as the President and CEO of the top level operating company affiliated with the Corporation or its successor or surviving entity.   9 -------------------------------------------------------------------------------- i. Change of Control Defined. For purposes of this Agreement, a “Change of Control” shall be deemed to have occurred if the transaction is of a nature that would be required to be reported in response to Item l(a) of the Current Report on Form 8-K, as in effect on January 1, 2003, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); provided that, without limitation, such a “Change of Control” shall be deemed to have occurred if: (i) a third Person, including a “group” as such term is used in Section 13(d)(3) of the Exchange Act, other than the trustee of any employee benefit plan of the Corporation, becomes the beneficial owner, directly or indirectly, of 35% or more of the combined voting power of the Corporation’s outstanding voting securities ordinarily having the right to vote for the election of directors of the Corporation; (ii) during any period of twenty-four (24) consecutive months individuals who, at the beginning of such consecutive twenty-four (24) month period, constitute the Board of Directors of the Corporation (the “Board”) cease for any reason (other than retirement upon reaching normal retirement age, disability, or death) to constitute at least a majority of the Board; provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) the Corporation shall cease to be a publicly owned corporation having its outstanding Common Stock listed on the New York Stock Exchange or quoted in the NASDAQ National or Small Cap Market System, except where the delisting is related to a private purchase of the Corporation’s stock by a group consisting of the Corporation’s current officers.   For these purposes, a “Change of Control” also shall not be deemed to have occurred where, with respect to any transaction otherwise constituting a “Change of Control,” Executive is reasonably expected to maintain his existing position as President and CEO with the Corporation.   For these purposes, Incumbent Board means the Board as in existence twenty-four (24) months prior to the date the action is being considered. Notwithstanding the foregoing, if the Incumbent Board specifically determines that any transaction does not constitute a Change of Control for purposes of this Agreement such determination shall be conclusive and binding.   10 -------------------------------------------------------------------------------- j. Person Defined. For purposes of this Agreement, the term “Person” means any individual, corporation, association, partnership, limited partnership, limited liability company, limited liability partnership, organization, business, joint venture, sole proprietorship, governmental agency, entity or subdivision or other entity of any kind or nature.   k. Voluntary Termination by Executive. Executive may, at his option, upon thirty (30) days prior written notice to the Corporation, terminate his employment hereunder. In the event of a voluntary termination of his employment by the Executive pursuant to this Paragraph, Executive’s rights to receive compensation and other benefits (other than any Base Salary and vacation accrued but as yet unpaid on the effective date of such termination) shall terminate on the effective date of such termination, and Executive shall not be entitled to any severance payments or other benefits.   l. Eligibility for Severance; Requirement of Release. Except as provided in Sections 12d, 12e, 12f, and 12g, Executive shall not be eligible for or entitled to any severance payments in the event of termination of his employment hereunder. No severance shall be paid under this Agreement unless Executive first executes and agrees to be bound by a release of all claims, on a form provided by the Corporation, which releases any and all claims that Executive has or might have against the Corporation and which contains terms customary in such agreements.   m. Resignation. In the event of termination of his employment other than for death, Executive shall be deemed to have resigned from all positions held in the Corporation, including without limitation any position as a director, officer, agent, trustee, or consultant of the Corporation or any affiliate of the Corporation. Upon request of the Corporation, Executive shall promptly sign and deliver to the Corporation any and all documents reflecting such resignations as of the date of termination of his employment.   n. Compliance with Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, to the extent that the Corporation in the exercise of its reasonable judgment shall determine that Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), applies to any amounts payable under this Section 12, then any such amounts shall be paid in such fashion and at such times so as to ensure that the Corporation and Executive are in compliance with Section 409A of the Code.   13. Vesting upon Change of Control. Any stock options and restricted stock granted to Executive by the Corporation shall accelerate and immediately vest upon the occurrence of the following events: if (a) any “person,” as such term is used in Sections 13(d) and 14(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportion as their ownership of stock in the Corporation) is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 50% or more of the combined voting power of the Corporation’s then outstanding securities (other than as a result of acquisitions of such securities from the Corporation); (b) individuals who, as of the date hereof, constitute the Board of Directors of the Corporation (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the date hereof whose election, or nomination for election by the Corporation’s stockholders, was approved by a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation) shall be, for purposes of this Agreement, considered to be a member of the Incumbent Board; (c) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than (i) a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no “person” (as defined above, acquires more than 20% of the combined voting power of the Corporation’s then outstanding securities; or (d) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition of the Corporation of all or substantially all of the Corporation’s assets. To the extent permitted by applicable law, Executive shall be entitled to exercise, for a period of 12 months from the effective date of termination of his employment, all of his stock options and restricted grants, which vest pursuant to this Section or were otherwise vested prior to the termination of his employment.   11 -------------------------------------------------------------------------------- 14. Payment or Benefit in Connection with Change of Control.   a.  Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by the Executive (i) is deemed to be in connection with a Change of Control (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a Change of Control or any corporation (“Affiliates”) affiliated (or which, as a result of the completion of the transactions causing a Change of Control will become affiliated) with the Corporation within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the “Code”) (collectively with the payments and benefits pursuant to this Agreement if deemed to be paid pursuant to a Change of Control, “Total Payments”) and (ii) is determined by the Corporation's independent certified accounting firm (the “Tax Advisor”) that such amount exceeds 2.99 times the base amount (as such term is defined under Section 280G(b)(3) of the Code) but that is less than 4 times the base amount and that an excise tax is payable by Executive under Section 4999 of the Code, then the amount of payments to the Executive shall be reduced so that the payments do not exceed the limits then set forth in Section 280G of the Code.   b.  Notwithstanding any other provisions of this Agreement or the provisions of Section (a) above, in the event that the Total Payments received or to be received by Executive in connection with a Change of Control would be subject (in whole or part), to an excise tax pursuant to Section 4999 of the Code (such tax hereinafter referred to as the “Excise Tax”) because the amount of the Total Payments equals or exceeds four (4) times the base amount (as such term is defined under Section 280G(b)(3) of the Code), then the Total Payments shall be grossed up to the extent necessary to reflect any Excise Taxes due by Executive and the income taxes attributable thereto so that the Executive will be entitled to a net amount equal to the Total Payments (the “Grossed-Up Payment”). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of this termination of employment shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by Corporation does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code, (including by reason of Section 280(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payment shall be taken into account which constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount as defined in Section 280G(b)(3) of the Code allowable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by Corporation in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Prior to the thirtieth day following the date of Executive’s termination of employment, Corporation shall provide Executive with its calculation of the amounts referred to in this Section and such supporting materials as are reasonably necessary for Executive to evaluate Corporation’s calculations but the Corporation’s calculations shall be used for purposes of any payments pursuant to this Section.  12 -------------------------------------------------------------------------------- c. If the Corporation’s Tax Advisor determines that the Total Payments received or to be received by Executive fall under subparagraph (a) above and upon audit by the Internal Revenue Service the IRS determines that an Excise Tax is due and payable due to the amount of the Total Payments received by Executive, then the Corporation agrees to make a Grossed-Up Payment calculated in the same manner as provided in subparagraph (b). d. In the event of any IRS audit concerning to the Total Payments payable or paid to Executive, the Corporation may in its sole discretion choose to respond to the audit. If the Corporation chooses not to respond, then it shall be the sole responsibility of Executive to respond to the audit. 15. Waiver. A party’s failure to insist on compliance or enforcement of any provision of this Agreement shall not affect the validity or enforceability or constitute a waiver of future enforcement of that provision or of any other provision of this Agreement by that party or any other party.   16. Governing Law. This Agreement shall in all respects be subject to, and governed by, the laws of the State of Connecticut without reference to its conflict of laws   17. Severability. Subject to the provisions of Section 18, Executive and the Corporation agree that the invalidity or unenforceability of any provision in the Agreement shall not in any way affect the validity or enforceability of any other provision and this Agreement shall be construed in all respects as if such invalid or unenforceable provision had never been in the Agreement.   18. Judicial Modification. If a court of competent jurisdiction determines that the character, duration, geographic scope, activity and/or subject of the provisions in Sections 8, 9, or 10 of this Agreement is or are unreasonable under the circumstances as they then exist, then Executive and the Corporation agree that such provisions should be limited and reduced, and request that any reviewing court limit and reduce such provisions, so as to make them enforceable under applicable law to assure the Corporation of the intended maximum benefit of such provisions under this Agreement.   13 -------------------------------------------------------------------------------- 19. Notice. Any and all notices required or permitted herein shall be in writing and shall be deemed to have been duly given (a) when delivered if delivered personally, (b) on the fifth day following the date of deposit in the United States mail if sent first class, postage prepaid, or by certified mail, or (c) one day after delivery to a nationally recognized overnight courier service. The parties’ respective addresses for such notices shall be those set forth below, or such other address or addresses as either party may hereafter designate in writing to the other.   If to the Corporation: FuelCell Energy, Inc. 3 Great Pasture Road Danbury, CT 06813 Attention: Chairman of the Board of Directors Facsimile No.: (203) 825-6100   With a copy to: Robinson & Cole LLP Financial Centre 695 East Main Street Stamford, CT 06904-2305 Attention: Richard A. Krantz, Esq. Facsimile No.: (203) 462-7599   If to Employee: R. Daniel Brdar     109 Lake Ridge Road     Southbury, CT 06488            20. Assignment. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which the Corporation may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of Executive under this Agreement, being personal, may not be delegated.   14 -------------------------------------------------------------------------------- 21. Amendments. This Agreement may be amended at any time by mutual consent of the parties hereto, with any such amendment to be invalid unless in writing and signed by the Corporation and Executive and expressly referring to this Agreement.   22. Entire Agreement. This Agreement contains the entire agreement and understanding by and between Executive and the Corporation with respect to the employment of Executive and supersedes all existing agreements between the Corporation and Executive with respect to such subject matter. No representations, promises, agreements, or understandings, written or oral, relating to the employment of Executive by the Corporation, or any of its officers, directors, employees, or agents, not contained herein shall be of any force or effect, provided that, Sections 5, 6, 7, 8, and 9 shall be supplemental to any other agreement of Executive with the Corporation related to the matters identified therein.   23. No Undue Influence; Construction. This Agreement is executed voluntarily and without any duress or undue influence. Executive acknowledges that he has read this Agreement and executed it with his full and free consent. No provision of this Agreement shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Agreement.   24. References to Gender and Number Terms. In construing this Agreement, feminine or number pronouns shall be substituted for those masculine in form and vice versa, and plural terms shall be substituted for singular and singular for plural in any place in which the context so requires.   25. Counterparts; Headings; Sections. This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of any original but all of which taken together shall constitute but one and the same instrument. The various headings in this Agreement are inserted for convenience only and are not part of the Agreement. All references to “Sections” and “Paragraphs” in this Agreement refer to the various corresponding sections and paragraphs of this Agreement.   26. Survival. The covenants and agreements contained in Sections 5 through 10 shall survive any termination of Executive’s employment with the Corporation.   15 -------------------------------------------------------------------------------- 27. Arbitration; Waiver of Trial by Jury. Executive and the Corporation shall submit any disputes arising under this Agreement to an arbitration panel conducting a binding arbitration in Hartford, Connecticut or at such other location as may be agreeable to the parties, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect on the date of such arbitration (the “Rules”), and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof; provided, however, that nothing herein shall impair the Corporation’s right to seek equitable relief in any court for any breach or threatened breach of Section 8 or Section 9. The award of the arbitrators shall be final and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues or accountings presented to the arbitration panel. The parties hereto further agree that the arbitration panel shall consist of one (1) person mutually acceptable to the Corporation and Executive, provided that if the parties cannot agree on an arbitrator within thirty (30) days of filing a notice of arbitration, the arbitrator shall be selected by the manager of the principal office of the American Arbitration Association serving Hartford County in the State of Connecticut. Each party will pay for the fees and expenses of its own attorneys, experts, witnesses, and preparation and presentation of proofs and post-hearing briefs (unless (i) the party prevails on a claim for which attorney’s fees and expenses are recoverable under the Rules and those amounts are included as part of the award or (ii) Executive prevails on a claim for breach of this Agreement after the Corporation has terminated Executive pursuant to Section 12c hereof, in which case, the Corporation will pay for Executive's above-described fees and expenses related to such claim). Any action to enforce or vacate the arbitrator’s award shall be governed by the federal Arbitration Act, if applicable, and otherwise by applicable state law. If either the Corporation or Executive pursues any claim, dispute or controversy against the other in a proceeding other than the arbitration provided for herein, the responding party shall be entitled to dismissal or injunctive relief regarding such action and recovery of all costs, losses and attorney’s fees related to such action. Executive acknowledges and expressly agrees that this arbitration provision constitutes a knowing and voluntary waiver of trial by jury in any action or proceeding to which Executive and the Corporation may be parties arising out of or pertaining to this Agreement.   THE NEXT PAGE IS THE SIGNATURE PAGE 16 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Corporation and Executive have duly executed this Agreement on the date set forth below. CORPORATION:   WITNESS:       FUELCELL ENERGY, INC.           By:  _______________________________________     Name:   Name: Its:           Date: ___________                 EXECUTIVE:   WITNESS:             Name: R. Daniel Brdar   Name:       Date: ____________         17 --------------------------------------------------------------------------------    

Exhibit 10.1 UTAH DEPARTMENT OF HEALTH Box 143104 288 North 1460 West, Salt Lake City, Utah 84114-3104 CONTRACT AMENDMENT   H0535503   066222 Department Log Number   State Contract Number Amendment Number 01   1. CONTRACT NAME: The name of this Contract is Health Plan - Molina.   2. CONTRACTING PARTIES: This Contract Amendment is between the Utah Department of Health (DEPARTMENT), and Molina Healthcare of Utah (CONTRACTOR).   3. PURPOSE OF CONTRACT AMENDMENT: To extend the Contract Period for 12 months; to increase the Contract Amount to cover the additional 12 months; and to replace “Attachment F: Payment Methodology” dated January 1, 2006 with “Attachment F: Payment Methodology” dated July 1, 2006.   4. CHANGES TO CONTRACT:     A. On page 1, paragraph 3, CONTRACT PERIOD, is changed to read as follows: “The service period of this contract will be January 1, 2006 through June 30, 2007, unless terminated or extended by agreement in accordance with the terms and conditions of this Contact. This Contract may be extended annually 1 time, at the option of the DEPARTMENT, by means of an amendment to this contract. Such extension must be in writing.”     B. On page 1, paragraph 4, CONTRACT AMOUNT, is changed to read as follows: “The CONTRACTOR will be paid up to a maximum amount of $144,000,000.00 in accordance with the provisions in this Contract. This contract is funded with 70.76% Federal funds and with 29.24% State funds. The CFDA # is 93.778 and relates to the federal funds provided.     C. Effective July 1, 2006, “Attachment F: Payment Methodology” dated January 1, 2006 is replaced with “Attachment F: Payment Methodology” dated July 1, 2006.     D. All other provisions of the Agreement remain unchanged.   5. EFFECTIVE DATE OF AMENDMENT: This amendment is effective July 1, 2006.   6. If the Contractor is not a local public procurement unit as defined by the Utah Procurement Code (UCA § 63-56-5), this Contract Amendment must be signed by a representative of the State Division of Finance and the State Division of Purchasing to bind the State and the Department to this Contract Amendment.   7. This Contract, its attachments, and all documents incorporated by reference constitute the entire agreement between the parties and supercede all prior negotiations, representations, or agreements, either written or oral between the parties relating to the subject matter of this Contract. IN WITNESS WHEREOF, the parties sign this Contract Amendment. -------------------------------------------------------------------------------- CONTRACTOR: Molina Healthcare of Utah     UTAH DEPARTMENT OF HEALTH By:           By:         Signature of Authorized Individual   Date       Shari A. Watkins, C.P.A.   Date           Director Office of Fiscal Operations   Print Name:   G. Kirk Olsen           Title:   Chief Executive Officer         State Finance:   Date           State Purchasing:   Date   Page 1 of 1 -------------------------------------------------------------------------------- ATTACHMENT “A” UTAH DEPARTMENT OF HEALTH General Provisions   I. CONTRACT DEFINITIONS    1 II. AUTHORITY    1 III. MISCELLANEOUS PROVISIONS    2 IV. UTAH INDOOR CLEAN AIR ACT    3 V. RELATED PARTIES & CONFLICTS OF INTEREST    4 VI. OTHER CONTRACTS    4 VII. SUBCONTRACTS & ASSIGNMENTS    4 VIII. FURTHER WARRANTY    4 IX. INFORMATION OWNERSHIP    4 X. SOFTWARE OWNERSHIP    4 XI. INFORMATION PRACTICES    5 XII. INDEMNIFICATION    5 XIII. SUBMISSION OF REPORTS    6 XIV. PAYMENT    6 XV. RECORD KEEPING, AUDITS, & INSPECTIONS    6 XVI. CONTRACT ADMINISTRATION REQUIREMENTS    7 XVII. DEFAULT, TERMINATION, & PAYMENT ADJUSTMENT    9 XVIII. FEDERAL REQUIREMENTS    10   i -------------------------------------------------------------------------------- ATTACHMENT “A” UTAH DEPARTMENT OF HEALTH GENERAL PROVISIONS I. CONTRACT DEFINITIONS The following definitions apply in these general provisions: “Assign” or “Assignment” means the transfer of all rights and delegation of all duties in the contract to another person. “Business” means any corporation, partnership, individual, sole proprietorship, joint stock company, joint venture, or any other private legal entity. “This Contract” means this agreement between the Department and the Contractor, including both the General Provisions and the Special Provisions. “The Contractor” means the person who delivers the services or goods described in this Contract, other than the state or the Department. “The Department” means the Utah Department of Health. “Director” means the Executive Director of the Department or authorized representative. “Equipment” means capital equipment which costs at least $1,000 and has a useful life of one year or more unless a different definition or amount is set forth in the Special Provisions or specific Department Program policy as described in writing to Contractor. “Federal law” means the constitution, orders, case law, statutes, rules, and regulations of the federal government. “General provisions” means those provisions of this Contract which are set forth under the heading “General Provisions.” “Governmental entity” means a federal, state, local, or federally-recognized Indian tribal government, or any subdivision thereof. “Individual” means a living human being. “Local health department” means a local health department as defined in § 26A-1-102, Utah Code Annotated, 1953 as amended (UCA.). “Non-governmental entity” means privately held non-profit or for profit organization not classified as a “Governmental entity.” “Person” means any governmental entity, business, individual, union, committee, club, other organization, or group of individuals. “Recipient” means an individual who is eligible for services provided by the Department or by an authorized Contractor of the Department under the terms of this Contract. “Services” means the furnishing of labor, time, or effort by a Contractor, not involving the delivery of a specific end product other than reports which are merely incidental to the required performance. “Special provisions” means those provisions of this Contract which are in addition to the General Provisions and which more fully describe the goods or services covered by this Contract. “State” means the State of Utah. “State law” means the constitution, orders, case law, statutes, and rules, of the state. “Subcontract” means any signed agreement between the Contractor and a third party to provide goods or services for which the Contractor is obligated, except purchase orders for standard commercial equipment, products, or services. “Subcontractor” means the person who performs the services or delivers the goods described in a subcontract. II. AUTHORITY 1. The Department’s authority to enter into this Contract is derived from Chapter 56, Title 63, UCA; Titles 26 and 26A, UCA; and from related statutes. 2. The Contractor represents that it has the institutional, managerial, and financial capability to ensure proper planning, management, and completion of the project or services described in this Contract.   Page 1 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” III. MISCELLANEOUS PROVISIONS 1. For reference clarity, as used in these General Provisions: “ARTICLE” refers to a major topic designated by capitalized roman numerals; “SECTION” refers to the next lower numbered heading designated by arabic numerals, and “SUBSECTIONS” refers to the next two lower headings designated by lower case letters and lower case roman numerals.   2. If the General Provisions and the special provisions of this Contract conflict, the special provisions govern. 3. These provisions distinguish between two Contractor types: Governmental and Non-governmental. Unspecified text applies to both types. Type-specific statements appear in bold print (e.g., Non-governmental entities only). 4. Once signed by the Director and the State Division of Finance, when applicable, and the State Division of Purchasing, when applicable, this Contract becomes effective on the date specified in this Contract. Changes made to the unsigned Contract document shall be initialed by both persons signing this Contract on page one. Changes made to this Contract after the signatures are made on page one may only be made by a separate written amendment signed by persons authorized to amend this Contract. 5. Neither party may enlarge, modify, or reduce the terms, scope of work, or dollar amount in this Contract, except by written amendment as provided in section 4. 6. This Contract and the contracts that incorporate its provisions contain the entire agreement between the Department and the Contractor. Any statements, promises, or inducements made by either party or the agent of either party which are not contained in the written Contract or other contracts are not valid or binding. 7. The Contractor shall comply with all applicable laws regarding federal and state taxes, unemployment insurance, disability insurance, and workers’ compensation. 8. The Contractor is an independent Contractor, having no authorization, express or implied, to bind the Department to any agreement, settlement, liability, or understanding whatsoever, and agrees not to perform any acts as agent for the Department unless expressly set forth herein. Compensation stated herein shall be the total amount payable to the Contractor by the Department. The Contractor shall be responsible for the payment of all income tax and social security amounts due as a result of payments received from the Department for these contract services. 9. The Contractor shall maintain all licenses, permits, and authority required to accomplish its obligations under this Contract. 10. The Contractor shall obtain prior written Department approval before purchasing any equipment with contract funds. 11. Notice shall be in writing, directed to the contact person on page one of this Contract, and delivered by certified mail or by hand to the other party’s most currently known address. The notice shall be effective when placed in the U.S. mail or hand-delivered. 12. The Department and the Contractor shall attempt to resolve contract disputes through available administrative remedies prior to initiating any court action. 13. This Contract shall be construed and governed by the laws of the State of Utah. The Contractor submits to the jurisdiction of the courts of the State of Utah for any dispute arising out of this Contract or the breach thereof. The proper venue of any legal action arising under this contract shall be in Salt Lake City, Utah. 14. Any court ruling or other binding legal declaration which declares that any provision of this Contract is illegal or void, shall not affect the legality and enforceability of any other provision of this Contract, unless the provisions are mutually dependent. 15. The Contractor agrees to maintain the confidentiality of records that it holds as agent for the Department as required by the Government Records Access and Management Act, Title 63, Chapter 2, UCA and the confidentiality of records requirements of Title 26, UCA. 16. The Contractor agrees to abide by the State of Utah’s executive order, dated March 17,1993, which prohibits sexual harassment in the workplace. 17. The waiver by either party of any provision, term, covenant or condition of this Contract shall not be deemed to be a waiver of any other provision, covenant or condition of this Contract nor any subsequent breach of the same or any other provision, term, covenant or condition of this Contract. 18. The Contractor agrees to warrant and assume responsibility for each hardware, firmware, and/or software product (hereafter called the product) that it licenses, or sells, to the Department under this Contract. The Contractor   Page 2 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” acknowledges that the Uniform Commercial Code applies to this Contract. In general, the Contractor warrants that: (a) the product will do what the salesperson said it would do, (b) the product will live up to all specific claims that the manufacturer makes in their advertisements, (c) the product will be suitable for the ordinary purposes for which such product is used, (d) the product will be suitable for any special purposes that the Department has relied on the Contractor’s skill or judgement to consider when it advised the Department about the product, (e) the product has been properly designed and manufactured, and (f) the product is free of significant defects or unusual problems about which the Department has not been warned. 19. The State of Utah’s sales and use tax exemption number is E33399. The tangible personal property or services being purchased are being paid for from State funds and used in the exercise of that entity’s essential functions. If the items purchased are construction materials, they will be converted into real property by employees of this government entity, unless otherwise stated in the contract. 20. The Contractor agrees that the Contract will be a public document, and may be available for distribution. Contractor gives the Department express permission to make copies of the Contract and/or of the response to the solicitation in accordance with State of Utah Government Records Access and Management Act. The permission to make copies as noted will take precedence over any statements of confidentiality, proprietary information, copyright information, or similar notation. 21. This Contract may be amended, modified, or supplemented only by written amendment to the Contract, executed by the parties hereto, and attached to the original, signed copy of the Contract.. 22. Unless otherwise specified in this Contract, all deliveries will be F.O.B. destination with all transportation and handling charges paid by the Contractor. Responsibility and liability for loss or damage will remain with Contractor until final inspection and acceptance, when responsibility will pass to the Department, except as to latent defects, fraud and Contractor’s warranty obligations. 23. All orders will be shipped promptly in accordance with the delivery schedule. The Contractor will promptly submit invoices (within 30 days of shipment or delivery of services) to the Department. The State contract number and/or the agency purchase order number shall be listed on all invoices, freight tickets, and correspondence relating to the Contract order. The prices paid by the Department will be those prices listed in the Contract. The Department has the right to adjust or return any invoice reflecting incorrect pricing. 24. The Contractor will release, indemnify, and hold the State, its officers, agents, and employees harmless from liability of any kind or nature, including the Contractor’s use of any copyrighted or un-copyrighted composition, secret process, patented or un-patented invention, article, or appliance furnished or used in the performance of this Contract. 25. Neither party to this Contract will be held responsible for delay or default caused by fire, riot, acts of God, and/or war which is beyond that party’s reasonable control. The Department may terminate this Contract after determining that such delay or default will reasonably prevent successful performance of the Contract. 26. The Contractor understands that a person who is interested in any way in the sale of any supplies, services, construction, or insurance to the State of Utah is violating the law if the person gives or offers to give any compensation, gratuity, contribution, loan, or reward, or any promise thereof to any person acting as a procurement officer on behalf of the State, or who in any official capacity participates in the procurement of such supplies, services, construction, or insurance, whether it is given for their own use or for the use or benefit of any other person or organization (63-56-73, Utah Code Annotated, 1953 as amended). 27. Contractor Terms and Conditions that apply must be in writing and attached to the Contract. No other Terms and Conditions will apply to this Contract, including terms listed or referenced on a Contractor’s website, terms listed in a Contractor quotation/sales order, etc. In the event of any conflict in the contract terms and conditions, the order of precedence shall be: a. Department General Provisions; b. Department Special Provisions; c. Contractor Terms and Conditions. IV. UTAH INDOOR CLEAN AIR ACT The Contractor, for all personnel operating within the State of Utah, shall comply with the Utah Indoor Clean Air Act, Title 26, Chapter 38, UCA, which prohibits smoking in public places.   Page 3 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” V. RELATED PARTIES & CONFLICTS OF INTEREST 1. The Contractor may not pay related parties for goods, services, facilities, leases, salaries, wages, professional fees, or the like for contract expenses without the prior written consent of the Department. The Department may consider the payments to the related parties as disallowed expenditures and accordingly adjust the Department’s payment to the Contractor for all related party payments made without the Department’s consent. As used in this section, “related parties” means any person related to the Contractor by blood, marriage, partnership, common directors or officers, or 10% or greater direct or indirect ownership in a common entity. 2. The Contractor shall comply with the Public Officers’ and Employees’ Ethics Act, § 67-16-10, UCA, which prohibits actions that may create or that are actual or potential conflicts of interest. It also provides that “no person shall induce or seek to induce any public officer or public employee to violate any of the provisions of this act.” The Contractor represents that none of its officers or employees are officers or employees of the State of Utah, unless disclosure has been made in accordance with § 67-16-8, UCA. VI. OTHER CONTRACTS 1. The Department may perform additional work related to this Contract or award other contracts for such work. The Contractor shall cooperate fully with other contractors, public officers, and public employees in scheduling and coordinating contract work. The Contractor shall give other contractors reasonable opportunity to execute their work and shall not interfere with the scheduled work of other contractors, public officers, and public employees. 2. The Department shall not unreasonably interfere with the Contractor’s performance of its obligations under this Contract. VII. SUBCONTRACTS & ASSIGNMENTS The Contractor shall not assign, sell, transfer, subcontract, or sublet rights or delegate responsibilities under this Agreement, in whole or part, without the prior written consent of the Department. The Department agrees that the Contractor may partially subcontract services, provided that the Contractor retains ultimate responsibility for performance of all terms, conditions and provisions of this Agreement. When subcontracting, the Contractor agrees to use written subcontracts that conform with Federal and State laws. The Contractor shall request Department approval for any assignment at least 20 days prior to its effective date. VIII. FURTHER WARRANTY The Contractor warrants that (a) all services shall be performed in conformity with the requirements of this Contract by qualified personnel in accordance with generally recognized standards; and (b) all goods or products furnished pursuant to this Contract shall be free from defects and shall conform to contract requirements. For any item that the Department determines does not conform with the warranty, the Department may arrange to have the item repaired or replaced, either by the Contractor or by a third party at the Department’s option, at the Contractor’s expense. IX. INFORMATION OWNERSHIP Except for confidential medical records held by direct care providers, the Department shall own exclusive title to all information gathered, reports developed, and conclusions reached in performance of this Contract. The Contractor may not use, except in meeting its obligations under this Contract, information gathered, reports developed, or conclusions reached in performance of this Contract without the express written consent of the Department. X. SOFTWARE OWNERSHIP 1. If the Contractor develops or pays to have developed computer software exclusively with funds or proceeds from this Contract to perform its obligations under this Contract, or to perform computerized tasks that it was not previously performing to meet its obligations under this Contract, the computer software shall be exclusively owned by or licensed to the Department. In the case of software owned by the Department, the Department grants to the Contractor a nontransferable, nonexclusive license to use the software in the performance of this Contract. In the case of software licensed to the Department, the Department grants to the Contractor permission to use the software in the performance of this Contract. This license or permission, as the case may be, terminates when the Contractor has completed its work under this Contract.   Page 4 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” 2. If the Contractor develops or pays to have developed computer software which is an addition to existing software owned by or licensed exclusively with funds or proceeds from this Contract, or to modify software to perform computerized tasks in a manner different than previously performed, to meet its obligations under this Contract, the addition shall be exclusively owned by or licensed to the Department. In the case of software owned by the Department, the Department grants to the Contractor a nontransferable, nonexclusive license to use the software in the performance of this Contract. In the case of software licensed to the Department, the Department grants to the Contractor permission to use the software in the performance of this Contract. This license or permission, as the case may be, terminates when the Contractor has completed its work under this Contract. 3. If the Contractor uses computer software licensed to it which it does not modify or program to handle the specific tasks required by this Contract, then to the extent allowed by the license agreement between the Contractor and the owner of the software, the Contractor grants to the Department a continuing nonexclusive license to use the software, either by the Department or by a different Contractor, to perform work substantially identical to the work performed by the Contractor under this Contract. If the Contractor cannot grant the license as required by this section, then the Contractor shall reveal the input screens, report formats, data structures, linkages, and relations used in performing its obligations under this Contract in such a manner to allow the Department or another Contractor to continue the work performed by the Contractor under this Contract. 4. The Contractor shall deliver to the Department a copy of the software or information required by this Article within 90 days after the commencement of this Contract and thereafter immediately upon making a modification to any of the software which is the subject of this Contract. XI. INFORMATION PRACTICES 1. (Governmental entities only) The Contractor shall establish, maintain, and practice information procedures and controls that comply with Federal and State law. The Contractor assures that any information about an individual that it receives or requests from the Department pursuant to this Contract is necessary to the performance of its duties and functions and that the information will be used only for the purposes set forth in this Contract. The Department shall inform the Contractor of any non-public designation of any information it provides to the Contractor. 2. (Non-governmental entities only) The Contractor shall establish, maintain, and practice information procedures and controls that comply with Federal and State law. The Contractor may not release any information regarding any person from any information provided by the Department, unless the Department first consents in writing to the release. XII. INDEMNIFICATION 1. (Governmental entities only) It is mutually agreed that each party assumes liability for the negligent or wrongful acts committed by its own agents, officials, or employees, regardless of the source of funding for this Contract. Neither party waives any rights or defenses otherwise available under the Governmental Immunity Act. 2. (Non-governmental entities only) To the extent authorized by law, the Contractor shall indemnify and hold harmless the Department and any of its agents, officers, and employees, from any claims, demands, suits, actions, proceedings, loss, injury, death, and damages of every kind and description, including any attorney’s fees and litigation expenses, which may be brought, made against, or incurred by that party on account of loss or damage to any property, or for injuries to or death of any person, caused by, arising directly or indirectly out of, or contributed to in whole or in part, by reason of any alleged act, omission, professional error, fault, mistake, or negligence of the Contractor or its employees, agents, or representatives, or subcontractors or their employees, agents, or representatives, in connection with, incident to, or arising directly or indirectly out of this Contract, or arising out of workers’ compensation claims, unemployment, or claims under similar such laws or obligations.   Page 5 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” XIII. SUBMISSION OF REPORTS If the Contractor is a Local Health Department, it shall submit monthly expenditure reports to the Department in a format approved by the Department. All other Contractors shall submit monthly summarized billing statements to the Department. Expenditure reports and billing statements must be submitted to the Department within 30 days following the last day of the month in which the expenditures were incurred or the services provided. XIV. PAYMENT 1. If a recipient, a recipient’s insurance, or any third-party is responsible to pay for services rendered pursuant to this Contract, the Contractor shall bill and collect for the goods or services provided to the recipient. The Department shall reimburse total actual expenditures, less amounts collected as required by this section. 2. Under no circumstances shall the Department authorize payment to the Contractor that exceeds the amount specified in this Contract without an amendment to the Contract. 3. The Department agrees to make every effort to pay for completed services, and payments are conditioned upon receipt of applicable, accurate, and completed reports prepared by the Contractor and delivered to the Department. The Department may delay or deny payment for final expenditure reports received more than 20 days after the Contractor has satisfied all Contract requirements. 4. In the case that funds are not appropriated or are reduced, the Department will reimburse Contractor for products delivered or services performed through the date of cancellation or reduction, and the Department will not be liable for any future commitments, penalties, or liquidated damages. XV. RECORD KEEPING, AUDITS, & INSPECTIONS 1. The Contractor shall use an accrual or a modified accrual basis for reporting annual fiscal data, as required by Generally Accepted Accounting Principles (GAAP). Required monthly or quarterly reports may be reported using a cash basis. 2. The Contractor and any subcontractors shall maintain financial and operation records relating to contract services, requirements, collections, and expenditures in sufficient detail to document all contract fund transactions. The Contractor and any subcontractors shall maintain and make all records necessary and reasonable for a full and complete audit, inspection, and monitoring of services by state and federal auditors, and Department staff during normal business hours or by appointment, until all audits and reviews initiated by federal and state auditors are completed, or for a period of four years from the date of termination of this Contract, whichever is longer, or for any period required elsewhere in this Contract. 3. The Contractor shall retain all records which relate to disputes, litigations, claim settlements arising from contract performance, or cost/expense exceptions initiated by the Director, until all disputes, litigations, claims, or exceptions are resolved. 4. The Contractor shall comply with federal and state regulations concerning cost principles, audit requirements, and grant administration requirements, cited in Table 1. Unless specifically exempted in this Contract’s special provisions, the Contractor must comply with applicable federal cost principles and grant administration requirements if state funds are received. The Contractor shall also provide the Department with a copy of all reports required by the State Legal Compliance Audit Guide (SLCAG) as defined in Chapter 2, Title 51, UCA. All federal and state principles and requirements cited in Table 1 are available for inspection at the Utah Department of Health during normal business hours. A Contractor who receives $100,000 or more in a year from all federal or from all state sources may be subject to federal and state audit requirements. A Contractor who receives $500,000 for fiscal years ending after December 31, 2003 or more per year from federal sources may be subject to the federal single audit requirement. Counties, cities, towns, school districts, and all non-profit corporations that receive 50 percent or more of its funds from federal, state or local governmental entities are subject to the State of Utah Legal Compliance Audit Guide. Copies of required audit reports shall be sent to the Utah Department of Health, Bureau of Financial Audit, Box 144002, Salt Lake City, Utah 84114-4002.   Page 6 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” Federal and State Principles and Requirements   Contractor   Cost Principles   Federal Audit Requirements   State Audit Requirements   Grant Admin. Requirements State or Local Govt. & Indian Tribal Govts.   OMB Circular A-87   OMB Circular A-133   SLCAG   OMB Common Rule Hospitals   45 CFR 74, App. E   OMB Circular A-133   SLCAG   OMB Common Rule or Circular A-110 College or University   OMB Circular A-21   OMB Circular A-133   SLCAG   OMB Circular A-110 Non-Profit Organization   OMB Circular A-122   OMB Circular A-133   SLCAG   OMB Circular A-110 For-Profit Organization   48 CFR 31   n/a   n/a   OMB Circular A-110 Documents   Web Address             OMB Circulars   http://www.whitehouse.gov/omb/circulars/index.html OMB Common Rule   http://www.whitehouse.gov/omb/grants/attach.html CFRs   http://www.access.gpo.gov/nara/cfr/cfr-table-search.html SLCAG   http://www.sao.state.ut.us/resources/resources-lg.htm Table 1 XVI. CONTRACT ADMINISTRATION REQUIREMENTS The Contractor agrees to administer this Contract in compliance with either OMB Common Rule or OMB Circular A-110 depending upon the legal status of the of the Contractor as shown in Table 1. Financial management, procurement, and affirmative step requirements specify that:     1. the Contractor must have fiscal control and accounting procedures sufficient to:     a. permit preparation of reports required by this Contract, and     b. permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes.     2. the Contractor’s financial management systems must meet the following standards:     a. financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of this Contract.     b. accounting records. The Contractor must maintain records which adequately identify the source and application of funds provided for federally financially-assisted activities. These records must contain information pertaining to the Contract’s awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income.     c. internal control. Effective control and accountability must be maintained for all Contract cash, real and personal property, and other assets. The Contractor must adequately safeguard all such property and must assure that it is used solely for authorized purposes.     d. budget control. Actual expenditures or outlays must be compared with budgeted amounts for the Contract Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in this Contract. If unit cost data are required, estimates based on available documentation will be accepted whenever possible.     3. Federal OMB cost principles, federal agency program regulations, and the terms of grant and subgrant, and contract agreements will be followed in determining the reasonableness, allowability, and allocability of costs.     a. source documentation. Accounting records must be supported by such source documentation as canceled checks, paid bills, payrolls, time and attendance records, contract and subcontract award documents, etc.     b. cash management. Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by the Department and the Contractor must be followed whenever advance payment procedures are used.   Page 7 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” 4. the Contractor shall use its own procurement procedures which reflect applicable State and local laws, rules, and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this Contract. a. The Contractor will maintain a contract administration system which ensures that subcontractors perform in accordance with the terms, conditions, and specifications of its contracts or purchase orders. b. The Contractor will maintain a written code of standards of conduct governing the performance of its employees engaged in the award and administration of contracts. No employee, officer or agent of the Department or the Contractor shall participate in selection, or in the award or administration of a contract supported by federal funds if a conflict of interest, real or apparent, would be involved. Such a conflict would arise when: i. the employee, officer or agent, ii. any member of his immediate family, iii. his or her partner; or iv. an organization which employs, or is about to employ, any of the above, has a financial or other interest in the firm selected for award. The Department’s or the Contractor’s officer, employees or agents will neither solicit nor accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties to subagreements. The Department and the Contractor may set minimum rules where the financial interest is not substantial or the gift is an unsolicited item of nominal intrinsic value. To the extent permitted by State or local law or regulations, such standards or conduct will provide for penalties, sanctions, or other disciplinary actions for violations of such standards by the Department’s or the Contractor’s officers, employees, or agents, or by subcontractors or their agents. c. The Contractor’s procedures will provide for a review of proposed procurements to avoid purchase of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach. d. To foster greater economy and efficiency, the Contractor, if a governmental entity, is encouraged to enter into State and local intergovernmental agreements for procurement or use of common goods and services. e. If allowed by law, the Contractor is encouraged to use Federal excess and surplus property in lieu of purchasing new equipment and property whenever such use is feasible and reduces project costs. f. The Contractor may contract only with responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. g. The Contractor shall maintain records sufficient to detail the significant history of a procurement. These records shall include, but are not necessarily limited to the following: i. the rationale for the method of procurement, ii. selection of contract type, iii. contractor selection or rejection, and iv. the basis for the contract price. h. The Contractor may use time and material type contracts only: i. after a determination that no other contract is suitable, and ii. if the Contract includes a ceiling price that the Contractor exceeds at its own risk. i. The Contractor alone will be responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to source evaluation, protests, disputes, and claims. These standards do not relieve the Contractor of any contractual responsibilities under its contracts. j. The Contractor shall have protest procedures to handle and resolve disputes relating to its procurements and shall in all instances disclose information regarding the protest to the federal funding agency. A protestor must exhaust all administrative remedies with the Department and the Contractor before pursuing a protest with the federal funding agency. 5. the Contractor shall take all necessary affirmative steps to assure that minority firms, women’s business enterprises, and labor surplus area firms are used when possible. Affirmative steps shall include: a. placing qualified small and minority businesses and women’s business enterprises on solicitation lists; b. assuring that small and minority businesses, and women’s business enterprises are solicited whenever they are potential sources;   Page 8 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” c. dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority business, and women’s business enterprises; d. establishing delivery schedules, where the requirement permits, which encourage participation by small and minority business, and women’s business enterprises; e. using the services and assistance of the Small Business Administration, and the Minority Business Development Agency of the Department of Commerce; and f. requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in Article XVI, section 5, subsections a - e. XVII. DEFAULT, TERMINATION, & PAYMENT ADJUSTMENT 1. Each party may terminate this Contract with cause. If the cause for termination is due to the default of a party, the non-defaulting party shall send a notice, which meets the notice requirements of this Contract, citing the default and giving notice to the defaulting party of its intent to terminate. The defaulting party may cure the default within fifteen days of the notice. If the default is not cured within the fifteen days, the party giving notice may terminate this Contract 45 days from the date of the initial notice of default or at a later date specified in the notice. 2. The Department may terminate this Contract without cause, in advance of the specified termination date, upon 30 days written notice. 3. The Department agrees to use its best efforts to obtain funding for multi-year contracts. If continued funding for this Contract is not appropriated or budgeted at any time throughout the multi-year contract period, the Department may terminate this Contract upon 30 days notice. 4. If funding to the Department is reduced due to an order by the Legislature or the Governor, or is required by federal or state law, the Department may terminate this Contract or proportionately reduce the services and goods due and the amount due from the Department upon 30 days written notice. If the specific funding source for the subject matter of this Contract is reduced, the Department may terminate this Contract or proportionately reduce the services and goods due and the amount due from the Department upon 30 written notice being given to the Contractor. 5. If the Department terminates this Contract, the Department may procure replacement goods or services upon terms and conditions necessary to replace the Contractor’s obligations. If the termination is due to the Contractor’s failure to perform, and the Department procures replacement goods or services, the Contractor agrees to pay the excess costs associated with obtaining the replacement goods or services. 6. If the Contractor terminates this Contract without cause, the Department may treat the Contractor’s action as a default under this Contract. 7. The Department may terminate this Contract if the Contractor becomes debarred, insolvent, files bankruptcy or reorganization proceedings, sells 30% or more of the company’s assets or corporate stock, or gives notice of its inability to perform its obligations under this Contract. 8. If the Contractor defaults in any manner in the performance of any obligation under this Contract, or if audit exceptions are identified, the Department may, at its option, either adjust the amount of payment or withhold payment until satisfactory resolution of the default or exception. Default and audit exceptions for which payment may be adjusted or withheld include disallowed expenditures of federal or state funds as a result of the Contractor’s failure to comply with federal regulations or state rules. In addition, the Department may withhold amounts due the Contractor under this Contract, any other current contract between the Department and the Contractor, or any future payments due the Contractor to recover the funds. The Department shall notify the Contractor of the Department’s action in adjusting the amount of payment or withholding payment. This Contract is executory until such repayment is made. 9. The rights and remedies of the Department enumerated in this article are in addition to any other rights or remedies provided in this Contract or available in law or equity. 10. Upon termination of the Contract, all accounts and payments for services rendered to the date of termination will be processed according to the financial arrangements set forth herein for approved services rendered to date of termination. If the Department terminates this Contract, the Contractor shall stop all work as specified in the notice of termination. The Department shall not be liable for work or services performed beyond the termination date as specified in the notice of termination.   Page 9 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” 11. Any of the following events will constitute cause for the Department to declare Contractor in default of the Contract: a. Nonperformance of contractual requirements; b. A material breach of any term or condition of this contract. The Department will issue a written notice of default providing a ten (10) day period in which Contractor will have an opportunity to cure. Time allowed for cure will not diminish or eliminate Contractor’s liability for damages. If the default remains, after Contractor has been provided the opportunity to cure, the Department may do one or more of the following: c. Exercise any remedy provided by law; d. Terminate this Contract and any related Contracts or portions thereof; e. Impose liquidated damages, if liquidated damages are listed in the Contract; f. Suspend Contractor from receiving future solicitations. XVIII. FEDERAL REQUIREMENTS The Contractor shall comply with all applicable federal requirements. To the extent that the Department is able, the Department shall give further clarification of federal requirements upon the Contractor’s request. If the Contractor is receiving federal funds under this Contract, certain federal requirements apply. The Contractor agrees to comply with the federal requirements to the extent that they are applicable to the subject matter of this Contract and are required by the amount of federal funds involved in this Contract. 1. Civil Rights Requirements: a. The Civil Rights Act of 1964, Title VI, provides that no person in the United States shall, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance. The Health and Human Services regulation implementing this requirement is 45 CFR Part 80. b. The Civil Rights Act of 1964, Title VII, (P.L. 88-352 & 42 U.S.C. § 2000e) prohibits employers from discriminating against employees on the basis of race, color, religion, national origin, and sex. Title VII applies to employers of fifteen or more employees, and prohibits all discriminatory employment practices. c. The Rehabilitation Act of 1973, as amended, section 504, provides that no otherwise qualified handicapped individual in the United States shall, solely by reason of the handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance. The Health and Human Services regulation 45 CFR Part 84 implements this requirement. d. The Age Discrimination Act of 1975, as amended (42 U.S.C. §§ 6101-6107), prohibits unreasonable discrimination on the basis of age in any program or activity receiving federal financial assistance. The Health and Human Services regulation implementing the provisions of the Age Discrimination Act is 45 CFR Part 91. e. The Education Amendments of 1972, Title IX, (20 U.S.C. §§ 1681-1683 and 1685-1686), section 901, provides that no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any educational program or activity receiving federal financial assistance. Health and Human Services regulation 45 CFR Part 86 implements this requirement. f. Executive Order No. 11246, as amended by Executive Order 11375 relates to “Equal Employment Opportunity,” (all construction contracts and subcontracts in excess of $10,000) g. Americans with Disabilities Act of 1990, (P.L.101-336), section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. § 794), prohibits discrimination on the basis of disability. h. The Public Health Service Act, as amended, Title VII, section 704 and TITLE VIII, section 855, forbids the extension of federal support for health manpower and nurse training programs authorized under those titles to any entity that discriminates on the basis of sex in the admission of individuals to its training programs. Health and Human Services regulation implementing this requirement is 45 CFR Part 83. i. The Public Health Service Act, as amended, section 526, provides that drug abusers who are suffering from medical conditions shall not be discriminated against in admission or treatment because of their drug abuse or drug dependence, by any private or public general hospital that receives support in any form from any federally funded program. This prohibition is extended to all outpatient facilities receiving or benefitting from federal financial assistance by 45 CFR Part 84. j. The Public Health Service Act, as amended, section 522, provides that alcohol abusers and alcoholics who are suffering from medical conditions shall not be discriminated against in admission or treatment, solely because of their alcohol abuse or alcoholism, by any private or public general hospital that receives support in any form from any federally funded program. This prohibition is extended to all outpatient facilities receiving or benefitting from federal financial assistance by 45 CFR Part 84.   Page 10 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” 2. Confidentiality: The Public Health Service Act, as amended, sections 301(d) and 543, require that certain records be kept confidential except under certain specified circumstances and for specified purposes. Confidential records include records of the identity, diagnosis, prognosis, or treatment of any patient that are maintained in connection with the performance of any activity or program relating to drug abuse prevention, i.e., drug abuse education, training, treatment, or research, or alcoholism or alcohol abuse education, training, treatment, rehabilitation, or research that is directly or indirectly assisted by the federal government. Public Health Service regulations 42 CFR Parts 2 and 2a implement these requirements. 3. Lobbying Restrictions: Lobbying restrictions as required by 31 U.S.C. § 1352, requires the Contractor to abide by this section and to place it’s language in all of it’s contracts: a. No federal funds have been paid or will be paid, by or on behalf of the Contractor, to any person for influencing or attempting to influence an officer or employee of any federal agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement. b. If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any federal agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with the federal contract, grant, loan, or cooperative agreement, the Contractor shall complete and submit Federal Standard Form LLL, “Disclosure Form to report Lobbying,” in accordance with its instructions. c. The Contractor shall require that the language of this article be included in the award documents for all subcontracts and that subcontractors shall certify and disclose accordingly. 4. Debarment, suspension or other ineligibility: The Contractor certifies that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or excluded from participation in this Contract by any governmental department or agency. The Contractor must notify the Department within 30 days in accordance with the notification requirements specified in Article III, section 11 of this Contract if the Contractor has been debarred by any governmental entity within the contract period. Debarment regulations are stated in Health and Human Services regulation 45 CFR Part 76. 5. Environmental Impact: The National Environmental Policy Act of 1969 (NEPA) (Public Law 91-190) establishes national policy goals and procedures to protect and enhance the environment. NEPA applies to all federal agencies and requires them to consider the probable environmental consequences of any major federal activity, including activities of other organizations operating with the concurrence or support of a federal agency. This includes grant-supported activities under this Contract if federal funds are involved. Additional environmental requirements include: a. the institution of environmental quality control measures under the National Environmental Policy Act of 1969 (P.L. 91-190) and Executive Order 11514; b. the notification of violating facilities pursuant to Executive Order 11738 (all contracts, subcontracts, and subgrants in excess of $100,000); c. the protection of wetlands pursuant to Executive Order 11990; d. the evaluation of flood hazards in floodplains in accordance with Executive Order 11988; e. the assurance of project consistency with the approved State management program developed under the Coastal Zone Management Act of 1972 (16 U.S.C. §§ 1451 et seq.); f. the conformity of Federal actions to State (Clear Air) Implementation Plans under Section 176 (c) of the Clear Air Act of 1955, as amended (42 U.S.C. §§ 7401 et seq.); g. the protection of underground sources of drinking water under the Safe Drinking Water Act of 1974, as amended, (P.L. 93-523), h. the protection of endangered species under the Endangered Species Act of 1973, as amended, (P.L. 93-205) and; i. the protection of the national wild and scenic rivers system under the Wild and Scenic Rivers Act of 1968 (16 U.S.C. §§ 1271 et seq.).   Page 11 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” 6. Human Subjects: The Public Health Service Act, section 474(a), implemented by 45 CFR Part 46, requires basic protection for human subjects involved in Public Health Service grant supported research activities. Human subject is defined in the regulation as “a living individual about whom an investigator (whether professional or student) conducting research obtains data through intervention or interaction with the individual or identifiable private information.” The regulation extends to the use of human organs, tissues, and body fluids from individually identifiable human subjects as well as to graphic, written, or recorded information derived from individually identifiable human subjects. The regulation also specifies additional protection for certain classes of human research involving fetuses, pregnant women, human in vitro fertilization, and prisoners. However, the regulation exempts certain categories of research involving human subjects which normally involve little or no risk. The exemptions are listed in 45 CFR Part 46.101(b). The protection of human subjects involved in research, development, and related activities is found in P.L. 93-348. 7. Sterilization: Health and Human Services and Public Health Service have established certain limitations on the performance of nonemergency sterilizations by Public Health Service grant-supported programs or projects that are otherwise authorized to perform such sterilizations. Public Health Service has issued regulations that establish safeguards to ensure that such sterilizations are performed on the basis of informed consent and that the solicitation of consent is not based on the withholding of benefits. These regulations, published at 42 CFR Part 50, Subpart B, apply to the performance of nonemergency sterilizations on persons legally capable of consenting to the sterilization. Federal financial participation is not available for any sterilization procedure performed on an individual who is under the age of 21, legally incapable of consenting to the sterilization, declared mentally incompetent, or is institutionalized. 8. Abortions and Related Medical Services: Federal financial participation is generally not available for the performance of an abortion in a grant-supported health services project. For further information on this subject, consult the regulation at 42 CFR Part 50, Subpart C. 9. Recombinant DNA and Institutional Biosafety Committees: Each institution where research involving recombinant DNA technology is being or will be conducted must establish a standing Biosafety Committee. Requirements for the composition of such a committee are given in Section IV of Guidelines for Research Involving Recombinant DNA Molecules, (49 FR 46266 or latest revision), which also discusses the roles and responsibilities of principal investigators and contractor institutions. Guidelines for Research Involving Recombinant DNA Molecules and Administrative Practices Supplement should be consulted for complete requirements for the conduct of projects involving recombinant DNA technology. 10. Animal Welfare: The Public Health Service Policy on Humane Care and Use of Laboratory Animals By Awardee Institutions requires that applicant organizations establish and maintain appropriate policies and procedures to ensure the humane care and use of live vertebrate animals involved in research activities supported by Public Health Service. This policy implements and supplements the U.S. Government Principles for the Utilization and Care of Vertebrate Animals Used in Testing, Research, and Training and requires that institutions use the Guide for the Care and Use of Laboratory Animals as a basis for developing and implementing an institutional animal care and use program. This policy does not affect applicable State or local laws or regulations which impose more stringent standards for the care and use of laboratory animals. All institutions are required to comply, as applicable, with the Animal Welfare Act as amended (7 U.S.C. 2131 et seq.) and other federal statutes and regulations relating to animals. These documents are available from the Office for Protection from Research Risks (OPRR), National Institutes of Health, Bethesda, MD 20892, (301) 496-7005. 11. Contract Provisions: The Contractor must include the following provisions in its contracts, as limited by the statements enclosed within the parentheses following each provision: a. administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provides for such sanctions and penalties as may be appropriate. (Contracts other than small purchases. Small purchase involve relatively simple and informal procurement methods that do not cost more than $100,000 in aggregate.) b. termination for cause and for convenience by the contractor or subgrantee including the manner by which it will be effected and the basis for settlement. (All contracts in excess of $10,000) c. compliance with Executive Order 11246 of September 24, 1965 entitled “Equal Employment Opportunity,” as amended by Executive Order 11375 of October 13, 1967 and as supplemented in Department of Labor regulations (41 CFR Chapter 60). (All construction contracts awarded in excess of $10,000 by the Contractor and its contractors or subgrantees)   Page 12 of 13 -------------------------------------------------------------------------------- ATTACHMENT “A” d. compliance with the Copeland “Anti-Kickback” Act (18 U.S.C. 874) as supplemented in Department of Labor regulations (29 CFR Part 3). (All contracts and subgrants for construction or repair) e. compliance with the Davis-Bacon Act (40 U.S.C. 276a to a-7) as supplemented by Department of Labor regulations (29 CFR Part 5). (Construction contracts in excess of $2,000 awarded when required by Federal grant program legislation) f. compliance with the Contract Work Hours and Safety Standards Act, sections 103 and 107, (40 U.S.C. 327-330) as supplemented by Department of Labor regulations (29 CFR Part 5). (Construction contracts awarded in excess of $2,000, and in excess of $2,500 for other contracts which involve the employment of mechanics or laborers) g. notice of the federal awarding agency requirements and regulations pertaining to reporting. h. notice of federal awarding agency requirements and regulations pertaining to patent rights with respect to any discovery or invention which arises or is developed in the course of or under such contract. i. federal awarding agency requirements and regulations pertaining to copyrights and rights in data. j. access by the Department, the Contractor, the Federal funding agency, the Comptroller General of the United States, or any of their duly authorized representatives to any books, documents, papers, and records of the Contractor which are directly pertinent to that specific contract for the purpose of making audit, examination, excerpts, and transcriptions. k. compliance with all applicable standards, orders, or requirements of the Clear Air Act, section 306, (42 U.S.C. 1857(h)), the Clean Water Act, section 508, (33 U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency regulations (40 CFR Part 15). (Contracts, subcontracts, and subgrants of amounts in excess of $100,000) l. mandatory standards and policies relating to energy efficiency which are contained in the state energy conservation plan issued in compliance with the Energy Policy and Conservation Act (Pub. L. 94-163). 12. (Governmental entities only) Merit System Standards: The Intergovernmental Personnel Act of 1970 (42 U.S.C. §§ 4728-4763), requires adherence to prescribed standards for merit systems funded with federal funds. 13. Misconduct in Science: The United States Public Health Service requires certain levels of ethical standards for all PHS grant-supported projects and requires recipient institutions to inquire into, investigate and resolve all instances of alleged or apparent misconduct in science. Issues involving potential criminal violations must be promptly reported to the HHS Office of Inspector General. (See regulations in 42 CFR Part 50, Subpart A) END OF GENERAL PROVISIONS   Page 13 of 13 -------------------------------------------------------------------------------- ATTACHMENT B SPECIAL PROVISIONS TABLE OF CONTENTS                      Page Article I    Definitions    1 Article II    Service Area    5 Article III    Marketing, Enrollment, Orientation, Education, and Disenrollment    6 1.    Marketing Activities    6 2.    Enrollment Process    6 3.    Member Orientation    9 4.    Member Education    11 5.    Disenrollment by Enrollee    15 6.    Disenrollment by CONTRACTOR    17 7.    Enrollee Transition Between Health Plans    19 8.    Enrollee Transition from FFS to Health Plan or from Health Plan to FFS    19 Article IV    Benefits    20 1.    In General    20 2.    Scope of Services    21 3.    Clarification of Covered Services    21    1.      Emergency Services    21    2.      Care Provided in Skilled Nursery Facilities    24    3.      Hospice    25    4.      Inpatient Hospital Services for Scheduled Admissions    26    5.      Children in Custody of the Department of Human Services    26    6.      Organ Transplantations    28    7.      Mental Health Services    29    8.      Developmental and Organic Disorders    29    9.      Out-of-State Accessory Services    30    10.      Non-Contractor Prior Authorizations    30 4.    Additional Services for Enrollees with Special Health Care Needs    31    1.      In General    31    2.      Identification    31    3.      Choosing a Primary Care Provider    32    4.      Referrals and Access to Specialty Providers    32    5.      Survey of Enrollees with Special Health Care Needs    32    6.      Collaboration with Other Programs    33    7.      Case Management and Coordination of Care Program    33    8.      Specific Requirements for Children with Special Health Care Needs    34   i -------------------------------------------------------------------------------- Table of Contents   Article V    Delivery Network    35 1.    Availability of Services    35 2.    Subcontracts and Assurances    36 3.    Contractor’s Selection of Providers    39 Article VI    Authorization of Services and Notices of Action    41 1.    Service of Authorization and Notice of Action    41 2.    Other Actions Requiring Notice of Action    46 3.    Content of Notice of Action    47 4.    Attachment to Notice of Actions - Written Appeal Request Form    49 5.    Compensation for Utilization Management Activities    50 6.    Medical Necessity Denials    50 Article VII    Grievance Systems    50 1.    Overall Grievance System    50 2.    Special Requirements for Appeals    50 3.    Standard Appeals Process    51 4.    Process for Expedited Resolution of Appeals    54 5.    Continuation of Benefits During Appeal or State Fair Hearing Processes    57 6.    Duration of Continued or Reinstated Benefits    57 7.    Reversed Appeal Resolutions    57 8.    State Fair Hearings    58 9.    Grievances    59 10.    Documentation    61 Article VIII    Enrollee Rights and Protections    62 1.    Written Information on Enrollee Rights and Protections-General Requirements    62 2.    Specific Enrollee Rights and Protections    62 3.    Provider - Enrollee Communications    63   ii -------------------------------------------------------------------------------- Table of Contents   Article IX    Contractor Assurances    64 1.    Nondiscrimination    64 2.    Member Services Function    64 3.    Provider Services Function    65 4.    Enrollee Liability    65 5.    Access    65 6.    Coordination and Continuity of Care    68 7.    Billing Enrollees    71 8.    Survey Requirements    72   iii -------------------------------------------------------------------------------- Table of Contents   Article X    Measurement and Improvement Standards    73 1.    Practice Guidelines    73 2.    Quality Assessment and Performance Improvement Program    73 Article XI    Other Requirements    75 1.    Compliance with Public Health Service Act    75 2.    Advance Directives    75 3.    Fraud and Abuse Requirements    75 4.    Disclosure of Ownership and Control Information    76 5.    Safeguarding Confidential Information on Enrollees    76 6.    Disclosure of Provider Incentive Plans    77 Article XII    Payments    78 1.    Non-Risk Contract    78 2.    Payment Methodology    78 3.    Contract Maximum    78 4.    Medicare    78 5.    Third Party Liability (Coordination of Benefits)    80 6.    Third Party Responsibility (Including Worker’s Compensation)    82 7.    Changes in Covered Services    83 8.    Clarification of Payment Responsibilities    83 Article XIII    Records and Reporting Requirements    87 1.    Health Information Systems    87 2.    Federally Required Reports    88 3.    Periodic Reports    89 4.    Data Certification    94 Article XIV    Compliance/Monitoring    95 1.    Audits    95 2.    Quality Monitoring by the DEPARTMENT    95 3.    External Quality Review    96 4    Corrective Action    98 Article XV    Termination of the Contract    101 1.    Automatic Termination    101 2.    90-Day Termination Option    101   iv -------------------------------------------------------------------------------- Table of Contents   3.    Effect of Termination    101 4.    Assignment    103 Article XVI    Miscellaneous    103 1.    Integration    103 2.    Enrollees May Not Enforce Contract    103 3.    Interpretation of Laws and Regulations    103 4.    Adoption of Rules    103   v -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 Covered Services Limitations & Exclusions Co-payment & Co-insurance Requirements Covered Services are the same under both the Traditional and Non-Traditional Medicaid Plans unless otherwise indicated. Co-payments and co-insurances are listed if required. Pregnant women and children under age 18 are exempt from all co-payment and co-insurance requirements. Services related to family planning are excluded from all co-payment and co-insurance requirements. Medicaid Provider Manuals provide detailed information regarding covered services and are available to the CONTRACTOR upon request.   A. In General The CONTRACTOR will provide the following benefits to Enrollees in accordance with Medicaid benefits as defined in the Utah State Plan subject to the exception or limitations as noted below. The DEPARTMENT reserves the right to interpret what is in the State plan. Medicaid services can only be limited through utilization criteria based on Medical Necessity. The CONTRACTOR will provide at least the following benefits to Enrollees. The CONTRACTOR is responsible to provide or arrange for all Medically Necessary Covered Services on an emergency basis 24 hours each day, seven days a week. The CONTRACTOR is responsible for payment for all covered Emergency Services furnished by providers that do not have arrangements with the CONTRACTOR.   B. Hospital Services     1. Inpatient Hospital Services furnished in a licensed, certified hospital are Covered Services. Non-Traditional Medicaid Plan excludes the following revenue codes: 430 - 439 (Occupational Therapy) 380 - 382, and 391 (Whole Blood) 390 and 399 (Autologous or self blood storage for future use) 811 - 813 (Organ Donor charges) CO-INSURANCE Traditional Medicaid: $220.00 for non-emergency admissions. Limited to $220.00 per Enrollee per calender year. Non-Traditional Medicaid: $220.00 for each non-emergency admission per Enrollee. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.      Page 1 of 16    health plan/molina -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006     2. Outpatient Hospital Services provided to Enrollees at a licensed, certified hospital who are not admitted to the hospital are Covered Services. CO-PAYMENT Traditional Medicaid: $2.00 co-payment per visit. Limited to one co-payment per date of service per provider. The facility fees associated with services provided in an outpatient hospital or free-standing ambulatory surgical centers are subject to $2.00 co-payment per date of service per provider. Annual calendar year maximum for any combination of physician, podiatry, outpatient hospital, and surgical centers is $100.00 per Enrollee. Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one co-payment per date of service per provider. The facility fees associated with services provided in an outpatient hospital or a free standing ambulatory surgical centers are subject to $3.00 co-payment per date of service per provider. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.     3. Emergency Department Services Emergency Services provided to Enrollees in designated hospital emergency departments are Covered Services. CO-PAYMENT Traditional Medicaid: Co-payment is $6.00 for non-emergency use of the emergency room. Non-Traditional Medicaid: Co-payment is $6.00 for non-emergency use of the emergency room. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.   C. Physician Services Services provided directly by licensed physicians or osteopaths, or by other licensed professionals such as physician assistants, nurse practitioners, or nurse midwives under the physician’s or osteopath’s supervision are covered Services. Non-Traditional Medicaid excludes office visits in conjunction with allergy injections (CPT codes 95115 through 95134 and 95144 through 95199). CO-PAYMENT Traditional Medicaid: Co-pay is $3.00 per visit. Limited to one co-payment per date of service per provider. Annual calendar year maximum is $100.00 per Enrollee for any combination of physician, osteopath, podiatry, outpatient hospital, freestanding emergency centers, and surgical centers. Co-payment required for preventive services and immunizations.      Page 2 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 Non-Traditional Medicaid: Co-payment is $3.00 per visit. Limited to one co-payment per date of service per provider. No co-payment for preventive services and immunizations. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.   D. General Preventive Services The CONTRACTOR must develop or adopt practice guidelines consistent with current standards of care, as recommended by professional groups such as the American Academy of Pediatric and the U.S. Task Force on Preventive Care. A minimum of three screening programs for prevention or early intervention (e.g. Pap Smear, diabetes, hypertension).   E. Vision Care Services provided by licensed ophthalmologists or licensed optometrists, and opticians within their scope of practice are Covered Services. Services include, but are not limited to, the following:     1. Eye examinations and care to identify and treat medical problems     2. Eye refractions, examinations     3. Laboratory work     4. Lenses     5. Eyeglass Frames     6. Repair of Frames     7. Repair or Replacement of Lenses     8. Contact Lenses (when Medically Necessary) Traditional Medicaid Plan: Full coverage for all Non-Traditional clients. Non-Traditional Medicaid Plan is limited to the following services and limitations: Non- Traditional Medicaid clients have coverage for vision screening in conjunction with determining refractions. Providers may bill using procedure codes 92002, 92004, 92012, and 92014. There is a maximum Medicaid benefit of $31.21 for screening services. Charges above the $31.21 are non-covered Medicaid services and are considered the patient’s responsibility. Eye refraction/examination is limited to one eye examination every 12 months. Eyeglasses (lenses and frames) are not covered. Services to identify and treat medical problems such as diabetic retinopathy, glaucoma, cataracts, etc., may be billed by ophthalmologists and optometrists using procedure codes      Page 3 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 92020, 92083, 92135, 95930, 99201-99205, 99211-99215, 65210, 65220, 65222, 67820, 68761, and 68801. Ophthalmologists may bill additional procedure codes within their scope of service that are covered by Medicaid. These services are paid based on the Medicaid fee schedule and are considered payment in full.   F. Lab and Radiology Services Professional and technical laboratory and X-ray services furnished by licensed and certified providers are Covered Services. All laboratory testing sites, including physician office labs, providing services under this Contract will have either a Clinical Laboratory Improvement Amendments (CLIA) Certificate of Waiver or a certificate of registration along with a CLIA identification number. Those laboratories with certificates of waiver will provide only the eight types of tests permitted under the terms of their waiver. Laboratories with certificates of registration may perform a full range of laboratory tests.   G. Physical and Occupational Therapy     1. Physical Therapy Treatment and services provided by a licensed physical therapist. Treatment and services must be authorized by a physician and include services prescribed by a physician or other licensed practitioner of the healing arts within the scope of his or her practice under State law and provided to an Enrollee by or under the direction of a qualified physical therapist. Necessary supplies and equipment will be reviewed for medical necessity and follow the criteria of the R414.12 rule.     2. Occupational Therapy Treatment of services provided by a licensed occupational therapist. Treatment and services must be authorized by a physician and include services prescribed by a physician or other licensed practitioner of the healing arts within the scope of his or her practice under State law and provided to an Enrollee by or under the direction of a qualified occupational therapist. Necessary supplies and equipment will be reviewed for medical necessity and follow the criteria of the R414.12 rule. Non-Traditional Medicaid: Physical therapy and occupational therapy (in combination) are limited to 10 visits per calendar year. CO-PAYMENT Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one co-payment per date of service per provider. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.      Page 4 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   H. Speech and Hearing Services Services and appliances, including hearing aids and hearing aid batteries, provided by a licensed medical professional to test and treat speech defects and hearing loss are Covered Services. Non-Traditional Medicaid Plan: Full coverage except hearing aids are limited to congenital (birth defect) hearing losses only.   I. Podiatry Services Services provided by a licensed podiatrist are Covered Services. Traditional Medicaid Plan: Full coverage is limited to children up to age 21 and pregnant women. Limited podiatry benefits are covered for adults. Non-Traditional Medicaid Plan: Limited podiatry benefits are covered. CO-PAYMENT Traditional Medicaid: Co-pay is $3.00 per visit. Limited to one co-payment per date of service per provider. Annual calendar year maximum is $100.00 per Enrollee for any combination of physician, podiatry, outpatient hospital, freestanding emergency centers, and surgical centers. Co-payment required for preventive services and immunizations. Non-Traditional Medicaid: Co-payment is $3.00 per visit. Limited to one co-payment per date of service per provider. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.   J. End Stage Renal Disease - Dialysis Treatment of end stage renal dialysis for kidney failure is a Covered Service. Dialysis is to be rendered by a Medicare-certified Dialysis facility.   K. Home Health Services Home health services are defined as intermittent nursing care provided by certified nursing professionals (registered nurses, licensed practical nurses, and home health aides) in the client’s home when the client is homebound or semi-homebound are Covered Services. Home health care must be rendered by a Medicare-certified Home Health Agency. The CONTRACTOR agrees to comply with all federal regulations regarding surety bonds. The CONTRACTOR agrees to contract with only Medicare-certified Home Health Agencies who carry a surety bond if federal regulations regarding this requirement are reinstated. The DEPARTMENT agrees to notify the CONTRACTOR if such federal regulations are reinstated.      Page 5 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 Personal care services as defined in the DEPARTMENT’s Medicaid Personal Care Provider Manual are included in this Contract. Personal care services may be provided by a State licensed home health agency.   L. Hospice Services Services delivered to terminally ill patients (six months life expectancy) who elect palliative versus aggressive care are Covered Services. Hospice care must be rendered by a Medicare-certified hospice. When an Enrollee is receiving hospice in a nursing facility, ICF/MR or freestanding hospice facility, the CONTRACTOR is responsible for up to 30 days of hospice care.   M. Private Duty Nursing Services provided by licensed nurses for ventilator-dependent children and technology-dependent adults in their home in lieu of hospitalization if Medically Necessary, feasible, and safe to be provided in the patient’s home are Covered Services. Requests for continuous care will be evaluated on a case by case basis and must be approved by the CONTRACTOR. Non-Traditional Medicaid Plan: Private Duty Nursing is not a covered service.   N. Medical Supplies and Medical Equipment This Covered Service includes any necessary supplies and equipment used to assist the Enrollee’s medical recovery, including both durable and non-durable medical supplies and equipment, and prosthetic devices. The objective of the medical supplies program is to provide supplies for maximum reduction of physical disability and restore the Enrollee to his or her best functional level. Medical supplies may include any necessary supplies and equipment recommended by a physical or occupational therapist, but should be ordered by a physician. Durable medical equipment (DME) includes, but is not limited to, prosthetic devices and specialized wheelchairs. Durable medical equipment and supplies must be provided by a DME supplier that has a surety bond. Necessary supplies and equipment will be reviewed for medical necessity and follow the criteria of the R414.12 of the Utah Administrative Code, with the exception of criteria concerning long term care since long term care services are not covered under the Contract. Non-Traditional Medicaid Plan excludes blood pressure monitors, and replacement of lost, damaged, or stolen durable medical equipment or prosthesis.   O. Abortions and Sterilizations These Covered Services are provided to the extent permitted by Federal and State law and must meet the documentation requirement of 42 CFR 441, Subparts E and F. These requirements must be met regardless of whether Medicaid is primary or secondary payer.      Page 6 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   P. Treatment for Substance Abuse and Dependency Treatment will cover medical detoxification for alcohol or substance abuse conditions is a Covered Service. Medical services including hospital services will be provided for the medical non-psychiatric aspects of the conditions of alcohol/drug abuse.   Q. Organ Transplants The following transplantations are Covered Services for all Enrollees: kidney, liver, cornea, bone marrow, stem cell, heart, intestine, lung, pancreas, small bowel, combination heart/lung, combination intestine/liver, combination kidney/pancreas, combination liver/kidney, multi visceral, and combination liver/small bowel unless amended under the provisions of Attachment B, Article IV (Benefits), Section C, Subsection 2 of this Contract. Non-Traditional Medicaid Plan is limited to kidney, liver, cornea, bone marrow, stem cell, heart, and lung transplantations.   R. Other Outside Medical Services The CONTRACTOR, at its discretion and without compromising quality of care, may choose to provide services in Freestanding Emergency Centers, Surgical Centers and Birthing Centers. CO-PAYMENT Traditional Medicaid: $2.00 co-payment per visit. Limited to one co-payment per date of service per provider. Annual calendar year maximum is $100.00 per Enrollee for any combination of physician, podiatry, outpatient hospital, freestanding emergency centers, and surgical centers. (Co-payment does not apply to birthing centers.) Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one co-payment per date of service per provider. Counts toward total maximum co-payment and co-insurance of $500.00 per Enrollee per calendar year.   S. Long Term Care The CONTRACTOR may provide long term care for Enrollees in skilled nursing facilities requiring such care as a continuum of a medical plan when the plan includes a prognosis of recovery and discharge within thirty (30) days or less. When the prognosis of an Enrollee indicates that long term care (over 30 days) will be required, the CONTRACTOR will notify the DEPARTMENT and the skilled nursing facility of the prognosis determination and will initiate disenrollment. Skilled nursing care is to be rendered in a skilled nursing facility which meets federal regulations of participation.      Page 7 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   T. Services to CHEC Enrollees     1. CHEC Services The CONTRACTOR will provide to CHEC Enrollees preventive screening services and other necessary medical care, diagnostic services, treatment, and other measures necessary to correct or ameliorate defects and physical and mental illnesses and conditions discovered by the screening services, whether or not such services are covered under the State Medicaid Plan. The CONTRACTOR is not responsible for home and community-based services available through Utah’s Home and Community-Based waiver programs. The CONTRACTOR will provide the full early and periodic screening, diagnosis, and treatment services to all eligible children and young adults up to age 21 in accordance with the periodicity schedule as described in the Utah CHEC Provider Manual. All children between six months and 72 months must be screened for blood lead levels. Non-Traditional Medicaid: CHEC services are not covered. Enrollees who are 19 or 20 years of age receive the adult scope of services.     2. CHEC Policies and Procedures The CONTRACTOR agrees to have written policies and procedures for conducting tracking, follow-up, and outreach to ensure compliance with the CHEC periodicity schedules. These policies and procedures will emphasize outreach and compliance monitoring for children and young adults, taking into account the multi-lingual, multi-cultural nature as well as other unique characteristics of the CHEC Enrollees.   U. Family Planning Services These Covered Services includes disseminating information, counseling, and treatments relating to family planning services. All services must be provided by or authorized by a physician, certified nurse midwife, or nurse practitioner. All services must be provided in concert with Utah law. Birth control services include information and instructions related to the following:     1. Birth control pills;     2. Norplant (removal only);     3. Depo Provera;     4. IUDs;     5. Barrier methods including diaphragms, male and female condoms, and cervical caps;      Page 8 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006     6. Vasectomy or tubal ligations;     7. Nuvaring; and     8. Office calls, examinations or counseling related to contraceptive devices. Non-Traditional Medicaid: Norplant is not a covered service.   V. High-Risk Prenatal Services     1. In General - Ensure Services are Appropriate and Coordinated The CONTRACTOR must ensure that high risk pregnant Enrollees receive an appropriate level of quality perinatal care that is coordinated, comprehensive, preventive, and continuous either by direct service or referral to an appropriate provider or facility. In the determination of the provider and facility to which a high risk prenatal Enrollee will be referred, care must be taken to ensure that the provider and facility both have the appropriate training, expertise and capability to deliver the care needed by the Enrollee and her fetus/infant. Although many complications in perinatal health cannot be anticipated, most can be identified early in pregnancy. Ideally, preconceptional counseling and planned pregnancy are the best ways to assure successful pregnancy outcome, but this is often not possible. Provision of routine preconceptional counseling must be made available to those women who have conditions identified as impacting pregnancy outcome, i.e., diabetes mellitus, medications which may result in fetal anomalies or poor pregnancy outcome, or previous severe anomalous fetus/infant, among others.     2. Risk Assessment     a. General Enrollees who are pregnant should be risk assessed at their first prenatal visit, preferably in the first trimester, and later in pregnancy as low, moderate or high risk for medical and psychosocial conditions which may contribute to poor birth outcomes. Women found to not be moderate or high risk should be evaluated for change in risk status throughout their pregnancy.   b. Assessment tools The CONTRACTOR must have a mechanism to assure that prenatal care providers conduct risk assessments on all pregnant Enrollees on entry into prenatal care and, as needed, on an ongoing basis to re-assess risk status throughout pregnancy. Assessment tools used by prenatal care providers should be consistent with standards of practice and linked to the CONTRACTOR’s care coordination/case management programs for those Enrollees who have a moderate or high risk status. All prenatal health care providers should be able to identify the full range of medical and psychosocial risk factors and either provide appropriate care or initiate referrals to the appropriate level of care/consultation throughout pregnancy. The CONTRACTOR’s healthy pregnancy programs must also include assessment of risk for all pregnant Enrollees as soon as a pregnancy is identified and as needed, on an ongoing basis. The CONTRACTOR shall refer to and coordinate care with the prenatal care providers concerning the treatment plan and risk factors. The CONTRACTOR’s risk assessments shall be overseen by the CONTRACTOR’s Medical Director.      Page 9 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 Assessment tools used by prenatal care providers and the CONTRACTOR should include a means of identifying prenatal risk factors based on medical and psychosocial conditions that may contribute to poor birth outcomes and that will assist the CONTRACTOR and prenatal care providers in determining the level and intensity of care coordination/case management required to ensure the appropriate level of perinatal care. The DEPARTMENT recommends “Guidelines for Perinatal Care by American Academy of Pediatrics, and American College of Obstetricians and Gynecologists” as a resource for evaluating and classification of risk, the level of care and consultation recommended based on risk status, and the level of care coordination required. The DEPARTMENT recommends that Enrollees be identified with a status of no risk, low risk, moderate risk, or high risk and that at a minimum, Enrollees who are classified as moderate or high risk should receive care coordination/case management services.   c. Recommended Prenatal Screening     (1) Hepatitis B surface antigen The DEPARTMENT recommends routine prenatal screening of every woman for hepatitis B surface antigen (HBsAg) early in prenatal care to identify all those at high risk for transmitting the virus to their newborns and later in pregnancy for women who tested negative for HbsAg during early pregnancy but who are at high risk based on:     (a) evidence of clinical hepatitis during pregnancy;     (b) injection drug use;     (c) occurrence during pregnancy or a history of STDs; or     (d) judgement of the health care provider. When a woman is found to be HBsAg-positive, the CONTRACTOR will provide HBIG and HB vaccine at birth. Initial treatments should be given during the first 12 hours of life. The CONTRACTOR will comply with all other requirements as specified in Utah Law R386-702-9.     (2) Sexually Transmitted Diseases (STDs) The DEPARTMENT recommends prenatal screening including sexually transmitted diseases such as gonorrhea, chlamydia, and standard serological testing for syphilis as required by Utah Law 26-6-20. Testing for STDs should be repeated in the 3rd trimester for Enrollees at high risk for exposure.     (3) HIV testing The DEPARTMENT also recommends testing of all pregnant Enrollees for HIV and testing and treatment at labor and delivery for women who have not received testing during pregnancy. The CONTRACTOR should encourage providers to develop policies that are consistent with the American College of Obstetricians and Gynecologists, including but not limited to:     (a) universal testing with an opt-out approach (testing of all pregnant women and not just those who appear to be at high risk for HIV;      Page 10 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006     (b) flexibility in the consent process; and     (c) prevention and referral through education during prenatal care. Prenatal care providers should have a mechanism to document in medical records when pregnant Enrollees are offered HIV tests and when tests are refused. Pregnant Enrollees who refuse HIV testing earlier in pregnancy should be offered HIV testing again later in pregnancy. Pregnant Enrollees who test positive should receive treatment throughout their pregnancy and labor and delivery to reduce the risk of HIV transmission to their newborns.   3. Prenatal Initiative Program Prenatal services provided directly or through agreements with appropriate providers include those services covered under Medicaid’s Prenatal Initiative Program which includes the following enhanced services for pregnant women:     a. perinatal care coordination     b. prenatal and postnatal home visits     c. group prenatal and postnatal education     d. nutritional assessment and counseling     e. prenatal and postnatal psychosocial counseling Psychosocial counseling is a service designed to benefit the pregnant client by helping her cope with the stress that may accompany her pregnancy. Enabling her to manage this stress improves the likelihood that she will have a healthy pregnancy. This counseling is intended to be short term and directly related to the pregnancy. However, pregnant women who are also suffering from a serious emotional or mental illness should be referred to an appropriate mental health care provider.   W. Services for Children with Special Needs   1. In General In addition to primary care, children with chronic illnesses and disabilities need specialized care provided by trained experienced professionals. Since early diagnosis and intervention will prevent costly complications later on, the specialized care must be provided in a timely manner. The specialized care must comprehensively address all areas of need to be most effective and must be coordinated with primary care and other services to be most efficient. The children’s families must be involved in the planning and delivery of the care for it to be acceptable and successful.      Page 11 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   2. Services Requiring Timely Access All children with special health care needs must have timely access to the following services:     a. Comprehensive evaluation for the condition.     b. Pediatric subspecialty consultation and care appropriate to the condition.     c. Rehabilitative services provided by professionals with pediatric training in areas such as physical therapy, occupational therapy and speech therapy.     d. Durable medical equipment appropriate for the condition.     e. Care coordination for linkage to early intervention, special education and family support services and for tracking progress. In addition, children with the conditions marked by * below must have timely access to coordinated multispecialty clinics, when Medically Necessary, for their disorder.      Page 12 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   3. Definition of Children with Special Health Care Needs The definition of children with special health needs includes, but is not limited to, the following conditions:     a. Nervous System Defects such as Spina Bifida* Sacral Agenesis* Hydrocephalus     b. Craniofacial Defects such as Cleft Lip and Palate* Treacher - Collins Syndrome     c. Complex Skeletal Defects such as Arthrogryposis* Osteogenesis Imperfecta* Phocomelia*     d. Inborn Metabolic Disorders such as Phenylketonuria* Galactosemia*     e. Neuromotor Disabilities such as Cerebral palsy* Muscular Dystrophy* Complex Seizure Disorders     f. Congenital Heart Defects     g. Genetic Disorders such as Chromosome Disorders Genetic Disorders     h. Chronic Illnesses such as Cystic Fibrosis Hemophilia Rheumatoid Arthritis Bronchopulmonary Dysplasia Cancer Diabetes Nephritis Immune Disorders     i. Developmental Disabilities with multiple or global delays in development such as Down Syndrome or other conditions associated with mental retardation.      Page 13 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 The CONTRACTOR agrees to cover all Medically Necessary services for children with special health care needs such as the ones listed above. The CONTRACTOR further agrees to cooperate with the DEPARTMENT’s quality assurance monitoring for this population by providing requested information.   X. Medical and Surgical Services of a Dentist   1. Who May Provide Services Under Utah law, medical and surgical services of a dentist may be provided by either a physician or a doctor of dental medicine or dental surgery.   2. Universe of Covered Services Medical and surgical services that under Utah law may be provided by a physician or a doctor of dental medicine or dental surgery, are covered under the Contract.   3. Services Specifically Covered The CONTRACTOR is responsible for palliative care and pain relief for severe mouth or tooth pain in an emergency room. If the emergency room physician determines that it is not an emergency and the client requires services at a lesser level, the provider should refer the client to a dentist for treatment. If the dental-related problem is serious enough for the client to be admitted to the hospital, the CONTRACTOR is responsible for coverage of the inpatient hospital stay. The CONTRACTOR is responsible for authorized/approved medical services provided by oral surgeons consistent with injury, accident, or disease (excluding dental decay and periodontal disease) including, but not limited to, removal of tumors in the mouth, setting and wiring a fractured jaw. Also covered are injuries to sound natural teeth and associated bone and tissue resulting from accidents including services by dentists performed in facilities other than the emergency room or hospital.   4. Dental Services Not Covered The CONTRACTOR is not responsible for routine dental services such as fillings, extractions, treatment of abscess or infection, orthodontics, and pain relief when provided by a dentist in the office or in an outpatient setting such as a surgical center or scheduled same day surgery in a hospital including the surgical facilities charges.   Y. Diabetes Education The CONTRACTOR shall provide diabetes self-management education from a Utah certified or American Diabetes Association recognized program when an Enrollee:   1. has recently been diagnosed with diabetes, or      Page 14 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006   2. is determined by the health care professional to have experienced a significant change in symptoms, progression of the disease or health condition that warrants changes in the Enrollee’s self-management plan, or   3. is determined by the health care professional to require re-education or refresher training.   Z. HIV Prevention The CONTRACTOR shall have in place the following:     1. General Program The CONTRACTOR must have educational methods for promoting HIV prevention to Enrollees. HIV prevention information, both primary (targeted to uninfected Enrollees), as well as secondary (targeted to those Enrollees with HIV) should must be culturally and linguistically appropriate. All Enrollees should be informed of the availability of both in-plan HIV counseling and testing services, as well as those available from Utah State-operated programs.     2. Focused Program for Women Special attention should be paid identifying HIV+ women and engaging them in routine care in order to promote treatment including, but not limited to, antiretroviral therapy during pregnancy.      Page 15 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment C Molina Healthcare of Utah January 1, 2006 SUMMARY OF CO-PAYMENT AND CO-INSURANCE REQUIREMENTS Pregnant women and children under age 18 are exempt from all co-payment and co-insurance requirements. Services related to family planning are excluded from all co-payment and co-insurance requirements. Traditional Medicaid Plan Inpatient hospital: Each Enrollee must pay a $220.00 co-insurance for non-emergency inpatient hospital admissions. The maximum co-payment per Enrollee per calendar year is $220.00 for non-emergency inpatient hospital admissions. Emergency Department: Each enrollee must pay a $6.00 co-payment for non-emergency use of the emergency room. Physician, osteopath, podiatrist, outpatient hospital, freestanding emergency centers, and surgical centers: Each Enrollee must pay a $3.00 co-payment per provider per day. The maximum co-payment per Enrollee per calendar year is $100.00 for any combination of the services provided by the above providers. Prescription Drugs: Each Enrollee must pay a co-payment of $3.00 per prescription. The maximum co-payment is $15.00 per Enrollee per month.* There is no overall out-of-pocket maximum for the above services. Non-Traditional Medicaid Plan Inpatient hospital: Each Enrollee must pay a $220.00 co-insurance for each non-emergency inpatient hospital admissions. Emergency Department: Each enrollee must pay a $6.00 co-payment for non-emergency use of the emergency room. Physician, osteopath, podiatrist, physical therapist, occupational therapist, chiropractor*, freestanding emergency centers, surgical centers: Each Enrollee must pay a $3.00 co-payment per provider per day. Prescription Drugs: Each Enrollee must pay a co-payment of $2.00 per prescription.*   The out-of-pocket maximum for each Enrollee is $500.00 for any combination of the above co-payments and co-insurance.   -------------------------------------------------------------------------------- * Pharmacy services and chiropractic services are not the responsibility of the CONTRACTOR.      Page 16 of 16    health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Utah’s Quality Assessment and Performance Improvement Plan (Utah “QAPIP”) For Contracted Medicaid Health Plans Attachment D: Program Description LOGO [g67034img1.jpg] State of Utah Department of Health Division of Health Care Financing Bureau of Managed Health Care August 13, 2003 LOGO [g67034img2.jpg] -------------------------------------------------------------------------------- Table of Contents                            Page I.    Utah Quality Assessment and Performance Improvement Plan (UQAPIP), Executive Summary    3 II.    Utah Quality Assessment and Performance Improvement Plan (UQAPIP), Program Description    4       A.    Overview    4       B.    Purpose    4       C.    Objectives    4       D.    Quality Assessment and Performance Improvement (QAPI) Strategy    5          1.    Health Plan Compliance Reviews    5             a. CMS Reporting    7             b. Documentation Requirements and Time Lines    7             c. Deeming    7             d. Corrective Actions and Sanctions    8          2.    Internal Surveillance and Tracking (analysis of internal MMCS and Data Warehouse data)    8          3.    External Quality Reviews (EQR’s)    8             a. Mandatory EQR activities include    8             b. Optional activities include    9          4.    Annual Program Evaluation Page    9 III.    Table of Appendices    10 IV.    References    11   Page 2 of 11 -------------------------------------------------------------------------------- I. Utah Quality Assessment and Performance Improvement Monitoring Plan (QAPIP) Executive Summary: The Utah Department of Health (DOH), Division of Health Care Financing (DHCF), Bureau of Managed Health Care (BMHC) by authority of 42 CFR, Part 438, Subparts C, D, E, F, H (438.602, 438.608, 438.610), and Subpart I (438.700) has oversight responsibility of contracted Medicaid health plans to ensure the delivery of quality health care and compliance with state and federal regulations. The BMHC oversight methodology consists of activities to collect and analyze data from on-site reviews, required reports, and other internal and external data sources. This information is used to determine compliance with state Medicaid requirements; federal regulations pertaining to managed care entities; to identify opportunities for improvement and areas of non-compliance. When BMHC identifies non-compliance and areas where improvement is needed, BMHC makes recommendations and requires corrective action plans (CAP’s). Health plans are required to submit CAP’s according to specified timeframes; BMHC reviews what is submitted and either accepts or requests a revised CAP. Health plans can request extensions to the required CAP timeframes or appeal the BMHC’s findings. Once the health plan submits an acceptable action plan, the BMHC provides adequate opportunity for the plan to implement corrections and improvements. Follow up activities are conducted thereafter to assess progress toward compliance and address areas for continuous improvement. The BMHC uses information from quality monitoring activities to assess the effectiveness of its monitoring program, implement improvements to its oversight processes, update health plan compliance requirements and develop work plans for subsequent years. The BMHC reports to Centers for Medicare and Medicaid Services (CMS) as required concerning results of quality monitoring activities and program evaluations.   Page 3 of 11 -------------------------------------------------------------------------------- II. Utah Quality Assessment and Performance Improvement Monitoring Plan (QAPIP) Program Description A. Overview: The Utah Department of Health (DOH), Division of Health Care Financing (DHCF), Bureau of Managed Health Care (BMHC) by authority of 42 CFR, Part 438, Subparts C, D, E, F, H (438.602, 438.608, 438.610), and Subpart I (438.700) has oversight responsibility of contracted Medicaid health plans to ensure the delivery of quality health care and compliance with state and federal regulations. The UTAH QAPIP encompasses oversight of regulations pertaining to Managed Care Organizations (MCOs), Prepaid Inpatient Health Plans (PIHPs) and Primary Care Case Management (PCCM) entities. B. Purpose: The purpose of the Utah Quality Assessment and Performance Improvement Plan is to ensure that the Medicaid health plans provide quality health care to Medicaid enrollees, to provide a mechanism to ensure continuous improvement in the care and services provided and assess compliance to state and federal regulations required for managed care entities. C. Objectives:     •   To establish a monitoring plan that uses experts outside of the BMHC to promote interagency cooperation and support other state DOH programs.     •   To establish a monitoring plan which includes deeming provisions, in order to minimize duplication and redundancy of comparable monitoring content for organizations that have received accreditation by a nationally recognized accreditation body.     •   To assess the quality, availability and access to, coordination of, and appropriateness of care and services provided to Medicaid enrollees (including those with special health care needs) under MCO, PIHP and PCCM contracts.     •   To assure care and services are provided in a culturally competent manner, which respects the rights of enrollees, including those with disabilities.     •   To assess compliance through regular monitoring in a way that promotes collaboration and continuous quality improvement.     •   To ensure adherence to contract requirements, state and federal regulations applicable to the types of health plans contracted with Medicaid.     •   To assure appropriate adherence to privacy and confidentiality rules in the provision of care and services.     •   To assure the organizations structure, operations and information systems support adherence to the Utah QAPIP, program oversight needs and meet federal and state regulations.     •   To assure that data and documentation necessary for quality oversight is accurate and complete.   Page 4 of 11 -------------------------------------------------------------------------------- D. Quality Assessment and Performance Improvement (QAPI) Strategy: The BMHC’s methods of oversight of contracted Medicaid health plans involve an integrated approach using information derived from the following four activities. These include:     1. Health Plan Compliance Reviews   2. Internal Surveillance and Tracking (analysis of internal data)   3. External Quality Review (EQR)   4. Annual Program Review 1. Health Plan Compliance Reviews The BMHC conducts periodic reviews of contracted MCOs, PIHPs and PCCMs to monitor contract compliance and compliance to state and federal regulations applicable to these types of health plan entities. Reviews are done using the Utah Quality Assessment and Performance Improvement Plan (QAPIP), which is a comprehensive set of compliance Standards based on quality improvement, contract monitoring, and regulatory oversight needs. Most of the compliance Standards in the QAPIP is applicable to MCO and PIHP health plan entities. Oversight of PCCM contracts and compliance with state and federal regulations is also accomplished through the UTAH QAPIP; although, much fewer of the compliance Standards are applicable to PCCM entities. The BMHC’s conducts periodic comprehensive quality monitoring reviews (CQMRs) using the UTAH QAPIP compliance Standards. Frequency of CQMRs is determined by the level of compliance demonstrated during the on-reviews, internal surveillance and monitoring (number 2, described below), the amount of structural or operational changes made following reviews or based on other oversight needs. For all MCO or PIHP entities CQMR’s will occur at least every threes years and more frequently when necessary. Annually, follow-up reviews will be done to assess progress toward recommended improvements and CAPs. The BMHC may also conduct a focused review of a particular area(s); these are Follow-up/ Focused Quality Monitoring Review’s (FQMR’s). CQMRs consist of review of all UTAH QAPIP pertaining to the type of entity being reviewed and all applicable data sources for each area. The UTAH QAPIP delineates compliance areas that require detailed program narratives, any mandatory data sources needed to assess compliance, authority for particular areas of compliance, applicability of deeming status for entities who have received national accreditation, and DOH staff resources that may be used to assess each compliance area. Documentation requirements for annual monitoring will be tailored to the level of compliance from the most recent CQMR, analysis from internal surveillance, and other monitoring needed relating to quality, access to care and appropriateness of care and services, etc. CQMRs for MCOs or PIHPs will occur “on-site” at the organization’s local office(s). On-site reviews will consist of reviewing documentation, interviewing staff and conducting an exit conferencing, which outlines the organization’s strengths and weaknesses. The BMHC may use on-site review, in-person meetings or teleconferencing to conduct   Page 5 of 11 -------------------------------------------------------------------------------- FQMRs. For PCCMs, an assessment of compliance to applicable regulations may be conducted less formally (telephone conference following review of applicable documentation) and therefore not require an on-site review. The BMHC’s Quality Monitoring Unit staff and other DOH consultants will participate in review activities. The BMHC uses consultants from the Division of Community and Family Health Services, the Office of Health Care Statistics and other DHCF staff to conduct reviews. Following each review, the BMHC will compile a report addressing the level of compliance to applicable Utah QAPIP Standards for the type of entity being reviewed. This report will detail findings, recommendations for improvements and general comments. Written corrective action plans (CAPs) for any areas of non-compliance will be required as necessary. The BMHC will conduct follow-up reviews annually that will assess the plan’s progress toward CAPs, other recommended improvements and monitoring related to reviews and any reports required by the contract relating to quality, access to care and appropriateness of care and services since the last review. Depending on the level of compliance, BMHC may elect to repeat CQMR as often as necessary or conduct a partial/focused review annually until the required level of compliance is achieved. Quarterly progress reports (verbal or written) may be required depending on the level of non-compliance determined from CQMR or FQMRs. The BMHC will regularly monitor areas requiring annual oversight (see compliance Standards for “crosswalk” of annual monitoring areas). Attestation statements may be permitted to satisfy part(s) of the QAPIP compliance areas after a sufficient level of performance is demonstrated through CQMR’s. Attestation statements are permitted only for areas that have not changed or have changed minimally since the last review. The BMHC will determine if the attestations are acceptable on a case-by-case basis. These will permit the health plan to not have to provide full program narratives for areas that have not changed since the last review or have changed minimally. The BMHC will determine if attestations are acceptable on a case-by-case basis. Annually, Medicaid MCOs and PIHPs are required to produce a Work Plan (WP) each new calendar year detailing all quality assessment and performance improvement (QAPI) activities; including activities related to recommended improvements from reviews/CAPs, the organization’s clinical and non clinical performance improvement projects/studies, specific program activities, projects related to priority population groups, federal or state requirements, etc. Additionally, on completion of each calendar year the health plans are required to conduct a comprehensive program evaluation, called a Work Plan Evaluation (WPE), to determine the effectiveness of interventions in each area of the WP. The WPE is expected to be part of the process used to develop the WP for each new year and update the organizations overall Quality Improvement Program Description (QIPD), if necessary. The BMHC on an ongoing basis will provide input on WP, WPE and annually updated QIPD’s as part of annual monitoring activities or reviews for MCOs and PIHPs. PCCMs are not required to submit these documents since they are outside the scope of their regulations; however, may be required to submit other annual reports related to applicable regulations or compliance areas.   Page 6 of 11 -------------------------------------------------------------------------------- a. Center for Medicare and Medicaid Services (CMS) Reporting: In accordance with 42 CFR, part 438, 438.202, the BMHC will submit to CMS any required repots relating to BMHC’s UAPIP/quality improvement (QI) strategy, reports on the implementation and effectiveness of the QAPIP/QI strategy and of updates whenever substantial changes to the UAPIP/QI strategy are made. Additionally, CMS may require the BMHC to submit reports of findings from compliance reviews and EQR’s. b. Documentation Requirements and Timelines: Each health plan will be required to submit documentation that specifically addresses all compliance Standards in the QAPIP prior to a CQMR and FQMR. This documentation is required to be organized and categorized in accordance with the sequencing of each domain and Standard within the Utah QAPIP. Process narratives (a description of the compliance area and how compliance is achieved) are mandatory for specific areas in which exhibits alone are insufficient to determine how the plan operates in the given area (see “crosswalk” section of compliance Standards). Prior to an audit, the health plan may be required to submit pre-review documentation as early as 60 days before a CQMR or FQMR. All documentation is required to be available during the entire time of an on-site review. Organization’s being reviewed are required to provide suitable, private workspace; i.e., private conference room with a phone, for the number of staff participating and make appropriate plan staff available to assist in finding necessary information during documentation review sessions or for answering questions. Prior to a CQMR or FQMR an agenda will be developed including time frames for reviewing documentation, interviews, post interview team consultation and an exit conference. Following a CQMR or FQMR the BMHC will complete a compliance report within 60 calendar days of the date of the exit conference. The health plans, if necessary, will be required to submit a written plan of correction within 45 calendar days of the receipt of the compliance report or submit an appeal of the BMHC’s findings. If an extension is required the organization may request, in writing, an extension to the due date for the CAP and the timeframes will be adjusted as appropriate. The BMHC will provide written approval as to the acceptance of the CAP within 30 calendar days of BMHC’s receipt of the CAP. Within 30 calendar days of the receipt of the CAP the BMHC will provide written approval or request revisions, if not accepted. c. Deeming: The BMHC has incorporated deeming provisions in the UTAH QAPIP for areas applicable to MCOs and PIHPs. Accreditation by a nationally recognized accreditation agency that is also recognized by the State will be accepted to fulfill some compliance requirements. Examples of nationally recognized accreditation agencies include National Committee for Quality Assurance (NCQA), Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and Utilization Review and Accreditation Commission (URAC), also known as American Accreditation HealthCare Commission. The organization must provide written verification of accreditation in areas where deeming may be applicable. The BMHC will determine areas applicable for deeming based on comparability and level of accreditation achieved.   Page 7 of 11 -------------------------------------------------------------------------------- d. Corrective Actions and Sanctions: Corrective actions may be required to be submitted relating to quality monitoring activities if the BMHC determines the contracted Medicaid organization has not provided services in accordance with the contract or within expected professional standards. The BMHC will request in writing that the health plan correct deficiencies or identified problems through a corrective action plan (CAP). The contracted Medicaid health plan agrees with all applicable procedures and time frames set forth in the contract regarding compliance with CAP’s. However, CAP’s which are the result of non compliance findings with the Utah QAPIP, following reviews, longer time frames are granted for submitting initial CAP’s and subsequent requests for revision to CAP’s, until final acceptance. Additionally, longer time frames may be granted prior to implementing sanctions. Areas of non compliance related to contract requirements or the UQAMP, which are deemed more critical or urgent, may be subject to time frames associated with requests for CAP’s as set forth in the contract. The BMHC will follow do-process procedures as outlined in the contract with regard to requests for CAP’s, requests for extensions of CAP’s, allowing opportunity to appeal findings, considering explanations of disagreement and in issuing hearing rights. 2. Internal Surveillance and Tracking (analysis of internal MMCS and Data Warehouse data) Additionally, as a mechanism of quality oversight the BMHC will monitor and analyze other available internal data. These include internal MMCS data; information available through the state’s Data Warehouse or reported encounter data. When possible and appropriate this information will be integrated into compliance reviews in order to address areas where further study or improvement may be needed or when additional information is needed. 3. External Quality Reviews (EQR’s): The BMHC uses an External Quality Review Organization (EQRO) to conduct an annual, external assessment of outcomes related to quality, access to and timeliness of care for services covered in MCO and PIHPs contracts (42 CFR Part 438, Subpart E, 438.320). External review includes mandatory and optional activities. Mandatory EQR activities include using information from the following activities:     1. Validation of performance improvement projects as noted in 438.240(b)(1), validation of performance measures required by the state in accordance with 438.240(b)(2), and     2. To conduct a review within the previous 3 year period to determine MCO’s or PIHP’s compliance with standards related to access to care, structure and operations, and quality measurement [(438.204(g)].   Page 8 of 11 -------------------------------------------------------------------------------- Optional activities include using information derived from the previous 12 months from the following activities:     1. Validation of encounter data reported by an MCO or PIHP,     2. Administration or validation of consumer or provider surveys of quality of care,     3. Calculation of performance measures in addition to those reported by an MCO or PIHP and validation     4. Conducting performance improvement projects in addition to those conducted by an MCO or PIHP. The BMHC assures that EQROs meet the qualifications to perform external quality reviews (EQRs) as set forth in 42 CFR, Part 438, Subpart E, 438.354 (competence and independence). The state, its agent or the EQRO may perform the mandatory and optional EQR-related activities [42 CFR, Part 438, Subpart E, 438.358(a)]. The BMHC will assure that the date collection methods and tools used by the EQRO are consistent with the Medicaid managed care provisions of the Balanced Budget Act (BBA) and the compliance requirements outlined in the Utah QAPIP, which were developed to assess compliance in accordance with the BBA. The EQRO will submit reports in accordance with requirements in 438.364. The BMHC will make available upon request information obtained from the technical report supplied by the EQRO to interested parties, such as participating health care providers, enrollees and potential enrollees of the MCO or PIHP, recipient advocacy groups and general public. This information will be supplied in alternative formats for persons with sensory impairments, when requested. The EQRO contract may be amended as necessary in order to accommodate review activities. Study subjects will be determined collaboratively by DHCF, BMHC, EQRO and health plan staff. 4. Annual Program Evaluation Annually, the BMHC will develop a Work Plan, which outlines the planned review activity (CQMR or follow up reviews), EQR activity and activities related to available systems data (MMCS/DW, grievance/appeals, hearings, exemptions, reporting, etc.,). At the end of each calendar a Work Plan Evaluation will be completed. The Work Plan Evaluation will be used to develop the Work Plan for each new year and schedule monitoring reviews. At least every 3 years the BMHC will perform a more comprehensive evaluation, which will be used to make program improvements. The BMHC will submit to CMS any required reports relating to the states quality improvement program.   Page 9 of 11 -------------------------------------------------------------------------------- III. Table of Appendices   Tab Heading   Content Utah’s QAPIP   Utah’s Quality Assessment and Performance Improvement Monitoring Plan (Program Description Document) Table of Appendices   Listing of all appendices to Attachment G, Utah’s QAPIP Appendix A Flow Chart   Utah QAPIP Flow Chart Appendix B   (B1)   Utah’s QAPIP Compliance Standards Crosswalk (DRAFT) Crosswalk   (B2)   Federal Register Appendix C Definitions   Definitions Appendix D Scoring   Weighting and Scoring (to be developed) Appendix E Attestation   Attestation Template (to be developed) Appendix F Data Collection   Review Data Collection Tools Appendix G WP Format   Work Plan Format (required) Appendix H WPE Format   Work Plan Format (required) Appendix I   (I1)   Example Clinical and Non-Clinical Areas for Study PI Topics   (I2)   Example Performance Improvement (PI) Project Description Appendix J CM Report   Example Case Management Report Appendix K ACOG Record   Example Risk Assessment Information: ACOG Antepartum Record© (by permission of Donna Weber, ACOG Marketing, Inventory and Distribution Manager, July 1, 2003) Appendix L   Example CHEC Audit Report Appendix M   (M1)   Example Grievance, Appeal, Action and Notice of Action Requirements   (M2)   Example Grievance Tracking   (M3)   Flow Charts for Grievances, Appeals, Actions, Notices of Action, Continuation of Benefits and State Fair Hearing Procedures Appendix N   Example Newsletter Topic Tracking Grid Appendix O   Priority Matrix Appendix P   Member Handbook Checklist (DRAFT)   Page 10 of 11 -------------------------------------------------------------------------------- IV. References     1. Federal Register, Volume 67, No. 115, Friday, June 14, 2002, 42 CFR, Part 438, Managed Care.     2. Utah Quality Assessment and Performance Improvement Plan (QAPIP) (Attachment G of contracts).     3. Quality Improvement System for Managed Care (QISMC), www.cms.hhs.gov/cop/2d.asp     4. Case Management Society of America (CMSA) Standards of Practice, (2003).     5. Aspen Publications, Inc. 1185 Avenue of the Americas, New York, NY 10036 (medical case management, forms, checklists, & guidelines), (1997), www.aspenpublishers.com     6. United States Department of Human Services, National Standards for Culturally and Linguistically Appropriate Standards (CLAS), Http://www.omhrc.gov/omh/programs/2pgprograms/finalreport.pdf     7. Siefker, Garrett, Van Genderen, Weis: Guidelines for Practicing Case Managers; Fundamentals of Case Management (1998).     8. Powell, Suzanne K., A Practical Guide to Success in Managed Care, Case Management (2000).     9. Case Management Inc.,10530 Paces Ave. Suite 1511Matthews, NC 28105-2714Tel. 704.847.1195 [email protected]     10. Melamed, Dennis, Brittin, Alexander, URAC, The HIPAA Handbook: What You Organization Should Know About The Federal Privacy Standards (2001).     11. Melamed, Dennis, Brittin, Alexander, URAC, The HIPAA Handbook: What You Organization Should Know About The Federal Electronic Transaction Standards (2002).     12. Melamed, Dennis, Brittin, Alexander, URAC, The HIPAA Handbook: What You Organization Should Know About The Federal Security Standards (2002).     13. National Association for Healthcare Quality, Guide to Quality Management, Eighth Edition (1998).     14. American Accreditation Healthcare Commission/URAC, Health Plan Standards, Version 3.2 (2003).     15. American Accreditation Healthcare Commission/URAC, Health Network Standards & Interpretive Guide, version 3.2 (2003).     16. National Committee for Quality Assurance (NCQA), Standards and Guidelines for the Accreditation of MCOs (2003).     17. National Committee for Quality Assurance (NCQA), Data Collection Tools (2003).     18. Joint Commission on Accreditation of Healthcare Organizations, 2003-2004 Comprehensive Accreditation Manual for Health Care Networks (2003)     19. The Team Handbook, How to Use Teams to Improve Quality, Peter R. Scholtes, (1988).     20. United Health Care, The Language of Managed Health Care, the Managed Health Care Resource (1994).     21. Houghton Mifflin Company, Webster’s II, New College Dictionary, (1995).     22. AMSO.com, American Medical Specialty Organization, Inc. Definition of Terms, 2003.     23. The Managed Care Group, Managed Care Resources, Inc., MCR Canada, Managed Care Options, LLC, Managed Care Terms and Definitions, http://www.managedcaregroup.com/mcrdef.htm (2003).     24. Center for Health Services Research and Policy, The George Washington University2021 K Street, W, Suite 800Washington, DC 20006, http://www.gwu.edu/~chsrp .     25. The U.S. Department of Health and Human Services, 200 Independence Avenue, S. W. Washington, D.C. 20201, http://www.hhs.gov/ContactUs.html.     26. http://www.nlm.nih.gov/, U.S. National Library of Medicine, 8600 Rockville Pike, Bethesda, MD 20894.     27. http://www.access.gpo.gov/aboutgpo/index., Keepinfg America Informed, United States Government Printing Office.     28. http://www.chcs.org/contact/contact.html, Center For Health Care Strategies.   Page 11 of 11 -------------------------------------------------------------------------------- Attachment E Healthy U Page 4 of 15 MEDICAL SERVICES REVENUE AND COST DEFINITIONS FOR TABLE 2 REVENUES (Report all revenues received or receivable at the end-of-period date on the form)   1. Premiums Report premium payments received or receivable from the DEPARTMENT.   2. Delivery Fees Report the delivery fee received or receivable from the DEPARTMENT.   3. Reinsurance Report the reinsurance payments received or receivable from a reinsurance carrier other than the DEPARTMENT.   4. Stop Loss Report stop loss payments received or receivable from the DEPARTMENT.   5. TPL Collections - Medicare Report all third party collections received from Medicare.   6. TPL Collections - Other Report all third party collections received other than Medicare collections. (Report TPL savings because of cost avoidance as a memo amount on line 48).   7. Other (specify)   8. Other (specify) For lines seven and eight: Report all other revenue not included in lines one through six. (There may not be any amount to report; however, this line can be used to report revenue from total Utah operations that do not fit lines one through six.)   9. TOTAL REVENUES Total lines one through eight. NOTE: Duplicate premiums are not considered a cost or revenue as they are collected by the CONTRACTOR and paid to the DEPARTMENT. Therefore, the payment to the DEPARTMENT would reduce or offset the revenue recorded when the duplicate premium was received. However, line 49 has been established for reporting duplicate premiums as a memo amount.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Healthy U Page 5 of 15 MEDICAL COSTS: Report all costs accrued as of the ending date on the form. In the first data column (column 3), report all costs for Utah operations per the general ledger. In the 15 Medicaid data columns (columns 4 through 18), report only costs for Medicaid Enrollees.   10. Inpatient Hospital Services Costs incurred in providing inpatient hospital services to Enrollees confined to a hospital.   11. Outpatient Hospital Services Costs incurred in providing outpatient hospital services to Enrollees, not including services provided in the emergency department.   12. Emergency Department Services Costs incurred in providing outpatient hospital emergency room services to Enrollees.   13. Primary Care Physician Services (Including EPSDT Services, Prenatal Care, and Family Planning Services) All costs incurred for Enrollees as a result of providing primary care physician, osteopath, physician assistant, nurse practitioner, and nurse midwife services, including payroll expenses, any capitation and/or contract payments, fee-for-service payments, fringe benefits, travel and office supplies.   14. Specialty Care Physician Services (Including EPSDT Services, Prenatal Care, and Family Planning Services) All costs incurred as a result of providing specialty care physician, osteopath, physician assistant, nurse practitioner, and nurse midwife services to Enrollees, including payroll expenses, any capitation and/or contract payments, fee-for-service payments, fringe benefits, travel and office supplies.   15. Adult Screening Services Expenses associated with providing screening services to Enrollees.   16. Vision Care - Optometric Services Included are payroll costs, any capitation and/or contract payments, and fee-for-service payments for services and procedures performed by an optometrist and other non-payroll expenses directly related to providing optometric services for Enrollees.   17. Vision Care - Optical Services Included are payroll costs, any capitation and/or contract payments and fee-for-service payments for services and procedures performed by an optician and other supportive staff, cost of eyeglass frames and lenses and other non-payroll expenses directly related to providing optical services for Enrollees.   18. Laboratory (Pathology) Services Costs incurred as a result of providing pathological tests or services to Enrollees including payroll expenses, any capitation and/or contract payments, fee-for-service payments and other expenses directly related to in-house laboratory services. Excluded are costs associated with a hospital visit.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Healthy U Page 6 of 15   19. Radiology Services Cost incurred in providing x-ray services to Enrollees, including x-ray payroll expenses, any capitation and/or contract payments, fee-for-service payments, and occupancy overhead costs. Excluded are costs associated with a hospital visit.   20. Physical and Occupational Therapy Included are payroll costs, any capitation and/or contract payments, fee-for-service costs, and other non-payroll expenditures directly related to providing physical and occupational therapy services.   21. Speech and Hearing Services Payroll costs, any capitation and/or contract payments, fee-for-service payments, and non-payroll costs directly related to providing speech and hearing services for Enrollees.   22. Podiatry Services Salary expenses or outside claims, capitation and/or contract payments, fee-for-service payments, and non-payroll costs directly related to providing services rendered by a podiatrist to Enrollees.   23. End Stage Renal Disease (ESRD) Services - Dialysis Costs incurred in providing renal dialysis (ESRD) services to Enrollees.   24. Home Health Services Included are payroll costs, any capitation and/or contract payments, fee-for-service payments, and other non-payroll expenses directly related to providing home health services for Enrollees.   25. Hospice Services Expenses related to hospice care for Enrollees including home care, general inpatient care for Enrollees suffering terminal illness and inpatient respite care for caregivers of Enrollees suffering terminal illness.   26. Private Duty Nursing Expenses associated with private duty nursing for Enrollees.   27. Medical Supplies and Medical Equipment This cost center contains fee-for-service cost for outside acquisition of medical requisites, special appliances as prescribed by the CONTRACTOR to Enrollees.   28. Abortions Medical and hospital costs incurred in providing abortions for Enrollees.   29. Sterilizations Medical and hospital costs incurred in providing sterilizations for Enrollees.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Healthy U Page 7 of 15   30. Detoxification Medical and hospital costs incurred in providing treatment for substance abuse and dependency (detoxification) for Enrollees.   31. Organ Transplants Medical and hospital costs incurred in providing transplants for Enrollees.   32. Other Outside Medical Services The costs for specialized testing and outpatient surgical centers for Enrollees ordered by the CONTRACTOR.   33. Long Term Care Costs incurred in providing long-term care for Enrollees required under Attachment C.   34. Transportation Services Costs incurred in providing ambulance (ground and air) services for Enrollees.   35. Accrued Costs Costs Incurred for services rendered to Enrollees but not yet billed. 36/37    Other Report costs not otherwise reported.   38. TOTAL MEDICAL COSTS Total lines10 through 37. ADMINISTRATIVE COSTS Report payroll costs, any capitation and/or contract payments, non-payroll costs and occupancy overhead costs for accounting services, claims processing services, health plan services, data processing services, purchasing, personnel, Medicaid marketing and regional administration. Report the administration cost under four categories—advertising, home office indirect cost allocation, utilization and all other administrative costs. If there are no advertising costs or indirect home office cost allocations, report a zero amount in the applicable lines.   39. Administration - Advertising   40. Home Office Indirect Cost Allocations   41. Utilization Payroll cost and any capitation and/or contract payments for utilization staff and other non-payroll costs directly associated with controlling and monitoring outside physician referral and hospital admission and discharges of Enrollees.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Healthy U Page 8 of 15   42. Administration - Other   43. TOTAL ADMINISTRATIVE COSTS Total lines 39 through 42.   44. TOTAL COSTS (Medical and Administrative) Total lines 38 and 43.   45. NET INCOME (Gain or Loss) Line 9 minus line 44.   46. ENROLLEE MONTHS Total Enrollee months for period of time being reported.   47. MEDICAL COSTS PER ENROLLEE MONTH Line 38 divided by line 46.   48. ADMINISTRATIVE COSTS PER ENROLLEE MONTH Line 43 divided by line 46.   49. TOTAL COSTS PER ENROLLEE MONTH Line 44 divided by line 46. OTHER DATA   50. TPL Savings - Cost Avoidance   51. Duplicate Premiums Include all premiums received for Enrollees from all sources other than Medicaid.   52. Number of Deliveries Total number of Enrollee deliveries when the delivery occurred at 24 weeks or later.   53. Family Planning Services Include costs associated with family planning services as defined in Attachment C (Covered Services, Section V, Family Planning Services).   54. Reinsurance Premiums Received Include the reinsurance premiums received or receivable that are not counted as revenue.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Healthy U Page 9 of 15   55. Reinsurance Premiums Paid Include reinsurance premiums paid to a reinsurance carrier other than the DEPARTMENT.   56. Administrative Revenue Retained by the CONTRACTOR Include the administrative revenue retained by the CONTRACTOR from the reinsurance premiums received or receivable.         health plan/hu 10/17/2005 -------------------------------------------------------------------------------- Attachment E Page 11 of 15 MEDICAL SERVICES UTILIZATION DEFINITIONS FOR TABLE 3 MEDICAL SERVICES   1. Hospital Services - General Days Record total number of inpatient hospital days associated with inpatient medical care.   2. Hospital Services - Discharges Record total number of inpatient hospital discharges.   3. Hospital Services - Outpatient Visits Record total number of outpatient visits.   4. Emergency Department Visits Record total number of emergency room visits.   5. Primary Care Physician Services Number of services and procedures defined by CPT-4 codes provided by primary care physicians or licensed physician extenders or assistants under direct supervision of a physician inclusive of all services except radiology, laboratory and injections/ immunizations which should be reported in their appropriate section. The reporting of data under this category includes both outpatient and inpatient services.   6. Specialty Care Physician Services Number of ser services and procedures defined by CPT-4 codes provided by specialty care physicians or licensed physician extenders or assistants under direct supervision of a physician inclusive of all services except radiology, laboratory and injections/ immunizations which should be reported in their appropriate section. The reporting of data under this category includes both outpatient and inpatient services.   7. Adult Screening Services Number of adult screenings performed.   8. Vision Care - Optometric Services Number of optometric services and procedures performed by an optometrist. -------------------------------------------------------------------------------- Attachment E Page 12 of 15   9. Vision Care - Optical Services Number of eye glasses and contact lenses dispensed.   10. Laboratory (Pathology) Procedures Number of procedures defined by CPT-4 Codes under the Pathology and Laboratory section. Excluded are services performed in conjunction with a hospital outpatient or emergency department visit.   11. Radiology Procedures Number of procedures defined by CPT-4 Codes under the Radiology section. Excluded are services performed in conjunction with a hospital outpatient or emergency department visit.   12. Physical and Occupational Therapy Services Physical therapy refers to physical and occupational therapy services and procedures performed by a physician or physical therapist.   13. Speech and Hearing Services Number of services and procedures.   14. Podiatry Services Number of services and procedures.   15. End Stage Renal Disease (ESRD) Services - Dialysis Number of ESRD procedures provided upon referral.   16. Home Health Services Number of home health visits, such as skilled nursing, home health aide, and personal care aide visits.   17. Hospice Days Number of days hospice care is provided, including respite care.   18. Private Duty Nursing Services Hours of skilled care delivered. -------------------------------------------------------------------------------- Attachment E Page 13 of 15   19. Medical Supplies and Medical Equipment Durable medical equipment such as wheelchairs, hearing aids, etc., and nondurable supplies such as oxygen etc.   20. Abortion Procedures Number of procedures performed.   21. Sterilization Procedures Number of procedures performed.   22. Detoxification Days Days of inpatient detoxification.   23. Organ Transplants Number of transplants.   24. Other Outside Medical Services Specialized testing and outpatient surgical services ordered by IHC.   25. Long Term Care Facility Days Total days associated with long-term care.   26. Transportation Trips Number of ambulance trips.   27. Other (specify) -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006 MOLINA Attachment F: Payment Methodology This Contract is classified as non-risk. Under a non-risk contract, the DEPARTMENT’s total payments to Molina for medical services provided under this Contract net of third party payments may not exceed the Payment Limit. The Payment Limit is the total amount Medicaid would have paid for the same services on a fee-for-service (FFS) basis net of third party payments. In calculating payments to determine the amount the DEPARTMENT would have paid on each claim, the DEPARTMENT will use its reimbursement schedule for each claim and subtract (1) any third party payment reported on each claim and (2) any co-payment and co-insurance for which the Enrollee is responsible. Molina may reimburse individual providers at rates different from the Medicaid fee schedule. However, the DEPARTMENT’s aggregate payments to Molina for medical services provided to its Enrollees must not exceed what Medicaid would have paid in aggregate for the same services on a FFS basis. Based on direction from the Centers for Medicare and Medicaid Services (CMS), the 9% add-on amount that the DEPARTMENT reimburses Molina will not be included when determining the total payments the DEPARTMENT paid Molina when ascertaining compliance with the Payment Limit for a non-risk contract. The 9% add-on includes administration, case management services, profit earned, etc., and any incentive payments (CHEC screenings and immunizations). The 9% add-on that the DEPARTMENT reimburses Molina for administration, case management services, and profit will be included when calculating the savings sharing payments. If CMS requires in writing that this method of calculating the Payment Limit be revised, this Contract will be amended in accordance with, and only to the extent necessary to comply with, the specific requirements of CMS. For Molina clients enrolled in Molina’s Medicare product, Molina will reimburse its providers at no less than the Medicare fee schedule.   A. Molina Cost Plus 9% Payment Provisions Based on Molina’s Encounter Records     1. Molina will submit encounter records including any associated encounter refunds from providers or from the Office of Recovery Services to the DEPARTMENT following the Electronic Data Interchange (EDI) standards defined in the Encounter Records 837 Institutional Companion Guide and Encounter Records 837 Professional Companion Guide. Molina will not submit any encounter record in the same month in which the service to which the encounter record relates was provided. In the event Molina inadvertently does so, the DEPARTMENT will not pay for any encounter record in the same month in which the service was provided.     2. The DEPARTMENT will process Molina’s encounter records and reimburse Molina for encounter records that pass the Medicaid Managed Care System      Page 1 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006 (MMCS) encounter records edits within 30 calendar days after the DEPARTMENT has received the encounter records. However, it is the intent of the DEPARTMENT to pay Molina within 15 calendar days after the DEPARTMENT has received the encounter records. The DEPARTMENT will reimburse Molina the amount Molina paid its providers as reflected in each encounter record’s “paid amount” field, net of third party payments and net of any co-payment or co-insurance for which the Enrollee is responsible, for those encounters that pass the MMCS edits. In addition, the DEPARTMENT will pay to Molina an additional amount equal to 9% of the total amount of paid encounter records, net of third party payments. The 9% does not apply to the Medicaid payment on encounters for Molina’s Medicaid enrollees who are also enrolled in Molina’s Medicare plan.     3. The 9% add-on fee is based on the reasonable expenses of managed care plans organizations for all administrative functions, case management services, profit earned, etc. necessary to operate as an efficient and effective Medicaid managed care plan and including federal managed care requirements as described in 42 CFR Part 438-Managed Care. The DEPARTMENT will verify Molina’s costs incurred for administration, case management services, profit earned, etc. using the quarterly reports submitted by Molina as defined in Section F., Quarterly Report of Costs Incurred for Administration, Case Management Services, Etc., of this Attachment F.     4. Rejected encounter records that are corrected and resubmitted and that clear the MMCS edits will be paid to Molina in the next regular payment cycle.   B. Determination of the Amount the DEPARTMENT Would have Paid under FFS (Payment Limit)     1. Determination of Covered Encounters All encounter records not rejected in the process under Section A. above will go through a final cleansing by running said encounters through the DEPARTMENT’s fee-for-service pricing process. Encounters for which the DEPARTMENT paid the CONTRACTOR under Section A. but that are not covered encounters based on the criteria in B.2. will be credited back to the DEPARTMENT and excluded from the Payment Limit calculation. The DEPARTMENT will provide documentary support for its calculation to Molina and afford Molina a reasonable opportunity to review and comment.     2. Covered Services Criteria For purposes of this Attachment F, a covered encounter record is an encounter record that is covered under this Contract, is not rejected by the rejection edits in the DEPARTMENT’s Encounter Records Companion Guides and:     a. the procedure codes are either covered by Medicaid as indicated on Medicaid’s Reference File, or      Page 2 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006     b. the Enrollee who received the service was a CHEC eligible, or     c. the DEPARTMENT approved the payment for services described in Attachment B (Special Provisions), under Article VI (Authorization of Services and Notices of Action), A.2. (Process for the CONTRACTOR to Request Payment Authorization of Services); or     d. the services provided are in lieu of services covered in the Utah Medicaid State Plan because they are cost-effective and of equal or higher quality.     3. Determination of Payments Subject to the Payment Limit For purposes of determining whether the DEPARTMENT paid Molina more or less than the Payment Limit, the total amount the DEPARTMENT paid Molina is the total amount as determined in Section A. (net of third party payments and enrollee co-payments and co-insurance) excluding the 9% add-on fee that includes administration, case management services, profit earned, etc.     4. Determination of Payment Limit The DEPARTMENT will determine the Payment Limit by pricing covered encounter records, net of third party payments and Enrollee co-payments and co-insurance. For services that do not have a reimbursement amount in the DEPARTMENT’s Reference File or the Reference File indicates that the service is manually priced, the amount the CONTRACTOR paid its provider will be the amount used in determining the Payment Limit. The DEPARTMENT will provide documentary support for its calculation to Molina and afford Molina a reasonable opportunity to review and comment.     5. Payment Limit Reconciliation The DEPARTMENT will begin a final reconciliation within 60 days following the conclusion of State Fiscal Year (SFY) 2007 to determine compliance with the Payment Limit. The DEPARTMENT will compare the total amount in B.3. with the total amount in B.4. If the amount in B.3. is greater than the amount in B.4., the DEPARTMENT will recoup the difference from Molina so that all payments to Molina equal the Payment Limit. In addition, Molina would not qualify for the Savings Sharing described in Article C. below. If the amount in B.3. is less than the amount in B.4., Molina may qualify for the Savings Sharing Provision.      Page 3 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006   C. Savings Sharing Provision for FY2007 For State fiscal year 2007, the DEPARTMENT will calculate the amount due to Molina, if any, under this Savings Sharing Provision, utilizing only a fee-for-service methodology. The calculations and comparisons described below will be computed separately for urban and rural Enrollees.     1. Determination of Payments Subject to Savings Sharing For purposes of determining the amount due to Molina, if any, under this Savings Sharing Provision, the total amount the DEPARTMENT paid Molina is the total amount as determined in Section A. (net of third party payments and net of Enrollee co-payments and co-insurance) including the 9% add-on fee.     2. Determination of the Amount the DEPARTMENT Would have Paid Under Fee-For-Service For purposes of determining the amount due to Molina, if any, under this Savings Sharing Provision, the total amount the DEPARTMENT would have paid Molina under fee-for-service is the total amount as determined in B.4. (the Payment Limit) plus a 2% administration fee applied to that Payment Limit amount.     3. Savings Sharing Reconciliation The DEPARTMENT will compare the total amounts in C.1 and C.2 for each of the urban population and the rural population. Such comparisons of the two populations will be separate and independent of each other. If the amount in C.1 for urban members is less than the amount in C.2 for urban members, the DEPARTMENT will pay Molina as an incentive payment fifty percent (50%) of the difference. Likewise, if the amount in C.1 for rural members is less than the amount in C.2 for rural members, the DEPARTMENT will pay Molina as an incentive payment fifty percent (50%) of the difference.   D. CHEC Screening Incentive Clause     1. CHEC Screening Goal Molina will ensure that Medicaid children have access to appropriate well-child visits. Molina will follow the Utah EPSDT (CHEC) guidelines for the periodicity schedule for well-child protocol. The Centers for Medicare and Medicaid Services (CMS), mandates that all states have 80% of all children screened. The DEPARTMENT and Molina will work toward that goal.      Page 4 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006     2. Calculation of CHEC Incentive Payment The DEPARTMENT will calculate Molina’s annual participation rate based on information supplied by Molina under the CMS-416 EPSDT (CHEC) reporting requirements. Based on the CMS-416 data, Molina’s well-child participation rate was 61% for Federal Fiscal Year (FFY) 2005 (October 1, 2004 through September 30, 2005). The incentive payment for the Contract year ending June 30, 2006 will be based on Molina’s FFY 2006 (October 1, 2005 through September 30, 2006) CMS-416 participation rate. The DEPARTMENT will pay Molina $10,000 if a rate of 80% or higher is attained during FFY 2006. The participation rate will be calculated no later than April 15, 2007; Molina will be notified of the incentive payment, if applicable, no later than April 30, 2007.     3. MOLINA’s Use of Incentive Payment The CONTRACTOR agrees to use this incentive payment to reward Molina’s employees responsible for improving the EPSDT (CHEC) participation rate.   E. Immunization Incentive Clause The CONTRACTOR will ensure that Enrollees have access to recommended immunizations. Molina will follow the Advisory Committee on Immunization Practices’ recommendations for immunizations for children.     1. Immunizations for two-year-olds The National Immunization Survey reported that in 2004 Utah had a statewide immunization level of 71.3% for two-year-olds. Molina’s 2004 HEDIS rate was 72.2% for the Combination 1 immunization measure for two-year olds. Based on Molina’s 2004 HEDIS result for the Combination 1 immunization measure, the DEPARTMENT will pay Molina $300 for each full percentage point above 72.2%. The CONTRACTOR agrees to use this incentive payment to reward Molina’s employees responsible for improving the HEDIS immunization rate for two-year- olds.     2. Immunizations for adolescents The DEPARTMENT realizes it is important that adolescents are vaccinated according to the schedule recommended by the Advisory Committee on Immunization Practices and other professional groups. Molina’s 2004 HEDIS rate was 27.3% for the Combination 1 immunization measure for adolescents. Based on Molina’s 2005 HEDIS measure for adolescent immunizations, the DEPARTMENT will pay Molina $300 for each full percentage point above 27.3% up to 77.3%.      Page 5 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006 The CONTRACTOR agrees to use this incentive payment to reward Molina’s employees responsible for improving the HEDIS immunization rate for adolescents.     3. Immunizations for adults The DEPARTMENT will provide an incentive to Molina using an influenza measure developed by the DEPARTMENT and the Office of Health Care Statistics. The measurement is the percentage of Enrollees age 50 and older who receive an influenza immunization during the previous year’s flu season (September 1 of the previous year through May 31 of the measurement year). The baseline year is September 1, 2002 through August 31, 2003. Based on Molina’s percentage for the flu season ending in 2006, the DEPARTMENT will pay Molina $300 for each full percentage point above Molina’s percentage in the baseline year up to 50 percentage points above the baseline year. The CONTRACTOR agrees to use this incentive payment to reward Molina’s employees responsible for improving the influenza immunization rate for adults.   F. Quarterly Report of Costs Incurred for Administration, Case Management Services, etc.     1. On a quarterly basis, the DEPARTMENT is required to report costs incurred for administration, case management services, etc., from non-risk managed care contracts with Federal Financial Participation (FFP). This reporting is required 30 days after the quarters ending March 31, June 30, September 30, and December 31. In order to meet this requirement, Molina must submit the cost data to the DEPARTMENT by the 25th of each month following each quarter’s end.     2. The CONTRACTOR will report to the DEPARTMENT its costs incurred for administration, case management services, profit earned, etc. in an Excel spreadsheet. Molina will develop a cost reporting plan that documents methods used for reporting including direct assignment and/or allocation process. The purpose of the plan methods is to facilitate any reviews that the DEPARTMENT conducts. The CONTRACTOR will itemize its costs incurred into at least the following cost categories:     a. Family Planning including Skilled Medical Professionals     b. Claims Processing     c. Provider Enrollment & Credentialing/Re-credentialing     d. Prior Authorization      Page 6 of 7    -------------------------------------------------------------------------------- Attachment F Molina Healthcare of Utah July 1, 2006     e. Case Management Services/Care Coordination     f. Disease Management Programs     g. Perinatal Care Programs     h. Educational Newsletters and other Outreach     i. HEDIS Reporting     j. Audit of HEDIS Performance Measures     k. Encounter Data Submitted to the DEPARTMENT     l. Grievance and Appeals Processes     m. Work related to the DEPARTMENT’s External Quality Review Organization     n. Quality-related (Quality Improvement Programs, Quality Committees, Performance Improvement Projects)     o. Health Needs Assessments     p. Profit from Operations Before Taxes     q. Taxes from Operations     r. Skilled Professional Medical Personnel (physicians, registered nurses, MSWs, LCSWs, pharmacists)     s. Other General Administrative Costs     •   Support Services (Accounting Services, Payroll Processing Services, Outside Services-Other, Outside Services-Translation, Software Hardware Expenses, Equipment Lease/Rental, Non-specified Payroll)     •   Oral Interpretation       •   Business Development (Marketing Costs)       •   Fees/Taxes (Regulatory Fees, Board Fees, Bank Service Charges, Taxes/Personal Prop-unsecured, Licenses)       •   Educational Expenses (Periodical Subscriptions, Membership Dues, Continuing Ed/User Training, Conferences/Seminars)       •   Travel Expenses (Hotels & Lodging, Meals & Entertainment)       •   HR (Employment-recruitment, Employment Relations, Employment Functions)       •   Office Expenses (Common Area Maintenance, Rent, Telephone, Electric, Security, Repair & Maint-Office Equip, Copier Expenses, Office Supplies, Printing Supplies, Postage, Miscellaneous, Other Admin Expenses, Depreciation-admin)     G. Other Payment-Related References Attachment A, Article III, #4, #5, and #6 - (unauthorized changes to contract) Attachment B, Article XI - Other Requirements (Fraud & Abuse) Article XII - Payments (Third Party Liability) Article XIII - Records and Reporting Requirements (Accuracy of Data) Article XIV - Compliance/Monitoring (Right to Audit) Article XV - Termination of Contract      Page 7 of 7   

Exhibit 10.3 THREE-YEAR EMPLOYMENT AGREEMENT (LIBERTY BANCORP, INC./BANKLIBERTY) THIS AGREEMENT (the “Agreement”), made this 21st day of July, 2006, by and among LIBERTY BANCORP, INC., a Missouri-chartered corporation (the “Company”) BANKLIBERTY, a federally-chartered financial institution (the “Bank”), and Brent Giles (“Executive”). WITNESSETH WHEREAS, Executive serves in a position of substantial responsibility; WHEREAS, the Company and the Bank wish to assure the services of Executive for the period provided in this Agreement; and WHEREAS, Executive is willing to serve in the employ of the Bank on a full-time basis for said period. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows: 1. Employment. Executive is employed as the President and Chief Executive Officer of the Company and the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the office of President and Chief Executive Officer or which, consistent with those offices, are delegated to him by the Board of Directors of the Bank or the Company. 2. Location and Facilities. Executive will be furnished with the working facilities and staff customary for executive officers with the title 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 be (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 on the first year anniversary date of this Agreement, and continuing on each anniversary thereafter, the disinterested members of the boards of directors of the Bank and the Company may extend the Agreement an additional year such that the remaining term of the Agreement shall be 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 Boards of Directors of the Bank and the Company (the “Boards”) will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement. Executive shall receive notice as soon as possible after such review as to whether the Agreement is to be extended.     --------------------------------------------------------------------------------   4. Base Compensation.    a. The Bank and the Company agree to pay Executive during the term of this Agreement an aggregate base salary at the rate of $185,000 per year, payable in accordance with customary payroll practices of the Bank and the Company.   b. The Boards shall review annually the rate of Executive’s base salary based upon factors they deem relevant, and may maintain or increase his salary, provided that no such action shall reduce the rate of salary below the rate in effect on the Effective Date.   c. In the absence of action by the Boards, Executive shall continue to receive a base salary at the annual rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Boards under the provisions of this Section 4.   5. Bonuses. Executive shall be eligible to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise. 6. Benefit Plans. Executive shall be eligible to participate in such life insurance, medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees. 7. Vacation and Leave.   a. Executive shall be entitled to vacation and other leave in accordance with policy for senior executives, or otherwise as approved by the Boards.   b. In addition to paid vacation and other leave, the Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment for such additional periods of time and for such valid and legitimate reasons as the Boards may in their discretion determine. Further, the Boards may grant to the Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Boards in their discretion may determine.     2 --------------------------------------------------------------------------------   8. Expense Payments and Reimbursements. Executive shall be reimbursed for all reasonable out-of-pocket business expenses that he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Company and the Bank.   9. Automobile. During the term of this Agreement, Executive shall be entitled to use of an automobile. Executive shall comply with reasonable reporting and expense limitations on the use of such automobile as may be established by the Company or the Bank from time to time, and the Company or the Bank shall annually include on Executive’s Form W-2 any amount of income attributable to Executive’s personal use of such automobile. 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 or 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 Boards 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.     3 --------------------------------------------------------------------------------   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 shall terminate upon his death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to the Executive through the last day of the calendar month in which his death occurred.   b. Retirement. This Agreement shall be terminated upon Executive’s retirement under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement or otherwise. Executive will receive the compensation due to him through his retirement date.   c. Disability.       i. The Boards 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 that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company or the Bank (or, if there are no such plans 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 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 may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.   ii. In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate. The Bank will pay Executive, as Disability pay, an amount equal to 100% of Executive’s bi-weekly rate of base salary in effect as of the date of his termination of employment due to Disability. Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of: (A) the date he returns to full-time employment at the Bank in the same capacity as he was employed prior to his termination for Disability; (B) his death; (C) upon attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to the Executive under any other disability programs sponsored by the Company and 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 and the Bank, in which Executive participated prior to his Disability on the same terms as if Executive were actively employed by the Company and the Bank.     4 --------------------------------------------------------------------------------     d. Termination for Cause.   i. The Boards may, by written notice to the Executive in the form and manner specified in this paragraph, terminate his employment at any time, for “Cause”. The Executive shall have no right to receive compensation or other benefits for any period after termination for Cause. Termination for “Cause” shall mean termination because of, in the good faith determination of the Boards, 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 a final cease-and-desist order; or       (7) Material breach by Executive of any provision of this Agreement.     ii. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted at a meeting of such Boards where in the good faith opinion of the Boards, Executive was guilty of the conduct described above and specifying the particulars thereof.   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 Boards, in which case Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination.     5 --------------------------------------------------------------------------------     f. Without Cause or With Good Reason.   i. In addition to termination pursuant to Sections 11(a) through 11(e) the Boards, 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 Boards, 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 shall be entitled to receive his base salary in effect as of his termination date 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.   iii. “Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective 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 or the Bank;       (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) 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 to which he was entitled prior to the Change in Control;     6 --------------------------------------------------------------------------------         (4) 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;       (5) A requirement that Executive relocate his principal business office or his principal place of residence outside of the area consisting of a fifty (50) mile radius from the current main office and any branch of the Bank, or the assignment to Executive of duties that would reasonably require such a relocation; or (6) Liquidation or dissolution of the Company or the Bank.     iv. Notwithstanding the foregoing, a reduction or elimination of the Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or plans or benefits thereunder applicably to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the type or to the general extent as those offered under such plans prior to such reduction or elimination are not available to other officers of the Company and the Bank or any company that controls either of them 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 and the Bank or Executive pursuant to Section 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, the Executive shall not serve as an officer, director or employee of any bank holding company, bank, savings bank, savings and loan holding company, or mortgage company (any of which, a “Financial Institution”) which Financial Institution offers products or services competing with those offered by the Bank from any office within fifty (50) miles from the main office or any branch of the Bank and shall not interfere with the relationship of the Company and the Bank and any of its employees, agents, or representatives.     7 --------------------------------------------------------------------------------   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 or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, 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 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 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 or the Bank’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 or the Bank’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 stockholders) 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 or the Bank sells to a third party all or substantially all of its assets.   b. Termination. If within the period ending two (2) years after a Change in Control, (i) the Company or the Bank shall terminate the Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company or the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump-sum cash payment to him equal to three (3) times the 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. In determining Executive’s average Annual Compensation, Annual Compensation shall include base salary and any other taxable income (paid by the Company and the Bank), including but not limited to amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as, 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, 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 of 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 a termination in such period. Executive’s rights under Section 11(f) are not otherwise affected by this Section 12. Also, in such event, the Executive shall, for a thirty-six (36) month period following his termination of employment, receive the benefits he would have received over such period under any retirement programs (whether tax-qualified or nonqualified) in which the 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 the Change in Control) and continue to participate in any benefit plans of the Company and 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 Bank during such period. In the event that the Company and the Bank are unable to provide such coverage by reason of the Executive no longer being an employee, the Company and the Bank shall provide the Executive with comparable coverage on an individual policy.     8 --------------------------------------------------------------------------------     c. The provisions of Section 12 and Sections 14 through 26, including the defined terms used is such sections, shall continue in effect until the later of the expiration of this Agreement or two (2) years following a Change in Control.   13. Indemnification and Liability Insurance. Subject to and limited by Section 26(f) of this Agreement, the Bank and the Company shall provide the following:   a. Indemnification. The Company and the Bank agree to indemnify the Executive (and his heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and 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 Executive of the Company, the Bank or any of their affiliates (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorney’s fees and the cost of reasonable settlements, such settlements to be approved by the Boards, if such action is brought against the Executive in his capacity as an Executive or director of the Company or the Bank or any of their subsidiaries. Indemnification for expense shall not extend to matters for which the Executive has been terminated for Cause. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.     9 --------------------------------------------------------------------------------     b. Insurance. During the period in which indemnification of the Executive is required under this Section, the Company and the Bank shall provide the Executive (and his heirs, executors, and administrators) with coverage under a directors’ and Executives’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior Executives of the Company and the Bank. 14. Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company and the Bank shall reimburse the Executive for all reasonable out-of-pocket expenses, including, without limitation, reasonable attorney’s fees, incurred by the Executive in connection with successful enforcement by the Executive of the obligations of the Company and the Bank to the Executive under this Agreement. Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement: (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from the Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand. 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 which the Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by the 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 and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank. In the event that the Company, the Bank and/or the Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to the Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by the Executive, which such opinion indicates there is a high probability of such payments and benefits being deductible to the Company and the Bank and not subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and the Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences. Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to the Executive’s approval prior to filing, which shall not be unreasonably withheld. The Company, the Bank and the Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.   10 -------------------------------------------------------------------------------- 16. Injunctive Relief. If there is 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 that the Company and the Bank shall be entitled to injunctive relief restraining the Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that the Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank 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 and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank. b. Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company and the Bank. 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 and/or the Bank at their principal business offices and to Executive at his home address as maintained in the records of the Company and the Bank.   11 --------------------------------------------------------------------------------   20. No Plan Created by this Agreement. Executive, the Company and the Bank 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 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 such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an 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. 22. Applicable Law. Except to the extent preempted by Federal law, the laws of the State of Missouri 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 provision shall not affect the validity or enforceability of the other provisions hereof. 24. Headings. Headings contained herein are for convenience of reference only. 25. Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6. 26. Required Provisions. In the event any of the foregoing provisions of this Section 26 are in conflict with the terms of this Agreement, this Section 26 shall prevail.   a. The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, 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 11(d) hereinabove. 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 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.     12 --------------------------------------------------------------------------------   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 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. g. 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 (6) months in order to satisfy the requirements of Section 409A of the Internal Revenue 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).     13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.   Attest:     LIBERTY BANCORP, INC.                 /s/ Steven K. Havens     By: /s/ Daniel G. O’Dell --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   Attest:     BANKLIBERTY                 /s/ Steven K. Havens     By: /s/ Daniel G. O’Dell --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   Witness:     EXECUTIVE         /s/ Steven K. Havens     /s/ Brent Giles --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Brent Giles       14 --------------------------------------------------------------------------------  

Exhibit 10.12   [g209021kui001.gif]   November 17, 2003   Craig Johnson 7998 Paseo Membrillo Carlsbad, CA 92009   Re:                             Employment Terms     Dear Craig:   Neurogenetics, Inc. (“Neurogenetics” or the “Company”) is pleased to offer you the position of Chief Financial Officer reporting to Neil Kurtz. You will work at our facility at 11085 N. Torrey Pines Road, La Jolla, CA.   You will be primarily responsible for the financial strategy of the company, direction of private equity financings with venture capital firms, defining and executing an M&A strategy, and taking the lead role in the company’s IPO. You will also be responsible for the direction and management of the company’s finance and accounting departments. In addition, you will be a member of the Company’s Executive Committee.   This is a full-time exempt position. Your starting salary will be $15,125.00 per month ($181,500.00 annualized), less payroll deductions and all required withholdings. You will be paid semi-monthly and you will be eligible for the following standard Company benefits: medical insurance, dental insurance, life insurance, long term disability insurance, accidental death and dismemberment insurance, 401(k) retirement savings plan, paid time off (PTO) and holidays. Details about these benefit plans are attached for your review. hi addition, the Company will make a commitment to finalize a contract of employment with you within six (6) months of your start date to include all of the above plus the addition of a severance clause which will pay you in full for a period of nine (9) months should you be terminated without cause, or should your position be eliminated or adversely effected by change of control of the Company.   After your acceptance of this offer, and commencement of employment at Neurogenetics, I will recommend to the Company’s Board of Directors, that you be granted an option to purchase 150,000 shares of Neurogenetics Common Stock. The shares will be subject to the terms and conditions of the Company’s Stock Option Plan. This stock option grant is intended as an incentive and also recognition of the important role that you are expected to play in the Company.   As a condition of employment you will need to sign and comply with the attached Proprietary Information and Inventions Agreement, which prohibits unauthorized use or disclosure of Company proprietary information. In your work for the Company, you will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. During our   11085 NORTH TORREY PINES ROAD • SUITE 300 •LA JOLLA, CA 92037 • TEL 858-623-5665 • FAX 858-623-5666   --------------------------------------------------------------------------------   discussions about your proposed job duties, you assured us that you would be able to perform those duties within the guidelines just described.   You agree that you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.   Our normal working hours are Monday through Friday 8:00AM to 5:00PM. As an exempt, salaried employee you will be expected to work additional hours as required by the nature of your work assignments.   Both you and Neurogenetics have the right to terminate your employment at any time for any reason, with or without cause, and with or without notice. This at-will employment relationship cannot be changed except in writing signed by the CEO of the Company. Similarly, promotions, transfers, demotions, suspensions and employee discipline may be effected or administered at the will of Neurogenetics at any time for any reason, with or without cause, and with or without notice. Neurogenetics may change your position, duties, and work location and may modify compensation and benefits from time to time, as it deems necessary.   This letter, together with your Proprietary Information and Inventions Agreement, forms the complete and exclusive statement of your employment agreement with Neurogenetics. The employment terms in this letter supersede any other agreements or promises made to you by anyone, whether oral or written. As required by law, this offer is subject to satisfactory proof of your right to work in the United States and is contingent on our confirming the background and employment history you have provided to us.   We would like to have your decision regarding this offer by December 1, 2003 and would like to anticipate a start date of January 1, 2004. To formally accept this offer on the above terms, please sign one copy of this letter and return it to me.   The management of Neurogenetics and I look forward to working with you.   Sincerely,   /s/ Neil Kurtz     Neil Kurtz President & CEO     Accepted:     /s/ Craig Johnson   November 26, 2003   Craig Johnson Date       Attachments: Benefits Summary and Proprietary Information and Inventions Agreement   --------------------------------------------------------------------------------  

Exhibit 10.7   NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.   DYNECO CORPORATION   WARRANT TO PURCHASE SHARES OF COMMON STOCK 2,000,000 Shares THIS CERTIFIES THAT, for value received, the undersigned purchaser MMA Capital, LLC, a Delaware Limited Liability Company, or its assigns (the “Holder”), is entitled to purchase TWO MILLION (2,000,000) Shares of Common Stock (as adjusted pursuant to Section 3 hereof)(“Shares”) of Dyneco Corporations, a Minnesota corporation (the “Company”), at a price of One Dollar ($1.00 U.S.) per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 3 hereof is herein referred to as the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term “Common Stock” shall mean the Company’s presently authorized Common Stock, and any stock into or for which such Common Stock may hereafter be converted or exchanged, and (b) the term “Date of Grant” shall mean January 13, 2006.   This Warrant is contingent and dependent upon the Company’s contemplated increase in authorized shares, conversion of all preferred stock into common stock , and 30:1 reverse split to be approved by the Company’s shareholders. Should these events not occur as contemplated at the time of conversion, this Warrant shall be automatically amended in such manner so that the rights of the Holder are the same as if the contemplated events had occurred.   This Warrant is granted by the Company in accordance with the terms of that Secured Convertible Promissory Note (the “Note”) and Common Stock Subscription Agreement (the “Subscription Agreement”) (collectively, the “Agreement”) by and between the Company and Holder of even date herewith. Any capitalized terms not defined herein are ascribed the meaning given them in the Agreement.     1   --------------------------------------------------------------------------------     Notwithstanding anything to the contrary in this Warrant, this Warrant shall automatically terminate and expire unless exercised on or prior to 5:00 p.m. (Delaware Time) three (3) years from the Date of Grant.     1. Method of Exercise: Payment.   (a)         Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of immediately available funds or (B) by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(g)). Upon exercise in full of this Warrant, the Holder shall deliver the original Warrant in order to effect an exercise hereunder, or, in the alternative, an affidavit of lost instrument in form reasonably satisfactory to the Company. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.   (b)         Share Delivery. On or before the first business day following the date on which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third business day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and if the Holder is entitled to receive shares not bearing a legend pursuant to Section 6 of the Subscription Agreement, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.   (c)         Holder. Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in Section 1(a) above or notification to the Company of a Cashless Exercise referred to in Section 1(g) below, the Holder shall be deemed for   2   --------------------------------------------------------------------------------     all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.   (d)         Partial Exercise. If this Warrant is submitted in connection with any exercise pursuant to Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.   (e)         Taxes. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.   (f)         Company’s Failure to Timely Deliver Securities. If the Company shall fail for any reason or for no reason to issue to the Holder within three (3) business days of receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such third business day that the issuance of such shares of Common Stock is not timely effected an amount equal to two percent (2%) of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the closing sale price of the shares of Common Stock on the trading day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder without violating Section 1(b).   (g)         Cashless Exercise. Notwithstanding anything contained herein to the contrary, if a registration statement covering the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not available for the resale of such Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):   Net Number = (A x B) - (A x C)   B     3   --------------------------------------------------------------------------------       For purposes of the foregoing formula:   A= the total number of shares with respect to which this Warrant is then being exercised.   B= the closing sale price of the shares of Common Stock (as reported by Bloomberg) on the date immediately preceding the date of the Exercise Notice.   C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.   2.           Stock Fully Paid: Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.   3.          Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:   (a)         Reclassification or Merger. In case of any reclassification, change or conversion of securities of the class issuable upon exercise of this Warrant (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), or in case of any merger of the Company with or into another corporation (other than (i) a merger in which the stockholders of the Company prior to the transaction continue to hold at least fifty percent (50%) of the voting power of the successor corporation following the transaction in the same relative proportions, or (ii) a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the Holder of this Warrant a new Warrant (in form and substance reasonably satisfactory to the Holder of this Warrant), so that the Holder of this Warrant shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such   4   --------------------------------------------------------------------------------     reclassification, change or merger by a holder of the number of shares of Common Stock then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers, consolidations and transfers.   (b)         Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide, by split or otherwise, or combine its outstanding shares of Common Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination, effective at the close of business on the date the subdivision or combination becomes effective. When any adjustment is required to be made to the Exercise Price, the number of shares issuable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment, such that the aggregate purchase price payable for the total number of shares purchasable under this Warrant (as adjusted) shall remain the same.   (c)         Adjustment upon Issuance of Common Stock. If and whenever on or after the Date of Grant the Company issues or sells, or in accordance with this Section 3 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company for a consideration per share (the “New Issuance Price”) less than a price (the “Applicable Price”) equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing, a “Dilutive Issuance”), then immediately after such Dilutive Issuance the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. Upon each such adjustment of the Exercise Price hereunder, the number of Warrant Shares shall be adjusted to the number of shares of Common Stock determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.   (d)         Other Events. If any event occurs of the type contemplated by the provisions of this Section 3 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the holder of this Warrant; provided that no such adjustment pursuant to this Section 3 will increase the Exercise Price or decrease the number of Warrant Shares.     5   --------------------------------------------------------------------------------     4.           Notice of Adjustments. Whenever the Exercise Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 3 hereof, the Company shall make a certificate 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 the number of Shares purchasable hereunder after giving effect to such adjustment, which shall be mailed by first class mail, postage prepaid, to the Holder of this Warrant.   5.          Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares, the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company’s Board of Directors.   6.           Non-Circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or through any 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 of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the holder of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) will, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Warrants, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).     7. Compliance with Securities Act: Disposition of Warrant or Shares.   (a)         Compliance with Securities Act. The Holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act or an exemption from such registration is available, the Holder hereof shall confirm in writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale. This Warrant and all shares of Common Stock issued upon   6   --------------------------------------------------------------------------------     exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:   “THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”   In addition, in connection with the issuance of this Warrant, the Holder specifically represents to the Company by acceptance of this Warrant as follows:   (i)         The Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof for purposes of the Act.   (ii)        The Holder understands that this Warrant and any securities issuable upon the exercise hereof might not have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. In this connection, the Holder understands that, in the view of the Securities and Exchange Commission (the “SEC”), the statutory basis for such exemption may be unavailable if the Holder’s representation was predicated solely upon a present intention to hold the Warrant for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Warrant, or for a period of one year or any other fixed period in the future.   (iii)       The Holder further understands that this Warrant and any securities issuable upon the exercise hereof must be held indefinitely unless subsequently registered under the Act and any applicable state securities laws, or unless exemptions from registration are otherwise available.   (iv)       The Holder is aware of the provisions of Rule 144, promulgated under the Act, which, in substance, permit 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 certain conditions, if applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than one (1) year after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an   7   --------------------------------------------------------------------------------     unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein.   (v)        The Holder further understands that at the time it wishes to sell this Warrant and any securities issuable upon the exercise hereof there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the Holder may be precluded from selling this Warrant and any securities issuable upon the exercise hereof under Rule 144 even if the one-year minimum holding period had been satisfied.   (vi)       The Holder further understands that in the event all of the requirements of Rule 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.   (b)         Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant, the Holder hereof and each subsequent Holder of this Warrant agrees to give written notice to the Company, describing the manner thereof to the extent required by applicable securities laws, provided, however, that, at any time that the Common Stock is publicly traded, such Common Stock may be offered, sold or otherwise disposed of without any such notice. To the extent applicable any certificate representing this Warrant or the shares of Common Stock transferred shall bear a legend as to the applicable restrictions on transferability.   8.           No Rights as a Stockholder. No Holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company which 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 of this Warrant, 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 receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.     8   --------------------------------------------------------------------------------     9.           Representations and Warranties. The Company represents and warrants to the Holder of this Warrant as follows:   (a)         This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies;   (b)        The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable;   (c)         The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company’s Articles of Incorporation or bylaws, as amended, do not and will not contravene any material law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.   10.        Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the registered Holder of this Warrant.   11.        Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the Holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to the Holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.   12.        Binding Effect on Successors. Except as otherwise set forth herein, this Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets and shall be binding upon any Holder of this Warrant.   13.        Lost Warrants or Stock Certificates. The Company covenants to the Holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company   9   --------------------------------------------------------------------------------     and its transfer agent, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the Company will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.   14.        Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.   15.          Governing Law. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of California without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of California.   16.          Dispute Resolution. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two business days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the holder of this Warrant. If the holder of this Warrant and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three business days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two business days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the holder of this Warrant or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten business days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.   17.          Remedies; Other Obligations, Breaches, and Injunctive Relief. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, the Note and the Subscription Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the holder of this Warrant to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holder of this Warrant and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.   10   --------------------------------------------------------------------------------     This Warrant was issued by the Company and the terms hereof were accepted by the Holder of this Warrant on January 13, 2006.   “THE COMPANY”   DYNECO CORPORATION   By: /s/ Daniel G. Brandano   Title: President   Address:     “HOLDER”   MMA CAPITAL, LLC     By: /s/ Gary Armitage   Title: Managing Member   Address: 456 Montgomery Street Suite 2200 San Francisco, CA 94104   11   --------------------------------------------------------------------------------     EXHIBIT A   NOTICE OF EXERCISE     To: Dyneco Corporation     _____________________     _____________________     1.          The undersigned hereby elects to exercise this Warrant as to __________ shares of Common Stock of Dyneco Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. The purchase price is being paid by (check one):     ___ (i) certified check, bank check or cashier’s check.   ___ (ii) wire transfer.     2.           Please issue a certificate or certificates representing said shares in the name of the undersigned.   3.          The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. In support thereof, the undersigned has executed an Investment Representation Statement attached hereto as Schedule 1.     Holder:   _______________________________ (Signature)   ________________________________ (Date)   12   --------------------------------------------------------------------------------     Schedule 1   INVESTMENT REPRESENTATION STATEMENT   Purchaser: ________________________   Company: Dyneco Corporation   Security: Common Stock   Amount: _____________   Date: _____________   In connection with the purchase of the above-listed securities (collectively, the “Securities”), the undersigned (the “Purchaser”) represents to the Company as follows:   (a)         The Purchaser is aware of the Company’s business affairs and financial condition, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The Purchaser is purchasing the Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof for purposes of the Securities Act of 1933, as amended (the “Act”).   (b)        The Purchaser understands that the Securities have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Purchaser’s investment intent as expressed herein. In this connection, the Purchaser understands that, in the view of the Securities and Exchange Commission (“SEC”), the statutory basis for such exemption may be unavailable if the Purchaser’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future.   (c)         The Purchaser further understands that the Securities must be held indefinitely unless subsequently registered under the Act or unless an exemption from registration is otherwise available. Moreover, the Purchaser understands that the Company is under no obligation to register the Securities. In addition, the Purchaser understands that the certificate evidencing the Securities will be imprinted with the legend referred to in the Warrant under which the Securities are being purchased.   (d)        The Purchaser is aware of the provisions of Rule 144, promulgated under the Act, which, in substance, permit 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 certain conditions, if   13   --------------------------------------------------------------------------------     applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than one year after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein.   (e)         The Purchaser further understands that at the time it wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the Purchaser may be precluded from selling the Securities under Rule 144 even if the one-year minimum holding period had been satisfied.   (f)         The Purchaser further understands that in the event all of the requirements of Rule 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.   Purchaser:   _______________________________ (Signature)   ________________________________ (Date)     14   --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- EXECUTION COPY ***************************************************************** $650,000,000 INCREMENTAL FACILITY AGREEMENT (TRANCHE C TERM LOANS) dated as of May 5, 2006 between MEDIACOM ILLINOIS LLC MEDIACOM INDIANA LLC MEDIACOM IOWA LLC MEDIACOM MINNESOTA LLC MEDIACOM WISCONSIN LLC ZYLSTRA COMMUNICATIONS CORP. MEDIACOM ARIZONA LLC MEDIACOM CALIFORNIA LLC MEDIACOM DELAWARE LLC MEDIACOM SOUTHEAST LLC The LENDERS Party Hereto J.P. MORGAN SECURITIES INC. and WACHOVIA CAPITAL MARKETS, LLC, as Joint Lead Arrangers and Joint Bookrunners and JPMORGAN CHASE BANK, N.A. as Administrative Agent GOLDMAN SACHS CREDIT PARTNERS, L.P., SOCIÉTÉ GÉNÉRALE and SUNTRUST BANK, as Documentation Agents WACHOVIA CAPITAL MARKETS, LLC, as Syndication Agent ***************************************************************** --------------------------------------------------------------------------------   INCREMENTAL FACILITY AGREEMENT (TRANCHE C TERM LOANS) INCREMENTAL FACILITY AGREEMENT dated as of May 5, 2006, between MEDIACOM ILLINOIS LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Illinois”); MEDIACOM INDIANA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Indiana”); MEDIACOM IOWA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Iowa”); MEDIACOM MINNESOTA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Minnesota”); MEDIACOM WISCONSIN LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Wisconsin”); ZYLSTRA COMMUNICATIONS CORP., a corporation duly organized and validly existing under the laws of the State of Minnesota (“Zylstra” and, together with Mediacom Illinois, Mediacom Indiana, Mediacom Iowa, Mediacom Minnesota and Mediacom Wisconsin, the “Mediacom Midwest Borrowers”); MEDIACOM ARIZONA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Arizona”); MEDIACOM CALIFORNIA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom California”); MEDIACOM DELAWARE LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Delaware”); and MEDIACOM SOUTHEAST LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Southeast” and, together with Mediacom Arizona, Mediacom California and Mediacom Delaware, the “Mediacom USA Borrowers”; the Mediacom USA Borrowers together with the Mediacom Midwest Borrowers, the “Borrowers”); the TRANCHE C TERM LOAN LENDERS party hereto (including each Tranche C Term Loan Lender as defined below that becomes a party hereto pursuant to a Lender Addendum as defined below) and JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders (together with its successors in such capacity, the “Administrative Agent”). The Borrowers, the Lenders party thereto and the Administrative Agent are parties to Credit Agreement (the “Credit Agreement”) dated as of October 21, 2004. Section 2.01(d) of the Credit Agreement contemplates that at any time and from time to time, the Borrowers may request that one or more persons (which may include the Lenders under and as defined in the Credit Agreement) offer to enter into commitments to make (or, as provided herein, to convert Tranche B Term Loans into) Incremental Facility Loans. The Borrowers have requested that $650,000,000 of Incremental Term Loans be made available to it in a single Series of term loans. Upon the effectiveness of Amendment No. 1 (as defined below), Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 2 - $550,000,000 aggregate principal amount of the Incremental Term Loans will constitute Reinstating Incremental Facility Term Loans. The Tranche C Term Loan Lenders (as defined below) are willing to make (or to convert Tranche B Term Loans into) such loans on the terms and conditions set forth below and in accordance with the applicable provisions of the Credit Agreement, and accordingly, the parties hereto hereby agree as follows:   ARTICLE I   DEFINED TERMS Terms defined in the Credit Agreement are used herein as defined therein. In addition, the following terms have the meanings specified below: “Amendment No. 1” shall mean Amendment No. 1 to the Credit Agreement, between the Borrowers and the Administrative Agent, substantially in the form of Schedule II hereto, dated the date hereof. “Lender Addendum” shall mean, with respect to any Tranche C Term Loan Lender, a Lender Addendum substantially in the form of Schedule I hereto, dated as of the date hereof and executed and delivered by such Tranche C Term Loan Lender as provided in Section 2.06. “Tranche C Term Loan Commitment” shall mean, with respect to each Tranche C Term Loan Lender, the commitment of such Lender to make Tranche C Term Loans hereunder (or, as provided herein, to convert Tranche B Term Loans into Tranche C Terms Loans hereunder). The amount of each Tranche C Term Loan Lender’s Tranche C Term Loan Commitment is set forth in the Lender Addendum executed and delivered by such Tranche C Term Loan Lender. The aggregate original amount of the Tranche C Term Loan Commitments is $650,000,000. “Tranche C Term Loan Lender” shall mean (a) on the date hereof, a Lender that has executed and delivered a Lender Addendum and (b) thereafter, the Lenders from time to time holding Tranche C Term Loan Commitments or Tranche C Term Loans after giving effect to any assignments thereof pursuant to Section 11.06 of the Credit Agreement. “Tranche C Term Loan” shall mean a Loan made (or, as provided herein, converted from Tranche B Term Loans) pursuant to this Agreement which shall constitute a single Series of Incremental Facility Term Loans under Section 2.01(d) of the Credit Agreement. Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 3 - “Tranche C Term Loan Effective Date” shall mean the date on which the conditions specified in Article IV are satisfied (or waived by the Majority Tranche C Term Loan Lenders). “Tranche C Term Loan Maturity Date” shall mean January 31, 2015. ARTICLE II TRANCHE C TERM LOANS Section 2.01. Commitments. Subject to the terms and conditions set forth herein and in the Credit Agreement, each Tranche C Term Loan Lender agrees to make Tranche C Term Loans to the Borrowers (or, as provided below, to convert Tranche B Term Loans) in Dollars, in an aggregate principal amount equal to such Tranche C Term Loan Lender’s Tranche C Term Loan Commitment. Proceeds of Tranche C Term Loans shall be available for the prepayment of the Tranche B Term Loans, the making of Restricted Payments permitted under the Credit Agreement, the payment of fees and expenses related thereto and any use permitted under Section 8.16(b) of the Credit Agreement (including the general business purposes of the Borrowers). Notwithstanding the foregoing, it is understood and agreed that any Tranche C Term Loan Lender that also holds any Tranche B Term Loans may elect, by notice to the Administrative Agent, that the Tranche C Term Loans required to be made by such Lender on the Tranche C Term Loan Effective Date shall, to the extent of the portion of such Tranche C Term Loans not exceeding the aggregate principal amount of the Tranche B Term Loans of such Lender, be made through such Tranche B Term Loans being converted into Tranche C Term Loans (and each reference in this Agreement or the Credit Agreement to the “making” of any Tranche C Term Loan, or words of similar import, shall in the case of such Lender be deemed to include such conversion). Without limiting the generality of the foregoing, it is understood that the Tranche C Term Loans into which the Tranche B Term Loans are so converted shall be treated identically to the Tranche C Terms Loans being funded (and not being converted from Tranche B Term Loans) on the Tranche C Term Loan Effective Date and shall have identical Interest Periods in identical proportions and durations as all other Tranche C Loans (and, for these purposes, any Interest Periods for Tranche B Term Loans that are Eurodollar Loans in effect on the Tranche C Term Loan Effective Date shall be terminated on the Tranche C Term Loan Effective Date, and any such converting Lender shall be paid accrued interest on its Tranche B Term Loans being so converted, together with any amounts payable under Section 5.05 of the Credit Agreement, as if the Tranche B Term Loans were being prepaid in full on the Tranche C Term Loan Effective Date). Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 4 - Section 2.02. Termination of Commitments. Unless previously terminated, the Tranche C Term Loan Commitments shall terminate after the Borrowing of the Tranche C Term Loans on the Tranche C Term Loan Effective Date. Section 2.03. Repayment of Loans. The Borrowers hereby jointly and severally unconditionally promise to pay to the Administrative Agent for the account of the Tranche C Term Loan Lenders the principal of the Tranche C Term Loans on each Principal Payment Date set forth in column (A) below, by an amount equal to the percentage of the Tranche C Term Loan Closing Balance (as defined below) set forth in column (B) below of the aggregate principal amount of the Tranche C Term Loans: (A)   (B) Principal Payment Date   Percentage Reduction           March 31, 2007   0.250%   June 30, 2007   0.250%   September 30, 2007   0.250%   December 31, 2007   0.250%           March 31, 2008   0.250%   June 30, 2008   0.250%   September 30, 2008   0.250%   December 31, 2008   0.250%           March 31, 2009   0.250%   June 30, 2009   0.250%   September 30, 2009   0.250%   December 31, 2009   0.250%           March 31, 2010   0.250%   June 30, 2010   0.250%   September 30, 2010   0.250%   December 31, 2010   0.250%           March 31, 2011   0.250%   June 30, 2011   0.250%   September 30, 2011   0.250%   December 31, 2011   0.250%   Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 5 -     March 31, 2012   0.250%   June 30, 2012   0.250%   September 30, 2012   0.250%   December 31, 2012   0.250%           March 31, 2013   0.250%   June 30, 2013   0.250%   September 30, 2013   0.250%   December 31, 2013   0.250%           March 31, 2014   0.250%   June 30, 2014   0.250%   September 30, 2014   0.250%   December 31, 2014   0.250%           January 31, 2015   92.00%   For purposes hereof, the “Tranche C Term Loan Closing Balance” shall mean the aggregate principal amount of the Tranche C Term Loans outstanding hereunder on the close of business on the Tranche C Term Loan Effective Date. To the extent not previously paid, all Tranche C Term Loans shall be due and payable on the Tranche C Term Loan Maturity Date. Notwithstanding the foregoing, if on any date (the “Test Date”) the maturity date of the 9 ½% Senior Notes due 2013 of Mediacom LLC shall fall within three months of the Test Date, then the Tranche C Term Loans shall be paid in full on the Test Date. Section 2.04. Applicable Margin. The Applicable Margin for Tranche C Term Loans of any Type shall be the rates indicated below for Loans of such Type opposite the then current Rate Ratio (determined pursuant to Section 3.03 of the Credit Agreement) indicated below (except that anything in this Agreement or the Credit Agreement to the contrary notwithstanding, the Applicable Margin with respect to the Loans of any Type shall be the highest margins indicated below during any period when an Event of Default shall have occurred and be continuing): Rate Ratio Base Rate Loans   Eurodollar Loans Greater than 3.50 to 1 0.75%   1.75% Less than or equal to 3.50 to 1 0.50%   1.50%   Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 6 - Section 2.05. Prepayment Premium. Any optional prepayment of Tranche C Term Loans effected on or prior to the first anniversary of the Tranche C Term Loan Effective Date with the proceeds of a substantially concurrent borrowing of bank debt (including any Incremental Facility Term Loans or other term loans permitted under the Credit Agreement pursuant to an amendment thereto, including any conversion of Tranche C Term Loans into any such other borrowings), shall be accompanied by a prepayment fee equal to 1.00% of the aggregate amount of such prepayment in the event that the Applicable Margin in respect of such Incremental Facility Term Loans (or other term loans) is less than the corresponding Applicable Margin in respect of the Tranche C Term Loans. Section 2.06. Delivery of Lender Addenda. Each Tranche C Term Loan Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Tranche C Term Loan Lender, the Borrowers and the Administrative Agent. Section 2.07. Status of Agreement. The Tranche C Term Loan Commitments of the Tranche C Term Lenders constitute Incremental Term Loan Commitments. Upon the effectiveness of Amendment No. 1 (i) $550,000,000 of such Tranche C Term Loan Commitments will constitute Reinstating Incremental Facility Term Loan Commitments and (ii) $100,000,000 of such Tranche C Term Loan Commitments will constitute utilization of the $650,000,000 of Incremental Term Loans available under Section 2.01(d)(iii). In addition, the Tranche C Term Loan Lenders constitute Incremental Facility Term Loan Lenders and the Tranche C Term Loans constitute a single Series of Incremental Facility Term Loans under Section 2.01(d) of the Credit Agreement. ARTICLE III REPRESENTATION AND WARRANTIES; NO DEFAULTS The Borrowers represent and warrant to the Administrative Agent and the Lenders that (i) each of the representations and warranties made by the Borrowers in Section 7 of the Credit Agreement, and by each Obligor in the other Loan Documents to which it is a party, is true and complete on and as of the date hereof with the same force and effect as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and as if each reference therein to the Credit Agreement or Loan Documents included reference to this Agreement and (ii) no Default has occurred and is continuing. Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 7 - ARTICLE IV CONDITIONS The obligations of the Tranche C Term Loan Lenders to make Tranche C Term Loans are subject to the conditions precedent that each of the following conditions shall have been satisfied (or waived by the Majority Tranche C Term Loan Lenders): (a)    Counterparts of Agreement. The Administrative Agent shall have received duly executed and delivered counterparts (or written evidence thereof satisfactory to the Administrative Agent, which may include telecopy transmission of, as applicable, a signed signature page or Lender Addendum) of (i) this Agreement from each Obligor and (ii) Lender Addenda from the Tranche C Term Loan Lenders for aggregate Tranche C Term Loan Commitments in an amount equal to $650,000,000. (b)    Opinion of Counsel to Obligors. The Administrative Agent shall have received an opinion, dated the Tranche C Term Loan Effective Date, of Sonnenschein Nath & Rosenthal LLP, counsel to the Obligors, covering such matters as the Administrative Agent or any Tranche C Term Loan Lender may reasonably request (and the Borrowers hereby instruct counsel to deliver such opinion to the Tranche C Term Loan Lenders and the Administrative Agent). (c)    Organizational Documents. Such organizational documents (including, without limitation, board of director and shareholder resolutions, member approvals and evidence of incumbency, including specimen signatures, of officers of each Obligor) with respect to the execution, delivery and performance of this Agreement and each other document to be delivered by such Obligor from time to time in connection herewith and the extensions of credit hereunder as the Administrative Agent may reasonably request (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from such Obligor to the contrary). (d)    Officer’s Certificate. A certificate of a Senior Officer, dated the Tranche C Term Loan Effective Date, to the effect that (i) the representations and warranties made by the Borrowers in Article III hereof, and by each Obligor in the other Loan Documents to which it is a party, are true and complete on and as of the date hereof with the same force and effect as if made on and as of such date (or, if any such representation and warranty is expressly stated to have been made as of a specific date, as of such specific date) and (ii) no Default shall have occurred and be continuing. (e)    Fees and Expenses. The Administrative Agent, and JPMorgan Securities Inc. and Wachovia Capital Markets, LLC as the Joint Lead Arrangers and Joint Bookrunners, shall have received all fees and other amounts due and payable on or prior Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 8 - to the Tranche C Term Loan Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder. (f)     Prepayment of Tranche B Term Loans. The principal of and interest on and all other amounts (including any amounts payable under Section 5.05 of the Credit Agreement) owing in respect of the Tranche B Term Loans shall, to the extent not converted into Tranche C Term Loans as provided herein, have been (or shall be concurrently) prepaid in full from funds available to the Borrowers and the proceeds of the Tranche C Term Loans. (g)    Other Documents. Such other documents as the Administrative Agent or any Tranche C Term Loan Lender or special New York counsel to JPMCB may reasonably request. ARTICLE V MISCELLANEOUS SECTION 5.01. Expenses. Subject to the provisions of the Engagement Letter dated as of April 3, 2006 among Mediacom LLC, J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC, the Obligors jointly and severally agree to pay, or reimburse JPMorgan Securities Inc. and Wachovia Capital Markets, LLC for paying, all reasonable out-of-pocket expenses incurred by JPMorgan Securities Inc. and Wachovia Capital Markets, LLC and their Affiliates, including the reasonable fees, charges and disbursements of special New York counsel to JPMCB, in connection with the syndication of the Incremental Facility Loans provided for herein and the preparation of this Agreement.   SECTION 5.02. 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 shall become effective when this Agreement shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof and thereof which, when taken together, bear the signatures of each of the other parties hereto and thereto, 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 5.03. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York (without giving effect to any conflict of laws principles under New York law). Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 9 - SECTION 5.04. Headings. Article and Section headings 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 5.05. Amendment. Each Tranche C Term Loan Lender party to this Agreement hereby authorizes and directs the Administrative Agent (a) to execute and deliver on its behalf Amendment No. 1 and (b) to consent to amendments to any instrument or agreement representing Affiliate Subordinated Indebtedness to extend the maturity of such instrument or agreement to the date contemplated in said Amendment No. 1.   Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 10 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.   MEDIACOM ILLINOIS LLC     MEDIACOM INDIANA LLC     MEDIACOM IOWA LLC     MEDIACOM MINNESOTA LLC     MEDIACOM WISCONSIN LLC     MEDIACOM ARIZONA LLC     MEDIACOM CALIFORNIA LLC     MEDIACOM DELAWARE LLC     MEDIACOM SOUTHEAST LLC             By: Mediacom LLC, Member     By: Mediacom Communications     Corporation, Member                     By: /s/       Name:       Title:                     ZYLSTRA COMMUNICATIONS CORP.                     By: /s/       Name:       Title:                     c/o Mediacom LLC     100 Crystal Run Road     Middletown, New York 10941             Attention: Mark Stephan             Telecopier No.: (845) 695-2639     Telephone No.: (845) 695-2600     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 11 -   JPMORGAN CHASE BANK, N.A,     as Administrative Agent                     By: /s/       Name:       Title:                     Address for Notices to     JPMorgan Chase Bank, N.A.,     as Administrative Agent:           JPMorgan Chase Bank, N.A.     1111 Fannin Street, 10th Floor     Houston, Texas 77002-8069     Attention: Loan and Agency Services Group           Telephone No.: 713-750-2102           Telecopier No.: 713-750-2782     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 12 - By its signature below, the undersigned hereby consents to the foregoing Incremental Facility Agreement and confirms that the Tranche C Term Loans shall constitute “Guaranteed Obligations” under the Guarantee and Pledge Agreement under and as defined in said Credit Agreement for all purposes of said Guarantee and Pledge Agreement and shall be entitled to the benefits of the guarantee and security provided under the Guarantee and Pledge Agreement.   MEDIACOM LLC             By: Mediacom Communications Corporation,     Member                     By: /s/       Name:       Title:             Address for Notices:             100 Crystal Run Road     Middletown, New York 10941             Attention: Mark Stephan             Telecopier No.: (845) 695-2639     Telephone No.: (845) 695-2600     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 13 -   MEDIACOM MANAGEMENT CORPORATION                     By: /s/       Name:       Title:             Address for Notices:             c/o Mediacom LLC     100 Crystal Run Road     Middletown, New York 10941             Attention: Mark Stephan             Telecopier No.: (845) 695-2639     Telephone No.: (845) 695-2600     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 14 -     MEDIACOM INDIANA PARTNERCO LLC             By: Mediacom LLC, Member     By: Mediacom Communications Corporation,     Member                     By: /s/       Name:       Title:             Address for Notices:             c/o Mediacom LLC     100 Crystal Run Road     Middletown, New York 10941             Attention: Mark Stephan             Telecopier No.: (845) 695-2639     Telephone No.: (845) 695-2600     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 15 -     MEDIACOM INDIANA HOLDINGS, L.P.             By: Mediacom Indiana Partnerco LLC, General     Partner     By: Mediacom LLC, Member     By: Mediacom Communications Corporation,     Member                     By: /s/       Name:       Title:             Address for Notices:             c/o Mediacom LLC     100 Crystal Run Road     Middletown, New York 10941             Attention: Mark Stephan             Telecopier No.: (845) 695-2639     Telephone No.: (845) 695-2600     Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 16 - By its signature below, the undersigned hereby consents to the foregoing Incremental Facility Agreement and confirms that the Tranche C Term Loans shall constitute “Guaranteed Obligations” under the respective Subsidiary Guarantee Agreements under and as defined in said Credit Agreement for all purposes of said Subsidiary Guarantee Agreements and shall be entitled to the benefits of the guarantee and security provided under the Subsidiary Guarantee Agreements.   ILLINI CABLE HOLDING, INC.                     By: /s/       Name:       Title:             ILLINI CABLEVISION OF ILLINOIS, INC.                     By: /s/       Name:       Title:   Incremental Facility Agreement (Tranche C Term Loans) -------------------------------------------------------------------------------- - 17 - By its signature below, the undersigned hereby confirms that all of its obligations under the Management Fee Subordination Agreement and Section 5.04 of the Guarantee and Pledge Agreement shall continue unchanged and in full force and effect for the benefit of the Administrative Agent, the Lenders party to the Credit Agreement and the Tranche C Term Loan Lenders.   MEDIACOM COMMUNICATIONS     CORPORATION                     By: /s/       Name: Mark E. Stephan       Title: Chief Financial Officer     Incremental Facility Agreement (Tranche C Term Loans) --------------------------------------------------------------------------------   Schedule I [Form of Lender Addendum] LENDER ADDENDUM Reference is made to the Incremental Facility Agreement dated as of May 5, 2006 (the “Incremental Facility Agreement”) between MEDIACOM ILLINOIS LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Illinois”); MEDIACOM INDIANA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Indiana”); MEDIACOM IOWA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Iowa”); MEDIACOM MINNESOTA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Minnesota”); MEDIACOM WISCONSIN LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Wisconsin”); ZYLSTRA COMMUNICATIONS CORP., a corporation duly organized and validly existing under the laws of the State of Minnesota (“Zylstra” and, together with Mediacom Illinois, Mediacom Indiana, Mediacom Iowa, Mediacom Minnesota and Mediacom Wisconsin, the “Mediacom Midwest Borrowers”); MEDIACOM ARIZONA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Arizona”); MEDIACOM CALIFORNIA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom California”); MEDIACOM DELAWARE LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Delaware”); and MEDIACOM SOUTHEAST LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Mediacom Southeast” and, together with Mediacom Arizona, Mediacom California and Mediacom Delaware, the “Mediacom USA Borrowers”; the Mediacom USA Borrowers together with the Mediacom Midwest Borrowers, the “Borrowers”); the TRANCHE C TERM LOAN LENDERS named therein (the “Tranche C Term Loan Lenders”); and JPMORGAN CHASE BANK, N.A., as Administrative Agent (the “Administrative Agent”), which Incremental Facility Agreement is being entered into pursuant to Section 2.01(d) of the Credit Agreement (the “Credit Agreement”) dated as of October 21, 2004 among the Borrowers, the Lenders party thereto and the Administrative Agent. Terms used but not defined in this Lender Addendum have the meanings assigned to such terms in the Incremental Facility Agreement and the Amendment and Restatement. By its signature below, and subject to the acceptance hereof by the Borrowers and the Administrative Agent as provided below, the undersigned hereby becomes a Tranche C Term Loan Lender under the Incremental Facility Agreement, having the Tranche C Term Loan Commitment, set forth below opposite its name. Form of Lender Addendum -------------------------------------------------------------------------------- - 2 - It is understood and agreed that if the undersigned also holds any Tranche B Term Loans under the Credit Agreement, the undersigned may elect, by notice to the Administrative Agent, that the Tranche C Term Loans required to be made by the undersigned on the Tranche C Term Loan Effective Date shall, to the extent of the portion of such Tranche C Term Loans not exceeding the aggregate principal amount of the Tranche B Term Loans of the undersigned, be made through such Tranche B Term Loans being converted into Tranche C Term Loans (and each reference in the Incremental Facility Agreement or the Amendment and Restatement to the “making” of any Tranche C Term Loan, or words of similar import, shall in the case of the undersigned be deemed to include such conversion). This Lender Addendum shall be governed by, and construed in accordance with, the law of the State of New York (without giving effect to any conflict of laws principles under New York law). This Lender Addendum 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.   Form of Lender Addendum -------------------------------------------------------------------------------- - 3 - IN WITNESS WHEREOF, the parties hereto have caused this Lender Addendum to be duly executed and delivered by their proper and duly authorized officers as of this 5th day of May, 2006.   Tranche C Term Loan Commitment:              [Name of Tranche C Term Loan Lender]             $ 1                 By: /s/           Name:           Title:       [DO NOT COMPLETE UNTIL FINAL COMMITMENT ALLOCATIONS HAVE BEEN DETERMINED.] -------------------------------------------------------------------------------- 1 Lenders may insert “Full Conversion” in lieu of a Dollar Commitment here if they wish to convert all outstanding Tranche B Term Loans into Tranche C Term Loans. This option is available only if the Dollar amount of the Tranche C Terms Loans to be held after conversion are exactly equal to the Dollar amount of the Tranche B Term Loans being converted.   Form of Lender Addendum -------------------------------------------------------------------------------- - 4 -   Accepted and agreed:         JPMORGAN CHASE BANK, N.A.,   as Administrative Agent               By: /s/     Name:     Title:               MEDIACOM ILLINOIS LLC   MEDIACOM INDIANA LLC   MEDIACOM IOWA LLC   MEDIACOM MINNESOTA LLC   MEDIACOM WISCONSIN LLC   MEDIACOM ARIZONA LLC   MEDIACOM CALIFORNIA LLC   MEDIACOM DELAWARE LLC   MEDIACOM SOUTHEAST LLC         By: Mediacom LLC, Member   By: Mediacom Communications   Corporation, Member               By: /s/     Name:     Title:     Form of Lender Addendum -------------------------------------------------------------------------------- - 5 -   ZYLSTRA COMMUNICATIONS CORP.               By: /s/     Name:               c/o Mediacom LLC   100 Crystal Run Road   Middletown, New York 10941         Attention: Mark Stephan         Telecopier No.: (845) 695-2639   Telephone No.: (845) 695-2600     Form of Lender Addendum -------------------------------------------------------------------------------- Schedule II Form of Amendment   [To be inserted]   Form of Amendment  --------------------------------------------------------------------------------

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT         THIS AMENDMENT NO. 1 is made as of the 28th day of August, 2006 and amends the Employment Agreement dated as of May 2, 2001 (the “Original Agreement”) by and between HENNESSY ADVISORS, INC., a California corporation (the “Company”), and NEIL J. HENNESSY (“Employee”). BACKGROUND         The Initial Term of the Original Employment Agreement has expired. The Company desires to retain the services of the Employee, and the Employee desires to be employed by the Company, in accordance with the terms and conditions set forth in the Original Agreement, as amended by this Amendment No. 1. Accordingly, the parties agree as follows (all capitalized terms not otherwise defined herein have the meanings given to them in the Original Agreement, and section references below refer to the sections of the Original Agreement):         1.    Term. The new term (“Renewal Term”) of this Agreement shall continue until the fifth anniversary of last day of the Initial Term of the Original Agreement, unless earlier terminated as provided herein. On such fifth anniversary date and each anniversary date thereafter, the term of this Agreement automatically shall be extended for an additional one year term (the “Extended Term”) unless either party hereto shall have provided written notice to the other party hereto of its, or his, intent not to extend this Agreement not less than sixty (60) days prior to the end of the Renewal Term or the Extended Term, as the case may be. For purposes of this Agreement, “Term” means the Renewal Term and, if so extended, the Extended Term.         2.    Compensation. Section 3(b) of the Original Agreement is amended to read in full as follows:         (b)        Bonus Compensation. The Board shall grant to Employee an annual bonus equal to 10% of the pre-tax profit of the Company for each fiscal year as computed for financial reporting purposes in accordance with generally accepted accounting principles, except that pre-tax profit shall be computed without regard to any bonuses payable for the fiscal year (“Annual Bonus”). An amount equal to 50% of the estimated Annual Bonus shall be payable on October 15 for the preceding fiscal year, and the balance of the Annual Bonus shall be payable within 30 days after the Company’s accountants have completed their audit of the Company’s financial statements for the fiscal year. (Signature page follows) --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly executed all as of the day and year first above written. Except as amended hereby, the Original Agreement shall remain in full force and effect. HENNESSY ADVISORS, INC. By:   /s/ Daniel B. Steadman Name:   Daniel B. Steadman Title:   Executive Vice President                     Company /s/ Neil J. Hennessy Neil J. Hennessy                     Employee 2

Exhibit 10.1 NUCOR CORPORATION 2005 Stock Option and Award Plan Restricted Stock Unit Award Agreement THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Award Agreement”) is made and entered into as of the 1st day of June, 20    , by and between Nucor Corporation, a Delaware corporation (the “Company”), and the individual (the “Grantee”) identified in the accompanying Notice of Grant of Restricted Stock Units (the “Notice”). TERMS AND CONDITIONS 1. Grant of Units. The Company hereby grants to the Grantee, subject to the restrictions and the other terms and conditions set forth in the Nucor Corporation 2005 Stock Option and Award Plan (the “Plan”) and in this Award Agreement, the number of restricted stock units (the “Units”) set forth in the Notice, each of which shall represent the right to receive, when and as provided herein, one (1) share of the Stock. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan. 2. Vesting of Units. The Units shall be fully and immediately vested on the Grant Date. 3. Account; Dividend Equivalent Payments. The Units shall be credited to a bookkeeping account in the name of Grantee on the books and records of the Company (the “Restricted Stock Unit Account”). The Company shall pay to the Grantee in cash, within thirty (30) days after the payment date of any cash dividend with respect to shares of Stock, a dividend equivalent payment equal to the number of Units credited to the Grantee’s Restricted Stock Unit Account as of the record date for such dividend multiplied by the per share amount of the dividend. 4. Receipt of Shares. The Company shall issue the shares of Stock represented by the Units to the Grantee, or to the Grantee’s estate in the event of Grantee’s death, as soon as administratively practicable after the termination of the Grantee’s service on the Board of Directors. 5. Limitation of Rights. The Units do not confer upon the Grantee, or the Grantee’s estate in the event of Grantee’s death, any rights as a stockholder of the Company unless and until shares of Stock are in fact issued to such person in respect of the Units. 6. Restrictions on Transfer and Pledge. No right or interest of Grantee in the Units may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an affiliate, or shall be subject to any lien, obligation, or liability of Grantee to any other party other than the Company or an affiliate. The Units are not assignable or transferable by Grantee other than by will or the laws of descent and distribution. 7. Plan Controls. The terms contained in the Plan (including without limitation provisions regarding changes in capital structure of the Company) are incorporated into and made a part of this Award Agreement and this Award Agreement shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Agreement, the provisions of the Plan shall be controlling and determinative. -------------------------------------------------------------------------------- 8. Amendment. The Company may amend or terminate this Award Agreement without the consent of Grantee; provided, however, that such amendment or termination shall not, without Grantee’s consent, reduce or diminish the value of this award determined on the date of such amendment or termination.   9. Successors. This Award Agreement shall be binding upon any successor of the Company, in accordance with the terms of this Award Agreement and the Plan.   10. Severability. If any one or more of the provisions contained in this Award Agreement are invalid, illegal or unenforceable, the other provisions of this Award Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.   11. Notice. Notices and communications under this Award Agreement must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to:       Nucor Corporation     2100 Rexford Road     Charlotte, North Carolina 28211     Attn: Corporate Secretary   or any other address designated by the Company in a written notice to Grantee. Notices to the Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.   12. Incorporation of Notice. The Notice is incorporated by reference and made a part of this Award Agreement.   13. Governing Law. This Agreement shall be construed, interpreted and governed and the legal relationships of the parties determined in accordance with the internal laws of the State of North Carolina without reference to rules relating to conflicts of law.

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Exhibit 10.25.11   Regulatory Commission of Alaska   Certificate   Of   Public Convenience and Necessity   No. 489   Having found that the grantee of this certificate is fit, willing, and able to provide the utility services applied for and that such services are required for the convenience and necessity of the public, the Regulatory Commission of Alaska, pursuant to the authority vested in it by AS 42.05, hereby issues this certificate of Public Convenience and Necessity to   GCI COMMUNICATIONS CORP. d/b/a GENERAL COMMUNICATION, INC., d/b/a GCI   authorizing it to operate a public utility, as defined by AS 42.05.990(4) (B) for the purpose of furnishing   TELECOMMUNICATIONS SERVICE (LOCAL EXCHANGE)   This Certificate is issued under, and subject to, the provisions of AS 42.05 and all rules, regulations. and orders from time to time promulgated by the Commission governing the rates, charges, services, facilities, and practices of utility operations of the kind authorized herein.   The specific nature, scope, terms, conditions, and limitations of the authority granted by this Certificate, as amended to date, are set forth in the appendix hereto and in the following order(s) of the Commission which, by this reference, are incorporated in and made a part hereof as though fully set forth herein.   Docket No.   Date of Order U-00-02(1)   July 7, 2000   (Chronology and service are descriptions shown on the attached Appendix A)   IN WITNESS THEREOF, the undersigned members of the Commission have executed this Certificate of Public Convenience and Necessity at Anchorage, Alaska on this 2nd day of September 2000.     [SEAL] Regulatory Commission of Alaska               /s/       (CHAIR)               /s/       (COMMISSIONER)               /s/       (COMMISSIONER)               /s/       (COMMISSIONER)               /s/       (COMMISSIONER)     1 --------------------------------------------------------------------------------

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Exhibit 10.30   THIRD AMENDMENT TO SENIOR UNSECURED REVOLVING CREDIT AGREEMENT   This Amendment (this “Amendment”), dated as of August 31, 2005, is made by and among CH2M HILL COMPANIES, LTD., an Oregon corporation, CH2M HILL, INC., a Florida corporation, OPERATIONS MANAGEMENT INTERNATIONAL, INC., a California corporation, and CH2M HILL INDUSTRIAL DESIGN & CONSTRUCTION, INC., an Oregon corporation (each, a “Borrower” and collectively, the “Borrowers”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL ASSOCIATION, BANK ONE N.A., n/k/a JP Morgan Chase Bank, N.A., THE BANK OF TOKYO-MITSUBISHI, LTD., BANK OF AMERICA, N.A. and THE NORTHERN TRUST COMPANY, each in its capacity as a Lender and an Issuing Bank (each a “Lender” and collectively, the “Lenders”) and WELLS FARGO BANK, NATIONAL ASSOCIATION in its capacity as an Issuing Bank and in its capacity as agent for itself and the other Lenders and in its capacity as lead arranger.   Recitals   The Borrowers and the Lenders are parties to that certain $125,000,000 Senior Unsecured Revolving Credit Agreement dated as of July 28, 2003 as amended by that certain First Amendment to $125,000,000 Senior Unsecured Revolving Credit Agreement, dated as of December 5, 2003 and that certain Second Amendment to $125,000,000 Senior Unsecured Revolving Credit Agreement dated as of June 21, 2004 (as so amended, the “Credit Agreement”).   The Borrowers have requested that certain amendments be made to the Credit Agreement, which the Lenders are willing to make pursuant to the terms and conditions set forth herein.   NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows:   1.                                       DEFINED TERMS.  CAPITALIZED TERMS USED IN THIS AMENDMENT INCLUDING, WITHOUT LIMITATION, THE RECITALS, WHICH ARE DEFINED IN THE CREDIT AGREEMENT SHALL HAVE THE SAME MEANINGS AS DEFINED THEREIN, UNLESS OTHERWISE DEFINED HEREIN.  ALTHOUGH THE CREDIT AGREEMENT IS TITLED THE $125,000,000 SENIOR UNSECURED REVOLVING CREDIT AGREEMENT, GOING FORWARD THE PARTIES WILL REFER TO THE CREDIT AGREEMENT AS THE SENIOR UNSECURED REVOLVING CREDIT AGREEMENT.  IN ADDITION, SECTION 1 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY ADDING OR AMENDING, AS THE CASE MAY BE, THE FOLLOWING DEFINITIONS:   “Capitalized Leases” means, in the case of any Person, (a) all leases that have been, should be or are expected to be recorded as capital leases on a balance sheet of such Person in accordance with GAAP, and (b) the principal balance outstanding under the $23,000,000 Lease Obligations, the $53,000,000 Lease Obligations, the 2005 Lease Obligations, any tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing transaction where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP.   1 --------------------------------------------------------------------------------   “Credit Obligations” means all present and future liabilities, obligations and Indebtedness of the Borrowers, any of their Subsidiaries or any other Obligor owing to the Agent or any Lender (or any Affiliate of a Lender and including any Issuing Bank) under or in connection with this Agreement or any other Credit Document, including obligations in respect of principal, interest, reimbursement obligations under Letters of Credit, fees, Letter of Credit fees, amounts provided for in Sections 3.2.4, 3.4, 3.5 and 12 and other fees, charges, indemnities and expenses from time to time owing hereunder or under any other Credit Document (whether accruing before or after a Bankruptcy Default).   “Final Maturity Date” means July 28, 2009, or such later date to which the Final Maturity Date has been extended in accordance with Section 2.6.   “Foreign Currency” means such currencies other than United States Dollars as may be approved by the Lenders in their sole discretion.  Each Foreign Currency must be one (a) that is freely transferable and convertible into United States Dollars, and (b) in which deposits are generally available to all Lenders in the London Interbank Market.  The Lenders approve each of the following as a Foreign Currency:  Canadian Dollars, Euros, Sterling, Australian Dollars, Hong Kong Dollars and Singapore Dollars.   “Foreign Indebtedness” is defined in Section 9.7.15.   “Issuing Bank” means any Lender, as applicable, in each case in its capacity as the issuer of a Letter of Credit.   “LC Available Credit” means the lesser of (a) $100,000,000 less the current Letter of Credit Exposure, or (b) the Available Credit.   “Lender” means each of the Persons listed as lenders on the signature page hereto, including Wells Fargo in its capacity as a Lender and the Swing Line Lender and each Lender in its capacity as an Issuing Bank, and such other Persons who may from time to time own a Percentage Interest in the Credit Obligations, but the term “Lender” will not include any Credit Participant.   “Letter of Credit Agreement” means an Issuing Bank’s standard letter of credit application and documentation modified to such extent, if any, as such Issuing Bank deems necessary.   “Letter of Credit Exposure” means, at any date, the sum of (a) the aggregate face amount of all drafts that may then or thereafter be presented by beneficiaries under all Letters of Credit then outstanding, plus (b) the aggregate face amount of all drafts that the Issuing Banks have previously accepted under Letters of Credit but that the Borrowers have not paid to such Issuing Banks.   “Multicurrency Available Credit”  means the lesser of (i) the U.S. Dollar Equivalent of $25,000,000 less the aggregate outstanding balance of all Multicurrency LIBOR Loans, or (ii) the Available Credit.   2 --------------------------------------------------------------------------------   “Permitted Acquisition” means an Acquisition that meets the following conditions:   (a)                                  Such proposed Permitted Acquisition does not cause the aggregate cash purchase price of all Acquisitions in any one calendar year to equal or exceed $100,000,000; provided that the Required Lenders will not unreasonably withhold their consent to additional Acquisitions and the Agent shall receive at least 10 days prior written notice of any proposed Permitted Acquisition for which the cash consideration exceeds $15,000,000;   (b)                                 Such proposed Permitted Acquisition shall only involve assets or businesses comprising a business, or those assets of a business, substantially of the type engaged in by the Borrowers as of the date of this Agreement;   (c)                                  Such proposed Permitted Acquisition shall be consensual and shall have been approved by the Target’s board of directors (and stockholders to the extent required by applicable law);   (d)                                 Prior to the closing of such proposed Permitted Acquisition for which cash consideration exceeds $15,000,000, the Borrowers shall deliver to the Agent, pro forma Consolidated financial statements for the Parent and its Subsidiaries, including the Target, in form satisfactory to the Agent, accompanied by a certificate of a Financial Officer certifying that, after giving effect to such proposed Permitted Acquisition, (i) the Borrowers will be in compliance with the financial covenants set forth in Section 9.4 through 9.6 on a pro forma basis, (ii) the ratio of Total Funded Debt divided by Adjusted EBITDA will not exceed 2.50 to 1.00 on a pro forma basis, (iii) any secured Indebtedness assumed in such proposed Permitted Acquisition is purchase money Indebtedness or Capitalized Leases secured only by the assets of the Target acquired with the proceeds of such purchase money Indebtedness or Capitalized Leases and (iv) no Default will exist;   (e)                                  The business and assets of the Target shall be free of Liens, except Liens permitted in connection with Indebtedness permitted to be assumed by paragraph (d) of this definition and Liens permitted under Section 9.8; and   (f)                                    All necessary or appropriate third party and government waivers and consents relating to the Permitted Acquisition have been received.   “2005 Lease Documents” is defined in Section 9.28.   “2005 Lease Obligations” means the Indebtedness of the Borrowers under the 2005 Lease Documents.   “2005 Lease Transaction” means the lease transaction entered into after July 15, 2005 and on or before December 31, 2005, by the Borrowers and certain other parties pursuant to the 2005 Lease Documents, for the purpose of constructing, financing the construction of, and leasing to CH2M Hill, Inc. a new building for the Borrowers in Douglas County, Colorado.   3 --------------------------------------------------------------------------------   2.                                       THE INITIAL PARAGRAPH OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:   “This Agreement, dated as of July 28, 2003, is entered into by and among CH2M HILL Companies, Ltd., an Oregon corporation, CH2M HILL, Inc., a Florida corporation, Operations Management International, Inc., a California corporation, and CH2M Hill Industrial Design & Construction, Inc., an Oregon corporation (each a “Borrower,” and collectively, the “Borrowers”), the Lenders from time to time party hereto, each in its capacity as a Lender and in its capacity as an Issuing Bank, and Wells Fargo Bank, National Association, in its capacity as a Lender, in its capacity as an Issuing Bank, in its capacity as agent for itself and the other Lenders and in its capacity as lead arranger.  The parties agree as follows:”   3.                                       SECTION 2.4 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “2.4                           Letters of Credit.   2.4.1                        Issuance of Letters of Credit.  Subject to all terms and conditions of this Agreement and so long as no Default exists, from time to time on and after the Initial Closing Date and prior to the Final Maturity Date, each Issuing Bank will issue for the account of the Borrowers standby and documentary letters of credit (the “Letters of Credit”).  No Issuing Bank will issue a Letter of Credit to the extent that the face amount of such requested Letter of Credit exceeds the LC Available Credit.   2.4.2                        Requests for Letters of Credit.  The Parent, on behalf of the applicable Borrower, may from time to time request a Letter of Credit to be issued (or amended, renewed or extended) by providing a notice from an Authorized Representative to the applicable Issuing Bank and the Agent which is actually received by both not less than three Banking Days prior to the requested Closing Date for such Letter of Credit specifying (a) the amount of the requested Letter of Credit, (b) the applicable Borrower, (c) the beneficiary thereof, (d) the requested Closing Date, (e) the applicable Issuing Bank, (f) the requested currency, if not in United States Dollars, (g) the principal terms of the text for such Letter of Credit and (h) any other information reasonably requested by the applicable Issuing Bank.  Following receipt of such notice, if a Foreign Currency is requested, the Agent shall calculate on the Closing Date the U.S. Dollar Equivalent of the face amount of such Letter of Credit as of the Closing Date, and shall promptly notify the Lenders of the amount thereof.  The issuance or amendment, renewal or extension of each Letter of Credit by an Issuing Bank shall, in addition to the conditions precedent set forth in Section 8.2 (the satisfaction of which no Issuing Bank shall have any duty to ascertain), be subject to the condition precedent that the applicable Issuing Bank shall have given the Agent written notice that the Parent has delivered to the Issuing Bank an executed Letter of Credit Agreement acceptable to such Issuing Bank and that such Letter of Credit is satisfactory to such Issuing Bank or that the Issuing Bank has waived such requirements.  In the event of any conflict between the terms of this Agreement and the terms of any Letter of Credit Agreement, the terms of this Agreement shall control.  Each Letter of Credit will be issued by forwarding it to the applicable Borrower or to such other Person   4 --------------------------------------------------------------------------------   as directed in writing by an Authorized Representative.  The Issuing Bank shall promptly deliver a copy of each Letter of Credit to the Agent.   2.4.3                        Form and Expiration of Letters of Credit.  Each Letter of Credit issued under this Section 2.4 and each draft accepted or paid under such a Letter of Credit will be issued, accepted or paid, as the case may be, by the applicable Issuing Bank at its principal office.  No Letter of Credit will provide for the payment of drafts drawn thereunder (and no draft will be payable) at a date which is later than the Final Maturity Date.  Each Letter of Credit and each draft accepted under a Letter of Credit will be in such form and minimum amount, and will contain such terms, as the applicable Issuing Bank and the applicable Borrower may agree upon at the time such Letter of Credit is issued, including a requirement of not less than three Banking Days after presentation of a draft before payment must be made thereunder.   2.4.4                        Lenders’ Participation in Letters of Credit.  Upon the issuance of any Letter of Credit (or an amendment of a Letter of Credit increasing the amount thereof), a participation therein, in an amount equal to each Lender’s Percentage Interest multiplied by the face amount of such Letter of Credit (which amount shall be the U.S. Dollar Equivalent of such face amount, if the Letter of Credit is issued in a Foreign Currency and which amount will change from time to time as the U.S. Dollar Equivalent of the face amount of such Letter of Credit changes), will automatically be deemed granted by the Issuing Bank to each Lender on the date of such issuance and the Lenders will automatically be obligated, as set forth in Section 2.4.6 and Section 13.4, to reimburse such Issuing Bank to the extent of their respective Percentage Interests in such Letter of Credit for all obligations incurred by such Issuing Bank to third parties in respect of such Letter of Credit not reimbursed by the Borrowers.  The Agent will send to each Lender a report regarding the participations in Letters of Credit outstanding during each month.  Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 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.   2.4.5                        Presentation.  Upon receipt from the beneficiary of any Letter of Credit of any demand for payment under such Letter of Credit, the applicable Issuing Bank shall notify the Agent by telephone (confirmed by facsimile) of such demand for payment and whether such Issuing Bank has made or will make a payment thereunder.  The Agent shall promptly notify the Parent and each other Lender as to the amount paid or to be paid by the applicable Issuing Bank as a result of such demand and the proposed payment date.  If the Letter of Credit was issued in a Foreign Currency, the Agent shall include in such notice a calculation of the anticipated U.S. Dollar Equivalent of such amount on the proposed payment date.  The responsibility of each Issuing Bank to the Borrowers and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit.  Except insofar as written instructions actually received are given by the applicable Borrower expressly to   5 --------------------------------------------------------------------------------   the contrary with regard to, and prior to, the Issuing Bank’s issuance of any Letter of Credit for the account of the applicable Borrower and such contrary instructions are reflected in such Letter of Credit, the Issuing Bank may honor as complying with the terms of the Letter of Credit and with this Agreement any drafts or other documents otherwise in order signed or issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for benefit of creditors, liquidator, receiver or other legal representative of the party authorized under such Letter of Credit to draw or issue such drafts or other documents.  Each Issuing Bank shall endeavor to exercise the same care in the issuance and administration of the Letters of Credit issued by it as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the applicable Issuing Bank, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the applicable Issuing Bank as set forth in Section 2.4.6.  No Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the applicable Issuing Bank in determining whether a request presented under any Letter of Credit issued by it complied with the terms of such Letter of Credit or (ii) the applicable Issuing Bank’s failure to pay under any Letter of Credit issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit.   2.4.6                        Payment of Drafts.  At such time as the applicable Issuing Bank makes any payment on a draft presented or accepted under a Letter of Credit, the Borrowers shall, on demand, pay to the Agent the amount of such payment either, at the Borrower’s election, (a) through a Revolving Credit Loan, subject to the terms and conditions of this Agreement, including satisfaction of the conditions precedent set forth in this Agreement to the making of a Revolving Credit Loan, and so long as no Default exists, or (b) in immediately available funds.  If the Letter of Credit was issued in a Foreign Currency, the Agent shall determine the U.S. Dollar Equivalent of such amount on the proposed payment date.  If the Borrowers fail to notify the Agent of their election as set forth above on the date such demand is made, such amount shall be considered a Revolving Credit Loan under Section 2.1.1 and part of the Loans as if the Borrowers had paid in full the amount required with respect to the Letter of Credit by borrowing such amount under Section 2.1.1.  In that event, the Agent shall notify each Lender that such Lender is to make a Revolving Credit Loan to the Borrowers (which shall consist of Base Rate Loans) in an amount equal to the Lender’s Percentage Interest of the aggregate principal amount of such Revolving Credit Loan; and, regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Loan are then satisfied, each Lender (other than the applicable Issuing Bank) will disburse directly to the applicable Issuing Bank, its Percentage Interest of the aggregate principal amount of such Revolving Credit Loan, prior to 12:00 noon (Denver time), in immediately available funds on the Banking Day next succeeding the date such notice is given to such Lender.  The proceeds of such Revolving Credit Loan shall be applied to repay the amount required by the first sentence of this Section.  Promptly following receipt by the Agent of any payment from the Borrowers pursuant to this Section, the Agent shall distribute such payment to the   6 --------------------------------------------------------------------------------   applicable Issuing Bank or, to the extent the Lenders have made payments pursuant to this Section to reimburse the applicable Issuing Bank, then to such Lenders and to the applicable Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this Section to reimburse the applicable Issuing Bank (other than the funding of a Revolving Credit Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrowers of their obligation to reimburse the applicable Issuing Bank.   2.4.7                        Subrogation.  Upon any payment by the applicable Issuing Bank under any Letter of Credit and until the reimbursement of such Issuing Bank by the Borrowers with respect to such payment, such Issuing Bank will be entitled to be subrogated to, and to acquire and retain, the rights which the Person to whom such payment is made may have against the Borrowers, all for the benefit of the Lenders.  The Borrowers will take such action as the applicable Issuing Bank may reasonably request, including requiring the beneficiary of any Letter of Credit to execute such documents as the applicable Issuing Bank may reasonably request, to assure and confirm to such Issuing Bank such subrogation and such rights, including the rights, if any, of the beneficiary to whom such payment is made in accounts receivable, inventory and other properties and assets of any Obligor.   2.4.8                        Modification, Consent, Etc.  If the Borrowers request or consent in writing to any modification or extension of any Letter of Credit, or waive any failure of any draft, certificate or other document to comply with the terms of such Letter of Credit, and if the applicable Issuing Bank consents thereto, such Issuing Bank will be entitled to rely on such request, consent or waiver.  This Agreement will be binding upon the Borrowers with respect to such Letter of Credit as so modified or extended, and with respect to any action taken or omitted by the Agent or the applicable Issuing Bank pursuant to any such request, consent or waiver.   2.4.9                        Obligations Absolute.  The Borrowers’ obligations under this Section 2.4 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower may have or have had against any Issuing Bank, any Lender or any beneficiary of a Letter of Credit.  The Borrowers further agree with the Issuing Banks and the Lenders that the Issuing Banks and the Lenders shall not be responsible for, and the reimbursement obligations of the Borrowers under any Letter of Credit shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among any Borrower, any of their Affiliates, the beneficiary of any Letter of Credit or any financing institution or other party to whom any Letter of Credit may be transferred or any claims or defenses whatsoever of any Borrower or of any of their Affiliates against the beneficiary of any Letter of Credit or any such transferee.  The Issuing Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit.  The Borrowers agree that any action taken or omitted by any Issuing Bank or any Lender under or in connection with each Letter of Credit and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon each Borrower and shall not put any Issuing Bank or   7 --------------------------------------------------------------------------------   any Lender under any liability to any Borrower.  Nothing in this Section 2.4.9 is intended to limit the right of the Borrowers to make a claim against any Issuing Bank for damages as contemplated by the proviso to the first sentence of Section 2.4.10.   2.4.10                  Actions of Issuing Banks.  Each Issuing Bank shall be entitled to rely, and shall be fully protected in relying, upon any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document 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 such Issuing Bank.  Each Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable 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. Notwithstanding any other provision of this Section 2.4, each Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Letter of Credit.   2.4.11                  Indemnification.  Each Lender severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrowers) to the extent of such Lender’s Percentage Interest from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Letter of Credit or any actual or proposed use of any Letter of Credit, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which any Issuing Bank may incur by reason of or in connection with (a) the failure of any other Lender to fulfill or comply with its obligations to any Issuing Bank hereunder (but nothing herein contained shall affect any rights the Borrowers may have against any defaulting Lender) or (b) by reason of or on account of any Issuing Bank issuing any Letter of Credit which specifies that the term “Beneficiary” included therein includes any successor by operation of law of the named Beneficiary, but which Letter of Credit does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the applicable Issuing Bank, evidencing the appointment of such successor Beneficiary; provided that the Borrowers shall not be required to indemnify any Lender, any Issuing Bank or the Agent for any claims, damages, losses, liabilities, costs or expenses; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank’s gross negligence or willful misconduct.  Without limitation of the foregoing, each Lender agrees to reimburse any Issuing Bank promptly upon demand for its Percentage Interest of any costs and expenses (including, without limitation, reasonable fees and expenses of counsel) payable by the Borrowers under Section 12.1 or   8 --------------------------------------------------------------------------------   12.2 with respect to a Letter of Credit issued by such Issuing Bank, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrowers.  The failure of any Lender to reimburse an Issuing Bank promptly upon demand for its Percentage Interest of any amount required to be paid by the Lender to such Issuing Bank as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse such Issuing Bank for its Percentage Interest of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse such Issuing Bank for such other Lender’s Percentage Interest of such amount.  Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 2.4.11 will survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Credit Documents.   2.4.12                  Rights as a Lender or Agent.  In its capacity as a Lender, each Issuing Bank shall have the same rights and obligations as any other Lender.  In its capacity as the Agent, the Agent shall have all of the rights and obligations of the Agent.”   4.                                       SECTION 3.3.2 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “3.3.2                  Letter of Credit Fees.  The Borrowers shall pay to the Agent for the benefit of the Lenders a Letter of Credit issuance fee (which shall be non-refundable even if any Letter of Credit is terminated or canceled before its stated expiration date) equal to (i) the undrawn amount of each standby Letter of Credit multiplied by the Applicable LIBOR Margin per annum applied for a period equal to the term of such Letter of Credit, and (ii) the face amount of each documentary Letter of Credit multiplied by 0.25% per annum applied for a period equal to the term of such Letter of Credit, which fees shall be payable upon issuance and quarterly in arrears thereafter; provided, however, that the Borrowers shall not be required to pay the initial fee due upon issuance with respect to Letters of Credit issued on the date hereof.  At the end of each calendar quarter, if the expiry date of a Letter of Credit has been reduced during such quarter, the fees payable under the preceding sentence shall thereafter be reduced pro rata as a result of such reduction; provided, however, that for the purpose of calculating such fees, the term remaining after any such reduction shall be rounded up to the next full quarter.  The Borrowers will pay to the applicable Issuing Bank, for its own account, fees upon the occurrence of certain activity with respect to any Letter of Credit, including, without limitation, the transfer, cancellation or amendment of any Letter of Credit, determined in accordance with such Issuing Bank’s standard fees and charges then in effect.”   5.                                       SECTION 4.2.2 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “4.2.2                  Voluntary Prepayments.  The Borrowers may from time to time prepay all or any portion of the outstanding principal amount of the Loans, together with accrued interest thereon, in a minimum amount of $1,000,000 and an integral multiple of $500,000, or such lesser amount as is then outstanding, or in the case of Multicurrency LIBOR Loans, the U.S. Dollar Equivalents thereof, without premium or penalty of any   9 --------------------------------------------------------------------------------   type (except as provided in Section 3.2.4 with respect to the early termination of LIBOR Pricing Options).  The Parent will give the Agent prior notice of the Borrowers’ intention to prepay a Base Rate Loan on or before 11:00 a.m. Colorado time on the Banking Day the Borrowers intend to make such prepayment and prior notice of its intention to prepay a LIBOR Loan at least three Banking Days prior to the Banking Day on which the Borrowers intend to make such prepayment, specifying the date of payment, the total amount of the Base Rate Loan or LIBOR Loan to be paid on such date and the amount of interest to be paid with such prepayment.”   6.                                       SECTION 4.4 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “4.4                           Letters of Credit.  If, on the Final Maturity Date or any accelerated maturity of the Credit Obligations, the Lenders will be obligated in respect of a Letter of Credit or a draft accepted under a Letter of Credit, the Borrowers will either:   (a)                                  prepay such obligation by depositing with the applicable Issuing Bank an amount of cash; or     (b)                                 deliver to the applicable Issuing Bank a standby letter of credit (designating the applicable Issuing Bank as beneficiary and issued by a bank and on terms reasonably acceptable to the applicable Issuing Bank); or   (c)                                  deliver to the applicable Issuing Bank such other collateral as is acceptable to such Issuing Bank;   in each case in an amount equal to 105% of the Letter of Credit Exposure related to each such Letter of Credit at such date.   The applicable Issuing Bank will notify the Agent in writing promptly of the deposit of such cash or collateral or the delivery of such standby letter of credit.  Upon the receipt of such notice, each such Letter of Credit will automatically be deemed to no longer be a Letter of Credit hereunder, the related reimbursement obligations shall cease to be Credit Obligations, and all obligations of each Lender under this Agreement with respect to each such Letter of Credit will automatically be deemed to be released and terminated.   Any such cash so deposited and the cash proceeds of any draw under any letter of credit so furnished, including any interest thereon, will be returned by the applicable Issuing Bank to the Borrowers only when, and to the extent that, the amount of such cash held by the applicable Issuing Bank exceeds 105% of the Letter of Credit Exposure related to each such Letter of Credit at such time and all other Credit Obligations have been paid in full.”   10 --------------------------------------------------------------------------------   7.                                       SECTION 4.7 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “4.7                           Records.  Each Lender is authorized but not required to record the date and amount of each advance made under its Notes, the date and amount of each payment or prepayment of principal and interest thereunder, and the resulting unpaid principal balance thereof, as well as the amount of the Letters of Credit made by such Lender as an Issuing Bank, in such Lender’s internal records, and any such recordation shall be prima facie evidence of the accuracy of the information so recorded; provided, however, that any Lender’s failure to so record shall not limit or otherwise affect the Borrowers’ obligations thereunder or hereunder to repay the unpaid principal and interest outstanding under such Notes or any amount owing with respect to Letters of Credit, and, in all events, the principal amounts owing by the Borrowers in respect of the Notes and all amounts owing with respect to Letters of Credit shall be the aggregate amount of all Loans made by the Lenders (less all payments of principal thereof made by the Borrowers) and all reimbursement obligations under all Letters of Credit.”   8.                                       SECTION 7.2 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “7.2                           Waivers of Defenses.  The obligations of the Borrowers hereunder shall not be released, in whole or in part, by any action or thing which might, but for this provision of this Agreement, be deemed a legal or equitable discharge of a surety or guarantor, other than irrevocable payment and performance in full of the Credit Obligations (except for contingent indemnity and other contingent Credit Obligations not yet due and payable) at a time after any obligation of the Lenders hereunder to make any Loans and of any Issuing Bank to issue Letters of Credit shall have expired or been terminated and all outstanding Letters of Credit shall have expired or the liability of the Issuing Bank thereon shall have otherwise been discharged.  The purpose and intent of this Agreement is that the Credit Obligations constitute the direct and primary obligations of each Borrower and that the covenants, agreements and all obligations of each Borrower hereunder be absolute, unconditional and irrevocable.  Each Borrower shall be and remain liable for any deficiency remaining after foreclosure of any mortgage, deed of trust or security agreement securing all or any part of the Credit Obligations, whether or not the liability of any other Person for such deficiency is discharged pursuant to statute, judicial decision or otherwise.”   9.                                       SECTION 8.2.1 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “8.2.1                  Officer’s Certificate.  The representations and warranties contained in Section 10 shall be true and correct on and as of such Closing Date with the same force and effect as though made on and as of such date (except as to any representation or warranty which refers to a specific earlier date); no Default shall exist on such Closing Date prior to or immediately after giving effect to the requested extension of credit; no event or circumstance which could be reasonably expected to have a Material Adverse Effect shall have occurred since December 31, 2004; and the Parent shall have furnished   11 --------------------------------------------------------------------------------   to the Agent, on the Closing Date, a certificate to these effects, in substantially the form of Exhibit 8.2.1 if a Revolving Credit Loan, a Swing Line Loan or a Letter of Credit is requested, in each case signed by a Financial Officer.”   10.                                 SECTION 9.3.5 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.3.5                  Notice of Litigation, Defaults, Etc.  The Borrowers will promptly furnish to the Lenders notice of any litigation or any administrative or arbitration proceeding (a) which creates a material risk of resulting, after giving effect to any applicable insurance, in the payment by any Obligor of more than $10,000,000, or (b) which has, or creates a material risk of having, a Material Adverse Effect.  Promptly upon acquiring knowledge thereof, the Borrowers will notify the Lenders of the existence of any Default or event which creates a material risk of a Material Adverse Effect, specifying the nature thereof and what action the Borrowers have taken, are taking or propose to take with respect thereto.”   11.                                 SECTION 9.3.6 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.3.6                  Amendments.  The Borrowers shall provide to the Agent an electronic copy of each amendment to any of the $53,000,000 Lease Documents, the $23,000,000 Lease Documents or the 2005 Lease Documents promptly after execution thereof.”   12.                                 SECTION 9.7.4 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.7.4                  Contingent Obligations with respect to (a) performance guarantees and surety bonds incurred in the ordinary course of business and of a type and amount consistent with past practices of the Borrowers and their Subsidiaries and (b) the sale of accounts receivable as permitted under Section 9.16.5;”   13.                                 SECTION 9.7.11 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.7.11            Indebtedness of the Borrowers in respect of the $53,000,000 Lease Transaction, the $23,000,000 Lease Transaction and the 2005 Lease Transaction;”   14.                                 SECTION 9.7 OF THE CREDIT AGREEMENT IS HEREBY MODIFIED BY DELETING THE WORD “AND” AT THE END OF SUBSECTION 9.7.13, BY REPLACING THE PERIOD AT THE END OF SUBSECTION 9.7.14 WITH “; AND” AND BY ADDING A NEW SUBSECTION 9.7.15 TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.7.15            Indebtedness and all commitments to incur Indebtedness incurred by foreign Borrowers or foreign Subsidiaries in currencies other than United States Dollars in an aggregate amount not to exceed the U.S. Dollar Equivalent of $50,000,000 at any one time (“Foreign Indebtedness”), so long as (a) no Event of Default has occurred and is continuing or will occur as a result of or immediately following the incurrence of such Foreign Indebtedness, (b) such Foreign Indebtedness is pari passu or junior in right of   12 --------------------------------------------------------------------------------   payment to the Indebtedness in respect of the Credit Obligations and the financial covenants related to such Foreign Indebtedness are no more restrictive than those set forth in Sections 9.4 through 9.6 and (c) prior to the closing of any transaction with respect to such Foreign Indebtedness, the Parent shall deliver to the Agent drafts of the documents related to such transaction substantially similar to the final documents evidencing such Foreign Indebtedness.  Such Foreign Indebtedness may be secured only by Liens on assets located outside of the United States and owned by the foreign Borrower or foreign Subsidiary incurring such Indebtedness and such Foreign Indebtedness may be guaranteed by any Borrower or Significant Subsidiary.  Within five (5) days after the execution of any documents evidencing such Foreign Indebtedness, the Parent will deliver a complete, fully executed copy of such documents to the Agent.”   15.                                 SECTION 9.8.3 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.8.3  Liens securing Indebtedness permitted by Sections 9.7.2, 9.7.9, 9.7.11 and 9.7.15; provided that Indebtedness permitted by Section 9.7.15 may be secured only by Liens on assets located outside of the United States and owned by the foreign Borrower or foreign Subsidiary incurring such Indebtedness;”   16.                                 SECTION 9.16.4 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.16.4  The $53,000,000 Lease Transaction, the $23,000,000 Lease Transaction and the 2005 Lease Transaction; and”   17.                                 SECTION 9.16.5 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.16.5  The sale of accounts receivable owed by the United States of America or any state, local or municipal government, or any department, agency or instrumentality thereof, to a Borrower or a Subsidiary which are generated by or related to services projects for governmental departments, agencies or instrumentalities, so long as (a)(I) such Borrower or Subsidiary does not incur any Contingent Obligations related to such sale or (II) if such Borrower or Subsidiary does incur Contingent Obligations related to such sale, such Contingent Obligations do not exceed $10,000,000 in the aggregate at any one time for all Borrowers and Subsidiaries and (b) the terms and conditions of such sale are reasonably acceptable to the Agent.”   13 --------------------------------------------------------------------------------   18.                                 SECTION 9.17.6 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.17.6  Permitted Acquisitions.”   19.                                 SECTION 9.19 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.19                     Limits on Capital Expenditures.  The Borrowers will not make, or permit any of their Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrowers and their Subsidiaries in any fiscal year to exceed one percent (1.00%) of the Borrowers’ consolidated annual revenues for the prior fiscal year, as determined in accordance with GAAP.”   20.                                 SECTION 9.21 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “9.21                     Prepayments, Etc. of Indebtedness.  No Borrower will prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness (including the $23,000,000 Lease Obligations, the $53,000,000 Lease Obligations and the 2005 Lease Obligations), (a) if such prepayment would, on a pro-forma basis, cause a Default or Event of Default hereunder; and (b) if such prepayment exceeds $3,000,000, without first providing the Agent with a written certification from a Financial Officer describing the amount and date of such proposed prepayment and stating that such prepayment will not, on a pro forma basis, cause a Default or Event of Default hereunder; provided, however, that the provisions of this Section 9.21 will not apply to (i) the prepayment of the Loans in accordance with the terms of this Agreement, or (ii) the prepayment of obligations under the Borrowers’ internal cash management system substantially similar to the system in effect on the date of this Agreement.”   21.                                 ARTICLE 9 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY ADDING A NEW SECTION 9.28 TO READ IN ITS ENTIRETY AS FOLLOWS:   “Section 9.28                          2005 Lease Transaction.  Prior to entering into the 2005 Lease Transaction, the Borrowers shall deliver to the Agent a detailed summary of the 2005 Lease Transaction, outlining the material terms thereof.  No Borrower shall enter into the 2005 Lease Transaction if an Event of Default has occurred and is continuing or will occur as a result of or immediately following the consummation of the 2005 Lease Transaction.  Within five (5) days after the execution of each material document related thereto (together with all renewals, extensions, amendments, modifications and supplements thereto, the “2005 Lease Documents”), the Borrowers will deliver to the Agent a complete, fully executed copy of the 2005 Lease Documents, together with a certificate from the Treasurer of the Parent certifying that (a) the Indebtedness in respect of the 2005 Lease Documents is pari passu or junior in right of payment to the Indebtedness in respect of the Credit Obligations (except that the 2005 Lease Obligations may be secured by a Lien on the real property and personal property in Douglas County,   14 --------------------------------------------------------------------------------   Colorado related to the 2005 Lease Transaction), (b) the financial covenants related to the 2005 Lease Documents are no more restrictive than those set forth in Sections 9.4 through 9.6 and (c) that the terms of the 2005 Lease Documents are substantially similar to those contained in the detailed summary delivered to the Agent prior to the closing of the 2005 Lease Transaction.”   22.                                 SECTION 10.9 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “10.9                     Environmental Regulations.   10.9.1                  Environmental Compliance.  Except as set forth on Schedule 10.9, each Borrower and its Subsidiaries is in compliance in all material respects with the Clean Air Act, the Federal Water Pollution Control Act, the Marine Protection Research and Sanctuaries Act, RCRA, CERCLA and any other Environmental Law in effect in any jurisdiction in which any properties of any Borrower or any of its Subsidiaries are located or where any of them conducts its business, and with all applicable published rules and regulations (and applicable standards and requirements) of the federal Environmental Protection Agency and of any similar agencies in states or foreign countries in which any Borrower or its Subsidiaries conducts its business other than those which in the aggregate have not resulted, and do not create a material risk of resulting, in a Material Adverse Effect.   10.9.2                  Environmental Litigation.  Except as set forth on Schedule 10.9, no suit, claim, action or proceeding of which any Borrower or any of its Subsidiaries has been given notice or otherwise has knowledge is now pending before any court, Governmental Authority or board or other forum, or to any Borrower’s or any of its Subsidiaries’ knowledge, threatened by any Person (nor to the knowledge of each Borrower and its Subsidiaries, does any factual basis exist therefor) for, and neither any Borrower nor any of its Subsidiaries have received written correspondence from any Governmental Authority with respect to, except to the extent any of the following would not have a Material Adverse Effect:   (a)                                  noncompliance by any Borrower or any of its Subsidiaries with any Environmental Law;   (b)                                 personal injury, wrongful death or other tortious conduct relating to materials, commodities or products used, generated, sold, transferred or manufactured by any Borrower or any of its Subsidiaries (including products made of, containing or incorporating asbestos, lead or other hazardous materials, commodities or toxic substances); or   (c)                                  the release into the environment by any Borrower or any of its Subsidiaries of any Hazardous Material generated by a Borrower or any of its Subsidiaries whether or not occurring at or on a site owned, leased or operated by any Borrower or any of its Subsidiaries.”   15 --------------------------------------------------------------------------------   23.                                 SECTION 11.1.1 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “11.1.1   Payment.  The Borrowers fail to make any payment in respect of:  (a) principal, interest or any fee on or in respect of any of the Credit Obligations as the same becomes due and payable, whether at maturity or by acceleration or otherwise, and such failure continues for a period of three Banking Days, or (b) any Credit Obligation with respect to payments made by any Issuing Bank under any Letter of Credit or any draft drawn thereunder within three Banking Days after demand therefor by the Agent.”   24.                                 SECTION 11.2.3 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “11.2.3  Acceleration.  The Agent on behalf of the Lenders may (and upon written request of the Required Lenders the Agent shall) by notice in writing to the Parent (a) declare all or any part of the unpaid balance of the Credit Obligations then outstanding to be immediately due and payable, and (b) require the Borrowers immediately and without demand to deposit with each applicable Issuing Bank in cash or cash equivalents an amount equal to 105% of the then Letter of Credit Exposure related to each Letter of Credit issued by such Issuing Bank, and thereupon such unpaid balance or part thereof and such cash or cash equivalents in an amount equal to the Letter of Credit Exposure shall become so due and payable without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived; provided, however, that if a Bankruptcy Default has occurred, the unpaid balance of the Credit Obligations shall automatically become immediately due and payable and the Borrowers shall be required immediately without demand to deposit with each applicable Issuing Bank in cash or cash equivalents an amount equal to 105% of the then Letter of Credit Exposure related to each Letter of Credit issued by such Issuing Bank.”   25.                                 SECTION 11.2.4 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “11.2.4  Enforcement of Payment; Credit Security; Setoff.  The Agent on behalf of the Lenders may (and upon written request of the Required Lenders the Agent shall) proceed to enforce payment of the Credit Obligations in such manner as it may elect and to realize upon any and all rights in any collateral securing the Credit Obligations.  Each Issuing Bank may (and upon written request of the Required Lenders each Issuing Bank shall) proceed to cancel any outstanding Letters of Credit issued by such Issuing Bank which permit the cancellation thereof.  The Lenders may offset and apply toward the payment of the Credit Obligations (or toward the curing of any Event of Default) any Indebtedness from the Lenders to the respective Obligors, including any Indebtedness represented by deposits in any account maintained with the Lenders, regardless of the adequacy of any security for the Credit Obligations.  The Lenders shall have no duty to determine the adequacy of any such security in connection with any such offset.”   16 --------------------------------------------------------------------------------   26.                                 THE SECOND PARAGRAPH OF SECTION 17 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS:   “Any term, covenant, agreement or condition of any Credit Document may be amended or waived if such amendment or waiver is in writing and is signed by the Required Lenders (or by the Agent with written consent of the Required Lenders), the Borrowers and any other party thereto; provided, however, that any amendment, waiver or consent which affects the rights or duties of the Agent, the Swing Line Lender or an Issuing Bank must be in writing and be signed also by the affected Agent, Swing Line Lender or Issuing Bank; and provided further, that any amendment, waiver or consent which effects any of the following changes must be in writing and signed by all Lenders (or by the Agent with the written consent of all Lenders):   (a)                                  increases the Maximum Amount of Credit available;   (b)                                 extends the Final Maturity Date;   (c)                                  reduces the principal of, or interest on, any Loan or any fees or other amounts payable for the account of the Lenders;   (d)                                 postpones or conditions any date fixed for any payment of the principal of, or interest on, any Loan or any fees or other amounts payable for the account of the Lenders;   (e)                                  waives or amends this Section 17;   (f)                                    amends the definition of Required Lenders or any provision of this Agreement requiring approval of the Required Lenders or some other specified amount of Lenders;   (g)                                 increases or decreases the Commitment or the Percentage Interest of any Lender (other than through an assignment under Section 14);   (h)                                 releases any Subsidiary Guarantee; or   (i)                                     waives any of the conditions set forth in Section 8.   Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given.”   27.                                 EXHIBIT 8.2.1 TO THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS SET FORTH IN EXHIBIT A TO THIS AMENDMENT.   28.                                 THE CREDIT AGREEMENT IS HEREBY AMENDED BY ADDING A NEW SCHEDULE 10.9 TO READ IN ITS ENTIRETY AS SET FORTH IN EXHIBIT B TO THIS AMENDMENT.   17 --------------------------------------------------------------------------------   29.                                 NO OTHER CHANGES.  EXCEPT AS EXPLICITLY AMENDED BY THIS AMENDMENT, ALL OF THE TERMS AND CONDITIONS OF THE CREDIT AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL APPLY TO ANY ADVANCE OR LETTER OF CREDIT THEREUNDER.   30.                                 CONDITIONS PRECEDENT.  THIS AMENDMENT SHALL BE EFFECTIVE WHEN THE AGENT SHALL HAVE RECEIVED AN EXECUTED ORIGINAL HEREOF, TOGETHER WITH THE ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS SET FORTH AT THE END OF THIS AMENDMENT, DULY EXECUTED BY EACH GUARANTOR, A CERTIFICATE OF AN OFFICER FROM EACH BORROWER CERTIFYING AS TO THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF EACH BORROWER APPROVING THE EXECUTION AND DELIVERY OF THIS AMENDMENT, INCLUDING WITHOUT LIMITATION THE EXTENSION OF THE MATURITY DATE AND SUCH OTHER MATTERS AS THE AGENT MAY REASONABLY REQUIRE, EACH IN SUBSTANCE AND FORM REASONABLY ACCEPTABLE TO THE AGENT IN ITS SOLE DISCRETION.   31.                                 REPRESENTATIONS AND WARRANTIES.  EACH BORROWER HEREBY REPRESENTS AND WARRANTS TO EACH LENDER AS FOLLOWS:   (A)          EACH BORROWER HAS ALL REQUISITE POWER AND AUTHORITY TO EXECUTE THIS AMENDMENT AND TO PERFORM ALL OF ITS OBLIGATIONS HEREUNDER, AND THIS AMENDMENT HAS BEEN DULY EXECUTED AND DELIVERED BY EACH BORROWER AND CONSTITUTES THE LEGAL, VALID AND BINDING OBLIGATION OF EACH BORROWER, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.   (B)         THE EXECUTION, DELIVERY AND PERFORMANCE BY EACH BORROWER OF THIS AMENDMENT HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION AND DO NOT (I) REQUIRE ANY AUTHORIZATION, CONSENT OR APPROVAL BY ANY GOVERNMENTAL DEPARTMENT, COMMISSION, BOARD, BUREAU, AGENCY OR INSTRUMENTALITY, DOMESTIC OR FOREIGN, (II) VIOLATE ANY PROVISION OF ANY LAW, RULE OR REGULATION OR OF ANY ORDER, WRIT, INJUNCTION OR DECREE PRESENTLY IN EFFECT, HAVING APPLICABILITY TO ANY BORROWER, OR THE ARTICLES OF INCORPORATION OR BYLAWS OF ANY BORROWER, OR (III) RESULT IN A BREACH OF OR CONSTITUTE A DEFAULT UNDER ANY INDENTURE OR LOAN OR CREDIT AGREEMENT OR ANY OTHER AGREEMENT, LEASE OR INSTRUMENT TO WHICH ANY BORROWER IS A PARTY OR BY WHICH IT OR ITS PROPERTIES MAY BE BOUND OR AFFECTED.   (C)          ALL OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 10 OF THE CREDIT AGREEMENT ARE CORRECT ON AND AS OF THE DATE HEREOF AS THOUGH MADE ON AND AS OF SUCH DATE, EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES RELATE SOLELY TO AN EARLIER DATE, AND NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED OR IS CONTINUING UNDER THE CREDIT AGREEMENT.   32.                                 REFERENCES.  ALL REFERENCES IN THE CREDIT AGREEMENT TO “THIS AGREEMENT” SHALL BE DEEMED TO REFER TO THE CREDIT AGREEMENT AS AMENDED HEREBY; ANY AND ALL REFERENCES IN ANY CREDIT AGREEMENT OR OTHER AGREEMENT OR DOCUMENT TO THE CREDIT AGREEMENT SHALL BE DEEMED TO REFER TO THE CREDIT AGREEMENT AS AMENDED HEREBY.   33.                                 NO WAIVER.  THE EXECUTION OF THIS AMENDMENT AND ACCEPTANCE OF ANY DOCUMENTS RELATED HERETO SHALL NOT BE DEEMED TO BE A WAIVER OF ANY DEFAULT OR EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT OR BREACH, DEFAULT OR EVENT OF DEFAULT UNDER ANY CREDIT DOCUMENT OR OTHER DOCUMENT HELD BY A LENDER, WHETHER OR NOT KNOWN TO ANY LENDER AND WHETHER OR NOT EXISTING ON THE DATE OF THIS AMENDMENT.   18 --------------------------------------------------------------------------------   34.                                 COSTS AND EXPENSES.  EACH BORROWER HEREBY REAFFIRMS ITS AGREEMENT UNDER THE CREDIT AGREEMENT TO PAY ALL REASONABLE EXPENSES OF THE AGENT (INCLUDING THE REASONABLE FEES OF AND DISBURSEMENTS TO THE COUNSEL TO THE AGENT) IN CONNECTION WITH THIS AMENDMENT.   35.                                 JOINT AND SEVERAL LIABILITY.  EACH BORROWER AGREES THAT IT IS LIABLE, JOINTLY AND SEVERALLY WITH EACH OTHER BORROWER, FOR ALL OBLIGATIONS OF THE BORROWERS UNDER THIS AMENDMENT, AND THAT THE LENDERS AND THE AGENT CAN ENFORCE SUCH OBLIGATIONS AGAINST ANY OR ALL BORROWERS, IN THE LENDERS’ OR THE AGENT’S SOLE AND UNLIMITED DISCRETION.   36.                                 MISCELLANEOUS.  THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH WHEN SO EXECUTED AND DELIVERED SHALL BE DEEMED AN ORIGINAL AND ALL OF WHICH COUNTERPARTS, TAKEN TOGETHER, SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  DELIVERY OF AN EXECUTED COUNTERPART OF THIS AMENDMENT BY TELEFACSIMILE SHALL BE EQUALLY AS EFFECTIVE AS DELIVERY OF AN ORIGINAL EXECUTED COUNTERPART OF THIS AMENDMENT.  ANY PARTY DELIVERING AN EXECUTED COUNTERPART OF THIS AMENDMENT BY TELEFACSIMILE ALSO SHALL DELIVER AN ORIGINAL EXECUTED COUNTERPART OF THIS AMENDMENT BUT THE FAILURE TO DELIVER AN ORIGINAL EXECUTED COUNTERPART SHALL NOT AFFECT THE VALIDITY, ENFORCEABILITY, AND BINDING EFFECT OF THIS AMENDMENT.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.  THE CAPTIONS OR HEADINGS IN THIS AMENDMENT ARE FOR CONVENIENCE ONLY AND IN NO WAY DEFINE, LIMIT OR DESCRIBE THE SCOPE OR INTENT OF ANY PROVISION OF THIS AMENDMENT.   [The remainder of this page intentionally left blank.]   19 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.   BORROWERS: CH2M HILL COMPANIES, LTD.           By:       Name:  Brian Shelton   Title:    Treasurer       CH2M HILL, INC.           By:       Name:   Brian Shelton   Title:     Treasurer       OPERATIONS MANAGEMENT INTERNATIONAL, INC.           By:       Name:  Brian Shelton   Title:    Treasurer       CH2M HILL INDUSTRIAL DESIGN & CONSTRUCTION, INC.           By:       Name:   Brian Shelton   Title:     Treasurer   S-1 --------------------------------------------------------------------------------     LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION           By:       Name:  Catherine M. Jones   Title:  Vice President       U.S. BANK NATIONAL ASSOCIATION           By:       Name:       Title:           BANK ONE N.A., n/k/a JP Morgan Chase Bank, N.A.           By:       Name:       Title:           THE BANK OF TOKYO-MITSUBISHI, LTD., Seattle Branch           By:       Name:       Title:           BANK OF AMERICA, N.A.           By:       Name:       Title:           THE NORTHERN TRUST COMPANY           By:       Name:  Peter R. Martinets   Title:  Vice President   S-2 --------------------------------------------------------------------------------   ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS   Each of the undersigned, each a guarantor of the indebtedness of CH2M HILL COMPANIES, LTD., an Oregon corporation, CH2M HILL, INC., a Florida corporation, OPERATIONS MANAGEMENT INTERNATIONAL, INC., a California corporation, and CH2M HILL INDUSTRIAL DESIGN & CONSTRUCTION, INC., an Oregon corporation (collectively, the “Borrowers”) to WELLS FARGO BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL ASSOCIATION, BANK ONE N.A., n/k/a JP Morgan Chase Bank, N.A., THE BANK OF TOKYO-MITSUBISHI, LTD., BANK OF AMERICA, N.A. and THE NORTHERN TRUST COMPANY (collectively, the “Lenders”) pursuant to a separate Subsidiary Guarantee dated as of February 9, 2004 with respect to LOCKWOOD GREENE, INC., and a separate Subsidiary Guarantee dated as of December 14, 2004 with respect to CH2M HILL CONSTRUCTORS, INC. (each, a “Guarantee”), hereby (i) acknowledges receipt of the foregoing Amendment and all earlier amendments to the Credit Agreement; (ii) consents to the terms and execution thereof; (iii) reaffirms its obligations to the Lenders pursuant to the terms of its Guarantee; and (iv) acknowledges that the Lenders may amend, restate, extend, renew or otherwise modify the Credit Agreement and any indebtedness or agreement of any Borrower, or enter into any agreement or extend additional or other credit accommodations, without notifying or obtaining the consent of the undersigned and without impairing the liability of the undersigned under its Guarantee for all of the Borrowers’ present and future indebtedness to the Lenders.       LOCKWOOD GREENE, INC.           By:       Name: Brian R. Shelton   Title: Vice President & Corporate Treasurer           CH2M HILL CONSTRUCTORS, INC.           By:       Name: Brian R. Shelton,   Title: Pursuant to a resolution of the Company’s     Board of Directors       S-3 --------------------------------------------------------------------------------   EXHIBIT A TO THIRD AMENDMENT TO UNSECURED REVOLVING CREDIT AGREEMENT   Exhibit 8.2.1 to Credit Agreement   Form of Notice of Revolving Credit Advance   Wells Fargo Bank, National Association MAC C7301-031 1740 Broadway Denver, CO 80274 Attn:  Catherine M. Jones   Reference is made to that certain $125,000,000 Senior Unsecured Revolving Credit Agreement dated as of July 28, 2003 (as amended, modified or supplemented from time to time, the “Credit Agreement”) among CH2M Hill Companies, Ltd. (“Parent”), CH2M Hill, Inc., Operations Management International, Inc., and CH2M Hill Industrial Design & Construction, Inc., the financial institutions from time to time parties thereto (collectively, the “Lenders”), and Wells Fargo Bank, National Association, as Agent.  Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement.   1.                                       Pursuant to the Credit Agreement, Parent hereby requests upon the following terms:   o                                    a Revolving Credit Loan   o                                    a Swing Line Loan   o                                    a Letter of Credit   (A)          THE AGGREGATE PRINCIPAL AMOUNT OF THE REQUESTED LOAN IS $                        (B)         THE AMOUNT OF THE REQUESTED LETTER OF CREDIT IS $                         OR                        [FILL IN AMOUNT AND CURRENCY, IF REQUEST IS NOT FOR UNITED STATES DOLLARS]   (C)          THE REQUESTED CLOSING DATE OF SUCH LOAN OR LETTER OF CREDIT IS                           (D)         IF THE REQUESTED LOAN IS A REVOLVING CREDIT LOAN, THE REQUESTED LOAN SHALL CONSIST OF:   o                                    Base Rate Loans.   o                                    Dollar LIBOR Loans; and the requested Interest Period is         months.   o                                    Multicurrency LIBOR Loans; and the requested Foreign Currency is          ; and   A-1 --------------------------------------------------------------------------------   o                                    the requested Interest Period is               months.   (E)          IF THE REQUEST IS FOR THE ISSUANCE OF A LETTER OF CREDIT, THE BENEFICIARY WILL BE                             AND THE PRINCIPAL TERMS OF THE TEXT ARE                                                                                                         (F)            IF THE REQUEST IS FOR THE ISSUANCE OF A LETTER OF CREDIT, THE ISSUING BANK IS                                                                                                                   (G)         THE APPLICABLE BORROWER SHALL BE                      2.                                       The Parent, on behalf of the Borrowers, hereby certifies to the Agent and the Lenders that, on the date of this Notice of Revolving Credit Advance and after giving effect to the requested disbursement or issuance (including the use of the proceeds thereof):   (A)          THE REPRESENTATIONS AND WARRANTIES OF THE BORROWERS IN THE CREDIT DOCUMENTS ARE TRUE AND CORRECT AS IF MADE ON THE DATE HEREOF, EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES LIMITED BY THEIR TERMS TO A SPECIFIC DATE, WHICH REPRESENTATIONS AND WARRANTIES WERE CORRECT ON AND AS OF SUCH DATE, AND   (B)         NO DEFAULT IS CONTINUING OR WOULD RESULT FROM THE MAKING OF THE REQUESTED LOAN OR ISSUANCE OF THE REQUESTED LETTER OF CREDIT, AND   (C)          NO EVENT OR CIRCUMSTANCE WHICH COULD BE REASONABLY EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT HAS OCCURRED SINCE DECEMBER 31, 2002.   The party signing below on behalf of Parent is authorized by Parent to act on its behalf as to the matters set forth in this Notice of Revolving Credit Advance.   Executed as of this        day of                 , 200    .     CH2M HILL COMPANIES, LTD.       By:       Name:       Title:       A-2 --------------------------------------------------------------------------------   EXHIBIT B TO THIRD AMENDMENT TO UNSECURED REVOLVING CREDIT AGREEMENT   Schedule 10.9 to Credit Agreement   Environmental Regulations   The office of the United States Attorney for the District of Connecticut has informed us that it is investigating possible Clean Water Act (“CWA”) misdemeanor violations at two wastewater treatment facilities in Connecticut operated by one of the Borrowers.  We have been informed that the investigation centers on the Borrower employees’ failures to comply with sampling and reporting requirements of CWA.  These alleged violations do not involve environmental contamination.  We are cooperating with the investigation and are in negotiations with the United States Attorney for the District of Connecticut to resolve the matter through a civil settlement, but no assurance can be given as to the eventual outcome of these negotiations.   B-1 --------------------------------------------------------------------------------  

EXHIBIT 10.1   SEPARATION AGREEMENT   THIS SEPARATION AGREEMENT (the “Agreement”) is made and entered into as of January 9, 2006, by and between Grant Guenther (“Employee”) and Orange 21 Inc., a Delaware corporation (the “Company”), with reference to the following facts:   1.                                       Employee is employed as Vice President of Marketing; and   2.                                       Employee’s employment with the Company will end as of February 15, 2006 (the “Separation Date”).   NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:   1.                                       CONSIDERATION.  IN CONSIDERATION OF THE COVENANTS AND PROMISES CONTAINED IN THIS AGREEMENT, AND AS FULL AND FINAL COMPENSATION TO EMPLOYEE FOR ALL SERVICES AS AN EMPLOYEE, EMPLOYEE SHALL BE ENTITLED TO CONTINUED EMPLOYMENT WITH THE COMPANY UNTIL THE SEPARATION DATE, UNLESS THE COMPANY DETERMINES THAT EMPLOYEE’S EMPLOYMENT MUST BE TERMINATED FOR CAUSE AT AN EARLIER TIME.  AS A RESULT, EMPLOYEE SHALL CONTINUE TO RECEIVE SALARY PAYMENTS AND BENEFITS ON THE REGULAR PAYDAYS OF THE COMPANY UNTIL THE SEPARATION DATE.  CAUSE IS DEFINED AS FOLLOWS: MATERIALLY BREACHING THIS AGREEMENT, REFUSING TO PERFORM DUTIES AS ASSIGNED, COMMITTING ANY ACT OF DISHONESTY, KNOWINGLY VIOLATING ANY APPLICABLE LAW OR REGULATION IN THE COURSE OF HIS DUTIES, VIOLATING A COMPANY POLICY WHICH VIOLATION HAS OR MAY HAVE A MATERIAL ADVERSE IMPACT ON THE COMPANY, FAILING TO PERFORM HIS DUTIES IN A TIMELY MANNER (RESULTING IN A SIGNIFICANT LOSS TO OR IMPAIRMENT OF THE COMPANY’S INTERESTS), BECOMING DISABLED SUCH THAT HE CANNOT PERFORM HIS ESSENTIAL DUTIES WITH OR WITHOUT REASONABLE ACCOMMODATION, OR DYING.  ADDITIONALLY, CAUSE, AS DEFINED ABOVE, IS DEEMED TO EXIST IF THE COMPANY MAKES A DETERMINATION THAT CAUSE EXISTS IN GOOD FAITH AFTER A REASONABLE INVESTIGATION.  ON OR ABOUT THE SEPARATION DATE, EMPLOYEE WILL RECEIVE A SECOND SEVERANCE AGREEMENT WHICH WILL ENTITLE HIM, SHOULD HE PROPERLY EXECUTE THE SECOND SEVERANCE AGREEMENT, TO FURTHER CONSIDERATION.  THE DETAILS OF THE SECOND SEVERANCE AGREEMENT ARE SET FORTH IN A LETTER ATTACHED HERETO AND INCORPORATED BY REFERENCE HEREIN.   2.                                       ACCRUED SALARY AND VACATION.  EMPLOYEE ACKNOWLEDGES AND UNDERSTANDS THAT AS OF THE SEPARATION DATE, THE COMPANY WILL HAVE PAID EMPLOYEE THE FOLLOWING AMOUNTS, SUBJECT TO STANDARD WITHHOLDINGS FOR TAX AND SOCIAL SECURITY PURPOSES:  (I) ALL ACCRUED SALARY AND BONUS THROUGH THE SEPARATION DATE; AND (II) ALL UNUSED AND ACCRUED VACATION PAY EMPLOYEE EARNED PRIOR TO THE SEPARATION DATE.  EMPLOYEE ACKNOWLEDGES AND AGREES THAT SUCH AMOUNTS WILL BE ALL THAT HE IS ENTITLED TO RECEIVE AS SALARY, BONUS, AND VACATION PAY.  ALL APPLICABLE TAXES AND REQUIRED WITHHOLDINGS SHALL BE DEDUCTED FROM THE SEPARATION PAYMENT.   --------------------------------------------------------------------------------   3.                                       STOCK OPTIONS.   Employee acknowledges that the vested 24,062 stock options he currently holds to purchase shares of the Company’s common stock will lapse ninety (90) days after the Separation Date.   4.                                       NON-SOLICITATION OF EMPLOYEES.   Employee agrees that for the term of his employment with the Company and for one year and six months after the Separation Date, Employee, will not encourage or solicit any employee or consultant of the Company to leave the Company for any reason or to devote less than all of any such employee’s or consultant’s efforts to the affairs of the Company.  The restriction set forth in this section is considered by the parties to be reasonable for the purposes of protecting the business of the Company.  However, if any such restriction is found by any court of competent jurisdiction to be unenforceable because its duration, range of activities or geographic area is too extensive, this section shall be interpreted to extend for the maximum period of time, range of activities or geographic area enforceable by law.   5.                                       NON-DISPARAGEMENT.  THE PARTIES AGREE THAT THEY SHALL NOT, DIRECTLY OR INDIRECTLY, BY ANY MANNER OR MEANS, IN PUBLIC OR IN PRIVATE, DISPARAGE, DEMEAN, INSULT, OR DEFAME EACH OTHER, OR ANY OF THE OFFICERS, EMPLOYEES, AGENTS OR ANY OTHER PERSON ASSOCIATED WITH EITHER PARTY AT ANY TIME.  THIS PROVISION, HOWEVER, DOES NOT PROHIBIT ANY PARTY, IF REQUIRED UNDER OATH, TO PROVIDE TRUTHFUL AND ACCURATE TESTIMONY.   6.                                       COMPANY PROPERTY; REIMBURSEMENT FOR BUSINESS EXPENSES.  EMPLOYEE SHALL, AS OF THE SEPARATION DATE, RETURN TO THE COMPANY ALL COMPANY PROPERTY WHICH HE HAD IN HIS POSSESSION AT ANY TIME, INCLUDING, BUT NOT LIMITED TO: COMPUTER RECORDED INFORMATION, TANGIBLE PROPERTY, CREDIT CARDS, ENTRY CARDS, IDENTIFICATION BADGES AND KEYS.  ADDITIONALLY, EMPLOYEE SHALL, AS OF THE SEPARATION DATE, SUBMIT ALL VOUCHERS FOR REASONABLE BUSINESS EXPENSES INCURRED BY EMPLOYEE IN THE COURSE OF HIS EMPLOYMENT.  SUCH EXPENSES SHALL BE REIMBURSED IN ACCORDANCE WITH THE COMPANY’S POLICIES THEREFOR.  SUBSEQUENT TO THE SEPARATION DATE, EMPLOYEE SHALL NO LONGER BE AUTHORIZED TO INCUR ANY EXPENSE ON BEHALF OF THE COMPANY.   7.                                       RELEASE OF CLAIMS.  IN CONSIDERATION OF THE ABOVE DESCRIBED PAYMENTS, EMPLOYEE AND THE COMPANY DO HEREBY UNCONDITIONALLY, IRREVOCABLY AND ABSOLUTELY RELEASE AND DISCHARGE EACH OTHER, AND ALL RELATED HOLDING, PARENT OR SUBSIDIARY ENTITIES, AND THEIR AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS, STOCKHOLDERS, INSURERS, SUCCESSORS AND/OR ASSIGNS, FROM ANY AND ALL LIABILITY, CLAIMS, DEMANDS, CAUSES OF ACTION, OR SUITS OF ANY TYPE, WHETHER IN LAW AND/OR IN EQUITY, KNOWN OR UNKNOWN, RELATED DIRECTLY OR INDIRECTLY OR IN ANY WAY CONNECTED WITH ANY TRANSACTION, AFFAIRS OR OCCURRENCES BETWEEN THEM TO DATE, INCLUDING, BUT NOT LIMITED TO, EMPLOYEE’S EMPLOYMENT WITH THE COMPANY AND THE SEPARATION OF SAID EMPLOYMENT. THIS RELEASE SHALL INCLUDE BUT NOT BE LIMITED TO A RELEASE OF CLAIMS ARISING UNDER ANY STATE OR FEDERAL STATUTE OR COMMON LAW REGULATING OR AFFECTING EMPLOYMENT, INCLUDING TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AGE DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH   2 --------------------------------------------------------------------------------   DISABILITIES ACT, THE EQUAL PAY ACT, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA LABOR CODE, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND ANY OTHER STATUTORY OR COMMON LAW PROVISION RELATING TO OR AFFECTING EMPLOYEE’S EMPLOYMENT BY THE COMPANY, INCLUDING ANY FEDERAL OR STATE STATUTORY PROVISION COVERING ANY AGE DISCRIMINATION IN ANY FORM BY THE COMPANY AGAINST EMPLOYEE, EXCEPT ANY CLAIM FOR WORKER’S COMPENSATION OR UNEMPLOYMENT INSURANCE.   8.                                       SECTION 1542 WAIVER.  EMPLOYEE AND THE COMPANY ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA (“SECTION 1542”) WHICH READS AS FOLLOWS:   A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.   Employee and the Company hereby expressly waive and relinquish all rights and benefits under Section 1542 and any law or legal principle of similar effect in any jurisdiction with respect to the release granted in this Agreement, including, but not limited to, any jurisdiction in the United States.  The parties acknowledge that they have separately bargained for the waiver of Section 1542.   9.                                       DISPUTE RESOLUTION.  EXCEPT AS PROHIBITED BY LAW, ANY DISPUTES ARISING FROM THE INTERPRETATION, BREACH, OR ENFORCEMENT OF THIS AGREEMENT, WHICH CANNOT FIRST BE RESOLVED BY NEGOTIATION BETWEEN THE PARTIES, SHALL BE RESOLVED THROUGH FINAL AND BINDING ARBITRATION IN SAN DIEGO, CALIFORNIA, OR WITHIN THE COUNTY WHERE THE EMPLOYEE IS OR WAS LAST EMPLOYED BY THE COMPANY.  THE LAW APPLICABLE TO ANY CONTROVERSY TO BE ARBITRATED SHALL BE THE LAW OF THE STATE WHERE THE EMPLOYEE IS OR WAS EMPLOYED, OR APPLICABLE FEDERAL LAW, EXCEPT THAT THE FEDERAL ARBITRATION ACT SHALL APPLY TO THE ISSUE OF ARBITRABILITY.  THE ARBITRATION SHALL BE CONDUCTED BY A SINGLE NEUTRAL ARBITRATOR SELECTED BY THE PARTIES FROM A LIST MAINTAINED AND PROVIDED BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) OR JUDICIAL ARBITRATION AND MEDIATION SERVICES (“JAMS”).  THE ARBITRATOR SHALL HAVE NO POWER TO AWARD COSTS AND ATTORNEYS’ FEES EXCEPT AS PROVIDED BY STATUTE OR BY SEPARATE WRITTEN AGREEMENT BETWEEN THE PARTIES.  THIS ARBITRATION PROVISION SHALL SUPERSEDE ANY AND ALL PRIOR AGREEMENTS BETWEEN THE COMPANY AND EMPLOYEE ON THE SUBJECT OF ARBITRATION OF EMPLOYMENT-RELATED CLAIMS.   10.                                 COSTS AND FEES.  OTHER THAN AS SET FORTH SPECIFICALLY HEREIN, THE PARTIES WILL BEAR THEIR OWN COSTS, EXPENSES, AND ATTORNEYS’ FEES INCURRED IN OR ARISING OUT OF OR IN ANY WAY RELATED TO THE MATTERS RELEASED HEREIN.   11.                                 ENTIRE AGREEMENT.  EXCEPT FOR ANY TERM OR CONDITION OF AN EMPLOYMENT AGREEMENT BETWEEN THE PARTIES WHICH SURVIVES THE EXPIRATION OR TERMINATION OF SUCH AGREEMENT, AND IS NOT INCONSISTENT WITH THIS AGREEMENT, THIS AGREEMENT, INCLUDING ALL ATTACHMENTS HERETO, CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND CONSTITUTES THE COMPLETE, FINAL, AND EXCLUSIVE EMBODIMENT OF THEIR AGREEMENT WITH RESPECT TO THE SUBJECT MATTER HEREOF.  THIS AGREEMENT IS EXECUTED WITHOUT RELIANCE UPON ANY PROMISE,   3 --------------------------------------------------------------------------------   WARRANTY OR REPRESENTATION, WRITTEN OR ORAL, BY ANY PARTY OR ANY REPRESENTATIVE OF ANY PARTY OTHER THAN THOSE EXPRESSLY CONTAINED HEREIN, AND IT SUPERSEDES ANY OTHER SUCH PROMISES, WARRANTIES OR REPRESENTATIONS.  EACH PARTY HAS HAD SUFFICIENT TIME TO READ, AND HAS CAREFULLY READ THIS AGREEMENT, HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY REGARDING ITS MEANING AND CONSEQUENCES, CONSENTS TO ALL OF ITS TERMS VOLUNTARILY AFTER TAKING SUFFICIENT TIME TO THINK ABOUT THE ADVANTAGES AND DISADVANTAGES OF SIGNING THIS AGREEMENT, AND SIGNED THE SAME OF HIS OR ITS OWN FREE WILL.  THIS AGREEMENT MAY NOT BE AMENDED OR MODIFIED EXCEPT IN A WRITING SIGNED BY BOTH EMPLOYEE AND THE CHIEF EXECUTIVE OFFICER OF THE COMPANY.  NOTHING IN THIS AGREEMENT IS INTENDED TO RELIEVE THE PARTIES OF THEIR OBLIGATIONS UNDER THE EMPLOYEE’S INDEMNITY AGREEMENT OR ANY CONFIDENTIAL OR PROPRIETARY INFORMATION AGREEMENTS WITH THE COMPANY.   12.                                 APPLICABLE LAW.  THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN ENTERED INTO AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT THAT AS PROVIDED IN SECTION 9, THE LAW APPLICABLE TO ANY CONTROVERSY TO BE ARBITRATED SHALL BE THE LAW OF THE STATE WHERE THE EMPLOYEE IS OR WAS EMPLOYED, OR APPLICABLE FEDERAL LAW, EXCEPT THAT THE FEDERAL ARBITRATION ACT SHALL APPLY TO THE ISSUE OF ARBITRABILITY.   13.                                 SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BIND THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, ASSIGNS, EXECUTORS, AND ADMINISTRATORS OF EACH PARTY, AND INURE TO THE BENEFIT OF EACH PARTY, AND HIS OR ITS HEIRS, SUCCESSORS AND ASSIGNS.   14.                                 NO ADMISSION.  IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THIS AGREEMENT REPRESENTS A COMPROMISE SETTLEMENT OF VARIOUS MATTERS, AND SHALL NOT BE CONSTRUED TO BE AN ADMISSION OF ANY LIABILITY OR OBLIGATION BY EITHER PARTY TO THE OTHER PARTY OR TO ANY OTHER PERSON.   15.                                 SECTION HEADINGS.  THE SECTION AND PARAGRAPH HEADINGS CONTAINED IN THIS AGREEMENT ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR INTERPRETATION OF THIS AGREEMENT.   16.                                 SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS DETERMINED TO BE INVALID OR UNENFORCEABLE, IN WHOLE OR IN PART, THIS DETERMINATION WILL NOT AFFECT ANY OTHER PROVISION OF THIS AGREEMENT.   17.                                 COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN TWO COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.   18.                                 DRAFTING.                                                 NONE OF THE PARTIES HERETO SHALL BE CONSIDERED TO BE THE DRAFTER OF THIS AGREEMENT OR ANY PROVISION HEREOF FOR THE PURPOSE OF ANY STATUTE, CASE LAW OR RULE OF INTERPRETATION OR CONSTRUCTION THAT MIGHT CAUSE ANY PROVISION TO BE CONSTRUED AGAINST THE DRAFTER HEREOF.   19.                                 NOTICES.  ALL NOTICES, REQUESTS, CONSENTS AND OTHER COMMUNICATIONS REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING AND SHALL BE HAND DELIVERED OR MAILED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE   4 --------------------------------------------------------------------------------   COMPANY AT 2070 LAS PALMAS DRIVE, CARLSBAD, CALIFORNIA, 92009 ATTENTION: CHIEF EXECUTIVE OFFICER, AND TO EMPLOYEE AT THE ADDRESS SET FORTH BELOW HIS SIGNATURE.   20.                                 CONFIDENTIALITY.  THE PARTIES HERETO AGREE NOT TO DIVULGE OR PUBLICIZE THE EXISTENCE OF THIS AGREEMENT OR THE TERMS HEREOF EXCEPT TO THEIR ACCOUNTANTS, LAWYERS, AND IF NECESSARY, THEIR LICENSED HEALTH CARE PROFESSIONALS AND AS MAY BE NECESSARY TO ENFORCE THIS AGREEMENT OR AS MAY BE REQUIRED BY LAW.   21.                                 COUNSEL.  EMPLOYEE ACKNOWLEDGES THAT HE FULLY UNDERSTANDS HIS RIGHT TO DISCUSS THIS AGREEMENT WITH INDEPENDENT COUNSEL OF HIS CHOICE, THAT HE IS ENCOURAGED TO DO SO, THAT HE HAS CAREFULLY READ AND FULLY UNDERSTANDS THIS ENTIRE AGREEMENT AND THAT HE IS VOLUNTARILY ENTERING INTO THIS AGREEMENT.   IN WITNESS WHEREOF, the parties have duly authorized and caused this Agreement to be executed as follows:   EMPLOYEE:   THE COMPANY:               ORANGE 21 INC.                   /s/ Grant Guenther   By: /s/ Barry Buchholtz   Grant Guenther   Barry Buchholtz       Chief Executive Officer   2070 Las Palmas Drive       Carlsbad, CA 92009       Address               Date of Execution: January 9, 2006   Date of Execution: January 9, 2006     5 --------------------------------------------------------------------------------   [g17751kki001.jpg]   Orange 21 Inc. 2070 Las Palmas Drive Carlsbad, CA  92009 PH:  (760) 804-8420 FX:  (760) 804-8442 NASDAQ:  [ORNG] www.orangetwentyone.com   January 9, 2006     Mr. Grant Guenther 2070 Las Palmas Carlsbad, CA  92009   Re:                               Separation Agreement   Dear Mr. Guenther:   Included with this letter is a Separation Agreement (“Agreement”).  If you choose to sign the Agreement, your employment with Orange 21 Inc. (“O21”) will continue until February 15, 2006, unless O21 determines that your employment should be terminated for cause at an earlier time (the definition of cause is set forth in the Agreement).   Shortly before the date of your separation from O21, in February 2006, O21 will provide you with a subsequent release.  The subsequent release will cover the time-period from the date you sign the Agreement mentioned above, until the date of your separation from O21.  If you choose to sign this subsequent release, you will receive three months of severance pay amounting to $37,803.00 and will be provided a three-month consulting agreement for your signature.  If you and O21 sign the consulting agreement, your monthly pay under the three-month consulting agreement will be $13,601.00.  If O21 elects not to sign the consulting agreement, you will be paid six months of severance pay in the amount of $78,606.00 in lieu of the severance payment of $37,803 described above (note: for the avoidance of doubt, in no event shall the severance payment and the payments under the consulting agreement exceed $78,606.00 unless expressly agreed to by O21).  To receive the severance pay and the consulting agreement you must sign the release provided to you by O21.   Please sign below to indicate your acceptance of the substance of this letter.   Very truly yours,   /s/ Barry Buchholtz     Barry Buchholtz                 ACCEPTED:           Dated:  1/9/2006   /s/ Grant Guenther       Grant Guenther   --------------------------------------------------------------------------------

Exhibit 10.1 ASSIGNMENT AND ASSUMPTION AND AMENDMENT AND NOTE MODIFICATION AGREEMENT THIS AGREEMENT is made as of the 17th day of July, 2006, by and among KVH Industries, Inc., a Delaware limited liability company with its principal place of business located at 50 Enterprise Center, Middletown, Rhode Island (the “Borrower”), Banc of America Leasing & Capital, LLC (successor-by-merger to Fleet Capital Corporation) with a place of business located at One Federal Street, Boston, Massachusetts (the “Assignor”), and Bank of America, N.A. (successor-by-merger to Fleet National Bank), a national banking association with a place of business located at 111 Westminster Street, Providence, Rhode Island (the “Assignee”). PURPOSE: On July 17, 2003, the Borrower, the Assignor and Fleet National Bank (predecessor-in-interest to the Assignee, as issuing lender and cash management bank) entered into, among other things, that certain Amended and Restated Credit and Security Agreement (the “Credit Agreement”) providing for a $15,000,000 line of credit (the “Line”) to the Borrower. As further evidence of the Line, the Borrower executed and delivered to the Assignor that certain Revolving Credit Note dated July 17, 2003, in the amount of $15,000,000 (the “Note”). The Assignor desires to assign all of its rights in and to the Credit Agreement and the Note, together with any and all other documents executed and/or prepared in connection therewith (collectively, the “Financing Documents”), to the Assignee; and the Assignee and the Borrower are desirous of amending some of the terms and conditions contained in the Financing Documents, including without limitation, the maturity date of the Line. NOW, THEREFORE, in consideration of the terms and conditions herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows (capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement):     I. Assignment and Assumption. 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE to the Assignor, all of Assignor’s interest in and to all of the Assignor’s rights and obligations under the Credit Agreement as of the Effective Date (as defined below), including without limitation, the Loans owing to the Assignor on the Effective Date and the Note evidencing the outstanding Loans held by the Assignor. -------------------------------------------------------------------------------- 2. The Assignor (i) represents and warrants that, as of the date hereof, its commitment under the Credit Agreement is Fifteen Million Dollars ($15,000,000), and the unpaid principal amount of its commitment under the Credit Agreement owing to the Assignor is $0; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any of the Loan Documents or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any of the Loan Documents or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements (if any) referred to in Section 7.1 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; and (ii) agrees that it will, independently and without reliance upon the Assignor, 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 the Credit Agreement. 4. The effective date of this Agreement shall be the date hereof (the “Effective Date”). 5. As of the Effective Date: (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Agreement, have the rights and obligations of the “Lender” thereunder and under the Loan Documents (and references to “Lender” therein and in the Note shall hereinafter mean the Assignee) and (ii) the Assignor shall, to the extent provided in this Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. Additionally, the Assignee, as successor-by-merger to Fleet National Bank, shall continue to have the rights and obligations set forth in the Credit Agreement as the “Issuing Lender” and “Cash Management Bank”. 6. From and after the Effective Date, the Borrower shall make all payments under the Credit Agreement and the Note in respect of the interest assigned hereby to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Note for periods prior to the Effective Date directly between themselves.   2 --------------------------------------------------------------------------------   II. Amendment and Note Modification. 1. Notwithstanding anything to the contrary contained in the Financing Documents, the Applicable Margin on Revolving Loans accruing interest based upon the Eurodollar Rate shall be one and one-half percent (1.5%). 2. The term “Borrowing Base” set forth in Section 1.1 of the Credit Agreement is hereby amended in its entirety to read as follows: “‘Borrowing Base’ shall mean Fifteen Million Dollars ($15,000,000).” 3. As the Revolving Loans will no longer be subject to a borrowing base, terms such as “Borrowing Base Certificate”, “Eligible Accounts”, “Eligible Inventory”, “Eligible Finished Goods Inventory”, and “Eligible Raw Materials Inventory” shall no longer have any meaning, force or effect, and provisions using such terms shall be construed accordingly as the context may require. The requirement for the presentation of a Borrowing Base Certificate, provided for in Section 7.1(e) of the Credit Agreement, is hereby deleted. 4. The reference to “$1,000,000” appearing in the definition of “LC Sublimit” set forth in Section 1.1 of the Credit Agreement is hereby amended to read “$5,000,000”. 5. The terms “Excess Availability”, “Merchant Service Line of Credit Reserve”, and “Permanent Availability Reserve” shall no longer have any meaning, force or effect, and provisions using such terms shall be construed accordingly as the context may require. 6. The reference to “Fleet National Bank” appearing in the definition of “Prime Rate” set forth in Section 1.1 of the Credit Agreement is hereby amended to read “Bank of America, N.A.”. 7. Notwithstanding anything to the contrary contained in the Financing Documents, the Assignee shall no longer charge an Unused Fee. Therefore, the third sentence of the term “Revolving Credit Commitment” set forth in Section 1.1 of the Credit Agreement is hereby deleted. In place of the Unused Fee, originally provided for in Section 2.7(a) of the Credit Agreement, the Borrower shall pay quarterly to the Assignee a commitment fee of $2,000, commencing October 1, 2006. 8. The reference to “July 17, 2006” appearing: (a) in the definition of “Revolving Credit Maturity Date” set forth in Section 1.1 of the Credit Agreement, and (b) as the maturity date in the Note, is hereby amended to read “December 31, 2006”.   3 -------------------------------------------------------------------------------- 9. Article 7 of the Credit Agreement is hereby amended by adding thereto the following Sections: “7.16 Fixed Charge Coverage Ratio. If at any time the Credit Parties have cash and/or cash equivalents of less than $25,000,000, the Credit Parties shall maintain a ratio of (a) the difference obtained by subtracting from EBITDA all cash capital expenditures, taxes and distributions, to (b) the sum of interest plus any scheduled principal payments, of not less than 1.5:1.0, tested quarterly on a rolling 12-month basis. 7.17 Maximum Leverage Ratio. If at any time the Credit Parties have cash and/or cash equivalents of less than $25,000,000, the Credit Parties shall maintain a ratio of total liabilities to tangible net worth of not more than 1.0:1.0, tested quarterly at the end of each fiscal period. 10. Except as modified hereby, the Borrower hereby affirms and restates all of the covenants and agreements made and set forth in the Financing Documents and any and all other documents executed in connection therewith. As to representations and warranties, the Assignee will rely upon the provisions of Section 6.2(a) of the Credit Agreement at such time as there is a Borrowing (as defined in the Credit Agreement) or the date of issuance, amendment, renewal or extension of a Letter of Credit (as defined in the Credit Agreement). 11. All references to the Credit Agreement appearing in the Note and any and all other documents executed in connection therewith, as the Credit Agreement may be otherwise defined or referred to therein, shall be deemed to mean the Credit Agreement as amended hereby. 12. All references to the Note appearing in the Credit Agreement and any and all other documents executed in connection therewith, as the Note may be otherwise defined or referred to therein, shall be deemed to mean the Note as amended hereby. 13. Any provision of this Agreement which is prohibited or unenforceable under any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 14. This Agreement is intended by the parties hereto as a final expression of this Agreement and is also intended as a complete and exclusive statement of the terms hereof. No course of dealing, course of performance or trade usage, and no parol or evidence of any nature shall be used to supplement or modify any terms hereof. 15. This Agreement has been negotiated, executed, and delivered in, and shall be deemed to have been made in the State of Rhode Island, and the validity of this   4 -------------------------------------------------------------------------------- Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder shall be determined under, governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Rhode Island. 16. An original of this Agreement shall be attached to and made a part of the Note and shall constitute an allonge thereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written.       WITNESS:     KVH Industries, Inc.          By:                    Bank of America, N.A.          By:                    Banc of America Leasing & Capital, LLC          By:                5

Exhibit 10.1 NOTICE OF BREACH AND TERMINATION We make reference to the Clinical Development and License Agreement dated as of July 14, 2005 among BioDelivery Sciences International, Inc, (“BDSI”), Clinical Development Capital LLC (together with its successors and assigns, “CDC”), and Arius Pharmaceuticals, Inc. (such agreement, as amended, the “CDLA”). CDC hereby gives notice to BDSI that (i) BDSI is in material breach of the CDLA and (ii) CDC is terminating the CDLA pursuant to Section 10.2 of the CDLA. BDSI’s breaches are not curable, such that the termination of the CDLA is effective immediately. If one or more of these breaches are subject to cure, then this Notice of Breach and Termination (“Notice”) also serves as a notice for purposes of starting any applicable cure period under the CDLA. The natures of BDSI’s defaults are as follows:     1. On August 15 2006, BDSI submitted to the United States Food and Drug Administration (“FDA”), without CDC’s approval, an amended agenda that changed the protocols and end-point of the clinical trials in violation of, inter alia, Sections 2.1 and 2.3 of the CDLA.     2. On July 26, 2006, BDSI was notified by the Research Advisory Panel of California that BDSI had failed to comply with applicable laws and protocols in obtaining informed patient consents, which failures are in violation of, inter alia, Sections 4.1 and 4.5 of the CDLA.     3. BDSI failed until August 22, 2006 to notify CDC of the failures to comply identified in item 2 above, in violation of, inter alia, Section 4.5 of the CDLA. CDC hereby demands that BDSI immediately comply with its obligations under Section 10.5 of the CDLA, including its obligations to transfer the specified assets and rights to CDC. CDC reserves all its rights and remedies against BDSI and its officers and directors, including with respect to breaches not enumerated.   CDC IV, LLC, As successor and assign of Clinical Development Capital LLC By:   /s/ David R. Ramsay Name:   David R. Ramsay Title:   Authorized Signatory

GOLDMAN SACHS & CO. | 85 BROAD STREET | NEW YORK, NEW YORK 10004 | TEL: 212-902-1000 To: PG&E Corporation One Market Street Spear Tower Suite 2400 San Francisco, CA 94105 From: Goldman, Sachs & Co. Subject: Accelerated Share Repurchase Transaction - VWAP Pricing (Non-Collared) Ref. No: As provided in the Supplemental Confirmation Date: November 16, 2005   This master confirmation ("Master Confirmation") dated as of November 16, 2005 is intended to supplement the terms and provisions of certain Transactions (each, a "Transaction") entered into from time to time between Goldman, Sachs & Co. ("GS&Co.") and PG&E Corporation ("Counterparty"). This Master Confirmation, taken alone, is neither a commitment by either party to enter into any Transaction nor evidence of a Transaction. The terms of any particular Transaction shall be set forth in a Supplemental Confirmation in the form of Annex A, which references this Master Confirmation, in which event the terms and provisions of this Master Confirmation shall be deemed to be incorporated into and made a part of each such Supplemental Confirmation. This Master Confirmation and each Supplemental Confirmation together shall constitute a "Confirmation" as referred to in the Agreement specified below. The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the "Equity Definitions"), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation. This Master Confirmation and each Supplemental Confirmation evidences a complete binding agreement between Counterparty and GS&Co. as to the terms of each Transaction to which this Master Confirmation and the related Supplemental Confirmation relates. This Master Confirmation and each Supplemental Confirmation, together with all other documents referring to the 1992 ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form" or the "Agreement), confirming Transactions entered into between GS&Co. and Counterparty, shall supplement, form a part of, and be subject to the ISDA Form as if GS&Co. and Counterparty had executed the Agreement (but without any Schedule) except that the following elections and modifications shall be made: (i) the election of Loss and Second Method, New York law (without regard to conflicts of law principles) as the governing law and US Dollars ("USD") as the Termination Currency, (ii) the election that subparagraph (ii) of Section 2(c) will not apply to Transactions, (iii) the replacement of the word "third" in the last line of Section 5(a)(i) with the word "first", (iv) the election that the "Cross Default" provisions of Section 5(a)(vi) shall apply to Counterparty, with a "Threshold Amount" of USD 100 million, and (v) the replacement of clause (1) in Section 6(d)(i) with the clause "(1) showing in reasonable detail such calculations and specifying any amount payable under Section 6(e) (including, without limitation, providing all relevant quotations and assumptions and specifying the methodologies used in sufficient detail so as to enable the other party to replicate the calculation)". Further, for purposes of determining whether an Event of Default pursuant to Section 5(a)(vi) of the Agreement has occurred, notwithstanding anything to the contrary stated in that provision, clause (1) of Section 5(a)(vi) will apply only to Specified Indebtedness that is actually declared to be due and payable before it would otherwise be due and payable under the relevant agreement or instrument, and not to Specified Indebtedness that is merely "capable at such time of being declared" so due and payable.   All provisions contained in the Agreement shall govern this Master Confirmation and the related Supplemental Confirmation relating to a Transaction except as expressly modified herein or in the related Supplemental Confirmation. With respect to any relevant Transaction, the Agreement, this Master Confirmation and the related Supplemental Confirmation shall represent the entire agreement and understanding of the parties with respect to the subject matter and terms of such Transaction and shall supersede all prior or contemporaneous written or oral communications with respect thereto. If, in relation to any Transaction to which this Master Confirmation and related Supplemental Confirmation relate, there is any inconsistency between the Agreement, this Master Confirmation, any Supplemental Confirmation and the Equity Definitions that are incorporated into this Master Confirmation or any Supplemental Confirmation, the following will prevail for purposes of such Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Agreement; and (iv) the Equity Definitions. Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and conditions which, together with the terms and conditions set forth in each Supplemental Confirmation (in respect of each relevant Transaction), shall govern each such Transaction. General Terms: Trade Date: For each Transaction, as set forth in the Supplemental Confirmation. Seller: Counterparty Buyer: GS&Co. Shares: Common Stock of Counterparty (Ticker: PCG) Number of Shares: For each Transaction, as set forth in the Supplemental Confirmation. Forward Price: For each Transaction, as set forth in the Supplemental Confirmation. Prepayment: Not Applicable Variable Obligation: Not Applicable Exchange: New York Stock Exchange Related Exchange(s): All Exchanges Market Disruption Event: The definition of "Market Disruption Event" in Section 6.3(a) of the Equity Definitions is hereby amended by inserting the words "at any time on any Scheduled Trading Day during the Valuation Period or" after the word "material," in the third line thereof.   Valuation: Valuation Period: Each Scheduled Trading Day during the period commencing on and including the Valuation Period Start Date to and including the Valuation Date (but excluding any day(s) on which the Valuation Period is suspended in accordance with Section 5 herein and including any day(s) by which the Valuation Period is extended pursuant to the provision below). Notwithstanding anything to the contrary in the Equity Definitions, to the extent that any Scheduled Trading Day in the Valuation Period is a Disrupted Day, the Valuation Date shall be postponed and the Calculation Agent in its sole discretion shall extend the Valuation Period and make adjustments to the weighting of each Relevant Price for purposes of determining the Settlement Price, with such adjustments based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares. To the extent that there are 9 consecutive Disrupted Days during the Valuation Period, then notwithstanding the occurrence of a Disrupted Day, the Calculation Agent shall have the option in its sole discretion to either determine the Relevant Price using its good faith estimate of the value for the Share on such 9th consecutive Disrupted Day or elect to further extend the Valuation Period as it deems necessary or appropriate. Valuation Period Start Date: For each Transaction, as set forth in the Supplemental Confirmation. Valuation Date: For each Transaction, as set forth in the Supplemental Confirmation (as the same may be postponed in accordance with the provisions of "Valuation Period" and Section 5 herein). Settlement Terms: Settlement Currency: USD (all amounts shall be converted to the Settlement Currency in good faith and in a commercially reasonable manner by the Calculation Agent). Settlement Method Election: Applicable; provided that Section 7.1 of the Equity Definitions is hereby amended by deleting the word "Physical" in the sixth line thereof and replacing it with the words "Net Share" and deleting the word "Physical" in the last line thereof and replacing it with the word "Cash". Electing Party: Counterparty Settlement Method Election Date: 10 Scheduled Trading Days prior to the originally scheduled Valuation Date. Default Settlement Method: Cash Settlement Forward Cash Settlement Amount: An amount in the Settlement Currency equal to the product of (a) the Number of Shares multiplied by (b) an amount equal to (i) the Settlement Price minus (ii) the Forward Price.     Settlement Price: The arithmetic mean of the Relevant Prices of the Shares for each Exchange Business Day in the Valuation Period. Relevant Price: The New York 10b-18 Volume Weighted Average Price per share of the Shares for the regular trading session (including any extensions thereof) of the Exchange on the related Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session) as published by Bloomberg at 4:15 p.m. New York time on such date. Cash Settlement Payment Date: 3 Currency Business Days after the Valuation Date. Counterparty's Contact Details for Purpose of Giving Notice: Nicholas Bijur Assistant Treasurer PG&E Corporation One Market Street, Spear Tower Suite 2400 San Francisco, CA 94105 Telephone No.: (415) 817-8199 Facsimile No.: (415) 267-7265 With a copy to: Gary Encinas Chief Counsel-Corporate PG&E Corporation One Market Street, Spear Tower Suite 2400 San Francisco, CA 94105 Telephone No.: (415) 817-8201 Facsimile No.: (415) 817-8225 GS&Co.'s Contact Details for Purpose of Giving Notice: Telephone No.: (212) 902-8996 Facsimile No.: (212) 902-0112 Attention: Equity Operations: Options and Derivatives With a copy to: Kelly Coffey Equity Capital Markets One New York Plaza New York, NY 10004 Telephone No.: (212) 902-1037 Facsimile No.: (212) 346-2126 Net Share Settlement: Net Share Settlement Procedures: Net Share Settlement shall be made in accordance with the procedures attached hereto as Annex B.   Net Share Settlement Price: The Net Share Settlement Price shall be the price per Share as of the Valuation Time on the Net Share Valuation Date as reported in the official real-time price dissemination mechanism for the Exchange. In the event Counterparty owes GS&Co. any amount, the Net Share Settlement Price shall be reduced by the per Share amount of the underwriting discount and/or commissions agreed to pursuant to the registration agreement contemplated by Annex B. Valuation Time: As provided in Section 6.1 of the Equity Definitions; provided that Section 6.1 of the Equity Definitions is hereby amended by inserting the words "Net Share," before the words "Valuation Date" in the first and third lines thereof. Net Share Valuation Date: The Exchange Business Day immediately following the Valuation Date. Net Share Settlement Date: The third Exchange Business Day immediately following the Valuation Date. Reserved Shares: For each Transaction, as set forth in the Supplemental Confirmation. Fixed, Floating and Counterparty Additional Payment Amounts Payable: Floating Amount Payable by GS&Co.: Floating Amount Payment Date: The Cash Settlement Payment Date Floating Amount: For each Transaction, an amount equal to the sum of the applicable Federal Funds Rate multiplied by (i) the Daily Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to and including the Valuation Date. Floating Amount Accrual Date: Trade Date Federal Funds Rate: For any date of determination, the "Fed Funds Open Rate," which shall be the interest rate reported on Bloomberg under the symbol "FEDSOPEN <index>" on such date. For the avoidance of doubt, for any day which is not a Currency Business Day the "Federal Funds Open Rate" for the immediately preceding Currency Business Day shall apply.   Daily Notional Amount: Commencing with the Floating Amount Accrual Date, for any date of determination, the Daily Notional Amount shall be an amount equal to the product of the Initial Notional Amount (as set forth in the Supplemental Confirmation) multiplied by a fraction with a numerator equal to the Originally Scheduled Number of Scheduled Trading Days in the Valuation Period minus the number of Exchange Business Days in the Valuation Period that have elapsed (other than any days during which the Valuation Period is suspended pursuant to Section 5 herein) as of such date of determination and a denominator equal to the Originally Scheduled Number of Scheduled Trading Days in the Valuation Period (such fraction, the "Remaining Percentage"). To the extent that the Valuation Period is extended pursuant to the terms of this Master Confirmation, the Calculation Agent shall adjust the Daily Notional Amount commencing with the first Exchange Business Day after such extension (the "Valuation Period Extension Date"). The notional amount deemed to be remaining at the end of the Exchange Business Day before the Valuation Period Extension Date (the "Remaining Notional Value") shall be the Initial Notional Value multiplied by the Remaining Percentage at the end of such day. Commencing with the Valuation Period Extension Date, for any date of determination, the Daily Notional Amount shall be equal to the product of the Remaining Notional Value multiplied by a fraction with (a) a numerator equal to (i) the number of Scheduled Trading Days remaining from and including the Valuation Period Extension Date to the Valuation Date after extension (the "Remaining Scheduled Trading Days") minus (ii) the number of Exchange Business Days in the Valuation Period after extension from and including the Valuation Period Extension Date that have elapsed (other than any days during which the Valuation Period after extension is suspended pursuant to Section 5 herein) as of such date of determination and (b) a denominator equal to the Remaining Scheduled Trading Days. Fixed Amount Payable by Counterparty: Fixed Amount Payment Date: The Cash Settlement Payment Date Fixed Amount: For each Transaction, an amount equal to the sum of (I) the applicable Daily Additional Spread multiplied by (i) the Daily Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to and including the Valuation Date plus (II) the applicable Fixed Rate multiplied by (i)  the Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to and including the Valuation Date. Fixed Rate: For each Transaction, as set forth in the Supplemental Confirmation. Daily Additional Spread: The Daily Additional Spread shall be 25 basis points.   Notional Amount: For any date of determination, 105% of the Daily Notional Amount. Counterparty Additional Amount Payable by Company: Counterparty Additional For each Transaction, as set forth in the Supplemental Payment Amount: Confirmation. Counterparty Additional Payment Date: The Cash Settlement Payment Date. Settlement Terms for Fixed Amount, Floating Amount and Counterparty Additional Payment Amount: Settlement Currency: USD (all amounts shall be converted to the Settlement Currency in good faith and in a commercially reasonable manner by the Calculation Agent). Settlement Method Election: Applicable; provided that Section 7.1 of the Equity Definitions is hereby amended by deleting the word "Physical" in the sixth line thereof and replacing it with the words "Net Share" and deleting the word "Physical" in the last line thereof and replacing it with the word "Cash". Electing Party: Counterparty Settlement Method Election Date: 10 Scheduled Trading Days prior to the originally scheduled Valuation Date. Default Settlement Method: Cash Settlement Share Adjustments: Method of Adjustment: Calculation Agent Adjustment Extraordinary Events: Consequences of Merger Events: Subject to Section 7(b) of the Master Confirmation: (a) Share-for-Share: Modified Calculation Agent Adjustment (b) Share-for-Other: Cancellation and Payment on that portion of the Other Consideration that consists of cash; Modified Calculation Agent Adjustment on the remainder of the Other Consideration. (c) Share-for-Combined: Component Adjustment Determining Party: GS&Co. Tender Offer: Applicable Consequences of Tender Offers: Subject to Section 7(b) of the Master Confirmation: (a) Share-for-Share: Modified Calculation Agent Adjustment   (b) Share-for-Other: Cancellation and Payment on that portion of the Other Consideration that consists of cash; Modified Calculation Agent Adjustment on the remainder of the Other Consideration. (c) Share-for-Combined: Component Adjustment Determining Party: GS&Co. Nationalization, Insolvency or Delisting: Subject to Section 7(a) of this Master Confirmation, Negotiated Close-out; provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange or The NASDAQ National Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange. Additional Disruption Events: (a) Change in Law: Applicable; provided that Section 12.9(a)(ii)(Y) of the Equity Definitions is hereby deleted. (b) Failure to Deliver: Not Applicable (c) Insolvency Filing: Applicable (d) Loss of Stock Borrow: Applicable; provided that Loss of Stock Borrow shall not constitute an Additional Disruption Event so long as Counterparty agrees to pay the Hedging Party the amount by which the stock loan rate necessary to maintain a borrowing of Shares by GS&Co. ("Hedge Position") in connection with the Transaction exceeds the Maximum Stock Loan Rate. Maximum Stock Loan Rate: 30 basis points (e) Hedging Disruption: Not Applicable (f) Increased Cost of Hedging: Not Applicable (g) Increased Cost of Stock Borrow: Not Applicable Hedging Party: GS&Co. Determining Party: GS&Co. Non-Reliance: Applicable Agreements and Acknowledgements Regarding Hedging Activities: Applicable Additional Acknowledgements: Applicable   Net Share Settlement following Extraordinary Event: Counterparty shall have the right, in its sole discretion, to elect that any payment required to be made pursuant to Sections 12.7 or 12.9 of the Equity Definitions (except with respect to any portion of the consideration for the Shares consisting of cash in the event of a Merger Event or Tender Offer) following the occurrence of an Extraordinary Event by Net Share Settlement of the Transactions under this Master Confirmation in accordance with the terms, and subject to the conditions, for Net Share Settlement herein by giving written notice to GS&Co. of such election on the day that the notice fixing the date that the Transactions are terminated or cancelled, as the case may be (the "Cancellation Date"), pursuant to the applicable provisions of Section 12 of the Equity Definitions is effective. If Counterparty elects Net Share Settlement: (a) the Net Share Valuation Date shall be the date specified in the notice fixing the date that the Transactions are terminated or cancelled, as the case may be; provided that the Net Share Valuation Date shall be either the Exchange Business Day that such notice is effective or the first Exchange Business Day immediately following the Exchange Business Day that such notice is effective, (b) the Net Share Settlement Date shall be deemed to be the Exchange Business Day immediately following the Cancellation Date and (c) all references to the Forward Cash Settlement Amount, the Fixed Amount, the Floating Rate Amount and the Counterparty Additional Payment Amount, as the case may be, in Annex B hereto shall be deemed to be references to the Cancellation Amount. The definition of "Cancellation Amount" in Section 12.8 of the Equity Definitions is hereby amended by inserting the following paragraph: "(h) The Determining Party shall show the other party in reasonable detail its calculation of the Cancellation Amount, including without limitation providing all relevant quotations and assumptions and specifying the methodologies used in sufficient detail so as to enable the other party to replicate the calculation". Net Share Settlement Upon Early Termination: Counterparty shall have the right, in its sole discretion, to elect that any payment required to be made (the "Early Termination Amount") pursuant to Sections 6(d) and 6(e) of the Agreement following the occurrence of an Early Termination Date in respect of the Agreement by Net Share Settlement of all the Transactions under this Master Confirmation in accordance with the terms, and subject to the conditions, for Net Share Settlement herein by giving written notice to GS&Co. of such election on the day that the notice fixing an Early Termination Date is effective. If Counterparty elects Net Share Settlement: (a) the Net Share Valuation Date shall be the datespecified in the notice fixing an Early Termination Date; provided that the Net Share Valuation Date shall be either the Exchange Business Day that such notice is effective or the first Exchange Business Day immediately following the Exchange Business Day that such notice is effective, (b) the Net Share Settlement Date shall be deemed to be the Exchange Business Day immediately following the Early   Termination Date (except for an Early Termination as a result of Section 7(d), in which event the Net Share Settlement Date shall be deemed to be the tenth Exchange Business Day following the Early Termination Date) and (c) all references to Forward Cash Settlement Amount, the Fixed Amount, the Floating Rate Amount and the Counterparty Additional Payment Amount, as the case may be, in Annex B hereto shall be deemed references to the Early Termination Amount. Transfer: Notwithstanding anything to the contrary in the Agreement, GS&Co. may assign, transfer and set over all rights, title and interest, powers, privileges and remedies of GS&Co. under any Transaction, in whole or in part, to an affiliate of GS&Co. that is fully and unconditionally guaranteed by The Goldman Sachs Group, Inc. without the consent of Counterparty, provided that Counterparty is not required to make a payment to GS&Co. in respect of an Indemnifiable Tax as a result of such transfer. GS&Co. Payment Instructions: Chase Manhattan Bank New York For A/C Goldman, Sachs & Co. A/C # 930-1-011483 ABA: 021-000021 Counterparty Payment Instructions: PG&E Corporation Master Account No. 099023 Mellon Trust of New England, N.A. Boston, MA ABA Routing No: 011001234 Calculation Agent: GS&Co. Representations, Warranties and Covenants of GS&Co. and Counterparty. Each party represents and warrants that it (i) is an "eligible contract participant", as defined in the U.S. Commodity Exchange Act, as amended and (ii) is entering into each Transaction hereunder as principal (and not as agent or in any other capacity, fiduciary or otherwise) and not for the benefit of any third party. Each party acknowledges that the offer and sale of each Share Forward Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section 4(2) thereof and the provisions of Regulation D promulgated thereunder ("Regulation D"); and this acknowledgement shall not be deemed to extend to Settlement Shares or Early Settlement Shares. Accordingly, each party represents and warrants to the other that (i) it has the financial ability to bear the economic risk of its investment in each Share Forward Transaction and is able to bear a total loss of its investment, (ii) it is an "accredited investor" as that term is defined under Regulation D, (iii) it will purchase each Share Forward Transaction for investment and not with a view to the distribution or resale thereof, and (iv) the disposition of each Share Forward Transaction is restricted under this Master Confirmation and each Supplemental Confirmation, the Securities Act and state securities laws. Additional Representations, Warranties and Covenants of Counterparty. As of the date hereof and the date of each Supplemental Confirmation, Counterparty represents, warrants and covenants to GS&Co. that: the purchase or writing of each Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); it is not entering into any Transaction on the basis of, and is not aware of, any material non-public information with respect to the Shares or in anticipation of, in connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer; it is not entering into any Transaction to create, and will not engage in any other securities or derivative transaction to create, a false or misleading appearance of active trading or market activity in the Shares (or any security convertible into or exchangeable for the Shares), or which would otherwise violate the Exchange Act; Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates, contain any untrue statement of a material fact or omit any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; each Transaction is being entered into pursuant to a publicly disclosed Share buy-back program and its Board of Directors has approved the use of the Transaction to effect the Share buy-back program; notwithstanding the generality of Section 13.1 of the Equity Definitions, GS&Co. is not making any representations or warranties with respect to the treatment of any Transaction under FASB Statements 149 or 150, EITF 00-19 (or any successor issue statements) or under FASB's Liabilities & Equity Project; it has not, and during any Valuation Period (as extended pursuant to the provisions of Section  5 and "Valuation Period" herein) it will not, enter into agreements similar to the Transactions described herein except with GS&Co. or an entity affiliated with GS&Co. where the valuation period in such other transaction will overlap at any time (including as a result of extensions in such valuation period as provided in the relevant agreements) with any Valuation Period (as extended pursuant to the provisions of Section 5 and "Valuation Period" herein) under this Master Confirmation. In the event that the valuation period in any other similar transaction with an entity other than GS&Co. or an entity affiliated with GS&Co. overlaps with any Valuation Period under this Master Confirmation as a result of any extension made pursuant to the provisions of Section 5 and "Valuation Period" herein, Counterparty shall promptly amend such transaction to avoid any such overlap; and it shall report each Transaction as required under the Exchange Act and the regulations promulgated thereunder. Suspension of Valuation Period; Extension of Valuation Period. If Counterparty concludes that it will be engaged in a distribution of the Shares for purposes of Regulation M promulgated under the Exchange Act ("Regulation M"), Counterparty agrees that it will, on one Scheduled Trading Day's written notice, direct GS&Co. not to purchase Shares in connection with hedging any Transaction during the "restricted period" (as defined in Regulation M). If on any Scheduled Trading Day Counterparty delivers written notice (and confirms by telephone) by 8:30 a.m. New York Time (the "Notification Time"), then such notice shall be effective to suspend the Valuation Period as of such Notification Time. In the event that Counterparty delivers notice and/or confirms by telephone after the Notification Time, then the Valuation Period shall be suspended effective as of 8:30 a.m. New York Time on the following Scheduled Trading Day or as otherwise required by law or agreed between Counterparty and GS&Co. The Valuation Period shall be suspended and the Valuation Date extended for each Scheduled Trading Day in such restricted period. In the event that GS&Co. concludes, in its reasonable discretion, that it is appropriate with respect to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by GS&Co.) for it to refrain from purchasing Shares on any Scheduled Trading Day during the Valuation Period, GS&Co. may by written notice to Counterparty elect to suspend the Valuation Period for such number of Scheduled Trading Days as is specified in the notice. The notice shall not specify, and GS&Co. shall not otherwise communicate to Counterparty, the reason for GS&Co.'s election to suspend the Valuation Period. The Valuation Period shall be suspended and the Valuation Date extended for each Scheduled Trading Day occurring during any such suspension. In the event that the Valuation Period is suspended pursuant to Sections 5(a) or (b) above during the regular trading session on the Exchange then the Calculation Agent in its sole discretion shall, in calculating the Forward Cash Settlement Amount, extend the Valuation Period and make adjustments to the weighting of each Relevant Price for purposes of determining the Settlement Price, with such adjustments based on, among other factors, the duration of any such suspension and the volume, historical trading patterns and price of the Shares. On the first Exchange Business Day of each calendar week during the Valuation Period, to the extent that the Number of Daily Reference Shares exceeds 25% of the ADTV (as defined in Rule 10b-18 under the Exchange Act ("Rule 10b-18")) for the Shares on such day, the Calculation Agent will (i) adjust the Number of Daily Reference Shares to equal an amount equal to 15% of ADTV for the Shares determined and effective on such Exchange Business Day and (ii) deem the remaining Scheduled Trading Days in the Valuation Period to be equal to the Remaining Number of Shares divided by the Number of Daily Reference Shares (after giving effect to any adjustments pursuant to (i) above), rounded up to the nearest whole number. "Number of Daily Reference Shares" means, for each Transaction, initially the Initial Number of Daily Reference Shares (as set forth in the Supplemental Confirmation) and thereafter as may be adjusted in accordance with this Section 5(d); provided that on the first Exchange Business Day of the fifth calendar week following any such adjustment the Number of Daily Reference Shares shall equal the lesser of (i) the Initial Number of Daily Reference Shares and (ii) 15% of the ADTV of the Shares determined on such Exchange Business Day. "Remaining Number of Shares" means, for each Transaction and as of any date of determination, a number of Shares equal to (i) the Number of Shares minus (ii) the sum of, for each Exchange Business Day in the Valuation Period up to and including such date, the Number of Shares divided by the total number of Exchange Business Days in the Valuation Period (the "Daily Amount"). The Daily Amount will be deemed to be zero for each day on which the Valuation Period is suspended in accordance with Sections 5(a) and (b) hereof. In the event that the Valuation Period is extended pursuant to the terms of this Master Confirmation, the Calculation Agent may make corresponding adjustments to the amount of the Remaining Number of Shares. Counterparty Purchases. Counterparty represents, warrants and covenants to GS&Co. that for each Transaction: Counterparty (or any "affiliated purchaser" as defined in Rule 10b-18) shall not, purchase any Shares, listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18)) during any Valuation Period (as extended pursuant to the provisions of Section 5 and "Valuation Period" herein) except for purchases through GS&Co. or an entity affiliated with GS&Co., or if not through GS&Co., with the prior written consent of GS&Co., and in compliance with Rule 10b-18 or otherwise in a manner that Counterparty and GS&Co. believe is in compliance with applicable requirements and except for purchases in connection with management compensation plans or other employee benefit arrangements and except for purchases of Counterparty's 9.50% Convertible Subordinated Notes due 2010, provided such purchases are made in compliance with any applicable legal regulatory or self-regulatory requirements or related policies and procedures (whether such requirements, policies or procedures are imposed by law or have been voluntarily adopted by GS&Co. for uniform   application to all such purchases). Any such purchase by Counterparty shall be disregarded for purposes of determining the Forward Cash Settlement Amount. To the extent that Counterparty makes any such purchase other than through GS&Co., or other than in connection with any Transaction, Counterparty hereby represents and warrants to GS&Co. that (a) it will not take other action that would or could cause GS&Co.'s purchases of the Shares during the Valuation Period not to comply with Rule 10b-18 and (b) any such purchases will not otherwise constitute a violation of Section 9(a) or Rule 10(b) of the Exchange Act. This subparagraph (a) shall not restrict any purchases by Counterparty of Shares effected during any suspension of any Valuation Period in accordance with Section 5 herein and any purchases during such suspension shall be disregarded in calculating the Forward Cash Settlement Amount; and for the avoidance of doubt, this subparagraph (a) shall not restrict any holders of outstanding securities of Counterparty from exercising or converting such securities to Shares; and Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act ("Rule 10b5-1"). It is the intent of the parties that each Transaction entered into under this Master Confirmation comply with the requirements of Rule 10b5-1(c)(1)(i)(A) and (B) and each Transaction entered into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c). Counterparty will not seek to control or influence GS&Co. to make "purchases or sales" (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) under any Transaction entered into under this Master Confirmation, including, without limitation, GS&Co.'s decision to enter into any hedging transactions. Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.   Additional Termination Events. Additional Termination Events will apply under Section 5(b)(v) of the Agreement. The following will constitute Additional Termination Events, in each case with Counterparty as the sole Affected Party: (a) Notwithstanding anything to the contrary in the Equity Definitions, the occurrence of a Nationalization, Insolvency or a Delisting (in each case effective on the Announcement Date as determined by the Calculation Agent); (b) Notwithstanding anything to the contrary in the Equity Definitions, the occurrence of a Merger Event (effective on the Merger Date) or a Tender Offer (effective on the Tender Offer Date) in respect of which any Other Consideration received for the Shares does not consist of cash. For the avoidance of doubt, in the event that any portion of the consideration received for the Shares consists of cash or New Shares, this Additional Termination Event shall only apply with respect to all or any Transaction(s) (or portions thereof) remaining after giving effect to the provisions in "Consequences of Merger Events" or "Consequences of Tender Offers", as the case may be, above; (c) [reserved]; or (d) Notwithstanding anything to the contrary in the Equity Definitions, one day prior to the ex-dividend date in respect of any Extraordinary Dividend (as specified in the Supplemental Confirmation) by the Issuer; provided that in the event that GS&Co. and Counterparty enter into a mutually acceptable new transaction (using their good faith and commercially reasonable efforts) on or prior to one day prior to the ex-dividend date in respect of the Extraordinary Dividend, the amounts determined pursuant to Section 6(e) of the Agreement or otherwise to be owed by Counterparty and GS&Co. with respect to the Affected Transaction(s) shall be deemed to be only the amounts that would otherwise be owed hereunder in respect of the Forward Cash Settlement Amount (the "Termination Forward Settlement Amount"), the Floating Amount (the "Termination Floating Amount"), the Fixed Amount (the "Termination Fixed Amount") and the Counterparty Additional Payment Amount if the Early Termination Date were the Cash Settlement Payment Date, and shall be payable in cash or (in the case of Counterparty) by Net Share Settlement or a combination of the two. In the event that an Early Termination Date would otherwise occur pursuant to this clause 7(d) while Counterparty is in possession of, or is aware of, material, non-public information, the Early Termination Date shall not be deemed to occur until the day after the day on which Counterparty is not in possession of, and is not aware of, material non-public information so long as, if, at Counterparty's option, on or prior to one day prior to the ex-dividend date for such Extraordinary Dividend, Counterparty agrees to pay GS&Co. no later than the earlier of the entry into the new transaction or the dividend payment date for such Extraordinary Dividend, a fixed amount in cash or by Net Share Settlement or a combination of the two, that shall be determined in good faith by GS&Co. as having a value equal to (i) the amount per share of such Extraordinary Dividend multiplied by (ii) the actual number of Shares that will remain borrowed by GS&Co. in connection with any Hedge Positions related to the Transaction as of such ex-dividend date. If Counterparty does not so agree on or prior to one day prior to the ex-dividend date for such Extraordinary Dividend, the Early Termination Date shall occur at the close of business on the Exchange Business Day that is one day prior to the ex-dividend date. For purposes of this Section 7(d): the Termination Forward Settlement Amount shall mean an amount in Settlement Currency equal to the product of (a) the Termination Trading Days multiplied by the Initial Number of Daily Reference Shares multiplied by (b) an amount equal to (i) the Termination Settlement Price minus (ii) the Forward Price; the Termination Floating Amount shall mean an amount equal to the sum of the applicable Federal Funds Rate multiplied by (i) the Daily Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to but excluding the Early Termination Date; and the Termination Fixed Amount shall mean an amount equal to the sum of (I) the applicable Daily Additional Spread multiplied by (i) the Daily Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to but excluding the Early Termination Date plus (II) an amount equal to the sum of the applicable Fixed Rate multiplied by (i)  the Notional Amount multiplied by (ii) 1/360 for each day from and including the Floating Amount Accrual Date to but excluding the Early Termination Date. Also for purposes of this Section 7(d): "Termination Trading Days" shall mean the number of Exchange Business Days (excluding any day(s) on which the Valuation Period was suspended in accordance with Section 5 herein or as a result of any Scheduled Trading Day being a Disrupted Day) from and including the Valuation Period Start Date to and including the Early Termination Date; "Termination Valuation Period" shall mean the Exchange Business Days during the period commencing on and including the Valuation Period Start Date to and including the Early Termination Date (but excluding any day(s) on which the Valuation Period was suspended in accordance with Section 5 herein or as a result of any Scheduled Trading Day being a Disrupted Day and including any day(s) by which the Valuation Period was extended pursuant to the provision below); and the "Termination Settlement Price" shall mean the arithmetic mean of the Relevant Prices of the Shares for each Exchange Business Day in the Termination Valuation Period. Automatic Termination Provisions. Notwithstanding anything to the contrary in Section 6 of the Agreement: An Additional Termination Event with Counterparty as the sole Affected Party will automatically occur without any notice or action by GS&Co. or Counterparty if the price of the Shares on the Exchange at any time falls below the Termination Price (as specified in the related Supplemental Confirmation) provided that (for the avoidance of doubt only) such Additional Termination Event shall be an Additional Termination Event only with respect to the Transaction documented in such related Supplemental Confirmation. The Exchange Business Day that the price of the Shares on the Exchange at any time falls below the Termination Price will be the "Early Termination Date" for purposes of the Agreement. Notwithstanding anything to the contrary in Section 6(d) of the Agreement, following the occurrence of such an Additional Termination Event, GS&Co. will notify Counterparty of the amount owing under Section 6(e) of the Agreement within a commercially reasonable time period (with such period based upon the amount of time, determined by GS&Co. (or any of its Affiliates) in its reasonable discretion, that it would take to unwind any of its Hedge Position(s) related to the Transaction in a commercially reasonable manner based on relevant market indicia). For purposes of the "Net Share Settlement Upon Early Termination" provisions herein, (i) the date that such notice is effective (the "Notice Date") shall constitute the "Net Share Valuation Date", (ii) the Exchange Business Day immediately following the Notice Date shall be the Net Share Settlement Date and (iii) all references to the Forward Cash Amount or the Fixed Amount in Annex B hereto shall be deemed to be the Early Termination Amount. For the avoidance of doubt, Hedge Position shall only mean any purchase, sale, entry into or maintenance of one or more stock borrowing transactions by GS&Co. or its Affiliates in respect of the Shares in connection with this Transaction and, notwithstanding the forgoing portions of this paragraph and Sections 6(d) and (e) of the Agreement, Counterparty shall be entitled to satisfy the Hedge Position by delivery of the Number of Early Settlement Shares as defined in and pursuant to the provisions of Section 10. Special Provisions for Merger Events. Notwithstanding anything to the contrary herein or in the Equity Definitions, to the extent that an Announcement Date for a potential Merger Transaction occurs during any Valuation Period: Promptly after request from GS&Co., Counterparty shall provide GS&Co. with written notice specifying (i) Counterparty's average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the Announcement Date that were not effected through GS&Co. or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the Announcement Date. Such written notice shall be deemed to be a certification by Counterparty to GS&Co. that such information is true and correct. Counterparty understands that GS&Co. will use this information in calculating the trading volume for purposes of Rule 10b-18; and GS&Co. in its sole discretion may (i) make adjustments to the terms of any Transaction, including, without limitation, the Valuation Date and the Number of Shares to account for the number of Shares that could be purchased on each day during the Valuation Period in compliance with Rule 10b-18 following the Announcement Date or (ii) treat the occurrence of the Announcement Date as an Additional Termination Event with Counterparty as the sole Affected Party. "Merger Transaction" means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act. Special Settlement Following Early Termination and Extraordinary Events. Notwithstanding anything to the contrary in this Master Confirmation or any Supplemental Confirmation hereunder, in the event that an Extraordinary Event under Article 12 of the Equity Definitions occurs or an Early Termination Date under Section 6 of the Agreement occurs or is designated with respect to any Transaction (each an "Affected Transaction"), then either party may elect, by notice to the other party, to have Counterparty deliver the Number of Early Settlement Shares to GS&Co. on the date that such notice is effective (provided that GS&Co. determines in its good faith sole discretion that such delivery is in compliance with any legal, regulatory or self-regulatory requirements or related policies and procedures), except for a termination as a result of Section 7(d), in which event the date of delivery shall be the tenth Business Day thereafter. To the extent that Counterparty elects to deliver Shares to GS&Co. accompanied by an effective Registration Statement (satisfactory to GS&Co. in its reasonable discretion) covering such Early Settlement Shares, Counterparty must be in compliance with the conditions specified in (iii) though (ix) in Annex B hereto at the time of such delivery. If Counterparty elects to deliver Unregistered Shares (as defined in Annex B) to GS&Co., Counterparty and GS&Co. will negotiate in good faith on acceptable procedures and documentation relating to the sale of such Unregistered Shares.   "Number of Early Settlement Shares" means a number of Shares based on the Hedge Positions of GS&Co. or any of its Affiliates with respect to each Affected Transaction under this Master Confirmation at the time of the Extraordinary Event or Early Termination Date, as applicable. In determining the amount of Loss under Section 6(e) of the Agreement or the Cancellation Amount under Article 12, the parties shall take into account the Floating Rate Amount that would have otherwise been due to Counterparty and the Fixed Amount that would have otherwise been due to GS&Co., and the difference between the New York 10b-18 Volume Weighted Average Price per share of the Shares over the Valuation Period as compared to the Forward Price. Further, if Counterparty delivers Early Settlement Shares, an amount equal to the product of (i)  the Number of Early Settlement Shares multiplied by (ii) the Forward Price (or if Counterparty delivers Unregistered Shares, as reduced by a discount determined by GS&Co. in a good faith commercially reasonable manner based on the discount to the New York 10b-18 Volume Weighted Average Price at which it could sell the Shares and whether GS&Co. and Counterparty have agreed on acceptable procedures and documentation relating to such Unregistered Shares as described above) shall be credited against any amount owing under Section 6(e) of the Agreement or pursuant to Article 12 of the Equity Definitions or otherwise under this Master Confirmation. Acknowledgments. The parties hereto intend for: Each Transaction to be a "securities contract" as defined in Section 741(7) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), a "swap agreement" as defined in Section 101(53B) of the Bankruptcy Code, or a "forward contract" as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 555, 556 and 560 of the Bankruptcy Code; A party's right to liquidate or terminate any Transaction, net out or offset termination values of payment amounts, and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a "contractual right" (as defined in the Bankruptcy Code); All payments for, under or in connection with each Transaction, all payments for the Shares and the transfer of such Shares to constitute "settlement payments" and "transfers" (as defined in the Bankruptcy Code). Set-Off. The parties agree to amend Section 6 of the Agreement by adding a new Section 6(f) thereto as follows: "(f) Upon the occurrence of an Event of Default or Termination Event with respect to a party who is the Defaulting Party or the Affected Party ("X"), the other party ("Y") will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X owed to Y (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y owed to X (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation). Y will give notice to X of any set-off effected under this Section 6(f).   Amounts (or the relevant portion of such amounts) subject to set-off may be converted by Y into the Termination Currency at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section 6(f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise)." Payment Date Upon Early Termination. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement will be payable on the day that notice of the amount payable is effective, except as otherwise provided in this Master Confirmation or any Supplemental Confirmation. Share Settlement; Maximum Shares. Notwithstanding anything contained in this Master Confirmation, the Agreement or the Equity Definitions, Counterparty or GS&Co. at the election by Counterparty may satisfy all amounts it may owe to the other party hereunder and under each Supplemental Confirmation by delivery of Shares in accordance with Annex B and/or Section 10 hereof, and Counterparty is solely vested with the right to determine whether such obligations may be satisfied in Shares, in cash or in a combination of the two. Notwithstanding anything contained in this Master Confirmation, the Agreement or the Equity Definitions, Counterparty and GS&Co. agree that in the event Counterparty owes an amount to GS&Co. and Counterparty elects to satisfy its obligations to GS&Co. by delivery of Shares, the delivery of a number of Shares equal to the Reserved Shares will satisfy in full the obligation of Counterparty to make any payments pursuant to Section 6(e) of the Agreement, Article 12 of the Equity Definitions or otherwise in respect of the Transaction. Governing Law. The Agreement, this Master Confirmation and each Supplemental Confirmation and all matters arising in connection with the Agreement, this Master Confirmation and each Supplemental Confirmation shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without reference to its choice of law doctrine. Offices. The Office of GS&Co. for each Transaction is: One New York Plaza, New York, New York 10004. The Office of Counterparty for each Transaction is: One Market Street, Spear Tower, Suite 2400, San Francisco, CA 94105. Arbitration. Arbitration is final and binding on Counterparty and GS&Co. Counterparty and GS&Co. are waiving their right to seek remedies in court, including the right to a jury trial. Pre-arbitration discovery is generally more limited than and different from court proceedings. The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by the arbitrators is strictly limited. The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry. Any controversy between or among GS&Co. or its affiliates, or any of its or their partners, directors, agents or employees, on the one hand, and Counterparty or its agents and affiliates, on the other hand, arising out of or relating to the Agreement or any Transaction entered into hereunder, shall be settled by arbitration, in accordance with the then current rules of the American Arbitration Association ("AAA"), except that the provisions of this Section 17 shall supersede any conflicting or inconsistent provisions of such rules. Each party shall appoint a qualified arbitrator within 5 days after the giving of notice by either party. If either party shall fail timely to appoint a qualified arbitrator, the appointed, qualified arbitrator shall select the second qualified arbitrator within 5 days after such party's failure to appoint. The qualified arbitrators so appointed shall meet and shall, if possible, determine such matter within 10 days after the second qualified arbitrator is appointed, and their determination shall be binding on the parties. If for any reason such two qualified arbitrators fail to agree on such matter within such period of 10 days, then either party may request the AAA to appoint a qualified arbitrator who shall be impartial within 7 days of such request and both parties shall be bound by any appointment so made by the AAA. Within 7 days after the third qualified arbitrator has been appointed, each of the first two qualified arbitrators shall submit their respective determinations to the third qualified arbitrator who must select one or the other of such determinations (whichever the third qualified arbitrator believes to be correct or closest to a correct determination) within 7 days after the first two qualified arbitrators shall have submitted their respective determinations to the third qualified arbitrator, and the selection so made shall in all cases be binding upon the parties, and judgment upon such decision may be entered into any court having jurisdiction. In the event of the failure, refusal or inability of a qualified arbitrator to act, a successor shall be appointed within 10 days as hereinbefore provided. The costs of the arbitration shall be funded 50% by each party, and the parties shall bear their own attorneys' fees, during the arbitration. The prevailing party shall be repaid all of such expenses by the non-prevailing party within 10 days after the final determination of the qualified arbitrator(s). The award of the arbitrators shall be final, and judgment upon the award rendered may be entered in any court, state or Federal, having jurisdiction. Neither party shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action; who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: the class certification is denied; the class is decertified; or the party is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under the Agreement except to the extent stated herein. [SIGNATURE PAGE FOLLOWS] Counterparty hereby agrees (a) to check this Master Confirmation carefully and immediately upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by GS&Co.) correctly sets forth the terms of the agreement between GS&Co. and Counterparty with respect to any Transaction, by manually signing this Master Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and immediately returning an executed copy to Equity Derivatives Documentation Department, facsimile No. 212-428-1980/83. Yours sincerely, GOLDMAN, SACHS & CO. By /s/ Sharon Siebold             Authorized Signatory Agreed and Accepted By: PG&E CORPORATION By: /s/ Christopher P. Johns            Name: Title: ANNEX A SUPPLEMENTAL CONFIRMATION FOR FULLY UNCOLLARED TRANSACTIONS     To: PG&E Corporation One Market Street, Spear Tower Suite 2400 San Francisco, CA 94105 From: Goldman, Sachs & Co. Subject: Accelerated Share Repurchase Transaction - VWAP Pricing Ref. No: SDB1620840449 Date: March 22, 2006   The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between Goldman, Sachs & Co. ("GS&Co.") and PG&E Corporation ("Counterparty") (together, the "Contracting Parties") on the Trade Date specified below. This Supplemental Confirmation is a binding contract between GS&Co. and Counterparty as of the relevant Trade Date for the Transaction referenced below. 1. This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation dated as of November 16, 2005 (the "Master Confirmation") between the Contracting Parties, as amended and supplemented from time to time. The definitions and provisions contained in the Master Confirmation are incorporated into this Supplemental Confirmation, except as expressly modified below. In the event of any inconsistency between those definitions and provisions and this Supplemental Confirmation, this Supplemental Confirmation will govern. 2. The terms of the Transaction to which this Supplemental Confirmation relates are as follows: Trade Date: March 28, 2006 Forward Price: USD 34.75 per Share Number of Shares: 11,385,000 Shares Valuation Period Start Date: March 29, 2006 Valuation Date: June 8, 2006 Termination Price: $10.00 per Share Fixed Rate: 25 basis points Reserved Shares: Two times the Number of Shares Extraordinary Dividends: Any cash dividend declared by the Issuer in excess of $0.00 per Share; provided that the cash dividend declared by the Counterparty in February 2006 shall not be an Extraordinary Dividend.   Initial Number of Daily Reference Shares: 227,700 Shares Initial Notional Amount: The Number of Shares multiplied by the Forward Price. Counterparty Additional Payment Amount: USD 3,757,050.00 [SIGNATURE PAGE FOLLOWS] 3. Counterparty represents and warrants to GS&Co. that neither it (nor any "affiliated purchaser" as defined in Rule 10b-18 under the Exchange Act) have made any purchases of blocks except through GS&Co. or an entity affiliated with GS&Co. pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during the four full calendar weeks immediately preceding the Trade Date. Counterparty hereby agrees (a) to check this Supplemental Confirmation carefully and immediately upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by GS&Co.) correctly sets forth the terms of the agreement between GS&Co. and Counterparty with respect to this Transaction, by manually signing this Supplemental Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and immediately returning an executed copy to Equity Derivatives Documentation Department, facsimile No. 212-428-1980/83. Yours sincerely, GOLDMAN, SACHS & CO. By: /s/ Frank Hujber                           Authorized Signatory Agreed and Accepted PG&E CORPORATION     By: /s/ G. Robert Powell                           Name:     G. Robert Powell Title:       Vice President and Controller     ANNEX B NET SHARE SETTLEMENT PROCEDURES In the event that the Counterparty has elected Net Share Settlement in accordance with the Master Confirmation, then the settlement procedure shall be as follows: In the event that the sum of the Forward Cash Settlement Amount, the Fixed Amount, the Floating Rate Amount and the Counterparty Additional Payment Amount (the "Final Settlement Amount") is an amount GS&Co. owes Counterparty, settlement shall be made by delivery of the number of Shares equal in value to the Final Settlement Amount, with such Shares' value based on the Relevant Prices per Share further described below. In such event, on each succeeding Exchange Business Day after the Net Share Valuation Date, GS&Co. shall purchase one-half of the maximum amount of Shares Counterparty could purchase each day in accordance with the provisions of Rule 10b-18(2), (3) and (4), subject to any delays between the execution and reporting of a trade of the Shares on the Exchange and other circumstances beyond its reasonable control, until the sum of the products of the number of Shares purchased by GS&Co. multiplied by the Relevant Price for the regular trading session (including any extensions thereof) of the Exchange on the related Exchange Business Day equals the Final Settlement Amount. GS&Co. shall deliver all Shares purchased pursuant to this paragraph free of any contractual or other restriction, in good transferable form on the Third Exchange Business Day following the day on which GS&Co. completes all such purchases. In the event that the Final Settlement Amount is an amount that Counterparty owes GS&Co., settlement shall be made by delivery of the number of Shares equal in value to the Final Settlement Amount (the "Settlement Shares"), with such Shares' value based on the Net Share Settlement Price. Delivery of such Settlement Shares shall be made free of any contractual or other restrictions in good transferable form (other than with respect to any Unregistered Shares (as defined below)) on the Net Share Settlement Date. Counterparty (i) shall represent and warrant to GS&Co. at the time of such delivery that it has good, valid and marketable title or right to sell and transfer all such Shares to GS&Co. under the terms of the related Transaction free of any lien charge, claim or other encumbrance and (ii) shall make the representations and agreements contained in Section 9.11(ii) through (iv) of the Equity Definitions to GS&Co. with respect to the Settlement Shares. GS&Co. or any affiliate of GS&Co. designated by GS&Co. (GS&Co. or such affiliate, "GS") shall resell the Settlement Shares owed to GS&Co. during a period (the "Resale Period") commencing no earlier than the Exchange Business Day on which the Settlement Shares are delivered. GS shall use its good faith, commercially reasonable efforts to sell the Settlement Shares as promptly as possible at commercially reasonable prices based on prevailing market prices for the Shares. The Resale Period shall end on the Exchange Business Day on which GS completes the sale of all Settlement Shares or a sufficient number of Settlement Shares so that the realized net proceeds of such sales exceed the sum of Forward Cash Settlement Amount, the Fixed Amount and the Counterparty Additional Payment Amount. Notwithstanding the foregoing, if resale by GS of the Settlement Shares, as determined by GS in its sole discretion (i) occurs during a distribution for purposes of Regulation M, and if GS would be subject to the restrictions of Rule 101 of Regulation M in connection with such distribution, the Resale Period will be postponed or tolled, as the case may be, until the Exchange Business Day immediately following the end of any "restricted period" as such term is defined in Regulation M with respect to such distribution under Regulation M or (ii) conflict with any legal, regulatory or self-regulatory requirements or related policies and procedures applicable to GS (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by GS), the Resale Period will be postponed or tolled, as the case may be, until such conflict is no longer applicable. During the Resale Period, if the realized net proceeds from the resale of the Settlement Shares exceed the sum of the Forward Cash Settlement Amount, the Fixed Amount and the Counterparty Additional Payment Amount, GS shall refund such excess in cash to Counterparty by the close of business on the third Exchange Business Day immediately following the last day of the Resale Period. If the sum of the Forward Cash Settlement Amount, the Fixed Amount and the Counterparty Additional Payment Amount exceeds the realized net proceeds from such resale, Counterparty shall transfer to GS by the open of the regular trading session on the Exchange on the third Scheduled Trading Day immediately following the last day of the Resale Period the amount of such excess (the "Additional Amount") in the number of Shares ("Make-whole Shares") in an amount that, based on the Net Share Settlement Price on the last day of the   Resale Period (as if such day was the "Net Share Valuation Date" for purposes of computing such Net Share Settlement Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares. The requirements and provisions set forth below shall apply to Shares delivered to pay such Additional Amounts. This provision shall be applied successively until the Additional Amount is equal to zero. Net Share Settlement of a Transaction by Counterparty is subject to the following conditions: Counterparty at its sole expense shall: (i) as promptly as practicable (but in no event more than five (5) Exchange Business Days immediately following the Settlement Method Election Date or, in the case of an election of Net Share Settlement upon the occurrence of an Extraordinary Event or an Early Termination Date, no more than one Exchange Business Day immediately following either the Cancellation Date or the Early Termination Date, as the case may be) file under the Securities Act and use its best efforts to make effective, as promptly as practicable, a registration statement or supplement or amend an outstanding registration statement, in any such case, in form and substance reasonably satisfactory to GS (the "Registration Statement") covering the offering and sale by GS of not less than 150% of the Shares necessary to fulfill the Net Share Settlement delivery obligation by Counterparty (determining the number of such Shares to be registered on the basis of the average of the Settlement Prices on the five (5) Exchange Business Days prior to the date of such filing, amendment or supplement, as the case may be); (ii) maintain the effectiveness of the Registration Statement until GS has sold all shares to be delivered by Counterparty necessary to satisfy its Net Share Settlement obligations; (iii) have afforded GS and its counsel and other advisers a reasonable opportunity to conduct a due diligence investigation of Counterparty customary in scope for transactions in which GS acts as underwriter of equity securities, and GS shall have been satisfied (with the approval of its Commitments Committee in accordance with its customary review process) with the results of such investigation; (iv) have negotiated and entered into a registration agreement with GS in substantially the form attached as Schedule 1, which such form the parties agree to amend by January 1, 2006 or anytime thereafter as mutually agreed by the parties in writing in order to reflect amendments to Rule 415 and Rule 462 and certain other rules set forth in Securities Act Release 33-8591 (the "Registration Agreement") covering the shares to be delivered by Counterparty in satisfaction of its Net Share Settlement obligations; (v) have delivered to GS such number of prospectuses relating thereto as GS shall have reasonably requested and shall promptly update and provide GS with replacement prospectuses as necessary to ensure the prospectus does not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; (vi) have retained for GS nationally-recognized underwriting counsel acceptable to GS (in its sole discretion) with broad experience in similar registered securities offerings and such counsel shall have agreed to act as such; (vii) have taken all steps necessary for the shares sold by GS to be listed or quoted on the primary exchange or quotation system that the Shares are listed or quoted on; (viii) have paid all reasonable and actual out-of-pocket costs and expenses of GS and all reasonable and actual fees and expenses of GS's outside counsel and other independent experts contemplated by the Registration Agreement; and (ix) take such action as is required to ensure that GS's sale of the Shares does not violate, or result in a violation of, the federal or state securities laws. In the event that the Registration Statement is not declared effective by the Securities Exchange Commission (the "SEC") or any of the conditions specified in (ii) through (ix) above are not satisfied on or prior to the Valuation Date (or, in the case of an election of Net Share Settlement upon the occurrence of an Extraordinary Event or an Early Termination Date, on or prior to the first Exchange Business Day following either the Cancellation Date or the Early Termination Date, as the case may be except for any Early Termination as result of Section 7(d) of the Master Confirmation, in which case, such date shall be the tenth Exchange Business Day following such Early Termination Date), then Counterparty may deliver Unregistered Shares to GS in accordance with the following conditions. If GS and Counterparty can agree on acceptable pricing, procedures and documentation relating to the sale of such Unregistered Shares (including, without limitation, applicable requirements in (iii) through (ix) above and insofar as pertaining to private offerings), then such Unregistered Shares shall be deemed to be the "Settlement Shares" for the purposes of the related Transaction and the settlement procedure specified in this Annex B shall be followed except that in the event that the Forward Cash Settlement Amount plus the Fixed Amount, exceeds the proceeds from the sale of such Unregistered Shares then for the purpose of calculating the number of "Make-whole Shares" to be delivered by Counterparty, GS shall determine the discount to the Net Share Settlement Price at which it can sell the Unregistered Shares. Notwithstanding the delivery of the Unregistered Shares, Counterparty shall endeavor in good faith to have a registration statement declared effective by the SEC as soon as practical. In the event that GS has not sold sufficient Unregistered Shares to satisfy Counterparty's obligations to GS contained herein at the time that a Registration Statement covering the offering and sale by GS of a number of Shares equal in value to not less than 150% of the amount then owed to GS is declared effective (based on the Net Share Settlement Price on the Exchange Business Day (as if such Exchange Business Day were the "Net Share Valuation Date" for purposes of computing such Net Share Settlement Price) that the Registration Statement was declared effective), GS shall return all unsold Unregistered Shares to Counterparty and Counterparty shall deliver such number of Shares covered by the effective Registration Statement equal to 100% of the amount then owed to GS based on such Net Share Settlement Price. Such delivered shares shall be deemed to be the "Settlement Shares" for the purposes of the related Transaction and the settlement procedure specified in this Master Confirmation, including, without limitation, this Annex B, (including the obligation to deliver any Make-whole Shares, if applicable) shall be followed. In all cases GS shall be entitled to take any and all required actions in the course of its sales of the Settlement Shares, including without limitation making sales of the Unregistered Shares only to "Qualified Institutional Buyers" (as such term is defined under the Securities Act), to ensure that the sales of the Unregistered Shares and the Settlement Shares covered by the Registration Statement are not integrated resulting in a violation of the securities laws and Counterparty agrees to take all actions requested by GS in furtherance thereof. If GS and Counterparty cannot agree on acceptable pricing, procedures and documentation relating to the sales of such Unregistered Shares then the number of Unregistered Shares to be delivered to GS pursuant to the provisions above shall not be based on the Net Share Settlement Price but rather GS shall determine the value attributed to each Unregistered Share in a commercially reasonable manner and based on such value Counterparty shall deliver a number of Shares equal in value to the Forward Cash Settlement Amount plus the Fixed Amount. For the purposes hereof "Unregistered Shares" means Shares that have not been registered pursuant to an effective registration statement under the Securities Act or any state securities laws ("Blue Sky Laws") and that cannot be sold, transferred, pledged or otherwise disposed of without registration under the Securities Act or under applicable Blue Sky Laws unless such sale, transfer, pledge or other disposition is made in a transaction exempt from registration thereunder. In the event that Counterparty delivers Shares pursuant to an election of Net Share Settlement, then Counterparty and GS agree to indemnify and hold harmless each other to the extent provided in the Registration Agreement. In no event shall the number of Settlement Shares (including, but without duplication or double counting, any Unregistered Shares) and any Make-whole Shares deliverable by Counterparty hereunder to GS&Co., be greater than the Reserved Shares minus the amount of any Shares actually delivered under any other Transaction(s) under this Master Confirmation (the result of such calculation, the "Capped Number"). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:     A - B Where A = the number of authorized but unissued shares of the Issuer that are not reserved for future issuance on the date of the determination of the Capped Number; and B = the maximum number of Shares required to be delivered to third parties if Counterparty elected Net Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this Master Confirmation) with all third parties that are then currently outstanding and unexercised.   SCHEDULE 1 Form of Registration Agreement PG&E Corporation Common Stock Registration Agreement [ ] [  ], 2005 Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: PG&E Corporation, a California corporation (the "Company"), proposes to deliver to Goldman, Sachs & Co. ("GS&Co.") pursuant to this Registration Agreement (this "Agreement") up to [_____] shares of common stock (no par value) ("Stock") of the Company (the "Shares") in satisfaction of the Company's obligations to GS&Co., as counterparty under an Accelerated Share Repurchase Transaction, Reference Number [_____], as documented pursuant to a Master Confirmation (the "Master Confirmation"), dated as of [ ] [ ], 2005 (the Master Confirmation, as may be amended, restated, supplemented or otherwise modified from time to time, the "ASB"), subject to the terms and conditions stated herein and in the ASB. The Company does not expect to receive any proceeds from the sale of the Shares. 1. The Company represents and warrants to, and agrees with, GS&Co. that: i. A registration statement on Form S-3, as amended (File No. 333- 121518) (including all documents incorporated by reference in the prospectus contained therein, the "Initial Registration Statement"), in respect of the Shares and the offering thereof from time to time in accordance with Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to GS&Co. (excluding exhibits thereto), have been declared effective by the Commission in such form; no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement or any post-effective amendment thereto has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement, including all exhibits thereto and including the documents incorporated by reference in the prospectus contained in the Initial Registration Statement at the time such part of the Initial Registration Statement became effective, each as amended at the time such part of the Initial Registration Statement became effective are hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Securities Act, is hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Initial Registration Statement that is incorporated by reference in the Registration Statement); ii. No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder, and did not 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; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by GS&Co. expressly for use in any Preliminary Prospectus; iii. The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an 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; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not 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 not misleading; iv. The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto, and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, 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 not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by GS&Co. expressly for use in the Registration Statement or the Prospectus; v. Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material change in the capital stock (other than changes occurring in the ordinary course of business and changes resulting from transactions relating to employee benefit plans or dividend reinvestment, stock option, stock award, retirement and stock purchase plans or repurchases of capital stock by the Company, including repurchases associated with the ASB) or any material increase in the long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development which would reasonably be expected to result in a material adverse change, in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus; vi. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of California, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; vii. Each corporation, association, partnership or other business entity of which more than 50% of the total voting power or other interests entitled to vote in the election of directors, managers or trustees thereof that is deemed by the Company to be significant to its operations, as set forth on Schedule I hereto, and that is controlled, directly or indirectly, by (i) the Company, (ii) the Company and one or more subsidiaries or (iii) one or more subsidiaries of the Company (each, a "Subsidiary" and collectively, the "Subsidiaries"), has been duly incorporated or organized and is a validly existing corporation, partnership or limited liability company in good standing under the laws of the jurisdiction of its incorporation or organization with corporate, partnership or limited liability company power and authority, as applicable, to own its properties and conduct its business as described in the Prospectus; all of the issued and outstanding capital stock, partnership or membership interests of each Subsidiary has been duly authorized and validly issued and is fully paid and nonassessable; and, except as disclosed in the Prospectus, the capital stock or membership interests of each Subsidiary are owned directly or indirectly by the Company, free and clear of all liens, encumbrances and defects; viii. The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable and conform in all material respects to the description of the Stock contained in the Prospectus; ix. The Shares have been duly and validly authorized and, when issued and delivered as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; upon delivery of the Shares to GS&Co. pursuant to this Agreement, good and valid title to the Shares, free and clear of liens, encumbrances, equities or claims, will pass to GS&Co.; and, other than the delivery of (i) an opinion of counsel and (ii) the Prospectus and, if required, an amendment or supplement thereto, clauses (i) - (iv) of Section 9.11 of the Equity Definitions (as defined in the ASB) apply to the Shares and the delivery of the Shares to GS&Co.; x. The issuance and delivery of Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except any such conflict, breach, violation or default which has been consented to or waived by the appropriate counterparty thereto, prior to the execution and delivery of this Agreement, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties, except for conflicts, breaches, violations or defaults (other than any relating to the Articles of Incorporation or By-Laws of the Company) that would not, individually or in the aggregate, impair the Company's ability to consummate the transactions herein contemplated; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required on the part of the Company for the sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except (i) the registration under the Securities Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the sale of the Shares by GS&Co. and (ii) where the failure to obtain such consent, approval, authorization, order, registration or qualification would not, individually or in the aggregate, impair the Company's ability to consummate the transactions herein contemplated; xi. None of the Company or its subsidiaries is (i) in violation of its Articles of Incorporation or By-Laws (or similar organizational document), or (ii) in default (nor has any event occurred which with notice or passage of time, or both, would constitute a default) in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or to which it is subject; xii. The statements set forth in the Prospectus under the caption "Description of Capital Stock," insofar as they purport to constitute a summary of the terms of the Stock, and the statements under the caption "Plan of Distribution", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects; and the statements in the Prospectus with respect to the ASB are accurate, complete and fair in all material respects; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by GS&Co. expressly for use in the Registration Statement or Prospectus; xiii. Other than with GS&Co. or as set forth in the Prospectus, 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 securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act; xiv. Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject, which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, shareholders' equity or results of operations of the Company and its subsidiaries; and, to the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; xv. xvi. The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended; xvii. Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075 of the Florida Statutes; xviii. Deloitte & Touche LLP, who have certified certain financial statements of the Company and its subsidiaries and have audited the Company's internal control over financial reporting and management's assessment thereof, are an independent registered public accounting firm as required by the Securities Act and the rules and regulations of the Commission and the Public Company Accounting Oversight Board (United States) (the "PCAOB") thereunder; xix. The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company's principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; except as disclosed in the Prospectus, the Company's internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting; xx. Except as disclosed in the Prospectus, since the date of the latest audited financial statements included in the Prospectus, there has been no change in the Company's internal control over financial reporting that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company's internal control over financial reporting; xxi. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company's management, including its principal executive officer and principal financial officer, by others within those entities; except as disclosed in the Prospectus, such disclosure controls and procedures are effective; xxii. Prior to the date hereof, neither the Company nor any of its subsidiaries has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company or any of its subsidiaries in connection with the offering of securities of the Company contemplated hereby; xxiii. The financial statements of the Company included in the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis, subject, in the case of interim statements, to normal year-end adjustments; xxiv. xxv. The common stock of the Company is registered pursuant to Section 12(b) of the Exchange Act and the outstanding shares of common stock (including the Shares) are listed for quotation on the New York Stock Exchange (the "NYSE"), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the common stock under the Exchange Act or de-listing the common stock from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such registration or listing; xxvi. The Company acknowledges and agrees that (i) in connection with the sale of Shares pursuant to this Agreement and with the process leading to such transaction GS&Co. is acting solely as a principal and not the agent or fiduciary of the Company, (ii) GS&Co. has not assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether GS&Co. has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that GS&Co. has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto; and xxvii. All of the representations and warranties of the Company in or made pursuant to the ASB are true and correct as of the time when made, when required to be made and when deemed to be repeated, in each case as specified therein. 2. Upon the delivery of the Shares to GS&Co. and the satisfaction or waiver of the conditions set forth in Section 6 of this Agreement, GS&Co. proposes to offer the Shares from time to time for sale upon the terms and conditions set forth in the Prospectus. GS&Co. intends to sell only such number of Shares so that the realized proceeds (net of customary expenses and commissions as set forth below) of such sales (the "Proceeds") are equal to the amount that the Company owes to GS&Co. under the ASB, and all of the Proceeds of such sales shall be retained by GS&Co. in satisfaction of the Company's obligations under the ASB. Once GS&Co. has sold such number of Shares so that the Proceeds of such sales are equal to the amount that the Company owes to GS&Co. under the ASB, and the Company's obligations to GS&Co. under the ASB shall have been satisfied in full, any Shares that have been delivered to but not sold by GS&Co. shall be promptly returned to the Company and any Proceeds in excess of the amount that was owed by the Company to GS&Co. under the ASB shall be promptly refunded to the Company. All commissions and customary expenses incurred by GS&Co. in connection with the sale of the Shares set forth in Section 5 of this Agreement shall be deemed to be incurred for the Company's account, and not for the account of GS&Co. and shall be paid by the Company. In no event shall commissions exceed 2.00% of the sales price of the shares. 3. The Shares to be delivered to GS&Co. hereunder, in definitive form, and in such authorized denominations and registered in such names as GS&Co. may request upon at least forty-eight hours' prior notice to the Company, shall be delivered by or on behalf of the Company to GS&Co., through the facilities of The Depository Trust Company ("DTC"), for the account of GS&Co. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery shall be 9:30 a.m., New York City time, on [ ___ ], 2005 or such other time and date as GS&Co. and the Company may agree upon in writing. Such time and date for delivery of the Shares is herein called the "Time of Delivery". The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 6 hereof, including the cross receipt for the Shares and any additional documents requested by GS&Co. pursuant to Section 6(j) hereof, will be delivered at the offices of Cadwalader, Wickersham & Taft LLP, One   World Financial Center, New York, New York 10281 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 3, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 4. The Company agrees with GS&Co.: a. To prepare the Prospectus in a form approved by GS&Co. and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; maintain the effectiveness of the Registration Statement until GS&Co. has sold all of the Shares to be sold as provided in Section 2 hereof; to make no further amendment or any supplement to the Registration Statement or Prospectus (other than by filing a document under the Exchange Act in the ordinary course of business, which will be incorporated by reference into the Registration Statement or the Prospectus) which shall be disapproved by GS&Co. after reasonable notice thereof; to advise GS&Co., promptly after the Company receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish GS&Co. with copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; to advise GS&Co., promptly after the Company receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; b. Promptly from time to time to take such action as GS&Co. may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as GS&Co. may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the sale of all of the Shares to be sold as provided in Section 2, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; c. Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish GS&Co. with written and electronic copies of the Prospectus in New York City in such quantities as it may reasonably request, and, if the delivery of a prospectus is required at any time prior to the time of the completion of the offering or sale of the Shares to be sold as provided in Section 2 and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, to notify GS&Co. and upon its request to file such document and to prepare and furnish without charge to GS&Co. and to any dealer in securities as many written and electronic copies as GS&Co. may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case GS&Co. is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of GS&Co., to prepare and deliver to GS&Co. as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Securities Act; d. To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158); e. If not otherwise available on EDGAR or a similar system during a period of five years from the effective date of the Registration Statement, to furnish to its shareholders as soon as practicable after the end of each fiscal year, but in any event within the time period after the end of each fiscal year of the Company that would have been required of the Company under Form 10-K, an annual report (including a balance sheet and statements of income, shareholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), but in any event within the time period after the end of each fiscal quarter of the Company that would have been required of the Company under Form 10-Q, to make available to its shareholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; f. If not otherwise available on EDGAR or a similar system during a period of five years from the effective date of the Registration Statement, to furnish to GS&Co. copies of all reports or other communications (financial or other) furnished to shareholders, and to deliver to GS&Co. (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as GS&Co. may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its shareholders generally or to the Commission); provided that the Company shall not be required to deliver any information that would cause the Company to make a public disclosure under Regulation FD as promulgated under the Exchange Act; and g. Upon request of GS&Co., to furnish, or cause to be furnished, to GS&Co. an electronic version of the Company's trademarks, servicemarks and corporate logo for use on the website, if any, operated by GS&Co. for the purpose of facilitating the on-line offering of the Shares (the "License"). The License shall be granted without any fee. 5. The Company covenants and agrees with GS&Co. that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants and of outside counsel to GS&Co. and other independent experts retained by GS&Co. in connection with the registration of the Shares under the Securities Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to GS&Co. and dealers; (ii) the cost of printing or producing this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 4(b) hereof, including the fees and disbursements of counsel for GS&Co. in connection with such qualification and in connection with the Blue Sky survey; (iv) the cost of preparing stock certificates; (v) the cost and charges of any transfer agent or registrar; and (vi) all other reasonable and actual costs and expenses incident to the performance of its obligations hereunder. Except as provided in this Section 5 and Section 7 of this Agreement, GS&Co. shall pay all other expenses it incurs in connection with the registration, offering and sale of the Shares. 6. The obligations of GS&Co. to accept the Shares to be delivered at the Time of Delivery in satisfaction of the Company's obligations under the ASB, and the obligations of GS&Co. hereunder with respect to the Shares to be delivered at the Time of Delivery, shall be subject, in its discretion, to the condition that all representations and warranties and other statements of the Company herein and in the ASB are, at and as of the Time of Delivery, as of the time when made, (and when required to be made and deemed to be repeated with respect to the representations and warranties and other statements of the Company in the ASB, in each case as specified therein), true and correct, the condition that the Company shall have performed all of its obligations hereunder and under the ASB theretofore to be performed, and the following additional conditions: a. The Prospectus (the form of which was previously approved by GS&Co.) shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Securities Act and in accordance with Section 4(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to GS&Co.'s reasonable satisfaction; b. Cadwalader, Wickersham & Taft LLP, counsel for GS&Co., shall have furnished to GS&Co. their written opinion (a draft of such opinion is attached as Annex II(a) hereto), dated the Time of Delivery, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; c. Orrick, Herrington & Sutcliffe LLP, counsel for the Company, shall have furnished to GS&Co. their written opinion (a draft of such opinion is attached as Annex II(b) hereto), dated the Time of Delivery, in form and substance satisfactory to GS&Co., to the effect that: i. The Company and Pacific Gas and Electric Company, a California corporation (the "Utility") have each been duly incorporated and are validly existing and in good standing under the laws of the State of California. The Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to own and hold its properties and conduct its business as described in the Registration Statement. ii. This Agreement and the ASB have been duly authorized, executed and delivered by the Company. iii. The statements in the Prospectus under the caption "Description of Capital Stock," insofar as they purport to constitute a summary of the terms of the Shares, and under the caption "Plan of Distribution," only to the extent that they purport to constitute summaries of United States federal statutes, rules and regulations, or portions thereof, and agreements referred to therein are accurate and fair in all material respects. iv. The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to the date hereof appear on their face to be appropriately responsive in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from either of them, as to which we express no opinion; and each document filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in the Registration Statement and Prospectus (except for financial statements, financial statement schedules and other financial data included in either of them, as to which we express no opinion) appears on its face to be appropriately responsive in all material respects when so filed to the requirements of the Exchange Act and the rules and regulations under the Exchange Act. v. The Company is not required to be registered as an investment company under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder. Such counsel shall also state that they have participated in the preparation of the Registration Statement and the Prospectus and are familiar with the documents incorporated by reference therein and, although the limitations inherent in the independent verification of factual matters and in the role of outside counsel are such that they have not undertaken to investigate or verify independently, and do not assume responsibility for, the accuracy, completeness or fairness of the statements contained in either of them (other than as explicitly stated in paragraph (iv) above), based upon such participation (and relying as to certain factual matters in their evaluation of materiality to the extent they deemed reasonable on officers, employees and other representatives of the Company), no facts have come to their attention that led them to believe that (a) the Registration Statement or any amendment (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from those documents, as to which such counsel may express no such belief), at the time it became effective, contained an 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 or (b) the Prospectus or any amendment or supplement (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from those documents, as to which such counsel may express no such belief), at the time the Prospectus was issued or on the date of such counsel's opinion, included or includes an untrue statement of a material fact or omitted 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. Such counsel does not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required. d. Bruce R. Worthington, Esq., Senior Vice President and General Counsel of the Company, shall have furnished to GS&Co. his written opinion (a draft of such opinion is attached as Annex II(c) hereto), dated the Time of Delivery, in form and substance satisfactory to GS&Co., to the effect that: i. The Shares to be delivered at the Time of Delivery have been duly authorized and, when delivered and paid for in accordance with this Agreement, will be validly issued and outstanding, fully paid and non-assessable. All of the issued and outstanding shares of common stock of the Utility have been duly authorized and are validly issued and outstanding, fully paid and non-assessable, are owned of record directly or indirectly by the Company and, to such counsel's knowledge, are owned free and clear of all liens, encumbrances, equities or claims, except as disclosed in the Prospectus. ii. The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to the date hereof appear on their face to be appropriately responsive in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from either of them, as to which such counsel may express no opinion; and each document filed under the Exchange Act, and incorporated by reference in the Registration Statement and Prospectus (except for financial statements, financial statement schedules and other financial data included in either of them, as to which such counsel may express no opinion) appears on its face to be appropriately responsive in all material respects when so filed to the requirements of the Exchange Act and the rules and regulations under the Exchange Act. iii. The compliance by the Company with all of the provisions of this Agreement applicable to it and the performance by the Company of its obligations hereunder will not (i) result in a violation of Company's Articles of Incorporation, as amended, or By-Laws, as amended, (ii) breach or result in a default under any agreement, indenture or instrument listed as an Exhibit to the Registration Statement or (iii) violate any Applicable Law (other than any state securities laws, as to which such counsel may express no opinion) or any judgment, order or decree of any court or arbitrator known to such counsel, except in the case of clauses (ii) and (iii) where the breach or violation would not have a material adverse effect on the Company and its subsidiaries taken as a whole. For purposes of this opinion, the term "Applicable Law" means the federal laws of the United States and the laws of the State of California, in each case which, in such counsel's experience, are normally applicable to the transactions of the type contemplated by this Agreement. iv. Based on such counsel's review of Applicable Law, but without any investigation concerning any other laws, rules or regulations, no consent, approval, authorization or order of, or filing, registration or qualification with, any Governmental Authority, which has not been obtained, taken or made (other than as required by any state securities laws, as to which we express no opinion) is required under any Applicable Law for the performance by the Company of its obligations under this Agreement. For purposes of this opinion, the term "Governmental Authority" means any executive, legislative, judicial, administrative or regulatory body of the State of New York, the State of California or the United States of America. v. To such counsel's knowledge (without making any docket search or similar investigation) and other than as set forth in the Prospectus, there are no legal proceedings pending or threatened against the Company or the Subsidiaries that could reasonably be expected to have a material adverse effect on the Company and the Subsidiaries, taken as a whole, or could reasonably be expected to materially impair the Company's ability to perform its obligations under this Agreement. To such counsel's knowledge, there are no legal or governmental actions, suits or proceedings pending or threatened which are required to be disclosed in the Registration Statement, other than those disclosed therein. Such counsel shall also state that he has participated in the preparation of the Registration Statement and the Prospectus and is familiar with the documents incorporated by reference therein and, although he has not undertaken to investigate or verify independently, and does not assume responsibility for, the accuracy, completeness or fairness of the statements contained in either of them, based upon such participation (and relying as to certain factual matters in his evaluation of materiality to the extent they deemed reasonable on officers, employees and other representatives of the Company), no facts have come to his attention that led him to believe that (a) the Registration Statement or any amendment (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from those documents, as to which such counsel may express no such belief), at the time it became effective, contained an 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 or (b) the Prospectus or any amendment or supplement (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference in or omitted from those documents, as to which such counsel may express no such belief), at the time the Prospectus was issued or on the date of such counsel's opinion, included or includes an untrue statement of a material fact or omitted 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. Such counsel does not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required. e. On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at the Time of Delivery, Deloitte & Touche LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment to the Registration Statement and as of the Time of Delivery is attached as Annex I(b) hereto); f. (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any material change in the capital stock (other than changes occurring in the ordinary course of business and changes resulting from transactions relating to employee benefit plans or dividend reinvestment, stock option, stock award, retirement and stock purchase plans or repurchases of capital stock by the Company, including repurchases associated with the ASB or long-term debt of the Company or any of its subsidiaries or any change, or any development which would reasonably be expected to result in a change, in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of GS&Co. so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Time of Delivery on the terms and in the manner contemplated in the Prospectus; g. h. On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; i. On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (ii) a suspension or material limitation in trading in the Company's securities on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of GS&Co. makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Time of Delivery on the terms and in the manner contemplated in the Prospectus; j. The Shares to be delivered at the Time of Delivery shall have been duly listed on the New York Stock Exchange; k. The Company shall have complied with the provisions of Section 4(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and l. The Company shall have furnished or caused to be furnished to GS&Co. at the Time of Delivery certificates of officers of the Company satisfactory to GS&Co. as to the accuracy of the representations and warranties of the Company herein at and as of the Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Time of Delivery, and as to the other matters as GS&Co. may reasonably request, and the Company shall have furnished certificates as to the matters set forth in subsections (a) and (e) of this Section, and as to such other matters as GS&Co. may reasonably request. The Company shall indemnify and hold harmless GS&Co., and any such person who may be deemed to be an "Underwriter" within the meaning of the Securities Act, each person, if any, who controls GS&Co. within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each partner, principal, member, officer, director, employee and agent of GS&Co. from and against any and all losses, claims, damages or liabilities to which GS&Co. may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse GS&Co. for any legal or other expenses reasonably incurred by GS&Co. in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall 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 or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by GS&Co. expressly for use therein. a. GS&Co. will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Shares, or any amendment or supplement thereto, or arise out of or are based upon the 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 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 any Preliminary Prospectus, the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Shares, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by GS&Co. expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. b. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include any statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. c. If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and GS&Co. on the other from the offering of the Shares to which such loss, claim, damage or liability (or action in respect thereof) relates. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and GS&Co. on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and GS&Co. on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Company bear to the total commissions received by GS&Co. 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 on the one hand or GS&Co. on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and GS&Co. agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if GS&Co. 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 above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include 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 subsection (d), GS&Co. shall not be required to contribute any amount in excess of the amount by which the total price at which the applicable Shares distributed to the public were offered to the public exceeds the amount of any damages which GS&Co. 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. d. The obligations of, and the indemnification provided by, the Company and GS&Co. under this Section 7 shall be in addition to any liability which the Company and GS&Co. may otherwise have, and, for the avoidance of doubt, shall be in addition to any other indemnification provided by the Company and GS&Co. or any other party, including the indemnification provided under the ASB, and shall extend, upon the same terms and conditions, to each Indemnified Party (as defined in the ASB); provided, however, that only this Section 7 and not clause (ii) of paragraph 8 of Annex B to the ASB shall apply in respect of the Shares. The respective indemnities, agreements, representations, warranties and other statements of the Company and GS&Co., as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of GS&Co. or any controlling person of GS&Co. or the Company or any officer or director or controlling person of the Company and shall survive delivery of and payment for the Shares. All statements, requests, notices and agreements hereunder shall be in writing, and if to GS&Co. shall be delivered or sent by mail, telex or facsimile transmission to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: [Registration Department] and if to the Company shall be delivered or sent by mail to the address of the Company set forth in the Registration Statement, Attention: General Counsel. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. This Agreement shall be binding upon, and inure solely to the benefit of, GS&Co. and the Company and, to the extent provided in Sections 7 and 8 hereof, each Indemnified Party (as defined in the ASB), and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from GS&Co. shall be deemed a successor or assign by reason merely of such purchase. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the Company and GS&Co. hereby irrevocably waives, to the fullest extent permitted by applicable 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. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. The Company is authorized, subject to applicable law, to disclose any and all aspects of this potential transaction that are necessary to support any U.S. federal income tax benefits expected to be claimed with respect to such transaction, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, without GS&Co. imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, "tax structure" is limited to any facts that may be relevant to that treatment. If the foregoing is in accordance with your understanding, please sign and return to us five counterparts hereof, and upon the acceptance hereof by GS&Co., this letter and such acceptance hereof shall constitute a binding agreement between GS&Co. and the Company. Very truly yours, PG&E Corporation By: Name: Title:   Accepted as of the date hereof: Goldman, Sachs & Co. By: (Goldman, Sachs & Co.) SCHEDULE I Name State of Incorporation Pacific Gas and Electric Company California ANNEX I Pursuant to Section 6(e) of the Agreement, the accountants shall furnish letters to GS&Co. to the effect that: (i) They are an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of the Securities Act and the applicable published rules and regulations thereunder adopted by the Commission and the PCAOB; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) audited by them and included or incorporated by reference in the Prospectus or the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Securities Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the PCAOB of the unaudited consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Company for the periods specified in such letter, as indicated in their reports thereon, copies of which have been separately furnished to GS&Co.; (iii) They have made a review in accordance with standards established by the PCAOB of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Company's quarterly report on Form 10-Q incorporated by reference into the Prospectus as indicated in their reports thereon copies of which have been separately furnished to GS&Co.; and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatements where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) On the basis of limited procedures, not constituting an examination in accordance with the standards of the PCAOB, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included or incorporated by reference in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus or included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included or incorporated by reference in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year incorporated by reference in the Prospectus; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived any unaudited condensed financial statements referred to in clause (A) and any unaudited income statement data and balance sheet items included or incorporated by reference in the Prospectus and referred to in clause (B) were not determined on a basis substantially consistent with the basis for the audited consolidated financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year incorporated by reference in the Prospectus; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest financial statements included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or shareholders' equity or other items specified by GS&Co., or any increases in any items specified by GS&Co., in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by GS&Co., or any increases in any items specified by GS&Co., in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by GS&Co., except in each case for decreases or increases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vi) In addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by GS&Co., which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by GS&Co. or in documents incorporated by reference in the Prospectus specified by GS&Co., and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. ANNEX II(a) FORM OF OPINION OF Cadwalader, Wickersham & Taft LLP   ANNEX II(b) FORM OF OPINION OF Orrick, Herrington & Sutcliffe LLP ANNEX II(c) FORM OF OPINION OF BRUCE R. WORTHINGTON, ESQ.          

  INTREPID HOLDINGS, INC.   EXECUTIVE EMPLOYMENT AGREEMENT   This Executive Employment Agreement (the “Agreement”) is entered into as of December 19, 2006, by and between Intrepid Holdings, Inc, a Nevada Corporation (the “Company”) and Toney E. Means (“Executive”).   1. Duties and Scope of Employment. (a) Positions and Duties. As of the date of approval of this Agreement by the Board of Directors (the “Board”) of the Company, (the “Effective Date”), Executive will serve as the President of the Company and the Company’s wholly owned subsidiaries, My Healthy Access, Inc., Rx Fulfillment Services, Inc., Intrepid Systems, Inc., My Discount Health Plan, Inc., My Healthy Access Providers, PLLC and My Urban Clinic, Inc. As President of each Company Executive will report to the CEO of Intrepid Holdings, Inc. As of the Effective Date, 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. As of the Effective Date, Executive shall also serve as a Director of the Board. 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 voluntarily, without any further required action by Executive, as of the end of 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. Notwithstanding the foregoing, Executive expects to serve as a member of the Board of Directors of not more than three (3) corporations of his choice and such service will not constitute a violation of this section 1(c), provided such services do not interfere with Executive’s obligations to the 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 membership on any boards of directors.   (d) Other Entities. Executive agrees to serve and will be appointed, 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. Compensation.   (a) Base Salary. For the period beginning on the Effective Date and ending December 31, 2006, the Company will pay Executive an annual salary of $110,000 as compensation for his services (such annual salary, as is then effective, to be referred to herein as “Base Salary”). Thereafter, Executive’s Base Salary shall be increased to $204,000 per annum. 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) Interim Period Bonus; Annual Incentive. Executive will be eligible to receive annual cash incentives payable for the achievement of performance goals established by the Board or by the Compensation Committee of the Board (the “Committee”). During the Employment Term, Executive’s target annual incentive (“Target Annual Incentive”) will be not less than 25% of Base Salary, with a maximum potential opportunity of 200% of Base Salary. The actual earned annual cash incentive, if any, payable to Executive for any performance period will depend upon the extent to which the applicable performance goal(s) specified by the Committee are achieved or exceeded and will be adjusted for under- or over-performance.    (c) Stock Options.   (i) On the Effective Date, Executive will be granted nonstatutory stock options to purchase up to 1,000,000 shares of Company common stock at a per share exercise price equal to the last sale price displayed by the OTC Bulletin Board for the common stock of the Company on the Effective Date (the “Option Grant”). The Option Grant will be granted under and subject to the terms, definitions and provisions of the Company’s 2005 Stock Plan for Directors,   -2- --------------------------------------------------------------------------------     Officers and Consultants (the “Plan”) and will be scheduled to vest at a rate of 33% on each anniversary of the grant over three (3) years assuming Executive’s continued employment with the Company on each scheduled vesting date. Except as provided in this Agreement, the Option Grant will be subject to the Company’s standard terms and conditions for options granted under the Plan. The Company must hold a reserve and/or take the appropriate action to make adjustments to the Plan to provide for Executive’s options.   (ii) On the Effective Date, Executive will be granted 250,000 shares of restricted stock (the “Restricted Stock Grant”). The Restricted Stock Grant will be granted under and subject to the terms, definitions and provisions of the Company’s Plan, and will vest at the rate of 50 % immediately and 25% at 6 months from October 18, 2006 and 25% 12 months from October 2006 assuming Executive’s continued employment with the Company on each scheduled vesting date. Except as provided in this Agreement, the Restricted Stock Grant will be subject to the Company’s standard terms and conditions for restricted stock granted under the Plan.   (iii) The Company will use its commercially reasonable best efforts to register all shares covered by the Option Grant, and the Restricted Stock Grant on Form S-8 as soon as administratively practicable following the Effective Date.   4. Employee Benefits.   (a) Generally. Executive will be eligible to participate in accordance with the terms of all Company employee benefit plans, policies and arrangements that are applicable to other executive officers of the Company, as such plans, policies and arrangements may exist from time to time.   (b) Vacation. Executive will be entitled to receive paid annual vacation in accordance with Company policy for other senior executive officers. In no event will Executive receive less than four (4) weeks of paid vacation time per calendar year.   5. 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.   6. 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; (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 Executive resigns for Good Reason, Executive will be entitled to the amounts and benefits specified in Section 7.   -3- --------------------------------------------------------------------------------     7. 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 8, Executive will receive: (i) continued payment of the aggregate of Executive’s Base Salary plus the Target Annual Incentive for the year in which the termination occurs (less applicable tax withholdings) for twelve (12) months, such amounts to be paid out bi-weekly in accordance with the Company’s normal payroll policies; (ii) [full] vesting with respect to Executive’s then outstanding, unvested equity awards (other than any awards that vest based on performance), and (iii) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (i) twelve (12) months, payable when such premiums are due (provided Executive validly elects to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), or (ii)  the date upon which Executive and Executive’s eligible dependents become covered under similar plans.   (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 8, Executive will receive: (i) continued payment of the aggregate of Executives’ Base Salary plus the Target Annual Incentive for the year in which the termination occurs (less applicable tax withholdings), for twenty-four (24) months, such amounts to be paid out bi-weekly in accordance with the Company’s normal payroll policies; (ii) [full] vesting with respect to Executive’s then outstanding unvested equity awards (other than any awards that vest based on performance), and (iii) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (i) twenty-four (24) months, payable when such premiums are due (provided Executive validly elects to continue coverage under COBRA), or (ii)  the date upon which Executive and Executive’s eligible dependents become covered under similar plans.   (c) Additional Severance Payment. If Executive’s employment is terminated under Section 7(a) or 7(b) of this Agreement, then Executive will be entitled to an additional severance payment of $1,000,000 if within the first 12 months, $667,000 if within the second 12 months, and $334,000 if within the third 12 months of this Agreement respectively.   (d) Voluntary Termination Without Good Reason or Termination for Cause. If Executive’s employment is terminated voluntarily without Good Reason or is terminated for Cause by the Company, then, except as provided in Section 6, (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.   8. 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 7 will be subject to Executive signing and not revoking a   -4- --------------------------------------------------------------------------------     separation agreement and release of claims in a form acceptable to the Company. No severance or other benefits will be paid or provided until the separation agreement and release agreement becomes effective.   (b) Non-solicitation and Non-competition. The receipt of any severance or other benefits pursuant to Section 7 will be subject to Executive agreeing that during the Employment Term and Continuance Period, Executive will not (i) solicit any employee of the Company (other than Executive’s personal assistant) for employment other than at the Company, or (ii) directly or indirectly engage in, have any ownership interest in or participate in any entity that as of the date of termination, competes with the Company in any substantial business of the Company or any business reasonably expected to become a substantial business of the Company. Executive’s passive ownership of not more than 1% of any publicly traded company and/or 5% ownership of any privately held company will not constitute a breach of this Section 8(b). This ownership restriction does not apply to any company, whether publicly traded or privately held, that does not compete with the Company.   (c) Nondisparagement. During the Employment Term and Continuance Period, Executive will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding the Company. 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.   (d) 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 and the provisions of this Section 8.   (e) 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.   9. Excise Tax Gross-Up. In the event that the benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and will be subject to the excise tax imposed by Section 4999 of the Code, then Executive will receive (i) a payment from the Company sufficient to pay such excise tax, and (ii) an additional payment from the Company sufficient to pay the federal and state income and employment taxes and additional excise taxes arising from the payments made to Executive by the Company pursuant to this sentence. Unless Executive and the Company agree otherwise in writing, the determination of Executive’s excise tax liability, if any, and the amount, if any, required to be paid under this Section 9 will be made in writing by the independent auditors who are primarily used by the Company immediately prior to the Change of Control (the “Accountants”). For purposes of making the calculations required by this Section 9, 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. Executive and the Company agree to furnish such information and documents as the Accountants may reasonably request in order to make a determination under this Section 9.  The Company will   -5- --------------------------------------------------------------------------------     bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9.   10. 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;   (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 of Control. For purposes of this Agreement, “Change of Control” will mean the occurrence of any of the following events:   -6- --------------------------------------------------------------------------------       (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) more than 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) becoming the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities; or                   (iv) A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” 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) Continuance Period. For purposes of this Agreement, “Continuance Period” will mean the period of time beginning on the date of the termination of Executive’s employment and ending on the date on which Executive is no longer receiving Base Salary payments under Section 7.   (d) 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.   (e) 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;     -7- --------------------------------------------------------------------------------     (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.   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.   (f) 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.   11. Indemnification. Subject to applicable law, Executive will be provided indemnification to the maximum extent permitted by the Company’s Articles of Incorporation or Bylaws, including, if applicable, any directors and officers insurance policies, with such indemnification to be on terms determined by the Board or any of its committees, but on terms no less favorable than provided to any other Company executive officer or director and subject to the terms of any separate written indemnification agreement.   12. Confidential Information. Executive will execute the Company’s standard form of confidential information, intellectual property, non-competition and non-solicitation agreement, appended hereto as Exhibit A (the “Confidential Information Agreement”).   13. 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.   -8- --------------------------------------------------------------------------------       14. 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:   If to the Company: Attn: Chairman of the Compensation Committee c/o Corporate Secretary 3200 Wilcrest, Suite 575 Houston, TX 77042   If to Executive:   at the last residential address known by the Company.   15. 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.   16. 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. 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 Houston, Texas, 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 Texas 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. 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.   17. Legal Expenses. The Company will reimburse Executive for reasonable and actual legal expenses incurred by him in connection with the negotiation, preparation and execution of this Agreement.   -9- --------------------------------------------------------------------------------     18. Integration. This Agreement, together with the Confidential Information Agreement and the standard forms of equity award grant that describe Executive’s outstanding equity awards, 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. 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 to be signed upon Executive’s hire, the terms in this Agreement will prevail.   19. 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.   20. Survival. The Confidential Information Agreement and the Company’s and Executive’s responsibilities under Sections 7 and 8 will survive the termination of this Agreement.   21. Headings. All captions and Section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.   22. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.   23. Governing Law. This Agreement will be governed by the laws of the state of Texas without regard to its conflict of laws provisions.   24. 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.   25. 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.   26. Code Section 409A. Notwithstanding anything to the contrary in this Agreement, if the Company reasonably determines that Section 409A of the Code will result in the imposition of additional tax to an earlier payment of any severance or other benefits otherwise due to Executive on or within the six (6) month period following Executive’s termination, the severance benefits will accrue during such six (6) 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 Executive’s termination. All subsequent payments, if any, will be payable as provided in this Agreement.   27. 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:   INTREPID HOLDINGS, INC.     /s/ James Shelton                                                            Date: December 19, 2006 James Shelton, Director and Chairman of the Compensation Committee   EXECUTIVE:   /s/ Toney E. Means                                                        Date: December 19, 2006 Toney E. Means   -11- --------------------------------------------------------------------------------  

Exhibit 10.3 NEITHER THIS SECURITY NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. NEITHER THIS SECURITY NOR THE SHARES OF STOCK ISSUED UPON EXERCISE HEREOF MAY BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND EXEMPTION OR QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY OR SUCH SHARES IN VIOLATION OF THESE RESTRICTIONS SHALL BE VOID. THE TRANSFER OF THIS SECURITY AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE ALSO RESTRICTED BY THIS AGREEMENT. ALLEGRO BIODIESEL CORPORATION STOCK OPTION AGREEMENT PURSUANT TO 2006 INCENTIVE COMPENSATION PLAN (As amended and restated effective September 20, 2006) Jeffrey Lawton (the “Optionee”) is hereby granted an option (the “Option”) to purchase shares of the Common Stock of Allegro Biodiesel Corporation, a Delaware corporation (the “Company”) pursuant to this Stock Option Agreement (this “Agreement”) and the Company’s 2006 Incentive Compensation Plan (as amended, the “Plan”), the provisions of which are incorporated herein by reference. The Option is amended and restated as set forth herein (i) to reflect the assumption by the Company of the Option previously granted by Diametrics Medical, Inc. (“Diametrics”), pursuant to the merger of Diametrics into the Company, and (ii) to restrict the period during which the Option may be exercised, in accordance with Section 409A of the Code.     1. TERMS OF GRANT. “Date of Option Grant” means September 20, 2006. “Option Shares” means 348,480 shares of Common Stock; $0.01 per share, of the Company. “Exercise Price” means $0.7587 per share of Common Stock “Option Expiration Date” means December 31, 2008, or such later date by which the Option may be exercised pursuant to Section 7.2.     2. DEFINITIONS AND CONSTRUCTION. 2.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Plan. 2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. This Option is intended to comply with Section 409A of the Code and shall be interpreted and construed accordingly.     3. TAX CONSEQUENCES. The Option is not intended to constitute an “incentive stock option” as that term is used in Code Section 422. --------------------------------------------------------------------------------   4. EXERCISE OF THE OPTION. 4.1 Vesting and Right to Exercise. Except as otherwise provided herein, and prior to the termination of the Option (as provided in Section 6), the Option shall be vested: (i) on the date that is three months after its date of grant, for 25% of the shares of Common Stock subject to such Option on its date of grant, (ii) on the date that is six months after its date of grant, for an additional 25% of the shares of Common Stock subject to such Option on its date of grant, (iii) on the date that is nine months after its date of grant, for an additional 25% of the shares of Common Stock subject to such Option on its date of grant and (iv) on the date that is twelve months after its date of grant, for an additional 25% of the shares of Common Stock subject to such Option on its date of grant. Except as otherwise provided herein, the Option shall be exercisable, to the extent the Option is vested, not earlier than January 1, 2008 and not later than the Option Expiration Date; provided that if a Change in Control occurs prior to January 1, 2008, and such Change in Control is also a “change in control event” within the meaning of Section 409A of the Code, the Option shall either be (i) converted into a right to receive a cash payment pursuant to Section 5.8(a)(2) of the Plan or (ii) be exercisable during the period beginning on the date of such Change in Control and ending on the later to occur of (A) the last day of the calendar year in which such Change in Control occurs or (B) the date that is 2 1/2 months after the date of such Change in Control. 4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company in the form of Exhibit A and Exhibit B hereto. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Chief Executive Officer of the Company, or other authorized representative of the Company, prior to the termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate Exercise Price for the number of Option Shares being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such written notice and the aggregate Exercise Price. 4.3 Payment of Exercise Price. (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of Option Shares for which the Option is being exercised shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company of whole Option Shares owned by the Optionee having a Fair Market Value not less than the aggregate Exercise Price (iii) by retention by the Company of that number of Options Shares (the “Retained Shares”) having an aggregate Fair Market Value on the date of exercise equal to the aggregate exercise price for all Option Shares for which the Option is being exercised, so that the Optionee receives the number of Option Shares for which the Option is exercised less the Retained Shares or (iv) by any combination of the foregoing. If the Retained Shares include a fractional share, the Retained Shares will be rounded up to the nearest whole share. (b) Limitations on Forms of Consideration. Notwithstanding the foregoing, the Option may not be exercised by tender to the Company of Option Shares to the extent such tender, or attestation to the ownership, of Stock would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. The Option may not be exercised by tender to the Company of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. 4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any Option Shares acquired upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon   2 -------------------------------------------------------------------------------- exercise of the Option. The Optionee is cautioned that the Option is not exercisable unless the tax withholding obligations of the Company are satisfied. Accordingly, the Optionee may not be able to exercise the Option when desired even though the Option is vested, and the Company shall have no obligation to issue a certificate for such shares. 4.5 Certificate Registration. The certificate for the Option Shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, the Optionee’s heirs. 4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of Option Shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of Option Shares upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.     5. NONTRANSFERABILITY OF THE OPTION AND OPTION SHARES. The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent provided in Section 7, may be exercised by the Optionee’s legal representative or by any person empowered to do so under the deceased Optionee’s will or under the then applicable laws of descent and distribution.     6. TERMINATION OF THE OPTION. Except as provided in Section 7.2, the Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Expiration Date, (b) the later to occur of (i) the last day of the calendar year in which a Change in Control occurs or (ii) 2 1/2 months after the date of such Change in Control or (c) the termination of the Optionee’s Service for Cause as described in Section 7.     7. EFFECT OF TERMINATION OF SERVICE. 7.1 Option Exercisability. If the Optionee’s employment with or service to the Company (“Service”) terminates for any reason other than for Cause, the Option shall continue to be exercisable pursuant to Section 4.1. If the Optionee’s Service is terminated for Cause, the Option shall terminate and cease to be exercisable immediately upon such termination of Service. 7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, then to the extent permitted without penalty under Section 409A of the Code, the Option shall remain exercisable until thirty (30) days after the date the Optionee is notified by the   3 -------------------------------------------------------------------------------- Company that the Option is exercisable. The Company makes no representation as to the tax consequences of any such delayed exercise. The Optionee should consult with the Optionee’s own tax advisor as to the tax consequences of any such delayed exercise.     8. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued. Nothing in this Agreement shall confer upon the Optionee any right to continue in Optionee’s Service or interfere in any way with any right of the Company to terminate the Optionee’s Service at any time.     9. LEGENDS. The Company may at any time place legends referencing the this Agreement and any applicable federal, state or foreign securities law restrictions on all certificates representing Option Shares subject to the provisions of this Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing Option Shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section 9. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following: 9.1 “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 RULE 701 UNDER THE ACT, 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.” 9.2 “THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, MORTGAGE, HYPOTHECATION, ENCUMBRANCE, GIFT OR OTHER DISPOSITION OF SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY A STOCK OPTION AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.”     10. REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE. 10.1 Optionee hereby confirms, that this Option is and the Option Shares will be acquired for investment for the Optionee’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Optionee has no present intention of selling, granting any participation in, or otherwise distributing such Option Shares. Optionee further represents that he does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to any Person, with respect to this Option or any of the Option Shares. 10.2 Optionee has had an opportunity to ask questions of and receive answers from the Company regarding business, management and financial affairs of the Company and the terms and conditions of the offering of this Option and the Option Shares. 10.3 Optionee understands that this Option and the Option Shares have not been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent   4 -------------------------------------------------------------------------------- and the accuracy of Optionee’s representations as expressed herein. Optionee understands that this Option is and the Option Shares are “restricted securities” under applicable federal and state securities laws and that, pursuant to these laws, the Optionee must hold this Option is and the Option Shares indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Optionee acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Option and the Option Shares, and on requirements relating to the Company that are outside of the Optionee’s control, and which the Company is under no obligation and may not be able to satisfy. 10.4 Optionee is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.     11. RESTRICTIONS ON TRANSFER OF SHARES. No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred.     12. BINDING EFFECT. Subject to the restrictions on transfer set forth herein, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.     13. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan or the Option at any time; provided, however, that no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.     14. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address set forth below or at such other address as such party may designate in writing from time to time to the other party.     15. INTEGRATED AGREEMENT. This Agreement and the Plan constitute the entire understanding and agreement of the Optionee and the Company with respect to the subject matter contained herein and therein and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of this Agreement shall survive any exercise of the Option and shall remain in full force and effect.   5 --------------------------------------------------------------------------------   16. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, or if the Company is reincorporated in another state by merger or otherwise, the laws of such other state, and construed in accordance therewith without giving effect to principles of conflicts of law. [Signature Page Follows]   6 -------------------------------------------------------------------------------- By their signatures below, the parties hereto agree that the Option is governed by the terms and conditions of the Plan as in effect on the Date of Option Grant, which is attached hereto. The Optionee acknowledges receipt of a copy of the Plan, represents that he or she is familiar with the provisions contained therein, and hereby accepts the Option subject to all of the terms and conditions thereof.   JEFFREY LAWTON     ALLEGRO BIODIESEL CORPORATION By:   /s/ Jeffrey Lawton     By:   /s/ W. Bruce Comer III       Name:   W. Bruce Comer III       Title:   Chief Executive Officer Address: 1521 36th Avenue Seattle, WA 98122       Address: 6033 West Century Blvd., Suite 850 Los Angeles, CA 90045   7 -------------------------------------------------------------------------------- EXHIBIT A OPTION EXERCISE NOTICE Allegro Biodiesel Corporation 6033 West Century Blvd., Suite 850 Los Angeles, CA 90045 Attn: Secretary Ladies and Gentlemen: This constitutes notice that, as of the date this notice and payment of the exercise price is received by the Secretary of Allegro Biodiesel Corporation (the “Company”), the Optionee is electing to exercise the stock option granted under Company’s 2006 Incentive Compensation Plan (the “Plan”) and identified below, and to purchase the number of shares for the price set forth below:   Grant Date of stock option:    __________________________ Number of shares as to which option is exercised:    ________________ Stock certificate to be issued in name of:    ______________________ Total exercise price:    $____________ Cash payment delivered with this election:    $____________ Principal amount of promissory note delivered with this election:    $____________ Value of _____ shares of common stock delivered with this election:1    $____________ -------------------------------------------------------------------------------- 1 This alternative applies only if shares meet the public trading requirements. Shares must be valued in accordance with the terms of the option being exercised, must have been owned for the minimum period required in the option, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from the certificate.   8 -------------------------------------------------------------------------------- By this exercise, the Participant agrees (i) to provide such additional documents as the Company may require pursuant to the terms of the Plan, and (ii) to provide for the payment to the Company (in the manner determined by the Company) of amounts required to satisfy the Company’s withholding obligation, if any, relating to this option exercise. The Participant also acknowledges having received, read and understood the Plan, and agrees to abide by and be bound by its terms and conditions.   Submitted by: JEFFREY LAWTON     Accepted by: ALLEGRO BIODIESEL CORPORATION        By:      Signature     Its:               Print Name   Address:   1521 36th Ave. Seattle, WA 98122     Date Received: December 26, 2006   9 -------------------------------------------------------------------------------- EXHIBIT B INVESTMENT REPRESENTATION STATEMENT [This form is to be completed at the time option is exercised, unless stock is publicly traded at that time.] Effective as of ___________________ [insert date of option exercise] (the “Effective Date”), the undersigned (“Optionee”) has elected to purchase __________ shares of the Common Stock, par value $0.01 per share (the “Shares”), of Allegro Biodiesel Corporation, a Delaware corporation (the “Company”) under and pursuant to the Company’s 2006 Incentive Compensation Plan (the “Plan”) and the Stock Option Agreement dated ______________ [insert grant date of option] (the “Option Terms”). The Optionee hereby makes the following certifications, representations, warranties and agreements with respect to the purchase of the Shares: The Optionee acknowledges that he or she is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. The Optionee represents and warrants to the Company that he or she is acquiring these Shares for investment for the Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). The Optionee further acknowledges that the Shares have not been registered under the Securities Act, are deemed to constitute “restricted securities” under Rule 701 and Rule 144 promulgated under the Securities Act and must be held indefinitely unless they are subsequently registered under the Securities Act and qualified under any applicable state securities laws or an exemption from such registration and qualification is available. The Optionee further acknowledges that the Company is under no obligation to register the Shares. The Optionee further acknowledges that he or she is familiar with the provisions of Rule 701 and Rule 144, which Rules, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. The Optionee understands that if the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Optionee will not be able to resell the Shares under Rule 701 (i) until at least ninety (90) days after the Company became subject to such reporting requirements (or any longer stand-off period, as discussed below, may require) and (ii) unless such resale satisfies those provisions of Rule 144 that are specified in Rule 701(g)(3). Even if the Company is not subject to such reporting requirements, the Shares may be resold in certain limited circumstances subject to satisfaction of all of the applicable provisions of Rule 144. The Optionee further acknowledges that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required in order to resell the Shares. The Optionee understands that no assurances can be given that any such registration will be made or any such exemption will be available in such event. The Optionee further acknowledges and understands that all certificates representing any of the Shares shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting any other restrictions pursuant to the Company’s Articles of Incorporation, Bylaws, the Option Terms, the Plan and/or applicable securities laws. The Optionee further agrees that, if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, the Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period, or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company (the “Market Standoff Period”), following the effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to -------------------------------------------------------------------------------- become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. The Optionee further acknowledge and agrees that the Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the representations, warranties, agreements or other provisions contained in this Notice of Exercise or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.       JEFFREY LAWTON   2

Exhibit 10.1   HARTE-HANKS, INC.   BONUS STOCK AWARD   Unless defined in this Bonus Stock Award (this “Award Document”), capitalized terms will have the same meanings ascribed to them in the Harte-Hanks, Inc. 2005 Omnibus Incentive Plan (as may be amended, the “Plan”).   Pursuant to Sections 10 and 12 of the Plan, you have been granted Common Shares on the following terms and subject to the provisions of the Plan, which is incorporated by reference. In the event of a conflict between the provisions of the Plan and this Award Document, the provisions of the Plan will prevail.   Participant:                                                                                           Total Number of Shares Granted:                                                     Common Shares     Fair Market Value per Share:   $                                          per Common Share     Total Fair Market Value of Award:   $                                                                                     Grant Date:                                                                                           Vesting Schedule:   Subject to the terms of Exhibit A attached hereto, all shares subject to this Award Document are vested and non-forfeitable on                                By your signature and the signature of the Company’s representative below, you and the Company agree that these Common Shares are granted under and governed by the terms and conditions of the Plan and the terms and conditions set forth in the attached as Exhibit A.   RECIPIENT         HARTE-HANKS, INC.           By:                Title:      Print Name                -------------------------------------------------------------------------------- EXHIBIT A   TERMS AND CONDITIONS OF THE BONUS STOCK AWARD   Payment for Shares.   No payment is required for the Common Shares that you receive under this Award.   Vesting.   The Common Shares that you receive under this Award will vest in accordance with the “Vesting Schedule” set forth in the Award Document, provided that you are still employed by the Company at the time such shares vest. The Common Shares will also vest upon your termination of employment prior to the dates the shares vest if such termination is by reason of your death, disability, retirement or, after a Change in Control, termination by the Company without Cause, or at such other time as determined by the Board or the Compensation Committee. In the event your employment terminates prior to the date the shares vest for a reason not specified above, including but not limited to, a termination by the Company with or without Cause, or a voluntary termination by you, all Common Shares shall be forfeited at the time of such termination.   Restricted Shares.   Unvested Common Shares that you receive under this Award will be considered “Restricted Shares”. You may not sell, transfer, pledge or otherwise dispose of, 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 Restricted Shares. Common Shares that vest in accordance with the “Vesting Schedule” set forth in the Award Document and this Exhibit A will no longer be considered Restricted Shares.   Stock Certificates.   Your Restricted Shares will be held for you by the Company in book entry form at its transfer agent. Upon the vesting of your Restricted Shares, a stock certificate for those Common Shares will be issued and released to you.   Withholding Taxes.   No stock certificates will be released to you unless you have made acceptable arrangements to pay any withholding taxes that may be due as a result of receipt of this Award or the vesting of the Common Shares that you receive under this Award. These arrangements may include withholding of Common Shares that otherwise would be released to you when they vest or surrendering of Common Shares that you already own. The Fair Market Value of the Common Shares that are withheld or that you surrender, determined as of the date when the taxes otherwise would have been withheld in cash, will be applied as a credit against the taxes. -------------------------------------------------------------------------------- No Guarantee of Continued Service.   YOU ACKNOWLEDGE AND AGREE THAT THE VESTING OF COMMON SHARES PURSUANT TO THE “VESTING SCHEDULE” SET FORTH IN THE AWARD DOCUMENT IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR BEING GRANTED THIS AWARD). YOU FURTHER ACKNOWLEDGE AND AGREE THAT THIS AWARD DOCUMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE “VESTING SCHEDULE” DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT OR ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD OR AT ALL AND WILL NOT INTERFERE IN ANY WAY WITH YOUR RIGHT OR THE COMPANY’S RIGHT TO DISMISS YOU FROM EMPLOYMENT, FREE FROM ANY LIABILITY, OR ANY CLAIM UNDER THE PLAN, AT ANY TIME, WITH OR WITHOUT CAUSE.   Entire Agreement; Governing Law.   The Plan and this Award Document 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 you with respect to the subject matter hereof. This Award Document may not be modified in a manner that impairs your rights heretofore granted under the Plan, except with your consent. This Award Document is governed by the internal substantive laws but not the choice of law rules of Delaware.   BY SIGNING THE AWARD DOCUMENT, YOU ACKNOWLEDGE RECEIPT OF A COPY OF THE PLAN AND REPRESENT THAT YOU ARE FAMILIAR WITH THE TERMS AND CONDITIONS OF THE PLAN, AND HEREBY ACCEPT THIS AWARD SUBJECT TO ALL PROVISIONS IN THIS AWARD DOCUMENT AND IN THE PLAN. YOU HEREBY AGREE TO ACCEPT AS FINAL, CONCLUSIVE AND BINDING ALL DECISIONS OR INTERPRETATIONS OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD DOCUMENT.

EXHIBIT 10.64 NALCO HOLDING COMPANY 2004 STOCK INCENTIVE PLAN RESTRICTED STOCK UNIT AGREEMENT 2006 GRANT THIS AGREEMENT, is made effective as of February 15, 2006 (the "GRANT DATE"), between Nalco Holding Company (the "COMPANY") and Douglas A. Pertz (the "PARTICIPANT"). RECITALS: WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that the Participant be granted the Restricted Stock Units provided for herein pursuant to the Plan and the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. (a) "PLAN" means the Nalco Holding Company 2004 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time. (b) "RESTRICTED STOCK UNIT" means the unfunded, unsecured right of the Participant to receive a share of the Company's common stock, par value $0.01 per share (the "SHARES"). 2. Grant of Restricted Stock Units. The Company hereby grants to the Participant, subject to the terms and conditions of this Agreement and the Plan, 3,670 Restricted Stock Units. The Participant shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in Shares in respect of the Restricted Stock Units until such Restricted Stock Units have been distributed to the Participant in the form of Shares. 3. Delivery of Shares Underlying the Restricted Stock Units. (a) In General. Subject to Sections 3(b), 3(c) and 3(d), (i) the Company shall issue or cause there to be transferred to the Participant on January 1, 2008, a number of Shares equal to the aggregate number of Restricted Stock Units granted to the Participant under this Agreement. (b) Change of Control. Notwithstanding the foregoing, upon a Change of Control, the Company shall issue or cause there to be transferred, to the extent not previously cancelled or forfeited, to the Participant a number of Shares equal to the aggregate number of Restricted Stock Units granted to the Participant under this Agreement. (c) Cancellation of Restricted Stock Units. Upon the issuance or transfer of Shares in accordance with this Section 3, a number of Restricted Stock Units equal to the number of Shares issued or transferred to the Participant shall be cancelled. (d) Termination of Service on the Board of Directors. If the Participant ceases to be a member of the Board of Directors of the Company for any reason, the Restricted Stock Units shall be immediately canceled by the Company without any payment or other consideration. (e) Registration or Qualification. Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board or the Company's Compensation Committee ("Committee") shall in its sole reasonable discretion determine to be necessary or advisable. (f) Certificates. As soon as practicable following the delivery date of the Shares subject to the Restricted Stock Units, the Company shall issue certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves 4. Legend on Certificates. The certificates representing the Shares issued to the Participant upon the vesting of the Restricted Stock Units shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company's Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 5. Transferability. Unless otherwise determined by the Committee, a Restricted Stock Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. 6. Withholding. The Company or its Affiliate shall have the right to withhold from any payment due or transfer made with respect to the Restricted Stock Unit, any applicable withholding taxes in respect of the Restricted Stock Unit or any payment or transfer with respect to the Restricted Stock Unit or under the Plan and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes. 7. Securities Laws. Upon the acquisition of any Shares pursuant to the vesting of the Restricted Stock Units, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. 8. Notices. Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws. 10. Restricted Stock Units Subject to the Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Units and the Shares received upon vesting are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail 11. Counterparts. 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. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. NALCO HOLDING COMPANY By: /s/ Stephen N. Landsman ------------------------------------------ Its Vice President, General Counsel & Corporate Secretary /s/ Douglas A. Pertz ----------------------------------------------- Participant

Exhibit 10.1 Separation Agreement and General Release            Separation Agreement and General Release, dated as of December 31, 2006 (this “Agreement“), by and between Peter K. Stevenson (“Employee“), an individual residing at 4510 Arniel Place, Fairfax, Virginia 22030 and Globix Corporation (“Employer“), a Delaware corporation with its principal place of business at 139 Centre Street, New York, New York 10013.            WHEREAS, Employer and Employee are parties to an Employment Agreement, dated September 15, 2005, as amended by a letter agreement dated January 6, 2006 (as so amended, the “Employment Agreement“); and            WHEREAS, the term of employment under the Employment Agreement shall expire as of the date hereof;            NOW, THEREFORE, the parties, for good and valuable consideration, agree as follows:            1.            Post-Employment Compensation and Similar Matters.            (a) In consideration of Employee‘s signing this Agreement and compliance with the promises made herein, Employer agrees that: (i) the options scheduled on Exhibit “A,“ which are fully vested and exercisable, will remain fully vested and exercisable at Employee‘s sole discretion through December 31, 2007 and will thereafter terminate; (ii) Employee will be given the right to effect a “net exercise“ of such options on or before December 31, 2007 if employees of Employer are extended such rights, which “net exercise“ program has been approved by the Compensation Committee of Employer; (iii) Employee will receive $175,000, the full amount of his allocated bonus for 2006, on the earlier of January 31, 2007 or the date employees participating in Employer’s 2006 incentive plan receive their bonus; (iv) Employee will receive two weeks of vacation pay on January 12, 2007; and (v) Employer will pay to Employee on January 12, 2007 an amount in cash equal to $650, representing the premium for 2006 on one year of term life insurance for Employee. Although the net exercise provisions will be subject to the final provisions of the amendment to the 2003 Stock Option Plan of Employer (the “Plan“) effecting the net exercise program, the program contemplates that, upon exercise of an option, if Employee in his sole discretion elects to effect a net exercise for all or part of the option, Employee will be entitled to receive shares of common stock having a fair market value, as determined under the Plan as of the date of exercise (the “fair market value“), equal to the difference between the aggregate exercise price of the number of shares for which the option is being exercised pursuant to the net exercise provisions and the fair market value of such shares..            (b) Employee‘s business expenses incurred in connection with Employer‘s business during the period he was employed by Employer will be reimbursed by Employer in accordance with Employer‘s reimbursement policies if Employee has submitted adequate documentation prior to December 29, 2006, or within no more than two weeks following such later date as Employee first receives documentation of such expenses in the case expenses charged to a credit card charge account that is billed on a monthly basis. --------------------------------------------------------------------------------            (c) Employee will be entitled to coverage under Employer‘s health insurance plans to the extent provided under COBRA, upon payment by Employee of the amounts provided under COBRA. Employee will have such post-employment rights under Employer‘s other employee benefit plans as may be provided under the terms of such plans.            (d) Employer agrees that for purposes of Section 8.3 of the Employment Agreement, there has been no “voluntary resignation“ or “termination for cause“. Employer and Employee agree that the terms of the Employment Agreement that apply to the post-employment period shall continue in effect, except as specifically modified by this Agreement.            2. Release of Claims by Employee. For good and valuable consideration, including the promises in this Agreement, Employee knowingly and voluntarily releases and forever discharges, to the full extent permitted by law, Employer, affiliates, subsidiaries, divisions, predecessors, successors and assigns and the current and former employees, officers, directors and agents thereof (such persons other than Employer being hereinafter collectively referred to as the “Other Releasees“), of and from any and all claims, known and unknown, asserted and unasserted, of any nature Employee has or may have against Employer and the Other Releasees as of December 31, 2006, including, but not limited to, any alleged violation of the Age Discrimination in Employment Act of 1967, as amended, or The Workers Adjustment and Retraining Notification Act, as amended, or similar provisions of state or local law. Employee represents that he has not filed any complaint or charge against Employer or the Other Releasees with any local, state, or federal agency or court.            3. Release of Claims by Employer. For good and valuable consideration, including the promises in this Agreement, Employer knowingly and voluntarily releases and forever discharges, to the full extent permitted by law, Employee, of and from any and all claims, known and unknown, asserted and unasserted, of any nature Employer has or may have against Employee as of December 31, 2006. Employer represents that it has not filed any complaint or charge against Employee with any local, state, or federal agency or court.            4. Indemnification and Similar Rights. Employer shall cause Employee to continue to be subject to coverage under Employer‘s directors‘ and officers‘ insurance policy in connection with his actions as an executive officer of Employer during the course of his employment and thereafter as a director to the same scope and extent as other similarly situated executive officers of Employer. Employer shall indemnify Employee as an officer and director of Employer to the fullest extent permitted under the certificate of incorporation and bylaws of Employer as in effect from time to time.            5. Non-Disclosure. Employee acknowledges his obligation to keep confidential all non-public information concerning Employer. Employee agrees to keep in strict secrecy and confidence any and all information Employee has assimilated or to which he has had access during his employment by Employer and which has not been publicly disclosed and is not a matter of common knowledge in the fields of work of Employer and/or to which Employee would not have been exposed but for his employment by Employer. Employee agrees that he will not, without the prior written consent of Employer, disclose to any third person, partnership, 2 -------------------------------------------------------------------------------- joint venture, company, corporation or other organization, or use for such third party‘s or his own benefit, any such confidential information.            6. Return of Employer Property.            (a) Employee hereby agrees to return, within the next 7 business days following the date of this Agreement, all originals and copies of all Employer property in his possession or control, including, but not limited to, all keys, pass keys, files, records, documents, electronic files, computer hardware and software, cellular phones, pagers, credit cards and Employer-provided vehicle. Employee further acknowledges and represents that he has correctly disclosed all requested systems login and password information, and not deleted, erased, written over, or destroyed any electronic Employer documents, including those which he developed or helped develop during his employment, except in the regular course of his employment and in furtherance of Employer’s best interests. Employee shall be entitled to keep at no cost to Employee the laptop computer, keyboard and monitor previously located in Employee‘s office at the New York City headquarters of Employer: provided, however, that such equipment shall be purged of all Employer related files by Employer‘s personnel prior to the release of such equipment to Employee. As a member of the Board of Directors of Employer, Employee shall be entitled to retain information circulated to members of the Board of Directors.            (b) For a period of three months, Employer will maintain the [email protected] e-mail address, and a voicemail message at 212-625-7425, in each with a message giving a forwarding address or phone number for matters not involving Employer‘s business.            7. Non-Disparagement. Employee agrees not to make any false, disparaging or derogatory statements, written or oral, about Employer or any of its directors, officers, employees, agents or representatives, or about Employer’s business affairs or financial condition. Employer agrees not to make any false, disparaging or derogatory statements, written or oral, about Employee.            8. Confidentiality. Employee understands and agrees that as a condition for the consideration provided by this Agreement, he must keep confidential both the terms of this Agreement and any discussions leading to it, except as required by law; provided, that he may make disclosures to his attorneys, accountants, advisors and similar persons where there is an expectation of confidentiality. Employee acknowledges that Employer may describe and file a copy of this Agreement in filings with the Securities and Exchange Commission. Except as provided by law, Employer will keep confidential any discussions leading to this Agreement.            9. No Admission of Liability. The parties understand and agree that this Agreement does not constitute an admission of liability or wrongdoing on the part of either party.            10. Amendment; Binding Nature of Obligation. This Agreement may not be abandoned, supplemented, changed or modified in any manner except by a written agreement signed by the parties. This Agreement is binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators. 3 --------------------------------------------------------------------------------            11. Waiver of Rights. No delay or omission by either party in exercising any rights under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by either party 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.            12. Validity. Should any provision of this Agreement be declared or be determined by any court of competent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby, and said illegal or invalid part, term or provision shall be stricken and replaced with a provision as similar as may be possible that is valid and enforceable and most nearly effects the parties’ intent.            13. Applicable Law. This Agreement shall be governed by the laws of the State of New York, without regard to its conflict-of-laws provisions.            14. Acknowledgements. Employee affirms that no other promises or agreements of any kind have been made to or with his by any person or entity whatsoever to cause him to sign this Agreement. Employee further states and represents that he has carefully read this Agreement, understands its contents, freely and voluntarily assents to all of its terms and conditions, and signs his name voluntarily.            IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of the 31st day of December, 2006.     PETER K. STEVENSON        /s/ Peter K. Stevenson   --------------------------------------------------------------------------------                   GLOBIX CORPORATION                By:  /s/ Ted S. Lodge   --------------------------------------------------------------------------------            Name: Ted S. Lodge             Title: Executive Chairman    86417     4 -------------------------------------------------------------------------------- EXHIBIT A 1.      An option to purchase 548,667 shares of common stock of Globix Corporation at $3.04 per share   2.      An option to purchase 209,530 shares of common stock of Globix Corporation at $2.75 per share       5 --------------------------------------------------------------------------------

COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT (this “Agreement”) dated as of December 30, 2005 is entered into among THE BANK OF NEW YORK, a company organized under the laws of the State of New York, as collateral agent (“Collateral Agent”) and (i) the undersigned holders from time to time of the 2003 Senior Notes (as defined below) (each, together with its successors and assigns, a “2003 Holder” and collectively the “2003 Holders”) and (ii) the undersigned holders from time to time of the 2005 Senior Notes (as defined below) (each, together with its successors and assigns, a “2005 Holder,” collectively the “2005 Holders” and, together with the 2003 Holders, each a “Holder,” and collectively, the “Holders”), and, for purposes of Section 4.03 hereof only, InSite Vision Incorporated, a Delaware corporation (the “Company”).   R E C I T A L S   A. The Company has issued to each 2003 Holder a promissory note, the form of which is attached hereto as Exhibit B (each such note, as amended, restated, supplemented or modified from time to time, a “2003 Senior Note” and collectively, the “2003 Senior Notes”) and has issued to each 2005 Holder a promissory note due June 30, 2006, as such date may be extended at the Company’s election in accordance with the terms of such promissory note, the form of which attached hereto as Exhibit C (each such note, as amended, restated, supplemented or modified from time to time, the form of which a “2005 Senior Note,” collectively, the “2005 Senior Notes” and, collectively with the 2003 Senior Notes, the “Senior Notes”).   B. The Company and the Collateral Agent, in its capacity as collateral agent and representative for the 2003 Holders and in its capacity as collateral agent and representative for the 2005 Holders, have entered into that certain Amended and Restated Security Agreement dated as of December 30, 2005 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) pursuant to which the Company has secured the obligations of the Company to the Holders under the Senior Notes (the “Obligations”).   C. The Security Agreement, among other things, grants to the Collateral Agent, on behalf of the Holders, security interests in, and liens on, certain property of the Company and proceeds thereof as set forth in such agreement and may in the future grant to the Collateral Agent security interests in, and/or liens on, additional property of the Company (hereinafter all of such collateral shall be referred to collectively as the “Collateral”).   D. The Collateral Agent and the Holders wish to enter into this Agreement to, among other things, set forth their understandings and agreements regarding the Holders’ and the Collateral Agent’s respective rights, obligations and priorities with respect to the Collateral and all proceeds thereof.   NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and the mutual covenants and promises set forth herein, each of the parties to this Agreement agrees as follows:   --------------------------------------------------------------------------------   SECTION I. DEFINITIONS; INTERPRETATION.   1.01 Definitions. Unless otherwise indicated in this Agreement each term set forth in Exhibit A when used in this Agreement shall have the respective meaning given to that term in Exhibit A. Initially capitalized terms used in this Agreement without definition are defined in the Security Agreement or the Senior Notes unless the context requires otherwise.   1.02 Headings. Headings in this Agreement are for convenience of reference only and are not part of the substance hereof or thereof.   1.03 Plural Terms. All terms defined in this Agreement in the singular form shall have comparable meanings when used in the plural form and vice versa.   1.04 Time. All references in this Agreement to a time of day mean New York time, unless otherwise indicated.   1.05 Construction. This Agreement is the result of negotiations among, and has been reviewed by the Holders, the Collateral Agent and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of all parties hereto and no ambiguity shall be construed in favor of or against any Holder or the Collateral Agent.   1.06 Conflicts. In the event of a conflict between the terms of this Agreement and the terms of the Security Agreement or any of the Senior Notes with respect to the matters related to the Collateral contained herein, as among the Collateral Agent and the Holders the terms of this Agreement shall control.   1.07 Other Interpretive Provisions. References in this Agreement to “Recitals,” “Sections,” “Exhibits” and “Schedules” are to recitals, sections, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement to any document, instrument or agreement shall (a) include all exhibits, schedules and other attachments thereto, (b) include all documents, instruments or agreements issued or executed in replacement thereof, and (c) mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “include” and “including” and words of similar import when used in this Agreement shall not be construed to be limiting or exclusive.   SECTION II. COLLATERAL AND REMEDIES.   2.01 Priority of Liens. The Collateral Agent, the 2003 Holders and the 2005 Holders hereby agree that the security interests and liens granted to the Collateral Agent under the Security Agreement shall be treated, as among the 2003 Holders and the 2005 Holders, as having equal priority and shall, except to the extent otherwise provided in Section 3.02, at all times be shared by the 2003 Holders and the 2005 Holders as provided herein regardless of any claim or defense (including any claims under the fraudulent transfer, preference or similar avoidance provisions of applicable bankruptcy, insolvency or other applicable Governmental Rules affecting the rights of creditors generally) to which the Collateral Agent or any Holder may be entitled or subject, and notwithstanding the relative timing of the filing of any financing statements by any party hereto with respect to the Collateral.   2 --------------------------------------------------------------------------------   2.02 Custody of Collateral. From and after the occurrence and during the continuance of an Event of Default, if any Holder acquires custody, control or possession of any Collateral other than any proceeds thereof distributed to such Holder pursuant to the terms of the Security Agreement or this Agreement, then such Holder shall promptly cause such Collateral to be delivered to, or put in the custody, possession or control of, the Collateral Agent for disposition or distribution in accordance with the provisions of this Agreement. From and after the occurrence and during the continuance of an Event of Default and until such time as the provisions of the immediately preceding sentence have been complied with, such Holder shall be deemed to hold such Collateral in trust for the parties entitled thereto under this Agreement.   2.03 Additional Collateral or Guaranties. None of the Holders shall accept a security interest in, or a Lien on, any collateral for the Obligations other than such Holder’s beneficial interest in the security interest in, and Lien on, the Collateral granted to the Collateral Agent under the Security Agreement; provided, however, that nothing contained in the foregoing shall be construed as prohibiting the opening and maintenance of deposit accounts for the account of the Company or its subsidiaries in the ordinary course of business. No Holder shall accept any guaranty of its Obligations from any Person unless such Person has previously or simultaneously guaranteed the Obligations held by each of the other Holders.   2.04 Enforcement of Remedies. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent shall, subject to the other provisions of this Agreement, take such action with respect to such Event of Default as shall be reasonably directed by the Required Holders (a “Direction Notice”); provided, however, that, in the absence of a Direction Notice, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable in the best interests of the Holders (other than the exercise of foreclosure remedies). Upon receipt by the Collateral Agent of a Direction Notice, the Collateral Agent shall seek to enforce the Security Agreement and to realize upon the Collateral in accordance with such Direction Notice; provided, however, that the Collateral Agent shall not be obligated to follow any Direction Notice if the Collateral Agent reasonably determines that such Direction Notice is in conflict with any provisions of any applicable Governmental Rule, this Agreement or the Security Agreement, or would in its reasonable determination otherwise subject it to liability and the Collateral Agent shall not, under any circumstances, be liable to any Holder, the Company or any other Person for following a Direction Notice.    2.05 Remedies of the Holders. Unless otherwise consented to in writing by the Required Holders, no Holder, individually or together with any other Holder, shall have the right to, nor shall it, exercise or enforce any of the rights, powers or remedies which the Collateral Agent is authorized to exercise or enforce under this Agreement or the Security Agreement.   3 --------------------------------------------------------------------------------   2.06 Holder Information. If the Collateral Agent proceeds to foreclose upon, collect, sell or otherwise dispose of or take any other action with respect to any or all of the Collateral or to enforce any provisions of the Security Agreement or takes any other action pursuant to this Agreement or any provision of the Security Agreement or requests directions from the Holders as provided herein, upon the request of the Collateral Agent, each of the Holders (or any agent of or representative for such Holder) shall promptly deliver a written notice to the Collateral Agent and each of the other Holders setting forth (a) the aggregate amount of principal, interest, fees, and other Obligations owing to such Holder under the applicable Senior Notes as of the date specified by the Collateral Agent in such request and (b) such other information as the Collateral Agent may reasonably request.   SECTION III. DISTRIBUTION OF PROCEEDS.   3.01 Other Collateral Proceeds Account.   (a) The Collateral Agent shall establish a collateral proceeds account subject to the Lien created by the Security Agreement in the name of the Collateral Agent into which the Proceeds (as defined below) shall be deposited and from which only the Collateral Agent may effect withdrawals (the “Other Collateral Proceeds Account”). Such amounts shall be held by the Collateral Agent in the Other Collateral Proceeds Account and shall be distributed from time to time by the Collateral Agent in accordance with Section 3.02.   (b) Following the occurrence and during the continuance of an Event of Default, the following proceeds, payments and amounts (collectively, the “Proceeds”) shall be deposited and held by the Collateral Agent in the Other Collateral Proceeds Account and shall be distributed from time to time by the Collateral Agent to the Holders in accordance with Section 3.02:   (i) any proceeds of any collection, recovery, receipt, appropriation, realization or sale of any or all of the Collateral through the enforcement of the Security Agreement received by the Collateral Agent or any Holder (the “Other Collateral Proceeds”); and   (ii) any amounts held in the Other Collateral Proceeds Account at the time an Event of Default occurs.   Each Holder agrees to deliver any Proceeds to the Collateral Agent within three (3) Business Days after receipt of such Proceeds, or if later (in the case of clause (ii)), within three (3) Business Days of being advised of the occurrence of an Event of Default. Until such time as the provisions of the immediately preceding sentence have been complied with, such Holder shall be deemed to hold such Proceeds in trust for the parties entitled thereto under this Agreement.   4 --------------------------------------------------------------------------------   3.02 Distribution of Proceeds. The Collateral Agent shall immediately and from time-to-time distribute the Proceeds which are held in the Other Collateral Proceeds Account in accordance with Section 10(c) of the Security Agreement, it being understood, however, that the Collateral Agent may deduct from any distribution the amount of all Collateral Agent’s fees and expenses that have not been paid by the Company or the Holders pursuant to Section 4.03 or otherwise. The Collateral Agent shall make such distributions as promptly as reasonably practicable after the deposit of any Proceeds into the Other Collateral Proceeds Account.   3.03 Distributions Recovered. Notwithstanding anything to the contrary contained in this Agreement, in each case in which any proceeds (or the value thereof) or payments are recovered as a preferential or otherwise voidable payment (whether by a trustee in bankruptcy or otherwise) from the party which distributed those proceeds to another party or parties under this Agreement (the “Distributor”), each party to whom any of those proceeds were ultimately distributed (a “Distributee”) shall, upon the Distributor’s notice of the recovery to the Distributee, return to the Distributor an amount equal to the Distributee’s ratable share of the amount recovered, together with a ratable share of interest thereon to the extent the Distributor is required to pay interest thereon computed on the amount to be returned from the date of the recovery. For purposes of this Agreement, “proceeds” means any payment (whether made voluntarily or involuntary) from any source, including any offset of any deposit or other indebtedness, any security (including any guaranty or any collateral) or otherwise.   SECTION IV. THE COLLATERAL AGENT AND RELATIONS AMONG SECURED CREDITORS.   4.01 Appointment, Powers and Immunities. Each Holder has appointed and authorized the Collateral Agent to act as its agent hereunder and under the Security Agreement with such powers as are expressly delegated to the Collateral Agent by the terms of the Security Agreement and this Agreement, together with such other powers as are reasonably incidental thereto. The Collateral Agent shall not have any duties or responsibilities except those expressly set forth in the Security Agreement or this Agreement. The Collateral Agent shall not have any fiduciary relationship with the Holders or any Holder, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the Security Agreement or otherwise exists against Collateral Agent. Notwithstanding anything to the contrary contained herein, the Collateral Agent shall not be required to take any action which is contrary to this Agreement, the Security Agreement or any applicable Governmental Rule. The Collateral Agent may employ agents and attorneys-in-fact and shall not be responsible to the Holders or any Holder for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.   4.02 Reliance by the Collateral Agent.    The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or the Security Agreement as it deems appropriate or it shall first be indemnified to its satisfaction by the Holders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected by the Holders in acting, or in refraining from acting, hereunder or under the Security Agreement in accordance with instructions (or pending receipt of instructions) of the Required Holders, or any other instructing group of holders specified hereunder or under the Security Agreement or the Senior Notes, and such instructions of the Required Holders and any action taken or failure to act pursuant thereto shall be binding on all of the Holders and all future holders of the Senior Notes.   5 --------------------------------------------------------------------------------   4.03 Collateral Agent Fees; Expenses.    (a) The Company, by its execution of the signature page of this Agreement, hereby agrees to pay to the Collateral Agent, for its own account, a collateral agent fee in the amount and on the dates of payment set forth in the Collateral Agent Fee Letter (the “Collateral Agency Fee”). In addition, the Company hereby agrees to pay promptly on demand all costs and expenses required to be paid by the Company pursuant to the Collateral Agent Fee Letter. If any amounts required to be paid by the Company under this Agreement, the Security Agreement or the Senior Notes remain unpaid after such amounts are due, the Company shall pay interest on the aggregate, outstanding balance of such amounts from the date due until those amounts are paid in full at a per annum rate in accordance with the default interest rate provided therein. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months.   (b) The Collateral Agent shall not be obliged to expend its own funds in performing its obligations under this Agreement or the Security Agreement.  4.04 Resignation or Removal of the Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent in this Section 4.04, the Collateral Agent may resign as collateral agent by delivering not less than thirty (30) days prior written notice to the Holders and the Collateral Agent may be removed at any time with or without cause by the Required Holders. Upon any such resignation or removal, the Required Holders shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been appointed by the Required Holders and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent’s giving of notice of resignation or the Required Holders’ removal of the retiring Collateral Agent, then the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective and the Holders shall assume and perform all of the duties of the Collateral Agent under the Security Agreement until such time, if any, as the Required Holders appoint a successor agent. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent’s resignation or removal hereunder as Collateral Agent, the provisions of this Section 4 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent.    4.05 Appointment of Co-Collateral Agent. The Collateral Agent may and, upon the request of the Required Holders, shall by an instrument in writing delivered to the Company and Purchasers, appoint a bank or trust company or an individual to act as separate Collateral Agent or co-Collateral Agent in a jurisdiction where the Collateral Agent is disqualified from acting or for any other purpose deemed by the Collateral Agent or the Required Holders to be advantageous to their respective interests, such separate Collateral Agent or co-Collateral Agent to exercise only such rights and to have only such duties as shall be specified in the instrument of appointment. The Company will pay the reasonable compensation and expenses of any such separate Collateral Agent or co-Collateral Agent and, if requested by the Collateral Agent, such separate Collateral Agent or co-Collateral Agent or the Required Holders, the Company will enter into an amendment to this Agreement, satisfactory in substance and form to the Collateral Agent, the Required Holders, such separate Collateral Agent or co-Collateral Agent and the Company, confirming the rights and duties of such separate Collateral Agent or co-Collateral Agent.   6 --------------------------------------------------------------------------------   4.06 Authorization; Liability of Collateral Agent and Reliance.    (a) Each Holder hereby authorizes the Collateral Agent to (i) execute, deliver and perform the Security Agreement to which the Collateral Agent is or is intended to be a party, (ii) subject to the other terms and provisions hereof, exercise and enforce any or all rights, powers and remedies provided to the Collateral Agent by the Security Agreement, this Agreement, any applicable Governmental Rule or any other document, instrument or agreement, whether before or after the occurrence of an Event of Default, and (iii) subject to the other terms and provisions hereof, take any other action under the Security Agreement which it shall deem advisable in the best interests of the Holders. Each Holder shall be bound by all of the agreements of the Collateral Agent contained in this Agreement and the Security Agreement and by all other actions taken by the Collateral Agent pursuant to this Agreement and the Security Agreement.   (b) Collateral Agent shall not (i) be liable for any action taken or omitted to be taken by it under or in connection with the Security Agreement or the transactions contemplated hereby, except to the extent that any of the damages or losses resulting from the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have directly and primarily resulted from its or such person’s own gross negligence or willful misconduct in connection with its duties expressly set forth herein, (ii) be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error, other than an error resulting from its own gross negligence or willful misconduct, the sole recourse of any Holder to whom payment was due but not made shall be to recover from other Holders any payment in excess of the amount to which they are determined to be entitled (and such other Holders hereby agree to return to such Holder any such erroneous payments received by them) , or (iii) be responsible in any manner to any Holder or its transferees for any recital, statement, representation or warranty made by the Company or any officer thereof, contained herein, in the Senior Notes or in the Security Agreement, or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, the Security Agreement or the Senior Notes, or the validity, effectiveness, genuineness, enforceability or sufficiency of the Security Agreement or the Senior Notes (including the attachment or perfection of liens by reason of the Security Agreement or otherwise), or for any failure of the Company or any other party to any Senior Note to perform its obligations hereunder or thereunder. In no event shall the Collateral Agent be liable for punitive, special, consequential, incidental, exemplary or other similar damages. The Collateral Agent shall be under no obligation to any Holder or transferee to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Security Agreement or the Senior Notes or the existence or possible existence of any Default or Event of Default, or to inspect the properties, books or records of the Company or any Affiliate thereof. The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default unless it has received notice from a Holder or the Company referring to this Agreement, describing such Event of Default and stating that such notice is a “notice of default.”   7 --------------------------------------------------------------------------------   (c) The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement 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, independent accountants and other experts selected by the Collateral Agent. The Collateral Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by such Person in its sole discretion. The Collateral Agent shall have no obligation to take any action if it believes, in good faith, that such action is deemed to be illegal or exposes the Collateral Agent to any liability for which the Collateral Agent has not received satisfactory indemnification.   4.07 Free Exercise of Rights. Except as specifically provided herein and in the Security Agreement, (a) each Holder may exercise its rights and remedies under this Agreement, the Security Agreement, its Senior Note(s) and all related documents, instruments and agreements for its sole benefit and (b) no Holder shall have any obligation or duty to exercise any such rights or duties for the benefit of any other Holder.   4.08 Indemnification by the Holders With Respect to Section 2.05. Without limiting the obligations of the Company hereunder, each Holder hereby agrees to indemnify each other Holder (any such Holder, a “Harmed Holder”) for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any Harmed Holder in any way relating to or arising out of an action that would cause a breach by such Holder of Section 2.05 of this Agreement. The provisions of this Section 4.08 shall survive the payment in full of all the Obligations and the termination of this Agreement, the Security Agreement and the Senior Notes, and shall continue to apply to any Holder which ceases to be a Holder hereunder.   8 --------------------------------------------------------------------------------   4.09 Indemnification of Collateral Agent by the Holders. Each Holder hereby agrees to indemnify the Collateral Agent in its capacity as such (in each case to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to the respective percentage that the principal amount of its Senior Note or Senior Notes bear to the principal of all outstanding Senior Notes in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Senior Notes shall have been paid in full, ratably in accordance with such percentages immediately prior to such date) from and against any and all liabilities, obligations, losses, damages, penalties, actions judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Senior Notes) be imposed on, incurred by or asserted against Collateral Agent in any way relating to or arising out of, this Agreement, the Security Agreement or the Senior Notes or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Collateral Agent under or in connection with any of the foregoing (including any indemnities, expenses or other amounts paid or payable by the Collateral Agent pursuant to indemnification or reimbursement provisions contained in the Security Agreement); provided that no Holder shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Collateral Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Senior Notes and all other amounts payable under the Security Agreement and the Senior Notes.    SECTION V. MISCELLANEOUS.   5.01 Third Party Beneficiaries. Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person (including the Company and its Subsidiaries), other than the Holders and the Collateral Agent, their permitted successors and assigns hereunder any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein.   5.02 Notices. All notices and other communications provided for herein, (including any modifications of, or waivers or consents under this Agreement) shall be sent in accordance with Section 13 of the Security Agreement or if to the Collateral Agent, to the address provided below, or to such other address specified in writing by the Collateral Agent and provided to the Company and Holders:   9 --------------------------------------------------------------------------------   THE BANK OF NEW YORK 600 E. Las Colinas Blvd. Ste. #1300 Irving, Texas 75039 Attention: Stephen Jerard Telecopy: (972) 401-8557 Telephone: (972) 401-8600 5.03 Amendments; Waivers. Any term, covenant, agreement or condition of this Agreement or the Security Agreement may be amended or waived if such amendment or waiver is in writing and is signed by Required Holders; provided, however that:    (a) Any amendment or waiver which affects the rights, duties, exculpations or indemnities of, or to, the Collateral Agent must be in writing and be signed also by the Collateral Agent;   (b) Any amendment or waiver which waives or amends this Section 5.03 must be in writing and signed by all Holders;   (c) Any amendment to (i) the Security Agreement, or (ii) to Section 4.03 or Section 5.03 of this Agreement which with respect to this subpart (ii) by its terms increases the obligations of the Company hereunder, must be in writing and acknowledged and agreed to by the Company; and   (d)  Any amendment which affects the holders of the 2003 Senior Notes or the 2005 Senior Notes in a manner that is different from the holders of the 2005 Senior Notes or the holders of the 2003 Senior Notes, respectively, must be in writing and signed by the holders of greater than 50% in principal amount, at the time outstanding, of the 2003 Senior Notes or the 2005 Senior Notes, as the case may be, subject to such amendment.   No failure or delay by the Collateral Agent or the Holders in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Except as set forth in clause (c) above, the Company’s consent is not required to amend any provision of this Agreement.   5.04 Releases of Collateral. The parties hereto agree that the Collateral Agent shall release (and hereby authorize the Collateral Agent to release) all or any portion of the Collateral (other than in connection with the exercise of its rights and remedies pursuant to Section 2.04) upon the receipt by the Collateral Agent of a written notice from the Required Holders stating that the Required Holders have approved the release of all of the Collateral or such portion of the Collateral specified in such notice. Upon receipt of such written notice, the Collateral Agent shall, at the Company’s expense, execute and deliver such releases of its security interest in, or Lien on, such Collateral to be released, and provide a copy of such releases to the Holders. Notwithstanding the foregoing, the parties hereto agree that the Collateral Agent shall release all of the Collateral without the written approval of the Required Holders in accordance with Sections 20 and 21 of the Security Agreement.   10 --------------------------------------------------------------------------------   5.05 Successors and Assigns. This Agreement and the Security Agreement shall be binding upon and inure to the benefit of the Holders and the Collateral Agent and their respective successors and permitted assigns, except that no Person other than a Holder (including any Person which becomes a holder of Senior Notes after the date hereof) and the Collateral Agent (including any Person which becomes a successor Collateral Agent pursuant to Section 4.04) shall have any rights and remedies under this Agreement or the Security Agreement. Any purported assignment that does not comply with the Security Agreement shall be null and void. Subject to the foregoing limitations, all references in this Agreement to any Person shall be deemed to include all successors and permitted assigns of such Person.   5.06 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together will constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.   5.07 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK.   5.08 Merger. This Agreement, the Security Agreement and the Senior Notes supersede all prior agreements, written or oral, among the parties with respect to the subject matter of such agreements.   5.09 Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under any applicable Governmental Rule of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the Governmental Rules of any other jurisdiction shall in any way be affected or impaired thereby.   5.10 Jury Trial. EACH OF THE COLLATERAL AGENT AND THE HOLDERS TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH OF THE COLLATERAL AGENT AND THE HOLDERS HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE COLLATERAL AGENT AND THE HOLDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.   5.11 Final Agreement. The written documents, agreements and instruments referred to above represent the final agreements between 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 between the parties.   11 -------------------------------------------------------------------------------- [Remainder of page intentionally left blank]   12 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.       THE BANK OF NEW YORK, as the Collateral Agent           By:     Name:     Title:         COMPANY:           INSITE VISION INCORPORATED           By:     Name:     Title:       -i- -------------------------------------------------------------------------------- THE UNDERSIGNED HEREBY ACKNOWLEDGE AND CONSENT TO THE FOREGOING AND EXPRESSLY ACKNOWLEDGE AND AGREE THAT PAYMENTS MADE TO ANY SECURED PARTY THAT CONSTITUTE COLLATERAL PROCEEDS OR SETOFF PROCEEDS SHALL BE DEEMED TO SATISFY OBLIGATIONS OWED TO SUCH SECURED PARTY ONLY TO THE EXTENT APPLIED TO SATISFY SUCH OBLIGATIONS IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT:   [HOLDER NAME]   By: [Holder Name]   By: ____________________________ Name: [_____________________] Title: [_____________________] Notice Address: -ii- -------------------------------------------------------------------------------- Exhibit A Glossary “Collateral” has the meaning given to that term in Recital E of this Agreement.   “Collateral Agent” has the meaning given to that term in the introductory paragraph of this Agreement.   “Collateral Agent Fee Letter” means the Fee Schedule dated December 29, 2005 from the Collateral Agent addressed to the Company with respect to the collateral agent fee to be paid from the Company to the Collateral Agent.   “Company” has the meaning given to that term in Recital A to this Agreement.   “Direction Notice” has the meaning given to that term in Section 2.04 of this Agreement.   “Distributee” has the meaning given to that term in Section 3.03 of this Agreement.   “Distributor” has the meaning given to that term in Section 3.03 of this Agreement.   “Event of Default” means any event of default, event of acceleration or other event which upon the occurrence thereof the obligations thereunder may be accelerated or become payable upon demand, pursuant to the 2003 Senior Notes or the 2005 Senior Notes.   “Governmental Authorization” means any permit, license, registration, approval, finding of suitability, authorization, plan, directive, order, consent, exemption, waiver, consent order or consent decree of or from, or notice to, action by or filing with, any Governmental Authority.   “Governmental Rule” means any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, Governmental Authorization guidelines, policy or similar form of decision of any Governmental Authority.   “Holders” has the meaning given to that term in the introductory paragraph of this Agreement.   “Required Holders” means, at any time, the holders of greater than 50% in principal amount of the 2003 Senior Notes at the time outstanding and the 2005 Senior Notes at the time outstanding, collectively.   “Security Agreement” has the meaning given to that term in Recital A of this Agreement.   “Obligations” has the meaning given to that term in Recital B to this Agreement.   -iii- --------------------------------------------------------------------------------   “Other Collateral Proceeds” has the meaning given to that term in Section 3.01(b)(i) of this Agreement.   “Other Collateral Proceeds Account” has the meaning given to that term in Section 3.01(a) of this Agreement.   “Proceeds” has the meaning given to that term in Section 3.01(b) of this Agreement.   “Senior Notes” has the meaning given to that term in Recital A to this Agreement.   -iv- --------------------------------------------------------------------------------

Exhibit 10.1 DYNTEK, INC. 2006 NONQUALIFIED STOCK OPTION PLAN The 2006 STOCK OPTION PLAN (the “Plan”) is hereby established by Dyntek, Inc., a Delaware corporation (the “Company”), and adopted by its Board of Directors as of the 15th day of June, 2006. ARTICLE 1 PURPOSES OF THE PLAN Purposes. The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers (to the extent qualifying under Article 3 hereof) upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company through the grant of nonqualified stock options and thereby have an interest in the success and increased value of the Company. Notwithstanding anything in this Plan to the contrary, all Option Agreements, as defined herein, must be structured to satisfy the exemption requirements applicable to nonqualified stock options regarding Section 409A of the Code, as defined herein, as set forth in any proposed, temporary or final regulations or other official guidance that is published by the Internal Revenue Service from time to time (the “Official Guidance”), as determined by the Company in its sole discretion. In the absence of an applicable exemption, all Option Agreements must be structured to satisfy the requirements of Section 409A of the Code and the Official Guidance. ARTICLE 2 DEFINITIONS For purposes of this Plan, the following terms shall have the meanings indicated: 2.1          “ADMINISTRATOR” MEANS THE BOARD OR, IF THE BOARD DELEGATES RESPONSIBILITY FOR ANY MATTER TO THE COMMITTEE, THE TERM ADMINISTRATOR SHALL MEAN THE COMMITTEE. 2.2          “AFFILIATED COMPANY” MEANS ANY “PARENT CORPORATION” OR “SUBSIDIARY CORPORATION” OF THE COMPANY, WHETHER NOW EXISTING OR HEREAFTER CREATED OR ACQUIRED, AS THOSE TERMS ARE DEFINED IN SECTIONS 424(E) AND 424(F) OF THE CODE, RESPECTIVELY AND ANY OTHER CORPORATION, LIMITED LIABILITY COMPANY (“LLC”), PARTNERSHIP OR JOINT VENTURE, WHETHER NOW EXISTING OR HEREAFTER CREATED OR ACQUIRED, WITH RESPECT TO WHICH THE COMPANY BENEFICIALLY OWNS MORE THAN FIFTY PERCENT (50%) OF:  (1) THE TOTAL COMBINED VOTING POWER OF ALL OUTSTANDING VOTING SECURITIES OR (2) THE CAPITAL OR PROFITS INTERESTS OF AN LLC, PARTNERSHIP OR JOINT VENTURE. 2.3          “BOARD” MEANS THE BOARD OF DIRECTORS OF THE COMPANY. -------------------------------------------------------------------------------- 2.4          “CHANGE IN CONTROL” MEANS: (A)           THE ACQUISITION, DIRECTLY OR INDIRECTLY, IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS, BY ANY PERSON OR GROUP (WITHIN THE MEANING OF SECTION 13(D)(3) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) OF THE BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY POSSESSING MORE THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF ALL OUTSTANDING SECURITIES OF THE COMPANY; (B)           A MERGER OR CONSOLIDATION IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY, EXCEPT FOR A TRANSACTION IN WHICH THE HOLDERS OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY IMMEDIATELY PRIOR TO SUCH MERGER OR CONSOLIDATION HOLD AS A RESULT OF HOLDING COMPANY SECURITIES PRIOR TO SUCH TRANSACTION, IN THE AGGREGATE, SECURITIES POSSESSING MORE THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF ALL OUTSTANDING VOTING SECURITIES OF THE SURVIVING ENTITY (OR THE PARENT OF THE SURVIVING ENTITY) IMMEDIATELY AFTER SUCH MERGER OR CONSOLIDATION; (C)           A REVERSE MERGER IN WHICH THE COMPANY IS THE SURVIVING ENTITY BUT IN WHICH THE HOLDERS OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY IMMEDIATELY PRIOR TO SUCH MERGER HOLD, IN THE AGGREGATE, SECURITIES POSSESSING LESS THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF ALL OUTSTANDING VOTING SECURITIES OF THE COMPANY OR OF THE ACQUIRING ENTITY IMMEDIATELY AFTER SUCH MERGER; (D)           THE SALE, TRANSFER OR OTHER DISPOSITION (IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS) OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, EXCEPT FOR A TRANSACTION IN WHICH THE HOLDERS OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY IMMEDIATELY PRIOR TO SUCH TRANSACTION(S) RECEIVE AS A DISTRIBUTION WITH RESPECT TO SECURITIES OF THE COMPANY, IN THE AGGREGATE, SECURITIES POSSESSING MORE THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF ALL OUTSTANDING VOTING SECURITIES OF THE ACQUIRING ENTITY IMMEDIATELY AFTER SUCH TRANSACTION(S); OR (E)           THE APPROVAL BY THE STOCKHOLDERS OF A PLAN OR PROPOSAL FOR THE LIQUIDATION OR DISSOLUTION OF THE COMPANY. 2.5          “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO TIME. 2.6          “COMMITTEE” MEANS A COMMITTEE OF TWO OR MORE MEMBERS OF THE BOARD APPOINTED TO ADMINISTER THE PLAN, AS SET FORTH IN SECTION 6.1 HEREOF. 2.7          “COMMON STOCK” MEANS THE COMMON STOCK, PAR VALUE $0.0001, OF THE COMPANY, SUBJECT TO ADJUSTMENT PURSUANT TO SECTION 4.2 HEREOF. 2.8          “DISABILITY” MEANS PERMANENT AND TOTAL DISABILITY AS DEFINED IN SECTION 22(E)(3) OF THE CODE. THE ADMINISTRATOR’S DETERMINATION OF A DISABILITY OR THE ABSENCE THEREOF SHALL BE CONCLUSIVE AND BINDING ON ALL INTERESTED PARTIES. 2.9          “EFFECTIVE DATE” MEANS THE DATE ON WHICH THE PLAN WAS ADOPTED BY THE BOARD, AS SET FORTH ON THE FIRST PAGE HEREOF. 2.10        “EXCHANGE ACT” MEANS THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 2 -------------------------------------------------------------------------------- 2.11        “EXERCISE PRICE” MEANS THE PURCHASE PRICE PER SHARE OF COMMON STOCK PAYABLE UPON EXERCISE OF AN OPTION. 2.12        “FAIR MARKET VALUE” ON ANY GIVEN DATE MEANS THE VALUE OF ONE SHARE OF COMMON STOCK, DETERMINED AS FOLLOWS: (A)           IF THE COMMON STOCK IS THEN LISTED OR ADMITTED TO TRADING ON A NASDAQ MARKET SYSTEM, A STOCK EXCHANGE OR OVER-THE-COUNTER MARKET THAT REPORTS CLOSING SALE PRICES, THE FAIR MARKET VALUE SHALL BE THE CLOSING SALE PRICE ON THE DATE OF VALUATION ON SUCH NASDAQ MARKET SYSTEM, PRINCIPAL STOCK EXCHANGE OR OVER-THE-COUNTER MARKET ON WHICH THE COMMON STOCK IS THEN LISTED OR ADMITTED TO TRADING, OR, IF NO CLOSING SALE PRICE IS QUOTED ON SUCH DAY, THEN THE FAIR MARKET VALUE SHALL BE THE CLOSING SALE PRICE OF THE COMMON STOCK ON SUCH NASDAQ MARKET SYSTEM, SUCH EXCHANGE OR OVER-THE-COUNTER MARKET ON THE NEXT PRECEDING DAY ON WHICH A CLOSING SALE PRICE IS REPORTED. (B)           IF THE COMMON STOCK IS NOT THEN LISTED OR ADMITTED TO TRADING ON A NASDAQ MARKET SYSTEM, A STOCK EXCHANGE OR OVER-THE-COUNTER MARKET THAT REPORTS CLOSING SALE PRICES, THE FAIR MARKET VALUE SHALL BE THE AVERAGE OF THE CLOSING BID AND ASKED PRICES OF THE COMMON STOCK IN THE OVER-THE-COUNTER MARKET ON WHICH THE COMMON STOCK IS THEN LISTED ON THE DATE OF VALUATION. (C)           IF NEITHER (A) NOR (B) IS APPLICABLE AS OF THE DATE OF VALUATION, THEN THE FAIR MARKET VALUE SHALL BE DETERMINED BY THE ADMINISTRATOR IN GOOD FAITH USING ANY REASONABLE METHOD OF EVALUATION, WHICH DETERMINATION SHALL BE CONCLUSIVE AND BINDING ON ALL INTERESTED PARTIES. 2.13        “INCENTIVE OPTION” MEANS ANY OPTION DESIGNATED AND QUALIFIED AS AN “INCENTIVE STOCK OPTION” AS DEFINED IN SECTION 422 OF THE CODE. 2.14        “NASD DEALER” MEANS A BROKER-DEALER THAT IS A MEMBER OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. 2.15        “OPTION” MEANS ANY OPTION TO PURCHASE COMMON STOCK GRANTED PURSUANT TO THE PLAN THAT IS NOT AN INCENTIVE OPTION. 2.16        “OPTION AGREEMENT” MEANS THE WRITTEN AGREEMENT ENTERED INTO BETWEEN THE COMPANY AND THE OPTIONEE WITH RESPECT TO AN OPTION GRANTED UNDER THE PLAN. 2.17        “OPTIONEE” MEANS ANY PARTICIPANT WHO HOLDS AN OPTION. 2.18        “PARTICIPANT” MEANS AN INDIVIDUAL OR ENTITY THAT HOLDS AN OPTION GRANTED PURSUANT TO THE PLAN. 2.19        “SERVICE PROVIDER” MEANS A CONSULTANT OR OTHER PERSON OR ENTITY THE ADMINISTRATOR AUTHORIZES TO BECOME A PARTICIPANT IN THE PLAN AND WHO PROVIDES SERVICES TO (I) THE COMPANY, (II) AN AFFILIATED COMPANY, OR (III) ANY OTHER BUSINESS VENTURE DESIGNATED BY THE ADMINISTRATOR IN WHICH THE COMPANY (OR ANY ENTITY THAT IS A SUCCESSOR TO THE COMPANY) OR AN AFFILIATED COMPANY HAS A SIGNIFICANT OWNERSHIP INTEREST. 3 -------------------------------------------------------------------------------- ARTICLE 3 ELIGIBILITY EMPLOYEES OF THE COMPANY OR OF AN AFFILIATED COMPANY, MEMBERS OF THE BOARD (WHETHER OR NOT EMPLOYED BY THE COMPANY OR AN AFFILIATED COMPANY), AND SERVICE PROVIDERS ARE ELIGIBLE TO RECEIVE OPTIONS UNDER THE PLAN. ARTICLE 4 PLAN SHARES 4.1          SHARES SUBJECT TO THE PLAN. THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE ISSUED UNDER THE PLAN SHALL BE EQUAL TO 11,790,672 SHARES, SUBJECT TO ADJUSTMENT AS TO THE NUMBER AND KIND OF SHARES PURSUANT TO SECTION 4.2 HEREOF. FOR PURPOSES OF THIS LIMITATION, IN THE EVENT THAT (A) ALL OR ANY PORTION OF ANY OPTION GRANTED UNDER THE PLAN CAN NO LONGER UNDER ANY CIRCUMSTANCES BE EXERCISED, OR (B) ANY SHARES OF COMMON STOCK ARE REACQUIRED BY THE COMPANY PURSUANT TO AN OPTION AGREEMENT, THE SHARES OF COMMON STOCK ALLOCABLE TO THE UNEXERCISED PORTION OF SUCH OPTION OR THE SHARES SO REACQUIRED SHALL AGAIN BE AVAILABLE FOR GRANT OR ISSUANCE UNDER THE PLAN. 4.2          CHANGES IN CAPITAL STRUCTURE. IN THE EVENT THAT THE OUTSTANDING SHARES OF COMMON STOCK ARE HEREAFTER INCREASED OR DECREASED OR CHANGED INTO OR EXCHANGED FOR A DIFFERENT NUMBER OR KIND OF SHARES OR OTHER SECURITIES OF THE COMPANY BY REASON OF A RECAPITALIZATION, STOCK SPLIT, COMBINATION OF SHARES, RECLASSIFICATION, STOCK DIVIDEND, OR OTHER CHANGE IN THE CAPITAL STRUCTURE OF THE COMPANY, THEN APPROPRIATE ADJUSTMENTS SHALL BE MADE BY THE ADMINISTRATOR TO THE AGGREGATE NUMBER AND KIND OF SHARES SUBJECT TO THIS PLAN, THE NUMBER AND KIND OF SHARES AND THE PRICE PER SHARE SUBJECT TO OUTSTANDING OPTION AGREEMENTS IN ORDER TO PRESERVE, AS NEARLY AS PRACTICAL, BUT NOT TO INCREASE, THE BENEFITS TO PARTICIPANTS. ARTICLE 5 OPTIONS 5.1          OPTION AGREEMENT. EACH OPTION GRANTED PURSUANT TO THIS PLAN SHALL BE EVIDENCED BY AN OPTION AGREEMENT WHICH SHALL SPECIFY THE NUMBER OF SHARES SUBJECT THERETO, VESTING PROVISIONS RELATING TO SUCH OPTION AND THE EXERCISE PRICE PER SHARE. AS SOON AS IS PRACTICAL FOLLOWING THE GRANT OF AN OPTION, AN OPTION AGREEMENT SHALL BE DULY EXECUTED AND DELIVERED BY OR ON BEHALF OF THE COMPANY TO THE OPTIONEE TO WHOM SUCH OPTION WAS GRANTED. EACH OPTION AGREEMENT SHALL BE IN SUCH FORM AND CONTAIN SUCH ADDITIONAL TERMS AND CONDITIONS, NOT INCONSISTENT WITH THE PROVISIONS OF THIS PLAN, AS THE ADMINISTRATOR SHALL, FROM TIME TO TIME, DEEM DESIRABLE. EACH OPTION AGREEMENT MAY BE DIFFERENT FROM EACH OTHER OPTION AGREEMENT. 5.2          EXERCISE PRICE. THE EXERCISE PRICE PER SHARE OF COMMON STOCK COVERED BY EACH OPTION SHALL BE DETERMINED BY THE ADMINISTRATOR, BUT IN NO EVENT SHALL THE EXERCISE PRICE OF AN OPTION BE LESS THAN 100% OF FAIR MARKET VALUE OF COMMON STOCK ON THE DATE THE OPTION IS GRANTED. NOTWITHSTANDING THE FOREGOING, AN OPTION MAY BE GRANTED WITH AN EXERCISE PRICE LOWER THAN THAT SET 4 -------------------------------------------------------------------------------- forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424 of the Code. 5.3          PAYMENT OF EXERCISE PRICE. PAYMENT OF THE EXERCISE PRICE SHALL BE MADE UPON EXERCISE OF AN OPTION AND MAY BE MADE, IN THE DISCRETION OF THE ADMINISTRATOR, SUBJECT TO ANY LEGAL RESTRICTIONS, BY:  (A) CASH; (B) CHECK; (C) THE SURRENDER OF SHARES OF COMMON STOCK OWNED BY THE OPTIONEE (PROVIDED THAT SHARES ACQUIRED PURSUANT TO THE EXERCISE OF OPTIONS GRANTED BY THE COMPANY MUST HAVE BEEN HELD BY THE OPTIONEE FOR THE REQUISITE PERIOD NECESSARY TO AVOID A CHARGE TO THE COMPANY’S EARNINGS FOR FINANCIAL REPORTING PURPOSES), WHICH SURRENDERED SHARES SHALL BE VALUED AT FAIR MARKET VALUE AS OF THE DATE OF SUCH EXERCISE; (D)  THE CANCELLATION OF INDEBTEDNESS OF THE COMPANY TO THE OPTIONEE; (E) THE WAIVER OF COMPENSATION DUE OR ACCRUED TO THE OPTIONEE FOR SERVICES RENDERED; (F) PROVIDED THAT A PUBLIC MARKET FOR THE COMMON STOCK EXISTS, A “SAME DAY SALE” COMMITMENT FROM THE OPTIONEE AND AN NASD DEALER WHEREBY THE OPTIONEE IRREVOCABLY ELECTS TO EXERCISE THE OPTION AND TO SELL A PORTION OF THE SHARES SO PURCHASED TO PAY FOR THE EXERCISE PRICE AND WHEREBY THE NASD DEALER IRREVOCABLY COMMITS UPON RECEIPT OF SUCH SHARES TO FORWARD THE EXERCISE PRICE DIRECTLY TO THE COMPANY; (G) PROVIDED THAT A PUBLIC MARKET FOR THE COMMON STOCK EXISTS, A “MARGIN” COMMITMENT FROM THE OPTIONEE AND AN NASD DEALER WHEREBY THE OPTIONEE IRREVOCABLY ELECTS TO EXERCISE THE OPTION AND TO PLEDGE THE SHARES SO PURCHASED TO THE NASD DEALER IN A MARGIN ACCOUNT AS SECURITY FOR A LOAN FROM THE NASD DEALER IN THE AMOUNT OF THE EXERCISE PRICE, AND WHEREBY THE NASD DEALER IRREVOCABLY COMMITS UPON RECEIPT OF SUCH SHARES TO FORWARD THE EXERCISE PRICE DIRECTLY TO THE COMPANY; OR (H) ANY COMBINATION OF THE FOREGOING METHODS OF PAYMENT OR ANY OTHER CONSIDERATION OR METHOD OF PAYMENT AS SHALL BE PERMITTED BY APPLICABLE LAW. 5.4          TERM AND TERMINATION OF OPTIONS. THE TERM AND TERMINATION OF EACH OPTION SHALL BE AS FIXED BY THE ADMINISTRATOR, BUT NO OPTION MAY BE EXERCISABLE MORE THAN TEN (10) YEARS AFTER THE DATE IT IS GRANTED. 5.5          VESTING AND EXERCISE OF OPTIONS. EACH OPTION SHALL VEST AND BECOME EXERCISABLE IN ONE OR MORE INSTALLMENTS AT SUCH TIME OR TIMES AND SUBJECT TO SUCH CONDITIONS, INCLUDING WITHOUT LIMITATION THE ACHIEVEMENT OF SPECIFIED PERFORMANCE GOALS OR OBJECTIVES, AS SHALL BE DETERMINED BY THE ADMINISTRATOR. 5.6          NONTRANSFERABILITY OF OPTIONS. NO OPTION SHALL BE ASSIGNABLE OR TRANSFERABLE EXCEPT BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION AND DURING THE LIFE OF THE OPTIONEE SHALL BE EXERCISABLE ONLY BY SUCH OPTIONEE. 5.7          RIGHTS AS STOCKHOLDER. AN OPTIONEE OR PERMITTED TRANSFEREE OF AN OPTION SHALL HAVE NO RIGHTS OR PRIVILEGES AS A STOCKHOLDER WITH RESPECT TO ANY SHARES COVERED BY AN OPTION UNTIL SUCH OPTION HAS BEEN DULY EXERCISED AND CERTIFICATES REPRESENTING SHARES PURCHASED UPON SUCH EXERCISE HAVE BEEN ISSUED TO SUCH PERSON. 5.8          UNVESTED SHARES. THE ADMINISTRATOR SHALL HAVE THE DISCRETION TO GRANT OPTIONS THAT ARE EXERCISABLE FOR UNVESTED SHARES OF COMMON STOCK PROVIDED THAT THE COMPANY RETAINS THE RIGHT TO REPURCHASE, AT THE EXERCISE PRICE PAID PER SHARE, ANY OR ALL OF THOSE UNVESTED SHARES IF THE OPTIONEE’S SERVICE TO THE COMPANY TERMINATES BEFORE ALL THE SHARES BECOME VESTED. THE TERMS UPON WHICH SUCH REPURCHASE RIGHT SHALL BE EXERCISABLE (INCLUDING THE PERIOD AND PROCEDURE FOR EXERCISE AND THE APPROPRIATE VESTING SCHEDULE FOR THE PURCHASED SHARES) SHALL BE ESTABLISHED BY THE ADMINISTRATOR AND SET FORTH IN THE DOCUMENT EVIDENCING SUCH REPURCHASE RIGHT. 5 -------------------------------------------------------------------------------- ARTICLE 6 ADMINISTRATION OF THE PLAN 6.1          ADMINISTRATOR. AUTHORITY TO CONTROL AND MANAGE THE OPERATION AND ADMINISTRATION OF THE PLAN SHALL BE VESTED IN THE BOARD, WHICH MAY DELEGATE SUCH RESPONSIBILITIES IN WHOLE OR IN PART TO A COMMITTEE CONSISTING OF TWO (2) OR MORE MEMBERS OF THE BOARD (THE “COMMITTEE”). MEMBERS OF THE COMMITTEE MAY BE APPOINTED FROM TIME TO TIME BY, AND SHALL SERVE AT THE PLEASURE OF, THE BOARD. THE BOARD MAY LIMIT THE COMPOSITION OF THE COMMITTEE TO THOSE PERSONS NECESSARY TO COMPLY WITH THE REQUIREMENTS OF SECTION 162(M) OF THE CODE AND SECTION 16 OF THE EXCHANGE ACT. AS USED HEREIN, THE TERM “ADMINISTRATOR” MEANS THE BOARD OR, WITH RESPECT TO ANY MATTER AS TO WHICH RESPONSIBILITY HAS BEEN DELEGATED TO THE COMMITTEE, THE TERM ADMINISTRATOR SHALL MEAN THE COMMITTEE. 6.2          POWERS OF THE ADMINISTRATOR. IN ADDITION TO ANY OTHER POWERS OR AUTHORITY CONFERRED UPON THE ADMINISTRATOR ELSEWHERE IN THE PLAN OR BY LAW, THE ADMINISTRATOR SHALL HAVE FULL POWER AND AUTHORITY:  (A) TO DETERMINE THE PERSONS TO WHOM, AND THE TIME OR TIMES AT WHICH OPTIONS SHALL BE GRANTED, THE NUMBER OF SHARES TO BE REPRESENTED BY EACH OPTION AND THE CONSIDERATION TO BE RECEIVED BY THE COMPANY UPON THE EXERCISE OF SUCH OPTIONS, (B) TO INTERPRET THE PLAN; (C) TO CREATE, AMEND OR RESCIND RULES AND REGULATIONS RELATING TO THE PLAN; (D) TO DETERMINE THE TERMS, CONDITIONS AND RESTRICTIONS CONTAINED IN, AND THE FORM OF, OPTION AGREEMENTS; (E) TO DETERMINE THE IDENTITY OR CAPACITY OF ANY PERSONS WHO MAY BE ENTITLED TO EXERCISE A PARTICIPANT’S RIGHTS UNDER ANY OPTION UNDER THE PLAN; (F) TO CORRECT ANY DEFECT OR SUPPLY ANY OMISSION OR RECONCILE ANY INCONSISTENCY IN THE PLAN OR IN ANY OPTION AGREEMENT; (G) TO ACCELERATE THE VESTING OF ANY OPTION,; (H) TO EXTEND THE EXERCISE DATE OF ANY OPTION; (I) TO PROVIDE FOR RIGHTS OF FIRST REFUSAL AND/OR REPURCHASE RIGHTS; (J) TO AMEND OUTSTANDING OPTION AGREEMENTS TO PROVIDE FOR, AMONG OTHER THINGS, ANY CHANGE OR MODIFICATION WHICH THE ADMINISTRATOR COULD HAVE INCLUDED IN THE ORIGINAL AGREEMENT OR IN FURTHERANCE OF THE POWERS PROVIDED FOR HEREIN; AND (K) TO MAKE ALL OTHER DETERMINATIONS NECESSARY OR ADVISABLE FOR THE ADMINISTRATION OF THE PLAN, BUT ONLY TO THE EXTENT NOT CONTRARY TO THE EXPRESS PROVISIONS OF THE PLAN. ANY ACTION, DECISION, INTERPRETATION OR DETERMINATION MADE IN GOOD FAITH BY THE ADMINISTRATOR IN THE EXERCISE OF ITS AUTHORITY CONFERRED UPON IT UNDER THE PLAN SHALL BE FINAL AND BINDING ON THE COMPANY AND ALL PARTICIPANTS. 6.3          LIMITATION ON LIABILITY. NO EMPLOYEE OF THE COMPANY OR MEMBER OF THE BOARD OR COMMITTEE SHALL BE SUBJECT TO ANY LIABILITY WITH RESPECT TO DUTIES UNDER THE PLAN UNLESS THE PERSON ACTS FRAUDULENTLY OR IN BAD FAITH. TO THE EXTENT PERMITTED BY LAW, THE COMPANY SHALL INDEMNIFY EACH MEMBER OF THE BOARD OR COMMITTEE, AND ANY EMPLOYEE OF THE COMPANY WITH DUTIES UNDER THE PLAN, WHO WAS OR IS A PARTY, OR IS THREATENED TO BE MADE A PARTY, TO ANY THREATENED, PENDING OR COMPLETED PROCEEDING, WHETHER CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE, BY REASON OF SUCH PERSON’S CONDUCT IN THE PERFORMANCE OF DUTIES UNDER THE PLAN. 6 -------------------------------------------------------------------------------- ARTICLE 7 CHANGE IN CONTROL 7.1          CHANGE IN CONTROL. IN ORDER TO PRESERVE A PARTICIPANT’S RIGHTS IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY: (A)           VESTING OF ALL OUTSTANDING OPTIONS SHALL ACCELERATE AUTOMATICALLY EFFECTIVE AS OF IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE CHANGE IN CONTROL UNLESS THE OPTIONS ARE TO BE ASSUMED BY THE ACQUIRING OR SUCCESSOR ENTITY (OR PARENT THEREOF) OR NEW OPTIONS OR NEW INCENTIVES, AS DEFINED IN SECTION 7.1(B) BELOW, ARE TO BE ISSUED IN EXCHANGE THEREFORE, AS PROVIDED IN SUBSECTION (B) BELOW. (B)           VESTING OF OUTSTANDING OPTIONS SHALL NOT ACCELERATE IF AND TO THE EXTENT THAT:  (I) THE OPTIONS (INCLUDING THE UNVESTED PORTION THEREOF) ARE TO BE ASSUMED BY THE ACQUIRING OR SUCCESSOR ENTITY (OR PARENT THEREOF) OR NEW OPTIONS OF COMPARABLE VALUE ARE TO BE ISSUED IN EXCHANGE THEREFORE PURSUANT TO THE TERMS OF THE CHANGE IN CONTROL TRANSACTION, OR (II) THE OPTIONS (INCLUDING THE UNVESTED PORTION THEREOF) ARE TO BE REPLACED BY THE ACQUIRING OR SUCCESSOR ENTITY (OR PARENT THEREOF) WITH OTHER INCENTIVES OF COMPARABLE VALUE UNDER A NEW INCENTIVE PROGRAM (“NEW INCENTIVES”) CONTAINING SUCH TERMS AND PROVISIONS AS THE ADMINISTRATOR IN ITS DISCRETION MAY CONSIDER EQUITABLE. IF OUTSTANDING OPTIONS ARE ASSUMED, OR IF NEW OPTIONS OF COMPARABLE VALUE ARE ISSUED IN EXCHANGE THEREFORE, THEN EACH SUCH OPTION OR NEW OPTION SHALL BE APPROPRIATELY ADJUSTED, CONCURRENTLY WITH THE CHANGE IN CONTROL, TO APPLY TO THE NUMBER AND CLASS OF SECURITIES OR OTHER PROPERTY THAT THE OPTIONEE WOULD HAVE RECEIVED PURSUANT TO THE CHANGE IN CONTROL TRANSACTION IN EXCHANGE FOR THE SHARES ISSUABLE UPON EXERCISE OF THE OPTION HAD THE OPTION BEEN EXERCISED IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL, AND APPROPRIATE ADJUSTMENT ALSO SHALL BE MADE TO THE EXERCISE PRICE SUCH THAT THE AGGREGATE EXERCISE PRICE OF EACH SUCH OPTION OR NEW OPTION SHALL REMAIN THE SAME AS NEARLY AS PRACTICABLE. (C)           IF ANY OPTION IS ASSUMED BY AN ACQUIRING OR SUCCESSOR ENTITY (OR PARENT THEREOF) OR A NEW OPTION OF COMPARABLE VALUE OR NEW INCENTIVE IS ISSUED IN EXCHANGE THEREFORE PURSUANT TO THE TERMS OF A CHANGE IN CONTROL TRANSACTION, THEN IF SO PROVIDED IN AN OPTION AGREEMENT, THE VESTING OF THE OPTION, THE NEW OPTION OR THE NEW INCENTIVE SHALL ACCELERATE IF AND AT SUCH TIME AS THE OPTIONEE’S SERVICE AS AN EMPLOYEE, DIRECTOR, OFFICER, CONSULTANT OR OTHER SERVICE PROVIDER TO THE ACQUIRING OR SUCCESSOR ENTITY (OR A PARENT OR SUBSIDIARY THEREOF) IS TERMINATED INVOLUNTARILY OR VOLUNTARILY UNDER CERTAIN CIRCUMSTANCES WITHIN A SPECIFIED PERIOD FOLLOWING CONSUMMATION OF THE CHANGE IN CONTROL, PURSUANT TO SUCH TERMS AND CONDITIONS AS SHALL BE SET FORTH IN THE OPTION AGREEMENT. (D)           IF VESTING OF OUTSTANDING OPTIONS WILL ACCELERATE PURSUANT TO SUBSECTION (A) ABOVE, THE ADMINISTRATOR IN ITS DISCRETION MAY PROVIDE, IN CONNECTION WITH THE CHANGE IN CONTROL TRANSACTION, FOR THE PURCHASE OR EXCHANGE OF EACH OPTION FOR AN AMOUNT OF CASH OR OTHER PROPERTY HAVING A VALUE EQUAL TO THE DIFFERENCE (OR “SPREAD”) BETWEEN:  (X) THE VALUE OF THE CASH OR OTHER PROPERTY THAT THE OPTIONEE WOULD HAVE RECEIVED PURSUANT TO THE CHANGE IN CONTROL TRANSACTION IN EXCHANGE FOR THE SHARES ISSUABLE UPON EXERCISE OF THE OPTION HAD THE OPTION BEEN EXERCISED IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL, AND (Y) THE EXERCISE PRICE OF THE OPTION. (E)           THE ADMINISTRATOR SHALL HAVE THE DISCRETION TO PROVIDE IN EACH OPTION AGREEMENT OTHER TERMS AND CONDITIONS THAT RELATE TO (I) VESTING OF SUCH OPTION IN THE EVENT OF A 7 -------------------------------------------------------------------------------- CHANGE IN CONTROL, AND (II) ASSUMPTION OF SUCH OPTIONS OR ISSUANCE OF COMPARABLE SECURITIES OR NEW INCENTIVES IN THE EVENT OF A CHANGE IN CONTROL. THE AFOREMENTIONED TERMS AND CONDITIONS MAY VARY IN EACH OPTION AGREEMENT, AND MAY BE DIFFERENT FROM AND HAVE PRECEDENCE OVER THE PROVISIONS SET FORTH IN SECTIONS 7.1(A) - 7.1(D) ABOVE. (F)            OUTSTANDING OPTIONS SHALL TERMINATE AND CEASE TO BE EXERCISABLE UPON CONSUMMATION OF A CHANGE IN CONTROL EXCEPT TO THE EXTENT THAT THE OPTIONS ARE ASSUMED BY THE SUCCESSOR ENTITY (OR PARENT THEREOF) PURSUANT TO THE TERMS OF THE CHANGE IN CONTROL TRANSACTION. (G)           IF OUTSTANDING OPTIONS WILL NOT BE ASSUMED BY THE ACQUIRING OR SUCCESSOR ENTITY (OR PARENT THEREOF), THE ADMINISTRATOR SHALL CAUSE WRITTEN NOTICE OF A PROPOSED CHANGE IN CONTROL TRANSACTION TO BE GIVEN TO OPTIONEES NOT LESS THAN FIFTEEN (15) DAYS PRIOR TO THE ANTICIPATED EFFECTIVE DATE OF THE PROPOSED TRANSACTION. ARTICLE 8 AMENDMENT AND TERMINATION OF THE PLAN 8.1          AMENDMENTS. THE BOARD MAY FROM TIME TO TIME ALTER, AMEND, SUSPEND OR TERMINATE THE PLAN IN SUCH RESPECTS AS THE BOARD MAY DEEM ADVISABLE. NO SUCH ALTERATION, AMENDMENT, SUSPENSION OR TERMINATION SHALL BE MADE WHICH SHALL SUBSTANTIALLY AFFECT OR IMPAIR THE RIGHTS OF ANY PARTICIPANT UNDER AN OUTSTANDING OPTION AGREEMENT WITHOUT SUCH PARTICIPANT’S CONSENT. THE BOARD MAY ALTER OR AMEND THE PLAN TO COMPLY WITH REQUIREMENTS UNDER THE CODE RELATING TO OPTIONS THAT GIVE OPTIONEE MORE FAVORABLE TAX TREATMENT THAN THAT APPLICABLE TO OPTIONS GRANTED UNDER THIS PLAN AS OF THE DATE OF ITS ADOPTION. UPON ANY SUCH ALTERATION OR AMENDMENT, ANY OUTSTANDING OPTION GRANTED HEREUNDER MAY, IF THE ADMINISTRATOR SO DETERMINES AND IF PERMITTED BY APPLICABLE LAW, BE SUBJECT TO THE MORE FAVORABLE TAX TREATMENT AFFORDED TO AN OPTIONEE PURSUANT TO SUCH TERMS AND CONDITIONS. 8.2          PLAN TERMINATION. UNLESS THE PLAN SHALL THERETOFORE HAVE BEEN TERMINATED, THE PLAN SHALL TERMINATE ON THE TENTH (10) ANNIVERSARY OF THE EFFECTIVE DATE AND NO OPTIONS MAY BE GRANTED UNDER THE PLAN THEREAFTER, BUT OPTION AGREEMENTS THEN OUTSTANDING SHALL CONTINUE IN EFFECT IN ACCORDANCE WITH THEIR RESPECTIVE TERMS. ARTICLE 9 TAX WITHHOLDING 9.1          WITHHOLDING. THE COMPANY SHALL HAVE THE POWER TO WITHHOLD, OR REQUIRE A PARTICIPANT TO REMIT TO THE COMPANY, AN AMOUNT SUFFICIENT TO SATISFY ANY APPLICABLE FEDERAL, STATE, AND LOCAL TAX WITHHOLDING REQUIREMENTS WITH RESPECT TO ANY OPTIONS EXERCISED UNDER THE PLAN. TO THE EXTENT PERMISSIBLE UNDER APPLICABLE TAX, SECURITIES AND OTHER LAWS, THE ADMINISTRATOR MAY, IN ITS SOLE DISCRETION AND UPON SUCH TERMS AND CONDITIONS AS IT MAY DEEM APPROPRIATE, PERMIT A PARTICIPANT TO SATISFY HIS OR HER OBLIGATION TO PAY ANY SUCH TAX, IN WHOLE OR IN PART, UP TO AN AMOUNT DETERMINED ON THE BASIS OF THE HIGHEST MARGINAL TAX RATE APPLICABLE TO SUCH PARTICIPANT, BY (A) DIRECTING THE COMPANY TO APPLY SHARES OF COMMON STOCK TO WHICH THE PARTICIPANT IS ENTITLED AS A RESULT OF THE EXERCISE OF AN OPTION OR (B) DELIVERING TO THE COMPANY SHARES OF COMMON STOCK OWNED BY THE PARTICIPANT. THE SHARES OF COMMON STOCK SO APPLIED OR DELIVERED IN SATISFACTION OF THE PARTICIPANT’S TAX WITHHOLDING 8 -------------------------------------------------------------------------------- obligation shall be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding. ARTICLE 10 MISCELLANEOUS 10.1        BENEFITS NOT ALIENABLE. OTHER THAN AS PROVIDED ABOVE, BENEFITS UNDER THE PLAN MAY NOT BE ASSIGNED OR ALIENATED, WHETHER VOLUNTARILY OR INVOLUNTARILY. ANY UNAUTHORIZED ATTEMPT AT ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION SHALL BE WITHOUT EFFECT. 10.2        NO ENLARGEMENT OF EMPLOYEE RIGHTS. THIS PLAN IS STRICTLY A VOLUNTARY UNDERTAKING ON THE PART OF THE COMPANY AND SHALL NOT BE DEEMED TO CONSTITUTE A CONTRACT BETWEEN THE COMPANY AND ANY PARTICIPANT TO BE CONSIDERATION FOR, OR AN INDUCEMENT TO, OR A CONDITION OF, THE EMPLOYMENT OF ANY PARTICIPANT. NOTHING CONTAINED IN THE PLAN SHALL BE DEEMED TO GIVE THE RIGHT TO ANY PARTICIPANT TO BE RETAINED AS AN EMPLOYEE OF THE COMPANY OR ANY AFFILIATED COMPANY OR TO INTERFERE WITH THE RIGHT OF THE COMPANY OR ANY AFFILIATED COMPANY TO DISCHARGE ANY PARTICIPANT AT ANY TIME. 10.3        APPLICATION OF FUNDS. THE PROCEEDS RECEIVED BY THE COMPANY FROM THE SALE OF COMMON STOCK PURSUANT TO OPTION AGREEMENTS, EXCEPT AS OTHERWISE PROVIDED HEREIN, WILL BE USED FOR GENERAL CORPORATE PURPOSES. 10.4        ANNUAL REPORTS. DURING THE TERM OF THIS PLAN, THE COMPANY WILL FURNISH TO EACH PARTICIPANT WHO DOES NOT OTHERWISE RECEIVE SUCH MATERIALS, COPIES OF ALL REPORTS, PROXY STATEMENTS AND OTHER COMMUNICATIONS THAT THE COMPANY DISTRIBUTES GENERALLY TO ITS STOCKHOLDERS. 9 --------------------------------------------------------------------------------

Exhibit 10.4   FOURTH AMENDED AND RESTATED EXCHANGE AGREEMENT THIS FOURTH AMENDED AND RESTATED EXCHANGE AGREEMENT (this “Agreement”), dated as of August 9, 2006, is entered into among MAINLINE SUB LLC, a Delaware limited liability company (“Holdco”), BUCKEYE GP LLC, a Delaware limited liability company (the “General Partner”), BUCKEYE PARTNERS, L.P., a Delaware limited partnership (the “Partnership”), MAINLINE L.P., a Delaware limited partnership (the “OLP GP”), BUCKEYE PIPE LINE COMPANY, L.P., a Delaware limited partnership (“BPLCLP”), LAUREL PIPE LINE COMPANY, L.P., a Delaware limited partnership (“Laurel”), EVERGLADES PIPE LINE COMPANY, L.P., a Delaware limited partnership (“Everglades”), and BUCKEYE PIPE LINE HOLDINGS, L.P., a Delaware limited partnership (collectively with BPLCLP, Laurel, and Everglades, the “Operating Partnerships”). WITNESSETH: WHEREAS, Buckeye Pipe Line Company LLC, a Delaware limited liability company (the “Former GP”), Buckeye Management Company LLC, a Delaware limited liability company (“BMC”), Glenmoor LLC, a Delaware limited liability company (“Glenmoor”), the Partnership and the Operating Partnerships entered into the Exchange Agreement, dated as of August 12, 1997 (the “Original Agreement”), the transactions contemplated by which were consummated on such date effective as of 11:59 P.M.; WHEREAS, the Original Agreement was amended and restated in its entirety on May 2, 2002, as of May 4, 2004 and as of December 15, 2004 (as so amended and restated, the “Prior Agreement”); WHEREAS, the Partnership is governed pursuant to an Amended and Restated Agreement of Limited Partnership (the “Master Partnership Agreement”), dated as of August 9, 2006, between the General Partner and the limited partners of the Partnership (the “Limited Partners”), as amended; the Operating Partnerships, are governed pursuant to similar Amended and Restated Agreements of Limited Partnership, each dated as of August 9, 2006, as amended, between the OLP GP and the Partnership (collectively, the “Operating Partnership Agreements”); WHEREAS, in connection with the Original Agreement, the Partnership (i) issued limited partnership units of the Partnership (“LP Units”) to Buckeye Pipe Line Services Company, a Pennsylvania corporation (the “Company”), whose shares of capital stock are owned by the Buckeye Pipe Line Services Company Employee Stock Ownership Plan Trust (referred to herein as the “ESOP”) in exchange for shares of Glenmoor stock (the “Exchange Shares”), and (ii) contributed an undivided interest in the Exchange Shares to the Operating Partnerships as of the date of the Original Agreement; WHEREAS, the Operating Partnerships transferred and assigned the Exchange Shares to the Former GP as of the date of the Original Agreement in exchange for the release of certain obligations that the Partnership had to BMC (as the former general partner of the Partnership) and the Former GP, and the Operating Partnerships had to the Former GP; Glenmoor and BMC caused the Former GP to receive the Exchange Shares and to release such obligations of the -------------------------------------------------------------------------------- Partnership and the Operating Partnerships; and the Exchange Shares were further transferred by the Former GP to BMC and by BMC to Glenmoor;   WHEREAS, the General Partner was the general partner of the Operating Partnerships, and pursuant to an Amended & Restated Contribution, Conveyance and Assumption Agreement dated August 9, 2006, assigned its general partner interests in the Operating Partnerships and all its right, title and interest in the Prior Agreement, to the extent relating to the role of general partner of the Operating Partnerships, to the OLP GP (the “Assignment Agreement”); and WHEREAS, the parties to the Prior Agreement desire to amend and restate the Prior Agreement in its entirety to reflect the organizational changes recited above. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I THE EXCHANGE Upon the terms and subject to the conditions of this Agreement, the Operating Partnerships have transferred and assigned the Exchange Shares to the Former GP in exchange for the release of certain obligations of the Partnership to BMC (as the former general partner of the Partnership) and the Former GP, and of the Operating Partnerships to the Former GP, as set forth in Article II below. ARTICLE II RELEASE OF OBLIGATIONS 2.01                           Obligations to Reimburse for Executive Compensation.  (a) Upon the terms and subject to the conditions of this Agreement, the General Partner and the OLP GP, for themselves and their affiliates, successors and assigns, hereby and irrevocably release, relinquishe and discharge the Partnership and the Operating Partnerships from any and all liability, obligation, claim, demand, action or suit of any kind or nature, in law or in equity, whatsoever, known or unknown, which may be asserted for or on account of or arising out of or in any manner relating to the Partnership’s and/or the Operating Partnerships’ obligations pursuant to Section 7.4(b) of the Master Partnership Agreement and the Operating Partnership Agreements or otherwise to reimburse the General Partner, the OLP GP or their affiliates for total compensation, including all benefits, paid for the four highest salaried officers performing duties for the General Partner with respect to the functions of operations, finance, legal, marketing and business development, treasury, or performing the function of President of the General Partner following the date of the Original Agreement.  Nothing in this Section 2.01(a) shall be deemed to waive the obligations of the Partnership and the Operating Partnerships to reimburse the General Partner and the OLP GP for (i) employee fringe benefits and retirement benefits for their executives relating to services performed prior to the date of the Original Agreement, (ii) obligations under severance agreements with their executives to the extent currently reimbursable under the Master Partnership Agreement or (iii) any obligations in respect of their executives which are not related to compensation, including, without limitation, indemnification obligations. (b)                                 Holdco, the General Partner and the OLP GP agree, unless the General Partner is removed as general partner of the Partnership, to perform the executive level functions 2 -------------------------------------------------------------------------------- referred to in Section 2.01(a) for the benefit of the Partnership and the Operating Partnerships in a manner satisfactory to the board of directors of the General Partner.   2.02                           ESOP Obligations Generally.  As of December 15, 2004, Holdco acknowledges that it has received all reimbursements due to it from the Partnership and the Operating Partnerships pursuant to the terms of the Prior Agreement in respect of (i) cash contributions made or to be made by the Company to the ESOP pursuant to the terms of the ESOP trust agreement, as necessary for the ESOP to make all payments of principal, interest and premium due under the Note Agreement, dated as of May 4, 2004, among the ESOP, The Prudential Insurance Company of America, Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey (the “Note Agreement”), (ii) cash deposits made or to be made by the Company pursuant to an obligation to maintain a minimum value of collateral pledged to secure the obligations of the ESOP or the Company in respect of the Note Agreement, (iii) income taxes incurred by the Company on the sale of LP Units made to satisfy the redemption obligations described in Section 2.03 below, and (iv) routine administrative charges and expenses common to employee stock ownership plans incurred in connection with the operation of the ESOP.  Each of Holdco, the General Partner and the OLP GP hereby release, relinquish and discharge the Partnership and the Operating Partnerships from any and all further liability, obligation, claim, demand, action or suit of any kind or nature, in law or in equity, whatsoever, known or unknown, which may be asserted for or on account of or arising out of or in any manner relating to the foregoing obligations under the Prior Agreement. 2.03                           No ESOP Contributions for Departing Employees.  Holdco, the General Partner and the OLP GP acknowledge that neither the Partnership nor the Operating Partnerships shall be obligated to reimburse Holdco, the General Partner or the OLP GP for obligations to redeem the ESOP accounts of departing employees upon the termination of their employment with the Company, or for any other costs or expenses of or relating to the operation of the ESOP other than those specified in Section 2.02(a) above. 2.04                           Representations and Warranties.  Holdco, the General Partner and the OLP GP hereby represent and warrant to the Partnership and the Operating Partnerships, as of the date of the Original Agreement, that (a) neither the Company nor any entity treated as a single employer with the Company under Sections 414(b), 414(c), 414(m), or 414(o) of the Internal Revenue Code of 1986, as amended (the “Code”), or Section 4001(b) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), has incurred any liability under any provision of ERISA or other applicable law relating to the ESOP; (b) the ESOP has been administered, in all material respects, in compliance with its terms and complies, both in form and operation, with the applicable provisions of ERISA (including, without limitation, the funding and prohibited transactions provisions thereof), the Code and other applicable laws; and (c) the ESOP has been determined by the Internal Revenue Service to be qualified within the meaning of Section 401 of the Code, and none of Holdco, the General Partner or the OLP GP is aware of any fact or circumstances which would adversely affect the qualified status of the ESOP. ARTICLE III AGREEMENT TO ACT AS GENERAL PARTNER 3.01                           Failure to Act as General Partner Over the ESOP Period.  Except to the extent this obligation is assumed by a successor general partner(s) pursuant to Section 3.02, the General Partner and the OLP GP shall continue to serve as the general partner of the Partnership and the 3 -------------------------------------------------------------------------------- Operating Partnerships, respectively, until all principal, interest and premium is paid in full under the Note Agreement and under any agreements or instruments replacing the Note Agreements have been repaid, unless the Partnership shall be sooner dissolved under Section 14.1(d) of the Master Partnership Agreement.  Each Party hereto hereby (i) consents to the transactions set forth in the Assignment Agreement, including the assignment of all general partner interests in the Operating Partnerships by the General Partner to the OLP GP, and (ii) agrees that the consummation of such transactions did not violate any provision of the Prior Agreement. 3.02                           Assumption of Obligations by a Successor General Partner.  If the General Partner or the OLP GP is removed as general partner of the Partnership or one or more of the Operating Partnerships, respectively, during the ESOP Period (but not if the General Partner or the OLP GP voluntarily withdraws as general partner) pursuant to Section 13.1(b) of the Master Partnership Agreement, or if the General Partner or the OLP GP transfers its general partner interests in the Partnership or the Operating Partnerships pursuant to Section 11.1 of the Master Partnership Agreement, the General Partner or the OLP GP may cause the successor general partner of the Partnership and the Operating Partnerships, respectively, to assume its respective obligations, liabilities and duties under this Agreement. ARTICLE IV GENERAL PROVISIONS 4.01                           Entire Agreement.  This Agreement supersedes all prior discussions and agreements among the parties hereto with respect to the subject matter hereof and contains the sole and entire agreement among the parties hereto with respect to the subject matter hereof. 4.02                           Headings.  The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 4.03                           Waiver and Amendment.  No failure 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 a breach thereof shall constitute a waiver of any such breach or of any other covenant, duty, agreement or condition. Any amendment to this Agreement shall be effective only if in a writing signed by each of the parties hereto. 4.04                           Severability.  If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof, or of such provision in other respects, shall not be affected thereby. 4.05                           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to a contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 4.06                           Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. [signatures follow on next page] 4 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each party hereto has caused this Agreement amending and restating the Prior Agreement to be signed by its officer duly authorized as of the date first above written. MAINLINE SUB LLC       By: /s/ Robert B. Wallace     Name: Robert B. Wallace   Title: Senior Vice President, Finance,   and Chief Financial Officer       BUCKEYE GP LLC       By:  /s/ Robert B. Wallace     Name: Robert B. Wallace   Title: Senior Vice President, Finance,   and Chief Financial Officer       MAINLINE L.P.       By: MAINLINE GP, INC.,   as General Partner       By: /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary       BUCKEYE PARTNERS, L.P.       By: BUCKEYE GP LLC,   as General Partner       By: /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary   [SIGNATURES CONTINUE ONTO NEXT PAGE]     [Fourth Amended and Restated Exchange Agreement] --------------------------------------------------------------------------------   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]   BUCKEYE PIPE LINE COMPANY, L.P.       By: MAINLINE L.P.,   as General Partner       By: MAINLINE GP, INC.,   as General Partner       By: /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary   LAUREL PIPE LINE COMPANY, L.P.       By: MAINLINE L.P.,   as General Partner       By: MAINLINE GP, INC.,   as General Partner       By: /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary   EVERGLADES PIPE LINE COMPANY, L.P.       By: MAINLINE L.P.,   as General Partner       By: MAINLINE GP, INC.,   as General Partner       By:  /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary   [SIGNATURES CONTINUE ONTO NEXT PAGE]   --------------------------------------------------------------------------------   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]     BUCKEYE PIPE LINE HOLDINGS, L.P.       By: MAINLINE L.P.,   as General Partner       By: MAINLINE GP, INC.,   as General Partner       By: /s/ Stephen C. Muther     Name: Stephen C. Muther   Title: Senior Vice President, Administration, General Counsel and Secretary   --------------------------------------------------------------------------------

  Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT           This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 24, 2006 is made and entered into between ZILA, INC., a Delaware corporation (the “Company”), and BLACK DIAMOND COMMERCIAL FINANCE, L.L.C. (the “Investor”).           WHEREAS, the Company and the Investor have entered into that certain Credit Agreement, dated as of the date hereof (the “Credit Agreement”);           WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor’s agreement to enter into the Credit Agreement, the Company has issued to the Investor a Warrant of even date herewith, exercisable from time to time during the period commencing on the date hereof and ending on the fifth anniversary of the date hereof (the “Warrant”) for the purchase of an aggregate of 1,200,000 shares of common stock of the Company, par value $.001 per share (the “Common Stock”), at a price specified in such Warrant;           WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor’s agreement to enter into the Credit Agreement, the Company has agreed to provide the Investor with certain registration rights with respect to the Registrable Securities (as defined below);           NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, in the Warrant and in the Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I. DEFINITIONS      Section 1.1 Definitions. Capitalized terms defined in the Credit Agreement or the Warrant shall have the same meanings herein as are ascribed to them therein. In addition, the following terms shall have the meanings ascribed below:           “Act” means the United States Securities Act of 1933, as amended.           “Registrable Securities” means all of the Common Stock and any other securities issued or issuable upon exercise of the Warrants as provided therein until (i) a registration statement under the Act covering the offering of such securities has been declared effective by the SEC and such securities have been disposed of pursuant to such effective registration statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Act (“Rule 144”) are met, (iii) such securities have been otherwise transferred and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend or (iv) such time as, in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Investor, such securities may be sold without any time,   --------------------------------------------------------------------------------   volume or manner limitation pursuant to Rule 144(k) (or any similar provision then in effect) under the Act.           “SEC” means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.           “Shelf Registration Statement” means a “shelf” registration statement filed under the Act providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities pursuant to Rule 415 under the Act and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions of Section 2 of this Agreement, including the prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement. ARTICLE II. REGISTRATION RIGHTS      Section 2.1 Form S-3 Registration Statements.           (a) The Company shall prepare and file with the Commission a “Shelf” Registration Statement on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) covering the resale on Nasdaq of the Registrable Securities, and use its reasonable best efforts to cause the Registration Statement to become effective and remain effective as provided herein. The Company shall use its reasonable best efforts to cause the Registration Statement to be filed no later than May 15, 2006 and declared effective under the Act as soon as practicable thereafter, and in any event by the later of (i) July 15, 2006 and (ii) the date upon which at least twenty-five percent (25%) of the Warrant Shares have been acquired upon exercise of the Warrant (the “Effectiveness Date”).           (b) The Company shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Act until the earlier to occur of (i) the date upon which all Registrable Securities registered under the Registration Statement have been sold, and (ii) the date upon which none of the Common Stock acquired, or which may be acquired, upon exercise of the Warrant constitutes Registrable Securities (the “Effectiveness Period”).           (c) In the event the Company fails to obtain the effectiveness of a Registration Statement by the Effectiveness Date, or fails to maintain the effectiveness of a Registration Statement during the Effectiveness Period, the Company shall pay to the Investor at the end of each thirty (30) day period following the Effectiveness Date, in cash, an amount equal to $40,000 for the first 30 days such registration is not effective, pro-rated on a daily basis, and $40,000 per each 30-day period thereafter, pro-rated on a daily basis. 2 --------------------------------------------------------------------------------   ARTICLE III. REGISTRATION PROCEDURES      Section 3.1 Filings; Information. In connection with the registration of Registrable Securities pursuant to Section 2.1, the Company:           (a) will (i) prepare and file with the SEC, as promptly as reasonably possible, such amendments and supplements to such Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to make sure such Shelf Registration Statement is, during the Effectiveness Period, in compliance with the provisions of the Act and the rules and regulations thereunder, and (ii) respond as promptly as reasonably possible, and in any event within fifteen (15) business days, to any comments received from the SEC with respect to the Shelf Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Investor true and complete copies of all correspondence from and to the SEC relating to the Shelf Registration Statement provided that the Company is not required to produce any information to the Investor pursuant to this Section 3.1(a) if the Company in good faith deems it material non-public information or otherwise of a confidential nature;           (b) will, not less than three days prior to filing a Shelf Registration Statement or prospectus or any amendment or supplement thereto (excluding amendments deemed to result from the filing of documents incorporated by reference therein), furnish to the Investor and one firm of counsel representing the Investor, a copy of such Shelf Registration Statement as proposed to be filed, together with exhibits thereto, which documents will be subject to review by such parties. Thereafter, the Company shall furnish to the Investor and its counsel copies of the “final” prospectus included in such Shelf Registration Statement (including each preliminary prospectus) and any amendment or supplement thereto as the Investor or counsel may reasonably request in order to facilitate the disposition of the Registrable Securities;           (c) will use its reasonable best efforts to (i) register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as the Investor may reasonably (in light of its intended plan of distribution) request, and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States 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 the Investor to consummate the disposition of the Registrable Securities; 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 or subject itself to general service of process in any such jurisdiction;           (d) will promptly notify the Investor upon the occurrence of any of the following events in respect of a Shelf Registration Statement or related prospectus in respect of an offering of Registrable Securities; (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Shelf Registration Statement for amendments or supplements to the Shelf Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable 3 --------------------------------------------------------------------------------   Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event which makes any statement made in the Shelf Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or which requires the making of any changes in the Shelf Registration Statement, related prospectus or documents so that, in the case of the Shelf Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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; and (vi) the Company’s reasonable determination that a post-effective amendment to the Shelf Registration Statement would be appropriate; and the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus;           (e) will otherwise comply with all applicable rules and regulations of the SEC, including, without limitation, compliance with applicable reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);           (f) will appoint a transfer agent and registrar for all such Registrable Securities covered by such Shelf Registration Statement not later than the effective date of such Shelf Registration Statement; and           (g) may require the Investor to promptly furnish in writing to the Company such information regarding the 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 including, without limitation, all such information as may be requested by the SEC, the NASD, or other similar governmental entity. The Investor agrees to provide such information requested in connection with such registration within three (3) business days after receiving such written request and the Company shall not be responsible for (and the penalties specified in Section 2.1(c) shall not apply in respect of) any delays in obtaining or maintaining the effectiveness of the Shelf Registration Statement caused by the Investor’s failure to timely provide such information. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(d) hereof, the Investor will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(d) hereof, and, if so directed by the Company, the Investor will deliver to the Company all copies, other than permanent file copies then in the Investor’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such Shelf Registration Statement shall be maintained effective (including the period referred to in Section 3.1(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.1(d) hereof to the date when the Company shall make available to the Investor a prospectus supplemented or amended to conform with the requirements of Section 3.1(d) hereof.           (h) Registration Expenses. In connection with each Shelf Registration Statement, the Company shall pay the following registration expenses incurred in connection 4 --------------------------------------------------------------------------------   with the registration thereunder (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) the Company’s 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, if any, for independent certified public accountants retained by the Company, and (vii) the 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, all such costs to be borne by the Investors. ARTICLE IV. INDEMNIFICATION AND CONTRIBUTION      Section 4.1 Indemnification           (a) The Company hereby agrees to indemnify and hold harmless, to the extent permitted by law, each seller of any Registrable Securities covered by such registration statement, its directors, officers, general and limited partners, employees, agents and representatives (and directors and officers thereof and, if such seller is a portfolio or investment fund, its investment advisors or agents), and each other Person, if any, who controls such seller or any such underwriter within the meaning of Section 15 of the Securities Act, as follows:      (i) against any and all loss, liability, claim, damage, attorneys’ fee or expense whatsoever arising out of or based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein not misleading;      (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement (a “Settlement Payment”) of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company, which consent shall not be unreasonably withheld or delayed; and      (iii) against any and all expense (other than any Settlement Payment) reasonably incurred by them in connection with investigating, preparing or defending against any litigation, or investigation or proceeding by any 5 --------------------------------------------------------------------------------   governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clauses (i) or (ii) above; provided, however, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of or based upon an untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such seller or underwriter expressly for use in the preparation of any registration statement (or any amendment thereto) or any preliminary prospectus or prospectus (or any amendment or supplement thereto); and provided, further, that if such offering and sale are not effected by or through an underwriter, then the Company will not be liable to the seller or any other Person, if any, who controls such seller within the meaning of Section 15 of the Securities Act, under the indemnity agreement in this Section 4.1(a) with respect to any preliminary prospectus or final prospectus or final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such controlling Person results from the fact that such seller sold Registrable Securities to a Person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company has previously furnished copies thereof to such seller. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, general or limited partner, investment advisor or agent, underwriter or controlling Person and shall survive the transfer of such securities by such seller.           (b) The Investors shall indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 4.1(a) hereof) the Company, each Person who controls the Company or any such underwriter (within the meaning of Section 15 of the Securities Act) and their respective officers, directors, partners, employees, agents and representatives, with respect to any statement in or omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such seller specifically for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company, or any such director, officer, partner, employee, agent, representative or controlling Person and shall survive the transfer of such securities by such seller. The obligations of the Company and each seller pursuant to this Section 4.1 are to be several and not joint; provided, however, that the indemnity agreement contained in this Section 4.1(b) shall not apply to amounts paid in settlement of any lawsuits, claims, damages, liabilities or actions if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld or delayed, and provided, further, however, that, with respect to each claim pursuant to this Section 4.1, each such seller’s liability under this Section 4.1 shall be limited to an amount equal to the net proceeds (after deducting the underwriters’ discount and expenses) received by such seller from the sale of Registrable Securities by it pursuant to such registration statement.           (c) Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding involving a claim referred to in this Section 6 --------------------------------------------------------------------------------   4.1, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to such indemnifying party of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 4.1, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof.      Section 4.2 Contribution. In order to provide for just and equitable contribution in circumstances under which the indemnity contemplated by Section 4.1 hereof is for any reason not available, the parties required to indemnify by the terms thereof shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company, any seller of Registrable Securities and one or more of the underwriters, except to the extent that contribution is not permitted under Section 11(f) of the Securities Act. In determining the amounts which the respective parties shall contribute, there shall be considered the relative benefits received by each party from the offering of the Registrable Securities (taking into account the portion of the proceeds of the offering realized by each), the parties’ relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission and any other equitable considerations appropriate under the circumstances. The Company and each such seller agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the underwriters were treated as one entity for such purpose) or for the underwriters’ portion of such contribution to exceed the percentage that the underwriting discount bears to the initial public offering price of the Registrable Securities. For purposes of this Section 4.2, each Person, if any, who controls an underwriter within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such underwriter, and each director and each officer of the Company who signed the registration statement, and each Person, if any, who controls the Company or a seller of Registrable Securities shall have the same rights to contribution as the Company or a seller of Registrable Securities, as the case may be. Notwithstanding the foregoing, no seller of Registrable Securities shall be required to contribute any amount in excess of the amount such seller would have been required to pay to an indemnified party if the indemnity under Section 4.1 hereof were available. ARTICLE V. MISCELLANEOUS      Section 5.1 Term. The registration rights provided to the holders of Registrable Securities hereunder shall terminate upon the earlier of (i) the Company’s obligations as set forth under Section 2.1 are satisfied or (ii) December 31, 2011; provided, however, that the provisions of Article IV hereof shall survive any termination of this Agreement. 7 --------------------------------------------------------------------------------        Section 5.2 Rule 144. The Company covenants that so long as any Registrable Securities remain outstanding and restricted it will file all reports required to be filed by it under the Act and the Exchange Act and that it will take such further action as holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable the Investor to sell Registrable Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144, as such Rule may be amended from time to time, or (b) any successor or similar rule or regulation hereafter adopted by the SEC. If at any time the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144.      Section 5.3 Amendment and Modification. Any provision of this Agreement may be waived, provided that such waiver is set forth in a writing executed by the party against whom the enforcement of such waiver is sought. 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 Company has obtained the written consent of the holders of a majority of the then outstanding Registrable Securities. Notwithstanding the foregoing, the waiver of any provision hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Shelf Registration Statement and does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. No course of dealing between or among any Persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement.      Section 5.4 Successors and Assigns; Entire Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Investor may assign its rights under this Agreement to any subsequent holder of Warrants or Registrable Securities, provided that the Company shall have the right to require any holder of Registrable Securities to execute a counterpart of this Agreement as a condition to such holder’s claim to any rights hereunder. This Agreement, together with the Credit Agreement and the Warrants, set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.      Section 5.5 Separability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless that provision held invalid shall substantially impair the benefits of the remaining portions of this Agreement.      Section 5.6 Notices. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served or deposited in the mail, registered or certified, return receipt requested, postage prepaid, or delivered by reputable air 8 --------------------------------------------------------------------------------   courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice: (i) if to the Company, to: Zila, Inc., 5227 North 7th Street, Phoenix, AZ 85014-2800; Attention: Gary V. Klinefelter, Vice President, General Counsel and Secretary, Facsimile No.: (602) 234-2318, with copies (which shall not constitute notice) to: Snell & Wilmer L.L.P., One Arizona Center, Phoenix, AZ 85004, Attention: Michael M. Donahey; and (ii) if to the Investor, to the address set forth on the signature pages hereto. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given on the third business day following the date mailed or on the second business day following delivery of such notice by a reputable air courier service.      Section 5.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.      Section 5.8 Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect.      Section 5.9 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument.      Section 5.10 Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.      Section 5.11 Remedies. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of any such provision will be inadequate compensation for any loss and that any defense or objection in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived.           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.                   ZILA, INC.                       By:   /s/ Andrew A. Stevens                   9 --------------------------------------------------------------------------------                              Name: Andrew A. Stevens                                Title:    Vice President & CFO                       BLACK DIAMOND COMMERCIAL FINANCE, LLC                       By:   /s/ Stuart Armstrong                                  Name: Stuart Armstrong                                Title:    President & Chief Executive Officer                       Address for Notice:                           Zila, Inc.             5227 N. 7th Street             Phoenix, AZ 85014                           Black Diamond Commercial Finance, LLC             Two Stamford Place             281 Tressor Blvd., 7th Floor             Stamford, CT 06901-3242     10

  EXHIBIT 10.2 FIRST AMENDMENT TO THE CAPITAL BANK & TRUST COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT DATED JULY 10, 2006 FOR R. RICK HART     THIS FIRST AMENDMENT is adopted this 20th day of December, 2006, effective as of July 10, 2006, except as otherwise provided herein, by and among CAPITAL BANK & TRUST COMPANY, a state-chartered bank located in Nashville, Tennessee (the “Bank”) and R. Rick Hart (the “Executive”).     The Bank and Executive executed the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement effective as of July 10, 2006 (the “Agreement”).     The undersigned hereby amend the Agreement for the purpose of bringing the Agreement into compliance with Section 409A of the Internal Revenue Code. Therefore, the following changes shall be made:     Section 1.1.1 of the Agreement shall be deleted in its entirety and replaced by the following: 1.1.1   “Change in Control” means any of the following:   (a)   any person (as such term is used in Sections 13d and 14d-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Corporation, a subsidiary of the Corporation, and employee benefit plan (or related trust) maintained by the Corporation or a direct or indirect subsidiary of the Corporation or affiliates of the Corporation (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation or the Bank representing more than thirty-five percent (35%) of the combined voting power of the Corporation’s or Bank’s then outstanding securities (other than a person owing ten percent (10%) or more of the total voting power of stock on the date hereof);     (b)   during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation or the Bank, cease for any reason to constitute a majority thereof, unless the election of each new director was approved in advance by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period;   --------------------------------------------------------------------------------     (c)   consummation of a merger, consolidation or other business combination of the Corporation or the Bank with any other Person or affiliate thereof, other than a merger, consolidation or business combination which would result in the outstanding common stock of the Corporation or the Bank immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity, or a parent or affiliate thereof) at least fifty percent (50%) of the outstanding common stock of the Corporation or the Bank, or such entity or parent or affiliate thereof outstanding immediately after such merger, consolidation or business combination; or     (d)   consummation of a plan of complete liquidation of the Corporation or the Bank or an agreement for the sale or disposition by the Corporation or the Bank of all or substantially all of the Corporation’s or the Bank’s assets.           The following Section 1.1.9a shall be added to the Agreement immediately following Section 1.1.9: 1.1.9a   “Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank (including any affiliate of the Bank that together with the Bank is considered a single employer under Code Section 414(b)) if any stock of the Bank is publicly traded on an established securities market or otherwise.           Section 1.1.10 of the Agreement shall be deleted in its entirety and replaced by the following: 1.1.10   “Termination of Employment” means the separation from service with the Bank and its affiliates as contemplated under Code Section 409A(a)(2)(A)(i) for reasons other than death. Whether a Termination of Employment 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 change in the Executive’s employment status will not be considered a Termination of Employment if:    (c)   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 (3) full calendar years of employment (or, if employed less than three (3) 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 (3) full calendar years of employment (or, if less, such lesser period), or      (d)   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 (3)   --------------------------------------------------------------------------------         full calendar years of employment (or if employed less than three (3) 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 (3) full calendar years of employment (or if less, such lesser period).           Section 2.1.3 of the Agreement shall be deleted in its entirety, effective November 1, 2006, and replaced with the following: 2.1.3   Benefit Increases. Commencing on the first anniversary of the first benefit payment and continuing on each subsequent anniversary of that date, this annual benefit shall increase by three percent (3%) from the immediately preceding anniversary date.           Sections 2.2.3 and 2.3.3 of the Agreement shall be deleted in their entirety.           The following Sections 2.5, 2.6 and 2.7 shall be added to the Agreement immediately following Section 2.4.2: 2.5   Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Termination of Employment under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Termination of Employment may not commence earlier than six (6) months after the date of such Termination of Employment. 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 (6) months following the Termination of Employment shall be accumulated and paid to the Executive in a lump sum as soon as practicable following the six-month anniversary of the Termination of Employment. All subsequent distributions shall be paid in the manner specified. 2.6   Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any amount 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 amount the Bank has accrued with respect to the Bank’s obligations hereunder, 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. All changes in the form or timing of distributions hereunder must comply with the following requirements. The changes: (d) may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder; (e) must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, 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 (f) must take effect not less than twelve (12) months after the election is made.   --------------------------------------------------------------------------------             Article 6 of the Agreement shall be deleted in its entirety and replaced by the following: Article 6 Claims and Review Procedures 6.2 Claims Procedure: As used in this Article, “Plan Administrator” shall mean the Bank the Bank until its resignation or removal by the Board of Directors of the Bank.   6.2.1   Notice of Denial. If a claimant is denied a claim for benefits under the Agreement, the Plan Administrator shall provide to the claimant written notice of the denial within ninety (90) days (forty-five (45) days with respect to a denial of any claim for benefits due to the Executive’s Disability) after the Plan Administrator receives the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall the extension exceed a period of ninety (90) days (thirty (30) days with respect to a claim for benefits due to the Executive’s Disability) from the end of such initial period. With respect to a claim for benefits due to the Executive’s Disability, an additional extension of up to thirty (30) days beyond the initial 30-day extension period may be required for processing the claim. In such event, written notice of the extension shall be furnished to the claimant within the initial 30-day extension period. Any extension notice shall indicate the special circumstances requiring the extension of time, the date by which the Plan Administrator expects to render the final decision, the standards on which entitlement to benefits are based, the unresolved issues that prevent a decision on the claim and the additional information needed to resolve those issues.     6.2.2   Contents of Notice of Denial. If a claimant is denied a claim for benefits under the Agreement, the Plan Administrator shall provide to such claimant written notice of the denial which shall set forth:   (a)   the specific reasons for the denial;     (b)   specific references to the pertinent provisions of the Agreement on which the denial is 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;     (d)   an explanation of the Agreement’s claim review procedures, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review;   --------------------------------------------------------------------------------     (e)   in the case of a claim for benefits due to the Executive’s Disability, if an internal rule, guideline, protocol or other similar criterion is relied upon in making the adverse determination, either the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the decision and that a copy of such rule, guideline, protocol or other similar criterion will be provided free of charge upon request; and   (f)   in the case of a claim for benefits due to the Executive’s Disability, if a denial of the claim is based on a medical necessity or experimental treatment or similar exclusion or limit, an explanation of the scientific or clinical judgment for the denial, an explanation applying the terms of the Agreement to the claimant’s medical circumstances or a statement that such explanation will be provided free of charge upon request.   6.2.3   Right to Review. After receiving written notice of the denial of a claim, a claimant or his representative shall be entitled to:   (a)   request a full and fair review of the denial of the claim by written application to the Plan Administrator (or Appeals Fiduciary in the case of a claim for benefits payable due to the Executive’s Disability);     (b)   request, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;     (c)   submit written comments, documents, records, and other information relating to the denied claim to the Plan Administrator or Appeals Fiduciary, as applicable; and     (d)   a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.       For purposes of this Article 6, the term “Appeals Fiduciary” means an individual or group of individuals appointed to review appeals of claims for benefits payable due to the Executive’s Disability.     6.2.4   Application for Review.   (a)   If a claimant wishes a review of the decision denying his claim to benefits under the Agreement, other than a claim described in clause (b) of this Section 6.1.4, he must submit the written application to the Plan Administrator within sixty (60) days after receiving written notice of the denial.     (b)   If the claimant wishes a review of the decision denying his claim to benefits under the Agreement due to the Executive’s Disability, he must submit the written application to the Appeals Fiduciary within   --------------------------------------------------------------------------------         one hundred eighty (180) days after receiving written notice of the denial. With respect to any such claim, in deciding an appeal of any denial based in whole or in part on a medical judgment (including determinations with regard to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate), the Appeals Fiduciary shall:   (i)   consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; and     (ii)   identify the medical and vocational experts whose advice was obtained on behalf of the Agreement in connection with the denial without regard to whether the advice was relied upon in making the determination to deny the claim.       Notwithstanding the foregoing, the health care professional consulted pursuant to this clause (b) shall be an individual who was not consulted with respect to the initial denial of the claim that is the subject of the appeal or a subordinate of such individual.     6.2.5   Hearing. Upon receiving such written application for review, the Plan Administrator or Appeals Fiduciary, as applicable, may schedule a hearing for purposes of reviewing the claimant’s claim, which hearing shall take place not more than thirty (30) days from the date on which the Plan Administrator or Appeals Fiduciary received such written application for review.     6.2.6   Notice of Hearing. At least ten (10) days prior to the scheduled hearing, the claimant and his representative designated in writing by him, if any, shall receive written notice of the date, time, and place of such scheduled hearing. The claimant or his representative, if any, may request that the hearing be rescheduled, for his convenience, on another reasonable date or at another reasonable time or place.     6.2.7   Counsel. All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.     6.2.8   Decision on Review. No later than sixty (60) days (forty-five (45) days with respect to a claim for benefits due to the Executive’s Disability) following the receipt of the written application for review, the Plan Administrator or the Appeals Fiduciary, as applicable, shall submit its decision on the review in writing to the claimant involved and to his representative, if any, unless the Plan Administrator or Appeals Fiduciary determines that special circumstances (such as the need to hold a hearing) require an extension of time, to a day no later than one hundred twenty (120) days (ninety (90) days with respect to a claim for benefits due to the Executive’s Disability) after the   --------------------------------------------------------------------------------         date of receipt of the written application for review. If the Plan Administrator or Appeals Fiduciary determines that the extension of time is required, the Plan Administrator or Appeals Fiduciary shall furnish to the claimant written notice of the extension before the expiration of the initial sixty (60) day (forty-five (45) days with respect to a claim for benefits due to the Executive’s Disability) period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator or Appeals Fiduciary expects to render its decision on review. In the case of a decision adverse to the claimant, the Plan Administrator or Appeals Fiduciary shall provide to the claimant written notice of the denial which shall include:   (a)   the specific reasons for the decision;     (b)   specific references to the pertinent provisions of the Agreement on which the decision is based;     (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 to the claimant’s claim for benefits;     (d)   an explanation of the Agreement’s claim review procedures, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring an action under Section 502(a) of ERISA following the denial of the claim upon review;     (e)   in the case of a claim for benefits due to the Executive’s Disability, if an internal rule, guideline, protocol or other similar criterion is relied upon in making the adverse determination, either the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the decision and that a copy of such rule, guideline, protocol or other similar criterion will be provided free of charge upon request;     (f)   in the case of a claim for benefits due to the Executive’s Disability, if a denial of the claim is based on a medical necessity or experimental treatment or similar exclusion or limit, an explanation of the scientific or clinical judgment for the denial, an explanation applying the terms of the Agreement to the claimant’s medical circumstances or a statement that such explanation will be provided free of charge upon request; and     (g)   in the case of a claim for benefits due to the Executive’s Disability, a statement regarding the availability of other voluntary alternative dispute resolution options.           Article 7 of the Agreement shall be deleted in its entirety and replaced by the following:   --------------------------------------------------------------------------------   Article 7 Amendments and Termination 7.1   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 changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.       No amendment shall provide for or otherwise permit any acceleration of the time or schedule of any payment under the Agreement in a manner that would be prohibited under Code Section 409A(a)(3). 7.2   Plan Termination Generally. The Bank and Executive may terminate this Agreement at any time. The benefit payable hereunder shall be the amount the Bank has accrued with respect to the Bank’s obligations hereunder as of the date the Agreement is terminated. Except as provided in Section 7.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3. 7.3   Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, this Agreement terminates 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 further 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 distribution 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;     the Bank may distribute the amount the Bank has accrued with respect to the Bank’s obligations hereunder, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.   --------------------------------------------------------------------------------             Section 8.12 shall be deleted in its entirety and replaced by the following: 8.12   Tax Withholding and Reporting. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder and employment (e.g. FICA) taxes due to be paid by the Bank pursuant to Code Section 3121(v) (i.e., FICA taxes on the present value of payments hereunder which are no longer subject to vesting). The 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. Executive agrees that appropriate amounts for withholding may be deducted from the cash salary, bonus or other payments due to the Executive by the Bank to satisfy the employee-portion of such obligations. If insufficient cash wages are available or if the Executive so desires, Executive shall remit payment in cash for the withholding amounts.           The following Section 8.18 shall be added to the Agreement immediately following Section 8.17: 8.18   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.           IN WITNESS OF THE ABOVE, the Bank and the Executive hereby consent to this First Amendment.           EXECUTIVE:   BANK:     CAPITAL BANK & TRUST COMPANY           /s/ R, Rick Hart   By   /s/ Albert J. Dale, III             R. Rick Hart   Title   Chairman Compensation Committee  

Exhibit 10(r) AMENDED AND RESTATED AIRCRAFT TIME SHARING AGREEMENT           This Amended and Restated Aircraft Time Sharing Agreement (“Agreement”) is made and entered into as of the 22nd day of September, 2006, by and between Becton, Dickinson and Company, a New Jersey corporation (“BD”), and Edward J. Ludwig.           WHEREAS, BD operates (i) a Falcon 2000EX aircraft bearing Federal Aviation Administration (“FAA”) Registration No. N522BD and Manufacturer's Serial No. 84, and (ii) a Falcon 900EX aircraft bearing FAA Registration No. N2BD and Manufacturer's Serial 072 (collectively, the “Aircraft”); and           WHEREAS, Mr. Ludwig is the Chairman, President and Chief Executive Officer of BD; and           WHEREAS, the Board of Directors of BD, by resolution adopted on March 28, 2006 (the “Resolution”), has authorized and encouraged Mr. Ludwig to use the Aircraft for all travel purposes, including personal use, to the extent practicable within business constraints, taking into account competing business use for the Aircraft;           WHEREAS, BD desires to make such Aircraft available for Mr. Ludwig’s personal use for the above operations on a time sharing basis in accordance with §91.501 of the Federal Aviation Regulations (“FARs”), subject to reimbursement of certain costs as defined more fully below, consistent with the Resolution and the terms of this Agreement; and           NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the parties agree as follows as to each of the Aircraft:           1.           Provision of Aircraft. BD agrees to provide the Aircraft to and operate Aircraft for Mr. Ludwig’s personal use, as permitted under the Resolution, on a time sharing basis in accordance with the provisions of §§ 91.501(b)(6), 91.501(c)(1) and 91.501(d) of the FARs for the term of this Agreement. To the extent the FARs and the Resolution conflict, the FARs shall govern.           2.           Reimbursement of Expenses. BD shall impose a charge for transportation furnished under this Agreement in an amount up to the sum of the expenses set forth in subsections (a)-(j) below in respect of the specific flight or flights to which such charge applies:            (a)           Fuel, oil, lubricants, and other additives;     (b) Travel expenses of the crew, including food, lodging, and ground transportation;     (c) Hangar and tie-down costs away from the Aircraft’s base of operation;     (d) Insurance obtained for the specific flight;     (e) Landing fees, airport taxes, and similar assessments;     (f) Customs, foreign permit, and similar fees directly related to the flight;     (g) In-flight food and beverages;     (h) Flight planning and weather contract services; and   --------------------------------------------------------------------------------           (i)           An additional charge equal to one hundred percent (100%) of the expenses listed in subsection (a) above.           3.           Invoicing and Payment. All payments to BD by Mr. Ludwig hereunder shall be paid in the manner set forth in this Section 3. BD will pay to suppliers, employees, contractors and governmental entities all expenses related to the operation of Aircraft hereunder in the ordinary course. As to each flight operated hereunder, BD will provide to Mr. Ludwig an invoice in an amount specified in Paragraph 2 of this Agreement (plus air transportation excise taxes, as applicable, imposed by the Internal Revenue Code and any other governmental imposed ad valorem taxes, charges or fees). Mr. Ludwig shall pay the full amount of such invoice within thirty (30) days of the date of the invoice. In the event BD has not received supplier invoices for reimbursable charges relating to such flight prior to such invoicing, BD may issue supplemental invoice(s) for such charge(s) to Mr. Ludwig, and Mr. Ludwig shall pay such charge(s) within thirty (30) days of the date of the supplemental invoice.           4.           Flight Notifications. Mr. Ludwig will provide BD with flight notifications and proposed flight schedules as far in advance as possible. Flight notifications shall be in a form, whether oral or written, mutually convenient to and agreed upon by the parties. Mr. Ludwig shall provide at least the following information for each proposed flight reasonably in advance of the desired departure time as required by BD or its flight crew:            (a)           departure point;     (b) destination;     (c) proposed date and time of flight;     (d) number and identity of anticipated passengers;     (e) nature and extent of baggage and/or cargo to be carried;     (f) proposed date and time of return flight, if any; and     (g) any other information concerning the proposed flight that may be pertinent to or required by BD or its flight crew, including any request for a particular Aircraft.             5.           Aircraft Scheduling. BD shall have final authority over all scheduling of the Aircraft, including determination of which Aircraft shall be operated on a particular flight, provided, however, that BD will use its reasonable efforts to accommodate Mr. Ludwig’s requests.           6.           Aircraft Maintenance. BD shall be solely responsible for securing scheduled and unscheduled maintenance, preventive maintenance, and required or otherwise necessary inspections of the Aircraft, and shall take such requirements into account in scheduling the Aircraft. Performance of maintenance or inspection shall not be postponed for the purpose of scheduling an Aircraft to accommodate Mr. Ludwig’s request, unless such maintenance or inspection can safely be conducted at a later time in compliance with applicable laws, regulations and requirements, and such postponement is consistent with the sound discretion of the pilot-in-command.           7.           Flight Crew. BD shall employ, pay for and provide a qualified flight crew for all flight operations under this Agreement. 2 --------------------------------------------------------------------------------           8.           Operational Authority and Control. BD shall be responsible for all aspects of the physical and technical operation of the Aircraft and the safe performance of all flights, and shall retain full authority and control, including exclusive operational control, and possession of the Aircraft at all times during flights operated under this Agreement. In accordance with applicable FARs, the qualified flight crew provided by BD will exercise all required and/or appropriate duties and responsibilities in regard to the safety of each flight conducted hereunder. The pilot-in-command shall have absolute discretion in all matters concerning preparation of the Aircraft for flight and the flight itself, the load carried and its distribution, the decision whether or not a flight shall be undertaken, the route to be flown, the place where landings shall be made, and all other matters relating to operation of the Aircraft. Mr. Ludwig specifically agrees that the flight crew shall have final and complete authority to delay or cancel any flight for any reason or condition that in the sole judgment of the pilot-in-command could compromise the safety of the flight, and to take any other action that in the sole judgment of the pilot-in-command is necessitated by considerations of safety. No such action of the pilot-in-command shall create or support any liability to Mr. Ludwig or any other person for loss, injury, damage or delay. The parties further agree that BD shall not be liable for delay or failure to furnish an Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty or breakdown, war, civil commotion, strike or labor dispute, weather conditions, act of God, or other circumstances beyond BD’s reasonable control.           9.           Insurance and Indemnification. (a) BD will maintain or cause to be maintained in full force and effect throughout the term of this Agreement aircraft liability insurance in respect of each Aircraft, covering Mr. Ludwig as an insured, in an amount at least equal to $300 million combined single limit for bodily injury to or death of persons (including passengers) and property damage liability.           (b) BD shall use reasonable efforts to procure such additional insurance coverage as Mr. Ludwig may request, covering Mr. Ludwig as an insured; provided, that the cost of such additional insurance shall be borne by Mr. Ludwig pursuant to Paragraph 2(d) hereof.           (c) Notwithstanding the obligations set forth in subparagraphs (a) and (b) of this Section 9, BD shall indemnify Mr. Ludwig and hold him harmless against all liabilities, obligations, losses, damages, penalties, and actions (including without limitation reasonable attorneys’ fees and expenses) of any nature which may be imposed on, incurred by or asserted against Mr. Ludwig caused by or arising out of any flight operated under this Agreement. The provisions of this subsection shall survive the termination of this Agreement.           10.        Warranties. Mr. Ludwig warrants that:           (a)         Mr. Ludwig will use the Aircraft under this Agreement consistent with the Resolution, and will not use such Aircraft for the purpose of providing transportation of passengers or cargo for compensation or hire; 3 --------------------------------------------------------------------------------           (b)        Mr. Ludwig will not permit any lien, security interest or other charge or encumbrance to attach against an Aircraft as a result of his actions or inactions, and shall not convey, mortgage, assign, lease or in any way alienate an Aircraft or his rights hereunder; and           (c)        Throughout the term of this Agreement, Mr. Ludwig and other authorized passengers will abide by and conform to all such laws, rules and regulations as may from time to time be in effect and applicable to him relating in any way to the operation or use of an Aircraft under this Agreement.           11       . Base of Operations. Mr. Ludwig acknowledges that the base of operations of any Aircraft may be changed temporarily or permanently by BD without notice.           12.        Notices and Communications. All notices and other communications under this Agreement shall be in writing (except as permitted in Section 4) and shall be given (and shall be deemed to have been duly given upon receipt or refusal to accept receipt) by personal delivery, addressed as follows:            If to BD:  Becton, Dickinson and Company      1 Becton Drive     Franklin Lakes, NJ 07417      Attn: Chief Financial Officer        If to Mr. Ludwig:            Edward J. Ludwig      c/o Becton, Dickinson and Company      1 Becton Drive     Franklin Lakes, NJ 07417  or to such other person or address as either party may from time to time designate in writing.           13.        Further Acts. Each of BD and Mr. Ludwig shall from time to time perform such other and further acts and execute such other and further instruments as may be required by law or may be necessary (i) to carry out the intent and purpose of this Agreement, or (ii) to establish, maintain or protect the respective rights and remedies of the other party.           14.        Successors and Assigns. Neither this Agreement nor any party's interest herein shall be assignable to any third party. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their representatives and their successors.           15.        Termination. Either party may terminate this Agreement for any reason upon written notice to the other, such termination to become effective thirty (30) days from the date of the notice; provided, that this Agreement may be terminated as a result of a breach by either party of its obligations under this Agreement on ten (10) days' written notice by the non-breaching party to the breaching party; and provided further, that this Agreement may be 4 -------------------------------------------------------------------------------- terminated on such shorter notice as may be required to comply with applicable laws, regulations or insurance requirements.           16.        Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions shall not be affected or impaired.           17.        Entire Agreement; Amendment or Modification. This Agreement supersedes and replaces any previous agreement between the parties hereto concerning the subject matter hereof, constitutes the entire agreement between the parties with respect to that subject matter, and is not intended to confer upon any person or entity any rights or remedies not expressly granted herein. This Agreement may be amended or modified only in writing duly executed by both parties hereto.           18.        TRUTH IN LEASING STATEMENT PURSUANT TO SECTION 91.23 OF THE FEDERAL AVIATION REGULATIONS. (a) BD CERTIFIES THAT THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED WITHIN THE 12-MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS, AND THAT ALL APPLICABLE REQUIREMENTS FOR THE AIRCRAFTS’ MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN MET AND ARE VALID FOR THE OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.           (b) BD AGREES, CERTIFIES AND ACKNOWLEDGES THAT WHENEVER AN AIRCRAFT IS OPERATED UNDER THIS AGREEMENT, BD SHALL BE KNOWN AS, CONSIDERED, AND SHALL IN FACT BE THE OPERATOR OF THAT AIRCRAFT, AND THAT BD UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.           (c) THE PARTIES UNDERSTAND THAT AN EXPLANATION OF FACTORS AND PERTINENT FEDERAL AVIATION REGULATIONS BEARING ON OPERATIONAL CONTROL CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. BD FURTHER CERTIFIES THAT IT WILL SEND, OR CAUSE TO BE SENT, A TRUE COPY OF THIS AGREEMENT TO: FEDERAL AVIATION ADMINISTRATION, AIRCRAFT REGISTRATION BRANCH, ATTN. TECHNICAL SECTION (AVN-450), P.O. BOX 25724, OKLAHOMA CITY, OKLAHOMA 73125, WITHIN 24 HOURS AFTER ITS EXECUTION, AS REQUIRED BY SECTION 91.23(c)(1) OF THE FEDERAL AVIATION REGULATIONS. [Remainder of Page Intentionally Left Blank] 5 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BECTON, DICKINSON AND COMPANY   By:      Name:            John R. Considine    Title:  Executive Vice President        and Chief Financial Officer                                 Edward J. Ludwig                The undersigned hereby consents to the transactions contemplated by this Aircraft Time Share Agreement between Becton, Dickinson and Company and Edward J. Ludwig. FRANKLIN LAKES ENTERPRISES, L.L.C.   By:      Name:            Dean J. Paranicas    Title:  Manager    6 --------------------------------------------------------------------------------

Exhibit 10.23   Named Executive Officer Compensation Schedule   On February 16, 2006, the Compensation Committee of the Board of Directors of Westlake Chemical Corporation (the “Company”) set 2006 base salaries and bonus targets for certain executive officers of the Company and determined the amount of 2005 bonuses payable in 2006 to such executive officers. Set forth below are the amounts for the “named executive officers” of the Company.   Name/Position --------------------------------------------------------------------------------    2006 Annual Base Salary --------------------------------------------------------------------------------    2006 Bonus Target (% of Base Salary) --------------------------------------------------------------------------------    2005 Bonus Payable in 2006 -------------------------------------------------------------------------------- Albert Chao President and Chief Executive Officer    $640,000    75%    $689,034 James Chao Chairman of the Board    $470,000    75%    $505,292 Wayne D. Morse Sr. Vice President Vinyls    $297,000    40%    $270,059 Stephen Wallace Vice President General Counsel & Secretary    $272,000    35%    $152,549 Warren W. Wilder Vice President Olefins and Styrene    $265,000    40%    $175,375 David R. Hansen Sr. Vice President Administration    $278,000    40%    $184,902   The 2006 bonus targets set forth above relate to the Company’s EVA Incentive Plan (the “EVAIP”). The EVAIP provides for awards that are principally contingent upon the attainment of specific targeted EVA® results. EVA, or “economic value added,” is a measure of financial performance based upon the achievement of returns for shareholders above the invested cost of capital. Under the plan, if the expected improvement in EVA is met in 2006, participants will be awarded a cash bonus equal to one times their target bonus. This is referred to as a 1X bonus. If -------------------------------------------------------------------------------- 2006 results exceed the expected improvement, awards will be granted at a rate corresponding to the rate of increase above expectation. Similarly, if 2006 results do not meet the expected improvement, the awards will be correspondingly lower. The gross EVA declared bonus is subject to modification by an Individual Performance Factor as recommended by management and approved by the Compensation Committee of the Board of Directors.

                                                                                                   ECL SETTLEMENT AGREEMENT   This Settlement Agreement (this “Agreement”), dated September 15, 2006 (the “Effective Date”) is made and entered into by and among bioMérieux, Inc. and bioMérieux bv (collectively, “bioMerieux”) and BioVeris Corporation (“BioVeris”).   WHEREAS, reference is made to the License and Technology Development Agreement, between Organon Teknika B.V. (now bioMérieux bv) and Igen International, Inc. (“Igen”) dated May 19, 1993, as amended July 31, 1998 (the “ECL License Agreement”);   WHEREAS, BioVeris has taken assignment of Igen’s rights and obligations under the ECL License Agreement; and   WHEREAS, bioMerieux and BioVeris have each alleged various breaches of the terms of the ECL License Agreement by the other party, but the parties desire hereby to resolve and settle the issues and claims arising out of or related to the ECL License Agreement.   NOW, THEREFORE, for and in consideration of the agreements and undertakings hereinafter set forth, and for other good and valuable consideration, which each party hereby acknowledges, it is agreed as follows:     1. Assignment   A.           BioVeris represents and warrants that Igen has assigned the ECL License Agreement and its rights and obligations thereunder to BioVeris pursuant to an agreement between BioVeris and Igen (the “Assignment Agreement”) and that BioVeris has the requisite authority to enter into this Agreement and agree to the provisions hereof.   B.           The parties hereby acknowledge and consent to the assignment of the ECL License Agreement and the rights and obligations thereunder by Igen to BioVeris pursuant to the Assignment Agreement.     2. Settlement Relating to the ECL License Agreement   In consideration of the foregoing and of the following mutual promises and other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, bioMerieux and BioVeris agree as follows with respect to the ECL License Agreement (capitalized terms used in this Section 2, unless otherwise defined herein, shall have the meanings ascribed thereto in the ECL License Agreement):   A.           The co-exclusive worldwide license to develop, use, manufacture, have manufactured, sell and have sold Systems in the Centralized Market granted to bioMerieux in Section 4.1 of the ECL License Agreement, shall no longer be a co-exclusive license and shall hereafter be a non-exclusive license to develop, use, manufacture, have manufactured, sell and have sold Systems in the Field.                                                                                                      B.     Upon the Effective Date of this Agreement bioMerieux shall make payment to BioVeris for royalties for the quarters ending March 31, 2006 and June 30, 2006 in the amount of $97,407. BioVeris waives any right to any additional payment for royalties prior to the Effective Date of this Agreement, other than the payment of royalties due for the current quarter ending September 30, 2006. BioMerieux agrees to make all future payments of ECL Royalties directly to BioVeris, in accordance with the terms of the ECL License Agreement.   C.    Section 10.2 of the ECL License Agreement relating to termination of the ECL License Agreement due to discontinuation of the development, marketing and sales of the Instruments shall be removed from the ECL License Agreement and shall have no further effect.   D.    Section 12.1 of the ECL License Agreement is amended to reflect that the term of the ECL License Agreement shall no longer be until the last to expire of the patents. Instead, the ECL License Agreement shall remain in effect until five (5) years from the Effective Date of this Agreement, unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of the ECL License Agreement.   E.     Sections 2 and 3 of the ECL License Agreement relating to the Development Program and Program Objectives shall be removed from the ECL License Agreement and shall have no further effect.   BioMerieux specifically acknowledges that it is not entitled to access to any Improvements by BioVeris to the Licensed ECL Technology including pursuant to Section 5.2. BioVeris specifically acknowledges that it is not entitled to access to any Improvements to the Licensed NASBA Technology including pursuant to Section 5.2.   F.     The parties hereby change their address for communication by notice to the other party under Section 17.3 of the ECL License Agreement as follows:     In the case of BioVeris: BioVeris Corporation   16020 Industrial Drive   Gaithersburg, MD 20877   Attn: President     with a copy to: BioVeris Corporation   16020 Industrial Drive   Gaithersburg, MD 20877   Attn: General Counsel     2     In the case of bioMerieux: bioMerieux, Inc. 100 Rodolphe Street Durham, NC 27712 Attn: President     with a copy to: bioMerieux, Inc. 100 Rodolphe Street Durham, NC 27712   Attn: General Counsel   G.    Each of the parties, for themselves and their officers, directors, shareholders, employees, agents, representatives, predecessors, successors, parents, subsidiaries, affiliates and assigns (collectively, “Affiliates”), hereby releases, acquits and forever discharges the other parties and their Affiliates from any and all claims (including but not limited to claims for attorney’s fees and costs), demands, commissions, actions, causes of action and liabilities, known or unknown, now accrued or which may hereafter accrue (collectively, “Claims”), resulting from or relating to the ECL License Agreement for the period prior to the Effective Date of this Agreement, including, but not limited to, all Claims which bioMerieux has or may have relating to non-compliance with Section 10.1(d) under the ECL License Agreement relating to non-investment in the Development Program by Igen and BioVeris or right to any Improvements, and all Claims which BioVeris has relating to payment of ECL Royalties.   H.    The parties agree that the ECL License Agreement is hereby amended to incorporate the changes to the ECL License Agreement agreed upon above. For the sake of clarity, other than as expressly described above, the parties do not intend to modify the rights and obligations of the parties under the ECL License Agreement.     3. Confidentiality.   A.    Each party agrees that the terms of this Agreement will be treated as confidential and proprietary information (“Confidential Information”) by the other party for three (3) years following the termination or expiration of the ECL License Agreement.   B.     Each party expressly agrees not to disclose, directly or indirectly, the Confidential Information to any third party (person or entity), other than its duly authorized representatives, employees, Affiliates or agents (each of which shall be bound by the confidentiality obligations of this Agreement), without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. Provided, however, that either party may make any disclosure required by law.   C.    In this regard, each party agrees to maintain the Confidential Information in confidence and shall take at least the same precautions to avoid disclosure of the Confidential Information as those it would take with its own Confidential Information.   3   4.   Indemnification. BioVeris agrees to defend, indemnify and hold harmless bioMerieux and its Affiliates against any and all claims made by, or judgment, damage, liability, loss, cost or other expense, including reasonable legal fees and expenses resulting from any Claims made or proceedings brought by Igen (or any successor-in-interest thereof) in connection with or relating to royalties payable under the ECL License Agreement.   5.   General Provisions. The parties hereby incorporate into this Agreement the provisions of the ECL License Agreement covering Waiver, Assignment, Headings, Amendment, Severability, Dispute Resolution, Governing Law, Jurisdiction and Venue.   ****** 4     IN WITNESS WHEREOF, the undersigned have executed this Settlement Agreement as of the Effective Date.     BIOVERIS CORPORATION     By: /s/ Samuel J. Wohlstadter Name: Samuel J. Wohlstadter Title: Chief Executive Officer       BIOMERIEUX BV     By: /s/ Bernard Thierry Name: Bernard Thierry Title: International Development Vice President       BIOMERIEUX, INC.     By: /s/ Eric Bouvies Name: Eric Bouvies Title: President     5    

SEPARATION AGREEMENT AND RELEASE THIS SEPARATION AGREEMENT AND RELEASE (the “Agreement”) is made and entered into by and between Parrish Medley (“Employee”) and Davi Skin, Inc. on behalf of itself and all of its subsidiaries, affiliates, divisions, predecessors, successors and assigns (hereinafter referred to collectively as the “Company””).   In consideration of the premises and mutual promises herein contained, it is agreed by and between Employee and the Company as follows:   1.  Termination Date and Resignation: Employee agrees that his employment with the Company terminated as of March 17, 2006 (the “Effective Date”). In consideration of these premises, Employee agrees that from and after the Effective Date, he will no longer be, nor hold himself out as, an employee or agent of the Company. In addition, Employee resigns as a director of the Company effective immediately. Employee further agrees that as of this date, he is not owed any money from the Company other than provided herein.   2.  Consulting Payment: As and for Employee’s continued consulting services over the next six months, the Company shall pay to the Employee the total sum of $80,000.00 upon execution of this Agreement in one lump sum as an independent contractor to the Company providing on going advice and support with investors on an as needed basis.   3.  Insurance Benefits: Employee will be eligible pursuant to COBRA for continued health insurance coverage at his own expense for up to eighteen (18) months following the Effective Date. If Employee elects to continue his health insurance       1 --------------------------------------------------------------------------------       coverage pursuant to COBRA, he must make appropriate payments to the Company for the cost of same in a timely manner so as to be received by the Company in sufficient time so as to allow the Company to make the timely necessary payments to the carrier.   4.  Full Discharge of Obligations: Employee understands and agrees that he is not entitled to, and will not receive, any payments or benefits of any kind from the Company other than those set forth herein above. In addition, Employee understands and agrees that after the Effective Date, he will not accrue any further benefits under any of the Company’s applicable plans.   5.  Release: In consideration for all the covenants provided herein, Employee and the Company hereby forever release and discharge each other and each of their predecessors, successors, assigns, partners, members, officers, managers, employees, representatives, attorneys, agents, divisions, subsidiaries, affiliates (and past and present partners, members, shareholders, officers, managers, employees, agents, representatives and attorneys of such divisions, subsidiaries, and affiliates), and all persons acting by, through, under or in concert with any of them, from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred) of any nature whatsoever, in law or equity, known or unknown, suspected or unsuspected, that either party, their successors, agents, executors, administrators, or assigns, ever had, now has or hereafter can, shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever through the date of this Agreement, including but not limited to, any       2 --------------------------------------------------------------------------------       claims arising out of Employee’s employment by the Company and the cessation of such employment, including any claims for unpaid wages, back pay, commissions, bonuses, incentive pay, vacation pay, legal fees, severance or other compensation, or any claims arising under any contracts, express or implied, or any covenant of good faith and fair dealing, express or implied, or any tort, including without limitation intentional infliction of emotional distress, defamation, fraud and breach of duty, or any legal restrictions on the Company’s right to terminate employees, and any federal, state or other governmental statute, regulation, or ordinance, including without limitation: Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the New York State and New York City Human Rights Laws, the Americans With Disabilities Act, the Equal Pay Act, the Employee Retirement Income Security Act, and the Rehabilitation Act of 1973; provided, however, that the foregoing does not affect any right to file an administrative charge with the Equal Employment Opportunity Commission (“EEOC”), subject to the restriction that if any such charge is filed, Employee agrees not to violate the confidentiality provisions of this Agreement and Employee further agrees and covenants that should he or any other person, organization, or other entity file, charge, claim, sue or cause or permit to be filed any charge with the EEOC, civil action, suit or legal proceeding against the Company involving any matter occurring at any time in the past, Employee will not seek or accept any personal relief (including, but not limited to, monetary award, recovery, relief or settlement) in such charge, civil action, suit or proceeding.   6.  No Actions: Employee, for himself, his issue, heirs, representatives,       3 --------------------------------------------------------------------------------       successors, agents, executors, administrators or assigns, hereby covenants and represents that he has not instituted, and will not institute, any complaints, claims, charges or lawsuits, with any governmental agency or any court or other tribunal, against the Company, by reason of any claim present or future, known or unknown, arising from or related in any way to his employment with the Company or the termination of such employment, or any relationship, association, or transaction to date between the parties hereto or any of their predecessors or their respective agents, employees or officers. The Company, for itself, its agents and management hereby covenants and represents that it has not instituted, and will not institute, any complaints, claims, charges or lawsuits, with any governmental agency or any court or other tribunal, against Employee, by reason of any claim present or future, known or unknown, arising from or related in any way to his employment with the Company or the termination of such employment, or any relationship, association, or transaction to date between the parties hereto or any of their predecessors or their respective agents, employees or officers. This covenant shall not apply to actions for breach of this Agreement.   7.  Confidentiality: In consideration of the above-described payments and benefits, Employee further agrees to the following: Employee recognizes that any knowledge or information of any type whatsoever of a confidential nature relating to the business of the Company or any of its subsidiaries, divisions or affiliates, including, without limitation, all types of trade secrets, client lists or information, employee lists or information, information regarding product development, marketing plans, management       4 --------------------------------------------------------------------------------       organization, operating policies or manuals, performance results, business plans, financial records, or other financial, commercial, business or technical information and agreements (collectively “Confidential Information”), must be protected as confidential, not copied, disclosed or used other than for the benefit of the Company at any time unless and until such knowledge or information is in the public domain through no wrongful act by Employee. Employee further agrees not to divulge to anyone (other than the Company), publish or make use of any such Confidential Information without the prior written consent of the Company, except by an order of a court having competent jurisdiction or under subpoena from an appropriate government agency.   8.  Return of Company Property: As of the Effective Date, Employee will return to the Company all confidential information, files, memoranda and records, cardkey passes, door and file keys, computer access codes, software and other property, which he received, acquired or prepared in connection with his employment with the Company, and Employee will not retain any copies, duplicates, reproductions or excerpts thereof. Employee will vacate the offices of the Company no later than 5:00 PM March 22, 2006, provided that the Company has arranged in writing to have Employee removed from all liability under the existing lease of the Company’s premises, or alternatively has deposited $33,333 with the Company’s securities counsel with irrevocable instructions to hold the funds in trust until Employee is no longer liable on the lease and then to return the funds to the Company as it directs; or, in the event the Company defaults on the lease and Employee becomes liable thereon, to use the funds to pay any such liability on Employee’s behalf.       5 --------------------------------------------------------------------------------       9.  Non-Disparagement: Employee agrees not to disparage, or make any disparaging remark or send any disparaging communications concerning, the Company, its reputation, its business, and/or its directors, partners, members, officers, managers, shareholders and employees, and likewise the Company’s senior management agrees not to disparage, or make any disparaging remark or send any disparaging communications concerning Employee his reputation and/or his business.   10.  Rule of Ambiguities: It is agreed and understood that the general rule that ambiguities are to be construed against the drafter shall not apply to this Agreement. In the event that any language in this Agreement is found or claimed to be ambiguous, each party shall have the same opportunity to present evidence as to the actual intent of the parties with respect to any such ambiguous language without any inference or presumption being drawn against the drafter. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.   11.  Non-Admission of Liability: This Agreement is not, and shall not in any way be construed as, an admission by the Company that it has acted wrongfully with respect to Employee or any other person, or that Employee has any rights whatsoever against the Company except as set forth herein, and the Company specifically disclaims any liability to or wrongful acts against Employee or any other person, on the part of itself, its employees or its agents.   12.  Representation: Employee acknowledges that he was advised by the       6 --------------------------------------------------------------------------------       Company to consult with an attorney of his own choosing concerning the waivers contained in this Agreement, and that the waivers Employee has made herein are knowing, conscious and with full appreciation that Employee is forever foreclosed from pursuing any of the rights so waived.   13.  No Modification: No waiver or modification of this Agreement or any term hereof shall be binding unless it is in writing and signed by the parties hereto or their expressly authorized representatives.   14.  Choice of Law: This Agreement shall be construed in accordance with the laws of the State of California and Employee agrees to submit to the exclusive jurisdiction of the state and/or federal courts located within the State of California for the resolution of any dispute which may arise hereunder. The Company and Employee each hereby waive, as against the other, trial by jury in any judicial proceeding to which they are both parties involving, directly or indirectly, any matter in any way arising out of, related to or connected with this Agreement.   15.  Injunctive Relief: Employee agrees and acknowledges that the Company will be irreparably harmed by any breach, or threatened breach, by him of Paragraph 7 of this Agreement and that monetary damages would be grossly inadequate. Accordingly, he agrees that in the event of a breach, or threatened breach, by him of this Agreement the Company shall be entitled to apply for immediate injunctive or other preliminary or equitable relief, as appropriate, in addition to all other remedies available at law and equity.   16.  Non-Compete, Non-Solicit: As material inducement for the Company to       7 --------------------------------------------------------------------------------       enter into this Agreement and to give Employee the payments and benefits described above, Employee who is still a shareholder of the Company agrees that for the either the period of the time he is a shareholder of the Company or two (2) years from this Agreement, whichever period is longer (the "Restricted Period") Employee will not i) either as a principal, director, employee or consultant of another entity compete with the Company, ii) will not solicit or attempt to solicit from the Company any employee of the Company who was an employee during this restricted period   17.  No Disclosure: Employee agrees not to disclose to anyone, other than his immediate family, accountant and attorney, the existence of this Agreement, the circumstances surrounding it, its terms, conditions or negotiation, including the dollar amounts set forth herein, and then only upon their express agreement not to disclose such subject matter to another person, except as required by law.   18.  Entire Agreement: This Agreement sets forth the entire agreement between the parties hereto, and fully supersedes and replaces any and all prior agreements or understandings (whether oral or written) between the parties hereto pertaining to the subject matter hereof. Employee acknowledges and agrees that in signing this Agreement he has not relied upon any representation, promise or inducement that is not expressly set forth in this Agreement.   19.  Voluntary Execution: Employee hereby acknowledges that he has read and that he understands the foregoing Agreement and that he has affixed his signature hereto voluntarily and without coercion.   20.  Consultant Services: Employee shall upon the Company's request during       8 --------------------------------------------------------------------------------       the 2 months following the execution of this Agreement, assist and cooperate with the Company in regard to Employee's termination and transition of responsibilities and projects. Employee will make himself reasonably available to the Company, on reasonable notice to the Employee for such services, for an amount of time equal up to no more than 20 hours per month over the 6 month period following the Effective Date. Employee shall be compensated as provided above.   PLEASE READ CAREFULLY. THIS SEPARATION AGREEMENT AND RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.   Executed, this 21st day of March, 2006 /s/ Parrish Medley PARRISH MEDLEY       Executed, this 23rd day of March, 2006 DAVI SKIN INC. By: /s/ Joseph Spellman JOSEPH SPELLMAN   No: 1367551

EXHIBIT 10.1 ATHEROS COMMUNICATIONS, INC. 2004 STOCK INCENTIVE PLAN NOTICE OF RESTRICTED STOCK UNIT AWARD You have been granted Restricted Stock Units representing shares of Common Stock of Atheros Communications, Inc. (the “Company”) on the following terms and pursuant to such other terms and conditions as are set forth in the Restricted Stock Unit Agreement and the Atheros Communications, Inc. 2004 Stock Incentive Plan (the “Plan”), both of which are attached to and made a part of this document. Certain capitalized terms used in this Notice of Restricted Stock Unit Award are defined in the Plan.   Name of Participant:    ____________________________________ Total Number of Restricted Stock Units Granted:    ____________________________________ Date of Grant:    _____________ _____, _____ Vesting Start Date:    _____________ _____, _____ Vesting Schedule:    By signing this document, you and the Company agree that these Restricted Stock Units are granted under and governed by the terms and conditions of the Atheros Communications, Inc. 2004 Stock Incentive Plan and the Restricted Stock Unit Agreement. By signing this document you further agree that the Company may deliver by email all documents relating to the Plan or this award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a website, it will notify you by email.   [NAME OF PARTICIPANT]      ATHEROS COMMUNICATIONS, INC.        By:            Its:     Print Name        -------------------------------------------------------------------------------- ATHEROS COMMUNICATIONS, INC. 2004 STOCK INCENTIVE PLAN RESTRICTED STOCK UNIT AGREEMENT   Payment for Restricted Stock Units    No payment is required for the Restricted Stock Units you receive. Vesting    Subject to the terms and conditions of the Plan and this Restricted Stock Unit Agreement (the “Agreement”), your Restricted Stock Units vest in accordance with the schedule set forth in the Notice of Restricted Stock Unit Award. Forfeiture    When your common-law employment with the Company or a Subsidiary terminates for any reason, vesting of your Restricted Stock Units subject to such Award immediately stops and such Award expires immediately as to the number of Restricted Stock Units that are not vested as of the date such Service terminates   This means that the unvested Restricted Stock Units will immediately be cancelled. You receive no payment for Restricted Stock Units that are forfeited.   The Company determines when your Service terminates for this purpose and all purposes under the Plan. Leaves of Absence and Part-Time Work    For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy or the terms of your leave. But your Service terminates when the approved leave ends, unless you immediately return to active work.   If you go on a leave of absence, then the vesting schedule specified in the Notice of Restricted Stock Unit Award may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Restricted Stock Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule. -------------------------------------------------------------------------------- Nature of Restricted Stock Units    Your Restricted Stock Units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue shares of Common Stock (or distribute cash) on a future date. As a holder of Restricted Stock Units, you have no rights other than the rights of a general creditor of the Company. No Voting Rights or Dividends    Your Restricted Stock Units carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a stockholder of the Company unless and until your Restricted Stock Units are settled by issuing shares of the Company’s Common Stock. No adjustments will be made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan. Restricted Stock Units Nontransferable    You may not sell, transfer, assign, pledge or otherwise dispose of any Restricted Stock Units. For instance, you may not use your Restricted Stock Units as security for a loan. Settlement of Restricted Stock Units    Each of your Restricted Stock Units will be settled when it vests.   At the time of settlement, you will receive one share of the Company’s Common Stock for each vested Restricted Stock Unit; provided, however, that no fractional Share will be issued or delivered pursuant to the Plan or this Agreement, and the Committee will determine whether cash will be paid in lieu of any fractional Share or whether such fractional Share and any rights thereto will be canceled, terminated or otherwise eliminated. Withholding Taxes and Stock Withholding    No stock certificates will be distributed to you unless any withholding taxes that may be due as a result of this award have been paid. By signing this Agreement, you authorize the Company or your actual employer to withhold all applicable withholding taxes legally payable by you. The Company, in its sole discretion, may withhold shares of Common Stock that otherwise would be distributed to you when the units are settled to satisfy the withholding obligation, but not in excess of the amount of shares necessary to satisfy the minimum withholding amount. The Fair Market Value of these shares, determined as of the date when taxes otherwise would have been withheld in cash, will be applied to the withholding taxes. You also authorize the Company, or your actual employer, to satisfy all withholding obligations of the Company or your actual employer from your wages or other cash compensation payable to you by the Company or your actual employer.   -------------------------------------------------------------------------------- Restrictions on Resale    By signing this Agreement, you agree not to sell any shares of the Company’s Common Stock issued upon settlement of the Restricted Stock Units at a time when applicable laws or Company policies prohibit a sale. This restriction will apply as long as you are an employee, consultant or director of the Company or a subsidiary of the Company. No Retention Rights    Neither your Award nor this Agreement gives you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause. Adjustments    In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Restricted Stock Units covered by this Award will be adjusted pursuant to the Plan. Beneficiary Designation    You may dispose of your Restricted Stock Units in a written beneficiary designation. A beneficiary designation must be filed with the Company on the proper form. It will be recognized only if it has been received at the Company’s headquarters before your death. If you file no beneficiary designation or if none of your designated beneficiaries survives you, then your estate will receive any vested Restricted Stock Units that you hold at the time of your death. Applicable Law    This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to choice-of-law provisions). The Plan and Other Agreements    The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have the meanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreement may be amended only by another written agreement, signed by both parties. BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

  Exhibit 10.1 Execution Copy FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT      Pursuant to this First Amendment to Stock Purchase Agreement, dated June 30, 2006 (this “Amendment”), the parties hereto hereby amend that certain Stock Purchase Agreement dated as of April 28, 2006 by and among Alon USA Energy, Inc., a Delaware corporation, and the stockholders of Paramount Petroleum Corporation named on the signature page thereto (the “Purchase Agreement”) as expressly set forth below. Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Purchase Agreement.   1.   Addition of Schedule 1(b) of the Purchase Agreement. Schedule 1(b) attached hereto as Annex A is hereby added to the Purchase Agreement as Schedule 1(b) thereto.     2.   Amendment to Schedule 2.3(a) of the Purchase Agreement. The section of Schedule 2.3(a) to the Purchase Agreement titled “Phoenix Terminal — Comparison of Total Ending Inventory Value and Market Price as of December 31, 2005” is hereby deleted in its entirety and replaced with “Phoenix Terminal — Comparison of Total Ending Inventory Value and Market Price as of December 31, 2005” attached hereto as Annex B.     3.   Amendment to Schedule 2.3(c) of the Purchase Agreement. Schedule 2.3(c)to the Purchase Agreement is hereby deleted in its entirety and replaced with Schedule 2.3(c) attached hereto as Annex C.     4.   Amendment to Schedule 2.3(d) of the Purchase Agreement. Schedule 2.3(d) to the Purchase Agreement is hereby deleted in its entirety and replaced with Schedule 2.3(d) attached hereto as Annex D.     5.   Amendment to Schedule 2.4 (b)(i) of the Purchase Agreement. Schedule 2.4(b) to the Purchase Agreement is hereby amended to be Schedule 2.4(b)(i).     6.   Addition of Schedule 2.4(b)(ii) of the Purchase Agreement. Schedule 2.4(b)(ii) attached hereto as Annex E is hereby added to the Purchase Agreement as Schedule 2.4(b)(ii) thereto.     7.   Amendment to Sellers’ Disclosure Schedule Section 4.3(a) of the Purchase Agreement. Sellers’ Disclosure Schedule Section 4.3(a) is hereby deleted in its entirety and replaced with Sellers’ Disclosure Schedule Section 4.3(a) attached hereto as Annex F.     8.   Deletion of Schedule 2.4(b)(iii) of the Purchase Agreement. The reference in the Schedules to Schedule 2.4(b)(iii)to the Purchase Agreement is hereby deleted in its entirety.   --------------------------------------------------------------------------------     9.   Amendment to Sellers’ Disclosure Schedule Section 4.15(i) of the Purchase Agreement. Sellers’ Disclosure Schedule Section 4.15(i) is hereby deleted in its entirety and replaced with Sellers’ Disclosure Schedule Section 4.15(i) attached hereto as Annex G.     10.   Except as expressly amended above, the Purchase Agreement shall continue in full force and effect in accordance with its terms.     11.   This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be considered to be one document. [Signature page follows]   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Stock Purchase Agreement as of the day and year first above written.             ALON USA ENERGY, INC       By:   /s/ David Wiessman         David Wiessman,        Executive Chairman              By:   /s/ Jeff D. Morris         Jeff D. Morris,        President and Chief Executive Officer        THE CRAIG C. BARTO AND GISELE M. BARTO LIVING TRUST, DATED APRIL 5, 1991       By:   /s/ Gisele M. Barto         GISELE M. BARTO, Trustee of the Craig C.        Barto and Gisele M. Barto Living Trust, Dated April 5, 1991              By:   /s/ Craig C. Barto         CRAIG C. BARTO, Trustee of the Craig C. Barto        and Gisele M. Barto Living Trust, Dated April 5, 1991        THE JERREL C. BARTO AND JANICE D. BARTO LIVING TRUST, DATED MARCH 18, 1991       By:   /s/ Jerrel C. Barto         JERREL C. BARTO, Trustee of the Jerrel C.        Barto and Janice D. Barto Living Trust, Dated March 18, 1991             By:   /s/ Janice D. Barto         JANICE D. BARTO, Trustee of the Jerrel C. Barto        and Janice D. Barto Living Trust, Dated March 18, 1991      --------------------------------------------------------------------------------                     By:   /s/ W. Scott Lovejoy III         W. SCOTT LOVEJOY III, an individual                      By:   /s/ Mark R. Milano         MARK R. MILANO, an individual               

Exhibit 10.4 LookSmart, Ltd. Executive Team Incentive Plan Plan Year 2006 A. INTRODUCTION 1) Plan Objectives     •   Keep our total compensation package market competitive, and enhance LookSmart’s ability to attract, motivate and retain top talent     •   Recognize the role that our leaders have in the success of the Company     •   Motivate and recognize “At Target” and “Exceeds Target” performance at Company, Function/Group and individual level     •   Encourage cross-company collaboration and motivate behaviors that improve the company’s annual financial performance     •   Provide consistency (but with some flexibility/ discretion) as we adapt to changing business and operational needs 2) Effective Period The Executive Team Incentive Plan is effective for the fiscal year 2006 beginning January 1, 2006, through December 31, 2006. B. PLAN PROVISIONS 1) Eligibility This Plan is for covered employees of LookSmart, Ltd. (the “Company”) only and does not include any subsidiary or other affiliated Company. SVPs/VPs who report directly to the CEO are eligible to participate. This Plan is for 2006 only and the Plan may or may not be continued in subsequent years. 2) Target Incentives Your target incentive is stated in your 2006 Compensation Workbook. This target can range higher or lower depending on performance criteria. Target Incentives does not constitute a promise of attainment, earning or payment. Your actual payment may vary from your target incentive depending on Company financial performance and your group and individual performance. Target incentives may be reviewed and revised at the discretion of the Chief Executive Officer and the Compensation Committee/Board of Directors, and in the case of the CEO, by the Compensation Committee/Board of Directors.   LookSmart Confidential   Page 1 of 4   Executive Team Plan Year 2006 -------------------------------------------------------------------------------- 3) Executive Team Incentive Plan –Determination Assuming minimum thresholds are met, participants will be eligible to receive a payment on all elements of the Plan based on the criteria set forth in Attachment 1. C. ADMINISTRATION 1) Form and Timing of Payment Awards made under the Plan are not earned until paid. Payment will not occur until after financial results for 2006 are calculated and filed with the SEC according to generally accepted accounting principles – but no later than the end of Q1 2007. You must be employed on the payout date to earn the award. The executive team can elect to receive 50% of their bonus target in a performance stock option grant as described in Attachment 2. Each team member will be provided with a workbook that outlines this option. If this option is not elected the bonus will be payable in cash, subject to appropriate taxes and pursuant to normal payroll procedures. Payouts are considered income at the time they are received. No loans may be made under the Plan. 2) Hires or Promotions into the Plan If an employee is hired into a job that qualifies for the Executive Team Incentive Plan on or before September 30, 2006, the employee will be included in the Plan and the target incentive amount will be prorated based on the date of hire. (Example: If hire or promotion date is July 1, 2006, employee would be eligible for 50% of target bonus.) If an employee is hired or promoted into the Plan after September 30, 2006, the employee will not be permitted to participate in the Executive Team Incentive Plan for 2006. 3) Transfers out of Plan When an employee transfers during 2006 from an Executive Team Incentive Plan-eligible position to one that is not eligible, the employee may receive the Plan award based on a prorated ETIP target incentive. (Example: If transfer out of eligible position occurs on June 30, 2006, employee is eligible for 50% of target bonus.) 4) Leaves of Absence and Part-Timers Target incentives will be prorated for participants who have been on an approved leave of absence of any length during the Plan year (inactive status), and for participants who are on a reduced work schedule. 5) Termination of Employment Any termination of your employment will be subject to the terms of your offer letter.   LookSmart Confidential   Page 2 of 4   Executive Team Plan Year 2006 -------------------------------------------------------------------------------- 6) Disputes and Binding Arbitration If you believe that you have not received a payment to which you believe you are entitled, or believe that the Plan is not being operated properly, you must file a formal claim within 6 months of the date on which you first knew (or should have known) of the facts on which the claim is based. You must present such a claim to the CEO or his/her designee(s) in writing. The CEO or his/her designee(s) shall consider the claim and issue its determination in writing. If your claim is granted, you will be provided with the benefits or relief you seek. If your claim is wholly or partially denied, the CEO or his/her designee(s) shall provide you with written notice setting forth the reason or reasons for the denial. If the CEO or his/her designee(s) fails to respond to your claim in a timely manner, you may treat the claim as having been denied. Any claims that you do not pursue through this procedure shall be treated as having been irrevocably waived. LookSmart hopes that any disputes involving the ETIP can be resolved through the process described above. However, in the event that such a resolution is not possible, you and the Company agree that all such disputes regarding this Plan shall be settled by binding arbitration held in San Francisco, California, under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280, et seq., including Section 1283.05, (the “Rules”) and pursuant to California law. A copy of the Rules is available for your review. The Company will pay for any administrative or hearing fees charged by the arbitrator or the arbitrating body except that except that the Participant shall pay the first $125.00 of any filing fees associated with any arbitration initiated by the Participant. Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between the Company and the Participant involving the Plan. Accordingly, except as provided for by the Rules, neither the Company nor the Participant will be permitted to pursue court action regarding claims that are subject to arbitration under this Plan. The Participant is not prohibited from pursuing an administrative claim with a local, state or federal administrative body. 7) Employment at Will Neither this Plan nor any information communicated to you regarding the ETIP alters the “at will” employment relationship between LookSmart and its employees. This means that your employment with the Company is for no specified period, and just as you are free to resign at anytime for any reason or no reason, similarly the Company is free to terminate its employment relationship with you at any time, with or without cause, and with or without notice. This Plan sets forth all the rules applicable to LookSmart’s Executive Team Incentive Plan. These rules may only be modified in a writing signed by the CEO.   LookSmart Confidential   Page 3 of 4   Executive Team Plan Year 2006 -------------------------------------------------------------------------------- I have read and understand the Plan: Print Name:                                                                                   Signature:                                                                                        Check One:              I would like to receive 50% of my target incentive payment in Performance Stock Options and 50% in cash.              I would like to receive 100% of my bonus achievement in cash.   LookSmart Confidential   Page 4 of 4   Executive Team Plan Year 2006

Exhibit 10.6 Sequa Corporation 200 Park Avenue New York, NY  10166 212-956-5500 May 10, 2006 Ms. Donna Costello 2 Queens Court Orangeburg,   NY   10962 Re: Employment Agreement Extension Dear Donna: Reference is hereby made to that certain Employment Agreement dated as of August 15, 2005 by and between Sequa Corporation and you (the “Employment Agreement”).  Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Employment Agreement. This letter shall confirm that the Employment Term as set forth in Section 3 of the Employment Agreement shall be extended for an additional one (1) year from and after May 31, 2006 through May 31, 2007. All other terms and conditions of the Employment Agreement shall remain in full force and effect and are hereby ratified by Executive and Company.   If the foregoing confirms your agreement and understanding, please so indicate by signing in the space provided below and returning one (1) original of this letter to me. Very truly yours, Sequa Corporation /s/ Martin Weinstein Martin Weinstein Vice Chairman and Chief Executive Officer Acknowledged and Agreed this   18         day of    May   , 2006 /s/ Donna Costello Donna Costello

  Exhibit 10.1 FIRST AMENDMENT TO PERSONAL SERVICES AGREEMENT This First Amendment (the “Amendment”) to the Personal Services Agreement, dated as of July 15, 2000 (the “Agreement”) between UGS Corp. (successor to Unigraphics Solutions, Inc.) and Charles C. Girndstaff (“Executive”) is made and entered into as of August 25, 2006. Except as otherwise provided herein, all of the terms and conditions of the Agreement remain in full force and effect. Capitalized terms not defined herein shall have the same meanings set forth in the Agreement.   1.   Section 3.2.2 is amended to replace all references to 60 days with 90 days.     2.   Section 3.2.4 is hereby deleted in its entirety and replaced with the following:         “(b) a reduction by UGS in Executive’s base salary or target bonus opportunity, excluding a company-wide reduction in base salaries or target bonus opportunities that would be applicable to similarly situated executives of UGS;”     3.   Section 3.3.3 (e) is amended to replace $75,000 with $90,000.     4.   Section 3.4.5 is amended to replace $75,000 with $90,000.     5.   The parties hereby agree that the provisions of Sections 3.3.3 (c) and 3.4.3 shall not apply to the agreement granting Executive a Deferred Stock Award, dated as of August 25, 2006 (the “Deferred Stock Agreement”). In the event of a conflict between the Deferred Stock Agreement and the Agreement, the terms and conditions of the Deferred Stock Agreement shall govern, including, but not limited to, any vesting or forfeiture provisions. IN WITNESS WHEREOF, the parties have executed this Amendment to be effective as of the date set forth in the Recital.           EXECUTIVE               By:   /s/ Charles C. Grindstaff   Charles C. Grindstaff     Date:   August 25, 2006               UGS CORP.               By: Name:   /s/ Anthony J. Affuso   Anthony J. Affuso     Title:   CEO & President     Date:   August 25, 2006     50

AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made on ________________, 2006 by and between Quantum Fuel Systems Technologies Worldwide, Inc. ("Quantum" or the "Company") and Michael H. Schoeffler ("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, the terms and conditions of this Agreement have been approved by the Board of Directors and its Compensation Committee; and WHEREAS, by executing this Agreement, the parties desire to amend and restate that certain Employment Agreement by and between the Company and Employee dated March 3, 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: . EMPLOYMENT. The Company hereby employs Employee as its Executive Vice President -- Mergers and Acquisitions. 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 CEO and COO of Quantum. The Company, through Quantum's CEO and COO, shall retain full direction and control of the manner, means and methods by which Employee performs the services for which he is employed hereunder. COMPENSATION. BASE SALARY. During the Term, Quantum will pay Employee a base salary of Five Hundred Fifty Thousand dollars ($550,000) per year. The Board of Directors and Compensation Committee shall review this base salary at least annually and approve any recommended increases. Said salary, including any increases, shall be paid to Employee in accordance with the Company's normal payroll policies as in effect from time to time. INCENTIVE COMPENSATION. During the Term, Employee shall be eligible for: (a) participation in any executive cash bonus plan adopted from time to time by Quantum and (b) awards under any long-term incentive compensation plans adopted from time to time by Quantum including, but not limited to, deferred compensation, stock options and restricted stock. BENEFITS. During the Term, Employee shall be entitled to the following benefits: Except as otherwise specified in this Agreement, the fringe benefits that from time to time the Company makes generally available to its executive officers. Term life insurance coverage, paid for by the Company, in the face amount of at least One Million dollars ($1,000,000). 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. Three (3) 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. The use of a Company owned or leased vehicle selected by Employee and approved by the Compensation Committee, or, at the option of Employee, a car allowance of Seven Hundred dollars ($700) per month, pro rated on a daily basis for any period of the Term which is less than a full month. 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. 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. 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. TERM AND TERMINATION PAYMENTS. TERM. The Term shall commence effective as of May 1, 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. 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 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); 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 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. 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"). 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. 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. 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. CONFIDENTIALITY. 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. 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. 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. DEFINITIONS. Whenever used in this Agreement with initial letters capitalized, the following terms shall have the following meanings: "BOARD" or "BOARD OF DIRECTORS" means 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 Quantum. "CHANGE OF CONTROL" means a change in ownership or control of the Company or Quantum 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 or Quantum. "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. "COO" means the Chief Operating Officer of Quantum. "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. "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 an Executive Vice President of the Company or a subsidiary or division of the Company, then Good Reason shall not have occurred; or (b) a reduction in Employee's base salary to a level below that in effect at any time during the Term. "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. MISCELLANEOUS. 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. 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. 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. 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, Michigan. 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. 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. 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. 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. 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.   Michael H. Schoeffler By: Its:   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, 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. 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 Michigan. 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 10.2   AMENDED AND RESTATED ISSUING AND PAYING AGENCY AGREEMENT   [4(2) Commercial Paper Program]   Dated as of May 3, 2006   Deutsche Bank National Trust Company Global Transaction Banking Trust & Securities Services 25 DeForest Ave, 2nd Floor Mail Stop: SUM01-0105 Summit, NJ 07901   ATTN: Corporate Trust and Agency Services Re:         AllianceBernstein L.P. Commercial Paper Program   Ladies and Gentlemen:   This letter (herein after referred to as the “Agreement”) sets forth the understanding between you and AllianceBernstein L.P., formerly known as Alliance Capital Management L.P. (the “Partnership”), whereby you have agreed to act as depositary for the safekeeping of certain notes of the Partnership which may be offered and sold in transactions exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, in the United States commercial paper market (the “Commercial Paper Notes”), as issuing agent on behalf of the Partnership in connection with the issuance of the Commercial Paper Notes and as paying agent to undertake certain obligations to make payments in respect of the Commercial Paper Notes, and amends and restates the Issuing and Paying Agency Agreement, dated as of March 12, 2001, between Bankers Trust Company and the Partnership. You have executed or will promptly hereafter execute a Letter of Representations (the “Letter of Representations”, which term shall include the   --------------------------------------------------------------------------------   Procedures referred to therein) with the Partnership and The Depository Trust Company (“DTC”) and a Certificate Agreement (the “Certificate Agreement”) with DTC which establish or will establish, among other things, the procedures to be followed by you in connection with the issuance and custody of Commercial Paper Notes in book-entry form.   1.     Appointment of Agent.  The Partnership hereby appoints you and you hereby agree to act, on the terms and conditions specified herein and in the Letter of Representations and Certificate Agreement, as custodian and issuing and paying agent for the Commercial Paper Notes. The Commercial Paper Notes will, in the case of Commercial Paper Notes issued in certificated form (“Certificated Notes”), be substantially in the form attached hereto as Exhibit A and, in the case of Commercial Paper Notes issued in book-entry form (“Book-Entry Notes”), be substantially in the forms attached to the Letter of Representations. The Commercial Paper Notes will be sold through such commercial paper dealers as the Partnership shall have notified you from time to time (collectively, the “Dealer” or “Dealers”). The Dealers currently are Banc of America Securities LLC and Merrill Lynch Money Markets Inc.   2.     Supply of Commercial Paper Notes.  The Partnership will from time to time furnish you with an adequate supply of Commercial Paper Notes, which shall be Book-Entry Notes and/or Certificated Notes, as the Partnership in its sole and absolute discretion considers appropriate. Certificated Notes shall be serially numbered and shall have been executed by manual or facsimile signature of an Authorized Representative (as hereafter defined), with the principal amount, payee, date of issue, maturity date, amount of interest (if an interest-bearing Commercial Paper Note) and maturity value left blank. Book-Entry Notes shall be represented by one or more master notes which shall be executed by manual or facsimile signature by an Authorized Representative in accordance with the Letter of Representations. Pending receipt of   2 --------------------------------------------------------------------------------   instructions pursuant to this Agreement, you will hold the Commercial Paper Notes in safekeeping for the account of the Partnership or DTC, as the case may be, in accordance with your customary practice and the requirements of the Certificate Agreement. The Certificated Notes shall be printed on a manifold that will produce one original and three non-negotiable copies.   3.     Authorized Representatives.  From time to time the Partnership will furnish you with a certificate, substantially in the form attached hereto as Exhibit B, certifying the incumbency and specimen signatures of officers or agents of the Partnership authorized to execute Commercial Paper Notes on behalf of the Partnership by manual or facsimile signature and/or to take other action hereunder on behalf of the Partnership (each an “Authorized Representative”). Until you receive a subsequent incumbency certificate of the Partnership, you are entitled to rely on the last such certificate delivered to you for purposes of determining the Authorized Representatives. You shall not have any responsibility to the Partnership to determine by whom or by what means a facsimile signature may have been affixed on the Commercial Paper Notes, or to determine whether any facsimile or manual signature is genuine, if such facsimile or manual signature resembles the specimen signature(s) filed with you by a duly authorized officer of the Partnership. Any Commercial Paper Note bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature is affixed shall be binding on the Partnership after the authentication thereof by you notwithstanding that such person shall have died or shall have otherwise ceased to hold his office on the date such Commercial Paper Note is countersigned or delivered to you.   4.     Completion, Authentication and Delivery of Commercial Paper Notes.  (a) Instructions for the issuance of Commercial Paper Notes will be given via a transmission through   3 --------------------------------------------------------------------------------   an instruction and reporting communication service (“Noteline Direct”), if available, or by telephone, confirmed in writing (which may be by facsimile) within twenty-four hours either by an Authorized Representative, or by any officer or employee of a Dealer who has been designated by an Authorized Representative in writing to you as a person authorized to give such instructions hereunder (each an “Authorized Dealer Representative”), provided that instructions may be given in writing if the Noteline Direct system is unavailable or is inoperative. Upon receipt of instructions as described in the preceding sentence, you will withdraw the necessary Commercial Paper Note(s) from safekeeping and, in accordance with such instructions, shall, (i) in the case of Book-Entry Notes, cause the issuance of such Book-Entry Notes in the manner set forth in, and take such other actions as are required by, the Letter of Representations and the Certificate Agreement, or (ii) in the case of Certificated Notes:   (1)  complete each Certificated Note as to principal amount (which shall not be less than $250,000), payee, date of issue, maturity date (which shall not be more than 270 days from the date of issue), amount of interest (if any) and maturity value; and   (2)  manually countersign each Certificated Note by any one of your officers or employees duly authorized and designated for this purpose; and   (3)  deliver the Certificated Note(s) to the appropriate Dealer or its agent within the Borough of Manhattan, City and State of New York, which delivery shall be against receipt for payment as herein provided or as otherwise provided in such instructions. If such instructions do not provide for such receipt, such Dealer shall nevertheless pay the purchase price for the Certificated Note in accordance with Paragraph 5 hereof. Of the three non-negotiable copies of each Commercial Paper Note, two shall be retained by you and one shall be sent promptly to the Partnership.   4 --------------------------------------------------------------------------------   (b)  Instructions given via the system must be entered by 12:00 p.m. for physical issuance and 1:00 p.m. for book-entry issuance, New York time, and instructions delivered by telephone or in writing must be received by you by 1:00 p.m., New York time, if the Commercial Paper Note(s) are to be delivered the same day. Telephone instructions shall be confirmed in writing the same day.   (c)  The Partnership understands that although you have been instructed to deliver Commercial Paper Notes against payment, delivery of Certificated Notes will, in accordance with the custom prevailing in the commercial paper market, be made before receipt of payment in immediately available funds. Therefore, once you have delivered a Certificated Note to a Dealer or its agent as provided in Paragraph 4(a)(3) hereof, the Partnership shall bear the risk that a Dealer or its agent fails to remit payment for the Certificated Note to you. It is understood that each delivery of Commercial Paper Notes hereunder shall be subject to the rules of the New York Clearing House in effect at the time of such delivery.   (d)  Except as may otherwise be provided in the Letter of Representations, if at any time the Partnership instructs you to cease issuing Certificated Notes and to issue only Book-Entry Notes, you agree that all Commercial Paper Notes will be issued as Book-Entry Notes and that no Certificated Notes shall be exchanged for Book-Entry Notes unless and until you have received written instructions from an Authorized Representative (any such instructions from an Authorized Dealer Representative shall not be sufficient for this purpose) to the contrary.   (e)  Notwithstanding any contrary instructions received from the Partnership or an Authorized Representative, you shall cease completing, authenticating, issuing and delivering Commercial Paper Notes, if, following the issuance of any Commercial Paper Notes, the aggregate principal amount of outstanding Commercial Paper Notes would exceed the authorized   5 --------------------------------------------------------------------------------   amount of $800,000,000, or such other amount as may be authorized by the Partnership from time to time and confirmed to you in writing.   5.     Noteline Direct   The Partnership acknowledges that it is granted a personal, non-transferable and non-exclusive right to use the instruction and reporting communication service Noteline Direct to transmit through the Noteline Direct system instructions made pursuant to Section 4 hereof. The Partnership may, by separate agreement between itself and one or more of its Dealers, authorize the Dealer to directly access Noteline Direct for the purposes of transmitting instructions to you or obtaining reports with respect to the Commercial Paper Notes.   The Partnership acknowledges that (a) some or all of the services utilized in connection with Noteline Direct are furnished by Digital Transactions Inc. (“DTI”), Dynamic Microprocessor Associates Inc. (“DMA”) and Deutsche Bank National Trust Company, (b) Noteline Direct is provided to the Partnership “AS IS” without warranties or representations of any kind whatsoever by DTI, DMA or you, and (c) Noteline Direct is proprietary and confidential property disclosed to the Partnership in confidence and only on the terms and conditions and for purposes set forth in this Agreement.   By this Agreement, the Partnership acquires no title, ownership or sublicensing rights whatsoever in Noteline Direct or in any trade secret, trademark, copyright or patent of yours, DTI, or DMA now or to become applicable to Noteline Direct. The Partnership may not transfer, sublicense, assign, rent, lease, convey, modify, translate, convert to a programming language, decompile, disassemble, recirculate, republish or redistribute Noteline Direct for any purpose without the prior written consent of you and, where necessary, DTI and DMA.   6 --------------------------------------------------------------------------------   In the event (a) any action is taken or threatened which may result in a disclosure or transfer of Noteline Direct or any part thereof, other than as authorized by this Agreement, or (b) the use of any trademark, trade name, service mark, service name, copyright or patent of yours, DTI or DMA by the Partnership amounts to unfair competition, or otherwise constitutes a possible violation of any kind, then you and/or DTI and/or DMA shall have the right to take any and all action deemed necessary to protect your rights in Noteline Direct, and to avoid the substantial and irreparable damage which would result from such disclosure, transfer or use, including the immediate termination of the Partnership’s right to use Noteline Direct.   To permit the use of Noteline Direct to issue instructions and/or obtain reports with respect to the Commercial Paper Notes, you will supply the Partnership with an identification number and initial passwords. From time to time thereafter, the Partnership may change its passwords directly through Noteline Direct. The Partnership will keep all information relating to its identification number and passwords strictly confidential and will be responsible for the maintenance of adequate security over its customer identification number and passwords. For security purposes, the Partnership should change its passwords frequently (at least once a year).   Instructions transmitted over Noteline Direct and received by you pursuant to Section 4 hereof accompanied by the Partnership’s identification number and the passwords, shall be deemed conclusive evidence that such instructions are correct and complete and that the issuance or redemption of the Commercial Paper Note(s) directed thereby has been duly authorized by the Partnership.   6.     Proceeds of Sale of the Commercial Paper Notes.  Prior to the execution and delivery of this Agreement, you have established an account designated in the Partnership’s name (the “Note Account”). On each day on which a Dealer or its agent receives Commercial Paper Notes   7 --------------------------------------------------------------------------------   (whether through the facilities of DTC in the manner set forth in the Letter of Representations or by delivery in accordance with Paragraph 4(a)(3) hereof), it shall pay the purchase price for such Commercial Paper Notes in immediately available funds for credit to the Note Account. From time to time upon telephonic or written instructions received by you from an Authorized Representative, you agree to transfer immediately available funds from the Note Account to any bank or trust company for the Partnership’s account.   7.     Payment of Matured Commercial Paper Notes.  By 1:00 p.m., New York time, on the date that any Commercial Paper Notes are scheduled to mature, there shall have been transferred to you for deposit in the Note Account immediately available funds at least equal to the amount of Commercial Paper Notes maturing on such date. When any matured Commercial Paper Note is presented to you for payment by the holder thereof (which may, in the case of Book-Entry Notes held by you in custody pursuant to the Certificate Agreement, be DTC or a nominee of DTC), payment shall be made from and charged to the Note Account to the extent funds sufficient to effect such payment are available in said account.   8.     Reliance on Instructions.  Except as otherwise set forth herein, you shall incur no liability to the Partnership in acting hereunder upon telephonic or other instructions contemplated hereby which the recipient thereof reasonably believed in good faith to have been given by an Authorized Representative or an Authorized Dealer Representative, as the case may be. In the event a discrepancy exists with respect to such instructions, the telephonic instructions as recorded by you will be deemed the controlling and proper instructions, unless such instructions are required by this Agreement to be in writing or have not been recorded by you as contemplated by the next sentence. It is understood that all telephonic instructions will be recorded by you and the Partnership hereby consents to such recording.   8 --------------------------------------------------------------------------------   9.     Cancellation of Commercial Paper Notes.  You will in due course cancel Certificated Note(s) presented for payment and return them to the Partnership. After payment of any matured Book-Entry Note, you shall annotate your records to reflect the face amount of Book-Entry Notes outstanding in accordance with the Letter of Representations. Promptly upon the written request of the Partnership, you agree to cancel and return to the Partnership all unissued Commercial Paper Notes in your possession at the time of such request.   10.   Notices; Addresses.  (a) All communications by or on behalf of the Partnership or a Dealer, by telephone, Noteline Direct or otherwise, relating to the completion, delivery or payment of the Commercial Paper Note(s) are to be directed to your Commercial Paper Issuance Unit of the Corporate Trust and Agency Services (or such other department or division which you shall specify in writing to the Partnership and the Dealers). The Partnership will send all Commercial Paper Notes to be completed and delivered by you to your Commercial Paper Issuance Unit of the Corporate Trust and Agency Services (or such other department or division as you shall specify in writing to the Partnership). You will advise the Partnership and the Dealers from time to time in writing of the individuals generally responsible for the administration of this Agreement and will from time to time certify incumbency and specimen signatures of officers or employees authorized to countersign Commercial Paper Notes.   (b)  Notices and other communications hereunder shall (except to the extent otherwise expressly provided) be in writing (which may be by facsimile) and shall be addressed as follows, or to such other address as the party receiving such notice shall have previously specified to the party sending such notice: if to the Partnership, at:   9 --------------------------------------------------------------------------------   (a)           concerning daily issuance of Commercial Paper Notes:   AllianceBernstein L.P. 1345 Avenue of the Americas New York, New York 10105   Attention: Paul Anzalone, Corporate Finance/Treasury Telecopy No.: (212) 823-3250   Attention: Lillian Mondo, Corporate Finance/Treasury Telecopy No.: (212) 823-3250   (b)           concerning all other matters:   AllianceBernstein L.P. 1345 Avenue of the Americas New York, New York 10105   Attention: Robert H. Joseph, Jr. Telecopy No.: (212) 969-2386   Attention: John J. Onofrio, Jr. Telecopy No.: (212) 823-3250   Attention: Laurence E. Cranch, Esq. Telecopy No.: (212) 969-1334   if to you, at:   Deutsche Bank National Trust Company Global Transaction Banking Trust & Securities Services 25 DeForest Avenue Mail Stop: SUM01-0105 Summit, New Jersey 07901 Attention: David Contino, Assistant Vice President Telecopy No.: (732) 578-4635   Notices shall be deemed delivered when received at the address specified above. For purposes of this paragraph, “when received” shall mean actual receipt (i) of an electronic communication by a telex machine, telecopier or Noteline Direct specified in or pursuant to this Agreement; (ii) or   10 --------------------------------------------------------------------------------   an oral communication by any person answering the telephone at your office specified in subparagraph 10(a) hereof and otherwise at the office of the individual or department specified in or pursuant to this Agreement; or (iii) of a written communication hand-delivered at the office specified in or pursuant to this Agreement.   11.   Additional Information.  Upon the request of the Partnership given at any time and from time to time, you shall promptly provide the Partnership with information with respect to the Commercial Paper Note(s) issued and paid hereunder. Such request shall be in written form and, to the extent known by the Partnership, shall include the serial number, principal amount, date of issue, maturity date and amount of interest, if any, of each Commercial Paper Note which has been issued or paid by you and for which the request is being made.   12.   Representations.   (a)  This Agreement and the Commercial Paper Notes have been duly authorized and this Agreement when executed and the Commercial Paper Notes when issued in accordance with instructions, will be valid and binding obligations of the Partnership, enforceable in accordance with their terms, subject to any applicable law relating to or affecting indemnification for liability under the securities laws and except to the extent such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors rights generally and the applicability of equitable principles thereto whether in a proceeding of law or in equity.   (b)  The offer and sale of each Commercial Paper Note issued under this Agreement will be exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.   13.   Liability.  Neither you nor your officers, employees or agents shall be liable for any act or omission hereunder, except in the case of negligence or willful misconduct. Your duties and obligations and those of your officers and employees shall be determined by the express   11 --------------------------------------------------------------------------------   provisions of this Agreement, the Letter of Representations and the Certificate Agreement (including the documents referred to therein), and they shall not be liable except for the performance of such duties and obligations as are specifically set forth herein and therein, and no implied covenants shall be read into any such document against them. Neither you nor your officers or employees shall be required to ascertain whether any issuance or sale of Commercial Paper Note(s) (or any amendment or termination of this Agreement) has been duly authorized or is in compliance with any other agreement to which the Partnership is a party (whether or not you are a party to such other agreement).   14.   Indemnification.  The Partnership agrees to indemnify and hold you and your officers, employees and agents harmless from and against all liabilities, claims, damages, costs and expenses (including reasonable legal fees and expenses) relating to or arising out of their actions or inactions in connection with this Agreement, except to the extent they are caused by your or their negligence or willful misconduct. This indemnity shall survive termination of this Agreement.   15.   Benefit of Agreement.  This Agreement is solely for the benefit of the parties hereto, and no other person shall acquire or have any right under or by virtue hereof.   16.   Termination.  (a) This Agreement may be terminated at any time by either you or the Partnership by 15 days prior written notice to the other, provided that you agree to continue acting as Issuing and Paying Agent hereunder until such time as your successor has been selected and has entered into an agreement with the Partnership to that effect. Such termination shall not affect the respective liabilities of the parties hereunder arising prior to such termination.   12 --------------------------------------------------------------------------------   (b)  If no successor has been appointed within 15 days, then you have the right to petition a court of competent jurisdiction for the appointment of a successor Issuing and Paying Agent. You shall incur no expense or liability in connection with any such appointment.   17.   Governing Law.  (a) This Agreement is to be delivered and performed in, and shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York.   (b)  Each party irrevocably and unconditionally submits to the exclusive jurisdiction of the United States Federal courts located in the Borough of Manhattan and the courts of the State of New York located in the Borough of Manhattan.   18.   Fees.  You shall receive fees from the Partnership for acting as Issuing and Paying Agent hereunder in such amounts as you and the Partnership shall agree from time to time in writing.   13 --------------------------------------------------------------------------------   Please indicate your agreement with and acceptance of the foregoing terms and provisions by signing the counterpart of this letter enclosed herewith and returning it to the Partnership.     ALLIANCEBERNSTEIN L.P.               By: /s/ John J. Onofrio, Jr.       Name: John J. Onofrio, Jr.     Title: Vice President and       Treasurer     Agreed to and accepted this 3rd day of May, 2006   DEUTSCHE BANK NATIONAL TRUST COMPANY as Issuing and Paying Agent     By: /s/ David Contino     Name: David Contino   Title: Assistant Vice President     By: /s/ Rodney Gaughan     Name: Rodney Gaughan   Title: Assistant Vice President   14 --------------------------------------------------------------------------------

AMENDMENT AMENDMENT, dated as March 16, 2006, between Verticalnet, Inc., a Pennsylvania corporation (the “Company”) and Nathanael Lentz (the “Employee”). RECITALS WHEREAS, the Company and the Employee previously entered into an employment agreement, dated December 23, 2002 (the “Employment Agreement”), that sets forth the terms and conditions of Employee’s employment with the Company; WHEREAS, the Employment Agreement provides that if a Sale of the Company (as defined in the Employment Agreement) occurs either (i) during the Employment Term (as defined in the Employment Agreement) or (ii) within 90 days after the Employee’s termination of employment on account of a covered termination, the Employee will receive a Sale of Company Bonus (as defined in the Employment Agreement); WHEREAS, as a result of changes in the Company and the long-term goals of the Company, the Employee and the Compensation Committee of the Board of Directors of the Company (the “Committee”) have mutually determined that the Sale of Company Bonus is no longer an appropriate compensation incentive for the Employee; WHEREAS, the Committee believes that the interests of the Employee should be more directly tied to the Company and its shareholders and, therefore, desires to amend the Employment Agreement to provide that if a change of control of the Company occurs (i) all equity rights held by the Employee will become fully vested and exercisable, and (ii) if the Employee’s employment with the Company is terminated on account of a covered termination, the Employee will have until the earlier of one year from the date of his termination of employment or the original life of the stock option, to exercise all outstanding exercisable stock options held by the Employee that were granted to him on or after the date of this Amendment; WHEREAS, in consideration for the full acceleration of the outstanding equity held by the Employee in the event of a change of control of the Company and the extended period to exercise certain stock options, the Employee has agreed to the elimination of the Sale of Company Bonus from the Employment Agreement; WHEREAS, the Committee desires to clarify that the additional severance payable on a termination related to a Change of Control (as defined in the Employment Agreement) includes a termination of the Employee by the Company without cause and the Committee also desires to clarify the portion of such severance relating to the Employee’s bonus; WHEREAS, the Employment Agreement also provides that, if the Employee dies during the Employment Term, among the benefits that will be provided by the Company to the Employee’s designated beneficiaries is a life insurance benefit equal to at least two times the Employee’s then Salary (as defined in the Employment Agreement); WHEREAS, the Employee and the Committee desire to amend the Employment Agreement to provide that, in lieu of the Company providing Employee’s designated beneficiaries with the life insurance benefit, the Company will pay to Employee an amount that will reimburse Employee for a portion of the annual premium costs associated with his purchase of a term life insurance policy; and WHEREAS, Section 15 of the Employment Agreement provides that the Employment Agreement may be amended pursuant to a written amendment between the Employee and the Company. NOW, THEREFORE, the Company and the Employee hereby agree that the Employment Agreement shall be amended as follows: 1. Section 4 of the Employment Agreement is hereby amended by adding a new paragraph to the end thereof to read as follows: “During the Employment Term, the Company shall reimburse the Employee for the annual insurance premium costs associated with a term life insurance policy purchased by the Employee with a death benefit equal to $700,000.” 2. Section 5 of the Employment Agreement is hereby amended in its entirety to read as follows: “5. Bonuses The Employee shall be entitled to participate in any bonus program established by the Board or the Compensation Committee for senior executives generally. The Employee’s annual target bonus shall be equal to 50% of the Employee’s Salary for such year (the “Target Bonus”). All bonus programs, as well as the goals for achieving the Target Bonus, are at the discretion of the Board or the Compensation Committee.” 3. Section 7 of the Employment Agreement is hereby amended in its entirety to read as follows: “7. Death If the Employee dies during the Employment Term, then the Employment Term shall terminate, and thereafter the Company shall not have any further liability or obligation to the Employee, the Employee’s executors, administrators, heirs, assigns or any other person claiming under or through the Employee, except (a) that the Employee’s estate shall receive any unpaid Salary and vacation that has accrued through the date of termination, (b) the Employee’s outstanding options are accelerated for an additional period of 6 months that is applied between scheduled vesting dates to accelerate vesting on the pro rata portion of the option vesting schedule using a monthly basis instead of the scheduled vesting dates, (c) a pro rata portion of any bonus that the Employee would have earned for the fiscal year of the Company in which the Employee died, paid no later than March 15th of the year following the calendar year to which the bonus relates or, if earlier, when bonuses for such year are paid to the executives generally, (d) the Employee’s group healthcare (medical, dental, vision and prescription drug) coverage will be continued for one year, to be paid in full by the Company so that there is no after-tax cost to the Employee’s spouse or dependents, and (e) any other benefits due under any programs of the Company in which the Employee participated and under which the Employee was due a benefit at the time of his death.” 4. Section 8 of the Employment Agreement is hereby amended in its entirety to read as follows: “8. Total Disability If the Employee becomes “totally disabled,” then the Employment Term shall terminate, and thereafter the Company shall have no further liability or obligation to the Employee hereunder, except as follows: the Employee shall receive (a) any unpaid Salary and vacation that has accrued through the date of termination, (b) continued Salary for 3 months following the date the Employee is considered totally disabled, (c) whatever benefits that he may be entitled to receive under any then existing disability benefit plans of the Company, (d) a pro rata portion of any bonus that the Employee would have earned for the fiscal year of the Company in which the Employee because totally disabled, paid no later than March 15th of the year following the calendar year to which the bonus relates or, if earlier, when bonuses for such year are paid to executives generally, (e) the Employee’s group healthcare (medical, dental, vision and prescription drug) coverage will be continued for one year, to be paid in full by the Company so that there is no after-tax cost to the Employee, and (f) any other benefits due under any programs of the Company in which the Employee participated and under which the Employee was due a benefit at the time of his becoming totally disabled. The term “totally disabled” means: (a) if the Employee is considered totally disabled under the Company’s group disability plan in effect at that time, if any, or (b) in the absence of any such plan, under applicable Social Security regulations.” 5. Section 11(1) of the Employment Agreement is hereby amended in its entirety to read as follows: “(1) the Company will pay to the Employee (a) a lump sum severance payment (the “Severance Payment”) in the amount equal to one year of the Salary then in effect plus (b) a pro rata portion of the Target Bonus or any other bonus that the Employee would have earned for the fiscal year of the Company in which the Employee terminated or the non-renewal occurs, paid no later than March 15th of the year following the calendar year to which the bonus relates or, if earlier, when bonuses for such year are paid to executives generally, and” 6. The first three paragraphs of Section 12 of the Employment Agreement are hereby amended in their entirety to read as follows: “If a Change of Control occurs, notwithstanding any provision to the contrary in any applicable plan, program or agreement to which the Employee is a party, all outstanding stock options, restricted stock grants, restricted stock unit grants and other equity rights held by the Employee as of the Change of Control shall become fully vested and/or exercisable, as applicable, as of the consummation of the Change of Control. During the 2 year period after a Change of Control, if the Company terminates the Employee without “cause” or the Employee terminates this Agreement for “Good Reason” by giving the Company written notice of termination one month in advance of the termination date (which the Employee shall have the right to do during this 2 year period), then (1) all the rights, benefits and obligations under Section 11 of this Agreement for termination without “cause” by the Company shall apply, (2) the Employee shall receive a lump payment equal to the Employee’s Target Bonus, and (3) all stock options granted to the Employee on or after March 16, 2006 that are outstanding and exercisable as of the date of the Employee’s termination date, shall remain exercisable until the earlier of (i) one year from the Employee’s termination date or (ii) the expiration of the original life of the stock option. During the 3 month period after a Change of Control, if the Employee terminates this Agreement for any reason by giving the Company written notice of termination one month in advance of the termination date (which the Employee shall have the right to do during this 3 month period), then (1) all the rights, benefits and obligations under Section 11 of this Agreement for termination without “cause” by the Company shall apply, (2) the Employee shall receive a lump payment equal to the Employee’s Target Bonus, and (3) all stock options granted to the Employee on or after March 16, 2006 that are outstanding and exercisable as of the date of the Employee’s termination date, shall remain exercisable until the earlier of (i) one year from the Employee’s termination date or (ii) the expiration of the original life of the stock option.” 7. The last paragraph of Section 12 of the Employment Agreement relating to the term “Change of Control Bonus” and the definition of such term shall be deleted in its entirety from the Employment Agreement. 8. In all respects not modified by this Amendment, the Employment Agreement is hereby ratified and confirmed. IN WITNESS WHEREOF, the Company and the Employee agree to the terms of the foregoing Amendment, effective as of the date first written above. VERTICALNET, INC.       BY:/s/ Gene S. Godick        Nathanael V. Lentz           Employee       March 16, 2006        March 16, 2006            Date   Date      

  Exhibit 10(d) THIRD AMENDED AND RESTATED SYSCO CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Effective January 1, 2005   --------------------------------------------------------------------------------   THIRD AMENDED AND RESTATED SYSCO CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN TABLE OF CONTENTS                       Page ARTICLE I — DEFINITIONS     3                 ARTICLE II — ELIGIBILITY     12                 ARTICLE III — PARTICIPANT DEFERRALS AND COMPANY CONTRIBUTIONS     13   3.1   Bonus Deferral Election     13   3.2   Company Match     14   3.3   Salary Deferral Election     14   3.4   Discretionary Company Contributions     15   3.5   Cancellation of Salary Deferral Election upon the Occurrence of an Unforeseeable Emergency     16                 ARTICLE IV — ACCOUNT     16   4.1   Establishing a Participant’s Account     16   4.2   Credit of the Participant’s Bonus Deferral and the Company’s Match     16   4.3   Credit of the Participant’s Salary Deferrals     17   4.4   Deemed Investment of Deferrals     17   4.5   Crediting of Interest on Company Match     19   4.6   Procedure to Credit or Debit Interest, Earnings or Losses Upon an Event of Distribution     19                 ARTICLE V — VESTING     21   5.1   Deferrals     21   5.2   Company Match     21                 ARTICLE VI — DISTRIBUTIONS     22   6.1   Death     22   6.2   Disability     23   6.3   Retirement     23   6.4   Distributions Upon Termination     23   6.5   In-Service Distributions     24   6.6   Distribution Elections for Deferrals     24   6.7   Forfeiture For Cause     28   6.8   Forfeiture for Competition     28   6.9   Hardship Withdrawals     29   6.10   Payments Upon Income Inclusion Under Section 409A     30   6.11   Restrictions on any Portion of Total Payments Determined to be Excess Parachute Payments     30   6.12   Responsibility for Distributions and Withholding of Taxes     31                 ARTICLE VII — ADMINISTRATION     32   7.1   Committee Appointment     32   7.2   Committee Organization and Voting     32   7.3   Powers of the Committee     32   7.4   Committee Discretion     33   7.5   Reimbursement of Expenses     33   7.6   Indemnification     33   7.7   Claims Procedure     34   -i- --------------------------------------------------------------------------------                         Page ARTICLE VIII — ADOPTION BY SUBSIDIARIES     35   8.1   Procedure for and Status After Adoption     35   8.2   Termination of Participation By Adopting Subsidiary     36                 ARTICLE IX — AMENDMENT AND/OR TERMINATION     36   9.1   Amendment or Termination of the Plan     36   9.2   No Retroactive Effect on Awarded Benefits     36   9.3   Effect of Termination     37                 ARTICLE X — FUNDING     38   10.1   Payments Under This Agreement are the Obligation of the Company     38   10.2   Agreement May be Funded Through Rabbi Trust     38   10.3   Reversion of Excess Assets     38   10.4   Participants Must Rely Only on General Credit of the Company     39                 ARTICLE XI — MISCELLANEOUS     40   11.1   Limitation of Rights     40   11.2   Distributions to Incompetents or Minors     40   11.3   Non-alienation of Benefits     40   11.4   Reliance Upon Information     41   11.5   Severability     41   11.6   Notice     41   11.7   Gender and Number     41   11.8   Governing Law     41   11.9   Effective Date     41   11.10   Compliance with Section 409A of the Code     42   -ii- --------------------------------------------------------------------------------   THIRD AMENDED AND RESTATED SYSCO CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN      WHEREAS, Sysco Corporation sponsors and maintains the Second Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, effective April 1, 2002 (the “Current Plan”) to provide the executives of Sysco Corporation the opportunity to defer the receipt of some or all of their compensation; and      WHEREAS, the American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code of 1986, as amended (the “Code”), and Section 409A of the Code imposes certain restrictions on compensation deferred on and after January 1, 2005; and      WHEREAS, the Board of Directors has determined that it is in the best interests of Sysco and the Plan participants to amend the Plan to provide for certain expanded rights related to early retirement benefits and to expand certain other rights provided in this Plan; and      WHEREAS, the Board of Directors has determined that it is in the best interests of Sysco Corporation and its current and former executives to amend and restate the Current Plan to comply with Section 409A of the Code with respect to all benefits provided under the Current Plan, without regard to when such benefits became earned and vested.      NOW, THEREFORE, Sysco Corporation hereby adopts the Third Amended and Restated Executive Deferred Compensation Plan as follows: ARTICLE I DEFINITIONS      Account. “Account” means a Participant’s Account in the Deferred Compensation Ledger maintained by the Committee which reflects the entire interest of the Participant in the Plan, as adjusted herein for deemed Investment earnings and losses and credited interest. A Participant’s Account shall be comprised of, if applicable, such Participant’s Termination/Retirement Account and In-Service Distribution Account(s). -3- --------------------------------------------------------------------------------        Affiliate. “Affiliate” means any entity with respect to which Sysco beneficially owns, directly or indirectly, at least 50% of the total voting power of the interests of such entity and at least 50% of the total value of the interests of such entity.      Beneficiary. “Beneficiary” means a person or entity designated by the Participant under the terms of this Plan to receive any amounts distributed under the Plan upon the death of the Participant.      Board of Directors. “Board of Directors” means the Board of Directors of Sysco. Bonus Deferral. “Bonus Deferral” shall have the meaning set forth in Section 3.1.      Bonus Deferral Election. “Bonus Deferral Election” shall have the meaning set forth in Section 3.1.      Business Day. “Business Day” means any day on which the New York Stock Exchange is open for trading.      Change of Control. “Change of Control” means the occurrence of one or more of the following events:           (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Act) of 20% or more of either (i) the then-outstanding shares of Sysco common stock (the “Outstanding Sysco Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of Sysco entitled to vote generally in the election of directors (the “Outstanding Sysco Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from Sysco, (2) any acquisition by Sysco, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Sysco or any Affiliate, or (4) any acquisition by any corporation; pursuant to a transaction that complies with subparagraphs (c)(i), (c)(ii) and (c)(iii) of this definition;           (b) Individuals who, as of November 10, 2005, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to -4- --------------------------------------------------------------------------------   November 10, 2005 whose election, or nomination for election by Sysco’s stockholders, 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 of Directors;           (c) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Sysco or any of its Affiliates, a sale or other disposition of all or substantially all of the assets of Sysco, or the acquisition of assets or stock of another entity by Sysco or any of its Affiliates (each, a “Business Combination”), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Sysco Common Stock and the Outstanding Sysco Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of 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 that, as a result of such transaction, owns Sysco or all or substantially all of Sysco’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 Sysco Common Stock and the Outstanding Sysco 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 Sysco 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 -5- --------------------------------------------------------------------------------   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 of Directors providing for such Business Combination; or           (d) Approval by the stockholders of Sysco of a complete liquidation or dissolution of Sysco.      Claimant. “Claimant” shall have the meaning set forth in Section 7.7.      Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.      Company. “Company” means Sysco and any Subsidiary that has adopted the Plan with the approval of the Committee, pursuant to Section 8.1.      Company Match. “Company Match” shall have the meaning set forth in Section 3.2.      Committee. “Committee” means the persons who are from time to time serving as members of the committee administering this Plan.      Default Distribution Option. “Default Distribution Option” shall have the meaning set forth in Section 6.6(c)(iv).      Default Investment. “Default Investment” shall mean a hypothetical investment with an investment return equal to the monthly average of the Moody’s Average Corporate Bond Yield for the calendar year ending prior to the beginning of the Plan Year for which such rate shall be effective, plus one (1) percent; provided, however, for calendar years commencing on or after January 1, 2006, “Default Investment” shall mean a hypothetical investment with a per annum investment return equal to the sum of (x) the monthly average of the Moody’s Average Corporate Bond Yield (determined by dividing the sum of the Corporate Bond Yield Averages for each month, as published in Moody’s Bond Survey, by the number of months in the applicable calculation period) for the period described in (i) or (ii) that produces the higher rate: (i) the six-month period ending on October 31st of the calendar year prior to the calendar year for which such rate shall be effective, or (ii) the twelve-month period ending on October 31st of the calendar year prior to the calendar year for which such rate shall be effective, plus (y) 1%, or such other Investment designated by the Committee as the “Default Investment” on Exhibit “A” attached hereto. The investment return of the Default Investment shall be re-determined annually as of -6- --------------------------------------------------------------------------------   November 1st of the calendar year prior to the calendar year for which such rate shall be effective. The investment return, once established, shall be effective as of January 1st of the calendar year following the calendar year in which such investment return is calculated and shall remain in effect for the entire calendar year.      Deferrals. “Deferrals” shall mean Bonus Deferrals and Salary Deferrals.      Deferral Election. “Deferral Election” shall mean either a Bonus Deferral Election, a Salary Deferral Election or both.      Deferred Compensation Ledger. “Deferred Compensation Ledger” means the ledger maintained by the Committee for each Participant which reflects the amount of the Participant’s Deferrals, Company Match, credits and debits for deemed Investment earnings and losses pursuant to Sections 4.4 and 4.6, interest credited pursuant to Sections 4.5 and 4.6, and cash distributed to the Participant or the Participant’s Beneficiaries pursuant to Article VI.      Disability. “Disability” means that a Participant (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; (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 not less than three (3) months under an accident and health plan covering employees of the Company; or (iii) has been determined by the Social Security Administration to be totally disabled.      Eligibility Date. “Eligibility Date” means the date as of which an employee of a Company is first eligible to participate in the Plan. An employee shall be notified of the employee’s Eligibility Date by the Committee or its designee.      Fair Market Value. “Fair Market Value” means, with respect to any Investment, the closing price on the date of reference, or if there were no sales on such date, then the closing price on the nearest preceding day on which there were such sales, and in the case of an unlisted security, the mean between the bid and asked prices on the date of reference, or if no such prices are available for such date, then the mean between the bid and asked prices on the nearest preceding day for -7- --------------------------------------------------------------------------------   which such prices are available. With respect to any Investment which reports “net asset values” or similar measures of the value of an ownership interest in the Investment, Fair Market Value shall mean such closing net asset value on the date of reference, or if no net asset value was reported on such date, then the net asset value on the nearest preceding day on which such net asset value was reported. For any Investment not described in the preceding sentences, Fair Market Value shall mean the value of the Investment as determined by the Committee in its reasonable judgment on a consistent basis, based upon such available and relevant information as the Committee determines to be appropriate.      Fixed Interest Option. “Fixed Interest Option” shall have the meaning set forth in Section 4.4(d).      In-Service Account. “In-Service Account” means a separate recordkeeping account under a Participant’s Account in the Deferred Compensation Ledger that is created when a Participant elects a new In-Service Distribution Date with respect to amounts deferred hereunder.      In-Service Distribution. “In-Service Distribution” means a payment by Sysco to the Participant following the occurrence of an In-Service Distribution Date of the amount represented by the balance in the In-Service Account with respect to such In-Service Distribution Date.      In-Service Distribution Date. “In-Service Distribution Date” means the date selected by the Participant following which the Participant’s applicable In-Service Account shall be paid.      In-Service Distribution Election. “In-Service Distribution Election” shall have the meaning set forth in Section 6.6(a)(ii).      Installment Distribution Option. “Installment Distribution Option” shall have the meaning set forth in Section 6.6(c)(i).      Investment. “Investment” means the options set forth in Exhibit “A” attached hereto, including interest credited at the investment return of the Default Investment, as the same may be amended from time to time by the Committee in its sole and absolute discretion.      Lump Sum Distribution Option. “Lump Sum Distribution Option” shall have the meaning set forth in Section 6.6(c)(ii). -8- --------------------------------------------------------------------------------        Management Incentive Plan. “Management Incentive Plan” means the Sysco Corporation 1995 Management Incentive Plan, the Sysco Corporation 2000 Management Incentive Plan, and the Sysco Corporation 2005 Management Incentive Plan, as each may be amended from time to time, any successor plan, and, at the discretion of the Committee, any other management incentive plan of Sysco.      MIP Bonus. “MIP Bonus” means a bonus awarded or to be awarded to the Participant under the Management Incentive Plan.      MIP Participation. “MIP Participation” means participation in the Management Incentive Plan. Solely for purposes of vesting under this Plan, MIP Participation shall include the time the Participant was not eligible to participate in the Management Incentive Plan if, the Participant (i) was previously eligible to participate in the Management Incentive Plan, (ii) employed by the Company while such Participant was ineligible to participate in the Management Incentive Plan; and (ii) later becomes eligible to again participate in the Management Incentive Plan.      Participant. “Participant” means an employee of a Company who becomes eligible for or is participating in the Plan, and any other current or former employee of a Company who has an Account in the Deferred Compensation Ledger.      Performance Based Compensation. “Performance Based Compensation” means compensation that is based on services performed over a period of at least twelve (12) months to the extent it is contingent on satisfaction of pre-established performance criteria and not readily ascertainable at the time of the Participant’s deferral election, as determined by the Committee in accordance with Section 409A.      Plan. “Plan” means the Third Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, as set forth in this document and amended from time to time.      Plan Year. “Plan Year” means a one-year period that coincides with the fiscal year of Sysco. Sysco has a 52/53 week fiscal year beginning on the Sunday next following the Saturday closest to June 30th of each calendar year.      Retirement. “Retirement” means (i) with respect to any Participant’s Separation from Service before July 3, 2005, “Retirement” means any Separation from Service of a Participant from the -9- --------------------------------------------------------------------------------   Company for any reason other than death or Disability on or after attaining age sixty (60); and (ii) with respect to any Participant’s Separation from Service on or after July 3, 2005, “Retirement” means a Participant’s Separation from Service from the Company for any reason other than death or Disability on or after the earlier of (A) the date the Participant attains age sixty (60), or (B) the date that the Participant has attained age fifty-five (55) and has at least fifteen (15) years of MIP Participation.      Retirement Investment Election. “Retirement Investment Election” shall have the meaning set forth in Section 4.4(d).      Salary Compensation. “Salary Compensation” means any base salary plus any receipts of commission compensation which is otherwise payable to a Participant in cash by the Company in any calendar year. Specifically, “Salary Compensation” shall include contributions made by the Company on behalf of a Participant under any salary reduction or similar arrangement to a cafeteria plan described in Section 125 of the Code, elective contributions pursuant to an arrangement qualified under Section 401(k) of the Code, amounts contributed as Salary Deferrals under this Plan, and any additional amounts determined in the sole discretion of the Committee. “Salary Compensation” shall exclude moving expenses, any gross up of moving expenses to account for increased income taxes, Company contributions under any qualified retirement plan, Company accruals to a Participant’s account under the Sysco Corporation Supplemental Executive Retirement Plan, any amounts payable to the Participant under the Sysco Corporation Long Term Incentive Cash Plan, a Participant’s MIP Bonus, any amounts relating to the grant of a stock option, the exercise of a stock option, or the sale or deemed sale of any shares thereby acquired, any compensation paid in the form of shares of Sysco stock, bonus paid as an inducement to enter the employment of the Company, any severance payments or other compensation which is paid to a Participant as a result of the Participant’s termination of employment with the Company, and any additional amounts determined in the sole discretion of the Committee.      Salary Deferral. “Salary Deferral” shall have the meaning set forth in Section 3.3.      Salary Deferral Election. “Salary Deferral Election” shall have the meaning set forth in Section 3.3. -10- --------------------------------------------------------------------------------        Section 409A. “Section 409A” means Section 409A of the Code. References herein to “Section 409A” shall also include any regulatory and other interpretive authority promulgated by the Treasury Department or the Internal Revenue Service under Section 409A of the Code.      Securities Act. “Securities Act” means the Securities Exchange Act of 1934, as amended from time to time.      Separation from Service. “Separation from Service” means “separation from service” within the meaning of Section 409A.      Specified Employee. “Specified Employee” means a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code. By way of clarification, “specified employee” means a “key employee” (as defined in Section 416(i) of the Code, disregarding Section 416(i)(5) of the Code) of the Company. A Participant shall be treated as a key employee if the Participant meets the requirements of Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the Treasury Regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the twelve (12) month period ending on an Identification Date. If a Participant is a key employee as of an Identification Date, the Participant shall be treated as a Specified Employee for the twelve (12) month period beginning on the first day of the fourth month following such Identification Date. For purposes of any “Specified Employee” determination hereunder, the “Identification Date” shall mean the last day of the calendar year. The Committee may in its discretion amend the Plan to change the Identification Date, provided that any change to the Plan’s Identification Date shall not take effect for at least twelve (12) months after the date of the Plan amendment authorizing such change.      Subsidiary. “Subsidiary” means (a) any corporation which is a member of a “controlled group of corporations” which includes Sysco, as defined in Code Section 414(b), (b) any trade or business under “common control” with Sysco, as defined in Code Section 414(c), (c) any organization which is a member of an “affiliated service group” which includes Sysco, as defined in Code Section 414(m), (d) any other entity required to be aggregated with Sysco pursuant to Code Section 414(o), and (e) any other organization or employment location designated as a “Subsidiary” by resolution of the Board of Directors or by the Committee for purposes of this Plan. -11- --------------------------------------------------------------------------------        Sysco. “Sysco” means Sysco Corporation, the sponsor of this Plan.      Termination. “Termination” means Separation from Service with the Company, voluntarily or involuntarily, for any reason other than Retirement, death or Disability.      Termination/Retirement Account. “Termination/Retirement Account” means that portion of a Participant’s Account in the Deferred Compensation Ledger that has not been allocated to In-Service Accounts.      Treasury Regulations. “Treasury Regulations” means the Federal Income Tax Regulations, and to the extent applicable any Temporary or Proposed Regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).      Total Payments. “Total Payments” means all payments or benefits received or to be received by a Participant in connection with a Change of Control of Sysco and the termination of his employment under the terms of this Plan, the Sysco Corporation Supplemental Executive Retirement Plan, and in connection with a Change of Control of Sysco under the terms of any stock option plan or any other plan, arrangement or agreement with the Company, its successors, any person whose actions result in a Change of Control or any person affiliated with the Company or who, as a result of the completion of transactions causing a Change of Control, become affiliated with the Company within the meaning of Section 1504 of the Code, taken collectively.      Unforeseeable Emergency. “Unforeseeable Emergency” shall have the meaning set forth in Section 6.9.      Variable Investment Option. “Variable Investment Option” shall have the meaning set forth in Section 4.4(d). ARTICLE II ELIGIBILITY      Initially, all participants in the Management Incentive Plan, exclusive of any participant whose compensation income from the Company and its Subsidiaries is subject to taxation under -12- --------------------------------------------------------------------------------   the Canadian income tax laws, shall be eligible to participate in this Plan. However, the Committee retains the right to establish such additional eligibility requirements for participation in this Plan as it may determine is appropriate or necessary from time to time and has the right to determine, in its sole discretion, that any one or more persons who meet the eligibility requirements shall not be eligible to participate for one or more Plan Years beginning after the date they are notified of this decision by the Committee. ARTICLE III PARTICIPANT DEFERRALS AND COMPANY CONTRIBUTIONS      3.1 Bonus Deferral Election. A Participant may elect, what, if any, percentage of his MIP Bonus earned during a given Plan Year is to be deferred under this Plan (a “Bonus Deferral Election”), and such percentage shall be designated by the Participant pursuant to such form as approved by the Committee for this purpose (any such amount so deferred, a “Bonus Deferral”). To be eligible to make a Bonus Deferral Election for a given Plan Year, a Participant’s Eligibility Date must occur or have occurred on or before the first day of the Plan Year to which such Bonus Deferral Election relates. To make a Bonus Deferral Election, a Participant must complete, execute and file with the Committee a Bonus Deferral Election form within the applicable deadlines set forth below. A Bonus Deferral Election shall apply only with respect to the Plan Year specified in the Bonus Deferral Election form, and except as provided in Section 3.5 hereof, shall be irrevocable after the applicable deadline for making a Bonus Deferral Election for such Plan Year. To be effective, a Participant’s Bonus Deferral Election form must be received by the Committee within the period established by the Committee for a given Plan Year, provided that such period ends no later than the following times: (i) if the MIP Bonus qualifies as Performance Based Compensation (as applied on a Participant-by-Participant basis), the date that is six (6) months before the end of the Plan Year with respect to which such MIP Bonus is payable; or (ii) if the MIP Bonus does not qualify as Performance Based Compensation, the last day of the Plan Year immediately preceding the Plan Year with respect to which such MIP Bonus is payable. Prior to the period the Committee establishes for each Participant to make his Bonus Deferral Election, the Committee shall notify all eligible Participants of the maximum and minimum -13- --------------------------------------------------------------------------------   percentages of the MIP Bonus earned during a given Plan Year that may be deferred. If the Committee does not receive a Participant’s Bonus Deferral Election form within the period established for such purpose by the Committee for such Plan Year, the Participant shall be deemed to have elected not to make a Bonus Deferral Election for that Plan Year.      3.2 Company Match. The Company shall award to each Participant who elects to defer a portion of his MIP Bonus under this Plan an amount equal to 50% of that portion of the amount of the MIP Bonus deferred which is not in excess of 20% of his MIP Bonus, for a maximum potential match by the Company of 10% of the Participant’s MIP Bonus (any such amount so awarded, a “Company Match”); provided, however, that for Bonus Deferrals made for Plan Years beginning on or after July 3, 2005, the Company shall award to each Participant who elects to defer a portion of his MIP Bonus under this Plan, a Company Match equal to 15% of that portion of the amount of the MIP Bonus deferred which is not in excess of 20% of his MIP Bonus, for a maximum potential Company Match of 3% of the Participant’s MIP Bonus. Notwithstanding anything herein or otherwise to the contrary, in no event shall the calculation of the Company Match take into account amounts deferred pursuant to Section 3.3.      3.3 Salary Deferral Election. A Participant may elect to defer under this Plan all or a portion of the Salary Compensation otherwise payable to the Participant by the Company (a “Salary Deferral Election”), which amount shall be designated by the Participant pursuant to such form as approved by the Committee for this purpose (any such amount so deferred, a “Salary Deferral”). To make a Salary Deferral Election, a Participant must complete, execute and file with the Committee a Salary Deferral Election form within the applicable deadlines set forth below. A Salary Deferral Election shall apply only with respect to the calendar year or portion thereof, specified in the Salary Deferral Election form, and, except as provided in Section 3.5 hereof, shall be irrevocable after the applicable deadline for making a Salary Deferral Election for such calendar year.           (a) In General. To be effective, a Salary Deferral Election form must be received by the Committee, within the period established by the Committee for a given calendar year; provided that such period ends on or before December 31 of the year prior to the calendar -14- --------------------------------------------------------------------------------   year for which the Salary Deferral Election is to be effective. If the Committee fails to receive a Salary Deferral Election form from a Participant during the period established by the Committee for such calendar year, the Participant shall be deemed to have elected not to make a Salary Deferral Election for that calendar year.           (b) Election for First Year as Participant. Notwithstanding the provisions of Section 3.3(a), in the calendar year in which a Participant first becomes eligible to participate in the Plan, the Participant may make a Salary Deferral Election with respect to all or a portion of such Participant’s Salary Compensation beginning with the payroll period next following the receipt of the Participant’s Salary Deferral Election form; provided that such Salary Deferral Election form is received by the Committee prior to the 31st day following the Participant’s Eligibility Date. If the Committee does not receive such Participant’s Salary Deferral Election prior to the 31st day following the Participant’s Eligibility Date, the Participant shall be deemed to have elected not to make a Salary Deferral Election for such calendar year. Salary Deferral Elections by such a Participant for succeeding calendar years shall otherwise be made in accordance with the provisions of Section 3.3(a).           (c) Additional Rules and Procedures. The Committee shall have the discretion to adopt such additional rules and procedures applicable to Salary Deferral Elections that the Committee determines are necessary. By way of amplification and not limitation, the Committee shall have the authority to limit the amount of Salary Compensation deferred by a Participant under this Plan for any calendar year, require a Participant to pay or provide for payment of cash to the Company, and/or take such other actions determined to be necessary where, as a result of a Participant’s Salary Deferral Election, the compensation payable to a Participant currently is less than such Participant’s tax withholding and other obligations.      3.4 Discretionary Company Contributions. Notwithstanding anything to the contrary contained herein, if authorized by the Board of Directors or a committee thereof, the Company, may, pursuant to a written agreement approved by the Board of Directors or a committee thereof, cause the Company to make additional contributions to a Participant’s Account. Any discretionary Company contributions made pursuant to this Section 3.4 shall be credited to a Participant’s -15- --------------------------------------------------------------------------------   Termination/Retirement Account and shall be paid at the earliest to occur of a Participant’s death, Disability, Retirement or Termination. Unless otherwise expressly provided in such written agreement, such discretionary contributions by the Company shall vest in accordance with the provisions of Section 5.2 of the Plan.      3.5 Cancellation of Deferral Elections upon the Occurrence of an Unforeseeable Emergency. Notwithstanding anything to the contrary contained herein, if a Participant requests a hardship withdrawal pursuant to Section 6.9, and the Committee determines that such Participant has suffered an Unforeseeable Emergency, the Participant may elect to cancel such Participant’s Deferral Elections in effect for such calendar year. Such election shall be made in writing by the Participant in such form as the Committee determines from time to time. In addition, if a Participant receives a hardship distribution under a 401(k) plan sponsored by the Company, all Deferral Elections in effect for the calendar year or Plan Year, as the case may be, in which such hardship distribution is made shall be cancelled, and such Participant may not make additional Deferral Elections for at least six (6) months following the receipt of such hardship distribution. Any subsequent Deferral Election shall be subject to the rules of Sections 3.1 or 3.3, as applicable. ARTICLE IV ACCOUNT      4.1 Establishing a Participant’s Account. The Committee shall establish an Account for each Participant in a Deferred Compensation Ledger which shall be maintained by the Company. Each Account shall reflect the entire interest of the Participant in the Plan.      4.2 Credit of the Participant’s Bonus Deferral and the Company’s Match. Upon completion of the Plan Year, the Committee shall determine, as soon as administratively practicable, the amount of a Participant’s MIP Bonus that has been deferred for that Plan Year and the amount of the Company Match that has been awarded to the Participant pursuant to Section 3.2 and shall credit those amounts to the Participant’s Account in the Deferred Compensation Ledger as of the July 1st coincident with or closest to the end of the Plan Year for which the MIP Bonus was awarded. -16- --------------------------------------------------------------------------------        4.3 Credit of the Participant’s Salary Deferrals. The Participant’s Account in the Deferred Compensation Ledger shall be credited with respect to Salary Deferrals, on the same day of each month on which cash compensation would otherwise have been paid to a Participant, with a dollar amount equal to the total amount by which the Participant’s cash compensation for such month was reduced in accordance with the Participant’s Salary Deferral Election.      4.4 Deemed Investment of Deferrals. The credit balance of the Deferrals in the Participant’s Account shall be deemed invested and reinvested from time to time in such Investments as shall be designated by the Participant in accordance with the following:           (a) Upon commencement of participation in the Plan, each Participant shall make a designation of the Investments in which the Deferrals in such Participant’s Account will be deemed invested. The Investments designated by a Participant shall be deemed to have been purchased on the date on which the Deferrals are credited to the Participant’s Account, or if such day is not a Business Day, on the first Business Day following such date. If a Participant has not made a designation of Investments in which such Participant’s Deferrals will be deemed invested, the credit balance of the Deferrals in the Participant’s Account shall be deemed to be invested in the Default Investment.           (b) At such times and under such procedures as the Committee shall designate, each Participant shall have the right to (i) change the existing Investments in which the Deferrals in such Participant’s Account are deemed invested by treating a portion of such Investments as having been sold and the new Investments purchased, and (ii) change the Investments which are deemed purchased with future Deferral credits to the Participant’s Account.           (c) In the case of any deemed purchase of an Investment, the Participant’s Account shall be decreased by a dollar amount equal to the number of units of such Investment treated as purchased multiplied by the per unit net asset value of such Investment as of such date or, if such date is not a Business Day, on the first Business Day following such date, and shall be increased by the number of units of such Investment treated as purchased. In the case of any deemed sale of an Investment, the Participant’s Account shall be decreased by the number of units of such Investment treated as sold, and shall be increased by a dollar amount equal to the number of -17- --------------------------------------------------------------------------------   units of such Investment treated as sold multiplied by the net asset value of such Investment as of such date or, if such date is not a Business Day, on the first Business Day following such date.           (d) If a Participant’s Retirement occurs on or after January 1, 2006, and the Participant has elected (or is deemed to have elected) to receive any portion of the Participant’s distribution under Section 6.3 (upon Retirement) pursuant to the Installment Distribution Option, then, with respect such portion, the Participant may elect (the “Retirement Investment Election”) either (i) to have interest credited to the declining balance of such portion of the Participant’s Account at a fixed interest rate determined pursuant to Section 4.6(b)(ii) (the “Fixed Interest Option”); or (ii) to have the Participant’s designation of deemed Investments (which deemed Investments may continue to be changed pursuant to Section 4.4(b)) remain in effect throughout the period of distribution with respect to such portion (the “Variable Investment Option”); provided, however, that if the Participant dies during the period of distribution, such Participant’s Investment designations shall be terminated as of the date of the Participant’s death and such Participant’s Account shall be deemed invested in the Default Investment. A Participant shall make his or her Retirement Investment Election at such time and in such form as determined by the Committee. If the Committee does not receive a Participant’s Retirement Investment Election in the period prescribed by the Committee, the Participant shall be deemed to have elected the Fixed Interest Option. Once a Participant has made a Retirement Investment Election (or is deemed to have made a Retirement Investment Election) such election is irrevocable. Interest or deemed Investment earnings or losses, as the case may be, shall be credited or debited to the Participant’s Account at such times and in such amounts as determined under Section 4.6.           (e) In no event shall the Company be under any obligation, as a result of any designation of Investments made by Participants, to acquire any Investment assets, it being intended that the designation of any Investment shall only affect the determination of the amounts ultimately paid to a Participant.           (f) In determining the amounts of all debits and credits to the Participant’s Account, the Committee shall exercise its reasonable best judgment, and all such determinations (in the absence of bad faith) shall be binding upon all Participants and their Beneficiaries. If an error -18- --------------------------------------------------------------------------------   is discovered in the Participant’s Account, the Committee, in its sole and absolute discretion, shall cause appropriate, equitable adjustments to be made as soon as administratively practicable following the discovery of such error or omission.      4.5 Crediting of Interest on Company Match . Interest will be credited on any Company Match in the Participant’s Account in accordance with this Section 4.5 at the investment return of the Default Investment. Interest on such Company Match shall be compounded annually, but credited on a daily basis. Following the occurrence of an event giving rise to a distribution, interest will be credited on any Company Match in the Participant’s Account at such times and at the rate (or rates) determined under Section 4.6.      4.6 Procedure to Credit or Debit Interest, Earnings or Losses Upon an Event of Distribution.           (a) Distributions upon Retirement under the Variable Investment Option. If a Participant is entitled to receive a distribution pursuant to Section 6.3 (upon Retirement) and elects the Variable Investment Option under Section 4.4(d)(ii), the declining balance of the portion of the Participant’s Account (including any portion of the Company Match (and any interest credited thereon pursuant to Section 4.5)) to which this Section 4.6(a) applies, shall continue to be credited or debited with Investment earnings or losses (including interest credited at the investment return of the Default Investment, if that Investment option is selected) for the period beginning on the day following the day on which the event giving rise to the distribution occurs and continuing until the day immediately prior to the final installment distribution is paid. For purposes of the preceding sentence, any portion of the Company Match (and any interest credited thereon pursuant to Section 4.5) that is subject to this Section 4.6(a) shall be deemed invested in the Default Investment. The amount of interest or deemed Investment earnings or losses credited or debited to the Participant’s Account shall be determined by the Committee in accordance with Section 4.4(f).           (b) Distributions Upon Death, Disability, Termination or Retirement (not under the Variable Investment Option). If a Participant or a Participant’s Beneficiaries are entitled to receive a distribution pursuant to Sections 6.1 (upon death), 6.2 (upon Disability), 6.3 (upon -19- --------------------------------------------------------------------------------   Retirement) and the Participant did not elect the Variable Investment Option under Section 4.4(d)(ii), or 6.4 (upon Termination), interest or deemed Investment earnings or losses shall be debited or credited to the portion of the Participant’s Account (including any portion of the Company Match (and interest credited thereon pursuant to Section 4.5)) subject to this Section 4.6(b) in accordance with this Section 4.6(b).                (i) Crediting of Interest or Deemed Investment Earnings or Losses Prior to Commencement of Distributions. The Participant’s Account shall continue to be credited or debited with Investment earnings or losses until, (A) for events giving rise to a distribution that occur before the January 1, 2006, the date of the event giving rise to the distribution, or (B) for events giving rise to a distribution that occur on or after January 1, 2006, the later to occur of (x) the date of the event giving rise to the distribution; or (y) the last day of the month preceding the month in which distributions will commence (the “Conversion Date”), at which time the deemed Investments in the Participant’s Account shall be treated as sold and credited with a dollar value in accordance with Section 4.4(c). For purposes of this Section 4.6(b)(i), for the period prior to the Conversion Date, any portion of the Company Match (and any interest credited thereon pursuant to Section 4.5), that is subject to this Section 4.6(b) shall be deemed invested in the Default Investment. After the Conversion Date, there shall be no additional credits or debits to the Participant’s Account for deemed Investment earnings or losses. Notwithstanding the foregoing, the Participant’s Account shall be credited with interest, at the rate of the Default Investment, for the period beginning on the Conversion Date and ending on the day immediately before the date on which distribution payments commence.                (ii) Crediting of Interest After Commencement of Installment Distributions. With respect to distributions subject to this Section 4.6(b), if any portion of a Participant’s Account is to be paid pursuant to the Installment Distribution Option, interest shall be credited to the declining balance of the portion of the Participant’s Account subject to this Section 4.6(b)(ii), beginning on the day on which distributions commence and continuing until the day immediately before the final installment distribution is paid. The interest crediting rate for purposes of this Section 4.6(b)(ii) shall be the investment return of the Default Investment for the last -20- --------------------------------------------------------------------------------   calendar year ending prior to the event giving rise to the distribution; provided however, that for events occurring on or after January 1, 2006 that give rise to a distribution, the interest crediting rate hereunder shall be the per annum interest rate equal to the sum of (x) the monthly average of the Moody’s Average Corporate Bond Yield (determined by dividing the sum of the Corporate Bond Yield Averages for each month, as published in Moody’s Bond Survey, by the number of months in the calculation period) for the period described in (i) or (ii) that produces the higher rate: (i) the six-month period ending on the last day of the month that is two months prior to the month during which distributions are to commence, or (ii) the twelve-month period ending on the last day of the month that is two months prior to the month during which distributions are to commence, plus (y) 1%. ARTICLE V VESTING      5.1 Deferrals. The amount credited to a Participant’s Account attributable to Deferrals, adjusted for deemed Investment earnings and losses pursuant to Section 4.4, shall be 100% vested at all times, except that deemed Investment earnings shall be subject to forfeiture under Sections 6.7 and 6.8.      5.2 Company Match.           (a) Each Company Match, together with interest accumulated on those matches pursuant to Section 4.5, shall vest on the earlier to occur of: (a) the tenth anniversary of the date as of which the Company Match was credited to the Participant’s Account, (b) the Participant attaining age 60, (c) the Participant’s death, (d) the Participant’s Disability, or (e) a Change of Control, provided that such vested Company Matches shall be subject to forfeiture under Sections 6.7 and 6.8 and any reduction caused by the restriction in Section 6.11.           (b) Notwithstanding the foregoing, effective for Plan Years beginning on or after July 3, 2005, upon a Participant’s Retirement, each previously unvested Company Match (together with interest accumulated on such Company Matches pursuant to Section 4.5) shall be vested according to the following schedule: -21- --------------------------------------------------------------------------------             Participant’s Combined Full Years of Age     as of the Participant’s Date of Retirement and     Full Years of MIP Participation   Vested Percentage Less than 70     0 % 70     50 % 71     55 % 72     60 % 73     65 % 74     70 % 75     75 % 76     80 % 77     85 % 78     90 % 79     95 % 80 or more     100 % By way of clarification, a Participant who is age fifty-five (55) with fifteen (15) years MIP Participation shall be fifty percent (50%) vested in any previously unvested Company Match, and the Participant shall be vested in any previously unvested Company Match (i) an additional five percent (5%) for each full year of his age in excess of fifty-five (55) as of the date of the date of such Participant’s Retirement; and (ii) an additional five percent (5%) for each full year of MIP Participation by such Participant over fifteen (15) years as of the date of such Participant’s Retirement.           (c) Notwithstanding anything to the contrary contained herein, the Compensation and Stock Option Committee of the Board of Directors may, within its sole discretion, accelerate vesting under this Section 5.2 when it determines that specific situations warrant such action. ARTICLE VI DISTRIBUTIONS      6.1 Death. Upon the death of a Participant, the Participant’s Beneficiary or Beneficiaries shall be paid the balance of the Participant’s Account in the Deferred Compensation Ledger pursuant to the distribution option selected by the Participant under Section 6.6(c).           Each Participant, upon making his initial deferral election, shall file with the Committee a designation of one or more Beneficiaries to whom distributions otherwise due the Participant shall be made in the event of his death prior to the complete distribution of the amount -22- --------------------------------------------------------------------------------   credited to his Account in the Deferred Compensation Ledger. The designation shall be effective upon receipt by the Committee of a properly executed form which the Committee has approved for that purpose. The Participant may from time to time revoke or change any designation of Beneficiary by filing another approved Beneficiary designation form with the Committee. If there is no valid designation of Beneficiary on file with the Committee at the time of the Participant’s death, or if all of the Beneficiaries designated in the last Beneficiary designation have predeceased the Participant or, in the case of an entity, otherwise ceased to exist, the Beneficiary shall be the Participant’s spouse, if the spouse survives the Participant, or otherwise the Participant’s estate. A Beneficiary who is an individual shall be deemed to have predeceased the Participant if the Beneficiary dies within 30 days of the date of the Participant’s death. If any Beneficiary survives the Participant but dies or, in the case of an entity, otherwise ceases to exist before receiving all amounts due the Beneficiary from the Participant’s Account, the balance of the amount which would have been paid to that Beneficiary shall, unless the Participant’s designation provides otherwise, be distributed to the individual deceased Beneficiary’s estate or, in the case of an entity, to the Participant’s spouse, if the spouse survives the Participant, or otherwise to the Participant’s estate. Any Beneficiary designation which designates any person or entity other than the Participant’s spouse must be consented to in writing by the Participant’s spouse in a form acceptable to the Committee in order to be effective.      6.2 Disability. Upon the Disability of a Participant, the Participant shall be paid the balance of the Participant’s Account in the Deferred Compensation Ledger pursuant to the distribution option selected by the Participant under Section 6.6(c).      6.3 Retirement. Upon the Retirement of a Participant, the Participant shall be paid the vested portion of such Participant’s Account in the Deferred Compensation Ledger pursuant to the Distribution option selected by the Participant under Section 6.6(c). Any amounts not vested at the time of such Participant’s Retirement shall be forfeited.      6.4 Distributions Upon Termination. Upon a Participant’s Termination, the Participant shall be paid the vested portion of such Participant’s Account in the Deferred Compensation -23- --------------------------------------------------------------------------------   Ledger pursuant to the Lump Sum Distribution Option. Any amounts not vested at the time of such Participant’s Termination shall be forfeited.      6.5 In-Service Distributions. Each In-Service Distribution shall be paid in a lump sum at the time provided in the In-Service Distribution election made with respect thereto, or as soon as administratively practicable after the occurrence of the In-Service Distribution Date. Notwithstanding a Participant’s election to receive an In-Service Distribution of some or all of the Participant’s Account, if the Participant’s Retirement, Disability, death or Termination, as applicable, occurs prior to the commencement or completion of payments elected in connection with any In-Service Distribution Date(s), the Participant’s remaining In-Service Distribution Account balance(s) shall be distributed pursuant to the Plan’s provisions regarding distributions upon Retirement, Disability, death or Termination, as applicable.      6.6 Distribution Elections for Deferrals. Each Participant shall have the right to elect, to revoke, or to change any prior election of the timing of payment or the form of distribution at the time and under the rules established by the Committee, which rules shall include the provisions of this Section 6.6.           (a) Initial Distribution Elections.                (i) Death/Disability/Retirement Distribution Elections. A Participant may elect different forms of distribution, as specified in Section 6.6(c), with respect to the distribution events described in Sections 6.1 (upon death), 6.2 (upon Disability) and 6.3 (upon Retirement). The initial election of form of distribution with respect to a particular distribution event, if received by the Committee in proper form prior to or concurrent with the time a Participant first makes an affirmative Deferral Election under this Plan, shall be effective upon receipt, and shall become irrevocable at the time a Participant first makes an affirmative Deferral Election under this Plan. All elections of form of distribution, with respect to such distribution events, made after the time a Participant first makes an affirmative Deferral Election under this Plan must comply with the rules of Section 6.6(b).                (ii) In-Service Distribution Elections. In connection with each Salary Deferral Election and/or Bonus Deferral Election made for a given calendar year and/or Plan Year, -24- --------------------------------------------------------------------------------   a Participant may elect to receive such Deferrals in a lump sum distribution at an In-Service Distribution Date that is at least three (3) years after the end of the calendar year in which such Salary Compensation or MIP Bonus would otherwise have been paid (an “In-Service Distribution Election”); provided, however, that a Participant’s designation of an In-Service Distribution Date with respect to a Bonus Deferral shall not apply to any Company Match associated with such Bonus Deferral. For the avoidance of doubt, a vested Company Match shall only be payable in connection with a distribution event described in Section 6.1 (upon death), 6.2 (upon Disability), 6.3 (upon Retirement), or 6.4 (upon Termination). Except as otherwise required by the Committee, an In-Service Distribution Election may be made separately with respect to each calendar year’s or Plan Year’s Salary Deferrals and/or Bonus Deferrals, and In-Service Distribution Accounts shall be established accordingly. Any portion of a Deferral that is not credited to an In-Service Distribution Account shall be credited to the Participant’s Termination/Retirement Account, which credited amounts shall remain credited to the Participant’s Termination/Retirement Account until such amounts have been distributed to the Participant or the Participant’s Beneficiary and may not be credited or reallocated to an In-Service Account.           (b) Subsequent Elections. Any election, revocation, or change of election of form of distribution with respect to distributions upon death, Disability and Retirement that a Participant makes after he first makes an affirmative Deferral Election under this Plan; or any revocation or change of election of time of payment with respect to In-Service Distributions (such elections, revocations and changes are referred to collectively herein as “Subsequent Elections”) shall be effective only if the requirements of this Section 6.6(b) are met. Subsequent Elections may be submitted to the Committee from time to time in the form determined by the Committee and shall be effective on the date that is twelve (12) months after the date on which such Subsequent Election is received by the Committee. If an event giving rise to a distribution occurs during the one-year period after a Subsequent Election is made, or if such Subsequent Election does not meet the requirements of this Section 6.6(b), distributions under this Plan shall be made pursuant to the Participant’s last effective election, revocation, or change with respect to the event -25- --------------------------------------------------------------------------------   giving rise to the distribution. With respect to payments upon Retirement, Termination or upon the occurrence of an In-Service Distribution Date, (i) the Subsequent Election must be received by the Committee in proper form at least one year prior to such Participant’s Retirement, Termination or the occurrence of an In-Service Distribution Date; and (ii) the first payment pursuant to such Subsequent Election may not be made within the five-year period commencing on the date such payment would have been made or commenced under the last effective election, revocation, or change made by the Participant. Notwithstanding the foregoing provisions of this Section 6.6(b), at such time as the Committee shall determine, but no later than December 31, 2006, a Participant may make a Subsequent Election to change the form of distribution of a Participant’s Account (for distributions upon Retirement, death or Disability) and such election shall be immediately effective, provided that a Subsequent Election made during calendar year 2006 may not (i) apply to any amount that would otherwise be payable during calendar year 2006 or (ii) otherwise cause an amount to be paid in calendar year 2006 that would not otherwise be payable in such calendar year.           (c) Distribution Options. The distribution options that may be selected by Participants pursuant to this Section 6.6 are as follows:                (i) Installment Distribution Option. If a Participant selects the “Installment Distribution Option”, with respect to all or a portion of a Participant’s Account, the Participant or the Participant’s Beneficiaries shall be paid the portion of the Participant’s Account in the Deferred Compensation Ledger to which this section applies as follows: (A) if the distribution is pursuant to Section 6.1 (upon death), 6.2 (upon Disability) or 6.3 (upon Retirement) and the Participant elected the Fixed Interest Option under Section 4.4(e)(i), in equal quarterly or annual (as selected by the Participant) installments of principal and interest for a period of up to 20 years (as selected by the Participant); or (B) if the distribution is pursuant to Section 6.3 (upon Retirement) and the Participant elected the Variable Investment Option under Section 4.4(e)(ii), each installment payment amount during the period of distribution (as selected by the Participant) shall be determined as the result of a calculation, performed as soon as administratively practicable before the date the installment payment is to be made, where (A) is divided by (B): -26- --------------------------------------------------------------------------------                       (A) equals the remaining value of the Participant’s Account as of the date of such calculation; and                     (B) equals the remaining number of installment payments. Amounts distributed pursuant to the Installment Distribution Option shall be treated as a single payment for purposes of Section 409A.                (ii) Lump Sum Distribution Option. If the Participant selects the “Lump Sum Distribution Option”, with respect to all or a portion of the Participant’s Account, the Participant or the Participant’s Beneficiaries shall be paid the portion of the Participant’s Account in the Deferred Compensation Ledger to which this Section 6.6(c)(ii) applies, in a lump sum.                (iii) Combination Lump Sum and Installment Distribution Option. Participants may also elect to have their Accounts distributed in part pursuant to the Lump Sum Distribution Option, and the balance distributed pursuant to the Installment Distribution Option, by making the appropriate designation on the form which the Committee has approved for this purpose.                (iv) Default Distribution Option. If a Participant does not have an effective election as to the form of distribution on file with the Committee at the time distributions to such Participant are to commence, the Participant shall be conclusively deemed to have elected to receive the vested balance of such Participant’s Account pursuant to the Installment Distribution Option annually over a period of fifteen (15) years (the “Default Distribution Option”).           (d) Commencement of Distributions. Distributions pursuant to this Section 6.6 shall commence as soon as administratively feasible after the event giving rise to the distribution, but not later than 90 days after the event giving rise to the distribution; provided, however, that in the case of the death of the Participant, distributions shall not commence within the 30-day period following the Participant’s death; provided further, that, in the case of a Participant who has made a Subsequent Election, distributions shall not commence earlier than the time prescribed by Section 6.6(b); provided further, that distributions to a Specified Employee that result from such Participant’s Separation from Service shall not commence earlier than the date that is six (6) months after such Specified Employee’s Separation from Service from the -27- --------------------------------------------------------------------------------   Company if such earlier commencement would result in the imposition of tax under Section 409A. If distributions to a Participant are delayed because of the six-month distribution delay described in the immediately preceding sentence, such distributions shall commence as soon as administratively feasible following the end of such six-month period.      6.7 Forfeiture For Cause. If the Committee finds, after full consideration of the facts presented on behalf of both the Company and a Participant, that the Participant was discharged by the Company for fraud, embezzlement, theft, commission of a felony, proven dishonesty in the course of his employment by the Company which damaged the Company, or for disclosing trade secrets of the Company, the entire amount credited to his Account in the Deferred Compensation Ledger, exclusive of the lesser of (a) the total Deferrals of the Participant, without any adjustments for deemed Investment earnings and losses pursuant to Section 4.4, or (b) the credit balance of the Participant’s Account attributable to Deferrals, taking into account the adjustments for deemed Investment earnings and losses pursuant to Section 4.4, shall be forfeited even though it may have been previously vested under Article V. The decision of the Committee as to the cause of a Participant’s discharge and the damage done to the Company shall be final. No decision of the Committee shall affect the finality of the discharge of the Participant by the Company in any manner. Notwithstanding the foregoing, the forfeiture created by this Section shall not apply to a Participant discharged during the Plan Year in which a Change of Control occurs, or during the next succeeding three (3) Plan Years following the Plan Year in which a Change of Controls occurs unless an arbitrator selected to review the Committee’s findings agrees with the Committee’s determination to apply the forfeiture. The arbitrator shall be selected by permitting the Company and the Participant to strike one name each from a panel of three names obtained from the American Arbitration Association. The person whose name is remaining shall be the arbitrator.      6.8 Forfeiture for Competition. If at the time a distribution is being made or is to be made to a Participant, the Committee finds after full consideration of the facts presented on behalf of the Company and the Participant, that the Participant at any time within two years from his termination of employment from the Company which adopted this Plan, and without written -28- --------------------------------------------------------------------------------   consent of the Company’s CEO or General Counsel, directly or indirectly owns, operates, manages, controls or participates in the ownership, management, operation or control of or is employed by, or is paid as a consultant or other independent contractor by a business which competes or at any time did compete with the Company by which he was formerly employed in a trade area served by the Company at the time distributions are being made or to be made and in which the Participant had represented the Company while employed by it; and, if the Participant continues to be so engaged 60 days after written notice has been given to him, the Committee shall forfeit all amounts otherwise due the Participant, exclusive of the lesser of (a) the total Deferrals of the Participant, without any adjustments for deemed Investment earnings and losses pursuant to Section 4.4, or (b) the credit balance of the Participant’s Account attributable to Deferrals, taking into account the adjustments for deemed Investment earnings and losses pursuant to Section 4.4, even though it may have been previously vested under Article V. Notwithstanding the foregoing, the forfeiture created by this Section shall not apply to any Participant whose termination of employment from the Company which adopted this Plan occurs during the Plan Year in which a Change of Control occurs or during the next three (3) succeeding Plan Years following the Plan Year in which a Change of Control occurs.      6.9 Hardship Withdrawals. Any Participant may request a hardship withdrawal to satisfy an “Unforeseeable Emergency.” No hardship withdrawal can exceed the lesser of (i) the amount of Deferrals credited to the Participant’s Account, or (ii) the amount reasonably necessary to satisfy the Unforeseeable Emergency. Whether an Unforeseeable Emergency exists and the amount reasonably needed to satisfy such need shall be determined by the Committee based upon the evidence presented by the Participant and the rules established in this Section 6.9. If a hardship withdrawal under this Section 6.9 is approved by the Committee, it shall be paid within 10 days of the Committee’s determination. For purposes of this Plan, an “Unforeseeable Emergency” means either: (i) a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or of a dependent (as defined in Section 152(a) of the Code) of the Participant, (ii) loss of the Participant’s property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstance arising as a result of -29- --------------------------------------------------------------------------------   events beyond the control of the Participant, provided that in each case the circumstances qualify as an “unforeseeable emergency” for purposes of Section 409A. The circumstances that constitute a hardship shall depend upon the facts of each case, but, in any case, amounts distributed with respect to an Unforeseeable Emergency shall not exceed the amount necessary to satisfy such need plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such need is or may be relieved: (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant’s assets, to the extent the liquidation of such assets will not itself cause severe financial hardship, or (c) additional compensation that may be available to such Participant by reason of a cancellation of deferrals under Section 3.5 of this Plan. Foreseeable needs for funds, such as the need to send a Participant’s child to college or the desire to purchase a home, shall not be considered to be an Unforeseeable Emergency.      6.10 Payments Upon Income Inclusion Under Section 409A. It is intended that the provisions of this Plan shall comply fully with the requirements of Section 409A. In the event that it is determined that the provisions of this Plan do not comply with the requirements of Section 409A and a Participant is required to include in income amounts otherwise deferred under this Plan as a result of non-compliance with Section 409A, the Participant shall be entitled, upon request, to receive a distribution from such Participant’s Account not to exceed the lesser of (i) the vested portion of the Participant’s Account, or (ii) the amount required to be included in income as a result of the failure of the Plan to comply with the requirements of Section 409A. Amounts distributable pursuant to this Section 6.9 shall be distributed as soon as administratively feasible but no later than ninety (90) days after the date of the determination that the Plan does not comply with the requirements of Section 409A.      6.11 Restrictions on any Portion of Total Payments Determined to be Excess Parachute Payments. In the event that any payment or benefit received or to be received by a Participant in connection with a Change of Control of Sysco, or the termination of his employment by the Company would not be deductible, whether in whole or in part, by the Company or any affiliated company, as a result of Section 280G of the Code and a reduction under the Sysco -30- --------------------------------------------------------------------------------   Corporation Supplemental Executive Retirement Plan is not sufficient to cause all benefits paid under this Plan to be deductible, the benefits payable under this Plan shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the benefits payable under this Agreement have been reduced to an amount equal to the credit balance of the Participant’s Account attributable to Deferrals, as adjusted for deemed Investment earnings and losses pursuant to Section 4.4. In determining this limitation: (a) no portion of the Total Payments which the Participant has waived in writing prior to the date of the payment of benefits under this Plan will be taken into account, (b) no portion of the Total Payments which tax counsel, selected by the Company’s independent auditors and acceptable to the Participant and reasonably acceptable to the Company (“Tax Counsel”), determines not to constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code will be taken into account (including, without limitation, amounts not treated as a “parachute payment” as a result of the application of Section 280G(d)(4)(A)), (c) no portion of the Total Payments which Tax Counsel, determines to be reasonable compensation for services rendered within the meaning of Section 280G(d)(4)(B) of the Code will be treated as an “excess parachute payment” in the manner provided by Section 280G(d)(4)(B), and (d) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by the Company’s independent auditors in accordance with Sections 280G(b)(3) and (4) of the Code. Notwithstanding anything herein or otherwise to the contrary, the Compensation and Stock Option Committee of the Board of Directors, may, within its sole discretion and pursuant to an agreement approved by the Compensation and Stock Option Committee, waive application of this Section 6.11, when it determines that specific situations warrant such action.      6.12 Responsibility for Distributions and Withholding of Taxes. The Committee shall furnish information, to the Company last employing the Participant, concerning the amount and form of distribution to any Participant entitled to a distribution so that the Company may make or cause the Rabbi Trust to make the distribution required. It shall also calculate the deductions from the amount of the benefit paid under the Plan for any taxes required to be withheld by federal, state or local government and will cause them to be withheld. -31- --------------------------------------------------------------------------------   ARTICLE VII ADMINISTRATION      7.1 Committee Appointment. The Committee shall be appointed by the Board of Directors or its designee. Each Committee member shall serve until his or her resignation or removal. The Board of Directors or its designee shall have the sole discretion to remove any one or more Committee members and to appoint one or more replacement or additional Committee members from time to time.      7.2 Committee Organization and Voting. The organizational structure and voting responsibilities of the Committee shall be as set forth in the bylaws of the Committee.      7.3 Powers of the Committee. The Committee shall have the exclusive responsibility for the general administration of the Plan according to the terms and provisions of the Plan and shall have all powers necessary to accomplish those purposes, including but not by way of limitation the right, power and authority:           (a) to make rules and regulations for the administration of the Plan;           (b) to construe all terms, provisions, conditions and limitations of the Plan;           (c) to correct any defect, supply any omission or reconcile any inconsistency that may appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into effect for the greatest benefit of all parties at interest;           (d) to designate the persons eligible to become Participants and to establish the maximum and minimum amounts that may be elected to be deferred;           (e) to determine all controversies relating to the administration of the Plan, including but not limited to:                (i) differences of opinion arising between the Company and a Participant in accordance with Section 7.7, except when the difference of opinion relates to the entitlement to, the amount of or the method or timing of payment of a benefit affected by a Change of Control, in which event, such difference of opinion shall be decided by judicial action; and -32- --------------------------------------------------------------------------------                  (ii) any question it deems advisable to determine in order to promote the uniform administration of the Plan for the benefits of all parties at interest;           (f) to delegate by written notice any plan administration duties of the Committee to such individual members of the Committee, individual employees of the Company, or groups of employees of the Company, as the Committee determines to be necessary or advisable to properly administer the Plan; and           (g) to designate the investment options treated as Investments for purposes of this Plan.      7.4 Committee Discretion. The Committee, in exercising any power or authority granted under this Plan, or in making any determination under this Plan shall perform or refrain from performing those acts pursuant to such authority using its sole discretion and judgment. By way of amplification and without limiting the foregoing, the Company specifically intends that the Committee have the greatest possible discretion to construe the terms of the Plan and to determine all questions concerning eligibility, participation and benefits. Any decision made by the Committee or any refraining to act or any act taken by the Committee in good faith shall be final and binding on all parties. The Committee’s decision shall never be subject to de novo review. Notwithstanding the foregoing, the Committee’s decisions, refraining to act or acting is to be subject to judicial review for those incidents occurring during the Plan Year in which a Change of Control occurs and during the next three succeeding Plan Years.      7.5 Reimbursement of Expenses. The Committee shall serve without compensation for its services but shall be reimbursed by Sysco for all expenses properly and actually incurred in the performance of its duties under the Plan.      7.6 Indemnification. To the extent permitted by law, members of the Board of Directors, members of the Committee, employees of the Company, and all agents and representatives of the Company shall be indemnified by the Company, and saved harmless against any claims resulting from any action or conduct relating to the administration of the Plan, except claims arising from gross negligence, willful neglect or willful misconduct. -33- --------------------------------------------------------------------------------        7.7 Claims Procedure. Any person who believes that he or she is being denied a benefit to which he or she is entitled under the Plan (referred to hereinafter as a “Claimant”) must file a written request for such benefit with the Committee; provided, however, that any claim involving entitlement to, the amount of or the method of or timing of payment of a benefit affected by a Change of Control shall be governed by Section 7.3(e)(i). Such written request must set forth the Claimant’s claim and must be addressed to the Committee at Sysco’s principal office.           (a) Initial Claims Decision. The Committee shall generally provide written notice to the Claimant of its decision within ninety (90) days (or forty-five (45) days for a Disability-based claim) after the claim is filed with the Committee; provided, however, that the Committee may have up to an additional ninety (90) days (or up to two (2) thirty (30) day periods for a Disability-based claim), to decide the claim, if the Committee determines that special circumstances require an extension of time to decide the claim, and the Committee advises the Claimant in writing of the need for an extension (including an explanation of the special circumstances requiring the extension) and the date on which it expects to decide the claim.           (b) Appeals. A Claimant may appeal the Committee’s decision by submitting a written request for review to the Committee within sixty (60) days (or 180 days for a Disability-based claim) after the earlier of receiving the denial notice or after expiration of the initial review period. Such written request must be addressed to the Committee at Sysco’s principal office. In connection with such request, the Claimant (and his or her authorized representative, if any) may review any pertinent documents upon which the denial was based and may submit issues and comments in writing for consideration by the Committee. If the Claimant’s request for review is not received within the earlier of sixty (60) days (or 180 days for a Disability-based claim) after receipt of the denial or after expiration of the initial review period, the denial shall be final, and the Claimant shall be barred and estopped from challenging the Committee’s determination.           (c) Decision Following Appeal. The Committee shall generally make its decision on the Claimant’s appeal in writing within sixty (60) days (or forty-five (45) days for a Disability-based claim) following its receipt of the Claimant’s request for appeal; provided, however, that the Committee may have up to an additional 60 days (or 45 days for a Disability- -34- --------------------------------------------------------------------------------   based claim) to decide the claim, if the Committee determines that special circumstances require an extension of time to decide the claim and the Committee advises the Claimant in writing of the need for an extension (including an explanation of the special circumstances requiring the extension) and the date on which it expects to decide the claim. The Committee shall notify the Claimant of its decision on the Claimant’s appeal in writing, regardless of whether the decision is adverse.           (d) Decisions Final; Procedures Mandatory. A decision on appeal by the Committee shall be binding and conclusive upon all persons, and completion of the claims procedures described in this Section 7.7 shall be a mandatory precondition to commencement of a legal or equitable action in connection with the Plan by a person claiming rights under the Plan or by another person claiming rights through such a person. The Committee may, in its sole discretion, waive the procedures described in this Section 7.7 as a mandatory precondition to such an action.           (e) Time for Filing Legal or Equitable Action. Any legal or equitable action filed in connection with the Plan by a person claiming rights under the Plan or by another person claiming rights through such a person must commence not later than two (2) years following the earlier of the Participant’s death, Disability, Retirement, or termination of employment. ARTICLE VIII ADOPTION BY SUBSIDIARIES      8.1 Procedure for and Status After Adoption. Any Subsidiary may, with the approval of the Committee, adopt this Plan by appropriate action of its board of directors. The terms of this Plan shall apply separately to each Subsidiary adopting this Plan and its Participants in the same manner as is expressly provided for Sysco and its Participants except that the powers of the Board of Directors and the Committee under the Plan shall be exercised by the Board of Directors of Sysco or the Committee, as applicable. Sysco and each Subsidiary adopting this Plan shall bear the cost of providing plan benefits for its own Participants. It is intended that the obligation of Sysco and each Subsidiary with respect to its Participants shall be the sole obligation of the Company that is employing the Participant and shall not bind any other Company. -35- --------------------------------------------------------------------------------        8.2 Termination of Participation By Adopting Subsidiary. Any Subsidiary adopting this Plan may, by appropriate action of its board of directors, terminate its participation in this Plan. The Committee may, in its discretion, also terminate a Subsidiary’s participation in this Plan at any time. The termination of the participation in this Plan by any Subsidiary shall not, however, affect the rights of any Participant who is working or has worked for the Subsidiary as to amounts previously standing to his credit in his Account in the Deferred Compensation Ledger, including, without limitation, all of the Participant’s rights pursuant to Sections 4.4 and 4.5 with respect to amounts deferred by him and matched by the Company and credited to his Account, prior to the distribution of those funds to the Participant, without his consent. ARTICLE IX AMENDMENT AND/OR TERMINATION      9.1 Amendment or Termination of the Plan. The Board of Directors, the Committee, or their designees, may amend this Plan at any time by an instrument in writing without the consent of any adopting Subsidiary; provided, however, that authority to terminate this Plan or to make any amendment that would have a significant financial statement or benefit impact on the Company shall be reserved to the Board of Directors or its designee. Notwithstanding the foregoing, in no event shall the Board of Directors have the authority to terminate this Plan during the two (2) years following a Change of Control.      9.2 No Retroactive Effect on Awarded Benefits. Absent a Participant’s prior consent, no amendment shall affect the rights of such Participant to the amounts then standing to his credit in his Account in the Deferred Compensation Ledger, to change the method of calculating Investment earnings and losses already accrued, or the rate of interest already accrued or to accrue in the future on the Participant’s Company Match prior to the date of the amendment, or to change a Participant’s rights under any provision relating to a Change of Control after a Change of Control has occurred. However, the Board of Directors shall retain the right at any time to change in any manner the method of calculating Investment earnings and losses, effective from and after the date of the amendment, and the method or the rate of interest on a Participant’s Company -36- --------------------------------------------------------------------------------   Match received after the date of the amendment, if in both cases the amendment has been announced to the Participants.      9.3 Effect of Termination. Upon termination of the Plan, the following provisions of this Section 9.3 shall apply:           (a) No additional amounts shall be credited to any Participant’s Account in the Deferred Compensation Ledger, to the extent such amounts relate to salaries or bonuses earned on or after the effective date of the Plan’s termination.           (b) The Board of Directors or its designee may, in its sole discretion, authorize distributions of the vested balance of the Participants’ Accounts in the Deferred Compensation Ledger to Participants as a result of the Plan’s termination; provided, that:                (i) All deferred compensation arrangements sponsored by the Company that would be aggregated with this Plan under Section 1.409A-1(c) of the Treasury Regulations, if the Participant participated in such arrangements are terminated;                (ii) No distributions other than distributions that would be payable under the terms of the Plan if the termination had not occurred are made within twelve (12) months of the termination of the Plan;                (iii) All distributions of amounts deferred under the Plan and any other vested amounts are paid within twenty-four (24) months of the termination of the Plan; and                (iv) The Company does not adopt a new deferred compensation arrangement at any time within five (5) years following the date of termination of the Plan that would be aggregated with this Plan under Section 1.409A-1(c) of the Treasury Regulations if the Participant participated in this Plan and the new arrangement.           (c) Except as otherwise provided in Sections 9.3(a) and (b), on and after the effective date of the Plan’s termination, (i) the Plan shall continue to be administered as it was prior to the Plan’s termination until all Participant Account balances have been distributed pursuant to the terms of the Plan; (ii) a Participant shall continue to be entitled to a distribution of his Plan Account only if he meets the distribution requirements set forth in Article 6 hereof; (iii) the forfeiture provisions of Sections 6.6 and 6.7, and the restrictions set out in Section 6.9 shall -37- --------------------------------------------------------------------------------   continue to apply; and (iv) no Participant shall be entitled to a distribution of the Participant’ Plan Account solely as a result of the Plan’s termination in accordance with the terms of this Article IX. ARTICLE X FUNDING      10.1 Payments Under This Plan are the Obligation of the Company. The Company shall pay the benefits due the Participants under this Plan; however should it fail to do so when a benefit is due, the benefit shall be paid by the trustee of that certain trust agreement by and between the Company and JPMorgan Chase Bank, with respect to the funding of the Plan. In any event, if the trust fails to pay for any reason, the Company still remains liable for the payment of all benefits provided by this Plan.      10.2 Plan Obligations May be Funded Through Rabbi Trust. It is specifically recognized by both the Company and the Participants that the Company may, but is not required to, purchase life insurance so as to accumulate assets to fund the obligations of the Company under this Plan, and that the Company may, but is not required to contribute any policy or policies it may purchase and any amount it finds desirable to a trust established to accumulate assets sufficient to fund the obligations of all of the Companies under this Plan. However, under all circumstances, the Participants shall have no rights to any of those policies; and likewise, under all circumstances, the rights of the Participants to the assets held in the trust shall be no greater than the rights expressed in this Plan and the trust agreement governing the trust. Nothing contained in the trust agreement which creates the funding trust shall constitute a guarantee by any Company that assets of the Company transferred to the trust shall be sufficient to pay any benefits under this Plan or would place the Participant in a secured position ahead of general creditors should the Company become insolvent or bankrupt. Any trust agreement prepared to fund the Company’s obligations under this Plan must specifically set out these principles so it is clear in that trust agreement that the Participants in this Plan are only unsecured general creditors of the Company in relation to their benefits under this Plan.      10.3 Reversion of Excess Assets. Any adopting Company may, at any time, request the record keeper for the Plan to determine the present Account balance, assuming the Account -38- --------------------------------------------------------------------------------   balance to be fully vested and taking into account credits and debits arising from deemed Investment earnings and losses in accordance with Section 4.4 and credited interest pursuant to Section 4.5, as of the month end coincident with or next preceding the request, of all Participants and Beneficiaries of deceased Participants for which the Company is or will be obligated to make payments under this Plan. If the fair market value of the assets held in the trust, as determined by the Trustee as of that same date, exceeds the total of the Account balances of all Participants and Beneficiaries by 25%, any Company may direct the trustee to return to each Company its proportionate part of the assets which are in excess of 125% of the Account balances. Each Company’s share, of the excess assets will be the Participants’ Accounts earned while in the employ of that Company as compared to the total of the Account balances earned by all Participants under the Plan times the excess assets. If there has been a Change of Control, for the purpose of determining if there are excess funds, all contributions made prior to the Change of Control will be subtracted from the fair market value of the assets held in the trust as of the determination date but before the determination is made.      10.4 Participants Must Rely Only on General Credit of the Company. It is also specifically recognized by both the Company and the Participants that this Plan is only a general corporate commitment and that each Participant must rely upon the general credit of the Company for the fulfillment of its obligations under this Plan. Under all circumstances the rights of Participants to any asset held by the Company will be no greater than the rights expressed in this Plan. Nothing contained in this Plan will constitute a guarantee by the Company that the assets of the Company shall be sufficient to pay any benefits under this Plan or would place the Participant in a secured position ahead of general creditors of the Company. Though the Company may establish or become a signatory to a Rabbi Trust, as indicated in Section 10.2, to accumulate assets to fulfill its obligations, the Plan and any such trust will not create any lien, claim, encumbrance, right, title or other interest of any kind whatsoever in any Participant in any asset held by the Company, contributed to any such trust or otherwise designated to be used for payment of any of its obligations created in this Plan. No policy or other specific asset of the Company has been or will be set aside, or will in any way be transferred to the trust or will be -39- --------------------------------------------------------------------------------   pledged in any way for the performance of the Company’s obligations under this Plan which would remove the policy or asset from being subject to the general creditors of the Company. ARTICLE XI MISCELLANEOUS      11.1 Limitation of Rights. Nothing in this Plan shall be construed:           (a) to give any employee of any Company any right to be designated a Participant in the Plan;           (b) to give a Participant any right with respect to the compensation deferred, the Company Match, the deemed Investment earnings and losses, or the interest credited in the Deferred Compensation Ledger except in accordance with the terms of this Plan;           (c) to limit in any way the right of the Company to terminate a Participant’s employment with the Company at any time;           (d) to evidence any agreement or understanding, expressed or implied, that the Company shall employ a Participant in any particular position or for any particular remuneration; or           (e) to give a Participant or any other person claiming through him any interest or right under this Plan other than that of any unsecured general creditor of the Company.      11.2 Distributions to Incompetents or Minors. Should a Participant become incompetent or should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is authorized to pay the funds due to the parent of the minor or to the guardian of the minor or incompetent or directly to the minor or to apply those funds for the benefit of the minor or incompetent in any manner the Committee determines in its sole discretion.      11.3 Non-alienation of Benefits. No right or benefit provided in this Plan shall be transferable by the Participant except, upon his death, to a named Beneficiary as provided in this Plan. No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge the same will be void. No right or benefit under this Plan shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to -40- --------------------------------------------------------------------------------   such benefits. If any Participant or any Beneficiary becomes bankrupt or attempts to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this Plan, that right or benefit shall, in the discretion of the Committee, cease. In that event, the Committee may have the Company hold or apply the right or benefit or any part of it to the benefit of the Participant or Beneficiary, his or her spouse, children or other dependents or any of them in any manner and in any proportion the Committee believes to be proper in its sole and absolute discretion, but is not required to do so.      11.4 Reliance Upon Information. The Committee shall not be liable for any decision or action taken in good faith in connection with the administration of this Plan. Without limiting the generality of the foregoing, any decision or action taken by the Committee when it relies upon information supplied it by any officer of the Company, the Company’s legal counsel, the Company’s independent accountants or other advisors in connection with the administration of this Plan shall be deemed to have been taken in good faith.      11.5 Severability. If any term, provision, covenant or condition of the Plan is held to be invalid, void or otherwise unenforceable, the rest of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated.      11.6 Notice. Any notice or filing required or permitted to be given to the Committee or a Participant shall be sufficient if submitted in writing and hand-delivered or sent by U.S. mail to the principal office of the Company or to the residential mailing address of the Participant. Notice shall be deemed to be given as of the date of hand-delivery or if delivery is by mail, as of the date shown on the postmark.      11.7 Gender and Number. If the context requires it, words of one gender when used in this Plan will include the other genders, and words used in the singular or plural will include the other.      11.8 Governing Law. The Plan shall be construed, administered and governed in all respects by the laws of the State of Texas.      11.9 Effective Date. This Plan will be operative and effective on January 1, 2005. -41- --------------------------------------------------------------------------------        11.10 Compliance with Section 409A of the Code. The Plan (i) is intended to comply with, (ii) shall be interpreted and its provisions shall be applied in a manner that is consistent with, and (iii) shall have any ambiguities therein interpreted, to the extent possible, in a manner that complies with Section 409A. As of the date the Plan is adopted, final Treasury Regulations have not been issued under Section 409A. It is Sysco’s intention that, to the extent that (a) any terms of the Plan conflict with Section 409A, or (b) Section 409A would require alternate or additional Plan provisions in order for the Plan to comply with the requirements of Section 409A, the Plan shall be amended in a manner that complies with the requirements of Section 409A. To that end, once such final Treasury Regulations are issued, Sysco shall conform the Plan to the requirements of Section 409A and the final Treasury Regulations and other interpretive authority promulgated thereunder.      IN WITNESS WHEREOF, the Company has executed this document as of January 1, 2005.               SYSCO CORPORATION               By:   /S/ DIANE DAY SANDERS               Name:   Diane Day Sanders               Title:   Vice President and Treasurer           -42- --------------------------------------------------------------------------------   EXHIBIT “A” SYSCO CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN INVESTMENT OPTIONS      The following are the “Investments” that are available under the Sysco Corporation Executive Deferred Compensation Plan:       Option   Manager Equity Income Trust   T. Rowe Price Associates, Inc. 500 Index B Trust   MFC Global Investment Management Mid-Value Trust   T. Rowe Price Associates, Inc. Overseas Equity Trust   Capital Guardian Trust Company Small Cap Value Trust   Wellington Management Company LLC Brandes International Equity Fund   Brandes Investment Partners, LP Frontier Capital Appreciation   Frontier Capital Management Company, LLC Bond Index B Trust   Declaration Management & Research LLC      Default Investment      Moody’s Average Corporate Bond Yield, plus 1%, as described in the definition of Default Investment. -43-

Exhibit 10.18 REVOLVING CREDIT AND TERM LOAN AGREEMENT                     AGREEMENT (this “Agreement”) is made and entered into as of the 20th day of November, 2006, by and between COMVEST CAPITAL LLC, a Delaware limited liability company (the “Lender”), and UNIFY CORPORATION, a Delaware corporation (the “Borrower”). W I T N E S S E T H :           WHEREAS, the Borrower is engaged in the business of providing application development tools, database and business automation software solutions (collectively, the “Business Operations”); and           WHEREAS, in order to enable the Borrower to repay in full and retire the Borrower’s existing secured loan facility and pay a portion of the cash payments required to be paid to the Seller pursuant to the Acquisition Agreement (as such terms are hereinafter defined), and for the Borrower’s working capital and other general corporate purposes, the Borrower has requested the Lender to extend to the Borrower a revolving credit facility and term loans on the terms and conditions of this Agreement; and           WHEREAS, the Lender is willing and able to provide such revolving credit facility and make such term loans to the Borrower on the terms and conditions of this Agreement;           NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereby agree as follows: I. DEFINITIONS           Section 1.01.  Defined Terms.  In addition to the other terms defined elsewhere in this Agreement, as used herein, the following terms shall have the following meanings:                     “Accounts” shall mean “accounts” (as defined in the UCC) of the Borrower and its Domestic Subsidiaries from time to time.                     “Account Debtor” shall mean any Person who is obligated on an Account.                     “Acquisition Agreement” shall mean the Purchase and Exchange Agreement, dated as of September 13, 2006 (and as same as may be amended, modified, supplemented and/or restated from time to time), by and between the Borrower and Halo Technology Holdings, Inc.                     “Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder.                     “Advances” shall mean the principal amounts loaned to the Borrower from time to time pursuant to Section 2.01 below.                     “Affiliate” shall mean, with respect to any Person, any other Person in Control of, Controlled by, or under common Control with the first Person, and any other Person who has a substantial interest, direct or indirect, in the first Person or any of its Affiliates, including, without limitation, any officer or director of the first Person or any of its Affiliates; provided, however, that, except as otherwise provided herein, neither the Lender nor any of its Affiliates shall be deemed an “Affiliate” of the Borrower for any purposes of this Agreement.  For the purpose of this definition, a “substantial interest” shall mean the direct or indirect legal or beneficial ownership of more than ten (10%) percent of any class of stock or similar interest.                     “Agreement” shall mean this Revolving Credit and Term Loan Agreement as it may from time to time be amended, modified, supplemented and/or restated.                     “Applicable Law” shall mean all applicable provisions of all (a) constitutions, statutes, ordinances, rules, regulations and orders of all governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c) order, judgments and decrees of all courts and arbitrators.                     “Availability” shall mean the amount (if any) by which, at the time of determination, (a) the Revolving Credit Commitment exceeds (b) the outstanding principal amount of Advances.                     “Borrowing Base” shall mean an amount, determined in accordance with the most recent borrowing base report provided to the Lender under Section 5.04(e) hereof, equal to the sum of (a) (i) $750,000 from the Closing Date through March 31, 2007, (ii) $500,000 from April 1, 2007 through August 31, 2007, (iii) $250,000 from September 1, 2007 through December 31, 2007, and (iv) $0 after January 1, 2008, plus (b) 85% of Eligible Domestic Accounts, plus (c) 85% of Eligible Foreign Accounts, minus (d) such reserves as the Lender may establish from time to time in its Permitted Discretion (including, without limitation, to account for concentration and other risks of collection).  In the event that the Borrower has not timely delivered a current Borrowing Base report in accordance with Section 5.04(e) below, then the applicable Borrowing Base shall be such amount as is established by the Lender, until such time as the Borrower has delivered a current Borrowing Base report.                     “Borrowing Date” means the Business Day on which the Lender makes a Loan hereunder.                     “Business Day” shall mean a day other than (a) a Saturday, (b) a Sunday, or (c)  a day on which banking institutions in either the State of Florida or the State of California are authorized or required by law or executive order to close.                     “Capital Expenditures” shall mean with respect to any Person, all expenditures of such Person for tangible assets which are capitalized, and the fair value of any tangible assets leased by such Person under any lease which would be a Capitalized Lease, determined in accordance with GAAP, including all amounts paid or accrued by such Person in connection with the purchase (whether on a cash or deferred payment basis) or lease (including Capitalized Lease Obligations) of any machinery, equipment, real property, improvements to real property (including leasehold improvements), or any other tangible asset of such Person which is required, in accordance with GAAP, to be treated as a fixed asset on the consolidated balance sheet of such Person. 2                     “Capitalized Lease” shall mean any lease which is or should be capitalized on the balance sheet of the lessee thereunder in accordance with GAAP.                     “Capitalized Lease Obligation” shall mean with respect to any Person, the amount of the liability which reflects the amount of future payments under all Capitalized Leases of such Person as at any date, determined in accordance with GAAP.                     “Cash Equivalents” shall mean (a) marketable securities issued, or directly and fully guaranteed or insured, by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve (12) months from the date of acquisition; (b) time deposits, demand deposits, certificates of deposit, acceptances or prime commercial paper issued by, or repurchase obligations for underlying securities of the types described in clause (a) entered into with any commercial bank having a short-term deposit rating of at least A-2 or the equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s Investors Service, Inc.; (c) commercial paper with a rating of A-I or A-2 or the equivalent thereof by Standard & Poor’s Corporation or P-1 or P-2 or the equivalent thereof by Moody’s Investors Service, Inc. and in each case maturing within twelve (12) months after the date of acquisition; (d) marketable direct obligations issued by any state in the United States or any agency or instrumentality thereof maturing within twelve (12) months from the date of acquisition thereof and, at the time of acquisition, have one of the two highest ratings generally obtainable from either Standard & Poor’s Corporation or Moody’s Investors Services, Inc.; (e) tax-exempt commercial paper of United States municipal, state or local governments rated at least A-2 or the equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s Investors Services, Inc. and maturing within twelve (12) months after the date of acquisition thereof; (f) any other items selected by the Borrower and approved by the Lender (which approval shall not be unreasonably withheld or delayed); or (g) any mutual fund or other pooled investment vehicle which invests principally in the foregoing obligations.                     “Closing Date” shall mean the date of this Agreement, simultaneously with the funding of the Term Loans.                     “Closing Fee” shall mean the sum of $188,400, which shall be payable in accordance with Section 2.03(a) below.                     “Code” shall mean the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, as in effect from time to time.                     “Collateral” shall mean all collateral pledged by the Borrower and/or any of the Subsidiaries as security for the payment and performance of the Obligations, whether pursuant to the Collateral Agreement or any other Security Document. 3                     “Collateral Agreement” shall mean the Collateral Agreement, dated as of the Closing Date, by and among the Borrower, the Domestic Subsidiaries and the Lender, as same may be amended, modified, supplemented and/or restated from time to time.                     “Common Stock” shall mean the authorized common stock of the Company, $.001 par value per share.                     “Confidential Information” shall mean information that the Borrower furnishes to the Lender pursuant to any Loan Document, but does not include any such information once such information has become, or if such information is, generally available to the public or available to the Lender from a source other than the Borrower which is not, to the Lender’s knowledge, bound by any confidentiality agreement in respect thereof.                     “Contract” shall mean any indenture, agreement (other than this Agreement), other contractual restriction, lease in which the Borrower or any Subsidiary is a lessor or lessee, license or instrument.                     “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.                     “Default” shall mean any of the events specified in Article VII hereof, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.                     “Disclosure Schedule” shall mean the disclosure schedule, dated as of the Closing Date, executed and delivered by the Borrower to the Lender, the section numbers of which correspond to the Section numbers of this Agreement.                     “Dollars” or “$” shall mean United States Dollars, lawful currency for the payment of public and private debts.                     “Domestic Subsidiary” shall mean any Subsidiary (including Gupta and its Domestic Subsidiaries) which is incorporated or formed under the laws of the United States, any State or Commonwealth in the United States, or the District of Columbia.                     “Eligible Domestic Account” shall mean the face amount of each trade Account of the Borrower or a Domestic Subsidiary for services rendered or goods and products sold in the ordinary course of the Business Operations which the Lender, in its Permitted Discretion, deems to be an Eligible Domestic Account; provided, however, that an Account shall not be deemed an Eligible Domestic Account unless it meets all of the following conditions:                     (a)          the subject services or products and goods have been rendered, shipped or delivered on an absolute sale basis to an Account Debtor which is not an Affiliate, vendor or supplier of the Borrower or a Domestic Subsidiary, with an invoice date contemporaneous with or within forty-five (45) calendar days after the date of shipment or service, and which does not constitute a consignment sale, bill-and-hold sale, sale-and-return or other such arrangement and 4 is not subject to any other repurchase, return or offset agreement binding upon the Borrower or a Domestic Subsidiary; the subject services or products and goods have been rendered, shipped and delivered (or shipped f.o.b.) to such Account Debtor on an open account basis (or with payment guaranteed by a domestic letter of credit, drawn on or by a domestic financial institution, acceptable to the Lender in all respects), and no part of the subject services, products or goods has been returned, rejected, lost or damaged; the Account is not evidenced by chattel paper or an instrument of any kind; and such Account Debtor, unless pre-approved in writing by the Lender, is not insolvent or the subject of any bankruptcy or insolvency proceeding of any kind in any jurisdiction;                     (b)          if the Account Debtor is located outside the continental United States and the subject Account is greater than $50,000, payment for the subject services or goods shall be secured by an irrevocable letter of credit, which letter of credit shall have been confirmed by a financial institutional reasonably acceptable to the Lender payable in the full amount of the face value of the Account in lawful currency of the United States; provided, however, that the Lender may, from time to time, in its sole and absolute discretion, waive the requirements of this subsection (b);                     (c)          it is a valid, legally enforceable obligation of the Account Debtor thereunder payable in Dollars and is not subject to any recoupment, offset or other defense or any discount or chargeback on the part of such Account Debtor (provided that prompt payment discounts granted in the ordinary course of business shall not cause an Account to be disqualified hereunder, so long as only the discounted amount of such Account, if not otherwise disqualified, is included in the calculation of the Borrowing Base) or to any claim on the part of such Account Debtor denying liability thereunder (provided that the undisputed portion may be considered to be an Eligible Account);                     (d)          it is subject to no Lien whatsoever, except for the Lien of the Lender;                     (e)          it has not remained unpaid in whole or in part for a period exceeding ninety (90) days after the invoice date;                     (f)          it does not arise out of a transaction (whether direct or indirect) with an employee, officer, agent, director or Affiliate of the Borrower or with any entity controlled by any employee, officer, agent or director of the Borrower;                     (g)          it is not subject to any contract retainage or other withholding of any portion of payments on amounts invoiced, whether to secure the Borrower’s or any Subsidiary’s performance or otherwise;                     (h)          it does not represent the unpaid portion of an Account any portion of which was previously paid or agreed to be paid through the issuance or delivery of equity securities or other non-cash consideration;                     (i)          if the Account Debtor is the United States, any State, or any department, agency or instrumentality thereof, the Borrower or the applicable Domestic Subsidiary has duly assigned its rights to payment of such Account to the Lender pursuant to the federal Assignment of Claims Act and any comparable state statutes; 5                     (j)          the Lender has a perfected first priority Lien in such Account;                     (k)          such Account is not payable by any person other than the Account Debtor (such as a beneficiary, recipient or subscriber individually), provided that the portion thereof which is payable by the Account Debtor may be considered to be an Eligible Domestic Account;                     (l)          at least sixty (60%) percent in dollar amount of the total Accounts owed by such Account Debtor and/or its Affiliates constitute Eligible Domestic Accounts;                     (m)          the total Accounts owed by the subject Account Debtor and/or its Affiliates constitute less than ten (10%) percent of the net collectible dollar value of all Eligible Domestic Accounts (provided that only the excess over ten (10%) percent shall be disqualified under this clause (m), unless the Lender has otherwise consented in writing to the inclusion of all or any portion of such excess);                     (n)          such Account is payable solely to the Borrower or a Domestic Subsidiary, and the Borrower or such Domestic Subsidiary is not aware of any dispute by the Account Debtor with respect to such Account; and                     (o)          it is not otherwise determined by the Lender, in the Lender’s Permitted Discretion, to be difficult to collect, uncollectible or otherwise unacceptable for any reason.                     “Eligible Foreign Account” shall mean the face amount of each trade Account of any Foreign Subsidiary for services rendered or goods and products sold in the ordinary course of the Business Operations which satisfies all of the criteria set forth above with respect to Eligible Domestic Accounts, except that (a) any otherwise applicable letter of credit requirement under subsection (b) of the Eligible Domestic Account criteria shall not be applicable, (b) subsection (j) of the Eligible Domestic Account criteria shall not be applicable, and (c) such Account must not be subject to any Lien.                     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time.                     “ERISA Affiliate” shall mean, with respect to any Person, any other Person which is under common control with the first Person within the meaning of Section 414(b) or 414(c) of the Code; provided, however, that with respect to the Borrower, no Person which is an Affiliate of the Lender (other than the Borrower and its Subsidiaries) shall be deemed an ERISA Affiliate for purposes of this Agreement                     “Event of Default” has the meaning set forth in Article VII below.                     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.                     “Existing Lender” shall mean Silicon Valley Bank, as the lender under that certain Loan and Security Agreement dated June 6, 2003 (as amended, restated, supplemented and modified to the date hereof) by and between such lender and the Borrower.                     “Financial Statements” has the meaning set forth in Section 3.01(a) below. 6                     “Fiscal Year” shall mean the fiscal year of the Borrower which ends on April 30 of each year.                     “Foreign Subsidiary” shall mean any Subsidiary which is not a Domestic Subsidiary.                     “GAAP” shall mean generally accepted accounting principles in the United States of America, consistently applied, unless the context otherwise requires, with respect to any financial terms contained herein, as then in effect with respect to the preparation of financial statements.                     “Government Approval” shall mean an authorization, consent, non-action, approval, license or exemption of, registration or filing with, or report to, any governmental or quasi-governmental department, agency, body or other unit.                     “Guaranty”, “Guaranteed” or to “Guarantee”, as applied to any Indebtedness, liability or other obligation, shall mean (a) a guaranty, directly or indirectly, in any manner, including by way of endorsement (other than endorsements of negotiable instruments for collection in the ordinary course of business), of any part or all of such obligation, and (b) an agreement, contingent or otherwise, and whether or not constituting a guaranty, assuring, or intended to assure, the payment or performance (or payment of damages in the event of non-performance) of any part or all of such obligation by any means (including, without limitation, the purchase of securities or obligations, the purchase or sale of property or services, or the supplying of funds).                      “Guaranty Agreement” shall mean the Guaranty Agreement, dated as of the Closing Date (and as same may be amended, modified, supplemented and/or restated from time to time), executed by each Domestic Subsidiary in favor of the Lender, pursuant to which such Domestic Subsidiaries will guaranty the full and timely payment and performance of all of the Obligations.                     “Gupta” shall mean Gupta Technologies, LLC, a Delaware limited liability company, which is a Wholly-Owned Subsidiary of the Borrower upon consummation of the Related Transactions.                     “Indebtedness” shall mean (without duplication), with respect to any Person, (a) all obligations or liabilities, contingent or otherwise, for borrowed money, (b) any and all obligations represented by promissory notes, bonds, debentures or the like, or on which interest charges are customarily paid, (c) any liability secured by any mortgage, pledge, lien or security interest on property owned or acquired, whether or not such liability shall have been assumed, (d) obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding trade payables and accrued obligations incurred in the ordinary course of business), (f) any obligations (contingent or otherwise) of such Person as an account party or applicant in respect of letters of credit and/or bankers’ acceptances, and (g) Guarantees, endorsements (other than for collection in the ordinary course of business) and other contingent obligations in respect of the obligations of others. 7                     “Investment”, as applied to the Borrower or any Subsidiary, shall mean: (a) any shares of capital stock, evidence of Indebtedness or other security issued by any other Person to the Borrower or any Subsidiary, (b) any loan, advance or extension of credit to, or contribution to the capital of, any other Person, other than credit terms extended to customers in the ordinary course of business, (c) any other investment by the Borrower or any Subsidiary in any assets or securities of any other Person, and (d) any commitment to make any Investment.                     “Knowledge” or “Known” or words of similar import shall mean, with respect to the Borrower and/or any Subsidiary, the actual knowledge of Todd Wille, Steven Bonham and/or Mark Bygraves, after reasonable inquiry of the appropriate employees of the Borrower and the Subsidiaries.                     “Liabilities and Contingencies” has the meaning set forth in Section 3.01(c) below.                     “Lien”, as applied to the property or assets (or the income or profits therefrom) of the Borrower or any Subsidiary, shall mean (in each case, whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise): (a) any mortgage, lien, pledge, hypothecation, attachment, assignment, deposit arrangement, encumbrance, charge, lease constituting a Capitalized Lease Obligation, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind in respect of any property (including, without limitation, stock of any Subsidiary) of the Borrower or any Subsidiary, or upon the income or profits therefrom; (b) any arrangement under which any property of the Borrower or any Subsidiary is transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of Indebtedness or the performance of any other liability in priority to the payment of the general, unsecured creditors of the Borrower or any Subsidiary; (c) any Indebtedness or liability which remains unpaid after the same shall become due and payable and which, if unpaid, by law or otherwise is given any priority whatsoever over the general unsecured creditors of the Borrower or any Subsidiary; and (d) any agreement (other than this Agreement) or other arrangement which, directly or indirectly, prohibits the Borrower or any Subsidiary from creating or incurring any lien on any of its properties or assets or which conditions the ability to do so on the security, on a pro rata or other basis, of Indebtedness other than Indebtedness outstanding under this Agreement.                     “Loan Documents” shall mean the collective reference to this Agreement, the Notes, the Security Documents, the Warrants, the Registration Rights Agreement, and any and all other agreements, instruments, certificates and other documents as may be executed and delivered by the Borrower and/or any of the Subsidiaries pursuant hereto or thereto.                     “Loans” shall mean, collectively, the Advances and the Term Loans.                     “Material Adverse Effect” shall mean any event, act, omission, condition or circumstance which has or would reasonably be expected to have a material adverse effect on (a) the business, operations, properties, assets or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Borrower or any Subsidiary to perform any of its obligations under any of the Loan Documents, or (c) the validity or enforceability of, or the Lender’s rights and remedies under, any of the Loan Documents, other than due to the acts or omissions of the Lender or one of its Affiliates. 8                     “Maturity Date” shall mean the Primary Maturity Date and/or the Tranche 3 Maturity Date, as the case may be.                     “Monitoring Fee” shall mean the fees payable to the Lender pursuant to Section 2.03(b) below.                     “Notes” shall mean, collectively, the Revolving Credit Note and the Term Notes.                     “Obligations” shall mean the collective reference to all Indebtedness and other liabilities and obligations of every kind and description owed by the Borrower to the Lender from time to time under or pursuant to this Agreement, the Notes, the Security Documents and the other Loan Documents (excluding the Warrant and Registration Rights Agreement, other than amounts payable from time to time pursuant to Section 2(c) of the Registration Rights Agreement), and/or otherwise in respect of the Loans, however evidenced, created or incurred, fixed or contingent, now or hereafter existing, due or to become due.                     “Organic Documents” shall mean, with respect to any Person, the certificate of incorporation, articles of incorporation, certificate of formation, certificate of limited partnership, by-laws, operating agreement, limited partnership agreement or other such document of such Person.                     “Permitted Discretion” shall mean a determination or judgment made by the Lender in good faith in the exercise of reasonable business judgment from the perspective of a secured lender.                     “Permitted Indebtedness” shall mean any and all Indebtedness expressly permitted pursuant to Section 6.01 below.                     “Permitted Liens” shall mean those Liens expressly permitted pursuant to Section 6.02 below.                     “Person” shall mean any individual, partnership, corporation, limited liability company, banking association, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.                     “Primary Maturity Date” shall mean October 31, 2010.                     “Real Properties” shall mean, collectively, any real properties (land, buildings and/or improvements) now owned or leased or occupied by the Borrower or any of the Subsidiaries, and, during the period of the Borrower’s and/or Subsidiary’s occupancy thereof, any other real properties heretofore owned or leased by the Borrower or any Subsidiary (provided that, with respect to leased properties, the “Real Property” shall refer only to the portion of the subject property (excluding common areas) leased by the Borrower or a Subsidiary). 9                     “Registration Rights Agreement” shall mean the Registration Rights Agreement, to be dated as of the Closing Date, made by the Borrower for the benefit of the Lender and any subsequent Holders (as such term is defined in the Registration Rights Agreement), as same may be amended, modified, supplemented and/or restated from time to time.                     “Related Transactions” shall mean the transactions contemplated by the Acquisition Agreement, in accordance with the terms of the Acquisition Agreement.                     “Revolving Credit Commitment” shall mean the Lender’s agreement to make Advances to the Borrower within the limitations set forth in Section 2.01 below.                     “Revolving Credit Note” shall mean the promissory note of the Borrower issued to the Lender to represent the Advances and interest thereon, as described in Section 2.01(f) below.                     “Sale” shall mean any transaction or series of related transactions (a) whereby Control of the Borrower is held by a Person (or group of Persons acting in concert) other than the management of the Borrower on the date of this Agreement (or Affiliates of such management), (b) in which the Borrower is a constituent party to any merger, consolidation or share exchange and as a result thereof (i) the holders of the outstanding capital stock of the Borrower which ordinarily has voting power for the election of directors (including preferred stock counted on an “as converted” basis into common stock) immediately prior to such merger or consolidation cease to own a majority of the outstanding capital stock of the Borrower which ordinarily has voting power for the election of directors (including preferred stock counted on an “as converted” basis into common stock), or (ii) the Borrower is not the surviving corporation, or (c) whereby all or any material portion of the assets of the Borrower or any Subsidiary are sold, assigned or transferred; provided, however, that a “Sale” shall not be deemed to have occurred solely by reason of normal market trading in the Common Stock unless a single Person or group of Persons acting in concert acquires Control of the Borrower in a single transaction or series of transactions.                     “SEC” shall mean the United States Securities and Exchange Commission, and any successor agency performing the functions thereof.                     “SEC Reports” shall mean the periodic and current reports, registration statements, proxy statements and other reports filed or required to be filed by the Borrower with the SEC pursuant to the Act and/or the Exchange Act, and any amendments or supplements thereto filed with the SEC.                     “Security Documents” shall mean the Collateral Agreement, any collateral assignments, control agreements, financing statements or other such agreements or documents pursuant thereto, the Guaranty Agreement, and any other agreements or instruments securing or creating or evidencing Liens securing the Obligations.                     “Seller” shall mean Halo Technology Holdings, Inc., and any Affiliate thereof which transfers any assets or business to the Borrower or any Subsidiary pursuant to the Acquisition Agreement. 10                     “Seller Consent” shall mean the written consent of the Seller for the collateral assignment by the Borrower to the Lender of all rights of the Borrower to indemnification under the Acquisition Agreement.                     “Subordinated Debt” shall mean all Indebtedness for money borrowed and other liabilities of the Borrower, whether or not evidenced by promissory notes, which is contractually subordinated in right of payment, in a manner satisfactory to the Lender (as evidenced by the Lender’s prior written approval thereof), to all Obligations of the Borrower to the Lender.                     “Subsidiary” or “Subsidiaries” shall mean the individual or collective reference to any corporation, limited liability company or other entity (including Gupta and its Subsidiaries upon consummation of the Related Transactions) of which 50% or more of the outstanding shares of stock or other equity interests of each class having ordinary voting power and/or rights to profits (other than stock having such power only by reason of the happening of a contingency) is at the time owned by the Borrower, directly or indirectly through one or more Subsidiaries of the Borrower.                     “Term Loans” shall mean the collective reference to the Tranche 1 Term Loan, the Tranche 2 Term Loan and the Tranche 3 Term Loan.                     “Term Notes” shall mean the promissory notes of the Borrower issued to the Lender as described in Section 2.02(e) below.                     “Tranche 1 Term Loan” shall mean the term loan in the principal amount of $1,000,000 to be made pursuant to Section 2.02(a)(i) below.                     “Tranche 1 Term Note” shall mean the promissory note of the Borrower to be issued pursuant to Section 2.02(e) below to evidence the Tranche 1 Term Loan.                     “Tranche 2 Term Loan” shall mean the term loan in the principal amount of $3,250,000 to be made pursuant to Section 2.02(a)(ii) below.                     “Tranche 2 Term Note” shall mean the promissory note of the Borrower to be issued pursuant to Section 2.02(e) below to evidence the Tranche 2 Term Loan.                     “Tranche 3 Maturity Date” shall mean October 31, 2011.                     “Tranche 3 Term Loan” shall mean the term loan in the principal amount of $1,100,000 to be made pursuant to Section 2.02(a)(iii) below.                     “Tranche 3 Term Note” shall mean the promissory note of the Borrower to be issued pursuant to Section 2.02(e) below to evidence the Tranche 3 Term Loan.                     “UCC” means the Uniform Commercial Code as in effect in the State of New York on the date hereof and hereafter from time to time. 11                     “Warrants” shall mean the warrants to purchase shares of Common Stock (such warrants covering an aggregate of 3,350,000 shares of Common Stock, subject to adjustment) to be issued by the Borrower to the Lender and/or the Lender’s designee(s) on the Closing Date.                     “Wholly-Owned Subsidiary” shall mean each Domestic Subsidiary of which all of the outstanding equity securities (other than directors’ qualifying shares) are owned by the Borrower or another such Wholly-Owned Subsidiary.           Section 1.02.  Use of Defined Terms.  All terms defined in this Agreement shall have their defined meanings when used in the Notes, the Security Documents, the other Loan Documents, and all certificates, reports or other documents made or delivered pursuant to this Agreement, unless otherwise defined therein or unless the specific context shall otherwise require.           Section 1.03.  Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP.           Section 1.04.  Other Definitional Provisions.  The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified. II. GENERAL TERMS           Section 2.01.  Revolving Credit Loans.                     (a)          Subject at all times to all of the terms and conditions of this Agreement, the Lender hereby agrees to extend to the Borrower a secured revolving credit facility, from the Closing Date to the Primary Maturity Date, in an aggregate principal amount not to exceed, at any time outstanding, the lesser of (i) the Borrowing Base at the subject time, or (ii) $2,500,000 (the “Revolving Credit Commitment”).                     (b)          Such revolving credit loans are herein sometimes referred to individually as an “Advance” and collectively as the “Advances.”  Subject at all times to all of the terms and conditions of this Agreement, from the Closing Date to the Primary Maturity Date and within the limits of the Revolving Credit Commitment, the Lender shall lend, and the Borrower may borrow, prepay (without premium or penalty) and reborrow under this Section 2.01.  Each request for an Advance (i) shall be irrevocable, (ii) shall be deemed to constitute an express affirmation that all conditions precedent set forth in Section 4B hereof are satisfied on the date of such request and will be satisfied on the requested Borrowing Date, and (iii) shall be made to the Lender in writing, not later than three (3) Business Days prior to the requested Borrowing Date, by an authorized officer of the Borrower or by telephonic communication by such authorized officer to the Lender, which shall be confirmed by written notice to the Lender to be delivered to the Lender by the Business Day next following the subject request.  In no event shall the Borrower request, or shall the Lender be required to honor, (A) any request for an Advance in an amount greater than the Availability at such time, (B) any request for an Advance in an amount less than $100,000, or (C) more than one request for the borrowing of Advances in any seven (7) calendar day period. 12                     (c)          The Borrower shall pay the Lender interest on all Advances at the rate(s) per annum as in effect from time to time in accordance with the Revolving Credit Note.  Such interest shall be payable monthly in arrears on the last day of each calendar month and on the Primary Maturity Date, and shall be computed on the daily unpaid balance of all Advances made under the Borrower’s revolving credit loan accounts with the Lender, based on a three hundred sixty (360) day year, counting the actual number of days elapsed.  The Borrower hereby authorizes the Lender to charge the Borrower’s revolving credit loan accounts for all such interest; provided, however, that the Lender shall be under no obligation to make any such charge to the Borrower’s revolving credit loan accounts (including, without limitation, if there is insufficient Availability at the time such interest is due and payable).                     (d)          In the event and to the extent that, at any time, the outstanding principal amount of Advances exceeds the Revolving Credit Commitment then in effect, then the Borrower shall immediately, without notice or demand, make a payment to the Lender in respect of the Advances in an amount sufficient to cause the outstanding principal amount of Advances to be equal to or less than the Revolving Credit Commitment then in effect.                     (e)          Unless sooner due and payable by reason of an Event of Default hereunder having occurred, the Borrower shall pay in full all of the Obligations to the Lender in respect of all Advances on or prior to the Primary Maturity Date.                     (f)          All Advances shall be evidenced by a secured Revolving Credit Note of the Borrower payable to the order of the Lender.                     (g)          The Borrower may, at its option, terminate the Revolving Credit Commitment at any time upon ten (10) Business Days’ prior written notice, and paying to the Lender, on the date fixed for termination, an amount equal to the sum of (i) all outstanding principal and accrued interest of the Advances, (ii) the outstanding principal balance, all unpaid accrued interest and applicable prepayment premiums of the Term Loans (subject to the Lender’s retained right, at all times prior to the prepayment, to convert all or any portion of such principal and interest into Common Stock in accordance with the Term Notes), and (iii) any and all other then-outstanding Obligations.           Section 2.02.  Term Loans.                     (a)          Subject at all times to all of the terms and conditions of this Agreement, the Lender hereby agrees to extend to the Borrower (i) a Term Loan in the principal amount of $1,000,000, (ii) an additional Term Loan in the principal amount of $3,250,000, and (iii) an additional Term Loan in the principal amount of $1,100,000.  The Term Loans shall be borrowed in a single borrowing on the Closing Date, and any principal amounts repaid in respect of the Term Loans may not be reborrowed. 13                     (b)          The Term Loans shall be repayable in installments, in accordance with the schedules of payments set forth in the Term Notes.  The Borrower shall be required to prepay the Term Loans (i) in full upon the consummation of any Sale, and (ii) in part from time to time in the event that, to the extent of, and at such time as the Borrower shall receive cash proceeds from time to time from the exercise of the Warrants.  With respect to any prepayment from the cash proceeds of the exercise of Warrants, such prepayments shall be applied (A) first to the principal installments of the Tranche 3 Term Loan in inverse order of maturity, until the Tranche 3 Term Loan has been repaid in full, (B) next, to the principal installments of the Tranche 2 Term Loan in inverse order of maturity, until the Tranche 2 Term Loan has been repaid in full, and (C) next, to the principal installments of the Tranche 1 Term Loan in inverse order of maturity, until the Tranche 1 Term Loan has been repaid in full.                     (c)          The Borrower shall pay the Lender interest on the principal balance of the Term Loans at the rate(s) per annum as in effect from time to time in accordance with the Term Notes.  Such interest shall be payable monthly in arrears on the last day of each calendar month and on the applicable Maturity Date, and shall be computed on the daily unpaid balance of each Term Loan, based on a three hundred sixty (360) day year, counting the actual number of days elapsed.  The Borrower hereby authorizes the Lender to charge the Borrower’s revolving credit loan accounts for all such interest and/or for any or all principal amounts due and payable in respect of the Term Loans; provided, however, that the Lender shall be under no obligation to make any such charge to the Borrower’s revolving credit loan accounts (including, without limitation, if there is insufficient Availability at the time such interest and/or principal is due and payable).  On the Closing Date, the Borrower shall prepay the interest to become due for the first three (3) months subsequent to the Closing Date on the full principal amount of the Term Loans.                     (d)          Unless sooner due and payable by reason of an Event of Default hereunder having occurred, the Borrower shall pay to the Lender all of the Obligations (i) in respect of the Tranche 1 Term Loan, the Tranche 2 Term Loan and all other Obligations (other than amounts not yet due and payable in respect of the Tranche 3 Term Loan) on or prior to the Primary Maturity Date, and (ii) in respect of the Tranche 3 Term Loan, on or prior to the Tranche 3 Maturity Date.                     (e)          The Term Loans shall be evidenced by secured Convertible Term Notes of the Borrower payable to the order of the Lender.           Section 2.03.  Fees and Premiums.                     (a)          The Borrower shall pay the Closing Fee to the Lender simultaneously with the execution and delivery of this Agreement.  The Closing Fee shall be deemed fully earned upon the parties’ execution and delivery of this Agreement, and shall not be refundable in whole or in part and shall not be subject to reduction or set-off under any circumstances.                     (b)          The Borrower shall further pay to the Lender, in advance on the Closing Date and on the first (1st) Business Day of each calendar month prior to the Primary Maturity Date or the earlier termination of the Revolving Credit Commitment and payment of the Obligations in accordance with Section 2.01(g) above, a collateral monitoring, availability and administrative fee in the amount of $1,000 per month or portion thereof. 14                     (c)          In the event of any prepayment of all or any portion of the Tranche 1 Term Loan or the Tranche 2 Term Loan at any time, or in the event of any prepayment of all or any portion of the Tranche 3 Term Loan subsequent to the second (2nd) anniversary of the Closing Date, in addition to the payment of the subject principal amount and all unpaid accrued interest thereon, the Borrower shall be required to pay to the Lender a prepayment premium in an amount equal to two (2%) percent of the principal amount being prepaid; provided, however, that no such prepayment premium shall be required in respect of any mandatory prepayment pursuant to Section 2.02(b) above.                     (d)          Payments received in respect of the Obligations after 12:00 Noon on any day shall be deemed to be received on the next succeeding Business Day, and if any payment is received other than by wire transfer of immediately available funds, such payment shall be subject to three (3) Business Days’ clearance prior to being credited to the Obligations for interest calculation purposes.                     (e)          In the event that the Closing Date has not occurred on or before December 31, 2006 and the Lender was, prior thereto, ready, willing and able to consummate the transactions contemplated by this Agreement on substantially the terms hereof, then the Lender may, at any time thereafter until the Closing Date, terminate this Agreement by written notice to the Borrower, in which event the Borrower shall, subject to and in accordance with the further provisions of this Section 2.03(e), become obligated to pay to the Lender an amount equal to the sum of (i) $150,000 (the “Breakup Fee”), plus (ii) all out-of-pocket costs, charges and expenses (including, reasonable attorneys’ fees and expenses) incurred by the Lender in respect of the transactions contemplated by this Agreement.  Such out-of-pocket costs, charges and expenses shall be payable on demand.  The Breakup Fee shall be due and payable in the event that and at such time as the Borrower or any Subsidiary, on or prior to October 2, 2007, (A) consummates the Related Transactions (or any alternative or revised transaction between the Borrower and any Seller) without consummating the transactions contemplated by this Agreement, or (B) enters into any commitment for an alternate financing in respect of the Related Transactions or any alternative or revised transaction between the Borrower and any Seller; provided, however, that the Breakup Fee shall not be payable if neither of such events occurs on or prior to October 2, 2007, or if the Lender is not, on or before December 31, 2006, ready, willing and able to consummate the transactions contemplated by this Agreement on substantially the terms hereof.           Section 2.04.  Use of Proceeds.  The Borrower shall utilize the proceeds of the Loans (a) on the Closing Date, to repay all then-outstanding Indebtedness owed by the Borrower to the Existing Lender and to pay cash amounts required to be paid to the Seller pursuant to the Acquisition Agreement, and (b) from and after the Closing Date, for working capital and other general corporate purposes of the Borrower.           Section 2.05.  Further Obligations.  With respect to all Obligations for which the interest rate is not otherwise specified herein (whether such Obligations arise hereunder, pursuant to the Notes or Security Documents, or otherwise), such Obligations shall bear interest at the rate(s) in effect from time to time pursuant to the Revolving Credit Note. 15           Section 2.06.  Application of Payments.  All amounts paid to or received by the Lender in respect of the Loans from whatever source (whether from the Borrower, any Subsidiary pursuant to the Guaranty Agreement, any realization upon any Collateral, or otherwise) shall, unless otherwise directed by the Borrower with respect to any particular payment (unless an Event of Default shall then be continuing, in which event the Lender may disregard the Borrower’s direction), be applied (a) first, to reimburse the Lender for all out-of-pocket costs and expenses incurred by the Lender which are reimbursable to the Lender in accordance with this Agreement, the Notes and/or any of the other Loan Documents, (b) next, to any accrued but unpaid fees or prepayment premiums, (c) next, to unpaid accrued interest on the Term Loans, (d) next, to unpaid accrued interest on the Advances, (e) next, to the outstanding principal of the Tranche 3 Term Loan, to the extent then due and payable, (f) next, to the outstanding principal of the Tranche 2 Term Loan, to the extent then due and payable, (g) next, to the outstanding principal of the Tranche 1 Term Loan, to the extent then due and payable, (h) next, to the outstanding principal of the Advances, and (i) finally, to the payment of any other outstanding Obligations; and after payment in full of the Obligations, any further amounts paid to or received by the Lender in respect of the Loans shall be paid over to the Borrower or such other Person(s) as may be legally entitled thereto.           Section 2.07.  Sale or Maturity Date.  Anything elsewhere contained in this Agreement and/or the Notes to the contrary notwithstanding, (a) the Revolving Credit Commitment shall terminate and all Obligations shall become immediately due and payable, without requirement of notice or demand, upon the consummation of any Sale, and (b) except as provided in Section 2.02(d) above with respect to the Tranche 3 Term Loan, the Revolving Credit Commitment shall terminate and all Obligations shall become immediately due and payable, without requirement of notice or demand, on the Primary Maturity Date.           Section 2.08.  Obligations Unconditional.            (a)          The payment and performance of all Obligations shall constitute the absolute and unconditional obligations of the Borrower, and shall be independent of any defense or rights of set-off, recoupment or counterclaim which the Borrower might otherwise have against the Lender.  All payments required by this Agreement and/or the Notes shall be paid free of any deductions or withholdings for any taxes or other amounts and without abatement, diminution or set-off.  If the Borrower is required by law to make such a deduction or withholding from a payment hereunder, the Borrower shall pay to the Lender such additional amount as is necessary to ensure that, after the making of such deduction or withholding, the Lender receives (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made.  The Borrower shall (i) pay the full amount of any deduction or withholding, which it is required to make by-law, to the relevant authority within the payment period set by the relevant law, and (ii) promptly after any such payment, deliver to the Lender an original (or certified copy) official receipt issued by the relevant authority in respect of the amount withheld or deducted or, if the relevant authority does not issue such official receipts, such other evidence of payment of the amount withheld or deducted as is reasonably acceptable to the Lender.           (b)          If, at any time and from time to time after the Closing Date, (i) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or application thereof, or (iii) compliance by the 16 Lender with any request or directive (whether or not having the force of law) from any governmental authority (A) subjects the Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to the Lender of any amount payable thereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment fees or other fees payable hereunder or changes in the rate of tax on the overall net income of the Lender or its members), or (B) imposes on the Lender any other condition or increased cost in connection with the transactions contemplated thereby or participations therein, and the result of any of the foregoing is to increase the cost to the Lender of making or continuing any Loan or to reduce any amount receivable hereunder, then, in any such case, the Borrower shall promptly pay to the Lender any additional amounts necessary to compensate the Lender, on an after-tax basis, for such additional cost or reduced amount as determined by the Lender.  If the Lender becomes entitled to claim any additional amounts pursuant to this Section 2.08(b), the Lender shall promptly notify the Borrower of the event by reason of which the Lender has become so entitled, and each such notice of additional amounts payable pursuant to this Section 2.08(b) submitted by the Lender to the Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.           Section 2.09.  Reversal of Payments.  To the extent that any payment or payments made to or received by the Lender pursuant to this Agreement or any other Loan Document are subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid to any trustee, receiver or other person under any state or federal bankruptcy or other such law, then, to the extent thereof, such amounts shall be revived as Obligations and continue in full force and effect hereunder as if such payment or payments had not been received by the Lender. III. REPRESENTATIONS AND WARRANTIES           As of the Closing Date and on each Borrowing Date (unless the representation and warranty refers to a specific date), the Borrower hereby makes the following representations and warranties to the Lender, all of which representations and warranties shall survive the Closing Date, the delivery of the Notes and the making of the Loans, shall be continuing in nature (subject only to changes occurring in the ordinary course of the Business Operations that do not and are not reasonably likely to have a Material Adverse Effect) so long as any Obligations are outstanding or the Revolving Credit Commitment remains in effect, and are as follows:           Section 3.01.  Financial Matters.                     (a)          The Borrower has heretofore furnished to the Lender (i) the audited consolidated financial statements (including balance sheets, statements of income and statements of cash flows) of the Borrower and its Subsidiaries as at April 30, 2004, 2005 and 2006, and for the Fiscal Years then ended, and (ii) the unaudited consolidated financial statements of the Borrower and its Subsidiaries as of July 31, 2006 and for the three (3) months then ended (collectively, the “Financial Statements”). 17                     (b)          The Financial Statements (i) have been prepared in accordance with GAAP and Regulation S-X promulgated under the Act on a consistent basis for all periods (subject, in the case of unaudited statements, to the absence of full footnote disclosures, and to normal non-material audit adjustments), (ii) are complete and correct in all material respects, (iii) fairly present the consolidated financial condition of the Borrower and its Subsidiaries as of said dates, and the results of their operations for the periods stated, (iv) contain and reflect all necessary adjustments and accruals for a fair presentation of the Company’s consolidated financial condition and the results of its consolidated operations as of the dates of and for the periods covered by such Financial Statements, and (v) make full and adequate provision, subject to and in accordance with GAAP, for the various assets and liabilities (including, without limitation, deferred revenues) of the Company and its Subsidiaries, fixed or contingent, and the results of their operations and transactions in their accounts, as of the dates and for the periods referred to therein.                     (c)          Except as set forth in Schedule 3.01 of the Disclosure Schedule, the Borrower and its Subsidiaries do not have any liabilities, obligations or commitments of any kind or nature whatsoever, whether absolute, accrued, contingent or otherwise (collectively “Liabilities and Contingencies”), including, without limitation, Liabilities and Contingencies under employment agreements and with respect to any “earn-outs”, stock appreciation rights, or related compensation obligations, except: (i) Liabilities and Contingencies disclosed in the Financial Statements or footnotes thereto, (ii) Liabilities and Contingencies incurred in the ordinary course of business and consistent with past practice since the date of the most recent Financial Statements, or (iii) those Liabilities  and Contingencies which are not required to be disclosed under GAAP.  The reserves, if any, reflected on the consolidated balance sheet of the Borrower and its Subsidiaries included in the most recent Financial Statements are appropriate and reasonable.  Neither the Borrower nor any of its Subsidiaries has had or presently has any Indebtedness for money borrowed, outstanding obligations for the purchase price of property, contingent obligations or liabilities for taxes, or any unusual forward or long-term commitments,  except as specifically set forth or provided for in the Financial Statements or in Schedule 3.01 of the Disclosure Schedule.                     (d)          Since the date of the most recent Financial Statements, except for the consummation of the Related Transactions and for the transactions pursuant to the Loan Documents, there has been no material adverse change in the working capital, condition (financial or otherwise), assets, liabilities, reserves, business, management or Business Operations of the Borrower or any of its Subsidiaries, including, without limitation, the following:                                    (i)          there has been no material change in any assumptions underlying, or in any methods of calculating, any bad debt, contingency or other reserve relating to the Borrower or any Subsidiary;                                     (ii)        there have been (A) no material write-downs in the value of any inventory of, and there have been no write-offs as uncollectible of any notes, accounts receivable or other receivables of, the Borrower or any Subsidiary other than write-offs of accounts receivable reserved in full as of the date of the most recent financial statements delivered to the Lender, and (B) no reserves established for the uncollectibility of any notes, Accounts or other receivables of the Borrower or any Subsidiary except to the extent that same have been disclosed to the Lender in writing and would not, individually or in the aggregate, cause the outstanding Advances to exceed the Revolving Credit Commitment; 18                                     (iii)       no debts have been cancelled, no claims or rights of substantial value have been waived and no properties or assets (real, personal or mixed, tangible or intangible) have been sold, transferred, or otherwise disposed of by the Borrower or any Subsidiary except in the ordinary course of business and consistent with past practice;                                     (iv)       there has been no change in any method of accounting or accounting practice utilized by the Borrower or any Subsidiary;                                     (v)        no material casualty, loss or damage has been suffered by the Borrower or any Subsidiary, regardless of whether such casualty, loss or damage is or was covered by insurance;                                     (vi)       Any announced changes in the policies or practices of any customer, supplier or referral source which would reasonably be expected to have a Material Adverse Effect;                                     (vii)      Any incurrence of (A) any liability or obligation outside of the ordinary course of business, or (B) any Indebtedness other than Permitted Indebtedness;                                     (viii)     Any declaration, setting aside or payment of any dividend or distribution or any other payment of any kind by the Borrower to or in respect of any equity securities of the Borrower; and                                     (ix)       No action described in this Section 3.01(d) has been agreed to be taken by the Borrower or any Subsidiary.                     (e)          The Borrower has in place adequate systems of internal controls sufficient to enable the Borrower and its management to obtain timely and accurate information regarding the Business Operations and all material transactions relating to the Borrower and the Subsidiaries, and no material deficiency exists with respect to the Borrower’s systems of internal controls.                     (f)          All of the SEC Reports, as of the respective dates thereof, complied in all material respects, as applicable, with the Act and the Exchange Act.           Section 3.02.  Organization; Corporate Existence.                     (a)          The Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) has all requisite corporate power and authority to own its properties and to carry on its business as now conducted and as proposed hereafter to be conducted, (iii) is qualified to do business as a foreign corporation in each jurisdiction in which the failure of the Borrower to be so qualified would have a Material Adverse Effect, and (iv) has all requisite corporate power and authority to execute and deliver, and perform all of its obligations under, the Loan Documents.  True and complete copies of the Organic Documents of the Borrower, together with all amendments thereto, have been furnished to the Lender. 19                     (b)          On the date of this Agreement, the outstanding capital stock of the Company, and the number and amount of all outstanding options, warrants, convertible securities, subscriptions and other rights to acquire capital stock of the Company, are as set forth in Schedule 3.02 of the Disclosure Schedule.  Since October 2, 2006, the Borrower has not reserved or committed any of its authorized shares of Common Stock to or in respect of any Person other than the Borrower, whether pursuant to subscription, commitment to issue, option, warrant, convertible security or other right to acquire.                     (c)          Schedule 3.02 of the Disclosure Schedule further sets forth, with respect to each Subsidiary on the date of this Agreement, (i) its proper legal name, (ii) its jurisdiction of incorporation or formation, (iii) the jurisdictions in which it is qualified to do business as a foreign entity, (iv) the number of shares of capital stock or ownership interests outstanding, and (v) the owner of such outstanding capital stock or other ownership interests.  Each of the Subsidiaries (A) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (B) has all requisite power and authority to own its properties and to carry on its business as now conducted and as proposed hereafter to be conducted, and to execute and deliver, and perform all of its obligations under, the Loan Documents to which it is a party, and (C) is not required to be qualified to do business as a foreign entity in any jurisdiction in which it is not so qualified and the failure to be so qualified would reasonably be expected to have a Material Adverse Effect.  True and complete copies of the Organic Documents of each Subsidiary, together with all amendments thereto to the date hereof, have been furnished to the Lender.           Section 3.03.  Authorization.            (a)          The execution, delivery and performance by the Borrower and the Subsidiaries of their respective obligations under the Loan Documents have been duly authorized by all requisite corporate and other action and will not, either prior to or as a result of the consummation of the transactions contemplated by this Agreement: (i) violate any provision of Applicable Law, any order of any court or other agency of government, any provision of the Organic Documents of the Borrower or any Subsidiary, or any Contract, indenture, agreement or other instrument to which the Borrower or any of the Subsidiaries is a party, or by which the Borrower or any of the Subsidiaries or any of its assets or properties are bound, or (ii) be in conflict with, result in a breach of, or constitute (after the giving of notice or lapse of time or both) a default under, or, except as may be provided in the Loan Documents, result in the creation or imposition of any Lien of any nature whatsoever upon any of the property or assets of the Borrower or any of the Subsidiaries pursuant to, any such Contract, indenture, agreement or other instrument.  Without limitation of the foregoing, the Borrower has satisfied all obligations in respect of any right of first offer or other such rights previously granted to the Existing Lender.            (b)          Neither the Borrower nor any of the Subsidiaries is required to obtain any Government Approval, consent or authorization from, or to file any declaration or statement with, any governmental instrumentality or agency in connection with or as a condition to the execution, delivery or performance of any of the Loan Documents. 20           Section 3.04.  Litigation.  Except as disclosed on Schedule 3.04 of the Disclosure Schedule, there is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of the Subsidiaries or any of their respective assets, which, if adversely determined, would have a Material Adverse Effect.  The Borrower has no Knowledge of any state of facts, events, conditions or circumstances which would properly constitute grounds for or the basis of any meritorious suit, action, arbitration, proceeding or investigation (including, without limitation, any unfair labor practice charges, interference with union organizing activities, or other labor or employment claims) against or with respect to the Borrower or any Subsidiary.           Section 3.05.  Material Contracts.  Except as disclosed on Schedule 3.05 of the Disclosure Schedule, neither the Borrower nor any of the Subsidiaries is (a) a party to any Contract, agreement or instrument or subject to any charter or other corporate or organizational restriction which has had or could reasonably be expected to have a Material Adverse Effect, (b) subject to any liability or obligation under or relating to any collective bargaining agreement, or (c) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contract, agreement or instrument to which it is a party or by which any of its assets or properties is bound, which default, individually or in the aggregate, would have or could reasonably be expected to have a Material Adverse Effect.           Section 3.06.  Title to Properties.  The Borrower and each of the Subsidiaries has good title to all of its properties and assets, free and clear of all mortgages, security interests, restrictions, encumbrances or other Liens of any kind, except for restrictions on the nature of use thereof imposed by Applicable Law, and except for Permitted Liens, none of which materially interfere with the use and enjoyment of such properties and assets in the normal course of the Business Operations as presently conducted, or materially impair the value of such properties and assets for the purpose of such business.            Section 3.07.  Real Property.  Schedule 3.07 of the Disclosure Schedule sets forth a correct and complete list of all Real Properties currently leased or occupied by the Borrower and/or any of the Subsidiaries.  Neither the Borrower nor any of the Subsidiaries owns any Real Properties.  The Borrower and each Subsidiary has a valid lessee’s interest in each Real Property currently leased or occupied by the Borrower or such Subsidiary.  Neither the Borrower, any Subsidiary, or, to the Borrower’s or each Subsidiary’s Knowledge, any other party thereto, is in material breach or violation of any requirements of any such lease; and such Real Properties are in good condition (reasonable wear and tear excepted) and are adequate for the current and proposed businesses of the Borrower and the Subsidiaries.  To the Borrower’s Knowledge, its use of the Real Properties in the normal conduct of the Business Operations does not violate any applicable building, zoning or other law, ordinance or regulation affecting such Real Properties, and no covenants, easements, rights-of-way or other such conditions of record impair the Borrower’s use of the Real Properties in the normal conduct of the Business Operations.           Section 3.08.  Machinery and Equipment.  The machinery and equipment owned and/or used by the Borrower and the Subsidiaries is, as to each individual material item of machinery and equipment, and in the aggregate as to all such equipment, in good and usable condition and in a state of good maintenance and repair (reasonable wear and tear excepted), and adequate for its use in the Business Operations. 21           Section 3.09.  Capitalization.  Except as set forth in Schedule 3.02 of the Disclosure Schedule and for new Subsidiaries formed in accordance with Section 5.11 hereof, the Borrower does not, directly or indirectly, own any capital stock of or any form of equity interest in any other Person.           Section 3.10.  Solvency.  After giving effect to the Loans and the other transactions contemplated hereby, the borrowings made and/or to be made by the Borrower under this Agreement do not and will not render the Borrower insolvent or with unreasonably small capital for its business; the fair saleable value of all of the assets and properties of the Borrower does now, and will, upon the funding of the Loans contemplated hereby, exceed the aggregate liabilities and Indebtedness of the Borrower (including contingent liabilities); the Borrower is not contemplating either the filing of a petition under any state or federal bankruptcy or insolvency law, or the liquidation of all or any substantial portion of its assets or property; the Borrower has no knowledge of any Person contemplating the filing of any such petition against the Borrower; and the Borrower reasonably anticipates that it will be able to pay its debts as they mature.           Section 3.11.  No Investment Company.  The Borrower is not an “investment company” or a company “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.           Section 3.12.  Margin Securities.  The Borrower does not own or have any present intention of acquiring any “margin security” or any “margin stock” within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System (herein called “margin security” and “margin stock”).  None of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry, any margin security or margin stock or for any other purpose which might constitute the transactions contemplated hereby a “purpose credit” within the meaning of said Regulations G, T, U or X, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Exchange Act, or any rules or regulations promulgated under such statutes.           Section 3.13.  Taxes.                     (a)          All federal, state and local tax returns and tax reports required to be filed by the Borrower and/or any Subsidiary have been timely filed with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed.  All federal, state and local income, franchise, sales, use, property, excise, ad valorem, value-added, payroll and other taxes (including interest, penalties and additions to tax and including estimated tax installments where required to be filed and paid) due from or with respect to the Borrower and the Subsidiaries have been fully paid, and appropriate accruals have been made on the Borrower’s books for taxes not yet due and payable.  All taxes and other assessments and levies which the Borrower and/or any Subsidiary is required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental authorities to the extent due and payable.  Except as set forth in Schedule 3.13 of the Disclosure Schedule, there are no outstanding or pending claims, deficiencies or assessments for taxes, interest or penalties with respect to any taxable period of the Borrower or any Subsidiary, and no outstanding tax Liens. 22                     (b)          Except as disclosed in Schedule 3.13 of the Disclosure Schedule, the Borrower has no Knowledge and has not received notice of any pending audit with respect to any federal, state or local tax returns of the Borrower or any Subsidiary, and no waivers of statutes of limitations have been given or requested with respect to any tax years or tax filings of the Borrower or any Subsidiary.           Section 3.14.  ERISA.  Except as set forth in Schedule 3.14 of the Disclosure Schedule, neither the Borrower nor any ERISA Affiliate of the Borrower maintains or has any obligation to make any contributions to any pension, profit sharing or other similar plan providing for deferred compensation to any employee.  With respect to any such plan(s) as may now exist or may hereafter be established by the Borrower or any ERISA Affiliate of the Borrower, and which constitutes an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, except as set forth on Schedule 3.14 of the Disclosure Schedule:  (a) the Borrower or the subject ERISA Affiliate has paid and shall cause to be paid when due all amounts necessary to fund such plan(s) in accordance with its terms, (b) except for normal premiums payable by the Borrower to the Pension Benefit Guaranty Corporation (“PBGC”), the Borrower or the subject ERISA Affiliate has not taken and shall not take any action which could result in any liability to the PBGC, or any of its successors or assigns, (c) the present value of all accrued benefits thereunder shall not at any time exceed the value of the assets of such plan(s) allocable to such accrued benefits, (d) there have not been and there shall not be any transactions such as would cause the imposition of any tax or penalty under Section 4975 of the Code or under Section 502 of ERISA, which would adversely affect the funded benefits attributable to the Borrower or the subject ERISA Affiliate, (e) there has not been and there shall not be any termination or partial termination thereof (other than a partial termination resulting solely from a reduction in the number of employees of the Borrower or an ERISA Affiliate of the Borrower, which reduction is not anticipated by the Borrower), and there has not been and there shall not be any “reportable event” (as such term is defined in Section 4043(b) of ERISA) on or after the effective date of Section 4043(b) of ERISA with respect to any such plan(s) subject to Title IV of ERISA, (f) no “accumulated funding deficiency” (as defined in Section 412 of the Code) has been or shall be incurred on or after the effective date of Section 412 of the Code, (g) except as otherwise reflected on Schedule 3.14 of the Disclosure Schedule, such plan(s) have been and shall be determined to be “qualified” within the meaning of Section 401(a) of the Code, and have been and shall be duly administered in compliance with ERISA and the Code, and (h) the Borrower is not aware of any fact, event, condition or cause which might adversely affect the qualified status thereof.  As respects any “multi-employer plan” (as such term is defined in Section 3(37) of ERISA) to which the Borrower or any ERISA Affiliate thereof has heretofore been, is now, or may hereafter be required to make contributions, the Borrower or such ERISA Affiliate has made and shall make all required contributions thereto, and there has not been and shall not be any “complete withdrawal” or “partial withdrawal” (as such terms are respectively defined in Sections 4203 and 4205 of ERISA) therefrom on the part of the Borrower or such ERISA Affiliate. 23           Section 3.15.  Intellectual Property.  The Borrower and the Subsidiaries own or have the valid right to use all material patents, trademarks, copyrights, software, computer programs, equipment designs, network designs, equipment configurations, technology and other intellectual property used, marketed and sold in the Business Operations, and the Borrower and the Subsidiaries are in compliance in all material respects with all licenses, user agreements and other such agreements regarding the use of intellectual property used in the Business Operations; and the Borrower has no Knowledge that or received notice claiming that any of such intellectual property infringes upon or violates the rights of any other Person.           Section 3.16.  Compliance with Laws.  The Borrower and the Subsidiaries are in compliance with all occupational safety, health, wage and hour, employment discrimination, environmental, flammability, labeling and other Applicable Law which are material to the Business Operations, except where such non-compliance would not, individually or in the aggregate, have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary is aware of any state or facts, events, conditions or occurrences which may now or hereafter constitute or result in a violation of any Applicable Law, or which may give rise to the assertion of any such violation, which could have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary has received written notice of default or violation, nor is the Borrower or any Subsidiary in default or violation, with respect to any judgment, order, writ, injunction, decree, demand or assessment issued by any court or any federal, state, local, municipal or other governmental agency, board, commission, bureau, instrumentality or department, domestic or foreign, relating to any aspect of the Borrower’s or any Subsidiaries’ business, affairs, properties or assets.  Neither the Borrower nor any Subsidiary has received written notice of or been charged with, or is, to the Borrower’s Knowledge, under investigation with respect to, any violation of any provision of any Applicable Law, which violation would have a Material Adverse Effect.           Section 3.17.  Licenses and Permits.  The Borrower and each Subsidiary has all federal, state and local licenses and permits required to be maintained in connection with and material to the Business Operations, and all such licenses and permits are valid and in full force and effect.   The Borrower and each Subsidiary has complied with the requirements of such licenses and permits in all material respects, and has received no notice of any pending or threatened proceedings for the suspension, termination, revocation or limitation thereof. There is no circumstance or condition Known to the Borrower that would cause or permit any of such licenses or permits to be voided, revoked or withdrawn.           Section 3.18.  Insurance.  Schedule 3.18 of the Disclosure Schedule lists all insurance coverages maintained by the Borrower and the Subsidiaries, including the names of insurers, policy limits and deductibles.  Neither the Borrower nor any Subsidiary has received written notice of cancellation or intent not to renew any of such policies, and there has not occurred, and there does not exist, any condition (other than general industry-wide conditions) such as would cause any of such insurers to cancel any of such insurance coverages, or would be reasonably likely to materially increase the premiums charged to the Company and the Subsidiaries for coverages consistent with the scope and amounts of coverages as in effect on the Closing Date. 24           Section 3.19.  Environmental Laws.                     (a)          The Borrower and each Subsidiary has complied in all material respects with all Environmental Laws relating to its business and properties, and to the Knowledge of the Borrower there exist no Hazardous Substances in amounts in violation of applicable Environmental Laws or underground storage tanks on any of the Real Properties the existence of which would have a Material Adverse Effect, except those that are stored and used in compliance with Applicable Laws.                     (b)          Neither the Borrower nor any Subsidiary has received notice of any pending or threatened litigation or administrative proceeding which in any instance (i) asserts or alleges any violation of applicable Environmental Laws on the part of the Borrower or any Subsidiary, (ii) asserts or alleges that the Borrower or any Subsidiary is required to clean up, remove or otherwise take remedial or other response action due to the disposal, depositing, discharge, leaking or other release of any Hazardous Substances or materials, or (iii) asserts or alleges that the Borrower or any Subsidiary is required to pay all or any portion of the costs of any past, present or future cleanup, removal or remedial or other response action which arises out of or is related to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials by the Borrower or any Subsidiary.  To the Borrower’s Knowledge, neither the Borrower nor any Subsidiary is subject to any judgment, decree, order or citation related to or arising out of any Environmental Laws.  To the Borrower’s Knowledge, neither the Borrower nor any Subsidiary has been named or listed as a potentially responsible party by any governmental body or agency in any matter arising under any Environmental Laws.  Neither the Borrower nor any Subsidiary is a participant in, nor does the Borrower have Knowledge of, any governmental investigation involving any of the Real Properties.                     (c)          Neither the Borrower or any Subsidiary nor, to the Borrower’s Knowledge, any other person, firm, corporation or governmental entity has caused or permitted any Hazardous Substances or other materials to be stored, deposited, treated, recycled or disposed of on, under or at any of the Real Properties which materials, if known to be present, would reasonably be expected to require or authorize cleanup, removal or other remedial action under any applicable Environmental Laws.                     (d)          As used in this Section 3.19 and in Section 5.08 below, the following terms have the following meanings:                     “Environmental Laws” include all federal, state, and local laws, rules, regulations, ordinances, permits, orders, and consent decrees agreed to by the Borrower or any Subsidiary, relating to health, safety, and environmental matters applicable to the business and property of the Borrower or any Subsidiary.  Such laws and regulations include but are not limited to the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §6901 et seq., as amended; the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §9601 et seq., as amended; the Toxic Substances Control Act (“TSCA”), 15 U.S.C. §2601 et seq., as amended; and the Clean Water Act, 33 U.S.C. §1331 et seq., as amended.                     “Hazardous Substances”, “Release”, “Respond” and “Response” shall have the meanings assigned to them in CERCLA, 42 U.S.C. §9601, as amended. 25                     “Notice” means any actual summons, citation, directive, information request, notice of potential responsibility, notice of violation or deficiency, order, claim, complaint, investigation, proceeding, judgment, letter, or other communication, written or oral, from the United States Environmental Protection Agency or other federal, state, or local agency or authority, or any other entity or individual, public or private, concerning any intentional or unintentional act or omission which involves management of Hazardous Substances in amounts in violation of Environmental Laws on or off any Real Properties; the imposition of any lien on any Real Properties, including but not limited to liens asserted by government entities in connection with any Borrower’s or Subsidiary’s response to the presence or Release of Hazardous Substances in amounts in violation of Environmental Laws; and any alleged violation of or responsibility under any Environmental Laws.           Section 3.20.  Sensitive Payments.  Neither the Borrower nor any Subsidiary has (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which made, (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books, (c) made any payments to any person with the intention that any part of such payment was to be used for any purpose other than that described in the documents supporting the payment, or (d) engaged in any “trading with the enemy” or other transactions violating any rules or regulations of the Office of Foreign Assets Control.           Section 3.21.  Full Disclosure.  No statement of fact made by the Borrower in this Agreement or any other Loan Document, in any SEC Report, or in any information memorandum, business summary, agreement, certificate, schedule or other written statement furnished by the Borrower to the Lender pursuant hereto, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary to make any statements contained herein or therein not misleading.  Except for matters of a general economic or political nature which do not affect the Borrower or any Subsidiary uniquely, there is no fact presently known to the Borrower or any Subsidiary which has not been disclosed to the Lender, which has had or would reasonably be expected to have a Material Adverse Effect.           Section 3.22.  Acquisition Agreement.  The Borrower has previously delivered to the Lender a true and complete copy of the Acquisition Agreement, all disclosure schedules thereto, and all amendments thereto.  To the best of the Borrower’s Knowledge, all representations and warranties made by the Seller in the Acquisition Agreement (including, without limitation, all financial statements and other financial information) are true and correct in all material respects.           Section 3.23.  Reaffirmation.  Each and every request by the Borrower for Advances shall constitute a reaffirmation of the truth and accuracy of the Borrowers’ representations and warranties made in this Agreement and the Security Documents on and as of the date of such request. 26 IV. CONDITIONS OF MAKING THE LOANS           A.          The obligation of the Lender to make the initial Loans hereunder and to consummate the other transactions contemplated hereby are subject to the following conditions precedent:           Section 4.01.  Representations and Warranties.  The representations and warranties set forth in Article III hereof and in the other Loan Documents shall be true and correct on and as of the Closing Date.           Section 4.02.  Loan Documents.  The Borrower and its Subsidiaries (as applicable) shall have duly executed and/or delivered to the Lender all of the following:                         (a)          The Notes;                         (b)          The Guaranty Agreement, the Collateral Agreement and any and all other Security Documents required by the Lender at the Closing Date (including, without limitation, any collateral assignments of intellectual property in recordable form and any landlord waivers or consents required by the Lender);                         (c)          The Warrants;                         (d)          The Registration Rights Agreement;                         (e)          A certificate or certificates of insurance, with loss payable endorsements, evidencing the insurance required by Section 5.01(d) hereof;                         (f)          A current Borrowing Base report in conformity with Section 5.04(e) hereof, and a written request for the borrowing of the Term Loans (and, if applicable, the initial Advance);                         (g)          A certificate of the Secretary or an Assistant Secretary of the Borrower and each Subsidiary, certifying the votes of the Boards of Directors or other applicable governing body of the Borrower and the Subsidiaries, authorizing and directing the execution and delivery of the Loan Documents and all further agreements, instruments, certificates and other documents pursuant hereto and thereto;                       (h)          A certificate of the Secretary or an Assistant Secretary of the Borrower and each Subsidiary, certifying the names of the officers of the Borrower and the Subsidiaries who are authorized to execute and deliver the Loan Documents and all other agreements, instruments, certificates and other documents to be delivered pursuant hereto and thereto, together with the true signatures of such officers.  The Lender may conclusively rely on such certificate until the Lender shall receive any further such certificate canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate;                         (j)          Certified copies of the Organic Documents of the Borrower and each Subsidiary, and a certificate of the Secretary of State or other appropriate official of the jurisdiction of incorporation of the Borrower and each Subsidiary (and, in the case of the Borrower, the State of California), dated reasonably prior to the Closing Date, stating that the Borrower or the subject Subsidiary is duly formed and in good standing in such jurisdiction; and 27                         (k)          Such other agreements, instruments, documents and certificates (including, without limitation, satisfactory lien and judgment searches respecting the Borrower and the Subsidiaries) as the Lender or its counsel may reasonably request.           Section 4.03.  Availability of Shares.  On the Closing Date, the Borrower shall have a minimum of 3,000,000 authorized and unreserved shares of Common Stock (after accounting for all outstanding shares, all options, warrants, convertible securities and other purchase rights, and all option plans) to satisfy conversion and exercise rights under the Warrants and the Term Loans.           Section 4.04.  Payoff and Release Letters.  The Borrower shall have received, and shall have delivered to the Lender, (a) a payoff and release letter signed by the Existing Lender, in form and substance satisfactory to the Lender, (i) confirming the amount required to be paid to the Existing Lender on the Closing Date in order to pay all of the Borrower’s and its Subsidiaries’ obligations to the Existing Lender, (ii) affirming that, upon receipt of such amount on the Closing Date, all liens, encumbrances and security interests held by the Existing Lender shall be terminated and released, and all collateral shall be released and retuned to the Borrower, and (iii) authorizing the filing, upon receipt of such amount on the Closing Date, of termination statements in respect of all lien filings against the Borrower and/or the Subsidiaries in respect of such liens, encumbrances and security interests of the Existing Lender, and (b) similar letters from Fortress Credit Corp. (in respect of Gupta) and the holders of any and all other secured Indebtedness (other than Permitted Indebtedness) of the Borrower and/or the Subsidiaries.  The Borrower shall pay such amounts to such creditors on the Closing Date out of the proceeds of the Term Loans and, if applicable, the initial Advance.           Section 4.05.  Related Transactions; Seller Consent.  The Borrower shall have delivered to the Lender a certified copy of the Acquisition Agreement (as amended), all disclosure schedules related thereto, and all material closing documents relating the Related Transactions;  all conditions precedent to the consummation of the Related Transactions (except for completing the financing therefore) shall have been satisfied, or shall have been waived with the written consent of the Lender (which consent shall not be unreasonably withheld or delayed); the Related Transactions shall, upon the funding of the initial Loans hereunder, be consummated in accordance with the terms of the Acquisition Agreement (subject to any restructuring or other material amendment consented to in writing by the Lender); and the Borrower shall have delivered to the Lender a Seller Consent in form and substance satisfactory to the Lender.           Section 4.06.  Legal Opinion.  The Lender shall have received the favorable written opinion of DLA Piper US LLP, counsel for the Borrower and the Subsidiaries, dated the Closing Date, satisfactory to the Lender and its counsel in scope and substance.           Section 4.07.  Interest, Fees and Reimbursements.  The Borrower shall have paid the Closing Fee, the initial Monitoring Fee, and the initial three (3) months of interest in respect of the Term Loans, and shall have paid or reimbursed the Lender for its reasonable out-of-pocket costs, charges and expenses incurred to the Closing Date; and in connection herewith, the Borrower hereby irrevocably authorizes the Lender to charge such amounts as Advances to the Borrower’s revolving credit loan account.  Failure of the Lender to effect any such charge shall not excuse the Borrower from its obligation to pay such amounts. 28           Section 4.08.  Further Matters.  All legal matters, and the form and substance of all documents, incident to the transactions contemplated hereby shall be satisfactory to counsel for the Lender.           Section 4.09.  No Default.  No Default or Event of Default shall have occurred and be continuing.           B.          The obligation of the Lender to make any Advances subsequent to the Closing Date is subject to (a) the representations and warranties set forth in Article III and in the other Loan Documents being true and correct in all material respects (except that, to the extent that any representation or warranty is already qualified by concepts of materiality and/or Material Adverse Effect, then such representations and warranties shall be true and correct in all respects) on and as of the subject Borrowing Date, (b) the Lender’s receipt of a current Borrowing Base report in conformity with Section 5.04(e) hereof, (c) the execution and delivery of such further Security Documents as the Lender may have reasonably requested pursuant to the Security Documents theretofore executed and delivered, and (d) there being no continuing Default or Event of Default. V. AFFIRMATIVE COVENANTS           The Borrower hereby covenants and agrees that, from the date hereof and until all Obligations (whether now existing or hereafter arising) have been paid in full and the Revolving Credit Commitment has been terminated, unless the Lender shall otherwise consent in writing, the Borrower shall, and shall cause each of its Subsidiaries to:           Section 5.01.  Corporate and Insurance.  Do or cause to be done all things necessary to at all times (a) preserve, renew and keep in full force and effect its corporate or other legal existence, rights, licenses, permits and franchises, (b) comply with the Loan Documents and any other agreements and instruments executed and delivered hereunder and thereunder (to the extent a party thereto), (c) maintain, preserve and protect all of its franchises and material trade names, and preserve all of its material property used or useful in the conduct of its business and keep the same in good repair, working order and condition (reasonable wear and tear excepted), and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements thereto, so that the Business Operations carried on in connection therewith may be properly and advantageously conducted at all times, (d) maintain insurance in amounts, on such terms and against such risks (including fire and other hazards insured against by extended coverage, and public liability insurance covering claims for personal injury, death or property damage) as are customary for companies of similar size in the same or similar businesses and operating in the same or similar locations, as well as all such other insurance as is required by the Collateral Agreement, each of which policies (other than workers compensation) shall be issued by a financially sound and reputable insurer reasonably satisfactory to the Lender and shall name the Lender as loss payee and additional insured as its interest appears and provide for the Lender to receive written notice thereof at least thirty (30) days prior to any cancellation of the subject policy, and (e) comply with all material Contracts and material obligations to which it is a party or by which it is bound, all benefit plans which it maintains or is required to contribute to, and all Applicable Law (including, without limitation, Environmental Laws) material to its Business Operations, and all requirements of its insurers, whether now in effect or hereafter enacted, promulgated or issued.  The Borrower will provide to the Lender a certificate of the foregoing insurance, promptly upon request. 29           Section 5.02.  Payment of Taxes.  File, pay and discharge, or cause to be paid and discharged, all material taxes, assessments and governmental charges or levies imposed upon the Borrower and/or any Subsidiary or upon its income and profits or upon any of its property (real, personal or mixed) or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials, supplies and otherwise, which, if unpaid when due, might become a Lien or charge upon such property or any part thereof; provided, however, that neither the Borrower nor any Subsidiary shall be required to pay and discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as (a) the validity thereof shall be contested in good faith by appropriate proceedings and the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge, levy or claim so contested, and (b) payment with respect to any such tax, assessment, charge, levy or claim shall be made before any of the Borrower’s or such Subsidiary’s property shall be seized or sold in satisfaction thereof.           Section 5.03.  Notices.  Give prompt written notice to the Lender of (a) the filing by the Borrower of any SEC Reports, (b) any proceedings instituted against the Borrower or any Subsidiary in any federal or state court or before any commission or other regulatory body, whether federal, state or local, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, and (c) the occurrence of any material casualty to any Collateral, any Material Adverse Effect, or any Default or Event of Default, and the action that the Borrower has taken, is taking, or proposes to take with respect thereto.           Section 5.04.  Periodic Reports.  Furnish to the Lender:                     (a)          Within ninety (90) calendar days after the end of each Fiscal Year, consolidated balance sheets, and consolidated and consolidating statements of income, statements of stockholders’ equity, and statements of cash flows of the Borrower and its Subsidiaries, together with footnotes and supporting schedules thereto, certified (as to the consolidated statements) by Grant Thornton or alternative independent certified public accountants with similar qualifications and expertise as selected by the Borrower, showing the financial condition of the Borrower and its Subsidiaries at the close of such Fiscal Year and the results of operations of the Borrower and its Subsidiaries during such Fiscal Year;                     (b)          Within thirty (30) calendar days after the end of each calendar month (forty-five (45) calendar days in the case of the end of a fiscal quarter), consolidated (and, if specifically requested by the Lender reasonably in advance, but not more frequently than quarterly, consolidating) unaudited balance sheets, statements of income and statements of cash flows of the Borrower and its Subsidiaries, together with supporting schedules thereto, prepared by the Borrower and certified by the Borrower’s Chairman, President, Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, such balance sheets to be as of the close of such calendar month and such statements of income and statements of cash flows to be for the period from the beginning of the then-current Fiscal Year to the end of such calendar month, together with comparative statements of income and cash flows for the corresponding period in the immediately preceding Fiscal Year, in each case subject to normal audit and year-end adjustments; 30                     (c)          Concurrently with the delivery of each of the financial statements required by Sections 5.04(a) and 5.04(b) above, a certificate on behalf of the Borrower (signed by the Chairman, President, Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer of the Borrower), certifying that he has examined the provisions of this Agreement and that no Default or Event of Default has occurred and/or is continuing;                     (d)          On or prior to the twenty-fifth (25th) calendar day of each calendar month (or more frequently if so requested by the Lender for good reason), a detailed calculation of the Borrowing Base as of the close of the immediately preceding calendar month, in form and substance, and with supporting documentation; (including, without limitation, receivables and payables agings as of the close of the immediately preceding calendar month) as may reasonably be required by the Lender;                     (e)          As soon as approved by the Borrower’s Board of Directors (but in any event not later than thirty (30) days after the beginning of each Fiscal Year), a budget and operating plan (on a month-by-month basis) for such Fiscal Year, in such detail as may reasonably be required by the Lender;                     (f)          As and when distributed to the Borrower’s stockholders, copies of all proxy materials, reports and other information which the Borrower provides to its stockholders; and as and when distributed to any other holders of Indebtedness of the Borrower or the Subsidiaries, copies of all reports, statements and other information provided to such lenders; and                     (g)          Promptly, from time to time, such other information (including, without limitation, receivables and payables agings, and sales reports) regarding the Borrower’s or any Subsidiary’s operations, assets, business, affairs and financial condition, as the Lender may reasonably request. To the extent that the financial statements required by Sections 5.04(a) and 5.04(b) are contained in any SEC Reports filed by the Borrower within the required time period for the delivery of such financial statements, then the Borrower shall be deemed to have complied with the subject financial statement delivery by notifying the Lender of the filing of the subject SEC Report. To the extent that any report or other delivery required under this Section 5.04 or elsewhere in this Agreement will, at the time of anticipated delivery to the Lender, contain any material non-public information, the Borrower will notify the Lender thereof as promptly as practicable prior to the delivery of such report (but without disclosing the specific items of material non-public information or the nature thereof), and if so requested by the Lender prior to the required date of the information delivery hereunder, the Borrower shall (x) if reasonably practicable, redact such material non-public information from the subject report prior to the delivery thereof to the Lender, or (y) defer delivery of such report until such time as the Borrower has made public disclosure of the subject material information or the Lender has affirmatively requested delivery of such report.  Absent timely request by the Lender as aforesaid, the Borrower shall make the required delivery to the Lender on a timely basis. 31           Section 5.05.  Books and Records; Inspection.  Maintain centralized books and records regarding all of the Business Operations at the Borrower’s principal place of business, and permit agents or representatives of the Lender to inspect, at any time during normal business hours, upon reasonable notice, and without undue material disruption of the Business Operations, all of the Borrower’s and its Subsidiaries’ various books and records, to make copies, abstracts and/or reproductions thereof, and to discuss the business and affairs of the Borrower and the Subsidiaries with the management of the Borrower.           Section 5.06.  Accounting.  Maintain a standard system of accounting in order to permit the preparation of financial statements in accordance with GAAP and Regulation S-X promulgated under the Act.           Section 5.07.  Reimbursements.  Pay or reimburse the Lender or other appropriate Persons on demand (after permitting the Borrower to review same) for all reasonable costs, expenses and other charges incurred or payable from time to time in connection with the transactions contemplated by this Agreement, any waivers or amendments in respect of any Loan Documents, and any “workout” or enforcement action, including but not limited to any and all search fees, recording fees, costs of inspections and legal and accounting fees.           Section 5.08.  Environmental Response.  In the event of any material discharge, spill, injection, escape, emission, disposal, leak or other Release of Hazardous Substances in amounts in violation of applicable Environmental Laws by the Borrower or any Subsidiary on any Real Property owned or leased by the Borrower or any Subsidiary, which is not authorized by a permit or other approval issued by the appropriate governmental agencies and which requires notification to or the filing of any report with any federal or state governmental agency, the Borrower shall promptly: (a) notify the Lender; and (b) comply with the notice requirements of the Environmental Protection Agency and applicable state agencies, and take all steps necessary to promptly clean up such discharge, spill, injection, escape, emission, disposal, leak or other Release in accordance with all applicable Environmental Laws and the Federal National Contingency Plan, and, if required, receive a certification from all applicable state agencies or the Environmental Protection Agency, that such Real Property has been cleaned up to the satisfaction of such agency(ies).           Section 5.09.  Management.  Cause Todd E. Wille to continue to be employed or to function as the chief executive officer of the Borrower, and Steven Bonham to be employed or to function as the chief financial officer of the Borrower, unless a successor is appointed within one hundred eighty (180) days after the termination of such individual’s employment, and such successor is reasonably satisfactory to the Lender; provided, however, that such Lender approval shall not be required from and after such time as the principal balance of the Term Loans is reduced to less than $2,000,000.           Section 5.10.  Use of Proceeds.  Cause all proceeds of the Loans to be utilized solely in the manner and for the purposes set forth in Section 2.04 hereof. 32           Section 5.11.  Future Subsidiaries.  At any time and from time to time when the Borrower or any of its Domestic Subsidiaries proposes to form or acquire any Domestic Subsidiary subsequent to the Closing Date, the Borrower shall give written notice thereof to the Lender reasonably in advance of the formation or acquisition of such Domestic Subsidiary, providing information therefor of the type called for in Schedule 3.02 of the Disclosure Schedule; and contemporaneously with the formation or acquisition of such new Domestic Subsidiary, the Borrower shall cause such new Domestic Subsidiary to execute and deliver (a) a guaranty agreement in substantially the form of the Guaranty Agreement (or a joinder agreement with respect to the existing Guaranty Agreement in form and substance reasonably satisfactory to the Lender), and (b) a Collateral Agreement (with completed perfection certificate and other appropriate Security Documents) in substantially the form of the Collateral Agreement as currently in place (or a joinder agreement with respect to the existing Collateral Agreement in form and substance reasonably satisfactory to the Lender) and other Security Documents as reasonably requested by the Lender.           Section 5.12.  Landlord Waivers.  To the extent requested by the Lender from time to time subsequent to the Closing Date, the Borrower and the Subsidiaries shall use their commercially reasonable efforts to obtain any and all landlord waivers and/or access agreements requested by the Lender, in form and substance reasonably satisfactory to the Lender.           Section 5.13.  Authorized Shares.  To the extent that, on the date of this Agreement, the Borrower has an insufficient number of authorized and unreserved shares of Common Stock (after accounting for all outstanding shares, all options, warrants, convertible securities and other purchase rights, and all option plans) to satisfy the conversion and exercise rights under the Term Notes and the Warrants, the Borrower shall use its commercially reasonable efforts to create additional available shares of Common Stock sufficient to satisfy such conversion and exercise rights, including through restructuring the Related Transactions and other transactions to reduce or eliminate requirements to issue Common Stock.  To the extent that such efforts fail to free up the required shares of authorized Common Stock, the Borrower shall, subsequent to the Closing Date, use all good faith efforts to seek approval of a sufficient increase in its authorized Common Stock at the next stockholder meeting called or held subsequent to the Closing Date; provided, that if such increase is not approved at such stockholder meeting, the Borrower shall continue to use all good faith efforts to obtain such approval as promptly as practicable.  Pending any required increase in the authorized Common Stock, (a) the available shares of authorized Common Stock shall be reserved first for the exercise rights under the Warrants, next to the conversion rights under the Tranche 1 Term Note, next to the conversion rights under the Tranche 2 Term Note, and finally to the conversion rights under the Tranche 3 Term Note, (b) no shares of Common Stock shall hereafter be reserved for any other purpose, and (c) the Borrower shall not grant or issue options, warrants, convertible securities or other purchase rights (other than the Term Notes and the Warrants) for more than 475,000 shares of Common Stock.  Upon stockholder approval of any such required increase, the Borrower shall promptly file a certificate of amendment of its certificate of incorporation to give effect to such increase. VI. NEGATIVE COVENANTS           The Borrower hereby covenants and agrees that, until all Obligations (whether now existing or hereafter arising) have been paid in full and the Revolving Credit Commitment has been terminated, unless the Lender shall otherwise consent in writing, the Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly: 33           Section 6.01.  Indebtedness.  Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, other than:                     (a)          Indebtedness to the Lender pursuant to the Loan Documents;                     (b)          liabilities with respect to trade obligations, accounts payable, advances, royalty or other similar payments, operating leases and other normal accruals incurred in the ordinary course of business, or with respect to which the Borrower or the subject Subsidiary is contesting in good faith the amount or validity thereof by appropriate proceedings, and then only to the extent that the Borrower or the subject Subsidiary has set aside on its books adequate reserves therefor;                     (c)          Indebtedness existing on the date of this Agreement and reflected in the Financial Statements or the footnotes thereto or owed to those Persons, in those amounts and having those maturities as set forth in Schedule 3.01 of the Disclosure Schedule;                     (d)          Capitalized Leases reflected in the Financial Statements, and Capitalized Leases hereafter entered into by the Borrower or its Subsidiaries;                     (e)          purchase money Indebtedness incurred in connection with the Borrower’s or its Subsidiaries’ acquisition of capital assets;                     (f)          Subordinated Debt in such amounts and upon such terms and conditions as shall be acceptable to the Lender in its sole and absolute discretion;                     (g)          intercompany Indebtedness between the Borrower and any Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries;                     (h)          Guarantees to the extent permitted pursuant to Section 6.03 below; and                     (i)          other unsecured Indebtedness not otherwise permitted by this Agreement in an aggregate amount not to exceed $100,000 at any time outstanding.           Section 6.02.  Liens.  Create, incur, assume or suffer to exist any Lien or other encumbrance of any nature whatsoever on any of its assets, now or hereafter owned, other than:                     (a)          subject to Section 5.02 above, Liens securing the payment of taxes which are either not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which the Borrower or the subject Subsidiary shall have set aside on its books adequate reserves;                     (b)          deposits under workers’ compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of money borrowed) or leases, or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; 34                     (c)          statutory Liens of landlords and Liens imposed by law, such as, carriers’, warehousemen’s, materialmen’s or mechanics’ liens, incurred by the Borrower or any Subsidiary in good faith in the ordinary course of business and discharged promptly after same are incurred; fully bonded Liens arising out of a judgment or award against the Borrower or any Subsidiary with respect to which the Borrower or such Subsidiary shall currently be prosecuting an appeal, a stay of execution pending such appeal having been secured; and Liens arising out of a judgment or award against the Borrower or any Subsidiary which are fully covered by insurance (subject to applicable deductibles) and for which the relevant insurer has not denied or disclaimed coverage;                     (d)          other Liens incurred in connection with Indebtedness expressly permitted pursuant to Section 6.01(d) and/or Section 6.01(e) above, provided that such Liens do not extend to any assets or property other than the specific assets or properties acquired pursuant to such permitted Indebtedness;                     (e)          encumbrances consisting of easements, rights-of-way, survey exceptions and other similar restrictions on the use of Real Property, or minor irregularities in title thereto which do not materially impair the use of such property in the operation of the business of the Borrower and its Subsidiaries;                     (f)          Liens in existence on the date of this Agreement, as set forth on Schedule 6.02 of the Disclosure Schedule;                     (g)          Liens arising out of judgments or awards (i) which are fully covered by insurance (subject to applicable deductibles) and for which the relevant insurer has not denied or disclaimed coverage, or (ii) with respect to which the Borrower or the subject Subsidiary shall be prosecuting an appeal in good faith and in respect of which a stay of execution shall have been issued;                     (h)          Liens in favor of the Lender; and                     (i)          extensions, renewals or replacements of any Lien referred to in clauses (a) through (f) above, provided that same shall not effect any increase in any principal amount secured thereby.           Section 6.03.  Guarantees.  Guarantee, endorse or otherwise in any manner become or be responsible for obligations of any other Person, except (a) endorsements of negotiable instruments for collection in the ordinary course of business, and (b) guarantees by the Borrower of obligations of Wholly-Owned Subsidiaries in the ordinary course of business.           Section 6.04.  Sales of Assets and Management.  (a) Sell, lease, transfer, encumber or otherwise dispose of any of the Borrower’s or any Subsidiary’s properties, assets, rights, licenses or franchises other than (i) sales of inventory in the ordinary course of business, (ii) licenses, joint ventures and related transactions entered into, modified or terminated in the ordinary course of business, or (iii) the disposition of surplus or obsolete personal properties in the ordinary course of business, or (b) permit any Affiliate of the Borrower (other than a Subsidiary which is 35 a party to the Collateral Agreement) to own or obtain any patent, patent application, copyright, copyright application, trademark, trademark application, license, or other intangible asset relating to the Business Operations except in the normal course of business on terms and conditions no less favorable to the Borrower or any Subsidiary than those which could be obtained in an arms’ length transaction with an unaffiliated third party.           Section 6.05.  Sale-Leaseback.  Enter into any arrangement, directly or indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or transfer any property (real, personal or mixed) used or useful in the Business Operations, whether now owned or hereafter acquired, and thereafter rent or lease such property.           Section 6.06.  Investments; Acquisitions.  Make any Investment in, or otherwise acquire or hold securities (including, without limitation, capital stock and evidences of Indebtedness) of, or make loans or advances to, or enter into any arrangement for the purpose of providing funds or credit to, any other Person (including any Affiliate), except:                     (a)          existing Investments in Arrango Software International, Inc. and Unify Japan KK, provided that no new Investment shall be made in either such Person after the date of this Agreement;                     (b)          Investments in Wholly-Owned Subsidiaries which have complied with the requirements of Section 5.11 hereof;                     (c)          advances (to the extent permitted by Applicable Law, including federal securities laws) to employees of the Borrower or any Wholly-Owned Subsidiaries for normal business expenses not to exceed at any time $15,000 in the aggregate;                     (d)          Investments of excess cash generated in the Business Operations in Cash Equivalents;                     (e)          Investments of cash in overnight deposits or other customary cash management Investments with commercial banks or in commercial paper satisfying the criteria for such banks or commercial paper as set forth in the definition of Cash Equivalents; and                     (f)          other Investments not otherwise permitted by this Agreement in an aggregate amount not to exceed $100,000.           Section 6.07.  Corporate Form; Acquisitions.  Except for the Related Transactions, dissolve or liquidate, or consolidate or merge with or into, sell all or substantially all of the assets of the Borrower or any Subsidiary to, or acquire all or substantially all of the securities, assets or properties of, any other Person, except for (a) consolidations of a Subsidiary with a Wholly-Owned Subsidiary; (b) mergers of a Wholly-Owned Subsidiary into the Borrower or into a Wholly-Owned Subsidiary; or (c) sales to the Borrower or another Subsidiary  for fair value.           Section 6.08.  Dividends and Redemptions.  Directly or indirectly declare or pay any dividends, or make any distribution of cash or property, or both, to any Person in respect of any of the shares of the capital stock or other equity securities of the Borrower or any other Person, or directly or indirectly redeem, purchase or otherwise acquire for consideration any securities or 36 shares of the capital stock or other equity securities of the Borrower or any other Person; provided, that this Section 6.08 shall not be deemed to prohibit the payment of dividends or distributions by any Subsidiary to the Borrower or to any other direct or indirect Wholly-Owned Subsidiary.           Section 6.09.  Compensation.  Directly or indirectly pay any compensation of any types or in any amounts to any executive officers of the Borrower except (a) in accordance with the employment agreements between the Borrower and such executive officers as in effect on the Closing Date, (b) in accordance with the compensation levels disclosed in Schedule 6.09 of the Disclosure Schedule, or (c) as otherwise approved by the independent Compensation Committee of the Board of Directors of the Borrower but in no case in any amount or amounts which would cause or reasonably be expected to cause a Material Adverse Effect.           Section 6.10.  Change of Business.  Directly or indirectly: (a) engage in a business materially different from the general nature of the Business Operations (i) as now being conducted, or (ii) as the same may hereafter be reasonably expanded from time to time in like areas of business; (b) wind up the Business Operations or cease substantially all of its normal Business Operations for a period in excess of ten (10) consecutive days; or (c) suffer any material disruption, interruption or discontinuance of a material portion of its normal Business Operations for a period in excess of ten (10) consecutive days.           Section 6.11.  Receivables.  Sell or assign in any way any accounts receivable, promissory notes or trade acceptances held by the Borrower or any Subsidiary with or without recourse, except for collections (including endorsements) in the ordinary course of business.           Section 6.12.  Certain Amendments.  Agree, consent, permit or otherwise undertake to amend any of the terms or provisions of the Borrower’s or any Subsidiary’s Organic Documents, or the Acquisition Agreement, in a manner which may impair in any respect any of the Lender’s rights under any of the Loan Documents.           Section 6.13.  Affiliate Transactions.  Enter into any Contract, agreement or transaction with any Affiliate of the Borrower except (a) as disclosed in Schedule 6.13 of the Disclosure Schedule, (b) for intercompany Indebtedness between the Borrower and any Wholly-Owned Subsidiary or between any Wholly-Owned Subsidiaries, or (c) in the normal course of business on terms and conditions no less favorable to the Borrower or any Subsidiary than those which could be obtained in an arms’ length transaction with an unaffiliated third party.           Section 6.14.  Fiscal Year.  Amend its Fiscal Year.           Section 6.15.  Subordinated Debt.  Prepay, redeem or purchase any Subordinated Debt. VII. DEFAULTS           Section 7.01.  Events of Default.  Each of the following events is herein, and in the Notes, sometimes referred to as an Event of Default:                     (a)          if any representation or warranty made herein or in any other Loan Document, or in any certificate, financial statement, Borrowing Base report, instrument or other 37 written statement furnished by the Borrower or any Subsidiary in connection with this Agreement or any of the borrowings hereunder, shall (subject only to any changes occurring in the ordinary course of the Business Operations that do not and are not reasonably likely to have a Material Adverse Effect) be false, inaccurate or misleading in any material respect when made or when deemed made hereunder;                     (b)          any default in the payment of any principal or interest under any of the Notes or any other Obligations when the same shall be due and payable, whether at the due date thereof or at a date required for prepayment or by acceleration or otherwise, and the continuance of any such non-payment (in whole or in part) for a period of three (3) Business Days;                     (c)          any default in the due observance or performance of any covenant, condition or agreement contained in any Section of Article VI hereof, which, if capable of being cured, is not fully cured within thirty (30) days after the occurrence thereof;                     (d)          any default in the due observance or performance of any covenant, condition or agreement to be observed or performed under Article V hereof, or otherwise pursuant to the terms hereof or any other Loan Document and not addressed in Sections 7.01(a), (b) or (c), and the continuance of such default unremedied for a period of thirty (30) days (five (5) Business Days in the case of Section 5.01(d) hereof) after written notice thereof to the Borrower, or such other cure period as may be provided in the applicable Loan Document;                     (e)          any default with respect to any Indebtedness for money borrowed of the Borrower or any of the Subsidiaries (other than to the Lender) in an amount in excess of $50,000, if the effect of such default is to permit the holder, with or without notice or lapse of time or both, to accelerate the maturity of any such Indebtedness for money borrowed or to cause such Indebtedness for money borrowed to become due prior to the stated maturity thereof;                     (f)          if the Borrower or any Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code, or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against him or it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;                     (g)          if any order, judgment or decree shall be entered, without the application, approval or consent of the Borrower or any Subsidiary, by any court of competent jurisdiction, approving a petition seeking reorganization of the Borrower or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Borrower or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days; 38                     (h)          if final judgment(s) for the payment of money in an uninsured amount in excess of $50,000 individually or in the aggregate shall be rendered against the Borrower and/or any Subsidiary, and the same shall remain undischarged or unbonded for a period of thirty (30) consecutive days, during which execution shall not be effectively stayed;                     (i)          the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Borrower or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $50,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;                     (j)          if any Lien purported to be created by any Security Document shall cease to be a valid perfected first priority Lien (subject only to any priority accorded by law to Permitted Liens) on the assets or properties covered thereby, or the Borrower or any Subsidiary shall assert in writing that any Lien purported to be created by any Security Document is not a valid perfected first priority lien (subject only to any priority accorded by law to Permitted Liens) on the assets or properties purported to be covered thereby;                     (k)          if any of the Loan Documents shall cease to be in full force and effect (other than as a result of the discharge thereof in accordance with the terms thereof or by written agreement of all parties thereto);                     (l)          if the Common Stock shall not be listed or traded on any national securities exchange, or shall cease to be actively quoted on the OTC Bulletin Board, for any period in excess of thirty (30) consecutive days; or                     (m)          if the Borrower or any Subsidiary shall be convicted of any criminal offense; or                     (n)          the occurrence of a Material Adverse Effect.           Section 7.02.  Remedies.  Upon the occurrence of any Event of Default, and at all times thereafter during the continuance thereof: (a) the Notes, and any and all other Obligations, shall, at the Lender’s option (except in the case of Sections 7.01(f) and 7.01(g) hereof, the occurrence of which shall automatically effect acceleration, regardless of any action or forbearance in respect of any prior or ongoing Default or Event of Default which may be inconsistent with such automatic acceleration), become immediately due and payable, both as to principal, interest and other charges, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes or other evidence of such Obligations to the contrary notwithstanding, (b) all outstanding Obligations under the Notes, and all other outstanding Obligations, shall bear interest at the default rate of interest provided in the Notes, (c) the Lender may file suit against the Borrower on the Notes and against the Borrower and the Subsidiaries under the other Loan Documents and/or seek specific performance or injunctive relief thereunder (whether or not a remedy exists at law or is adequate), (d) the Lender shall have the right, in accordance with the Security Documents, to exercise any and all remedies in respect of such or all of the Collateral as the Lender may determine in its discretion (without any requirement of marshalling of assets, or other such requirement), and (e) the Revolving 39 Credit Commitment shall, at the Lender’s option (except in the case of Sections 7.01(f) and 7/01(g) hereof, the occurrence of which shall automatically effect termination, regardless of any action or forbearance in respect of any prior or ongoing Default or Event of Default which may be inconsistent with such automatic termination), be immediately terminated or reduced, and the Lender shall be under no further obligation to consider making any further Advances. VIII. PARTICIPATING LENDERS; ASSIGNMENT.           Section 8.01.  Participations.  Anything in this Agreement to the contrary notwithstanding, the Lender may, at any time and from time to time, without in any manner affecting or impairing the validity of any Obligations, transfer, assign or grant participating interests in the Loans as the Lender shall in its sole discretion determine, to such other Persons (the “Participants”) as the Lender may determine.  Upon any such transfer, assignment or granting of participating interests, the Participants shall be deemed to be included within the term “Lender” for all purposes of this Agreement, subject to such agreements and arrangements as the Lender and the Participants may agree upon. Notwithstanding the granting of any such participating interests: (a) the Borrower shall look solely to the Lender for all purposes of this Agreement and the transactions contemplated hereby, (b) the Borrower shall at all times have the right to rely upon any waivers or consents signed by the Lender as being binding upon all of the Participants, and (c) all communications in respect of this Agreement and such transactions shall remain solely between the Borrower and the Lender (exclusive of Participants) hereunder.           Section 8.02.  Transfer.  Anything in this Agreement to the contrary notwithstanding, the Lender may, at any time and from time to time, without in any manner affecting or impairing the validity of any Obligations, transfer and assign all or any portion of its interest in this Agreement, the Notes and the other Loan Documents to any Person (an “Assignee Lender”) as the Lender may determine.  Upon any such transfer or assignment, the Assignee Lender shall be deemed to succeed (to the extent of the interest assigned) to the rights and obligations of the Lender for all purposes of this Agreement.  In the event of any transfer and assignment of the Lender’s entire interest in this Agreement, the Notes and the Security Documents, the Lender shall be replaced by the Assignee Lender as “Secured Party” under the Collateral Agreement and all other Security Documents. IX. MISCELLANEOUS           Section 9.01.  Survival.  This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto, shall survive the making by the Lender of the Loans and the execution and delivery to the Lender of the Notes, and shall continue in full force and effect for so long as the Notes or any other Obligations are outstanding and unpaid or the Revolving Credit Commitment remains outstanding.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party; and all covenants, promises and agreements in this Agreement contained, by or on behalf of the Borrower shall inure to the benefit of the successors and assigns of the Lender. 40           Section 9.02.  Indemnification.  The Borrower shall indemnify the Lender and its directors, officers, employees, attorneys and agents against, and shall hold the Lender and such Persons harmless from, any and all losses, claims, damages and liabilities and related expenses, including reasonable counsel fees and expenses, incurred by the Lender or any such Person arising out of, in any way connected with, or as a result of: (a) the use of any of the proceeds of the Loans made by the Lender to the Borrower; (b) this Agreement, the ownership and operation of the Borrower’s and any Subsidiary’s assets, including all Real Properties and improvements or any Contract, the performance by the Borrower or any other Person of their respective obligations thereunder, and the consummation of the transactions contemplated by this Agreement; (c) any finder’s fee, brokerage commission of other such obligation payable or alleged to be payable in respect of the transactions contemplated by this Agreement which arises or is alleged to arise from any agreement, action or conduct of the Borrower or any of its Affiliates, and/or (d) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not the Lender or its directors, officers, managers, employees, attorneys or agents are a party thereto; provided that such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses arising from (i) any unexcused breach by the Lender of any of its obligations under this Agreement, (ii) the willful misconduct or gross negligence of the Lender as determined by a final, non-appealable judgment of a court of competent jurisdiction, or (iii) the breach of any commitment or legal obligation of the Lender to any Person other than the Borrower or its Affiliates, provided that such breach is determined pursuant to a final and nonappealable decision of a court of competent jurisdiction.  The foregoing indemnity shall remain operative and in full force and effect regardless of the expiration or any termination of this Agreement, the consummation of the transactions contemplated by this Agreement, the repayment of the Loans, the invalidity or unenforceability of any term or provision of any Loan Document, any investigation made by or on behalf of the Lender, and the content or accuracy of any representation or warranty made by the Borrower or any Subsidiary in any Loan Document.  All amounts due under this Section 9.02 shall be payable on written demand therefor.           Section 9.03.  Governing Law.  This Agreement and the other Loan Documents shall (irrespective of where same are executed and delivered) be governed by and construed in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws).           Section 9.04.  Waiver and Amendment.  Neither any modification or waiver of any provision of this Agreement, the Notes, or any other Loan Document, nor any consent to any departure by the Borrower or any Subsidiary therefrom, shall in any event be effective unless the same shall be set forth in writing duly signed or acknowledged by the Lender and all parties to such Loan Document, and then such waiver or consent shall be effective only in the specific instance, and for the specific purpose, for which given.  No notice to or demand on the Borrower in any instance shall entitle the Borrower to any other or future notice or demand in the same, similar or other circumstances.           Section 9.05.  Reservation of Remedies.  Neither any failure nor any delay on the part of the Lender in exercising any right, power or privilege hereunder or under the Notes or any other Loan Document shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or future exercise, or the exercise of any other right, power or privilege. 41           Section 9.06.  Notices.  All notices, requests, demands and other communications under or in respect of this Agreement or any transactions hereunder shall be in writing (which may include telegraphic or telecopied communication) and shall be personally delivered or mailed (by prepaid registered or certified mail, return receipt requested), sent by prepaid recognized overnight courier service, or telegraphed or telecopied by facsimile transmission to the applicable party at its address or telecopier number indicated below.   If to the Lender:           ComVest Capital LLC     One North Clematis, Suite 300     West Palm Beach, FL 33401     Attention: Chief Financial Officer     Telecopier: (212) 829-5986         with a copy to:           Greenberg Traurig, LLP     200 Park Avenue     New York, New York  10166     Attention:  Shahe Sinanian, Esq.     Telecopier: (212) 801-6400         If to the Borrower:           Unify Corporation     2101 Arena Blvd., Suite 100     Sacramento, California 95834     Attention: Chief Financial Officer     Telecopier: (916) 928-6408         with a copy to:           DLA Piper US LLP     400 Capitol Mall, Suite 2400     Sacramento, California 95814     Attention:  Kevin A. Coyle, Esq.     Telecopier: (916) 930-3201 or, as to each party, at such other address or telecopier number as shall be designated by such party in a written notice to the other party delivered as aforesaid.  All such notices, requests, demands and other communications shall be deemed given (a) when personally delivered, (b) three (3) Business Days after being deposited in the mails with postage prepaid (by registered or certified mail, return receipt requested), (c) one (1) Business Day after being delivered to the telegraph company or overnight courier service, if prepaid and sent overnight delivery, addressed as aforesaid and with all charges prepaid or billed to the account of the sender, or (d) when sent by facsimile transmission to a telecopier number designated by such addressee. 42           Section 9.07.  Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not assign any of its rights or obligations hereunder without the prior written consent of the Lender.           Section 9.08.  Consent to Jurisdiction; Waiver of Jury Trial.  The Borrower hereby consents to the jurisdiction of all courts of the State of New York and the United States District Court for the Southern District of New York, as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of or with respect to this Agreement, any other Loan Document, any other agreements, instruments, certificates or other documents executed in connection herewith or therewith, or any of the transactions contemplated hereby or thereby, or any of the Borrower’s or any Subsidiary’s obligations hereunder or thereunder.  The Borrower hereby waives the right to interpose any counterclaims (other than compulsory counterclaims) in any action brought by the Lender hereunder or in respect of any other Loan Document, provided that this waiver shall not preclude the Borrower from pursuing any such claims by means of separate proceedings.  THE BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS WHICH IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS, AND ALSO WAIVES TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.  The Lender may file a copy of this Agreement as evidence of the foregoing waiver of right to jury trial.           Section 9.09.  Certain Waivers.  The Borrower and the Lender each hereby waives any claims for special, consequential or punitive damages in any way arising out of or relating to this Agreement, any of the other Loan Documents, or any breach hereof or thereof.           Section 9.10.  Severability.  If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be.           Section 9.11.  Captions.  The Article and Section headings in this Agreement are included herein for convenience of reference only, and shall not affect the construction or interpretation of any provision of this Agreement.           Section 9.12.  Sole and Entire Agreement.  This Agreement, the Notes, the other Loan Documents, and the other agreements, instruments, certificates and documents referred to or described herein and therein constitute the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersede all prior discussions, agreements and understandings of every kind and nature between the parties as to such subject matter.           Section 9.13.  Confidentiality.  The Lender shall not disclose any Confidential Information to any Person without the prior consent of the Borrower; provided, however, that nothing herein contained shall limit any disclosure of the tax structure of the transactions contemplated hereby, or the disclosure of any information (a) to the extent required by statute, 43 rule, regulation or judicial process, (b) to counsel for the Lender, (c) to bank examiners, auditors, accountants or, if required by law, any regulatory authority, (d) to the officers, partners, managers, directors, employees, agents and advisors (including independent auditors and counsel) of the Lender, (e) in connection with any litigation which relates to this Agreement to which the Lender is a party, (f) to a subsidiary or Affiliate of the Lender, or (g) to any assignee or participant (or prospective assignee or participant) which agrees to be bound by this Section 9.13, and further provided, that in no event shall the Lender be obligated or required to return any materials furnished by the Borrower.  The obligations of the Lender under this Section 9.13 shall supersede and replace the obligations of the Lender under any confidentiality letter in respect of this financing previously signed and delivered by the Lender to the Borrower.           Section 9.14.  Counterparts; Fax Signatures.  This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same agreement.  This Agreement may be executed by fax signatures, each of which shall be fully binding on the signing party.           Section 9.15.  Short Selling.  So long as ComVest Capital LLC and/or any of its Affiliates is the holder of any of the Notes, any of the Warrants and/or any shares of Common Stock acquired upon conversion of any of the Term Notes or exercise of any of the Warrants, ComVest Capital LLC and its Affiliates shall not engage in any uncovered short sales of Common Stock (provided that, for purposes of this Section 9.15, the sale of or commitment to sell shares which may be acquired by ComVest Capital LLC from the conversion of Term Notes or the exercise of Warrants shall not be deemed to be an uncovered short sale). [The remainder of this page is intentionally blank] 44           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officer as of the day and year first written above.   COMVEST CAPITAL LLC               By: /s/ Larry E. Lenig, Jr.     --------------------------------------------------------------------------------   Name: Larry E. Lenig, Jr.   Title: Senior Partner/Portfolio Manager               UNIFY CORPORATION               By: /s/ Todd E. Wille     --------------------------------------------------------------------------------   Name: Todd E. Wille   Title: President and CEO 45

Exhibit 10.24   Compensation of Directors Board members who are not employees of IMS receive compensation for Board service.  Messrs. Thomas and Carlucci are the only IMS employees now serving on the Board.  This summarizes the policy of IMS for compensation payable to non-employee Directors as in effect at February 16, 2006. Annual Retainer:   $45,000, payable in quarterly installments       Committee Chairman Fees:   $10,000 annually, payable in quarterly installments       Lead Director Fees:   $30,000 annually, payable in quarterly installments       Attendance Fees:   $1,500 for each Board meeting, $1,500 for each Board committee meeting       Stock Options:   7,000 shares annually; these options vest and become exercisable in three equal annual installments or earlier upon termination of service by death, disability or retirement or upon termination in other circumstances as determined by the Compensation and Benefits Committee, and expire seven years after grant or earlier following termination of service       Restricted Stock Units:   2,250 restricted stock units annually; these units are subject to a risk of forfeiture upon termination of service and restrictions on transferability for a one-year period, subject to acceleration upon death, disability or upon termination in other circumstances as determined by the Compensation & Benefits Committee; the units are settled by delivery of shares, and until that time do not have voting rights but carry a right to payment of unrestricted dividend equivalents, payable upon settlement.       Restricted Stock:   One-time grant of Common Stock with a value of $40,000 upon initial election as a Director; these shares are subject to a risk of forfeiture for five years but restrictions lapse upon death, disability or upon termination in other circumstances as determined by the Compensation and Benefits Committee; dividends are unrestricted.   Directors may elect to defer all or part of their compensation under our Non-Employee Directors’ Deferred Compensation Plan, a non-qualified plan. Under this plan, the participating Directors may direct deferrals to an account to be credited as deferred cash or deferred share units.   --------------------------------------------------------------------------------   The number of share units acquired is determined by dividing the cash amount deferred by 100% of the fair market value of the stock at the deferral date. A feature of the Plan permitting deferral of cash compensation into stock options is not available in 2006. Deferrals of restricted stock units are also permitted.  Deferrals are non-forfeitable.                 If there is a change in control of IMS, Directors’ stock options, restricted stock or restricted stock units generally will become vested. For this purpose, the term “change in control” has the same meaning as under the Change-in-Control Agreements, described in the Company’s proxy statement for its 2005 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on March 25, 2005.                   Expenses for attending Board and committee meetings and fulfilling other duties as directors are reimbursed by IMS.                   The Board of Directors has adopted share ownership guidelines for non-employee Directors because it believes that each non-employee Director should maintain a meaningful investment in IMS.     2 --------------------------------------------------------------------------------

EXHIBIT 10.1   Summary of Material Terms of Terex Corporation Outside Directors’ Compensation Program   Directors who are employees of the Company receive no additional compensation by virtue of their being directors of the Company. For their service, outside directors receive an annual retainer, as described below. All directors of the Company are reimbursed for travel, lodging and related expenses incurred in attending Board and committee meetings.   The compensation program for outside directors is designed to encourage outside directors to receive a significant portion of their annual retainer for Board service in Terex common stock, $.01 par value per share (“Common Stock”), or in options for Common Stock, or both, to enable directors to defer receipt of their fees and to satisfy the Company's Common Stock ownership objective for outside directors.   Under the program, outside directors receive annually the equivalent of $50,000 for service as a Board member (or a prorated amount if a director’s service begins other than on the first day of the year). Each director elects annually, for the particular year, to receive this fee in (i) shares of Common Stock currently, (ii) options to purchase shares of Common Stock currently, (iii) cash (which may be deferred pursuant to the Company's Deferred Compensation Plan), or (iv) any combination of the three preceding alternatives. If a director elects to receive shares of Common Stock currently, then 40% of this amount is paid in cash to offset the tax liability related to such election. If a director elects to receive cash, this cash must be deferred pursuant to the Company's Deferred Compensation Plan and invested in the Common Stock account, unless the director has already satisfied the Company's Common Stock ownership objective described below, in which case the cash may be received currently or deferred into an interest-bearing account in the Company's Deferred Compensation Plan.   In addition, effective in 2006, each director will receive annually the equivalent of $60,000 in either (i) options to purchase shares of Common Stock currently or (ii) cash which must be deferred pursuant to the Company's Deferred Compensation Plan and invested in either the Common Stock account or the interest-bearing account.   For purposes of calculating the number of shares of Common Stock into which any fixed sum translates, Common Stock is valued at its per share closing price on the New York Stock Exchange (“NYSE”) on the day immediately preceding the grant date. For 2006, for purposes of calculating the number of options into which any fixed sum translates, each option to purchase a share is valued at 25% of the per share closing price of Common Stock on the NYSE on the day immediately preceding the grant of such option. Options have an exercise price equal to the per share closing price of Common Stock on the NYSE on the day immediately preceding the grant of such option, vest immediately upon grant and have a ten-year term.   Directors receive a fee of $1,000 for each Board or committee meeting attended in person and $500 for each Board or committee meeting attended telephonically. In addition, each director who serves as chairperson of a committee of the Board receives an annual retainer of $10,000, payable in cash, and each director who serves as a member of a committee (including any committee that the director chairs) receives an annual retainer of $5,000, payable in cash. For a director whose service begins other than on the first day of the year, any retainer is prorated. Directors may elect to defer receipt of retainers for committee service into the Company’s Deferred Compensation Plan.   Any Board or committee retainers that are deferred into the Common Stock account of the Deferred Compensation Plan receive a matching 25% contribution from the Company in Common Stock. Board retainers and committee retainers (or portions of each) may also be deferred to an interest-bearing account under the Company's Deferred Compensation Plan and earn interest, which is compounded annually. The rate of interest for 2005 was approximately 5.64% per annum. Payment of any deferral (whether in Common Stock   -1-    --------------------------------------------------------------------------------   or cash) is deferred until the director’s termination of service or such earlier date as the director specifies when electing the applicable deferral.   The Company's director compensation program also establishes a Common Stock ownership objective for outside directors. Each director is expected to accumulate, over their first three years of Board service, the number of shares of Common Stock that is equal in market value to three times the annual retainer for Board service ($150,000). Once this ownership objective is achieved, the director is expected to maintain such minimum ownership level. The intent is to encourage acquisition and retention of Common Stock by directors, evidencing the alignment of their interests with the interests of stockholders. To this end, each new director receives an award of shares of Common Stock having a market value of $25,000 on the date of the award. Each new director must defer receipt of this award under the Company’s Deferred Compensation Plan.       -2-       

Number:0346012006200002 Shenyang City Commercial Bank Maximum Amount of Pledge Agreement Borrower: Shenyang Jitian Property Co., Ltd. Date:03/07/2006 1 -------------------------------------------------------------------------------- Pledgor (Party A): Shenyang Jitian Property Co., Ltd. Address: No.301-8, Shuangyuan Road, Dongling District, Shenyang Post code: Telephone: 22813888 Fax: 22813999 Legal representative: DUAN Jing Shi Bank details and account number: Pledgee (Party B): Shenyang City Commercial Bank (Holdings) Co., Ltd. Zhongshan. Branch Address: No.206, Zhongshan Road, Shenhe District, Shenyan Post code: 110013 Telephone: 22856375 Fax: Authorized representative: ZHANG Yun Debtor (Party C): Shenyang Jitian Property Co., Ltd. Address: No.301-8, Shuangyuan Road, Dongling District, Shenyang Post code: Telephone: 22813888 Fax: 22813999 Legal representative: DUAN Jing Shi Bank details and account number: Party A is willing to provide a pledge of maximum amount of loan for the creditor’s rights between Party B and the principal debtor under the principal agreement in order to achieve the realization of pledge rights. Therefore, this agreement is made and entered into by Party A and Party B in accordance with the PRC <Contract Law> and <Guarantee Law> through negotiation. Article one:   Definition The maximum amount of pledge refers to the pledgor provides a guarantee to its successive borrowing or other financing activities within the amount of loan granted, which means the pledgor provides a guarantee to its successive borrowing and other financing activities within the valid period of the loan granted (including the extension period). 2 -------------------------------------------------------------------------------- Article two:   Creditor’s rights on the guaranteed pledge Creditor’s rights on the guaranteed pledge refers to the loan granted by Party B to Party A from July 3, 2006 until July 2, 2009 and the maximum amount of the loan is RMB 550 million. Where Party A provides a gurantee under the terms of this agreement, the maximum amount of loan will be deducted by the real amount undertaken. All contracts, agreements, and other legal documents signed between Party A and the debtors hereunder has formed a relationship of creditors and debtors, are the principal agreements made under the terms agreed by the relevant parties. Article three:   Pledge The pledge provided by Party A to Party B are listed in the attachment- “List of Pledge” (the number of attachment is______). The total value of the pledges is RMB 781,789,620 and the pledge rate is 70%. Where the pledge rate is higher than the rate set herein due to any reasons, Party A will be responsible to compensate or to restate the rate above by using the methods which would be accepted by Party B. Article four:   Pledge range The pledge scope includes the principal of the debts, interest, interest fines, compound interest, fines for breaching agreement, compensation for damages, fees for the realization of creditor’s rights and pledge rights (including but not limited to, litigation fees, lawyer’s fee and travel costs) and any other necessary charges. Article five:   Pledge term The pledge rights become invalid 2 years after the effective creditor’s rights litigation period has expired. Article six:   Declaration and guarantee of Party A 1. Party A has the complete, valid and legal rights over the pledges provided under this agreement and Party A is the sole and lawful owner of the pledges provided. Party A has absolute rights over all the pledges provided which is not joint-owned or co-owned. Where they are joint-owned or co-owned, the other party should fully understand this agreement and agrees in writing that this agreement is the only agreement that will have binding legal force and effect. 3 -------------------------------------------------------------------------------- 2. Party A promises that there is not any ownership dispute on the pledges as well as pledges being sealed up and seized.   3. Party A fully understands and accepts all the terms of the principal agreements set herein and is willing to provide pledges for the debtor under the principal agreements. All the statements made herein are genuine.   4. Party A guarantees that the pledges have already been approved or authorized by Board Resolution and other authorized organizations.   5. The pledges provided will not be constrained and cause any legal dispute, no other ownership over the pledges, or, notwithstanding, there are certain constraints but Party A has already disclosed to Party B.   6. All the information upon the pledges provided is legal, genuine, correct and complete. Article seven:   Rights and liabilities of Party A 1. Party A should provide all the ownership documentations, any other effective certifications and relevant information over the pledges provided. All the relevant documents should be kept by Party B after they have been confirmed by both parties.   2. Party A should duly inform Party B with its best knowledge and from the knowledge it should have, about anything that affects or may affect the pledge rights, including but not limited to, stock transfer, re-organization, consolidation, separation, equity reform, joint-investment, collaboration, merger, sub-contracting, leasing, alteration of business scope and registered capital, serious financial dispute, dispute over pledge rights, bankruptcy, temporary halt, dissolution, business certificate revoked and withdrawal etc. within the term of this agreement.   3. Within the term of this agreement, Party A shall not transfer, lease, re-pledge or in any other way to deal with the pledges provided or any part thereof without Party B’s consent. Where Party B has agreed Party A to dispose these pledges, Party A agrees Party B to choose one of the following methods and assist with the procedures accordingly:     a) Pay off the principal, interest and relevant charges within the time limit or in advance b) Turns into a fixed term savings and the receipt is kept as pledges. c) Obtain from a third Party that Party B has appointed.   4 --------------------------------------------------------------------------------   d) Party A can dispose the income obtained after Party A has provided new pledges accepted by Party B. 4. Where there is or there may be any infringement of pledge rights Party A shall be responsible to take any actions to prevent them.   5. Where Party B disposes the pledges under this agreement, Party A shall not create any obstacles, or take any actions that may hinder or delay Party A’s disposal process under this agreement hereof. Party A promises to assist Party B in accordance with Party B’s requirements in order to make Party B to achieve the realization of pledge rights as soon as possible.   6. After the debtors under the principal agreements have paid off all its debts, Party A is entitled to have its pledge removed under this agreement.   Article eight:   Rights and liabilities of Party B 1. When the principal agreements reach its expiry date or the debts are paid off before the expiry date, where the debtor under this agreement has not paid off all the principal and interest under the terms of this agreement, Party B is entitled to dispose the pledges hereof.   2. Where the income obtained from disposing the pledges fails to pay off all the debts under this agreement, Party B is entitled to recover all unpaid amount to the debtor under this agreement or to Party A. When there is a surplus after the settlement, Party B shall return the surplus back to Party A.   3. Where Party B and the debtor under the principal agreements agrees to have the principal agreements amended, all the other matters does not need Party A’s approval, excluding the extension period of the agreements or an increased loan amount, Party will not be exempt from undertaking its liabilities over the pledges under this agreement.   4. Party B is entitled to inspect the security conditions from time to time.   Article nine:   Security management 1. During the pledge period, Party A has the responsibility to keep all the pledges safe without any damage and shall pay all relevant taxations and charges, to own, use, manage and operate the pledges under complete and good conditions lawfully and duly, accept the inspections over the pledge conditions by Party B and cooperate with Party B voluntarily. 5 -------------------------------------------------------------------------------- 2. During the pledge period, where the decrease in value of the pledges is not caused by Party B, Party A should recover the value of the pledges to meet Party B’s requirements or to provide with the same decreased value of pledges recognized by Party B, otherwise Party A should be responsible for the value decreased under the principal agreements and undertake joint liabilities.   Article ten:   Insurance over the pledges 1. During the pledge period, before all the debts are fully paid off, Party A should undertake an insurance policy in accordance with relevant laws and the policy should be designated by Party B. The designated amount of insurance required by Party B should be paid fully. Party A is not allowed to suspend or rescind the insurance policy before Party B’s creditor’s rights finally gets its compensation. Where Party B’s creditor’s rights has not got its compensation when the policy reaches its expiry date, Party A should apply for an extension over the insurance term.   2. During the pledge period, Party A should have its original copy of insurance documents kept by Party B.   3. Party A shall ask the insurer to make a clear note on its insurance documents: Party B is the preferential compensation receiver (the first beneficiary. Where accident occurs, the insurer should send the compensation directly to the bank account designated by Party B. Where the pledges are already insured but the first beneficiary is not written in Party B’s name, the preferential compensation receiver should be changed to Party B’s name.   4. Party A agrees Party B to choose one of the following methods to deal with the compensation and assist with the relevant procedures:     1) Pay off the principal, interest and relevant charges within the time limit or in advance 2) Turns into a fixed term savings and the receipt is kept as pledges 3) Use for restoring the value of the pledges in order to recover the original value of the pledges 4) Obtain from a third Party that Party B appoints 5) Party A may dispose the income obtained after Party A has provided new pledges accepted by Party B 6 -------------------------------------------------------------------------------- Article eleven:   Compensation over the damages caused by a third Party 1. During the pledge period, where a decrease in value of the pledges is caused by a third Party, the compensation should be paid directly into the bank account designated by Party B. Party A has agreed that Party B can choose the method stated in Article 4 to deal with the compensation and assist with the relevant procedure.   2. During the pledge period, where the value of the pledges is not enough to compensate the principal, interest of the debt and the relevant charges, Party A shall provide new pledges accepted by Party B. If the value of the pledges remains unchanged, it will still be treated as a pledge provided. Article twelve:   The realization of pledge rights Party A agrees that Party B may choose one of the following methods to achieve the realization of pledge rights: 1. Convert the pledges into money to achieve the realization of pledge rights. Party B may accept compensation at the agreed price between Party A and Party B, or may accept compensation at the price valued by the authorized Valuation Organization, which has been appointed by Party B and Party A shall not oppose or dissent from the Valuation Organization and the valued price.   2. Sell the pledges to achieve the realization of pledge rights. Party B may sell directly or appoint Party B, or a third Party to seek a potential buyer, or sell the pledges by inviting public auction and the price should be in accordance with the item 1 stated above under this Article.   3. To achieve the realization of pledge rights by auction. Party B is entitled to appoint a registered, authorized auction company to have the pledges auctioned and Party A shall not oppose or dissent from the Auction Company appointed by Party B. Party B may set a minimum price for vendor value based on or not less than ______% of the debts unpaid under the principal agreements, or not set a fixed minimum price for vendor value. Party A has accepted all the auctions made and concluded in such a way. Where the auction is unsuccessful, Party B is entitled to re-appoint the previous company or appoint a new auction company to have the pledges re-auctioned.   Article thirteen:   Pledge registration 1. Party A and Party B shall go to legal registration authority or local notarization organization of pledgor to register the pledges within days after signing the agreement. Party A shall submit pledge right certificate, registration document 7 -------------------------------------------------------------------------------- originals and other right certificates to Party B on the effective date of the agreement. 2. During the effective period of the agreement, if the ownership or any right of pledge changes or transfers with written consent from Party B, relative Party shall go through registration procedure for change within legal period. Relative certificate and document after registration change shall be submitted to Party B. 3. After all debt under principal agreement and this agreement get discharged, Party B shall return pledge right certificate, registration document originals and other right certificates to Party A, and go through pledge registration cancellation procedure with Party A. Article fourteen:    Notarization and acceptance of execution 1. If any Party asks for notarization, this agreement shall be notarized at notarization organization according to national regulation. 2. Party A agrees Party B to apply for notarization for execution. If debtor fails to repay loan amount, interest and related expenses, Party B shall apply for execution with notarization at People’s court with jurisdiction. Party A agrees to give up all of rights of defense and rights which may decline to undertake obligations to Party B. Article fifteen:   Default responsibilities 1. After the agreement becomes effective, both Parties shall perform the obligations under the agreement. Any Party who fails to perform or completely comply with the obligations under the agreement shall undertake corresponding default responsibilities and bear the compensation for damages caused to the other Party. 2. If Party A fails to present and guarantee truly, accurately, completely or make intent misunderstanding which causes damages to Party B under Article six, Party A shall bear the compensation. 3. If the agreement becomes ineffective resulting from the faults of Party A, Party A shall compensate all damages of Party B based on the original pledge scope. 4. During the effective period, Party B shall immediately undertake pledgor right if any of the following events occurs:   a) Party A fails to repay to Party B before the expiration of the agreement. b) The agreement terminates before the due date under this agreement. c) Party A is undergoing suspension of business, out of business, bankruptcy, disbandment, withdrawal of business license. d) Party A fails to maintain the pledge in complete and good condition. e) Any event of Party A shall or may damage the interest of Party B. 8 -------------------------------------------------------------------------------- Article sixteen:   Other matter agreed by both Parties _________________________________________ Article seventeen:   Governing law This Agreement shall be governed by and construed in accordance with the laws of the People's Republic of China with binding force to both Parties. Article eighteen:   Dispute settlement Where any dispute is arises through performing this agreement, both parties should resolve them through negotiations. Where it cannot be settled through negotiations, both Parties agree to take method 2 to resolve: 1. Apply for arbitration to      . 2. Engage in litigation at the local People's Court where Party B locates. During the litigation and arbitration period, both Parties shall continue to comply with other terms except the dispute part. Article nineteen:    Accumulation of obligation 1. The obligations of Party B under this agreement are accumulative, which will not affect and exclude other rights of Party B committing to party A under the law and other agreements. Unless Party B presents in writing, its partial performance, non-performance or postponed performance for any right will not refer to abandon or partial abandon of the right, and will not affect or prevent Party B’s continuous performance of the right and other rights.   2. The obligations of Party A under this agreement are accumulative, which will not affect and exclude other rights of Party A committing to Party B under the law and other contracts. Unless there are additional mandatory regulations with the law or a recognition and consent in writing form from Party B, Party B will not be responsible for the obligations that Party A committed to a third party according to the law or the contract.   Article twenty:   Continuity of obligation The obligations of Party A under the agreement are continuous with complete legal binding force to its successors, assignees, receivers and transferees or equity after merger, restructuring and name change. It shall not be influenced by any dispute, 9 -------------------------------------------------------------------------------- claim, legal procedure, instruction of superior organization or other contracts that are signed between the debtor and any natural person or legal person. Moreover, it shall not be changed due to bankruptcy, insolvency, loss of equity qualification, change of bylaws or nature of debtor. Article twenty-one:   The effectiveness of the agreement 1. The agreement is an independent agreement of the principal agreement. If the principal agreement is null and void, the agreement is still valid. 2. If an article or part of an article in this agreement is invalid now or in the future, it will not affect the validity of this agreement or the rest of agreement and the article. Article twenty-two:   The Effectiveness, Amendment & Termination of the Agreement 1. This agreement becomes effective after meeting the following requirements.   a) It is signed and sealed by legal representatives (persons in charge) or authorized representatives of both Parties (if Party A is a natural person, only signature is required); b) Pledges in the “Pledge List” of this agreement have been legally registered. 2 Party A and Party B are not entitled to amend or dissolve this agreement before it expires except any special arrangement being made under this agreement. When amendment or dissolution of this agreement becomes necessary both Parties should reach agreement in writing through negotiations. Article twenty-three:    Miscellaneous 1. As to unsettled matters, both Parties could reach other written agreements as Appendixes to this agreement. Any Appendix, amendment and supplement are integral part of the agreement, and shall have the same legal binding force with the agreement. 2. Party A shall cover all expenses related with valuation, notarization, insurance, registration, appraisal, storage and withdrawal, etc. 3. Any notice, demand or communication such as telegrams, telexes, facsimiles shall be deemed effectively given after delivery. If given in letter it shall be deemed effectively given on mailing date. 4. Any change of name, address, telephone or facsimile numbers shall be informed to the other Party within 15 calendar days after the change. 10 -------------------------------------------------------------------------------- 5. This agreement is written in _____ originals, one copy for each Party, one for Pledge Registration Authority and one for the notarization organization if the agreement is notarized. Party A: Shenyang Jitian Property Co., Ltd. (seal) Legal representative/authorized representative: DUAN Jingshi Party B: Shenyang City Commercial Bank (Holdings) Co., Ltd. Zhongshan Branch (seal) Legal representative/authorized representative: ZHANG Yun This agreement is made at Shenyang City Commercial Bank Zhongshan Branch on July 3, 2006. 11 -------------------------------------------------------------------------------- Pledge List         Pledgor Shenyang Jitian Property Co., Ltd. Nature Wholly owned enterprise Address No. 301-8 Shuangyuan Rd. Dongling Dist. Shenyang Legal representative DUAN Jingshi Details of Pledge Name of Pledge Land located at south bank of river, Qianling Block, Chessboard Mountain developoment zone, Shenyang Specification Land Unit Square meters Amount 420317 sqm Purchase date March 24, 2006 Original value   Valuation RMB 781,789,620 Discount rate 70% Pledge value RMB 550,000,000 Storage place   Insurance duration   Others   Pledgor: Shenyang Jitian Property Co., Ltd. (seal) Legal representative or authorized representative: DUAN Jingshi Pledgee: Shenyang City Commercial Bank (stock )Co., Ltd. Zhongshan Branch (seal) Legal representative or authorized representative: ZHANG Yun Date: July 3, 2006 12 --------------------------------------------------------------------------------

EXHIBIT 10.1   [img1.jpg]   350 Campus Drive Marlborough, MA 01752   April 11, 2006   Mr. Robert T. Dechant 2 Shasta Drive North Reading, MA 01864   Dear Bob:   It is my pleasure to extend to you an offer of employment with 3Com Corporation (“3Com” or the “Company”) as Senior Vice President, Sales and Marketing. You will work out of the Company’s Marlborough, Massachusetts office and report to the Chief Executive Officer. You will be designated by the Company as a Section 16 officer, and will be subject to the reporting requirements of Section 16 of the federal Securities Exchange Act of 1934. Your start date is expected to be April 18, 2006.   Your base salary will be $13,541.67, paid semi-monthly in accordance with the Company’s regular payroll practices ($325,000.00 annualized). You will be eligible to participate in the Company’s discretionary bonus program, 3Bonus. Your 3Bonus target amount will be 60% of your base salary, currently payable semi-annually. Payments under the 3Bonus plan are discretionary and are based on various factors, including Company and individual performance. As with all of the Company’s compensation and benefit plans, 3Com reserves the right to amend, modify and/or terminate the 3Bonus Program at its discretion, subject to all applicable laws and regulations.   In addition, you will be eligible to receive sales and margin based commission. Your target sales commission on an annualized basis will be 40% of your base salary, payable quarterly and in accordance with the Company’s regular payroll practices. Your actual incentive compensation will be determined by the achievement of certain sales and margin objectives to be established by the Company. You will be entitled to the following guaranteed minimum incentive compensation payments for the current fiscal quarter and the first three full fiscal quarters following your start date: 75% of quarterly target incentive for Q4 FY06 (prorated based on your start date); 75% of quarterly target incentive for Q1 FY07; 50% of quarterly target incentive for Q2 FY07; and 25% of quarterly target incentive for Q3 FY07. Except as otherwise provided herein, your incentive compensation shall be governed by the terms and conditions of the operative 3Com Sales Incentive Plan.   -------------------------------------------------------------------------------- Robert T. Dechant Page 2     You will receive an employee stock option grant of 600,000 shares of 3Com common stock subject to the necessary approvals; provided, however, that no stock options shall be deemed to have been accepted until you have signed the Company’s stock option agreement. The option price for the shares subject to this initial grant will be the closing stock price of 3Com common stock on the NASDAQ national market on the first Tuesday of the calendar month immediately following your start date referenced above (i.e., May 2, 2006), or if the NASDAQ national market is closed on that date, the closing stock price on the first trading day following that date. Your stock option grant is subject to the terms and conditions of the 3Com Corporation 2003 Stock Plan.   3Com also offers a competitive complement of benefits. You will be eligible to accrue twenty (20) days of Paid Time Off per year, subject to the terms and conditions of the Company’s Paid Time Off policy. 3Com also has eleven (11) Company-recognized/assigned paid holidays and provides employees with two (2) personal floating holidays. In addition, you will be eligible to participate in the Company’s standard benefit plans, including Company-sponsored insurance plans, the Company’s Employee Stock Purchase Program, and the Company’s 401(k) Plan, subject to the terms and conditions of the policies and/or plan documents governing those benefit programs. As a Section 16 officer of the Company, you will be eligible to participate in benefit programs available to the Company’s Section 16 officers including, without limitation, the Company’s Section 16 Officer Severance Plan (the “Section 16 Plan”), a copy of which is attached hereto. On or about your start date, you will receive and be invited to execute a Severance Benefits Agreement confirming your eligibility for severance benefits under the Section 16 Plan and a Management Retention Agreement (“MRA”) confirming your eligibility for severance benefits in the event of a Change of Control of the Company, as defined under the MRA. The Compensation Committee of the Company’s Board of Directors is in the process of reviewing the terms and conditions of the MRA, a draft of which is attached hereto. The Company reserves the right to amend, modify and/or terminate its benefit programs at its discretion, subject to all applicable laws and regulations.   This offer of employment is conditioned upon your signing the attached Restrictive Covenant Agreement regarding, among other things, confidentiality, non-solicitation and assignment of inventions. In addition, this offer of employment is contingent upon your providing the Company with documentation of your ability to work in the United States, as required by the federal Immigration Reform and Control Act, no later than three (3) days after your start date. This offer is also contingent upon the successful result of a background investigation. You will be required to sign an authorization for this purpose as part of the Company’s employment application form, if you have not done so already. Providing false or fraudulent information to the Company may result in withdrawal of the offer or termination of employment, if hired.   While we are confident that we will have a mutually beneficial employment relationship, your employment with 3Com is on an at-will basis. This means that both you and 3Com can terminate the employment relationship at any time, for any reason or no reason, without notice. Nothing in this offer letter is intended to or shall be construed as a contract of employment for any fixed time period.     -------------------------------------------------------------------------------- Robert T. Dechant Page 3     The terms and conditions of this offer letter supersede any previous written or verbal representations concerning conditions of employment. This offer of employment is valid for a period of five (5) working days from the date of this offer letter.   Please confirm your acceptance by signing and returning this letter. By signing this offer letter, you represent that you are not subject to any restrictions or covenants that would prevent or impede your performance of the duties and responsibilities of your position with 3Com and that your employment with 3Com will not violate or conflict with the terms of any employment, non-competition or other agreement with any previous employer or other entity.   Let me close by reaffirming our belief that the skill and background you bring to 3Com will be instrumental to the future success of the Company. 3Com believes that the single most important factor in our future success is our people. I look forward to working with you.   Sincerely,   /S/ SUSAN H. BOWMAN Susan H. Bowman Senior Vice President, Human Resources   I accept 3Com’s offer of employment based on the terms and conditions described in this offer letter.     /S/ ROBERT T. DECHANT April 13, 2006 Robert T. Dechant Date            

Exhibit 10.3 SETTLEMENT AGREEMENT AND RELEASE THIS AGREEMENT AND RELEASE is made and entered into this 9th day of May, 2006 by and between CombineNet, Inc. (“CombineNet”) and Verticalnet, Inc. (“Verticalnet”). W I T N E S S E T H WHEREAS, on August 3, 2005, CombineNet sued Verticalnet in an action styled CombineNet, Inc. v. Verticalnet, Inc., Case No. GD-05-18911 (C.P. Allegheny County) (the “First Action”), asserting, among other things, claims for breach of contract, misappropriation of trade secrets and unfair competition; and WHEREAS, the parties entered in Alternative Dispute Resolution Agreement on September 14, 2005 (the “ADR Agreement”) whereby they agreed to retain an independent expert to review the facts and to render a binding opinion as to whether two Verticalnet products, Verticalnet’s Advanced Sourcing Solution and the optimization features of the Verticalnet XE Supply Management Suite, Version 5.2, operate using CombineNet’s Combinatorial Description Language (“CEDL”) technology or are otherwise technologically derived from CEDL; and WHEREAS, the parties retained Professor Nicholas R. Jennings (“Jennings”) of the School of Electronics and Computer Science, University of Southhampton, Southhampton United Kingdom as the independent expert; WHEREAS, Jennings concluded, in a final report dated April 18, 2006, that Verticalnet’s Advanced Sourcing Solution product does operate using CEDL technology and that the optimization features of the Verticalnet XE Supply Management Suite, Version 5.2, do not; WHEREAS, disputes and differences arose between CombineNet and Verticalnet regarding the proper interpretation of and performance under the ADR Agreement; -------------------------------------------------------------------------------- WHEREAS, CombineNet filed an action styled as CombineNet, Inc. v. Verticalnet, Inc., No. GD 06-009583 (C.P. Allegheny County) (the “Second Action”); WHEREAS, the parties hereto have agreed to compromise their claims on the terms set forth herein to avoid the costs and uncertainties of additional litigation; and NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:   1. PAYMENT In full, complete and final settlement of all the claims that were made or which could have been made by the parties in the First and Second Actions, Verticalnet shall pay to CombineNet the total sum of Six Hundred Fifty Thousand Dollars ($650,000) (the “Settlement Sum”), by bank check or certified check, as follows: (a) Verticalnet shall pay CombineNet One Hundred Twenty-Five Thousand Dollars ($125,000) upon execution hereof by both parties of this Settlement Agreement and Release; and (b) Verticalnet shall pay CombineNet One Hundred Twenty-Five Thousand Dollars ($125,000) on July 31, 2006; and (c) Commencing on October 31, 2006 and continuing for the next seven quarters, Verticalnet shall make eight separate quarterly payments to CombineNet, each in the amount of Fifty Thousand Dollars ($50,000); provided, however, that Verticalnet’s obligation to make such payments continues only so long as it continues to offer services or products for optimization. In the event that Verticalnet decides not to pursue optimization with any products, other than XE Negotiation Manager, version 5.2 (its equivalent with respect to optimization capabilities   - 2 - -------------------------------------------------------------------------------- or Supply Curve) and provides CombineNet with a non-confidential written notice of its decision to do so and the date upon which it will stop offering such products or services (the “Effective Date”), Verticalnet’s obligation to make the quarterly payments will be terminated subject to a final payment for the last quarter during which Verticalnet offered optimization products or services. If the Effective Date is not the last day of such quarter, the final payment will be calculated by multiplying $50,000 by the percentage of time that Verticalnet offered such products or services during the quarter. The final payment is due ten (10) business days after the Effective Date. (d) In the event Verticalnet invokes the option under Section 1(c) to stop the quarterly payments, CombineNet may require Verticalnet to demonstrate that the products that is is then offering have optimization functionality that is at best equivalent to XE Negotiation Manager, version 5.2. If CombineNet determines, in good faith and in writing, that the optimization functionality of the outstanding Verticalnet products exceeds that of XE Negotiation Manager, version 5.2, then Verticalnet’s obligation to make the quarterly payments required under the Settlement Agreement and Release continues unabated.   2. LIMITED LICENSE (a) Scope and Permitted Uses. CombineNet grants Verticalnet a limited, non-exclusive, non-transferable license to use the CombineNet CEDL technology currently embedded in Verticalnet’s Advanced Sourcing Solution product solely for the purpose of completing each of the approximately nine active and four inactive Advanced Sourcing Solution optimization projects which Verticalnet currently has under contract. (Inactive projects are those where substantially all optimization has been completed but where Verticalnet has a continuing obligation to host the solution for a period ending no later than June 1, 2006). Verticalnet will provide the names of the customers for each of these contracts, on a confidential basis (i.e., the names will not be disclosed to CombineNet) to Kirkpatrick & Lockhart Nicholson Graham LLP (“K&LNG”). (b) Restrictions. Verticalnet is prohibited from copying or disclosing to any other person or entity the CEDL technology currently embedded in the Advanced Sourcing Solution product, either during the term of this license or thereafter. Except as provided above, Verticalnet will not use the optimization components of Advanced Sourcing Solution, including but not limited to the files and programs of the Advanced Sourcing Solution identified as Groups   - 3 - -------------------------------------------------------------------------------- 1 and 2 of Exhibit A, CEDL and/or any CEDL-derived technology for any purpose except for completion of the identified projects. (c) Term. This non-exclusive, limited license will expire at the earlier of the completion of the last of the projects so identified or July 31, 2006. (d) Destruction of CEDL-Derived Technology. Upon the termination of this limited license and not later than August 7, 2006, Verticalnet will delete from its computer systems and/or destroy the optimization components of Advanced Sourcing Solution, including but not limited to the files and programs listed on Exhibit A in Groups 1 and 2, and all written or electronic descriptions thereof. Upon such deletion and/or destruction, Verticalnet will certify in writing and under oath to CombineNet that it has complied with this requirement, identifying the parties responsible for compliance and the steps taken to comply.   3. ADVANCED SOURCING RFX (a) Verticalnet will submit Advanced Sourcing RFX and any other bid collection program used within Advanced Sourcing Solution (collectively “RFX”) to Jennings (or his neutral replacement, see Section 4(c)) for a determination of whether the constraints within RFX operate using CEDL technology or are otherwise Technologically Derived (as defined in Section 4(a), below) from CEDL. There shall be no review of whether “items” within RFX operate using CEDL technology or are otherwise Technologically Derived from CEDL. (b) Verticalnet will make its best effort to ensure that this review will take place before June 30, 2006. A copy of Jennings’ (or his neutral replacement’s) findings regarding RFX will be supplied to K&LNG, “attorney’s eyes only”. (c) If Jennings (or his neutral replacement) determines that the constraints within RFX operate using CEDL technology or are Technologically Derived from CEDL in accordance with the original standards employed by Jennings, then Verticalnet will stop using   - 4 - -------------------------------------------------------------------------------- such version of RFX determined to be in violation not later than 75 days after Jennings’ (or his neutral replacement’s) determination; if Jennings (or his neutral replacement) determines that the RFX was Technologically Derived from CEDL, Verticalnet may consult with Jennings (or his neutral replacement) prior to or during that 75 day period in an effort to modify RFX so that Jennings (or his neutral replacement) will determine as modified it is not so derived. At the end of the 75 day period or upon such determination by Jennings (or his neutral replacement) that the modified version of RFX is not Technologically Derived from CEDL, whichever comes earlier, Verticalnet will destroy and/or delete the portions of earlier versions of RFX that were Technologically Derived from CEDL under the same procedures set forth in Section 2(d) hereof. (d) If Jennings (or his neutral replacement) determines that RFX was not Technologically Derived from CEDL from CEDL, then Verticalnet may proceed to use RFX without restraint. (e) CombineNet acknowledges that there can be a way to collect any or all possible constraints in an RFX that does not involve a Technical Derivation of CEDL.   4. REVIEW OF FUTURE VERTICALNET OPTIMIZATION PRODUCTS (a) Until July 31, 2007, Verticalnet will not deliver to any customer any optimization product (including without limitation XE Collaborative Solutions , but not including Verticalnet XE Supply Management Suite, version 5.2, or Supply Curve) or major release of an enhancement of any optimization product without first submitting the product or enhancement to Jennings (or his neutral replacement) to determine whether it operates using CEDL technology or is otherwise technologically derived from CEDL. “Technologically Derived” means that the product is a direct modification of CEDL, or that Verticalnet used CEDL technology to develop or modify the product. The parties agree that Verticalnet may consult Jennings (or his neutral replacement) in the design phase of any optimization product or major release of an enhancement thereof before a determination is made on whether the   - 5 - -------------------------------------------------------------------------------- optimization product operates using CEDL technology or is otherwise Technologically Derived from CEDL. (b) If Jennings (or his neutral replacement) determines the product or release was so derived, Verticalnet may consult with Jennings (or his neutral replacement) in an effort to modify the product or release so that Jennings (or his neutral replacement) will determine as modified it is not so derived. Prior to July 31, 2007, Verticalnet will not deliver to any customer the product or release until Jennings (or his neutral replacement) determines that it is not so derived; once Jennings (or his neutral replacement) determines it was not so derived, Verticalnet may proceed without restraint. (c) CombineNet and Verticalnet each agree to encourage Jennings to undertake the engagement contemplated by this agreement. If, at any time, Jennings declines to serve in the capacity contemplated by this Settlement Agreement and Release, the parties will agree on a replacement using the same independence and technical expertise standards as applied to Jennings’ selection. If, after a good faith effort, an agreement cannot be reached between the parties within fifteen (15) business days, the parties agree that the replacement will be selected by Jennings, or if he has declined to participate in the selection process, a neutral party. In this instance, the parties will provide their recommendations to Jennings (or his neutral replacement) and Jennings (or his neutral replacement) will then select. The decision of Jennings (or his neutral replacement) will be binding. (d) Upon a request from Verticalnet that accurately describes the nature of the product or the enhancement, CombineNet may, at its discretion, waive the foregoing review requirement, giving due consideration to the nature of the product and/or the enhancement. (e) Verticalnet will not retain Jennings (or his neutral replacement) nor his replacement for any other purpose and will work with Jennings (or his neutral replacement) or his replacement only on a remote basis (i.e., Verticalnet will not meet personally with Jennings   - 6 - -------------------------------------------------------------------------------- (or his neutral replacement) or his replacement, but instead will communicate only via telephone, mail, e-mail or video conference). CombineNet also agrees not to employ the services of, or consult or confer with Jennings (or his neutral replacement) with respect to this matter without prior notice to Verticalnet, and, likewise will only communicate with Jennings (or his neutral replacement) by the means with which Verticalnet can communicate with him.   5. PAYMENT OF JENNINGS’ FEES (a) Verticalnet has sole responsibility for and will promptly pay all of Jennings’ fees and expenses incurred to date in connection with the performance of the review described in the ADR Agreement, including specifically the invoice that Jennings submitted with his final report. (b) Verticalnet has sole responsibility for and will timely pay all future fees billed and expenses incurred by Jennings (or his neutral replacement) in connection with the pre-release reviews and consulting described in Sections 3 and 4 hereof.   6. CONFIDENTIALITY The parties agree that their previous agreements regarding confidentiality, as embodied in the ADR Agreement and the Protective Order entered in the First Action, remain in full force and effect; provided, however, that CombineNet will not be found to be in breach of its confidentiality obligations unless it can be shown by Verticalnet that the breach was intentional and/or reckless.   7. VERTICALNET CUSTOMER LETTER Within ten (10) days of execution of this Settlement Agreement and Release, Verticalnet will deliver a letter, in a form mutually agreed upon by the parties, to each of the Verticalnet customers identified pursuant to Section 2(a) hereof acknowledging that Advanced Sourcing Solution uses CombineNet’s technology and advising the customer that Verticalnet has   - 7 - -------------------------------------------------------------------------------- obtained a license from CombineNet to use such technology. Within five (5) business days of delivery, Verticalnet will provide to K&LNG copies of each letter and satisfactory proof of delivery.   8. MUTUAL GENERAL RELEASE (a) CombineNet, in consideration of the payment of the Settlement Sum, the receipt and sufficiency of which is hereby acknowledged, the promises of Verticalnet set forth herein and the discontinuance of the First and Section Actions, hereby releases Verticalnet, and its past, present and future officers, directors, shareholders, employees, predecessor, successor, affiliated, subsidiary and parent corporations (and the officers, directors, shareholders and employees of said corporations), assigns, attorneys, agents, and legal representatives, from any and all manner of claims, actions, causes of action, remedies, rights, judgments, debts, contracts, promises, allegations, demands, obligations, duties, suits, expenses, assessments, penalties, charges, injuries, losses, costs, fees, including attorneys’ fees, damages and liabilities of every kind, character and manner whatsoever, in law or in equity, civil or criminal, administrative or judicial, contract, tort or otherwise, which it ever had, have or may have, whether now known or unknown, claimed or unclaimed, asserted or unasserted, suspected or unsuspected, discovered or undiscovered, accrued or unaccrued, for, upon or by reason of any matter, cause or thing whatsoever arising out of or in any way related, directly or indirectly, to the First or Second Actions. (b) Verticalnet, in consideration of the discontinuance of the First and Second Actions and the license granted herein, hereby jointly and severally release CombineNet, its past, present and future officers, directors, shareholders, employees, predecessor, successor, affiliated, subsidiary and parent corporations (and the officers, directors, shareholders and employees of said corporations), assigns, attorneys, agents, and legal representatives, from any and all manner of claims, actions, causes of action, remedies, rights, judgments, debts, contracts, promises,   - 8 - -------------------------------------------------------------------------------- allegations, demands, obligations, duties, suits, expenses, assessments, penalties, charges, injuries, losses, costs, fees, including attorneys’ fees, damages and liabilities of every kind, character and manner whatsoever, in law or in equity, civil or criminal, administrative or judicial, contract, tort or otherwise, which it ever had, have or may have, whether now known or unknown, claimed or unclaimed, asserted or unasserted, suspected or unsuspected, discovered or undiscovered, accrued or unaccrued, for, upon or by reason of any matter, cause or thing whatsoever arising out of or in any way related, directly or indirectly, to the First or Second Actions. This release is intended to specifically encompass, but is not limited to, any matter that could have been brought as a counterclaim in the First or Second Actions. (c) Notwithstanding subparts (a) and (b) above, each party hereto specifically reserves its rights to enforce the terms and conditions of this Settlement Agreement and Release.   9. DISMISSAL OF THE FIRST AND SECOND ACTIONS Within five (5) business days of the execution of this Settlement Agreement and Release, CombineNet shall cause the First and Second Actions to be marked settled and discontinued, each party to bear its own attorneys’ fees, costs (including court costs) and expenses.   10. REPRESENTATIONS The parties hereto hereby further warrant, represent and acknowledge that: (a) they have the right and authority to execute this Settlement Agreement and Release and to receive the consideration given therefor; (b) they have not sold, assigned, transferred, conveyed or otherwise disposed of any of the claims covered by this Settlement Agreement and Release;   - 9 - -------------------------------------------------------------------------------- (c) the consideration received for this Settlement Agreement and Release constitutes lawful consideration supporting the execution of this Settlement Agreement and Release; (d) through their duly authorized representatives, they have read all provisions of this Settlement Agreement and Release in full, have reviewed those provisions with their attorney, and understand them and voluntarily agree to be bound thereby; and (e) they are entering into this Settlement Agreement and Release based solely and exclusively upon their own judgment and/or the advice of their counsel.   11. RIGHTS AND REMEDIES UPON BREACH The parties recognize that each of the promises set forth above are material to this Settlement Agreement and Release and that they shall have the following rights and remedies to enforce those terms, each of which shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the parties under law or in equity: (a) Notice and Opportunity to Cure. In the event either party believes a breach of this agreement shall have occurred, such party shall give the other party written notice of such alleged breach and thereafter not less than 10 business days to cure such alleged breach. The parties agree that the passage of time during the cure period contemplated by this provision shall not be a basis for denial of immediate injunctive relief. (b) Specific Performance. The right and remedy to have this Settlement Agreement specifically enforced by the Court of Common Pleas of Allegheny County, Pennsylvania, including obtaining an injunction to prevent any continuing violation thereof, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable   - 10 - -------------------------------------------------------------------------------- injury and that money damages will be difficult to ascertain and will not provide adequate remedy for a breach. (c) The parties hereto expressly consent to personal and subject matter jurisdiction in the Court of Common Pleas of Allegheny County, Pennsylvania and agree that court will be the sole forum for adjudication of any disputes arising out of or in any way related to this Settlement Agreement and Release. (d) Reimbursement of Fees and Expenses. In addition to paying any actual damages sustained by the party seeking to enforce this Settlement Agreement and Release, any party who breaches it agrees to reimburse all of its costs and expenses, including attorneys’ fees, incurred in connection with enforcing the provisions of this Settlement Agreement and Release.   12. MISCELLANEOUS It is understood and agreed to by each party hereto that this Settlement Agreement and Release: (a) is in settlement and compromise of all claims and that nothing contained in this Settlement Agreement and Release (including but not limited to any consideration contained herein) is to be construed as an admission of liability; (b) shall be binding on all and shall inure to the benefit of the parties and their respective past, present and future assigns, attorneys, agents, legal representatives, officers, directors, employees, predecessor, successor, affiliated, subsidiary and parent corporations (and the officers, directors and employees of said corporations); (c) shall be construed and interpreted under the laws of the Commonwealth of Pennsylvania, excluding its rules of conflicts of law;   - 11 - -------------------------------------------------------------------------------- (d) contains the entire agreement between the parties with respect to the subject matter of this Settlement Agreement and Release and any agreement hereinafter made shall be ineffective to change, modify or discharge this Settlement Agreement and Release unless such subsequent agreement is in writing and signed by the party to be charged; and (e) may be executed in counterparts, each of which shall be deemed to be an original.   12. NOTICES Notices and other communications required or permitted hereunder shall be effective only if they are in writing and sent by certified or registered mail, postage prepaid, addressed as follows: If to CombineNet: Mr. Tony Bonidy President & Chief Executive Officer CombineNet, Inc. Fifteen 27th Street Pittsburgh, PA 15222   - 12 - -------------------------------------------------------------------------------- with a copy to: Kirkpatrick & Lockhart LLP Henry W. Oliver Building 535 Smithfield Street Pittsburgh, PA 15222-2312 Attention: Patrick J. McElhinny, Esq. If to Verticalnet: Nathanael V. Lentz President and Chief Executive Officer Verticalnet Software, Inc. 400 Chester Field Parkway Malvern, PA 19355 with a copy to: Christopher J. Soller, Esq. Reed Smith, LLP 435 Sixth Avenue Pittsburgh, PA 15219   13. BOARD APPROVAL The parties represent that they are signing this Settlement Agreement and Release with the approval of their respective boards of directors. IN WITNESS WHEREOF, the parties hereto have caused this Settlement Agreement and Release to be executed as of the date first above written.   COMBINENET, INC.     VERTICALNET, INC. By:   /s/ A. J. Bonidy     By:   /s/ Nathanael V. Lentz Title:   President & CEO     Title:   President & CEO   - 13 -

  EXHIBIT 10.1 CONFIDENTIAL SEVERANCE AGREEMENT AND GENERAL RELEASE           THIS CONFIDENTIAL SEVERANCE AGREEMENT AND GENERAL RELEASE (hereinafter “Agreement”) is made and entered into by and between Danny Shamlou (hereinafter “Shamlou”) on the one hand, and Mindspeed Technologies, Inc. (hereinafter referred to as “Mindspeed”), on the other hand. RECITALS           1. Shamlou represents to Mindspeed that he is signing this Agreement voluntarily and with a full understanding of, and agreement with, all of its terms, for the purpose of settling in full any and all claims he has against Mindspeed.           2. Termination: Mindspeed accepts Shamlou’s decision to leave the company in light of the carve-out of Mindspeed’s High Performance Analog business unit from a combined high performance analog and transmission business unit. Mindspeed and Shamlou mutually agree to effect a thoughtful and professional business transition. In reliance on Mindspeed’s representations and releases in this Agreement, Shamlou agrees to provide transitional assistance to Mindspeed by working through June 30, 2006, if necessary, to contribute to the: ***. Shamlou will cease active employment with Mindspeed on the Effective Date, which will be the earlier of June 30, 2006, or the end of Shamlou’s temporary assignment as described above in this paragraph. Should this assignment end prior to June 30, 2006, the balance of the time through June 30, 2006 will be treated as salary and benefit continuation per the provisions of Paragraphs 6 and 7 below.           3. Mindspeed Proprietary Information: Shamlou represents, understands and agrees that he is subject to the Employment Agreement regarding the Company’s Proprietary Information, which he executed in connection with his employment with Mindspeed, and that the provisions which survive his employment are enforceable and remain in full force and effect. Shamlou represents, as a material inducement to Mindspeed to enter into this Agreement, that he has not and will not disclose, use or misappropriate any confidential, proprietary or trade secret information of Mindspeed to the press, customers, analysts, investors, or competitors including but not limited to ***. This representation includes but is not limited to product roadmaps, customer lists, design wins, and employee lists. Mindspeed acknowledges that Shamlou’s employment with one of these companies, in and of itself, will not constitute disclosure. Mindspeed further acknowledges that the act of meeting with a Mindspeed customer, in and of itself, will not constitute disclosure, use, or misappropriation of Mindspeed proprietary information.   ***   Certain confidential portions of this Exhibit have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the Securities and Exchange Commission. 1 --------------------------------------------------------------------------------             4. Non-Compete: During the period of the salary continuation and unpaid leave of absence running through April 30, 2008, as described in Paragraphs 6 and 7 below, Shamlou agrees not to work directly in a division or unit of one of the following companies directly competing with Mindspeed in the following areas:   §   Carrier, Enterprise and CPE Infrastructure Voice-over-IP semiconductor product area: ***.     §   High Performance Analog Crosspoint Switches, Physical Media Devices for Optical Networking, and Video Broadcast Physical Device semiconductor product area: ***.     §   Passive Optical Networking (PON) Media Access Controller (MAC) semiconductor product area: ***. During the salary continuation and unpaid leave of absence period described in Paragraph 6, Shamlou can join one of these competitor companies in parts of their operations that do not directly involve Voice-over-IP, High Performance Analog, and PON MAC markets and technologies described above, including a Chief Executive Officer, Chief Operating Officer, or “Group” executive role with responsibility for multiple business units, provided that the terms of Paragraph 3 above are fully honored.           5. Non-Solicit: Shamlou agrees not to solicit or assist any other company or person in soliciting any Mindspeed employee to leave COMPANY and join another company for a period of twelve (12) months after Shamlou’s Termination Date, April 30, 2008, as referenced in Paragraphs 6 and 7 of this Agreement.           6. Settlement Sum: In reliance on Shamlou’s representations and releases in this Agreement, Mindspeed will provide Shamlou with severance pay at Shamlou’s current salary level of $5,769.23 per week for ten months beginning on July 1, 2006, paid according to the company’s bi-weekly payroll schedule. Payments to Shamlou will continue through April 30, 2007, when Shamlou’s last check for the remaining balance due on the severance pay will be paid along with all accrued, unused vacation. Shamlou will not accrue additional vacation hours after the Effective Date of this Agreement as defined in paragraph 2 above. During the period of continued severance payments, Shamlou’s medical, dental, vision, life insurance coverage, executive physical, health club, one airline club, and financial counseling benefits will continue. Participation in Mindspeed’s Long Term Disability Insurance coverage ends on the Effective Date. Following the conclusion of the severance payments, Shamlou will be placed on unpaid leave through April 30, 2008, during which time he will not accrue further pay, vacation or other compensation. During the period on unpaid leave, Shamlou’s medical, dental, vision, life insurance coverage, executive physical, health club, and financial counseling benefits will continue. Additionally, Mindspeed will provide Shamlou with outplacement assistance at   ***   Certain confidential portions of this Exhibit have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the Securities and Exchange Commission. 2 --------------------------------------------------------------------------------   Mindspeed’s expense through Right Management Consultants, or a similar firm, at the selected firm’s office location. Ownership of the office laptop, home computer, home printer, and home cable modem assigned to Shamlou will be transferred to Shamlou once the company files on the computers have been deleted by Mindspeed’s Information Technology department. Shamlou’s Blackberry cell phone service (T-Mobile) and the cell phone service for the additional two phones assigned to Shamlou (Verizon) will be discontinued as of June 30, 2006. Employee will be allowed to keep the Blackberry device and the two cell phones and to port the phone numbers to individual service plans should he elect to do so. Mindspeed will stop providing COX Broadband service as of June 30, 2006. Mindspeed will work with Employee to transfer this service to an individual service plan should Employee elect to do so.           7. The payments detailed above will be referred to collectively as the “Settlement Sum,” and the parties hereto agree that the Settlement Sum, along with the period of unpaid leave ending April 30, 2008, provides Shamlou with full recompense for any and all claims for lost or unpaid wages, benefits, damages, interest, and any other claim related to Shamlou’s employment or to the separation of such employment.           8. COMPANY Stock Plans: Upon the termination of Shamlou’s employment from Mindspeed at the close of business on April 30, 2008 (the Termination Date), all stock options for Mindspeed, Conexant, and Skyworks stock and Restricted Stock awards that have been granted to Shamlou under any of the Mindspeed or predecessor company’s stock plans and which are not vested as of the Termination Date shall immediately expire and shall not be exercisable under any circumstances. Copies of Shamlou’s Mindspeed, Conexant, and Skyworks grants are detailed in attached schedules. Any such options that are vested as of the Termination Date shall be exercisable for a period of three (3) months and shall expire at the end of such period if they are not exercised within that period. The FY06 Annual Incentive Plan Restricted Stock Award will be deemed to be earned as follows: first half performance achievement will be 100% of target and second half performance will be 100% of target resulting in 100% of target achievement for the plan year. The Restricted Shares awarded to Shamlou through the one-time program for senior level managers to emphasize and focus Mindspeed efforts on returning the business to profitability will vest based on Mindspeed’s business performance against the vesting schedule established specifically for that Restricted Share award. All other Restricted Shares will vest according to their respective time-based vesting installment dates.           9. Shamlou agrees that he is not entitled to receive, and will not claim, any additional right, benefit, payment or compensation, including but not limited to, any claim for wages, benefits, damages, interest, attorneys fees and costs, other than what is expressly set forth in Paragraph 6 above, and hereby expressly waives any right to additional rights, benefits, payments or compensation. Shamlou further acknowledges that Mindspeed makes this Agreement without any admission of liability, and agrees, to the extent permissible by law, that he will not defame, disparage or make allegations against Mindspeed, whether to the press, 3 --------------------------------------------------------------------------------   employees, customers, investors or otherwise, based upon or relating to matters released herein. Should Shamlou make such allegations during the consideration of this agreement, Mindspeed shall have the right to summarily withdraw this agreement, and to terminate Shamlou for cause. For their part, the specific Mindspeed executives aware of this Agreement, Raouf Halim, Brad Yates, and Simon Biddiscombe, agree not to defame, disparage or make allegations against Shamlou, whether to the press, employees, customers, investors or otherwise, based upon or relating to matters released herein, or furthermore to knowingly allow other Mindspeed employees to defame or disparage Shamlou. Shamlou should direct all prospective employment inquiries or requests for employment references to either Raouf Halim or to Brad Yates.           10. In exchange for the Settlement Sum provided Shamlou in Paragraphs 6 and 7 above, Shamlou agrees to, and by signing this Agreement does, waive and release all claims (known and unknown) which he might otherwise have had against Mindspeed and each of its past and present employees, officers, directors, agents, representatives, attorneys, insurers, related entities, assigns, successors, and predecessors of Mindspeed, and all persons acting by, through, under or in concert with any of them (collectively, the “Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including back wages, and attorneys’ fees and costs actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, rights arising out of alleged violations of any contract, express or implied (including but not limited to any contract of employment, partnership, independent contractor, fiduciary, special or confidential relationship); any covenant of good faith and fair dealing (express or implied); any tort, including fraud and deceit, negligent misrepresentation, promise without intent to perform, conversion, breach of fiduciary duty, defamation, libel, slander, invasion of privacy, negligence, intentional or negligent infliction of emotional distress, malicious prosecution, abuse of process, intentional or negligent interference with prospective economic advantage, and conspiracy; any “wrongful discharge” and “constructive discharge” claims; any claims relating to any breach of public policy; any violations or breaches of corporate by-laws; any legal restrictions on Mindspeed’s right to terminate employees or take other employment actions; or any federal, state or other governmental statute, regulation, or ordinance, including, without limitation: (1) Title VII of the Civil Rights Act of 1964 (race, color, religion, sex and national origin discrimination); (2) 42 U.S.C. §§ 1981 et seq. (discrimination); (3) 29 U.S.C. §§ 621-634 (age discrimination); (4) the California Fair Employment and Housing Act (discrimination in employment and/or housing, including race, color, national origin, ancestry, physical or mental disability, medical condition, marital status, sex, or age), Cal. Gov’t. Code §§ 12900 et seq.; (5) Executive Order 11246 (race, color, religion, sex and national origin discrimination); (6) Sections 503 and 504 of the Rehabilitation Act of 1973 (handicap discrimination); (7) California Labor Code Sections 200, et seq. (claims for wages, late payment of wages, vacation pay, penalties, etc.); (8) California Industrial Welfare Commission Orders (minimum wage, overtime, etc.); (9) Labor Code Sections 970, et seq. (misrepresentation of employment conditions); (10) 18 U.S.C. §§1513- 4 --------------------------------------------------------------------------------   1514A (retaliation); (11) Labor Code Sections 1050-1057 (false statements); (12) Civil Code Sections 44 et seq. (libel and slander); (13) Labor Code § 1050 (defamation); (14) California Labor Code Section 432.5 (agreement to illegal terms of employment); (15) the Family Medical Leave Act and (16) the California Family Rights Act; (collectively “Claim” or “Claims”) arising prior to the execution of this Agreement.           11. Shamlou expressly waives and relinquishes all rights and benefits afforded by Section 1542 of the Civil Code of the State of California, and does so understanding and acknowledging the significance of such specific waiver of Section 1542. Section 1542 of the Civil Code of the State of California 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 his must have materially affected his settlement with the debtor.” Thus, notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release and discharge of all Releasees, Shamlou expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all Claims which Shamlou does not know or suspect to exist in his favor against the Releasees, or any of them, at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such Claim or Claims. If Shamlou hereafter institutes any legal action against the Releasees, and each of them, (except to enforce the specific provisions of this Agreement or for any future cause of action unrelated to Shamlou’s employment with Mindspeed or its predecessor companies), Mindspeed shall be entitled to payment from Shamlou of all costs, expenses, and attorney’s fees incurred as a result of such legal action.           12. This Agreement contains all of the terms, promises, representations, and understandings made between the parties. Shamlou agrees that no promises, representations, or inducements have been made to him which caused his to sign this Agreement other than those which are expressly set forth above in Paragraphs 6 and 7 above.           13. a. Shamlou represents and agrees that, with the exception of any civil judicial action where disclosure of this Agreement is ordered by the court, or where disclosure is compelled by law or government audit, he has and will keep the nature, terms and existence of the Agreement and the Confidential Settlement Sum strictly confidential, and that he has not and will not disclose, discuss, or reveal any information concerning the nature, terms and existence of the Agreement and the Confidential Settlement Sum to any other person, entity, or organization, except that Shamlou may disclose this information to his legal counsel, spouse, and professional accountant. Shamlou is to advise Mindspeed of any request or demand for disclosure in any civil judicial action immediately upon learning of it so Mindspeed will be 5 --------------------------------------------------------------------------------   afforded a full opportunity to intervene, to object and to take any other action necessary to protect the confidentiality of this Agreement and the Confidential Settlement Sum.           14. Shamlou acknowledges that he has been advised to carefully consider all of the provisions in this Agreement before signing it. Shamlou represents, acknowledges and agrees that he has fully discussed all aspects of this Agreement with his attorneys to the full extent he so desired; that Shamlou has carefully read and fully understands all of the provisions of this Agreement; that Shamlou has taken as much time as he needs for full consideration of this Agreement; that Shamlou fully understands that this Agreement releases all of his claims, both known and unknown, against the Releasees; that Shamlou is voluntarily entering into this Agreement; and that Shamlou has the capacity to enter into this Agreement.           15. Shamlou understands that he has a period of twenty-one (21) days to review and consider his release of his claims of age discrimination under the Age Discrimination in Employment Act (“ADEA”) before signing the Agreement. Shamlou further understands that he may use as much or as little of this twenty-one (21) day period as he wishes to prior to signing this Agreement. Shamlou also understands that after he signs this Agreement he is given seven (7) days within which to revoke the portion of the agreement releasing his claims under the ADEA. Such revocation, to be valid, must be in writing and received by Mindspeed within the seven (7) day revocation period.           16. Shamlou represents and acknowledges that in executing this Agreement, he does not rely and has not relied upon any representation or statement not set forth in this Agreement made by Mindspeed, the Releasees, or by any of their agents, representatives, or attorneys with regard to the subject matter, basis or effect of this Agreement.           17. This Agreement shall not in any way be construed as an admission by Mindspeed that it has acted wrongfully with respect to Shamlou or any other person, or that Shamlou or any other person has any rights whatsoever against Mindspeed. Mindspeed specifically disclaims any liability to or wrongful acts against Shamlou or any other person, on the part of itself, its agents or its employees, past or present.           18. Shamlou represents, understands and agrees that he will not be re-employed or reinstated by Mindspeed or any of its related companies (owned, operated or controlled by Mindspeed), and that he will not apply for or otherwise seek employment with Mindspeed, or any subsidiary or entity related to Mindspeed, at any time.           19. Shamlou represents, understands and agrees that he is subject to the Employment Agreement regarding the Company’s Proprietary Information, which he executed in connection with his employment with Mindspeed, and that the provisions which survive his active employment are enforceable and remain in full force and effect. Shamlou represents, as a 6 --------------------------------------------------------------------------------   material inducement to Mindspeed to enter into this Agreement, that he has not disclosed, used or misappropriated any confidential, proprietary or trade secret information of Mindspeed as of the Effective Date of this Agreement. Shamlou further represents that he has fulfilled his ethical, legal and professional responsibilities to Mindspeed, that he has not at any time known or been complicit in any Financial Reporting certification or Board action taken in anything other than the best interest of Mindspeed shareholders, and that he is not aware of any liabilities, obligations, noncompliance with legal requirements (including, but not limited to, noncompliance with the Sarbanes-Oxley Act or any applicable securities regulations), or exposure of any kind on the part of Mindspeed that he has not, as of the date of this Agreement, brought to the attention of Mindspeed. Shamlou further agrees to cooperate fully in the transition of matters under his Responsibility, and to make himself reasonably available, as necessary, to answer questions or assist in such transitions.           20. The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This Agreement shall survive the termination of any arrangements contained herein.           21. This Agreement is made and entered into in the State of California, and shall in all respects be interpreted, enforced and governed by and under the laws of the State of California.           22. This Agreement sets forth the entire agreement between the parties hereto, and fully supersedes any and all prior agreements or understandings between the parties hereto pertaining to the subject matter of this Agreement. This Agreement may not be modified, waived, rescinded or amended in any manner, except by a writing executed by all parties to the Agreement which clearly and specifically modifies, waives, rescinds or amends this Agreement.           23. This Agreement shall be binding upon Shamlou and upon his respective heirs, administrators, representatives, executors, successors, and assigns, and shall inure to the benefit of Mindspeed and the other Releasees and their related entities.           24. Shamlou represents and warrants that he has not heretofore assigned or otherwise transferred or subrogated, or purported to assign, transfer or subrogate, to any person or entity, any Claim or portion thereof, or interest therein he may have against the Releasees, and he agrees to indemnify, defend and hold the Releasees harmless from and against any and all liability, loss, demands, claims, damages, costs, expenses or attorneys’ fees incurred by the Releasees as the result of any person or entity asserting any such right, assignment, transfer or subrogation.           25. This Agreement may be executed in one or more counterparts, any one of 7 --------------------------------------------------------------------------------   which shall be deemed to be the original even if the others are not produced.           26. Each party has had the opportunity to revise, comment upon and redraft this Agreement. Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party. This Agreement shall be construed as if the parties jointly prepared this Agreement, and any uncertainty or ambiguity shall not be interpreted against any one party and in favor of the other.           27. The parties hereto, without further consideration, shall execute and deliver such other documents and take such other action as may be necessary to achieve the objectives of this Agreement.           PLEASE READ CAREFULLY. THIS CONFIDENTIAL SETTLEMENT AGREEMENT AND GENERAL RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.               Dated: 6/26/06   By:   /s/ Danny Shamlou                           Danny Shamlou                       MINDSPEED, INC.                   Dated: 6/26/06   /s/ B. Yates for Raouf Halim                       Raouf Halim     8

[Execution Copy] SCHEDULE to the Master Agreement (Multicurrency-Cross Border) dated as of August 10, 2006 between SWISS RE FINANCIAL PRODUCTS CORPORATION, a corporation organized under the laws of the State of Delaware ("Party A") and WELLS FARGO BANK, N.A., not individually but solely as trustee for Carrington Mortgage Loan Trust, Series 2006-NC3 with respect to the Carrington Mortgage Loan Trust, Series 2006-NC3 Asset-Backed Pass-Through Certificates ("Party B") PART 1 DEFINITIONS Capitalized terms used herein and not otherwise defined shall have the meaning specified in that certain Pooling and Servicing Agreement, dated as of August 1, 2006 (the "Pooling and Servicing Agreement"), among Stanwich Asset Acceptance Company, L.L.C., as Depositor, New Century Mortgage Corporation, as Servicer, and Wells Fargo Bank, N.A., as Trustee (the "Trustee"). For the avoidance of doubt, references herein to a particular "Section" of this Agreement are references to the corresponding sections of the Master Agreement. TERMINATION PROVISIONS In this Agreement:- (a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:- Section 5(a)(v), Not Applicable Section 5(a)(vi), Not Applicable Section 5(a)(vii), Not Applicable Section 5(b)(iv), Not Applicable in relation to Party B for the purpose of:- Section 5(a)(v), Not Applicable Section 5(a)(vi), Not Applicable Section 5(a)(vii), Not Applicable Section 5(b)(iv), Not Applicable (b) "SPECIFIED TRANSACTION" is not applicable to Party A or Party B for any purpose. (c) The EVENTS OF DEFAULT specified under Sections 5(a)(ii), 5(a)(iv); 5(a)(v) and 5(a)(vi) of the Agreement will not apply to Party A or to Party B. With respect to Party B only, the provisions of Section 5(a)(iii) and 5(a)(vii) clause 2 will not be applicable as an Event of Default. (d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will not apply to Party A and Party B. (e) The "TAX EVENT" provisions of Section 2(d)(i)(4) and 2(d)(ii) of the Agreement shall not apply to Party B and Party B shall not be required to pay any additional amounts referred to therein. (f) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not apply to either Party A or to Party B. (g) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this Agreement:- (i) Market Quotation will apply. (ii) The Second Method will apply. (h) "TERMINATION CURRENCY" means United States Dollars. (i) ADDITIONAL TERMINATION EVENT will apply. Each of the following events shall constitute an Additional Termination Event hereunder: (i) A Ratings Event occurs as set forth in Part 5(f) hereof and Party A fails to satisfy the requirements set forth in Part 5(f) hereof. Party A shall be the sole Affected Party. (ii) A Swap Disclosure Event occurs as set forth in Part 5(g) hereof and Party A fails to satisfy the requirements set forth in Part 5(g) hereof. Party A shall be the sole Affected Party. PART 2 TAX REPRESENTATIONS (a) PAYER REPRESENTATIONS. For the purpose of Section 3(e) of this Agreement, Party A and Party B make the following representation:- It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii), or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement, and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) 2 and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the following representations:- (i) The following representation applies to Party A: Party A is a corporation organized under the laws of the State of Delaware. (ii) The following representation applies to Party B: Party B is a "U.S. person" as that term is used in section 1.1441-4(a)(3)(ii) of the United States Treasury Regulations (the "Regulations") for United States federal income tax purposes. PART 3 AGREEMENT TO DELIVER DOCUMENTS For the purpose of Section 4(a)(i) and (ii) of this Agreement, each Party agrees to deliver the following documents as applicable:- (a) Tax forms, documents or certificates to be delivered are:- PARTY REQUIRED TO DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE DATE BY WHICH TO DELIVERED ------------------------- --------------------------- ------------------------------ Party A and Party B. An executed U.S. Internal (i) Before the first Payment Revenue Service Form W-9 Date under this Agreement, (or any successor thereto). (ii) promptly upon reasonable demand by Party A and (iii) promptly upon learning that any such form previously provided to Party A has become obsolete or incorrect. (b) Other documents to be delivered are: PARTY REQUIRED TO DATE BY WHICH TO COVERED BY SECTION 3(D) DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE BE DELIVERED REPRESENTATION ----------------- ----------------------------------- ---------------------- ----------------------- Party B. Credit Support Document, if any, Concurrently with the No. specified in Part 4 hereof, such execution of this Credit Support Document being duly Agreement. executed if required. Party A/Party B. Incumbency certificate or other Concurrently with the Yes. documents evidencing the authority execution of this of the party entering into this Agreement or of any Agreement or any other document other documents executed in connection with this executed in connection Agreement. with this Agreement. 3 PARTY REQUIRED TO DATE BY WHICH TO COVERED BY SECTION 3(D) DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE BE DELIVERED REPRESENTATION ----------------- ----------------------------------- ---------------------- ----------------------- Party B. Copy of each report delivered under Upon availability. Yes. the Pooling and Servicing Agreement and/or any other Transaction Document. Party A. Legal opinion from counsel for Concurrently with the No. Party A concerning due execution of this authorization, enforceability and Agreement. related matters, addressed to Party B and acceptable to Party B. Party A. Certified copies of all corporate, Upon execution and Yes partnership or membership delivery of this authorizations, as the case may be, Agreement and any other documents with respect to the execution, delivery and performance of this Agreement and any Credit Support Document [remainder of page intentionally left blank] 4 PART 4 MISCELLANEOUS (a) ADDRESSES FOR NOTICES: For the purpose of Section 12(a) of this Agreement:- Address for notices or communications to PARTY A:- Swiss Re Financial Products Corporation 55 East 52nd Street New York, New York 10055 Attention: Head of Operations Facsimile. (917) 322-7201 CC: Attention: Head of Legal Facsimile: (212) 317-5474 (For all purposes). Address for notices or communications to PARTY B:- Wells Fargo Bank, N.A., not individually but solely as trustee for Carrington Mortgage Loan Trust, Series 2006-NC3 with respect to the Carrington Mortgage Loan Trust, Series 2006-NC3 Asset-Backed Pass-Through Certificates 9062 Old Annapolis Road Columbia, Maryland 21045 Attention: Client Manager-Carrington Mortgage Loan Trust, 2006-NC3 Telephone: (410) 884-2000 Facsimile: (410) 715-2380 (For all purposes). (b) PROCESS AGENT. For the purpose of Section 13(c):- Party A appoints as its Process Agent: Not Applicable. Party B appoints as its Process Agent: Not Applicable. (c) OFFICES. The provisions of Section 10(a) will apply to this Agreement. (d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:- Party A is not a Multibranch Party. Party B is not a Multibranch Party. 5 (e) CALCULATION AGENT. The Calculation Agent is Party A; provided, however, if an Event of Default has occurred with respect to Party A, a Reference Market-maker, as designated by Party B, shall be the Calculation Agent. (f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:- Each of the following, as amended, extended, supplemented or otherwise modified in writing from time to time, is a "Credit Support Document": Party A: A Guaranty of Swiss Reinsurance Company dated as of the date hereof, in a form acceptable to Party B and, if Party A is required pursuant to Part 5(f) hereof to post collateral, an ISDA Credit Support Annex. Party B: The Pooling and Servicing Agreement. (g) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to Party A, Swiss Reinsurance Company. Credit Support Provider means in relation to Party B, Not Applicable. (h) GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York without reference to its conflict of laws provisions (except for Sections 5-1401 and 5-1402 of the New York General Obligations Law). (i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement will apply. (j) "AFFILIATE" will have the meaning specified in Section 14 of the Form Master Agreement; provided, however, that Party B shall be deemed not to have any Affiliates for purposes of this Transaction. PART 5 OTHER PROVISIONS (a) ADDITIONAL REPRESENTATIONS. For purposes of Section 3, the following shall be added, immediately following paragraph (f) thereto: (g) It is an "eligible contract participant" within the meaning of Section 1(a)(12) of the Commodity Exchange Act, as amended. (h) It has entered into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business (including financial intermediation services) or the financing of its business. (i) NON-RELIANCE. Each party has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction; it being understood that 6 information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. Further, such party has not received from the other party any assurance or guarantee as to the expected results of this Transaction. (j) EVALUATION AND UNDERSTANDING. It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the financial and other risks of this Transaction. (k) STATUS OF PARTIES. The other party is not acting as an agent, fiduciary or advisor for it in respect of this Transaction. (b) NOTICE BY FACSIMILE TRANSMISSION. Section 12(a) of the Agreement is hereby amended by deleting the parenthetical "(except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system)." (c) NO SET-OFF. Without affecting the provisions of the Agreement requiring the calculation of certain net payment amounts, as a result of an Event of Default or Additional Termination Event or otherwise, all payments will be made without setoff or counterclaim. The provisions for Set-off set forth in Section 6(e) of the Agreement shall not apply for purposes of this Agreement. (d) CONSENT TO RECORDING. The parties agree that each may electronically record all telephonic conversations between marketing and trading personnel in connection with this Agreement and that any such recordings may be submitted in evidence in any Proceedings relating to the Agreement. (e) WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREUNDER. (f) DOWNGRADE OF PARTY A. For the purpose of this section, a "Ratings Event" shall occur with respect to Party A (or its Credit Support Provider) if the long-term and short-term senior unsecured debt ratings of Party A (or its Credit Support Provider) cease to be at least A and A-1 by Standard & Poor's Ratings Service, a division of the McGraw-Hill Companies, Inc. or any successor thereto ("S&P") (however, in the event that Party A does not have a short-term rating from S&P, if Party A's long-term senior unsecured debt rating is reduced below "A+" by S&P) or at least A1 and P-1 by Moody's Investors Service, Inc. or any successor thereto ("Moody's") (however, in the event that Party A does not have a short-term rating from Moody's, if Party A's long-term senior debt rating is reduced below "Aa3" by Moody's) or at least A and F1 by Fitch Ratings Ltd. or any successor thereto ("Fitch") (collectively, the "Approved Rating Threshold"), to the extent such obligations are rated by S&P or Moody's or Fitch. The failure by Party A to comply with the provisions set forth below shall constitute an Additional Termination Event for which Party A shall be the sole Affected Party. If a Ratings Event shall occur and be continuing with respect to Party A, then Party A shall (A) within 5 Business Days of such Ratings Event, give notice to Party B of the occurrence of such Ratings Event, and (B) use reasonable efforts to transfer (at its own cost) Party A's rights and obligations hereunder to another party, subject to satisfaction of the Rating Agency Condition (as 7 defined below). Unless such a transfer by Party A has occurred within 20 Business Days after the occurrence of a Ratings Event, Party A shall no later than the end of such 20 Business Day period, post eligible collateral at its own cost and satisfactory to Party B ("Eligible Collateral"), to secure Party B's exposure or potential exposure to Party A, and such Eligible Collateral shall be provided in accordance with a Credit Support Annex to be attached hereto and made a part hereof; provided, however, that if Party A's long-term senior unsecured debt rating is withdrawn or reduced below "BBB-" by S&P, Party A shall have 10 Business Days to effect such transfer and not be permitted to post Eligible Collateral pursuant to this sentence. The Eligible Collateral to be posted and the Credit Support Annex to be executed and delivered shall be subject to the Rating Agency Condition. Valuation and Posting of Eligible Collateral shall occur weekly. Notwithstanding the addition of the Credit Support Annex and the posting of Eligible Collateral, Party A shall continue to use reasonable efforts to transfer its rights and obligations hereunder to a third party with the Approved Rating Threshold; provided, however, that Party A's obligations to find a transferee and to post Eligible Collateral under such Credit Support Annex shall remain in effect only for so long as a Ratings Event is continuing with respect to Party A. "Rating Agency Condition" means, with respect to any action to be taken, a condition that is satisfied when S&P, Moody's and Fitch have confirmed that such action would not result in the downgrade, qualification (if applicable) or withdrawal of the rating then assigned by such Rating Agency to the applicable class of Certificates. (g) SWAP DISCLOSURE EVENT. Upon the occurrence of a Swap Disclosure Event (as defined below), if Party A has not, within 10 days after such Swap Disclosure Event (the "Response Period") complied with one of the solutions listed below, then an Additional Termination Event shall have occurred with respect to Party A and Party A shall be the sole Affected Party with respect to such Additional Termination Event. It shall be a swap disclosure event ("Swap Disclosure Event") if at any time after the date hereof Carrington Securities, LP ("Carrington Securities") or Stanwich Asset Acceptance Corporation ("Stanwich") notifies Party A that in the reasonable discretion of Carrington Securities or Stanwich acting in good faith, the "aggregate significance percentage" of all derivative instruments (as such term is defined in Item 1115(b)(2) of Regulation AB (as defined below)) provided by Party A and any of its affiliates to Carrington Mortgage Loan Trust, Series 2006-NC3 (the "Significance Percentage") is 10% or more. Following a Swap Disclosure Event, Party A shall take one of the following actions at its own expense: either (I) (a) (i) if the Significance Percentage is 10% or more, Party A shall provide in an EDGAR compatible format the information set forth in Item 1115(b)(1) of Regulation AB for Party A (or for its group of affiliated entities, if applicable) or (ii) if the Significance Percentage is 20% or more, Party A provide in an EDGAR compatible format the information set forth in Item 1115(b)(2) of Regulation AB for Party A (or for its group of affiliated entities, if applicable) (collectively, the "Reg AB Information"), to Carrington Securities or Stanwich and (b) provide written consent to Carrington Securities and Stanwich to incorporation by reference of such current Reg AB Information as is filed with the Securities and Exchange Commission in the reports of Stanwich filed pursuant to the Exchange Act, and (c) if applicable, cause its outside accounting firm to provide its consent to filing or incorporation by reference of such accounting firm's report relating to their audits of such current Reg AB Information in the Exchange Act Reports of Stanwich, and (d) provide to Carrington Securities and Stanwich any updated Reg AB Information with respect to Party A or any entity that consolidates Party A within five days of the release of any such updated Reg AB Information; or (II) cause a Reg AB Approved Entity (as defined below) to replace Party A as party to this Agreement on terms substantially similar to this 8 Agreement prior to the expiration of the Response Period and cause such Reg AB Approved Entity to provide the Reg AB Information prior to the expiration of the Response Period; provided however, that no such transfer to a Reg AB Approved Entity pursuant to (II) above shall occur unless the Reg AB Approved entity agrees to terms identical to those contained in Paragraph 5(n) of this Agreement. "Reg AB Approved Entity" means any entity that (i) has the ability to provide the Reg AB Information and (ii) meets or exceeds the Approved Rating Threshold and satisfies the Ratings Agency Condition. "Regulation AB" means Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R. Sections 229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the Securities and Exchange Commission ("SEC") in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the SEC, or as may be provided by the SEC or its staff from time to time. (h) NON-PETITION. Party A hereby agrees that it will not, prior to the date that is one year and one day (or, if longer, the applicable preference period) after all Certificates (as such term is defined in the Pooling and Servicing Agreement) issued by Party B pursuant to the Pooling and Servicing Agreement have been paid in full, acquiesce, petition or otherwise invoke or cause Party B to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against Party B under any federal or state bankruptcy, insolvency or similar law or for the purpose of appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for Party B or any substantial part of the property of Party B, or for the purpose of ordering the winding up or liquidation of the affairs of Party B. Nothing herein shall prevent Party A from participating in any such proceeding once commenced. The provisions of this paragraph shall survive the termination of this Agreement. (i) TRUSTEE LIABILITY LIMITATION. It is expressly understood and agreed by the parties hereto that (i) this confirmation is executed and delivered by Wells Fargo Bank, N.A. ("Wells Fargo"), not individually or personally but solely as trustee, (ii) each of the representations, undertakings and agreements herein made on the part of Party B is made and intended not as personal representations, undertakings and agreements by Wells Fargo but is made and intended for the purpose of binding only Party B, (iii) nothing herein contained shall be construed as creating any liability on Wells Fargo, individually or personally, to perform any covenant either expressed or implied contained herein, and (iv) under no circumstances shall Wells Fargo be personally liable for the payment of any indebtedness or expenses of Party B or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by Party B hereunder or any other related documents. Any resignation or removal of Wells Fargo as trustee under the Pooling and Servicing Agreement shall require the assignment of this confirmation to Wells Fargo's replacement. (j) SEVERABILITY. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties. 9 The parties shall endeavor to engage in good faith negotiations to replace any invalid or unenforceable term, provision, covenant or condition with a valid or enforceable term, provision, covenant or condition, the economic effect of which comes as close as possible to that of the invalid or unenforceable term, provision, covenant or condition. (k) The obligations of Party B under this Agreement are limited recourse obligations of Party B, payable solely from the Trust Fund (as such term is defined in the Pooling and Servicing Agreement), subject to and in accordance with the terms of the Pooling and Servicing Agreement, and, following realization of the Trust Fund, any claims of Party A against Party B shall be extinguished. It is understood that the foregoing provisions shall not (i) prevent recourse to the Trust Fund for the sums due or to become due under any security, instrument or agreement which is part of the Trust Fund (subject to the priority of payments set forth in the Pooling and Servicing Agreement) or (ii) constitute a waiver, release or discharge of any obligation of Party B arising under this Agreement until the Trust Fee have been realized and the proceeds applied in accordance with the Pooling and Servicing Agreement, whereupon any outstanding obligation of Party B under this Agreement shall be extinguished. Notwithstanding the foregoing (or anything to the contrary in this Agreement), Party B shall be liable for its own fraud, negligence, willful misconduct and/or bad faith. (l) DELIVERY OF CONFIRMATIONS. For each Transaction entered into hereunder, Party A shall promptly send to Party B a Confirmation (which may be via facsimile transmission). Party B agrees to respond to such Confirmation within two General Business Days, either confirming agreement thereto or requesting a correction of any error(s) contained therein. Failure by Party A to send a Confirmation or of Party B to respond within such period shall not affect the validity or enforceability of such Transaction. Absent manifest error, there shall be a presumption that the terms contained in such Confirmation are the terms of the Transaction. (m) Section 5(a)(i) is hereby amended as follows: The word "third" shall be replaced by the word "second" in the third line of Section 5(a)(i) of the Agreement. (n) COMPLIANCE WITH REGULATION AB. Party A agrees and acknowledges that Carrington Securities and Stanwich may be required under Regulation AB, to disclose certain financial information regarding Party A and Swiss Reinsurance Company depending on the applicable "significance percentage" of this Agreement, as calculated from time to time in accordance with Item 1115 of Regulation AB. Party A, or a Reg AB Approved Entity after a Swap Disclosure Event pursuant to Paragraph 5(g), as applicable, shall indemnify and hold harmless Carrington Securities, Stanwich, their respective directors or officers and any person controlling Carrington Securities or Stanwich, 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 the Reg AB Information that Party A or such Reg AB Approved Entity, as applicable, provides to Carrington Securities or Stanwich pursuant to Paragraph 8 (the "Party A Information") or caused by any omission or alleged omission to state in the Party A Information by Party A or the Reg AB Approved Entity, as applicable, 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. For the 10 avoidance of doubt, Party A shall provide the indemnity described above with respect to any Party A Information it is required to provide pursuant to Paragraph 8 and any Reg AB Approved Entity which has replaced Party A pursuant to Paragraph 8 shall provide the indemnity described above with respect to any Party A Information it is required to provide from pursuant to Paragraph 8. (o) LIMITED TRANSACTION. Party A and Party B each agrees and acknowledges that the only Transaction that are or will be governed by this Agreement is the Transaction evidenced by the Confirmation dated as of the date hereof (it being understood that, in the event any such Confirmation shall be amended (in any respect), such amendment shall not constitute (for purposes of this paragraph) a separate Transaction or a separate Confirmation). (p) TRANSFER, AMENDMENT AND ASSIGNMENT. No transfer, amendment, waiver, supplement, assignment or other modification of this Transaction shall be permitted by either party unless Moody's, S&P, and Fitch have been provided prior notice of the same and confirms in writing (including by facsimile transmission) that it will not downgrade, withdraw or otherwise modify its then-current ratings of any Certificates. [remainder of page intentionally left blank] 11 IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the date hereof. SWISS RE FINANCIAL PRODUCTS CORPORATION WELLS FARGO BANK, N.A., NOT INDIVIDUALLY BUT SOLELY AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST, SERIES 2006-NC3 WITH RESPECT TO THE CARRINGTON MORTGAGE LOAN TRUST, SERIES 2006-NC3 ASSET-BACKED PASS-THROUGH CERTIFICATES /s/ Robert Spuier /s/ Darron C. Woodus --------------------------------------- -------------------------------------- Name: Robert Spuier Name: Darron C. Woodus Title: Senior Vice President Title: Assistant Vice President 12

Exhibit 10.1(a) Atlantic Broadband Finance, LLC, as Borrower, Atlantic Broadband Holdings I, LLC, The Subsidiary Guarantors Party Hereto and The Lenders Named Herein   -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of February 10, 2004 as Amended and Restated as of February 9, 2005   -------------------------------------------------------------------------------- $395,000,000 Senior Secured Credit Facility   -------------------------------------------------------------------------------- Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Book Runner Merrill Lynch, Pierce, Fenner & Smith Incorporated and General Electric Capital Corporation as Co-Syndication Agents General Electric Capital Corporation as Documentation Agent Société Générale, as Administrative Agent Credit Lyonnais New York Branch as Agent Cahill Gordon & Reindel llp 80 Pine Street New York, New York 10005 -------------------------------------------------------------------------------- TABLE OF CONTENTS            Page SECTION 1.   DEFINITIONS    2             1.1.   Defined Terms    2             1.2.   Rules of Construction    36 SECTION 2.   TERM LOANS; INCREMENTAL LOANS    36             2.1.   Term Loans; Incremental Loans    36             2.2.   Repayment of Term Loans    38             2.3.   Use of Proceeds    38 SECTION 3.   AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS    38             3.1.   Revolving Credit Commitments    38             3.2.   Commitment Fee    39             3.3.   Proceeds of Revolving Credit Loans    39             3.4.   Swing Line Commitment    39             3.5.   Issuance of Letters of Credit    41             3.6.   Participating Interests    41             3.7.   Procedure for Opening Letters of Credit    41             3.8.   Payments in Respect of Letters of Credit    42             3.9.   Letter of Credit Fees    42             3.10.   Letter of Credit Reserves    43             3.11.   Further Assurances    44             3.12.   Obligations Absolute    44             3.13.   Participations    45 SECTION 4.   GENERAL PROVISIONS APPLICABLE TO LOANS    45             4.1.   Procedure for Borrowing    45             4.2.   Conversion and Continuation Options    46             4.3.   Changes of Commitment Amounts    46             4.4.   Optional Prepayments    47             4.5.   Mandatory Prepayments    48             4.6.   Repayment of Term Loans    50             4.7.   Application of Prepayments    50             4.8.   Interest Rates and Payment Dates    51             4.9.   Computation of Interest    52             4.10.   Certain Fees    52             4.11.   Inability to Determine Interest Rate    52             4.12.   Pro Rata Treatment and Payments    52             4.13.   Illegality    55             4.14.   Requirements of Law    55             4.15.   Indemnity    58   -i- --------------------------------------------------------------------------------             4.16.   Repayment of Loans; Evidence of Debt    58             4.17.   Replacement of Lenders    59             4.18.   Procedure for Incremental Loan Requests.    60 SECTION 5.   REPRESENTATIONS AND WARRANTIES    60             5.1.   Financial Statements; Financial Condition    60             5.2.   No Change    61             5.3.   Existence; Compliance with Law    61             5.4.   Power; Authorization    61             5.5.   Enforceable Obligations    62             5.6.   No Legal Bar    62             5.7.   No Material Litigation    62             5.8.   Investment Company Act    62             5.9.   Federal Regulation    62             5.10.   No Default    63             5.11.   Taxes    63             5.12.   Subsidiaries    63             5.13.   Ownership of Property; Liens    63             5.14.   ERISA    64             5.15.   Collateral Documents    64             5.16.   Copyrights, Patents, Permits, Trademarks and Licenses    66             5.17.   Environmental Matters    66             5.18.   Accuracy and Completeness of Information    67             5.19.   Labor Matters    68             5.20.   Solvency    68             5.21.   Use of Proceeds    68             5.22.   Regulation H    68             5.23.   [Reserved]    68             5.24.   Asset Purchase Documents; Representations and Warranties in Agreement    68             5.25.   Capitalization    69             5.26.   Indebtedness    69             5.27.   Anti-Terrorism Laws.    69 SECTION 6.   CONDITIONS PRECEDENT    70             6.1.   Conditions to Amendment and Restatement    70             6.2.   Conditions to All Loans and Letters of Credit    70             6.3.   [Reserved]    71             6.4.   Permitted Acquisitions    71 SECTION 7.   AFFIRMATIVE COVENANTS    72             7.1.   Financial Statements    72             7.2.   Certificates; Other Information    73             7.3.   Payment of Obligations    75             7.4.   Conduct of Business and Maintenance of Existence    75             7.5.   Maintenance of Property; Insurance    75             7.6.   Inspection of Property; Books and Records; Discussions; Lender Meetings    78   -ii- --------------------------------------------------------------------------------             7.7.   Notices    79             7.8.   Environmental Laws    80             7.9.   Additional Collateral and Guarantees    81             7.10.   Post-Closing Collateral Matters    82             7.11.   Compliance with Law    83             7.12.   Security Interests; Further Assurances    83             7.13.   Required Interest Rate Agreements    84             7.14.   Anti-Terrorism Law.    84             7.15.   Embargoed Person.    84             7.16.   Anti-Money Laundering.    85             7.17.   Payment of Taxes.    85 SECTION 8.   NEGATIVE COVENANTS    85             8.1.   Indebtedness    85             8.2.   Liens    87             8.3.   Contingent Obligations    89             8.4.   Fundamental Changes    90             8.5.   Sale of Assets    90             8.6.   Investments    92             8.7.   Capital Expenditures    94             8.8.   Hedge Agreements    95             8.9.   Financial Covenants    95             8.10.   Clauses Restricting Subsidiary Distributions    97             8.11.   Dividends    97             8.12.   Transactions with Affiliates    98             8.13.   Changes in Fiscal Year    99             8.14.   Lines of Business    99             8.15.   Amendments to Certain Documents    99             8.16.   Prepayments and Amendments of Certain Debt    99             8.17.   Negative Pledges    99             8.18.   Sales and Leasebacks    100             8.19.   Creation of Subsidiaries    100 SECTION 9.   EVENTS OF DEFAULT    100 SECTION 10.   THE AGENTS AND THE ISSUING LENDER    103             10.1.   Appointment    103             10.2.   Delegation of Duties    103             10.3.   Exculpatory Provisions    103             10.4.   Reliance by Agents    104             10.5.   Notice of Default    104             10.6.   Non-Reliance on Agents and Other Lenders    104             10.7.   Indemnification    105             10.8.   Agent in Its Individual Capacity    105             10.9.   Successor Administrative Agent    105             10.10.   Issuing Lender as Issuer of Letters of Credit    106             10.11.   Other Agents    106   -iii- -------------------------------------------------------------------------------- SECTION 11.   MISCELLANEOUS    106             11.1.   Amendments and Waivers    106             11.2.   Notices    109             11.3.   No Waiver; Cumulative Remedies    110             11.4.   Survival of Representations and Warranties    110             11.5.   Payment of Expenses and Taxes; Indemnification    110             11.6.   Successors and Assigns; Participations and Assignments    112             11.7.   Adjustments; Set-off    115             11.8.   Counterparts    116             11.9.   Governing Law; Third Party Rights    117             11.10.   Submission to Jurisdiction; Waivers    117             11.11.   Marshaling; Payments Set Aside    117             11.12.   Interest.    118             11.13.   Severability    118             11.14.   Integration    118             11.15.   Acknowledgments    118             11.16.   New York Mortgage    119 SECTION 12.   COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS    119             12.1.   Collateral Account    119             12.2.   Proceeds of Destruction, Taking and Collateral Dispositions    120             12.3.   Application of Proceeds    121   SCHEDULES1   Schedule I   List of Addresses for Notices; Lending Offices; Commitment Amounts Schedule II   Subsidiary Guarantors Schedule III   Pro Forma Adjustments Schedule 5.7   Litigation Schedule 5.12   Subsidiaries Schedule 5.13   Fee Properties, Leased Properties, Other Properties and Mortgaged Properties Schedule 5.15(b)   UCC and Other Necessary Filings Schedule 5.17   Environmental Matters Schedule 5.24(a)   Asset Purchase Agreement and Related Documents; Documents related to the New Notes Schedule 5.24(b)   Equity Documents Schedule 5.25(a)   Outstanding Rights In Respect of Capital Stock Schedule 5.25(b)   Organizational Chart Schedule 5.26   Existing Indebtedness Schedule 7.9   Subsidiaries Exempt from Subsection 7.9 -------------------------------------------------------------------------------- 1 Schedules are not being amended or restated, other than the deletion of Schedules 6.1(d)(i) and (ii).   iv -------------------------------------------------------------------------------- Schedule 7.10   Post Closing Collateral Matters Schedule 8.2(h)   Existing Liens Schedule 8.3(d)   Existing Contingent Obligations Schedule 8.6   Existing Investments Schedule 8.12   Existing Affiliate Transactions EXHIBITS2   Exhibit A   Form of Revolving Credit Note Exhibit B-1   Form of Tranche A Term Note Exhibit B-2   Form of Tranche B-1 Term Note Exhibit C   Form of Swing Line Note Exhibit D   Form of Assignment and Acceptance Exhibit E   Form of Security Agreement Exhibit F   Form of L/C Participation Certificate Exhibit G   Form of Mortgage Exhibit H   Form of Non-Bank Certificate Exhibit I-1   Form of Subsidiary Guarantee Exhibit I-2   Form of Parent Guarantee Exhibit J   Form of Swing Line Loan Participation Certificate Exhibit K   Form of Landlord Lien Waiver Exhibit L-1   Form of Opinion of Kirkland & Ellis LLP Exhibit L-2   Form of Local Counsel Opinion Exhibit M   Form of Closing Certificate Exhibit N   Form of Control Agreement Exhibit O-1   Form of Perfection Certificate Exhibit O-2   Form of Perfection Certificate Supplement Exhibit P   Form of Subordination Provisions for Subordinated Convertible Note Exhibit Q   Form of Borrowing Request -------------------------------------------------------------------------------- 2 Only Exhibits B-2, L-1 and L-2 are being amended as part of this Agreement.   -v- -------------------------------------------------------------------------------- CREDIT AGREEMENT, dated as of February 10, 2004, as amended as of February 29, 2004 and as amended and restated as of February 9, 2005 (the “Agreement”), among Atlantic Broadband Finance, LLC, a Delaware limited liability company (“Borrower”), Atlantic Broadband Holdings I, LLC (“Holdings”), the subsidiary guarantors listed on the signature pages hereto (the “Subsidiary Guarantors”), the several lenders from time to time party hereto (the “Lenders”), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Book Runner (in such capacity, the “Arranger”), Merrill Lynch, Pierce, Fenner & Smith Incorporated and General Electric Capital Corporation as Co-Syndication Agents (in such capacity, the “Co-Syndication Agents”), General Electric Capital Corporation as Documentation Agent (in such capacity, the “Documentation Agent”), Credit Lyonnais New York Branch as Agent and Société Générale as Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”). WITNESSETH : WHEREAS, Borrower, Holdings, the Subsidiary Guarantors listed on the signature pages thereto, the several lenders from time to time party thereto (the “Original Lenders”), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as sole lead arranger and book runner, Merrill Lynch, Pierce, Fenner & Smith Incorporated and General Electric Capital Corporation as co-syndication agents, General Electric Capital Corporation as documentation agent, Credit Lyonnais New York Branch as agent and Société Générale as administrative agent originally entered into the credit agreement on February 10, 2004 and the amendment thereto, as of February 29, 2004 (collectively, the “Original Credit Agreement”), and the parties hereto desire to amend and restate the Original Credit Agreement on and subject to the terms and conditions set forth herein and in the Amendment Agreement dated as of the date hereof (the “Amendment Agreement”) among the Arranger, the Administrative Agent, Borrower, the Guarantors and the Lenders party thereto; WHEREAS, Borrower intends to prepay its Tranche B Term Loans (as defined in the Original Credit Agreement) under the Original Credit Agreement with the proceeds from the Tranche B-1 Term Loans (it being understood that Tranche B Term Loan Lenders under the Original Credit Agreement that execute and deliver the Amendment Agreement are converting their Tranche B Term Loans under the Original Credit Agreement into Tranche B-1 Term Loans hereunder); WHEREAS, the parties hereto intend that (a) the Obligations under the Original Credit Agreement that remain unpaid and outstanding as of the Amendment and Restatement Date shall continue to exist under this Agreement on the terms set forth herein, (b) the loans under the Original Credit Agreement (other than the Tranche B Term Loans) outstanding as of the Amendment and Restatement Date shall be Loans under and as defined in this Agreement on the terms set forth herein, (c) any letters of credit outstanding under the Original Credit Agreement as of the Amendment and Restatement Date shall be Letters of Credit under and as defined in this Agreement and (d) the Security Documents shall continue to secure, guarantee, support and otherwise benefit the Obligations under the Original Credit Agreement as well as the other Obligations of Borrower and the other Credit Parties under this Agreement (including, without limitation, Obligations in respect of the Tranche B-1 Term Loans) and the other Credit Documents; -------------------------------------------------------------------------------- NOW, THEREFORE, Holdings, Borrower, the Subsidiary Guarantors, the Administrative Agent and the Lenders agree as follows: SECTION 1. DEFINITIONS 1.1. Defined Terms. As used in this Agreement, the terms defined in the caption hereto shall have the meanings set forth therein, and the following terms have the following meanings: “3.3 Reduction”: the amount by which the Purchase Price is reduced as a result of adjustments described in Sections 3.3(a)(iii) and (iv) of the Asset Purchase Agreement. “6.14 Reduction”: the amount by which the Purchase Price is reduced as a result of adjustments described in Section 6.14 of the Asset Purchase Agreement. “ABRY”: ABRY Partners, LLC, a Delaware limited liability company, its successors and assigns. “ABRY Subordinated Indebtedness”: Indebtedness of Holdings II owing to ABRY and/or any of its Controlled Investment Affiliates (other than any Subsidiary of Holdings) and/or other Persons (solely in respect of preemptive or similar rights, if any, granted to such other Persons) substantially in the form of the subordinated convertible note attached hereto as Exhibit P. “Acquisition”: any transaction or series of related transactions (other than the Transactions) for (a) the direct or indirect (i) acquisition of all or substantially all of the Property of a Person, or of any business or division of a Person or (ii) acquisition of in excess of 50% of the Capital Stock of any Person, or otherwise causing any Person to become a Qualified Subsidiary of such Person, or (b) a merger or consolidation or any other combination with another Person. “Acquisition Consideration”: the aggregate purchase consideration for any Acquisition and all other payments made and liabilities (other than customary and reasonable transaction expenses) incurred or assumed by Holdings, Borrower or any of its Qualified Subsidiaries in exchange for, or as part of, or in connection with any Acquisition, whether paid in cash or by exchange of Capital Stock or of assets or otherwise and whether payable on or prior to the consummation of such Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments and liabilities representing the purchase price and any assumptions of liabilities, “earn-outs” and other Profit Payment Agreements, consulting agreements, service agreements and non-competition agreements and other liabilities (other than customary and reasonable transaction expenses) of every type and description. “Acquisition Documentation”: collectively, the Asset Purchase Agreement and all other documents listed on Schedule 5.24(b), in each case as amended, supplemented or otherwise modified from time to time in accordance with subsection 8.15. “Adjusted Capital Expenditures”: with respect to any Person, for any four consecutive quarter period, the aggregate amount of Capital Expenditures made by such Person as adjusted such that for the purposes of this definition, the aggregate amount of Capital Expenditures made by such Person in respect of equipment located (or intended to be located once put to use) on the premises of a customer of Borrower or any of its Qualified Subsidiaries shall be no more than $15,000,000 for such period. “Adjustment Date”: as defined in the definition of Applicable Margin.   -2- -------------------------------------------------------------------------------- “Administrative Agent”: as defined in the preamble hereto. “Affiliate”: of any Person, any Person which, directly or indirectly, is in control of, is controlled by or is under common control with such Person; provided for the purpose of subsection 8.12, a Qualified Subsidiary shall not be deemed an Affiliate of any Credit Party. For purposes of this definition, a Person shall be deemed to control another Person if such Person has the power, direct or indirect, (x) to vote 10% or more of the securities having ordinary voting power for the election of members of the Board of Directors of such other Person, whether by ownership of securities, contract, proxy or otherwise, or (y) to direct or cause the direction of the management and policies of such other Person, whether by ownership of securities, contract, proxy or otherwise. “Agents”: the collective reference to the Administrative Agent, the Co-Syndication Agents, the Documentation Agent, the Arranger and any other agent for the Lenders designated in connection with the syndication and in accordance with Section 10 by the Administrative Agent with respect to the Credit Documents in a written notice to Borrower. “Aggregate Incremental Term Commitment”: at any time, the sum of the amount of all Incremental Facilities consisting of Incremental Term Commitments (whether or not terminated) at such time, in an initial amount equal to zero, as such amount may be increased pursuant to subsection 2.1(e) to an aggregate amount which may not exceed $100,000,000. “Agreement”: this Credit Agreement, as amended, supplemented or modified from time to time. “Alternate Base Rate”: for any day, a rate per annum equal to the higher of (a) the Base Rate in effect on such day, and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. For purposes hereof: “Base Rate” shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its base rate in effect at its principal office in New York City (the Base Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors) (any change in such rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change); and “Federal Funds Rate” shall mean, for any day, the weighted average of the rates (rounded upwards, if necessary, to the nearest 1/100th of 1%) 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; provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate for such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Base Rate or the Federal Funds Rate, respectively. “Alternate Base Rate Loans”: Loans at such time as they are made and/or being maintained at a rate of interest based upon the Alternate Base Rate.   -3- -------------------------------------------------------------------------------- “Amendment Agreement: as defined in the recitals hereto. “Amendment and Restatement Date”: February 9, 2005. “Anti-Terrorism Law”: as defined in subsection 5.27. “APA Termination Date”: the date upon which (a) Subsequent Consent Transfers or Subsequent Property Transfers (each as defined in the Asset Purchase Agreement) can no longer be made pursuant to the Asset Purchase Agreement in accordance with its terms or (b) Borrower delivers irrevocable notice to the Administrative Agent that it will make no further purchases of assets pursuant to the Asset Purchase Agreement. “Applicable Acquisition Documents”: as defined in subsection 6.4(iii). “Applicable Margin”: for any day with respect to (a) Tranche A Term Loans, 1.75% in the case of Alternate Base Rate Loans and 2.75% in the case of Eurodollar Loans, (b) Tranche B-1 Term Loans, 1.75% in the case of Alternate Base Rate Loans and 2.75% in the case of Eurodollar Loans, (c) Revolving Credit Loans, 2.25% in the case of Alternate Base Rate Loans and 3.25% in the case of Eurodollar Loans, (d) Swing Line Loans, the Applicable Margin then applicable to Revolving Credit Loans that are maintained as Base Rate Loans (including after giving effect to the following proviso) and (e) with respect to Incremental Term Loans that are neither Tranche A Term Loans nor Tranche B-1 Term Loans, the Incremental Margin to be added to the Alternate Base Rate or Eurodollar Rate, as the case may be, as agreed upon by Borrower and the Lender or Lenders providing the Incremental Term Commitment relating thereto as provided in subsection 4.18; provided, that the Applicable Margin with respect to (x) Tranche B-1 Term Loans will be adjusted on each Adjustment Date (as defined below) to (or remain at) 1.50% in the case of Alternate Base Rate Loans and to 2.50% in the case of Eurodollar Loans when the Senior Leverage Ratio is determined to be less than 4.00 to 1.00 in accordance with the last paragraph of this definition and (y) Tranche A Term Loans and Revolving Credit Loans will be adjusted on each Adjustment Date to the applicable rate per annum set forth in the pricing grid below based on the Total Leverage Ratio, in each case as determined from the most recently delivered financial statements delivered pursuant to subsection 7.1. PRICING GRID        Applicable Margin for Eurodollar Loans     Applicable Margin for Alternate Base Rate Loans   Total Leverage Ratio    Tranche A Term Loans     Revolving Credit Loans     Tranche A Term Loans     Revolving Credit Loans   Category 1          ³ 6.75 to 1.00    2.75 %   3.25 %   1.75 %   2.25 % Category 2          <6.75 to 1.00 but ³ 6.00 to 1.00    2.75 %   3.00 %   1.75 %   2.00 % Category 3          <6.00 to 1.00 but ³ 5.50 to 1.00    2.75 %   2.75 %   1.75 %   1.75 %   -4- --------------------------------------------------------------------------------      Applicable Margin for Eurodollar Loans     Applicable Margin for Alternate Base Rate Loans   Total Leverage Ratio    Tranche A Term Loans     Revolving Credit Loans     Tranche A Term Loans     Revolving Credit Loans   Category 4          <5.50 to 1.00 but ³ 5.00 to 1.00    2.50 %   2.50 %   1.50 %   1.50 % Category 5          < 5.00 to 1.00 but ³ 4.50 to 1.00    2.25 %   2.25 %   1.25 %   1.25 % Category 6          <4.50 to 1.00    2.00 %   2.00 %   1.00 %   1.00 % For purposes of the foregoing, (i) the Senior Leverage Ratio and the Total Leverage Ratio shall be determined as of the end of each fiscal quarter of Holdings based upon Holdings’ consolidated financial statements delivered pursuant subsection 7.1 and (ii) each change in the Applicable Margin resulting from a change in the Senior Leverage Ratio and/or the Total 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 (the “Adjustment Date”) and ending on the date immediately preceding the effective date of the next such change; provided that the Total Leverage Ratio shall be deemed to be in Category 1 and the Senior Leverage Ratio shall be deemed to be in excess of 4.00 to 1.00 (A) at any time that an Event of Default has occurred and is continuing or (B) if Holdings fails to deliver the consolidated financial statements required to be delivered by it pursuant to subsection 7.1, during the period from the date on which financial statements are required to be delivered to the date on which such consolidated financial statements are delivered. “Approved Fund”: with respect to any Lender that is a fund or commingled investment vehicle that invests in loans, any other fund that invests in loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. “Arranger”: as defined in the preamble hereto. “Asset Purchase Agreement”: that certain Asset Purchase Agreement dated as of September 3, 2003 among Charter Communications VI, LLC, The Helicon Group, L.P., Hornell Television Service, Inc., Interlink Communications Partners, LLC, Charter Communications, LLC, Charter Communications Holdings, LLC and Borrower, as amended on October 31, 2003 and December 3, 2003 (as may be amended subsequent to the Original Effective Date in accordance with subsection 8.15). “Asset Sale”: any sale, sale-leaseback, transfer, lease, conveyance or other disposition by Holdings, Borrower or any of its Qualified Subsidiaries of any of its property or assets, including the Capital Stock of any Subsidiary, including by issuance of Capital Stock, except sales and dispositions permitted by subsections 8.5(a), (b), (c), (f) and (h). “Asset Swap”: any transaction or transactions involving the disposition to one or more Persons of assets owned by one or more of Borrower and/or any of its Qualified Subsidiaries comprising one or more cable television systems, or portions thereof, and related assets, and, substantially contemporaneously   -5- -------------------------------------------------------------------------------- with such disposition, the acquisition by one or more of Borrower and/or any of its Qualified Subsidiaries, of assets comprising one or more other cable television systems, or portions thereof, and related assets, owned by such other Person or Persons, which assets acquired have a fair market value not less than the fair market value of the assets disposed of. “Assignee”: each Person acquiring Loans and Commitments pursuant to subsection 11.6(c). “Assignment and Acceptance”: an assignment and acceptance substantially in the form of Exhibit D. “Available Revolving Credit Commitment”: as to any Lender, at a particular time, an amount equal to (a) the amount of such Lender’s Revolving Credit Commitment and/or Incremental Revolving Commitment at such time less (b) the sum of (i) the aggregate unpaid principal amount at such time of all Revolving Credit Loans made by such Lender pursuant to subsection 3.1, (ii) such Lender’s Revolving Credit Commitment Percentage of the aggregate unpaid principal amount at such time of all Swing Line Loans; provided that, for purposes of calculating the Revolving Credit Commitments pursuant to subsection 3.2, the amount referred to in this clause (ii) shall be zero, (iii) such Lender’s L/C Participating Interest in the aggregate amount available to be drawn at such time under all outstanding Letters of Credit issued by the Issuing Lender and (iv) such Lender’s Revolving Credit Commitment Percentage of the aggregate outstanding amount of L/C Obligations; collectively, as to all the Lenders, the “Available Revolving Credit Commitments.” “Bailee Letter”: as defined in the Security Agreement. “Bankruptcy Code”: Title I of the Bankruptcy Reform Act of 1978, as amended and codified at Title 11 of the United States Code. “Base Amount”: as defined in subsection 8.7. “Board of Directors”: as for any Person, the board of directors (or similar governing body) of such Person or any duly authorized committee thereof. “Board”: the Board of Governors of the Federal Reserve System, together with any successor. “Borrower”: as defined in the preamble hereto. “Borrowing Date”: any Business Day specified in a notice pursuant to (a) subsection 3.4 or 4.1 as a date on which Borrower requests the Swing Line Lender or the Lenders to make Loans hereunder or (b) subsection 3.5 as a date on which Borrower requests the Issuing Lender to issue a Letter of Credit hereunder. “Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. “CapEx Carryforward Amount”: as defined in subsection 8.7.   -6- -------------------------------------------------------------------------------- “Capital Expenditures”: with respect to any Person, for any period, expenditures resulting in the aggregate gross increase during that period, in the property, plant or equipment reflected in the consolidated balance sheet of such Person and its consolidated Subsidiaries (including amounts in respect of Financing Leases), in conformity with GAAP, but excluding increases resulting from (i) expenditures made in connection with the replacement, substitution or restoration of property (a) to the extent financed from insurance proceeds paid on account of the loss of or damage to the property being replaced, substituted or restored, (b) with proceeds or awards on account of any Taking of the property being replaced or (c) with regard to equipment that is purchased simultaneously with the trade-in of existing equipment, fixed assets or improvements, the credit granted by the seller of such equipment for the trade-in of such equipment, fixed assets or improvements and (ii) any expenditures made in connection with Permitted Acquisitions or acquisition of the System or any portions thereof pursuant to the Asset Purchase Agreement. “Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all of the partnership interests, membership interests or equivalent equity securities in a Person (other than a corporation) and any and all warrants or options to purchase, or securities or instruments convertible into or exchangeable for, any of the foregoing. “Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by (i) any Lender, or any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000 or (ii) Brown Brothers Harriman & Co.; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. “CATV System”: any cable distribution system that receives broadcast signals by antennae, microwave transmission, satellite transmission or any other form of transmission and that amplifies such signals and distributes them to Persons who pay to receive such signals. “CERCLA”: as defined in subsection 5.17(f).   -7- -------------------------------------------------------------------------------- “Change in Law”: with respect to any Lender, (i) the adoption of, or change in, any law, treaty, rule, regulation, policy, guideline or directive (whether or not having the force of law), (ii) any change in the interpretation or application thereof by any Governmental Authority having jurisdiction over such Lender, or (iii) any determination of an arbitrator or a court or other Governmental Authority with which such Lender, in the reasonable opinion of its counsel, must comply to avoid censure or penalty, in each case after Original Effective Date. “Change of Control”: shall be considered to have occurred if: (i) at any time prior to a Qualified Public Offering: ABRY and its Controlled Investment Affiliates (A) shall cease to own, directly or indirectly, in the aggregate, issued and outstanding Capital Stock of Holdings having at least a majority of the voting power of the then outstanding Capital Stock of Holdings, free and clear of all Liens, or (B) shall cease to have the right, directly or indirectly, to designate a majority of the members of the Board of Directors of each of Holdings and Borrower; (ii) at any time: if (A) any Person (other than ABRY, its Controlled Investment Affiliates or any person acting in the capacity of an underwriter with respect to a distribution of Capital Stock of Holdings (each, a “Permitted Holder” and collectively, the “Permitted Holders”)), whether singly or in concert with one or more Persons, shall, directly or indirectly, have acquired or acquire the power to vote or direct the voting of 30% or more, on a fully diluted basis, of the outstanding Capital Stock of Holdings and (B) at such time ABRY and its Controlled Investment Affiliates own, free and clear of all Liens, directly or indirectly, in the aggregate, issued and outstanding Capital Stock of Holdings representing less voting power of the then outstanding Capital Stock of Holdings held by such Person(s); (iii) at any time: if Holdings shall cease to own 100% of the outstanding Capital Stock of Borrower; or (iv) at any time after a Qualified Public Offering: if the board of managers of Holdings shall cease to consist of a majority of Continuing Managers. “Closing Date”: March 1, 2004. “Code”: the United States Internal Revenue Code of 1986, as amended from time to time. “Collateral”: all property and assets of the Credit Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. “Collateral Account”: the collateral account or sub-account established and maintained by the Administrative Agent (or a Lender that agrees to be an administrative sub-agent for the Administrative Agent) in its name as Administrative Agent for the benefit of the Secured Parties, in accordance with the provisions of subsection 12.1. “Commercial L/C”: a commercial documentary Letter of Credit under which the Issuing Lender agrees to make payments in Dollars for the account of Borrower, on behalf of Borrower or a Qualified Subsidiary, in respect of obligations of Borrower or such Qualified Subsidiary in connection with the purchase of goods or services in the ordinary course of business.   -8- -------------------------------------------------------------------------------- “Commitment”: as to any Lender at any time, such Lender’s Swing Line Commitment, Tranche A Term Loan Commitment, Tranche B-1 Term Loan Commitment, Incremental Term Commitment, Revolving Credit Commitment and/or Incremental Revolving Commitment; collectively, as to all the Lenders from time to time, the “Commitments”. “Commitment Percentage”: as to any Lender at any time, its Tranche A Term Loan Commitment Percentage, Tranche B-1 Term Loan Commitment Percentage, Incremental Term Loan Commitment Percentage or Revolving Credit Commitment Percentage, as the context may require. “Commodities Account”: as defined in the UCC. “Confidential Information Memorandum”: as defined in subsection 5.18. “Consolidated Current Assets”: at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of Holdings and its Subsidiaries at such date. “Consolidated Current Liabilities”: at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of Holdings, Borrower and its Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of Holdings, Borrower and its Qualified Subsidiaries, (b) without duplication of clause (a) above, all Indebtedness consisting of contingent obligations under outstanding Letters of Credit, Revolving Loans or Swingline Loans to the extent otherwise included therein and (c) the current portion of deferred tax liabilities. “Consolidated EBITDA”: for any period, Consolidated Net Income for such period, plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) total provision for income tax expense, (b) Consolidated Interest Expense, (c) depreciation and amortization expense, (d) franchise taxes that are substantially the same as income taxes, (e) any extraordinary expenses or losses, (f) losses on sales of assets outside of the ordinary course of business (g) fees and expenses related to the amendment and restatement of this Agreement on the Amendment and Restatement Date not to exceed $500,000 and (h) any other non-cash charges (including non-cash interest expense), minus (x) all non-cash income and (y) to the extent included in the statement of such Consolidated Net Income for such period, the sum of (i) interest income (except to the extent deducted in determining Consolidated Interest Expense), (ii) any extraordinary income or gains and (iii) gains on the sales of assets outside of the ordinary course of business, all as determined on a consolidated basis; provided that the cumulative effect of a change in accounting principles (effected either through cumulative effect adjustment or a retroactive application) shall be excluded; provided further that for the purposes of subsections 8.9(A) and (B), Consolidated EBITDA shall be deemed to be (i) $33,950,000, on and after the Closing Date and through and including June 29, 2004 and (ii) for the fiscal period ending June 30, 2004, the sum of $16,975,000 plus Consolidated EBITDA for the quarter ending June 30, 2004 (Consolidated EBITDA for the quarter ending June 30, 2004 being calculated without giving effect to this second proviso).   -9- -------------------------------------------------------------------------------- “Consolidated Fixed Charge Coverage Ratio”: during any period, on a Pro Forma Basis, the ratio of (a) Consolidated EBITDA for any two consecutive fiscal quarters ending during such period to (b) the sum of (i) Consolidated Fixed Charges for such two consecutive fiscal quarters, measured on each date on which financial statements have been or are required to be provided to the Lenders pursuant to subsection 7.1 and (ii) the amount determined by dividing the aggregate amount of Adjusted Capital Expenditures made by Borrower and its Qualified Subsidiaries for the four consecutive fiscal quarters ending on the last day of such period by two; provided that for purposes of determining compliance on a Pro Forma Basis with respect to an Acquisition, neither clause (ii) of this definition nor clauses (b) and (c) of the definition of Consolidated Fixed Charges shall be included solely in respect of the Person being acquired. “Consolidated Fixed Charges”: for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) income taxes and franchise taxes that are substantially the same as income taxes paid in cash or accrued by Holdings, Borrower and its Qualified Subsidiaries during such period, and (c) scheduled payments made during such period on account of principal of Indebtedness of Holdings, Borrower or any of its Qualified Subsidiaries (including scheduled principal payments in respect of the Term Loans other than scheduled principal payments in respect of Tranche B-1 Term Loans coming due from December 2010 through and including the Tranche B-1 Maturity Date). “Consolidated Indebtedness”: at a particular date, the aggregate stated balance sheet amount of all Indebtedness of Holdings, Borrower and its Qualified Subsidiaries determined on a consolidated basis in accordance with GAAP at such date; provided that for the purposes of calculating the Total Leverage Ratio and Senior Leverage Ratio, Consolidated Indebtedness shall not include the aggregate stated balance sheet amount of any Holdings High Yield Notes. “Consolidated Interest Coverage Ratio”: during any period, on a Pro Forma Basis, the ratio of (a) Consolidated EBITDA for any two consecutive fiscal quarters ending during such period to (b) Consolidated Interest Expense for such two consecutive fiscal quarters, measured on each date on which financial statements have been or are required to be provided to the Lenders pursuant to subsection 7.1. “Consolidated Interest Expense”: for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of Holdings, Borrower and its Qualified Subsidiaries for such period with respect to all outstanding Indebtedness of Holdings, Borrower and its Qualified Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP), other than interest expense attributable to any Holdings High Yield Notes (solely to the extent that no interest thereon is paid or required to be paid in cash during such period). “Consolidated Net Income”: for any period, net income (or loss) of Holdings, Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that (i) the net income (but not net loss) of any Person that is a Non-Qualified Subsidiary or that is accounted for by the equity method of accounting shall not be included except to the extent paid in cash as a dividend or distribution to Borrower or (subject to clause (ii) below) a Qualified Subsidiary, (ii) the net income of any Qualified Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Qualified Subsidiary of that net income is prohibited or not permitted at the date   -10- -------------------------------------------------------------------------------- of determination and (iii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged with or into or consolidated with any of Borrower or its Qualified Subsidiaries shall be excluded. “Consolidated Total Debt”: at any date, the aggregate principal amount of all Indebtedness of Holdings, Borrower and its Qualified Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. “Consolidated Total Senior Indebtedness”: at any time, Consolidated Total Debt less the aggregate outstanding principal amount of any Subordinated Indebtedness of Holdings, Borrower and its Qualified Subsidiaries at such time. “Consolidated Working Capital”: at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date. “Contested Collateral Lien Conditions”: with respect to any Permitted Lien of the type described in clauses (a), (b) and (d) of subsection 8.2, the following conditions: (i) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (ii) solely to the extent such Lien exceeds $5 million, (other than Liens of the type described in clause (d) of subsection 8.2 to the extent relating to a Franchise, with respect to which this clause (ii) shall not apply) at the option and upon request of the Administrative Agent, the appropriate Credit Party shall have deposited with the Administrative Agent a sum sufficient to pay and discharge such Lien and the Administrative Agent’s reasonable estimate of all interest and penalties related thereto; and (iii) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be pari passu or superior to the Lien and security interest created and evidenced by the Security Documents. “Contingent Obligation”: as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to 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 of the primary obligor, (c) 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 (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount (based on the maximum reasonably anticipated net liability in respect   -11- -------------------------------------------------------------------------------- thereof as determined by Borrower in good faith) of the primary obligation or portion thereof in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated net liability in respect thereof (assuming such Person is required to perform thereunder) as determined by Borrower in good faith. “Continuing Managers”: the directors of Holdings on the Closing Date, after giving effect to the Transactions and the other transactions contemplated hereby, and each other director, if, in each case, such other director’s nomination for election to the Board of Directors of Holdings is recommended by at least a majority of the then Continuing Managers or by a nominations committee thereof. “Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of the property or assets owned by it are bound. “Control Agreements”: as defined in the Security Agreement. “Controlled Investment Affiliate”: as to any Person, any other Person which (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by the former such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of management and policies of such Person whether by contract or otherwise. “Co-Syndication Agents”: with respect to this Agreement, as defined in the preamble hereto, and with respect to the Original Credit Agreement, Merrill Lynch, Pierce, Fenner & Smith Incorporated and General Electric Capital Corporation, each as co-syndication agent for the Lenders under the Original Credit Agreement. “Covered Taxes”: all Taxes excluding Excluded Taxes. “Credit Documents”: this Agreement (including the Original Credit Agreement), the Amendment Agreement, the Notes, the Security Agreements, the Mortgages, the Guarantees, any Incremental Loan Amendment and all other documents delivered to any Agent and/or any Lender in connection herewith or therewith, and, solely for purposes of subsections 9(a) and (d) and subsection 11.15, the Fee Letter. “Credit Parties”: the collective reference to Borrower and the Guarantors. “Default”: any of the events specified in Section 9, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. “Deposit Account”: as defined in the Security Agreement. “Destruction”: any and all damage to, or loss or destruction of, or loss of title to, all or any portion of the Collateral. “Dividend Payments”: dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or   -12- -------------------------------------------------------------------------------- the purchase, redemption, retirement or other acquisition of, any Capital Stock of Holdings, Borrower or any of its Qualified Subsidiaries, but excluding dividends paid through the issuance of additional shares of Capital Stock and any redemption or exchange of any Capital Stock of such Person through the issuance of Capital Stock of such Person. “Documentation Agent”: with respect to this Agreement, as defined in the preamble hereto and with respect to the Original Credit Agreement, General Electric Capital Corporation, as documentation agent for the lenders under the Original Credit Agreement. “Dollars” and “$”: lawful money of the United States. “Eligible Assignee”: (a) a Lender; (b) an Affiliate of any Lender; (c) an Approved Fund of a Lender; and (d) any other Person approved by the Administrative Agent, the Issuing Lender (solely in the case of Revolving Credit Loans or Revolving Credit Commitments) and Borrower (such approval not to be unreasonably withheld or delayed); provided that (i) Borrower’s approval is not required during the existence and continuation of a Default or an Event of Default or (ii) approval by Borrower shall be deemed given if no objection is received by the assigning Lender and the Administrative Agent from Borrower within five Business Days after notice of such proposed assignment has been delivered to Borrower; and (iii) neither Borrower nor an Affiliate of Borrower shall qualify as an Eligible Assignee. “Embargoed Persons”: as defined in subsection 7.15. “Employee Benefit Plan”: an employee benefit plan (as defined in Section 3(3) of ERISA) that is maintained or contributed to by Borrower or any Subsidiary or, solely with respect to an employee benefit plan subject to Title IV of ERISA, by any ERISA Entity or with respect to which Holdings or any of its Subsidiaries could incur liability. “Environmental Laws”: any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority or Requirements of Law (including, without limitation, common law) relating to pollution or protection of the environment (including, without limitation, pollution or protection of ambient air, soil, subsurface strata, surface water, groundwater and natural resources such as flora, fauna and wetlands) or public or employee health, including, without limitation, release or threatened release, manufacture, storage, treatment, handling, use, transport or disposal of Hazardous Materials, as now or may at any time hereafter be in effect. “Environmental Permits”: any and all permits, licenses, registrations, notifications, exemptions, variances and any other authorizations required by any Governmental Authority under or issued pursuant to any Environmental Law. “Equity Documents”: collectively, the documents listed on Schedule 5.24(b), in each case as amended, supplemented or otherwise modified. “Equity Financing”: the purchase for cash by ABRY, its Controlled Investment Affiliates and the Permitted Investors (collectively, the “Investors”) of the Capital Stock of Atlantic Broadband Group, LLC, an indirect parent entity (“Parent”) of Holdings (of which (i) at least 60% of the aggregate gross proceeds shall be junior preferred equity securities that are not redeemable or puttable at the option   -13- -------------------------------------------------------------------------------- of the holders thereof or common equity and (ii) the balance shall be in a form and on terms and conditions reasonably acceptable to the Agents; provided that in no event shall any of the Capital Stock of Parent require cash payments in respect of dividends, redemptions or otherwise prior to the date which is seven and one-half years after the Closing Date) for an aggregate dollar amount equal to no less than 30% of the total capitalization of Borrower (determined as of the Closing Date, after giving effect to the consummation of the Transactions, based on the assumption that Section 6.14 of the Asset Purchase Agreement is not applicable thereto) and the subsequent and immediate contribution and/or loans of the net cash proceeds from the Investors’ investment by Parent, through one or more intermediate holding companies, to Holdings and Borrower and receipt by Holdings and Borrower of such cash, in the form of common equity. “ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time. “ERISA Entity”: any member of an ERISA Group. “ERISA Event”: (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Pension Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (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 Pension Plan; (d) the incurrence by any ERISA Entity of any liability under Title IV of ERISA with respect to the termination of any Pension Plan; (e) the receipt by any ERISA Entity from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or the occurrence of any event or condition that could reasonably be expected to constitute grounds under ERISA for the termination of or the appointment of a trustee to administer any Pension Plan; (f) the incurrence by any ERISA Entity of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; (g) the receipt by any ERISA Entity of any notice, or the receipt by any Multiemployer Plan from any ERISA Entity 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; (h) the making of any amendment to any Pension Plan that could reasonably be expected to result in the imposition of a lien or the posting of a bond or other security; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) that is reasonably likely to result in liability to Holdings or any of its Subsidiaries. “ERISA Group”: Borrower, any Subsidiary and all corporations and all trades or businesses (whether or not incorporated) under common control that, together with Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Code. “Eurocurrency Reserve Requirements”: for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by a member bank of the Federal Reserve System.   -14- -------------------------------------------------------------------------------- “Eurodollar Base Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise on such screen), the “Eurodollar Base Rate” for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. “Eurodollar Lending Office”: as to any Lender, the office of such Lender which shall be making or maintaining Eurodollar Loans. “Eurodollar Loans”: Loans at such time as they are made and/or being maintained at a rate of interest based upon a Eurodollar Rate. “Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):     Eurodollar Base Rate     1.00 – Eurocurrency Reserve Requirements   “Event of Default”: any of the events specified in Section 9; provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. “Excess Cash”: the aggregate amount of cash and cash equivalents in excess of $10,000,000 that would appear on the consolidated balance sheet of Holdings and its Qualified Subsidiaries as of any day, in conformity with GAAP. “Excess Cash Flow”: for any fiscal year of Holdings, the excess, if any, of: (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year (provided that for the purpose of this definition, Consolidated EBITDA shall not be calculated on a Pro Forma basis), (ii) decreases in Consolidated Working Capital for such fiscal year and (iii) if and to the extent of any Excess Cash Flow (before giving effect to clause (b)(viii) of this definition) for the prior fiscal year, any CapEx Carryforward Amount from the prior fiscal year that is not used in such fiscal year over (b) the sum, without duplication, of (i) the aggregate amount actually paid by Borrower and its Qualified Subsidiaries in cash during such fiscal year on account of capital expenditures   -15- -------------------------------------------------------------------------------- (other than capital expenditures made with the proceeds of eminent domain or condemnation proceedings to the extent such proceeds are not included in the determination of Consolidated EBITDA for such fiscal year and capital expenditures funded with the proceeds of the incurrence of Indebtedness, the issuance of Capital Stock or Asset Sales), (ii) the aggregate amount of payments of principal in respect of any Indebtedness during such fiscal year (other than (x) pursuant to subsection 4.5(a), (b), (c) or (d); (y) payments of principal in respect of any revolving credit facility to the extent that there is not an equivalent reduction in the commitments in respect of such facility and (z) any repayment of Indebtedness to the extent made with the proceeds of the incurrence of Indebtedness or the issuance of Capital Stock), (iii) cash interest expense (including fees paid in connection with letters of credit and surety bonds and commitment fees and other periodic bank charges) of Holdings, Borrower and its Qualified Subsidiaries, (iv) the amount of taxes (including franchise taxes that are substantially the same as income taxes) or, without duplication, tax distributions actually paid or to be paid in cash by Holdings, Borrower and its Qualified Subsidiaries for such fiscal year either during such fiscal year or within a normal payment period thereof, (v) to the extent added to Consolidated Net Income in calculating Consolidated EBITDA for such fiscal year, the net cash cost of Interest Rate Agreements, (vi) the amount of cash actually paid by Holdings, Borrower and its Qualified Subsidiaries in connection with clause (e) in the definition of Consolidated EBITDA, (vii) increases in Consolidated Working Capital for such fiscal year and (viii) the CapEx Carryforward Amount for such fiscal year. “Exchange Act”: the Securities Exchange Act of 1934, as amended. “Excluded Taxes”: (a) in the case of each Lender and Administrative Agent, taxes (including franchise taxes) imposed on its overall net income by (i) the jurisdiction under the laws of which such Lender or Administrative Agent is incorporated or organized or (ii) the jurisdiction in which Administrative Agent’s or such Lender’s principal executive office or applicable lending office is located and (b) in the case of a Lender that is not a United States Person (as defined in Section 7701(a)(30) of the Code), other than any such person that becomes a Lender pursuant to subsection 4.17, any U.S. federal withholding tax to the extent such tax could be imposed under the law in effect on the date such Lender becomes a party to this agreement, except, in the case of an Assignee, to the extent that such Assignee’s assignor was entitled (immediately prior to such assignment) to gross-up payments or indemnification in respect of such tax under subsection 4.14 (or would have been so entitled had the assignor’s tax status (residence, etc.) immediately before such assignment been the same as the Assignee’s tax status immediately after such assignment). “Executive Order”: as defined in subsection 5.27(a). “Executive Orders”: as defined in subsection 7.15. “Facility”: each of (a) the extensions of credit made hereunder in the form of Tranche A Term Loans and any outstanding Tranche A Term Loan Commitments (together, the “Term A Loan Facility”), (b) the extensions of credit made hereunder in the form of Tranche B-1 Term Loans and any outstanding Tranche B-1 Term Loan Commitments (the “Term B-1 Loan Facility”), (c) the Incremental Facilities that are neither a Term A Loan Facility nor a Term B-1 Loan Facility and (d) the Revolving Credit Commitments and any Incremental Revolving Commitments and the extensions of credit made thereunder (together, the “Revolving Credit Facility”), and “Facilities” means the collective reference to the   -16- -------------------------------------------------------------------------------- Term A Loan Facility, the Term B-1 Loan Facility, any Incremental Facilities that are none of a Term Loan A Facility, a Term Loan B-1 Facility, and Incremental Revolving Facility and the Revolving Credit Facility. “Federal Funds Rate”: as defined in the definition of Alternate Base Rate. “Fee Letter”: that certain Fee Letter among Holdings, the Arranger, the Co-Syndication Agents, the Documentation Agent and the Administrative Agent dated September 3, 2003. “Fee Property”: as defined in subsection 5.13. “Financing Lease”: (a) any lease of property, real or personal, the obligations under which are capitalized on a consolidated balance sheet of Holdings, Borrower and its consolidated Subsidiaries and (b) any other such lease to the extent that the then present value of any rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. “Finance Subsidiary”: Atlantic Broadband Finance, Inc., a Delaware corporation and co-issuer of the New Notes. “Franchise”: a franchise, license, authorization or right by contract or otherwise to construct, own, operate, promote, extend and/or otherwise exploit any CATV System operated or to be operated by the Borrower or any of its Subsidiaries granted by any state, county, city, town, village or other local or state government authority or by the Federal Communications Commission. The term “Franchise” shall include each of the Franchises set forth on Schedule 5.23. “Funded Debt”: as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation, and, in the case of Borrower, Indebtedness in respect of the Loans. “GAAP”: generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of the definition of “Applicable Margin” and subsections 4.5(a) and (e), 8.6(m) and 8.9, GAAP shall be determined on the basis of such principles in effect on the Original Effective Date and consistent with those used in the preparation of the most recent audited financial statements referred to in subsection 5.1(b). 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 Borrower, the Arranger and 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 Holdings and Borrower’s financial condition and results of operations of Holdings and its Subsidiaries 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 Borrower, the Arranger, the Administrative Agent and the Required Lenders, except for purposes of subsections 5.1(a), (b) and (c) and subsection 7.1, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such   -17- -------------------------------------------------------------------------------- Accounting Change had not occurred. “Accounting Change” refers to changes 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. “Governmental Authority”: any nation or government, any state or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. “Granting Lender”: as defined in subsection 11.6(i). “Guarantees”: the collective reference to the Parent Guarantee and the Subsidiary Guarantee and any guarantee which may from time to time be executed and delivered by a Subsidiary pursuant to subsection 7.9. “Guarantors”: the collective reference to Holdings and the Subsidiary Guarantors. “Hazardous Materials”: any pollutants, contaminants, chemicals, materials or wastes, radioactivity or radiation, hazardous pesticides or hazardous or toxic substances that may give rise to liability, or are subject to regulation, under any Environmental Law, including, without limitation, asbestos, petroleum, any other petroleum products (including gasoline, crude oil or any fraction thereof), polychlorinated biphenyls and urea-formaldehyde insulation. “Hedge Agreements”: all interest rate swaps, caps or collar agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. “Highest Lawful Rate”: as defined in subsection 11.12. “Holdings”: as defined in the preamble hereto. “Holdings II”: Atlantic Broadband Holdings II, LLC, a Delaware limited liability company. “Holdings High Yield Notes”: unsecured debt securities of Holdings and Atlantic Broadband Holdings, Inc., a Delaware corporation, that (a) are not guaranteed by any Subsidiary of Holdings (including, without limitation, Borrower), (b) do not have a scheduled principal payment prior to the date which is 6 months after the Tranche B-1 Maturity Date or, if any Incremental Term Loans exist, the Incremental Term Maturity Date (if later) and (c) do not require cash interest payments prior to the fifth anniversary of the issue date thereof. “Incremental Facility”: an aggregation of Incremental Revolving Commitments or Incremental Term Commitments of one or more Lenders that are made available to Borrower and become effective on the same date, pursuant to the same Incremental Loan Amendment and the extensions of credit hereunder in respect of Incremental Revolving Loans and Incremental Term Loans. “Incremental Installment Payment Date”: as defined in subsection 4.6.   -18- -------------------------------------------------------------------------------- “Incremental Loan”: any Incremental Revolving Loan and/or Incremental Term Loan advanced by a Lender. “Incremental Loan Amendment”: as defined in subsection 2.1(e). “Incremental Margin”: as defined in subsection 4.18. “Incremental Revolving Commitment”: as defined in subsection 4.18. “Incremental Revolving Lender”: each Lender that has an Incremental Revolving Commitment or that is a holder of an Incremental Revolving Loan. “Incremental Revolving Loan”: as defined in subsection 2.1(e). “Incremental Term Commitment”: as defined in subsection 4.18. “Incremental Term Lender”: each Lender that has an Incremental Term Commitment or that is the holder of an Incremental Term Loan. “Incremental Term Loan”: as defined in subsection 2.1(a). “Incremental Term Loan Commitment Percentage”: as to any Incremental Term Lender at any time, the percentage of the Aggregate Incremental Term Commitments that are not in respect of Tranche A Term Loans or Tranche B-1 Term Loans, then constituted by such Lender’s Incremental Term Loan Commitments that are not in respect of Tranche A Term Loans or Tranche B-1 Term Loans (or, after such Incremental Term Loans are made, the percentage of the aggregate outstanding principal amount of the Incremental Term Loans that are not Tranche A Term Loans or Tranche B-1 Term Loans, then constituted by the principal amount of such Incremental Term Lender’s Incremental Term Loans that are not in respect of Tranche A Term Loans or Tranche B-1 Term Loans). “Incremental Term Maturity Date”: for any Incremental Term Loan the date upon which the final scheduled payment of principal of such Incremental Term Loan shall be due and payable pursuant to the applicable Incremental Loan Amendment, which such date shall in no event be earlier than the Tranche B-1 Maturity Date unless such Incremental Term Loan is a Tranche A Term Loan. “Incremental Term Note”: as defined in subsection 4.16(e). “Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person’s business and not more than 180 days overdue), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments,   -19- -------------------------------------------------------------------------------- (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations under Financing Leases of such Person and the obligations (including contingent obligations) of such Person under and in respect of synthetic lease transactions under which such Person or any Affiliate of such Person is the lessee, (f) the face amount of all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit (whether drawn or undrawn), surety bonds or similar arrangements, (g) the liquidation value of all redeemable preferred Capital Stock of such Person, (h) all Contingent Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of subsection 8.1 and subsection 9(e) only, all obligations of such Person in respect of Hedge Agreements. 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 expressly provide that such Person is not liable therefor. “Indemnitee”: as defined in subsection 11.5(b). “Installment Payment Date”: each Tranche A Installment Payment Date, each Tranche B-1 Installment Payment Date and each Incremental Installment Payment Date. “Intellectual Property”: the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. “Interest Payment Date”: (a) as to Alternate Base Rate Loans, the last day of each March, June, September and December, commencing on the first such day to occur after any Alternate Base Rate Loans are made or any Eurodollar Loans are converted to Alternate Base Rate Loans, (b) as to any Eurodollar Loan in respect of which Borrower has selected an Interest Period of one, two or three months, the last day of such Interest Period and (c) as to any Eurodollar Loan in respect of which Borrower has selected a longer Interest Period than the periods described in clause (b), the last day of each three calendar month interval during such Interest Period and, in addition, the last day of such Interest Period.   -20- -------------------------------------------------------------------------------- “Interest Period”: with respect to any Eurodollar Loan and unless otherwise consented to in writing by the Arranger, initially, the period commencing on, as the case may be, the Borrowing Date or conversion date with respect to such Eurodollar Loan and thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and in each case ending (x) solely with respect to Tranche B-1 Term Loans that have not been converted from Tranche B Loans under the Original Credit Agreement, until the 30th day after the Amendment and Restatement Date, 14 days thereafter and (y) in all other cases, one, two, three or six months thereafter as selected by Borrower in its notice of borrowing as provided in subsection 4.1 or its notice of conversion as provided in subsection 4.2, in each case, not less than three Business Days prior to the last day of the then current Interest Period with respect to such Eurodollar Loan; provided that the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day, unless 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 immediately preceding Business Day; (B) any Interest Period that would otherwise extend beyond (i) in the case of an Interest Period for a Term Loan, the final Installment Payment Date shall end on such Installment Payment Date or, if such Installment Payment Date shall not be a Business Day, on the next preceding Business Day; and (ii) in the case of any Interest Period for a Revolving Credit Loan, the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date, or if the Revolving Credit Termination Date shall not be a Business Day, on the next preceding Business Day; (C) if Borrower shall fail to give notice as provided above in clause (y), it shall be deemed to have selected a conversion of a Eurodollar Loan into an Alternate Base Rate Loan (which conversion shall occur automatically and without need for compliance with the conditions for conversion set forth in subsection 4.2); and (D) any Interest Period that begins on the last 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 a calendar month. “Interest Rate Agreement”: any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. “Investment”: for any Person: (a) the acquisition (whether for cash, property, services or securities or otherwise) of equity interests, bonds, notes, debentures or other securities of any other Person; (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person); (c) any capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) any other Person; and (d) the entering into, or direct or indirect incurrence, of any Contingent Obligation with respect to Indebtedness or other liability of any other Person.   -21- -------------------------------------------------------------------------------- “Investment Election Notice”: as defined in subsection 12.2. “Issuing Lender”: collectively, Société Générale and any of its Affiliates, as issuer of the Letters of Credit. “Law”: any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or Canada or any state, province or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. “L/C Application”: as defined in subsection 3.5(a). “L/C Obligations”: the obligations of Borrower to reimburse the Issuing Lender for any payments made by the Issuing Lender under any Letter of Credit that have not been reimbursed by Borrower pursuant to subsection 3.8(a). “L/C Participating Interest”: an undivided participating interest in the face amount of each issued and outstanding Letter of Credit and the L/C Application relating thereto. “L/C Participation Certificate”: a certificate in substantially the form of Exhibit F. “L/C Sub-Account”: as defined in subsection 12.1(d). “Leased Property”: as defined in subsection 5.13. “Lenders”: as defined in the preamble hereto. “Letters of Credit”: the Commercial L/Cs and the Standby L/Cs; individually, a “Letter of Credit”. “Lien”: any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim, hypothecation, charge or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing). “Loans”: the Swing Line Loans, the Term Loans, and the Revolving Credit Loans; individually, a “Loan”. “Majority Facility Lenders”: (a) with respect to the Revolving Credit Facility, the holders of in excess of 50% of the Revolving Credit Commitments and any Incremental Revolving Commitments or, if the Revolving Credit Commitments and Incremental Revolving Commitments have been terminated in full, the Revolving Credit Exposure, (b) with respect to the Term A Loan Facility, the holders of in excess of 50% of the sum of the Tranche A Term Loans then outstanding and the unutilized   -22- -------------------------------------------------------------------------------- Tranche A Term Loan Commitment, (c) with respect to the Term B-1 Loan Facility, the holders of in excess of 50% of the Tranche B-1 Term Loans then outstanding and (d) with respect to any Incremental Term Loan that is neither a Tranche A Term Loan nor a Tranche B-1 Term Loan, the holders of in excess of 50% of such Tranche of Incremental Term Loans then outstanding. “Material Adverse Effect”: a material adverse effect on (i) the business, assets, results of operations, condition (financial or otherwise) or liabilities (contingent or otherwise) of Holdings and its Subsidiaries, taken as a whole, (ii) the ability of Holdings or any of its Subsidiaries to perform its respective obligations under any Credit Document, (iii) the rights and remedies of the Lenders under any Credit Document or (iv) the value of the Collateral or the validity, enforceability, perfection or priority of the Liens granted to the Administrative Agent (for its benefit and for the benefit of the other Secured Parties) on the Collateral pursuant to the Security Documents. “Material Subsidiary”: any Subsidiary that would be a “significant subsidiary” of Borrower within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act of 1933 (replacing references to 10 per cent therein with 5 per cent), or any group of Subsidiaries that together would constitute a Material Subsidiary. “Moody’s”: Moody’s Investors Service, Inc. “Mortgaged Properties”: (a) the Real Property designated as “Mortgaged Property” on Schedule 5.13 and (b) any Real Property covered by a Mortgage delivered pursuant to subsection 7.9(d). “Mortgages”: each of the mortgages and deeds of trust in respect of real property made by any Credit Party in favor of, or for the benefit of, the Administrative Agent for its benefit and for the benefit of the other Secured Parties, substantially in the form of Exhibit G (with such reasonable changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded and otherwise as shall be reasonably acceptable to the Administrative Agent), as the same may be amended, supplemented or otherwise modified from time to time. “Multiemployer Plan”: a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (i) to which any ERISA Entity is making or accruing an obligation to make contributions or (ii) to which any ERISA Entity has within the preceding five plan years made contributions, including any Person which ceased to be an ERISA Entity during such five year period. “Net 3.3 Reduction Proceeds”: as defined in subsection 4.5(f). “Net Proceeds”: the aggregate cash proceeds received by Holdings, Borrower or any of its Qualified Subsidiaries in respect of: (a) (i) any issuance or borrowing of any debt securities (including debt securities convertible into, or exchangeable or exercisable for, Capital Stock) or loans by Holdings, Borrower or any of its Qualified Subsidiaries, (ii) any issuance by Holdings, Borrower or any of its Qualified Subsidiaries of Capital Stock or (iii) any contributions to the capital of Holdings or Borrower;   -23- -------------------------------------------------------------------------------- (b) any Asset Sale; provided that (i) so long as no Event of Default then exists, the proceeds of any Asset Sale shall constitute Net Proceeds only to the extent such proceeds are not reinvested in properties or assets owned (or to be owned) by Borrower or a Qualified Subsidiary having a fair market value at least equal to the amount of such proceeds within twelve months from the date of receipt thereof, (ii) if the property so sold constituted Collateral under the Security Documents then (x) such proceeds shall be deposited and maintained in the Collateral Account pending the reinvestment contemplated in clause (b)(i) of this definition and applied in accordance with subsection 12.2; provided that there shall be no obligation to deposit any such proceeds unless and until, and only to the extent that, the aggregate amount at any time outstanding (and not applied in accordance with this Agreement) exceeds $5,000,000 (such $5,000,000 to be calculated net of the amount to be reinvested under any then existing binding contract entered into by Borrower or any of its Qualified Subsidiaries to reinvest such proceeds), and (y) any property purchased with the net proceeds thereof shall be mortgaged or pledged, as the case may be, to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties in accordance with subsection 7.9 and (iii) the aggregate outstanding amount of proceeds held by Borrower and its Qualified Subsidiaries at any time for reinvestment in respect of any property sold pursuant to this paragraph shall not exceed $5,000,000; (c) any insurance recoveries in respect of any Destruction or any proceeds or awards on account of any Taking; provided that (i) so long as no Event of Default then exists under paragraph (a), (e), (f), (g) or (h) of Section 9, the proceeds of any such insurance recoveries in respect of any Destruction or proceeds or award of any such Taking shall constitute Net Proceeds only to the extent they are not reinvested in properties or assets owned (or to be owned) by Borrower or a Qualified Subsidiary having a fair market value at least equal to the amount of such proceeds or awards within twelve months from the date of receipt thereof, and (ii) if the property subject to such Destruction or Taking constituted Collateral under the Security Documents then (x) such proceeds or awards (net of any costs of recovering such proceeds or awards) shall be deposited and maintained in the Collateral Account pending the reinvestment contemplated in clause (c)(i) of this definition and applied in accordance with subsection 12.2; provided, that there shall be no obligation to deposit any such proceeds or awards unless and until, and only to the extent that, the aggregate amount at any time outstanding (and not applied in accordance with this Agreement) exceeds $5,000,000 (such $5,000,000 to be calculated net of the amount to be reinvested under any then existing binding contract entered into by Borrower or any of its Qualified Subsidiaries to reinvest such proceeds or awards), and (y) any property purchased with the proceeds thereof or awards shall be mortgaged or pledged, as the case may be, to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties in accordance with subsection 7.9; (d) any cash received in respect of substantially like-kind exchanges of property to the extent provided in the proviso to subsection 8.5(e); and (e) any cash payments received in respect of promissory notes delivered to Holdings, Borrower or any of its Qualified Subsidiaries in respect of an Asset Sale delivered to Holdings or such Qualified Subsidiary in respect of an Asset Sale; in each case, net of (without duplication) (w) to the extent such Indebtedness and such Lien are permitted hereunder, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings, Borrower or any of its Qualified Subsidiaries (that are collateral for any such debt   -24- -------------------------------------------------------------------------------- securities or loans) that are sold or otherwise disposed of in connection with such Asset Sale or subject to the applicable Destruction or Taking, (x) the reasonable expenses (including legal fees and brokers’ and underwriters’ commissions, lenders fees or credit enhancement fees incurred in effecting the applicable event or events described in clauses (a) through (e) above, (y) any Taxes (including any withholding or distributions in respect of taxes) reasonably attributable to the applicable event or events described in clauses (a) through (e) above and reasonably estimated by Holdings or its Qualified Subsidiaries to be actually payable and (z) in the case of any receipt of proceeds by a Qualified Subsidiary, any amount required to be distributed to the holders of any Capital Stock in the respective Qualified Subsidiary other than Holdings, Borrower or any of its Qualified Subsidiaries (or in any other Qualified Subsidiary which directly or indirectly holds equity interests in such Qualified Subsidiary). “New Notes”: $150,000,000 in aggregate principal amount of Borrower’s and the Finance Subsidiary’s 9 3/8% unsecured senior subordinated notes due 2014. “Non-Bank Certificate”: a certificate substantially in the form of Exhibit H. “Non-Consenting Lender”: as defined in subsection 11.1. “Non-Funding Lender”: as defined in subsection 4.12(c). “Non-Qualified Subsidiary”: each subsidiary of Borrower that is not a Qualified Subsidiary. “Notes”: the Swing Line Note, the Revolving Credit Notes and the Term Notes; each of the Notes, a “Note”. “Obligations”: as defined in the Security Agreement. “OFAC”: as defined in subsection 5.27(b)(v). “Officer”: with respect to any corporation, its Chairman of the Board (if an officer) or its President or one of its Vice Presidents or its Chief Financial Officer or its Treasurer or any Assistant Treasurer or its Secretary or one of its Assistant Secretaries, and with respect to any other entity, persons acting in a similar capacity. “Officer’s Certificate”: a certificate of the entity in question executed on its behalf by an Officer of such entity. “Original Credit Agreement”: as defined in the recitals hereto. “Original Effective Date”: February 10, 2004. “Original Lenders”: as defined in the recitals hereto. “Other List”: as defined in subsection 7.15. “Other Real Property”: as defined in subsection 5.13.   -25- -------------------------------------------------------------------------------- “Other Taxes”: as defined in subsection 4.14(d)(ii). “Parent”: as defined within the definition of the term “Equity Financing.” “Parent Guarantee”: the Parent Guarantee, substantially in the form of Exhibit I-2, to be made by Holdings in favor of the Administrative Agent for the benefit of the Secured Parties, as the same may be amended, modified or supplemented from time to time. “Participants”: as defined in subsection 11.6(b). “Participating Lender”: any Revolving Credit Lender (other than the Issuing Lender) with respect to its L/C Participating Interest in each Letter of Credit. “PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor thereto. “Pension Plan”: an employee pension benefit plan (other than a Multiemployer Plan) that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code or Section 302 of ERISA and is maintained or contributed to by any ERISA Entity or with respect to which Holdings or any of its Subsidiaries could incur liability by application of Section 4069 of ERISA. “Permitted Acquisition”: as defined in subsection 8.6(m). “Permitted Encumbrances”: with respect to any Mortgaged Property, such exceptions to title as are set forth in the title insurance policy delivered with respect thereto. “Permitted Investors”: ABRY Partners IV, L.P., ABRY Mezzanine Partners, L.P., Oak Hill Capital Partners, L.P., Oak Hill Management Partners, L.P., New York Life Capital Partners II, L.P., The Northwestern Mutual Life Insurance Company, General Electric Capital Corporation, David Keefe, Edward Holleran and Merrill Lynch Capital Corporation, together with their respective Affiliates, and such other Persons as may be reasonably acceptable to the Arranger. “Permitted Issuances”: each of the following: (a) an issuance of Capital Stock by any Qualified Subsidiary of Holdings to (or acceptance of capital contributions from) Holdings, Borrower or any of its Qualified Subsidiaries, (b) an issuance of Capital Stock by Holdings to (or acceptance of capital contributions from) ABRY and its Controlled Investment Affiliates (other than Holdings and its Subsidiaries) and other Persons (solely in respect of preemptive rights granted to such other Persons so long as such preemptive rights were not granted in anticipation of, or in connection with, such issuance of Capital Stock as distinct from preemptive rights granted in anticipation of future issuances of capital stock generally) and (c) acceptance or issuance of Capital Stock by Holdings or Borrower upon receipt of proceeds contributed to it indirectly (i) from an issuance of ABRY Subordinated Indebtedness by Holdings II or (ii) from an issuance of Capital Stock by Parent to (or acceptance of capital contributions from) ABRY and its Controlled Investment Affiliates (other than Holdings and its Subsidiaries) and, other Persons (solely in respect of preemptive rights granted to such other Persons so long as such preemptive rights were not granted in anticipation of, or in connection with, such issuance of Capital Stock as distinct from preemptive rights granted in anticipation of future issuances of capital stock generally).   -26- -------------------------------------------------------------------------------- “Permitted Liens”: Liens permitted to exist under subsection 8.2. “Person”: an individual, partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. “Profit Payment Agreement”: any agreement to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any Person or business. “Pro Forma Balance Sheet”: as defined in subsection 5.1(a). “Pro Forma Basis”: (a) following (i) the acquisition of the System or any portion thereof pursuant to the Asset Purchase Agreement, (ii) any Permitted Acquisition or (iii) any sale, transfer, lease or other disposition of assets outside of the ordinary course of business permitted by subsection 8.5 during the relevant periods, Consolidated EBITDA and Consolidated Interest Expense for the relevant periods shall be calculated only after giving pro forma effect thereto, as if such acquisition, 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 Credit 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 or Consolidated Interest Expense and (b) any pro forma calculations under clause (a) of this definition may include operating and other expense reductions and other adjustments resulting from any such transaction that is being given pro forma effect to the extent that such operating and other expense reductions and other adjustments are (x) in the case of clause (i), reflected in the Consolidated EBITDA set forth in the proviso of the definition of “Consolidated EBITDA” or of the type listed on Schedule III and (y) in the case of clause (ii), of the type listed on Schedule III or otherwise appropriate in the commercially reasonable judgment of the Borrower given the facts and circumstances of the transaction in amounts consistent with actual experience or the adjustments referred to in clause (x), all reasonably acceptable to the Administrative Agent. “Pro Forma Financial Statements”: as defined in subsection 5.1(a). “Proposed Change”: as defined in subsection 11.1. “Property”: any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Capital Stock or other ownership interests of any Person. “Purchase Money Indebtedness”: Indebtedness (excluding Financing Leases), incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of Holdings, Borrower and its Qualified Subsidiaries or the cost of installation, construction or improvement thereof; provided that (1) the amount of such Indebtedness shall not exceed such purchase price or cost and (2) such Indebtedness shall be incurred within 90 days after such acquisition of such asset by the Holdings, Borrower or any of its Qualified Subsidiaries or such installation, construction or improvement.   -27- -------------------------------------------------------------------------------- “Purchase Price”: as defined in the Asset Purchase Agreement without giving effect to the adjustments provided in Sections 3.3(a)(i) and (ii) therein. “Qualified Public Offering”: any public offering of the common (or other voting) Capital Stock of Parent or its successor or any of its Subsidiaries (other than any such Subsidiary that is also a Subsidiary of Borrower) pursuant to an effective registration statement (other than a registration statement on Form S-4, S-8 or any successor or similar form) filed under the Securities Act of 1933, as amended, where the gross proceeds raised are not less than $50,000,000. “Qualified Subsidiary”: each wholly owned Subsidiary Guarantor. “Real Property”: each Fee Property and Leased Property listed on Schedule 5.13, all right, title and interest of any Person (including, without limitation, any leasehold estate) in and to a parcel of real property owned or operated by any Credit Party, whether by lease, license or other use or occupancy agreement, together with, in each case, all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof or thereon. “Refinance”: to refinance, repay, prepay, replace, renew or refund. “Refinancing Indebtedness”: Indebtedness incurred to Refinance other Indebtedness (the “Refinanced Indebtedness”); provided (i) the principal amount (or accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (or accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any premium paid to the holders of the Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness; (ii) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness; (iii) if the Refinanced Indebtedness was subordinated to the Loans, then such Refinancing Indebtedness, by its terms, is subordinate in right of payment to the Loans, at least to the same extent as the Refinanced Indebtedness; (iv) the Refinancing Indebtedness shall have a maturity that is not earlier than (x) the maturity of the Indebtedness being Refinanced or (y) the Tranche B-1 Maturity Date; (v) the Refinancing Indebtedness shall have a longer or equal weighted average life than the Indebtedness being Refinanced; and (vi) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets, that the Refinanced Indebtedness being repaid or amended is secured. “Refunded Swing Line Loans”: as defined in subsection 3.4(b).   -28- -------------------------------------------------------------------------------- “Register”: as defined in subsection 11.6(d). “Regulation U”: Regulation U (12 C.F.R. Part 221) of the Board of Governors of the United States Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. “Regulation X”: Regulation X (12 C.F.R. Part 224) of the Board of Governors of the United States Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. “Reorganization”: with respect to any Multiemployer Plan, the condition that such Multiemployer Plan is in reorganization as such term is used in Section 4241 of ERISA. “Required Consents and Approvals”: the consents and approvals in respect of an aggregate number of Equivalent Basic Subscribers (as such term is defined in the Asset Purchase Agreement) related to the assets not transferred to Borrower or any of its Qualified Subsidiaries on the Closing Date due to a 6.14 Reduction in excess of 12,000 Equivalent Basic Subscribers. “Required Lenders”: at a particular time, the holders of in excess of 50% of the sum of (i) the Term Loans then outstanding, (ii) the unutilized Tranche A Term Loan Commitment, (iii) any outstanding Tranche B-1 Term Loan Commitment and (iv) the Revolving Credit Commitments and/or Incremental Revolving Commitments or, if the Revolving Credit Commitments and Incremental Revolving Commitments have been terminated in full, the Revolving Credit Exposure. The Term Loans and the Revolving Credit Commitments and/or Incremental Revolving Commitments of any Non-Funding Lender shall be disregarded in determining Required Lenders at any time. “Requirement of Law”: as to any Person, the Articles or Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, order or determination of an arbitrator or a court or other Governmental Authority, in each case, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. “Responsible Officer”: with respect to any Person, the president, chief executive officer, the chief operating officer, the chief financial officer, assistant treasurer, controller or any vice president of such Person. “Revolving Credit Commitment”: as to any Lender, its obligations to (i) make Revolving Credit Loans (other than Incremental Revolving Loans) to Borrower pursuant to subsection 3.1 and (ii) purchase its L/C Participating Interest in any Letter of Credit, in an aggregate amount not to exceed the amount set forth under such Lender’s name in Schedule I opposite the caption “Revolving Credit Commitment” or in Schedule 1 to the Assignment and Acceptance by which such Lender acquired its Revolving Credit Commitment, as the same may be reduced from time to time pursuant to subsection 4.3 or 4.5 or adjusted pursuant to subsection 11.6(c); collectively, as to all the Lenders, the “Revolving Credit Commitments”. The original aggregate principal amount of the Revolving Credit Commitments is $90,000,000.   -29- -------------------------------------------------------------------------------- “Revolving Credit Commitment Percentage”: as to any Lender at any time, the percentage of the aggregate Revolving Credit Commitments and/or any Incremental Revolving Commitments then constituted by such Lender’s Revolving Credit Commitment and/or Incremental Revolving Commitments. “Revolving Credit Commitment Period”: the period from and including the Business Day immediately after the Closing Date to but not including the Business Day immediately prior to the Revolving Credit Termination Date. “Revolving Credit Exposure”: the sum of (i) the aggregate unpaid principal amount of the Revolving Credit Loans, (ii) participations in Swing Line Loans, (iii) the aggregate amount available to be drawn at such time under all outstanding Letters of Credit and (iv) L/C Obligations. “Revolving Credit Facility”: as defined in the definition of Facility. “Revolving Credit Lender”: any Lender with a Revolving Credit Commitment and/or Incremental Revolving Commitment. “Revolving Credit Loans”: as defined in subsection 3.1(a). “Revolving Credit Note”: as defined in subsection 4.16(e). “Revolving Credit Termination Date”: the earlier of (a) the sixth anniversary of the Closing Date or, if such date is not a Business Day, the immediately preceding Business Day and (b) such other earlier date as the Revolving Credit Commitments and any Incremental Revolving Commitments shall terminate hereunder. “Sale and Leaseback Transaction”: any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (it being understood that this definition does not include the sale or transfer of property and the subsequent lease of property with a materially higher fair market value than the property being sold or transferred and that is used for substantially the same purpose). “SDN List”: as defined in subsection 7.15. “SEC”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority. “Secured Parties”: the collective reference to the Administrative Agent, the Lenders and each party to an Interest Rate Agreement relating to the Loans if at the date of entering into such Interest Rate Agreement such Person was a Lender or an Affiliate of a Lender. “Securities Account”: as defined in the UCC. “Security Agreement”: the security agreement dated as of February 29, 2004, substantially in the form of Exhibit E to be entered into by each of the Credit Parties in favor of the Administrative Agent for the ratable benefit of the Lenders, as the same may be amended, modified or supplemented from time to time.   -30- -------------------------------------------------------------------------------- “Security Agreements”: the Security Agreement and any security agreement which may from time to time be executed and delivered by Borrower or a Subsidiary of Borrower pursuant to subsection 7.9. “Security Documents”: the Security Agreements, the Mortgages, all UCC or other financing statements and other instruments of perfection required by this Agreement, the Security Agreements or the Mortgages to be executed, delivered and/or filed or recorded, and any other documents utilized to pledge to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties, any other property or assets as collateral for the Obligations. “Senior Leverage Ratio”: at any day, the ratio, on a Pro Forma Basis, of (a) Consolidated Total Senior Indebtedness less Excess Cash as of such day to (b) the product of (x) Consolidated EBITDA for the most recently completed two fiscal quarters (determined after giving effect to the second proviso of the definition of “Consolidated EBITDA”) of Holdings for which financial statements have been or are required to be provided to the Lenders pursuant to subsection 7.1 multiplied by (y) 2. “Solvent” and “Solvency”: when used with respect to any Person, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (y) 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 or unmatured, disputed, undisputed, secured or unsecured. “S&P”: Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. “SPV”: as defined in subsection 11.6(i). “Standby L/C”: an irrevocable letter of credit under which the Issuing Lender agrees to make payments in Dollars for the account of Borrower, on behalf of Borrower or any Qualified Subsidiary in respect of obligations of Borrower or such Subsidiary incurred pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which Borrower or such Qualified Subsidiary is or proposes to become a party in Borrower’s or such Qualified Subsidiary’s business, including, without limiting the foregoing, for insurance purposes or in respect of advance payments or as bid or performance bonds or for any other purpose for which a standby letter of credit might customarily be issued.   -31- -------------------------------------------------------------------------------- “Subordinated Indebtedness”: Indebtedness that is subordinated to other obligations of the issuer or obligor thereof, as the case may be, on terms and conditions and pursuant to the documentation reasonably satisfactory to the Administrative Agent. “Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, by such Person or by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. A Subsidiary shall be deemed wholly owned by a Person who owns directly or indirectly all of the voting shares of stock or other interests of such Subsidiary having voting power under ordinary circumstances to vote for directors or other managers of such corporation, partnership or other entity, except for directors’ qualifying shares. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrower; provided that any joint venture or Person in which an investment is made pursuant to subsection 8.6(h) shall at the option of Borrower, so long as such investment is maintained in reliance on such subsection, not be a “Subsidiary” of Borrower for any purpose of this Agreement. “Subsidiary Guarantee”: the Subsidiary Guarantee, substantially in the form of Exhibit I-1, to be made by the Subsidiary Guarantors in favor of the Administrative Agent for the ratable benefit of the Lenders, as the same may be amended, modified or supplemented from time to time. “Subsidiary Guarantor”: each of (1) each Subsidiary of Borrower listed on Schedule II and (2) each Subsidiary of Borrower which pursuant to subsection 7.9 becomes a party to the Subsidiary Guarantee. “Survey”: a survey of any Mortgaged Property (and all improvements thereon): (i) prepared by a surveyor or engineer licensed to perform surveys in the state, province or country where such Mortgaged Property is located, (ii) dated as of a recent date reasonably acceptable to the Administrative Agent, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent and the Title Company reasonably acceptable to the Administrative Agent, and (iv) complying in all material respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey; provided, however, that such survey is in a form sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) and issue a survey and comprehensive endorsement with respect to such Mortgaged Property. “Swing Line Commitment”: the Swing Line Lender’s obligation to make Swing Line Loans pursuant to subsection 3.4. “Swing Line Lender”: Société Générale, in its capacity as lender of the Swing Line Loans. “Swing Line Loan Participation Certificate”: a certificate in substantially the form of Exhibit J.   -32- -------------------------------------------------------------------------------- “Swing Line Loans”: as defined in subsection 3.4(a). “Swing Line Note”: as defined in subsection 4.16(e). “System”: the cable television reception and distribution system owned and operated in the conduct of the cable television business and all of the activities and operations ancillary thereto, including the provision of cable modem Internet access services, advertising and services and other income generating businesses, conducted or carried on in the Franchise Areas (as defined in the Asset Purchase Agreement) and communities listed on Schedule 1 to the Asset Purchase Agreement. “Taking”: any taking of any assets of Holdings, Borrower or any of its Qualified Subsidiaries or any portion thereof, in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or by reason of the temporary requisition of the use of such assets or any portion thereof, by any Governmental Authority, civil or military. “Taxes”: means any and all present or future taxes, duties, levies, fees, imposts, deductions, charges or withholdings imposed by the Internal Revenue Service or any other taxing authority (whether domestic or foreign and including any federal, state, U.S. possession, county, local, provincial or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing. “Term A Loan Facility”: as defined in the definition of Facility. “Term B-1 Loan Facility”: as defined in the definition of Facility. “Term Loan” and “Term Loans”: as defined in subsection 2.1. “Term Loan Commitments”: collectively, the Tranche A Term Loan Commitments, the Tranche B-1 Term Loan Commitments and any Incremental Term Commitment; individually, a “Term Loan Commitment”. “Term Note”: a Tranche A Term Note, a Tranche B-1 Term Note or any Incremental Term Note, as the context shall require, and collectively, the “Term Notes”. “Title Company”: such title insurance company as shall be retained by Borrower and reasonably acceptable to the Administrative Agent. “Title Policy”: a title policy with respect to each Mortgage paid for by Borrower, issued by Title Company, together with such endorsements (including, without limitation, “tie-in” or “cluster”, first loss, last dollar, usury, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, zoning (provided that with respect to zoning, Borrower may, in lieu of such endorsement, deliver a zoning compliance letter prepared by the appropriate Governmental Authority or a zoning and site requirement summary report prepared by the Planning and Zoning Resource Corporation or other similar service reasonably acceptable to the Administrative Agent) and so-called comprehensive coverage over covenants and restrictions), coinsurance and reinsurance as may be reasonably requested by the Administrative Agent and provided that such endorsements are available in a given jurisdiction, in   -33- -------------------------------------------------------------------------------- form and substance reasonably acceptable to the Administrative Agent, insuring the Mortgage as a first Lien on the relevant Mortgaged Property and subject only to Permitted Encumbrances and such other Liens expressly agreed to by the Administrative Agent. “Total Leverage Ratio”: at any time, the ratio, on a Pro Forma Basis, of (a) Consolidated Indebtedness less Excess Cash as of such time to (b) the product of (x) Consolidated EBITDA for the most recently completed two fiscal quarters (determined after giving effect to the second proviso of the definition of “Consolidated EBITDA”) of Holdings for which financial statements have been or are required to be provided to the Lenders pursuant to subsection 7.1 multiplied by (y) 2. “Tranche”: the Tranche A Term Loans, the Tranche B-1 Term Loans or Incremental Term Loans (that are neither Tranche A Term Loans nor Tranche B-1 Term Loans) or the Revolving Credit Commitment or Incremental Revolving Commitment, as the case may be. “Tranche A Installment Payment Date”: as defined in subsection 4.6(a). “Tranche A Lender”: each Lender that has a Tranche A Term Loan Commitment or is the holder of a Tranche A Term Loan. “Tranche A Maturity Date”: the date which is seven years after the Closing Date or, if such date is not a Business Day, the immediately preceding Business Day. “Tranche A Term Loan”: a loan in Dollars made by each Tranche A Lender, severally, to Borrower on the Closing Date in the aggregate amount of such Lender’s Tranche A Term Loan Commitment (collectively, the “Tranche A Term Loans”). “Tranche A Term Loan Commitment”: as to any Tranche A Lender, its obligation to make a Tranche A Term Loan to Borrower pursuant to subsection 2.1 to the Original Credit Agreement in an aggregate amount not to exceed the amount set forth under such Lender’s name in Schedule I opposite the caption “Tranche A Term Loan Commitment” or in an Incremental Loan Amendment or in Schedule 1 to the Assignment and Acceptance pursuant to which a Lender acquires its Tranche A Term Loan Commitment, as the same may be reduced pursuant to subsection 4.3 or adjusted pursuant to subsection 11.6(c); collectively, as to all the Tranche A Lenders, the “Tranche A Term Loan Commitments”. The aggregate principal amount of the Tranche A Term Loan Commitments on the Closing Date was $30,000,000. “Tranche A Term Loan Commitment Percentage”: as to any Tranche A Lender at any time, the percentage of the aggregate Tranche A Term Loan Commitments then constituted by such Lender’s Tranche A Term Loan Commitment (or, after the Tranche A Term Loan Commitment has been reduced to 0, the percentage of the aggregate outstanding principal amount of the Tranche A Term Loans then constituted by the principal amount of such Tranche A Lender’s Tranche A Term Loan). “Tranche A Term Loan Commitment Termination Date”: the earlier of (a) the APA Termination Date, if the Tranche A Term Loan(s) have not been made on or prior to such date, and (b) the date the Tranche A Term Loan Commitment is reduced to $0. “Tranche A Term Note”: as defined in subsection 4.16(e).   -34- -------------------------------------------------------------------------------- “Tranche B-1 Installment Payment Date”: as defined in subsection 4.6(b). “Tranche B-1 Lender”: each Lender that has a Tranche B-1 Term Loan Commitment or is the holder of a Tranche B-1 Term Loan. “Tranche B-1 Maturity Date”: the date which is seven and one-half years after the Closing Date or, if such date is not a Business Day, the immediately preceding Business Day. “Tranche B-1 Term Loan”: as defined in subsection 2.1. “Tranche B-1 Term Loan Commitment”: as to any Tranche B-1 Lender, its obligation to make a Tranche B-1 Term Loan to Borrower pursuant to subsection 2.1 in an aggregate amount not to exceed the amount set forth under such Lender’s name in the Amendment Agreement or in an Incremental Loan Amendment or in Schedule 1 to the Assignment and Acceptance pursuant to which a Lender acquires its Tranche B-1 Term Loan Commitment, as the same may be adjusted pursuant to subsection 11.6(c); collectively, as to all the Tranche B-1 Lenders, the “Tranche B-1 Term Loan Commitments”. The aggregate principal amount of the Tranche B-1 Term Loan Commitments on the Amendment and Restatement Date is $275,000,000. “Tranche B-1 Term Loan Commitment Percentage”: as to any Tranche B-1 Lender at any time, the percentage of the aggregate Tranche B-1 Term Loan Commitments then constituted by such Lender’s Tranche B-1 Term Loan Commitment (or, after the Tranche B-1 Term Loans are made, the percentage of the aggregate outstanding principal amount of the Tranche B-1 Term Loans then constituted by the principal amount of such Tranche B-1 Lender’s Tranche B-1 Term Loan). “Tranche B-1 Term Note”: as defined in subsection 4.16(e). “Transactions”: the acquisition of the System pursuant to the Acquisition Documentation (including any Subsequent Consent Transfers and Subsequent Property Transfer (each as defined in the Asset Purchase Agreement)), the Equity Financing, the issuance and sale of the New Notes, the execution and delivery of the Credit Documents and the initial extension of credit hereunder, the other transactions contemplated by the Equity Documents or the Acquisition Documentation entered into and consummated in connection with the acquisition of the System and the payment of fees and expenses in connection with any of the foregoing. “Transferee”: as defined in subsection 11.6(f). “Type”: as to any Loan, its nature as an Alternate Base Rate Loan or Eurodollar Loan. “UCC”: the Uniform Commercial Code as in effect in the applicable jurisdiction. “Uniform Customs”: the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any amendments thereof. “United States”: the United States of America. “United States Person”: any Person organized under the laws of the United States or any state thereof or the District of Columbia.   -35- -------------------------------------------------------------------------------- “Withdrawal Liability”: 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 1 of Subtitle E of Title IV of ERISA. 1.2. Rules of Construction. (a) In this Agreement and each other Credit Document, unless the context clearly requires otherwise (or such other Credit Document clearly provides otherwise), references to (i) the plural include the singular, the singular the plural and the part the whole; (ii) Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; (iii) agreements (including this Agreement), promissory notes and other contractual instruments include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments or other modifications thereto are not prohibited by their terms or the terms of any Credit Document; (iv) statutes and related regulations include any amendments of same and any successor statutes and regulations; and (v) time shall be a reference to New York, New York time. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) In this Agreement and each other Credit Document, unless the context clearly requires otherwise (or such other Credit Document clearly provides otherwise), (i) ”amend” shall mean “amend, restate, amend and restate, supplement or modify”; and “amended,” “amending” and “amendment” shall have meanings correlative to the foregoing; (ii) in the computation of periods of time from a specified date to a later specified date, “from” shall mean “from and including”; “to” and “until” shall mean “to but excluding”; and “through” shall mean “to and including”; (iii) ”hereof,” “herein” and “hereunder” (and similar terms) in this Agreement or any other Credit Document refer to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Credit Document; (iv) ”including” (and similar terms) shall mean “including without limitation” (and similarly for similar terms); (v) “or” has the inclusive meaning represented by the phrase “and/or”; (vi) “satisfactory to” the Administrative Agent or the Arranger shall mean in form, scope and substance and on terms and conditions satisfactory to the Administrative Agent or the Arranger, as the case may be; (vii) ”permitted” (and similar terms), with respect to any Credit Document, means permitted in accordance with the terms of such Credit Document, whether express, implied or by operation of any consent, waiver or amendment and (viii) ”asset” and “property” shall have the same meaning and effect and refer to all tangible and intangible assets and property, whether real, personal or mixed and of every type and description. (c) In this Agreement unless the context clearly requires otherwise, any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or Schedule, as the case may be, attached to this Agreement and constituting a part hereof, and (ii) a Section or other subsection is to a Section or such other subsection of this Agreement. SECTION 2. TERM LOANS; INCREMENTAL LOANS 2.1. Term Loans; Incremental Loans. (a) Subject to the terms and conditions hereof, each Tranche B-1 Lender severally agrees to make a loan in Dollars (individually, a “Tranche B-1 Term Loan”; and collectively, the “Tranche B-1 Term Loans”) to Borrower on the Amendment and Restatement Date, in an aggregate principal amount equal to such Lender’s Tranche B-1 Term Loan Commitment (it being understood that Tranche B Term Loan Lenders under the Original Credit Agreement that   -36- -------------------------------------------------------------------------------- execute and deliver the Amendment Agreement are converting their Tranche B Loans under the Original Credit Agreement into Tranche B-1 Term Loans hereunder), and each Lender making an Incremental Term Commitment severally agrees to make a Loan to Borrower on the date of an Incremental Loan Amendment therefor, in an aggregate principal amount equal to such Lender’s Incremental Term Commitment (collectively, the “Incremental Term Loans”; together with the Tranche A Term Loans and the Tranche B-1 Term Loans, the “Term Loans”). (b) [Reserved] (c) [Reserved] (d) [Reserved] (e) (i) So long as no Default or Event of Default has occurred and is continuing, at any time and from time to time after June 30, 2004, Borrower may request pursuant to the procedure set forth in, and in accordance with the terms of, subsection 4.18, the addition of an Incremental Facility consisting of an increase to the existing Revolving Credit Facility (an “Incremental Revolving Loan”), Tranche A Term Loans or Tranche B-1 Term Loans or a new tranche of Term Loans; provided, however, that Borrower may not make a request for any Incremental Facility if after giving effect thereto the sum of all then outstanding Incremental Revolving Loans, unused Incremental Revolving Commitments, Incremental Term Loans and unused Incremental Term Commitments would exceed $100,000,000; provided, further, that Borrower may not make a request for an Incremental Facility in respect of a Revolving Loan or a Tranche A Term Loan if after giving effect thereto the sum of all then outstanding Incremental Revolving Loans, unused Incremental Revolving Commitments and Incremental Term Loans and unused Incremental Term Commitments in respect of Tranche A Loans would exceed $25,000,000. Each Incremental Facility shall: (A) be in an amount not less that $10,000,000; (B) have such pricing as may be agreed by Borrower and the Lenders providing such Incremental Loans pursuant to the provisions of this subsection 2.1(e) and subsection 4.18; and (C) except as specifically provided in the applicable Incremental Loan Amendment, this subsection (C) and subsection (B) above or in subsection 4.18, otherwise have all of the same terms and conditions as the Revolving Credit Loans (if such Incremental Loans are Incremental Revolving Loans), the Tranche A Term Loans (if such Incremental Loans are Tranche A Term Loans) or the Tranche B-1 Term Loans (if such Incremental Loans are Tranche B-1 Term Loans); provided that notwithstanding anything to the contrary contained herein, the maturity date of the Incremental Term Loans shall be the Incremental Term Maturity Date. In addition, unless otherwise specifically provided in this Agreement, all references in the Credit Documents to Revolving Credit Loans, Tranche A Term Loans or Tranche B-1 Term Loans shall be deemed, unless the context otherwise requires, to include references to Incremental Revolving Loans or Incremental Term Loans of such Tranche, respectively, made pursuant to this Agreement. No Lender shall have any obligation to make an Incremental Loan unless and until it commits to do so. Commitments in respect of Incremental Loans shall become Commitments under this Agreement pursuant to (x) an amendment (each, an “Incremental Loan Amendment”) to this Agreement executed by Borrower, each   -37- -------------------------------------------------------------------------------- Lender or other approved financial institution agreeing to provide such Commitment (and no other Lender shall be required to execute such amendment), and the Administrative Agent, and (y) any amendments to the other Credit Documents (executed by the relevant Credit Party and the Administrative Agent only) as the Administrative Agent shall reasonably deem appropriate to effect such purpose. Notwithstanding anything to the contrary contained herein, the effectiveness of such Incremental Loan Amendment shall be subject to the receipt by the Administrative Agent of a certificate of Borrower executed by a Responsible Officer of Borrower certifying that immediately prior to and after giving effect to the incurrence of the Incremental Facility (A) each of the representations and warranties made by the Credit Parties in or pursuant to the Credit Documents shall be true and correct in all material respects, (B) Borrower is in compliance with each of the financial covenants contained in subsection 8.9 on a Pro Forma Basis and set forth in an Officer’s Certificate delivered to the Administrative Agent, based on financial projections of Borrower and its Subsidiaries attached to such certificate which have been prepared on a Pro Forma Basis giving effect to any Borrowing made hereunder on such date and the consummation of any related transaction and (C) no Default or Event of Default shall have occurred and be continuing or be caused by the incurrence of the Incremental Facility. (ii) So long as (x) Borrower shall have given the Administrative Agent no less than five Business Days’ prior notice of the Incremental Loan Amendment’s effectiveness and (y) any financial institution not theretofore a Lender which is providing an Incremental Revolving Commitment and/or an Incremental Term Commitment shall have become a Lender under this Agreement pursuant to an Incremental Loan Amendment, the Incremental Revolving Commitment and/or Incremental Term Commitment being requested by Borrower shall become effective under this Agreement upon the effectiveness of such Incremental Loan Amendment. Upon such effectiveness, Schedule I shall be deemed amended to reflect such Commitments. In the event that an Incremental Facility shall have become effective, the Lender or Lenders providing such Incremental Revolving Commitment and/or Incremental Term Commitments shall be deemed to have agreed, severally and not jointly, upon the terms and subject to the conditions of this Agreement, (A) with respect to Incremental Term Commitments to make an Incremental Term Loan in the amount of the Incremental Term Commitment of such Lender on the effective date of the applicable Incremental Loan Amendment and (B) with respect to Incremental Revolving Commitments, to make from time to time during the period from the date of the effectiveness of the applicable Incremental Loan Amendment through the Revolving Credit Termination Date, one or more Incremental Revolving Loans to the Borrower pursuant to the provisions of subsection 3.1 in an aggregate principal amount not exceeding at any time the Incremental Revolving Commitment of such Lender at such time. 2.2. Repayment of Term Loans. Borrower may repay the Term Loans as provided in subsection 4.4 and shall repay the Term Loans as provided in subsections 4.5 and 4.6. 2.3. Use of Proceeds. The proceeds of the Term Loans (other than any Incremental Term Loans) shall be used to finance a portion of the Transactions and to pay fees, expenses and financing costs in connection therewith. SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 3.1. Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to the extent of its Revolving Credit Commitment to extend   -38- -------------------------------------------------------------------------------- credit to Borrower at any time and from time to time on any Borrowing Date during the Revolving Credit Commitment Period in each case (i) by purchasing an L/C Participating Interest in each Letter of Credit issued by the Issuing Lender and (ii) by making loans in Dollars (individually, a “Revolving Credit Loan”; and collectively, the “Revolving Credit Loans”) to Borrower from time to time. Notwithstanding the above, in no event shall any Revolving Credit Loans be made, or Letter of Credit be issued, if the aggregate amount of the Revolving Credit Loans to be made or Letter of Credit to be issued would, after giving effect to the use of proceeds, if any, thereof, exceed the aggregate Available Revolving Credit Commitments nor shall any Letter of Credit be issued if after giving effect thereto the sum of the undrawn amount of all outstanding Letters of Credit and the amount of all L/C Obligations would exceed $7,500,000. (b) During the Revolving Credit Commitment Period, Borrower may use the Revolving Credit Commitments and any Incremental Revolving Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof, and/or by having the Issuing Lender issue Letters of Credit, having such Letters of Credit expire undrawn upon or if drawn upon, reimbursing the Issuing Lender for such drawing, and having the Issuing Lender issue new Letters of Credit. (c) Each borrowing of Revolving Credit Loans pursuant to the Revolving Credit Commitments and any Incremental Revolving Commitments shall be in an aggregate principal amount of the lesser of (i) $500,000 or a whole multiple of $100,000 in excess thereof in the case of Alternate Base Rate Loans, and $1,000,000 or a whole multiple of $100,000 in excess thereof, in the case of Eurodollar Loans, and (ii) the Available Revolving Credit Commitments, except (x) that any borrowing of Revolving Credit Loans to be used solely to pay a like amount of Swing Line Loans may be in the aggregate principal amount of such Swing Line Loans and (y) any borrowing under subsection 3.8(a) shall be in the amount of the applicable Letter of Credit draw. 3.2. Commitment Fee. Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than any Non-Funding Lender) a commitment fee from and including the Closing Date, in either case to but excluding the Revolving Credit Termination Date computed at the rate of 1/2 of 1% per annum on the average daily amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made (whether or not Borrower shall have satisfied the applicable conditions for borrowing or for the issuance of a Letter of Credit set forth in Section 6). Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date, commencing on the first such date to occur on or following the Closing Date, in each case for the actual number of days elapsed over a 365- or 366-day year. 3.3. Proceeds of Revolving Credit Loans. Borrower shall use the proceeds of Revolving Credit Loans for Permitted Acquisitions and to provide for the ongoing working capital and general corporate purposes of Borrower and its Qualified Subsidiaries, in each case, after the Closing Date. 3.4. Swing Line Commitment. (a) Subject to the terms and conditions hereof, the Swing Line Lender agrees, so long as the Administrative Agent has not received notice that an Event of Default has occurred and is continuing, to make swing line loans (individually, a “Swing Line Loan”; collectively, the “Swing Line Loans”) to Borrower at any time and from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding not to exceed   -39- -------------------------------------------------------------------------------- $5,000,000; provided that no Swing Line Loan may be made if the aggregate principal amount of the Swing Line Loans to be made would exceed the aggregate Available Revolving Credit Commitments at such time. Amounts borrowed by Borrower under this subsection 3.4 may be repaid at any time, subject to the limitation stated herein, without prior notice and, through but excluding the Revolving Credit Termination Date, reborrowed. All Swing Line Loans (1) shall be made as Alternate Base Rate Loans, (2) shall not be entitled to be converted into Eurodollar Loans and (3) must be repaid in full within seven days of making of such Loan or, if sooner, upon the making of any Revolving Credit Loan and shall in any event mature no later than the Revolving Credit Termination Date. Borrower shall give the Swing Line Lender irrevocable notice (which notice must be received by the Swing Line Lender prior to 3:00 p.m.) on the requested Borrowing Date specifying the amount of each requested Swing Line Loan, which shall be in an aggregate minimum amount of $250,000 or a whole multiple of $50,000 in excess thereof. The Swing Line Lender shall, before 5:00 p.m. on such requested Borrowing Date, make available to the Administrative Agent for the account of Borrower in same day funds, the proceeds of such Swing Line Loans. The proceeds of each Swing Line Loan will be made available by the Swing Line Lender to Borrower in immediately available funds to be delivered by wire transfer to the account(s) designated by Borrower in the applicable borrowing notice. The proceeds of Swing Line Loans may be used solely for the purposes referred to in subsection 3.3. (b) The Swing Line Lender at any time in its sole and absolute discretion may, and on the fifteenth day (or if such day is not a Business Day, the next Business Day) and last Business Day of each calendar month shall, on behalf of Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf) request each Revolving Credit Lender, including the Swing Line Lender, to make a Revolving Credit Loan in an amount equal to such Lender’s Revolving Credit Commitment Percentage of the amount of the Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the date such notice is given. Unless any of the events described in paragraph (f) of Section 9 shall have occurred and be continuing (in which event the procedures of paragraph (c) of this subsection 3.4 shall apply), each such Lender shall make the proceeds of its Revolving Credit Loan available to the Swing Line Lender for the account of the Swing Line Lender at the office of the Swing Line Lender specified in subsection 11.2 (or such other location as the Swing Line Lender may direct) prior to 12:00 noon in funds immediately available on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Refunded Swing Line Loans. (c) If, prior to the making of a Revolving Credit Loan pursuant to paragraph (b) of this subsection 3.4, one of the events described in paragraph (f) of Section 9 shall have occurred and be continuing, each Revolving Credit Lender will, on the date such Loan was to have been made, purchase an undivided participating interest in the Refunded Swing Line Loan in an amount equal to its Revolving Credit Commitment Percentage of such Refunded Swing Line Loan. Each such Lender will immediately transfer to the Swing Line Lender in immediately available funds, the amount of its participation and upon receipt thereof the Swing Line Lender will deliver to such Lender a Swing Line Loan Participation Certificate dated the date of receipt of such funds and in such amount. (d) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit Lender such Lender’s participating interest in a Refunded Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line 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) in like funds as received; provided that, in the event that such payment received by the Swing   -40- -------------------------------------------------------------------------------- Line Lender is required to be returned, such Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it in like funds as such payment is required to be returned by the Swing Line Lender. (e) The obligation of each Revolving Credit Lender to purchase participating interests pursuant to subsection 3.4(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of Borrower; (iv) any breach of this Agreement by Borrower or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 3.5. Issuance of Letters of Credit. (a) Borrower may from time to time request the Issuing Lender to issue a Standby L/C or a Commercial L/C by delivering to the Issuing Lender (with a copy to the Administrative Agent) at its address specified in subsection 11.2 (or such other location as the Issuing Lender may direct) a letter of credit application in the Issuing Lender’s then customary form (the “L/C Application”) completed to the satisfaction of the Issuing Lender, together with the proposed form of such Letter of Credit (which shall comply with the applicable requirements of paragraph (b) below) and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request; provided that if the Issuing Lender informs Borrower that it is for any reason unable to open such Letter of Credit, Borrower may request any Lender to open such Letter of Credit upon the same terms offered to the Issuing Lender and each reference to the Issuing Lender for purposes of subsections 3.5 through 3.13, 6.1 and 6.2 shall be deemed to be a reference to such Issuing Lender for the purposes of such Letter of Credit. (b) Each Standby L/C and Commercial L/C issued hereunder shall be issued for the account of Borrower and shall, among other things, (i) be in such form requested by Borrower as shall be acceptable to the Issuing Lender in its sole discretion and (ii) have an expiry date occurring not later than (a) 365 days, in the case of a Standby L/C, or (b) 120 days, in the case of a Commercial L/C, after the date of issuance of such Letter of Credit and, in the case of Standby L/Cs, may be automatically renewed on its expiry date for an additional period equal to the initial term, but in no case shall any Letter of Credit have an expiry date occurring later than the Revolving Credit Termination Date. Each L/C Application and each Letter of Credit shall be subject to the International Standby Practices (ISP 98) of the International Chamber of Commerce (in the case of Standby L/Cs) or the Uniform Customs (in the case of Commercial L/Cs) and, to the extent not inconsistent therewith, the Laws of the State of New York. 3.6. Participating Interests. Effective in the case of each Standby L/C and Commercial L/C (if applicable) as of the date of the opening thereof, the Issuing Lender agrees to allot and does allot, to itself and each other Revolving Credit Lender, and each such Lender severally and irrevocably agrees to take and does take in such Letter of Credit and the related L/C Application (if applicable), an L/C Participating Interest in a percentage equal to such Lender’s Revolving Credit Commitment Percentage. 3.7. Procedure for Opening Letters of Credit. The Issuing Lender will notify each Lender after the end of each calendar month of any L/C Applications received by the Issuing Lender from Borrower during such month. Upon receipt of any L/C Application from Borrower, the Issuing Lender   -41- -------------------------------------------------------------------------------- will process such L/C Application, and the other certificates, documents and other papers delivered to the Issuing Lender in connection therewith, in accordance with its customary procedures and, subject to the terms and conditions hereof, shall promptly open such Letter of Credit by issuing the original of such Letter of Credit to the beneficiary thereof and by furnishing a copy thereof to Borrower and, after the end of the calendar month in which such Letter of Credit was opened, to the other Lenders; provided that no such Letter of Credit shall be issued if subsection 3.1 would be violated thereby. 3.8. Payments in Respect of Letters of Credit. (a) Borrower agrees forthwith upon demand by the Issuing Lender and otherwise in accordance with the terms of the L/C Application relating thereto, (i) to reimburse the Issuing Lender for any payment made by the Issuing Lender under any Letter of Credit issued for the account of Borrower and (ii) to pay interest on any unreimbursed portion of any such payment from the date of such payment until reimbursement in full thereof at a rate per annum equal to (a) on or prior to the date which is one Business Day after the day on which the Issuing Lender demands reimbursement from Borrower for such payment, the Alternate Base Rate plus the Applicable Margin for the Revolving Credit Loans and (b) thereafter, the Alternate Base Rate plus the Applicable Margin for the Revolving Credit Loans plus 2%. Each drawing under any Letter of Credit shall (unless an event of the type described in paragraph (f) of Section 9 shall have occurred and be continuing, in which case the procedures specified in this subsection 3.8 for payments in respect of Letters of Credit shall apply) constitute a request by Borrower to the Administrative Agent for a borrowing pursuant to subsection 3.1(a) of Alternate Base Rate Loans (or, at the option of the Administrative Agent and the Swing Line Lender in their sole discretion, a borrowing pursuant to subsection 3.4 of Swing Line Loans) in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of payment of the relevant drawing. (b) In the event that the Issuing Lender makes a payment under any Letter of Credit and is not reimbursed pursuant to subsection 3.8(a) in full therefor forthwith upon demand of the Issuing Lender, and otherwise in accordance with the terms of the L/C Application relating to such Letter of Credit, the Issuing Lender will promptly notify each other Revolving Credit Lender. Forthwith upon its receipt of any such notice, each such other Lender will transfer to the Issuing Lender, in immediately available funds, an amount equal to such other Lender’s pro rata share (based on its Revolving Credit Commitment and/or any Incremental Revolving Commitment) of the L/C Obligation arising from such unreimbursed payment. Promptly, upon its receipt from such other Lender of such amount, the Issuing Lender will complete, execute and deliver to such other Lender an L/C Participation Certificate dated the date of such receipt and in such amount. (c) Whenever, at any time after the Issuing Lender has made a payment under any Letter of Credit and has received from any other Revolving Credit Lender such other Lender’s pro rata share of the L/C Obligation arising therefrom, the Issuing Lender receives any reimbursement on account of such L/C Obligation or any payment of interest on account thereof, the Issuing Lender will promptly distribute to such other Lender its pro rata share thereof in like funds as received; provided that in the event that the receipt by the Issuing Lender of such reimbursement or such payment of interest (as the case may be) is required to be returned, such other Lender will return to the Issuing Lender any portion thereof previously distributed by the Issuing Lender to it in like funds as such reimbursement or payment is required to be returned by the Issuing Lender. 3.9. Letter of Credit Fees. (a) In lieu of any letter of credit commissions and fees provided for in any L/C Application relating to Standby or Commercial L/Cs (other than standard issuance,   -42- -------------------------------------------------------------------------------- amendment and negotiation fees), Borrower agrees to pay the Administrative Agent, (i) for the account of the Issuing Lender and the Participating Lenders, with respect to each Standby L/C or Commercial L/C issued for the account of Borrower, a Standby L/C or Commercial L/C fee, as the case may be, equal to the Applicable Margin for Revolving Credit Loans which are Eurodollar Loans per annum; and (ii) in addition to the Standby or Commercial L/C fee referred to in subsection 3.9(a)(i) above, for the account of the Issuing Lender and not on account of its L/C Participating Interest therein, 0.25% per annum, each on the daily average amount available to be drawn under each Standby L/C in the case of a Standby L/C and on the maximum face amount of each Commercial L/C in the case of a Commercial L/C, in either case, payable, in arrears, on the last day of each March, June, September and December and on the Revolving Credit Termination Date. The Administrative Agent will disburse any Standby or Commercial L/C fees received pursuant to subsection 3.9(a)(i) to the respective Lenders promptly following the receipt of any such fees. (b) For purposes of any payment of fees required pursuant to this subsection 3.9, the Administrative Agent agrees to provide to Borrower a statement of any such fees to be so paid; provided that the failure by the Administrative Agent to provide Borrower with any such invoice shall not relieve Borrower of its obligation to pay such fees. 3.10. Letter of Credit Reserves. (a) If any Change in Law shall either (i) impose, modify, deem or make applicable any reserve, special deposit, assessment or similar requirement against letters of credit issued by the Issuing Lender or (ii) impose on the Issuing Lender any other condition regarding this Agreement (with respect to Letters of Credit) or any Letter of Credit, and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost of the Issuing Lender of issuing or maintaining any Letter of Credit (which increase in cost shall be the result of the Issuing Lender’s reasonable allocation of the aggregate of such cost increases resulting from such events), then, upon demand by the Issuing Lender, Borrower shall immediately pay to the Issuing Lender, from time to time as specified by the Issuing Lender, additional amounts which shall be sufficient to compensate the Issuing Lender for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the rate applicable to Alternate Base Rate Loans pursuant to subsection 4.8(b). Borrower shall not be required to make any payments to the Issuing Lender for any additional amounts pursuant to this subsection 3.10(a) unless the Issuing Lender has given written notice to Borrower of its intent to request such payments prior to or within 60 days after the date on which the Issuing Lender became entitled to claim such amounts. A certificate, setting forth in reasonable detail the calculation of the amounts involved, submitted by the Issuing Lender to Borrower concurrently with any such demand by the Issuing Lender, shall be conclusive, absent manifest error, as to the amount thereof. (b) In the event that any Change in Law with respect to the Issuing Lender shall, in the reasonable opinion of the Issuing Lender, require that any obligation under any Letter of Credit be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by the Issuing Lender or any corporation controlling the Issuing Lender, and such Change in Law shall have the effect of reducing the rate of return on the Issuing Lender’s or such corporation’s capital, as the case may be, as a consequence of the Issuing Lender’s obligations under such Letter of Credit to a level below that which the Issuing Lender or such corporation, as the case may be, could have achieved but for such Change in Law (taking into account the Issuing Lender’s or such corporation’s policies, as the case may be, with respect to capital adequacy) by an amount reasonably deemed by the Issuing Lender to be material, then from time to time following notice by the Issuing Lender to Borrower of such Change in Law, within 15 days after demand by the Issuing Lender, Borrower shall pay to the   -43- -------------------------------------------------------------------------------- Issuing Lender such additional amount or amounts as will compensate the Issuing Lender or such corporation, as the case may be, for such reduction. The Issuing Lender agrees that, upon the occurrence of any event giving rise to the operation of paragraph (a) or (b) of this subsection 3.10 with respect to the Issuing Lender, it will, if requested by Borrower and to the extent permitted by law or by the relevant Governmental Authority, endeavor in good faith to avoid or minimize the increase in costs or reduction in payments resulting from such event; provided that such avoidance or minimization can be made in such a manner that the Issuing Lender, in its sole determination, suffers no economic, legal or regulatory disadvantage. Borrower shall not be required to make any payments to the Issuing Lender for any additional amounts pursuant to this subsection 3.10(b) unless the Issuing Lender has given written notice to Borrower of its intent to request such payments prior to or within 60 days after the date on which the Issuing Lender became entitled to claim such amounts. A certificate, in reasonable detail setting forth the calculation of the amounts involved, submitted by the Issuing Lender to Borrower concurrently with any such demand by the Issuing Lender, shall be conclusive, absent manifest error, as to the amount thereof. (c) Borrower and each Participating Lender agree that the provisions of the foregoing paragraphs (a) and (b) shall apply equally to each Participating Lender in respect of its L/C Participating Interest in such Letter of Credit, as if the references in such paragraphs and provisions referred to, where applicable, such Participating Lender or, in the case of paragraph (b), any corporation controlling such Participating Lender. 3.11. Further Assurances. Borrower hereby agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments reasonably requested by the Issuing Lender more fully to effect the purposes of this Agreement and the issuance of Letters of Credit hereunder. 3.12. Obligations Absolute. The payment obligations of Borrower under this Agreement with respect to the Letters of Credit shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) the existence of any claim, set-off, defense or other right which Borrower or any of its Qualified Subsidiaries may have at any time against any beneficiary, or any transferee, of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Lender, the Administrative Agent or any Lender, or any other Person, whether in connection with this Agreement, any Credit Document, the transactions contemplated herein, or any unrelated transaction; (ii) any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent or invalid or any statement therein being untrue or inaccurate in any respect, except arising from the gross negligence or willful misconduct on the part of the Issuing Lender; (iii) payment by the Issuing Lender under any Letter of Credit against presentation of a draft or certificate or other document which does not comply with the terms of such Letter of Credit or is insufficient in any respect, except where such payment constitutes gross negligence or willful misconduct on the part of the Issuing Lender; or   -44- -------------------------------------------------------------------------------- (iv) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing, except for any such circumstances or happening constituting gross negligence or willful misconduct on the part of the Issuing Lender. 3.13. Participations. The obligation of each Revolving Credit Lender to purchase participating interests pursuant to subsection 3.6 shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Lender, Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of Borrower; (iv) any breach of this Agreement by Borrower or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS 4.1. Procedure for Borrowing. (a) Subject to the terms and conditions hereof, Borrower may borrow under the Commitments on any Business Day; provided that, with respect to any borrowing, Borrower shall give the Administrative Agent (or, with respect to Swing Line Loans, the Swing Line Lender) irrevocable notice substantially in the form of Exhibit Q (which notice must be received by the Administrative Agent prior to 12:00 noon (or, with respect to Swing Line Loans, 3:00 p.m.) (i) three Business Days prior to the requested Borrowing Date if all or any part of the Loans are to be Eurodollar Loans and (ii) one Business Day prior to the requested Borrowing Date (or, in the case of Swing Line Loans and, if the Closing Date occurs on the date this Agreement is executed and delivered, Loans made on the Closing Date, on the requested Borrowing Date) if the borrowing is to be solely of Alternate Base Rate Loans) and specifying (a) the amount of the borrowing, (b) whether such Loans are initially to be Eurodollar Loans or Alternate Base Rate Loans or a combination thereof, (c) if the borrowing is to be entirely or partly Eurodollar Loans, the length of the Interest Period for such Eurodollar Loans and (d) whether the Loan is a Term Loan, a Swing Line Loan or Revolving Credit Loan. Upon receipt of such notice the Administrative Agent shall promptly notify each affected Lender thereof. Not later than 12:00 noon on the Borrowing Date specified in such notice, each affected Lender shall make available to the Administrative Agent at the office of the Administrative Agent specified in subsection 11.2 (or at such other location as the Administrative Agent may direct) an amount in immediately available funds equal to the amount of the Loan to be made by such Lender (except that proceeds of Swing Line Loans will be made available to Borrower in accordance with subsection 3.4(a)). Loan proceeds received by the Administrative Agent hereunder shall promptly be made available to Borrower in immediately available funds to be delivered by wire transfer to the account(s) designated by Borrower in the applicable borrowing notice, with the aggregate amount actually received by the Administrative Agent from the Lenders and in like funds as received by the Administrative Agent. (b) Any borrowing of Eurodollar Loans hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, (i) the aggregate principal amount of all Eurodollar Loans having the same Interest Period shall not be less than $1,000,000 or a whole multiple of $100,000 in excess thereof, and (ii) no more than ten Interest Periods shall be in effect at any one time. No Borrowings made on the Closing Date or the next four consecutive Business Days shall be Eurodollar Loans without the Arranger’s consent.   -45- -------------------------------------------------------------------------------- 4.2. Conversion and Continuation Options. (a) Subject to subsection 4.15, Borrower may elect from time to time to convert Eurodollar Loans into Alternate Base Rate Loans by giving the Administrative Agent irrevocable notice of such election, to be received by the Administrative Agent prior to 12:00 noon at least three Business Days prior to the proposed conversion date. Borrower may elect from time to time to convert all or a portion of the Alternate Base Rate Loans (other than Swing Line Loans) then outstanding to Eurodollar Loans by giving the Administrative Agent irrevocable notice of such election, to be received by the Administrative Agent prior to 12:00 noon at least three Business Days prior to the proposed conversion date, specifying the Interest Period selected therefor; provided that no conversion date with respect to Tranche B-1 Term Loans that have not been converted from Tranche B Loans under the Original Credit Agreement may be earlier than the fifth Business Day subsequent to the Amendment and Restatement Date without the Arranger’s consent. Such conversion shall be made on the requested conversion date or, if such requested conversion date is not a Business Day, on the next succeeding Business Day; provided that no such conversion shall be made when any Event of Default has occurred and is continuing and the Required Lenders have, by written notice to Borrower, determined that such conversion is not appropriate. Upon receipt of any notice pursuant to this subsection 4.2, the Administrative Agent shall promptly notify each affected Lender thereof. All or any part of the outstanding Loans (other than Swing Line Loans) may be converted as provided herein; provided that partial conversions of Alternate Base Rate Loans shall be in the aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof and the aggregate principal amount of the resulting Eurodollar Loans outstanding in respect of any one Interest Period shall be at least $1,000,000 or a whole multiple of $100,000 in excess thereof. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans; provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Required Lenders have, by written notice to Borrower, determined that such a continuation is not appropriate, (ii) if, after giving effect thereto, subsection 4.1(b) would be contravened or (iii) after the date that is one month prior to the Revolving Credit Termination Date (in the case of continuations of Revolving Credit Loans) or the final Installment Payment Date of the Term Loans. 4.3. Changes of Commitment Amounts. (a) Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, at any time subsequent to the Closing Date, to terminate or from time to time to permanently reduce the Revolving Credit Commitments and any Incremental Revolving Commitments, subject to the provisions of this subsection 4.3. To the extent, if any, that the sum of the amount of the Revolving Credit Loans, Swing Line Loans and L/C Obligations then outstanding and the amounts available to be drawn under outstanding Letters of Credit exceeds the amount of the Revolving Credit Commitments and any Incremental Revolving Commitments, as then reduced, Borrower shall be required to make a prepayment equal to such excess amount, the proceeds of which shall be applied, first, to payment of the Swing Line Loans then outstanding, second, to payment of any L/C Obligations then outstanding, third to payment of the Revolving Credit Loans then outstanding and fourth, to cash collateralize any outstanding Letters of Credit on terms reasonably satisfactory to the Administrative Agent. Any termination of the Revolving Credit Commitments and any Incremental Revolving Commitments shall be accompanied by prepayment in full of the Revolving Credit Loans, Swing Line Loans and L/C Obligations then outstanding in excess   -46- -------------------------------------------------------------------------------- of the then outstanding Revolving Credit Commitments and any Incremental Revolving Commitments after giving effect to such reduction and by cash collateralization of any outstanding Letters of Credit on terms reasonably satisfactory to the Administrative Agent. Upon termination of the Revolving Credit Commitments and any Incremental Revolving Commitments, any Letter of Credit then outstanding that has been so cash collateralized shall no longer be considered a “Letter of Credit” as defined in subsection 1.1 and any L/C Participating Interests heretofore granted by the Issuing Lender to the Lenders in such Letter of Credit shall be deemed terminated (subject to automatic reinstatement in the event that such cash collateral is returned and the Issuing Lender is not fully reimbursed for any such L/C Obligations) but the Letter of Credit fees payable under subsection 3.9 shall continue to accrue to the Issuing Lender and the Participating Lenders (or, in the event of any such automatic reinstatement, as provided in subsection 3.9) with respect to such Letter of Credit until the expiry thereof (provided that in lieu of paying a Standby L/C or Commercial L/C fee, as the case may be, equal to the Applicable Margin for Revolving Credit Loans which are Eurodollar Loans per annum, Borrower shall pay to the Administrative Agent an amount equal to 0.25% per annum). (b) In the case of termination of the Revolving Credit Commitments, Incremental Revolving Commitments and/or Term Loan Commitment, interest accrued on the amount of any prepayment relating thereto and any unpaid commitment fee accrued hereunder shall be paid on the date of such termination. Any such partial reduction of the Revolving Credit Commitments, Incremental Revolving Commitments and/or Term Loan Commitment, shall be in an amount of $1,000,000 or a whole multiple of $100,000 in excess thereof and shall, in each case, reduce permanently the amount of the Revolving Credit Commitments, Incremental Revolving Commitments and/or Term Loan Commitment, then in effect. (c) (i) The Tranche A Term Loan Commitments, the Tranche B-1 Term Loan Commitments and any Incremental Term Commitments shall be automatically and permanently reduced upon the making of a Tranche A Term Loan, Tranche B-1 Term Loan or Incremental Term Loan, as the case may be, by the amount of such Loan and (ii) the Incremental Term Commitments under any Incremental Facility shall be terminated effective as of the day after the effective date of the Incremental Loan Amendment relating thereto. (d) The Revolving Credit Commitments shall be automatically and permanently reduced on the fifth anniversary of the Closing Date, if the aggregate Revolving Credit Commitments are greater than $67,500,000 at such time, to $67,500,000. 4.4. Optional Prepayments. Subject to subsection 4.15, Borrower may at any time and from time to time prepay Loans, in whole or in part, without premium or penalty, by irrevocable written notice to the Administrative Agent by 12:00 noon on the Business Day preceding the proposed date of prepayment in the case of Alternate Base Rate Loans, by 12:00 noon on the third Business Day preceding the proposed date of prepayment in the case of Eurodollar Loans, specifying the date and amount of prepayment and whether the prepayment is of Revolving Credit Loans or Term Loans. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof. If such notice is given, Borrower shall make such prepayment, and the payment amount specified in such notice shall be due and payable, on the date specified therein. Partial prepayments of Term Loans pursuant to this subsection 4.4 shall be in an aggregate principal amount equal to the lesser of (a) (i) $1,000,000 or a whole multiple of $100,000 in excess thereof with respect to Eurodollar Loans or (ii) $500,000 or a whole multiple of $100,000 in excess thereof with respect to Alternate Base Rate Loans and (b) the aggregate unpaid principal   -47- -------------------------------------------------------------------------------- amount of the Term Loans. Partial prepayments of Revolving Credit Loans pursuant to this subsection shall be in an aggregate principal amount equal to the lesser of (a) (i) $1,000,000 or a whole multiple of $100,000 in excess thereof with respect to Eurodollar Loans or (ii) $500,000 or a whole multiple of $100,000 in excess thereof with respect to Alternate Base Rate Loans and (b) the aggregate unpaid principal amount of the Revolving Credit Loans (or the aggregate unpaid principal amount of Revolving Credit Loans maintained as Alternate Base Rate Loans (in the case of a prepayment of such Revolving Credit Loans) or as Eurodollar Loans with a single Interest Period (in the case of a prepayment of such Revolving Credit Loans)), as the case may be. Prepayments of the Term Loans pursuant to this subsection 4.4 shall be applied in accordance with subsection 4.7 below. All voluntary prepayments of Tranche B-1 Term Loans effected on or prior to the first anniversary of the Amendment and Restatement Date with the proceeds of a substantially concurrent issuance or incurrence of new term loans or loans under a new revolving credit facility (excluding a refinancing of all Loans outstanding under this Agreement in connection with another transaction not permitted by this Agreement (as determined prior to giving effect to any amendment or waiver of this Agreement being adopted in connection with such transaction)), shall be accompanied by a prepayment fee equal to 1.00% of the aggregate amount of such prepayments if the Applicable Margin (or similar interest rate spread) applicable to such new term loans is or, upon the satisfaction of certain conditions, could be less than the Applicable Margin applicable to the Tranche B-1 Term Loans, as of the Amendment and Restatement Date. 4.5. Mandatory Prepayments. (a) Equity Issuances. If, subsequent to the Closing Date, Holdings or Borrower shall issue any Capital Stock (it being understood that the issuance of debt securities convertible into, or exchangeable or exercisable for, Capital Stock shall be governed by subsection 4.5(b) below), or receive any contributions in respect of its capital, within five Business Days of receipt of any Net Proceeds therefrom, the Borrowers shall prepay outstanding Loans in an amount equal to 75% of such Net Proceeds and such prepayment shall be applied in accordance with subsection 4.7 below; provided that, following receipt by the Administrative Agent of the financial statements required by subsection 7.1 for the second fiscal quarter beginning after the Closing Date, (x) such percentage shall be reduced to 50% with respect to such Net Proceeds (or a smaller portion thereof, as the case may be) if the Total Leverage Ratio is less than 6.00 to 1.00 but greater than or equal to 5.00 to 1.00 as of the date of receipt of such Net Proceeds after giving effect to the prepayment required by this subsection 4.5(a) with such Net Proceeds (or such smaller portion thereof) and (y) such percentage shall be reduced to 0% with respect to such Net Proceeds (or a smaller portion thereof, as the case may be) if the Total Leverage Ratio is less than 5.00 to 1.00 as of the date of receipt of such Net Proceeds after giving effect to the prepayment required by this subsection 4.5(a) with such Net Proceeds (or such smaller portion thereof); provided further that this subsection 4.5(a) shall not apply to (i) Permitted Issuances, (ii) issuances where the proceeds are used to pay the purchase price in a Permitted Acquisition or pursuant to the Asset Purchase Agreement or (iii) contributions of the proceeds of ABRY Subordinated Indebtedness. (b) Indebtedness. If, subsequent to the Closing Date, Holdings, Borrower or any of its Qualified Subsidiaries shall incur or permit the incurrence of any Indebtedness (including pursuant to debt securities which are convertible into, or exchangeable or exercisable for, Capital Stock), within five Business Days of receipt of any Net Proceeds therefrom, Borrower shall prepay outstanding Loans in an amount equal to 100% of such Net Proceeds and such prepayment shall be applied in accordance with   -48- -------------------------------------------------------------------------------- subsection 4.7 below, provided that, following receipt by the Administrative Agent of the financial statements required by subsection 7.1 for the second fiscal quarter beginning after the Closing Date, such percentage shall be reduced to 50% with respect to such Net Proceeds (or a smaller portion thereof, as the case may be) if the Total Leverage Ratio is less than 6.00 to 1.00 as of the date of receipt of such Net Proceeds after giving effect to the prepayment required by this subsection 4.5(b); provided further that this subsection 4.5(b) shall not apply to Net Proceeds of (i) Holdings High Yield Notes if such Net Proceeds are used to fund a Permitted Acquisition or in respect of Subsequent Consent Transfers and/or Subsequent Property Transfers (each as defined in the Asset Purchase Agreement) or (ii) any Indebtedness permitted by subsections 8.1(a) through (j). (c) Asset Sales. If, subsequent to the Closing Date, Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale, within five Business Days of receipt of any Net Proceeds therefrom, Borrower shall prepay outstanding Loans in an amount equal to 100% of such Net Proceeds and such prepayment shall be applied in accordance with subsection 4.7 below; provided that no payment shall be required pursuant to this subsection 4.5(c) until the date that the aggregate amount of Net Proceeds received by Holdings or any of its Subsidiaries from any Asset Sales exceeds $5,000,000 (and has not yet been so applied). (d) Casualty Events. If, subsequent to the Closing Date, Holdings, Borrower or any of its Subsidiaries shall receive proceeds from insurance recoveries in respect of any Destruction or any proceeds or awards in respect of any Taking, in each case, in excess of $500,000, within five Business Days of receipt of such Net Proceeds, Borrower shall prepay outstanding Loans in an amount equal to 100% of the Net Proceeds thereof and such prepayment shall be applied in accordance with subsection 4.7 below subject to Borrower’s right to reinvest or restore under subsection 12.2. (e) Excess Cash Flow. If, for any fiscal year of Holdings commencing with its fiscal year ending on December 31, 2005, there shall be Excess Cash Flow for such fiscal year, not later than 90 days after the end of such fiscal year Borrower shall prepay Loans in an amount equal to 75% of such Excess Cash Flow and such prepayment shall be applied in accordance with subsection 4.7 below; provided that such percentage shall be reduced to 50% with respect to such Excess Cash Flow (or portion thereof) if the Total Leverage Ratio as of the end of such fiscal year is or after giving effect to the prepayment required by this subsection 4.5(e) with such Excess Cash Flow (or such smaller portion thereof) would be less than 6.00 to 1.00 but greater than or equal to 5.00 to 1.00; provided further that such percentage shall be reduced to 25% with respect to such Excess Cash Flow (or a smaller portion thereof) if the Total Leverage Ratio as of the end of such fiscal year is, or after giving effect to the prepayment required by this subsection 4.5(e) with such Excess Cash Flow (or such smaller portion thereof) would be, less than 5.00 to 1.00. (f) 3.3 Reduction. If Borrower receives a cash payment as a result of a 3.3 Reduction and the aggregate amount of such payment, net of any costs directly relating to the determination of the 3.3 Reduction (the “Net 3.3 Reduction Proceeds”) exceeds $20,000,000, then within 180 days after the Post Closing Certificate (as defined in the Asset Purchase Agreement) becomes conclusive, final and binding on the parties to the Asset Purchase Agreement and the Net 3.3 Reduction Proceeds have been received by Borrower, Borrower shall prepay Loans in an amount equal to 66.67% of the amount by which the amount of such Net 3.3 Reduction Proceeds exceeds $20,000,000 and such prepayment shall be applied in accordance with subsection 4.7 below; provided that if Borrower is not permitted to make a Dividend Payment pursuant to subsection 8.11(g) with respect to the 3.3 Reduction, then Borrower shall prepay outstanding Loans in the amount of the entire amount of the Net 3.3 Reduction Proceeds and such prepayment shall be applied in accordance with subsection 4.7 below.   -49- -------------------------------------------------------------------------------- 4.6. Repayment of Term Loans. (a) Beginning in June 2006 through December 2010 (19 quarters) the Tranche A Term Loans shall be repaid on the last Business Day of each March, June, September and December (each such day, a “Tranche A Installment Payment Date”) in an amount equal to 5.0% per fiscal quarter of the total principal amount of Tranche A Term Loans made on the Closing Date, plus the amounts set forth in any Incremental Loan Amendment for Incremental Term Loans that are Tranche A Term Loans which shall be in proportion (in each case, subject to reduction as described in subsections 4.4, 4.5 and 4.7) and the remaining principal amount shall be repaid on the Tranche A Maturity Date. Amounts repaid on account of the Tranche A Term Loans pursuant to this subsection or otherwise may not be reborrowed. Accrued interest on the amount of any prepayment shall be paid on the Interest Payment Date next succeeding the date of any partial prepayment and on the date of such prepayment in the case of a prepayment in full of the Tranche A Term Loans. To the extent not previously paid, all Tranche A Term Loans shall be due and payable on the Tranche A Maturity Date. (b) (i) Subject to clause (ii) below, the Tranche B-1 Term Loans shall be repaid on the last Business Day of each March, June, September and December (each such day, a “Tranche B-1 Installment Payment Date”), in the amounts equal to the percentages of the total principal amount of Tranche B-1 Term Loans made on the Amendment and Restatement Date set forth below for the periods set forth below plus the amounts set forth in any Incremental Loan Amendment for Incremental Term Loans that are Tranche B-1 Term Loans which shall be in proportion to the percentages set for below (in each case, subject to reduction as described in subsections 4.4, 4.5 and 4.7).   Period    Percentage June 2006 - September 2010    0.250% per fiscal quarter December 2010 - June 2011    23.875% per fiscal quarter Tranche B-1 Maturity Date    23.875% Amounts repaid on account of the Tranche B-1 Term Loans pursuant to this subsection or otherwise may not be reborrowed. Accrued interest on the amount of any prepayments shall be paid on the Interest Payment Date next succeeding the date of any partial prepayment and on the date of such prepayment in the case of a prepayment in full of the Tranche B-1 Term Loans. To the extent not previously paid, all Tranche B-1 Term Loans shall be due and payable on the Tranche B-1 Maturity Date. (ii) The applicable Incremental Loan Amendment may provide for scheduled repayments of any Incremental Term Loans (each such day, an “Incremental Installment Payment Date”), subject to the requirements of the definition of Incremental Term Maturity Date. 4.7. Application of Prepayments. (a) Prepayments of Term Loans pursuant to subsection 4.4 shall be applied as elected by Borrower. Prepayments pursuant to subsection 4.5 shall be applied first, to Term Loans outstanding and second, to the extent no Term Loans remain outstanding, to the   -50- -------------------------------------------------------------------------------- Revolving Credit Loans in the amount of the Net Proceeds or Excess Cash Flow remaining to be applied; provided that in the case of a prepayment pursuant to subsection 4.5(b), (c) or (d), there shall be permanent reduction in the Revolving Credit Commitments and/or Incremental Revolving Commitments (on a pro rata basis between them) by the amount of Net Proceeds applied to the Revolving Credit Loans. Following any such reduction, Borrower shall comply with the second paragraph of subsection 4.3(a). (b) Prepayments of Term Loans pursuant to subsection 4.5 shall be applied pro rata to the Tranche A Term Loans, the Tranche B-1 Term Loans and any Incremental Term Loans that are neither Tranche A Term Loans nor Tranche B-1 Term Loans based upon the aggregate principal amount of Term Loans then outstanding under each Tranche of Term Loans; within each Tranche prepayments will be applied to the remaining installments of principal on a pro rata basis. Except as otherwise may be directed by Borrower, any prepayment of Loans pursuant to this subsection 4.7 shall be applied, first, to any Alternate Base Rate Loans of the applicable Tranche then outstanding and the balance of such prepayment, if any, to the Eurodollar Loans of the applicable Tranche then outstanding; provided that prepayments of Eurodollar Loans, if not on the last day of the Interest Period with respect thereto, shall, at the option of Borrower, be prepaid subject to the provisions of subsection 4.15 or the amount of such prepayment (after application to any Alternate Base Rate Loans) shall be deposited with the Administrative Agent as cash collateral for the Loans on terms reasonably satisfactory to the Administrative Agent and thereafter shall be applied in the order of the Interest Periods of the applicable Tranche next ending most closely to the date such prepayment is required to be made and on the last day of each such Interest Period. After such application, unless an Event of Default shall have occurred and be continuing (in which case such interest shall be held as cash collateral or applied by the Administrative Agent to any Obligations then due and payable), any remaining interest earned on such cash collateral shall be paid to Borrower. 4.8. Interest Rates and Payment Dates. (a) Eurodollar Loans shall bear interest for each day during each Interest Period applicable thereto, commencing on (and including) the first day of such Interest Period to, but excluding, the last day of such Interest Period, on the unpaid principal amount thereof at a rate per annum equal to the Eurodollar Rate determined for such Interest Period plus the Applicable Margin. (b) Alternate Base Rate Loans shall bear interest for the period from and including the date such Loans are made to, but excluding, the maturity date thereof, or to, but excluding, the conversion date if such Loans are earlier converted into Eurodollar Loans on the unpaid principal amount thereof at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. (c) Upon the occurrence and during the continuance of an Event of Default the overdue amount of any Loans, Interest or other obligations shall, without limiting the rights of the Lenders under Section 9, bear interest (which shall be payable on demand): (a) in the case of any Loan, the rate otherwise applicable to such Loan pursuant to this subsection 4.8 and the Applicable Margin plus 2%; and (b) in all other cases, a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days) equal to the Alternate Base Rate and the Applicable Margin plus 2%. (d) Except as otherwise expressly provided for in this subsection 4.8, interest shall be payable in arrears (a) for Eurodollar Loans, at the end of each Interest Period (or, for any Interest Period longer than three months, at three month intervals following the first day of such Interest Period) and on the final maturity of the Loans, and (b) for Alternate Base Rate Loans, quarterly in arrears on the last Business Day of each March, June, September and December and on the final maturity of the Loans.   -51- -------------------------------------------------------------------------------- 4.9. Computation of Interest. (a) Interest in respect of Alternate Base Rate Loans shall be calculated on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be. Interest in respect of Eurodollar Loans shall be calculated on the basis of the actual number of days elapsed over a year of 360 days. The Administrative Agent shall as soon as practicable notify Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate is announced or such change in the Eurocurrency Reserve Requirements becomes effective, as the case may be. The Administrative Agent shall as soon as practicable notify Borrower and the Lenders of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of Borrower or any Lender, deliver to Borrower or such Lender a statement showing the quotations used by the Administrative Agent in determining the Eurodollar Rate. 4.10. Certain Fees. Borrower agrees to pay to the Administrative Agent, for its own account, a non-refundable agent’s fee in an amount previously agreed to with the Administrative Agent, payable annually in advance on the Closing Date and on each anniversary thereof unless all Loans have been (or are on such date) repaid and all Commitments hereunder have been (or are on such date) terminated. 4.11. Inability to Determine Interest Rate. In the event that the Administrative Agent or the Required Lenders shall have reasonably determined (which determination shall be conclusive and binding upon Borrower) that (a) by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any Interest Period with respect to (i) proposed Loans that Borrower has requested be made as Eurodollar Loans, (ii) any Eurodollar Loans that will result from the requested conversion of all or part of the Alternate Base Rate Loans into Eurodollar Loans or (iii) the continuation of any Eurodollar Loan as such for an additional Interest Period, or (b) Dollar deposits in the relevant amount and for the relevant period with respect to any such Eurodollar Loan are not generally available to the Lenders in their respective Eurodollar Lending Offices’ interbank eurodollar markets, the Administrative Agent shall forthwith give telecopy notice of such determination, confirmed in writing, to Borrower and the Lenders at least one day prior to, as the case may be, the requested Borrowing Date, the conversion date or the last day of such Interest Period. If such notice is given (i) any requested Eurodollar Loans shall be made as Alternate Base Rate Loans, (ii) any Alternate Base Rate Loans that were to have been converted to Eurodollar Loans shall be continued as Alternate Base Rate Loans, and (iii) any outstanding Eurodollar Loans shall be converted on the last day of the then current Interest Period applicable thereto into Alternate Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made and no Alternate Base Rate Loans shall be converted to Eurodollar Loans. 4.12. Pro Rata Treatment and Payments. (a) Except to the extent otherwise provided herein, each borrowing of Loans by Borrower from the Lenders and any reduction of the Commitments of the Lenders hereunder shall be made pro rata according to the relevant Commitment Percentages of the Lenders with respect to the Loans borrowed or the Commitments to be reduced.   -52- -------------------------------------------------------------------------------- (b) Whenever any payment received by the Administrative Agent under this Agreement or any Note or any other Credit Document is insufficient to pay in full all amounts then due and payable to the Administrative Agent and the Lenders under this Agreement, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the following order: first, to the payment of fees and expenses due and payable to the Administrative Agent (in such capacity and not in its capacity as a Lender) under and in connection with this Agreement and the other Credit Documents; second, to the payment of all expenses due and payable under subsection 11.5, ratably among the Lenders in accordance with the aggregate amount of such payments owed to each such Lender; third, to the payment of fees due and payable under subsections 3.2 and 3.9, ratably among the Lenders in accordance with the Commitment Percentage of each Lender of the Commitment for which such payment is owed and, in the case of the Issuing Lender, the amount retained by the Issuing Lender for its own account pursuant to subsection 3.9; fourth, to the payment of interest then due and payable on the Loans and the L/C Obligations ratably in accordance with the aggregate amount of interest owed to each such Lender; and fifth, to the payment of the principal amount of the Loans and the L/C Obligations which is then due and payable ratably among the Lenders in accordance with the aggregate principal amount owed to each such Lender. (c) If any Lender (a “Non-Funding Lender”) has (x) failed to make a Revolving Credit Loan required to be made by it hereunder, and the Administrative Agent has determined that such Lender is not likely to make such Revolving Credit Loan or (y) given notice to Borrower or the Administrative Agent that it will not make, or that it has disaffirmed or repudiated any obligation to make, any Revolving Credit Loan, in each case by reason of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, or otherwise, (i) any payment made on account of the principal of the Revolving Credit Loans outstanding shall be made as follows: (A) in the case of any such payment made on any date when and to the extent that, in the determination of the Administrative Agent, Borrower would be able under the terms and conditions hereof to reborrow the amount of such payment under the Commitments and to satisfy any applicable conditions precedent set forth in Section 6 to such reborrowing, such payment shall be made on account of the outstanding Revolving Credit Loans held by the Lenders other than the Non-Funding Lender pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans of such Lenders; and (B) otherwise, such payment shall be made on account of the outstanding Revolving Credit Loans held by the Lenders pro rata according to the respective outstanding principal amounts of such Revolving Credit Loans; and (ii) any payment made on account of interest on the Revolving Credit Loans shall be made pro rata according to the respective amounts of accrued and unpaid interest due and payable on the Revolving Credit Loans with respect to which such payment is being made. Borrower agrees to give the Administrative Agent such assistance in making any determination pursuant to subparagraph (i)(A) of this paragraph (c) as the Administrative Agent may reasonably request. Any such determination by the Administrative Agent shall be conclusive and binding on the Lenders.   -53- -------------------------------------------------------------------------------- (d) All payments (including prepayments) to be made by Borrower on account of principal, interest and fees shall be made without set-off, counterclaim or other defense and shall be made to the Administrative Agent, for the account of the Lenders at the Administrative Agent’s office located at 1221 Avenue of the Americas, NY, NY 10020, in lawful money of the United States and in immediately available funds. The Administrative Agent shall promptly distribute such payments in accordance with the provisions of subsection 4.12(b) upon receipt in like funds as received. If any payment hereunder (other than payments on Eurodollar Loans) would become due and payable on a day other than a Business Day, such payment shall become due and payable on 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. If any payment on a Eurodollar Loan 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), unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day. (e) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount which would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent in accordance with subsection 4.1 and the Administrative Agent may, in reliance upon such assumption, make available to Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection 4.12(e) shall be conclusive absent manifest error. If such Lender’s Commitment Percentage of such borrowing is not in fact made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Alternate Base Rate Loans hereunder (in lieu of any otherwise applicable interest), on demand, from Borrower, without prejudice to any rights which any such Borrower or the Administrative Agent may have against such Lender hereunder. Nothing contained in this subsection 4.12 shall relieve any Lender which has failed to make available its ratable portion of any borrowing hereunder from its obligation to do so in accordance with the terms hereof. (f) The failure of any Lender to make the Loan to be made by it on any Borrowing Date shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on such Borrowing Date. (g) All payments and optional prepayments (other than prepayments as set forth in subsection 4.14 with respect to increased costs) of Eurodollar Loans hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all Eurodollar Loans with the same Interest Period shall not be less than $1,000,000 a whole multiple of $100,000 in excess thereof.   -54- -------------------------------------------------------------------------------- 4.13. Illegality. Notwithstanding any other provision herein, if any Change in Law occurring after the date that any Person becomes a Lender party to this Agreement shall make it unlawful for such Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, the commitment of such Lender hereunder to make Eurodollar Loans or to convert all or a portion of Alternate Base Rate Loans into Eurodollar Loans shall forthwith be suspended until such time, if any, as such illegality shall no longer exist and such Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Alternate Base Rate Loans for the duration of the respective Interest Periods (or, if permitted by applicable law, at the end of such Interest Periods) and all payments of principal which would otherwise be applied to such Eurodollar Loans shall be applied instead to such Lender’s Alternate Base Rate Loans. Borrower hereby agrees to pay any Lender, promptly upon its demand, any amounts payable pursuant to subsection 4.15 in connection with any conversion in accordance with this subsection 4.13 (such Lender’s notice of such costs, as certified in reasonable detail as to such amounts to Borrower through the Administrative Agent, to be conclusive absent manifest error). 4.14. Requirements of Law. (a) In the event that any Change in Law or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority occurring after the date that any lender becomes a Lender party to this Agreement: (i) does or shall subject any such Lender or its Eurodollar Lending Office to any Tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loans made by it, or change the basis of taxation of payments to such Lender or its Eurodollar Lending Office of principal, the commitment fee, interest or any other amount payable hereunder (except for (x) net income and franchise taxes imposed on the net income of such Lender or its Eurodollar Lending Office by the United States or any political subdivision thereof or therein, by the jurisdiction under the laws of which such Lender is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Lender’s Eurodollar Lending Office is located or any political subdivision or taxing authority thereof or therein, including changes in the rate of tax on the overall net income of such Lender or such Eurodollar Lending Office, and (y) taxes resulting from the substitution of any such system by another system of taxation; provided that the taxes payable by Lenders subject to such other system of taxation are not generally charged to borrowers from such Lenders having loans or advances bearing interest at a rate similar to the Eurodollar Rate); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender which are not otherwise included in the determination of the Eurodollar Rate; or (iii) does or shall impose on such Lender any other condition which is applicable to lenders generally; and the result of any of the foregoing is to increase the cost to such Lender or its Eurodollar Lending Office of making, converting, renewing or maintaining advances or extensions of credit or to reduce any amount receivable hereunder, in each case, in respect of its Eurodollar Loans, then, in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate   -55- -------------------------------------------------------------------------------- such Lender for such additional cost or reduced amount receivable which such Lender deems to be material as reasonably determined by such Lender with respect to such Eurodollar Loans, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the Alternate Base Rate plus 1%. (b) In the event that any Change in Law occurring after the date that any Person becomes a Lender party to this Agreement with respect to any such Lender shall, in the reasonable opinion of such Lender, require that any Commitment of such Lender be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by such Lender or any corporation controlling such Lender, and such Change in Law shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital, as the case may be, as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such corporation, as the case may be, could have achieved but for such Change in Law (taking into account such Lender’s or such corporation’s policies, as the case may be, with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time following notice by such Lender to Borrower of such Change in Law as provided in paragraph (c) of this subsection 4.14, within 15 days after demand by such Lender, Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation on an after-tax basis, as the case may be, for such reduction. (c) Borrower shall not be required to make any payments to any Lender for any additional amounts pursuant to this subsection 4.14 unless such Lender has given written notice to Borrower, through the Administrative Agent, of its intent to request such payments prior to or within 60 days after the date on which such Lender became entitled to claim such amounts. If any Lender has notified Borrower through the Administrative Agent of any increased costs pursuant to paragraph (a) of this subsection 4.14, Borrower at any time thereafter may, upon at least three Business Days’ notice to the Administrative Agent (which shall promptly notify the Lenders thereof), and subject to subsection 4.15, prepay (or convert into Alternate Base Rate Loans) all (but not a part) of the Eurodollar Loans of the applicable Lender then outstanding. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of paragraph (a) of this subsection 4.14 with respect to such Lender, it will, if requested by Borrower and to the extent permitted by law or by the relevant Governmental Authority, endeavor in good faith to avoid or minimize the increase in costs or reduction in payments resulting from such event (including, without limitation, endeavoring to change its Eurodollar Lending Office); provided that such avoidance or minimization can be made in such a manner that such Lender, in its sole determination, suffers no economic, legal or regulatory disadvantage. If any Lender requests compensation from any Borrower under this subsection 4.14, Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender thereafter to make or continue Loans of the Type with respect to which such compensation is requested, or to convert Loans of any other Type into Loans of such Type, until the Requirement of Law giving rise to such request ceases to be in effect; provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (d) (i) Subject to subsection 4.14(d)(iv) below, all payments by Borrower or any Guarantor to or for the account of any Lender, Issuing Lender or Administrative Agent hereunder or under any Note shall be made without setoff, counterclaim or other defense and free and clear of, and without deduction or withholding for, any and all Covered Taxes. If Borrower shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder to any Lender, Issuing Lender or Administrative Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional   -56- -------------------------------------------------------------------------------- sums payable under this subsection 4.14(d)) such Lender, Issuing Lender or 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, (b) Borrower shall make such deductions or withholdings, (c) Borrower shall pay the full amount deducted or withheld to the relevant authority in accordance with applicable law and (d) Borrower shall furnish to Administrative Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, Borrower hereby agrees to pay and indemnify and hold harmless the Administrative Agent and each Lender and Issuing Lender from any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution, delivery, enforcement or registration of, or otherwise with respect to, this Agreement or any Note or Guarantee, and all interest, fines, penalties and additions to tax and related expenses with regard thereto (“Other Taxes”). (iii) Borrower and the Guarantors, jointly and severally, hereby agree to indemnify and hold harmless Administrative Agent and each Lender and Issuing Lender for the full amount of Covered Taxes (including, without limitation, any Covered Taxes imposed on amounts payable under this subsection 4.14(d)) paid by Administrative Agent or such Lender or Issuing Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Covered Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payments due under this indemnification shall be made within 30 days of the date Administrative Agent or such Lender or Issuing Lender makes demand therefor. (iv) Each Lender that is not a United States Person (as defined in Section 7701(a)(30) of the Code) for federal income tax purposes either (1) in the case of a Lender that is a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (i) agrees, to the extent legally entitled to do so, to furnish to Borrower, with a copy to the Administrative Agent, either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (or successor form) (wherein such Lender claims entitlement at the Closing Date (or (x) in the case of a Tranche B-1 Lender that is not a Lender under the Original Credit Agreement, on the Amendment and Restatement Date and (y) in the case of an Assignee, on the date it becomes a Lender) to a complete exemption from or a reduction in, U.S. federal withholding tax on interest payments hereunder) and (ii) agrees (for the benefit of Borrower and the Administrative Agent), to the extent legally entitled do so at such times, upon reasonable request by Borrower or the Administrative Agent, to provide Borrower, with a copy to the Administrative Agent, a new Form W-8ECI or Form W-8BEN (or successor form) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations duly executed and completed by such Lender that establishes a complete exemption from, or a reduction in, U.S. federal withholding tax on interest payments hereunder or (2) in the case of a Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (i) agrees, to the extent legally entitled to do so, to furnish to Borrower, with a copy to the Administrative Agent, (a) a Non-Bank Certificate and (b) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (or successor form), certifying to such Lender’s legal entitlement at the Closing Date (or (x) in the case of a Tranche B-1 Lender that is not a Lender under the Original Credit Agreement, on the Amendment and Restatement Date and (y) in the case of an Assignee, on the date it becomes a Lender) to a complete exemption from or a reduction in, U.S. federal withholding tax, under the provisions of Sections 871(h) or 881(c) of the Code with respect to interest payments to be made under this Agreement, and (ii) agrees, to the extent legally entitled to do so, upon reasonable request by Borrower or the Administrative Agent, to   -57- -------------------------------------------------------------------------------- provide to Borrower (for the benefit of Borrower and the Administrative Agent) such other forms as may be required in order to establish the legal entitlement of such Lender to a complete exemption from, or reduction in, U.S. federal withholding with respect to interest payments under this Agreement. Notwithstanding any provision of this subsection 4.14 to the contrary, Borrower shall have no obligation to pay any amount to or for the account of any Lender on account of any U.S. federal withholding taxes pursuant to this subsection 4.14, to the extent that such amount results from the failure of any Lender to comply with its obligations pursuant to this subsection 4.14. (e) A certificate in reasonable detail as to any amounts submitted by such Lender, through the Administrative Agent, to Borrower, shall be conclusive in the absence of manifest error. The covenants contained in this subsection 4.14 shall survive the termination of this Agreement and repayment of the Loans. 4.15. Indemnity. Borrower and the Subsidiary Guarantors agree to jointly and severally indemnify each Lender and to hold such Lender harmless from any loss or expense (but (x) without duplication of any amounts payable as default interest and (y) excluding any loss of anticipated profits) which such Lender may sustain or incur as a consequence of (a) default by Borrower in making a borrowing after Borrower has given a notice in accordance with subsection 4.1 or in making a conversion of Alternate Base Rate Loans to Eurodollar Loans or in continuing Eurodollar Loans as such, in either case, after Borrower has given notice in accordance with subsection 4.2, (b) default by Borrower in making any prepayment after Borrower has given a notice in accordance with subsection 4.4 or (c) a payment or prepayment of a Eurodollar Loan or conversion (including without limitation, as a result of subsections 4.4, 4.5 or 4.6 and/or a conversion pursuant to subsection 4.13) of any Eurodollar Loan into an Alternate Base Rate Loan, in either case on a day which is not the last day of an Interest Period with respect thereto, including, but not limited to, any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Eurodollar Loans hereunder (but excluding loss of profit). This covenant shall survive termination of this Agreement and repayment of the Loans. The payment of an amount due hereunder as a result of Borrower failing to make a borrowing, payment or conversion after delivering notice of the same shall constitute a cure of any Default or Event of Default arising therefrom. 4.16. Repayment of Loans; Evidence of Debt. (a) Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the then unpaid principal amount of each Revolving Credit Loan of such Lender on the Revolving Credit Termination Date, (ii) the principal amount of the Tranche A Term Loan of such Lender, in installments, payable on each Tranche A Installment Payment Date, in accordance with subsection 4.6(a) (or the then unpaid principal amount of such Tranche A Term Loan on the date that the Tranche A Term Loans become due and payable pursuant to Section 9), (iii) the principal amount of the Tranche B-1 Term Loan (including the principal amount of any Incremental Term Loan that is a Tranche B-1 Term Loan) of such Lender, in installments, payable on each Tranche B-1 Installment Payment Date, in accordance with subsection 4.6(b) (or the then unpaid principal amount of such Tranche B-1 Term Loan on the date that the Tranche B-1 Term Loans become due and payable pursuant to Section 9), and (iv) the then unpaid principal amount of the Swing Line Loans of the Swing Line Lender on the Revolving Credit Termination Date. Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the Closing Date until payment in full thereof at the rates per annum and on the dates set forth in subsection 4.8.   -58- -------------------------------------------------------------------------------- (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of Borrower 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 shall maintain the Register pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan, Tranche A Term Loan, Tranche B-1 Term Loan and any Incremental Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from Borrower and each Lender’s share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 4.16(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of Borrower therein recorded; provided 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 Borrower to repay (with applicable interest) the Loans made to Borrower by such Lender or to repay any other obligations in accordance with the terms of this Agreement. (e) Borrower agrees that, upon the request to the Administrative Agent by any Lender, Borrower will execute and deliver to such Lender (i) a promissory note of Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a “Revolving Credit Note”), (ii) a promissory note of Borrower evidencing the Tranche A Term Loan of such Lender, substantially in the form of Exhibit B-1 with appropriate insertions as to date and principal amount (a “Tranche A Term Note”), (iii) a promissory note of such Borrower evidencing the Tranche B-1 Term Loan of such Lender, substantially in the form of Exhibit B-2 with appropriate insertions as to date and principal amount (a “Tranche B-1 Term Note”), (iv) a promissory note of Borrower evidencing any Incremental Term Loan of such Lender (an “Incremental Term Note”) and/or (v) in the case of the Swing Line Lender, a promissory note of Borrower evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form of Exhibit C with appropriate insertions as to date and principal amount (the “Swing Line Note”). 4.17. Replacement of Lenders. In the event any Lender or the Issuing Lender is a Non-Funding Lender, exercises its rights pursuant to subsection 4.13 or requests payments pursuant to subsections 3.10 or 4.14, Borrower may require, at Borrower’s expense (including payment of any processing fees under subsection 11.6(e)) and subject to subsection 4.15, such Lender or the Issuing Lender to assign, at par plus accrued interest and fees, without recourse (in accordance with subsection 11.6) all of its interests, rights and obligations hereunder (including all of its Commitments and the Loans and other amounts at the time owing to it hereunder and its Notes and its interest in the Letters of Credit) to a bank, financial institution or other entity specified by Borrower; provided that (i) such assignment shall not conflict with or violate any law, rule or regulation or order of any court or other Governmental Authority, (ii) Borrower shall have received the written consent of the Administrative Agent, which consent shall not unreasonably be withheld, to such assignment, (iii) Borrower shall have paid to the assigning Lender or the Issuing Lender all monies other than principal, interest and fees accrued and owing hereunder to it (including pursuant to subsections 3.10, 4.13, 4.14 and 4.15) and (iv) in the case of a required assignment by the Issuing Lender, the Letters of Credit shall be canceled and returned to the Issuing Lender.   -59- -------------------------------------------------------------------------------- 4.18. Procedure for Incremental Loan Requests. Borrower may solicit requests from any one or more Lenders or other financial institutions for the provision of (i) a commitment for an Incremental Revolving Loan (each, an “Incremental Revolving Commitment”) or an Incremental Term Loan (each, an “Incremental Term Commitment”), as the case may be, and (ii) the margins, if any, to be added by such Lenders or other financial institutions to the Alternate Base Rate and the Eurodollar Rate for Loans made under such Incremental Revolving Commitments or Incremental Term Commitments (any such margin, an “Incremental Margin”); provided that if, pursuant to an Incremental Loan Amendment with respect to an Incremental Term Loan that is not a Tranche A Term Loan or Tranche B-1 Term Loan, any net yield for such Incremental Term Loan is in excess of 25 basis points above the comparable margin set forth for Tranche B-1 Term Loans in the definition of Applicable Margin, the Applicable Margin for outstanding Tranche B-1 Term Loans shall automatically be increased, as of the effective date of the applicable Incremental Loan Amendment, to any extent required so that the margin applicable thereto is 25 basis points less than the margin for such Incremental Term Loan without any action or consent of the Borrower, the Administrative Agent or any Lender. The Administrative Agent shall approve any financial institution wishing to provide an Incremental Revolving Commitment, such approval not to be unreasonably withheld. SECTION 5. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Agreement and to make the Loans and to induce the Issuing Lender to issue, and the Participating Lenders to participate in, the Letters of Credit, Borrower and Holdings hereby represent and warrant to each Lender and the Administrative Agent as of the Amendment and Restatement Date (it being understood that notwithstanding anything to the contrary, Holdings and its Subsidiaries did not acquire the System until the Closing Date) and (except as otherwise stated to be as of a different date as of the date of the making of any extension of credit hereunder): 5.1. Financial Statements; Financial Condition. (a) The unaudited pro forma consolidated balance sheet of Holdings at September 30, 2003 (the “Pro Forma Balance Sheet”) and the related unaudited pro forma statements of operations for the year ended December 31, 2002 and the nine-month period ended September 30, 2003 (collectively, the “Pro Forma Financial Statements”), copies of which have heretofore been furnished to each Lender, have been prepared giving effect to the consummation of the Transactions as if they had occurred on September 30, 2003 in the case of such balance sheet and on January 1, 2002 in the case of such statements of operations. The Pro Forma Financial Statements have been prepared in good faith by Borrower, based on assumptions Borrower believes to be reasonable, accurately reflect in all material respects all adjustments required to be made to give effect to the Transactions and present fairly in all material respects on a Pro Forma Basis the financial position and results of operations of Holdings and its Subsidiaries as at and for such dates, assuming that the Transactions had actually occurred at such dates. (b) All financial statements delivered pursuant to subsection 6.1(u) of the Original Credit Agreement, 7.1(a) or 7.1(b) present fairly in all material respects the financial condition, results of operations and cash flows of the entities to which they relate as of the dates and for the periods indicated. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as disclosed therein and except that any such unaudited financial statements lack footnote disclosure and normal year-end audit adjustments).   -60- -------------------------------------------------------------------------------- (c) Except as set forth in the financial statements delivered pursuant to subsection 6.1(u) of the Original Credit Agreement, after giving effect to the Indebtedness, customary liabilities in respect of expenses incurred in connection with the Transactions and liabilities incurred in the ordinary course of business of the Systems or the Credit Parties since the date of the most recent such financial statements, as of the Original Effective Date and as of the Closing Date there are no material liabilities of the Credit Parties of any kind (including, without limitation, liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives) required to be set forth on a balance sheet or in the notes thereto prepared in accordance with GAAP, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which is reasonably likely to result in such a liability. 5.2. No Change. Since September 30, 2003, after giving effect to the Transactions, there has been no change, development or event which, individually or when taken together with all other circumstances, changes or events, has had, or could reasonably be expected to have, a Material Adverse Effect. 5.3. Existence; Compliance with Law. Each of Holdings and its Subsidiaries (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has full power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals (including, without limitation, all Franchises and all permits granted by the Federal Communications Commission) necessary to enable it to use its corporate name and to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (c) is duly qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in each jurisdiction in which the nature of its business or the ownership, leasing or holding of its properties makes such qualification necessary, except such jurisdictions where the failure so to qualify, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all applicable statutes, laws (including Environmental Laws), ordinances, rules, orders, permits (including Environmental Permits) and regulations of any Governmental Authority or instrumentality, domestic or foreign (including, without limitation, those related to Hazardous Materials and substances), except where noncompliance individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries has received any written communication from a Governmental Authority that alleges that Holdings, or any of its Subsidiaries is not in compliance with federal, state, local or foreign laws, ordinances, rules and regulations, or any Franchise except to the extent such noncompliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.4. Power; Authorization. Each Credit Party has the power and authority to execute, deliver and perform each of the Credit Documents to which it is a party, and Borrower has the power and authority and legal right to borrow hereunder and to have Letters of Credit issued for its account hereunder. Each Credit Party has taken all necessary   -61- -------------------------------------------------------------------------------- action to authorize the execution, delivery and performance of each of the Credit Documents to which it is or will be a party and Borrower has taken all necessary action to authorize the borrowings hereunder and the issuance of Letters of Credit for its account hereunder. No consent or authorization of, or filing with, any Person (including, without limitation, any Governmental Authority) is required in connection with the execution, delivery or performance by any Credit Party, or for the validity or enforceability in accordance with its terms against any Credit Party, of any Credit Document except for (i) consents, authorizations and filings which have been obtained or made and are in full force and effect, (ii) such consents, authorizations and filings which the failure to obtain or perform, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (iii) such filings as are necessary to perfect the Liens of the Lenders created pursuant to this Agreement and the Security Documents. 5.5. Enforceable Obligations. This Agreement has been, and each of the other Credit Documents will be, duly executed and delivered on behalf of each Credit Party that is party thereto. This Agreement constitutes, and each of the other Credit Documents will constitute upon execution and delivery thereof, the legal, valid and binding obligation of each Credit Party that is party thereto, and is enforceable against each Credit Party that is party thereto in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 5.6. No Legal Bar. None of the execution, delivery or performance by each Credit Party of each Credit Document to which it is a party and the incurrence and use of the proceeds of the Loans and the issuance of and of drawings under the Letters of Credit (a) will violate any Requirement of Law, constitutive document or any Contractual Obligation applicable to or binding upon such Credit Party or any of their respective Subsidiaries or any of their respective properties or assets, in any manner which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) will result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it, as the case may be, or any of its Contractual Obligations, except for the Liens arising under the Security Documents and Permitted Liens. 5.7. No Material Litigation. Except as disclosed in Schedule 5.7, there is no pending or, to the knowledge of any Credit Party, threatened claim, legal action, arbitration or other legal, governmental, administrative or tax proceeding or any order, complaint, decree or judgment involving or affecting the Transactions, Holdings or any of its Subsidiaries or any of their respective properties, assets, operations or businesses which have had, or are reasonably likely to have, a Material Adverse Effect. 5.8. Investment Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment company” (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended) that is required to be registered under such Act. 5.9. Federal Regulation. The extensions of credit hereunder will not be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the regulations of the Board. If requested by any Lender or the Administrative Agent, Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U. Following application of the proceeds of each extension of credit hereunder, not more than 25 percent of the value of the assets of any Credit Party will be Margin Stock (as defined in Regulation U).   -62- -------------------------------------------------------------------------------- No Credit Party or any of their respective Subsidiaries is a “holding company”, or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”, within the meaning of the United States Public Utility Holding Company Act of 1935, as amended. No Credit Party is subject to regulation under any law or regulation which limits its ability to incur Indebtedness, other than Regulation X of the Board. 5.10. No Default. Each of Holdings and its Subsidiaries have performed all material obligations required to be performed by them under their respective Contractual Obligations (including after giving effect to the Transactions) and they are not (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder, except to the extent that such breach or default, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries (including after giving effect to the Transactions) is in default under any material judgment, order or decree of any Governmental Authority, domestic or foreign, applicable to it or any of its respective properties, assets, operations or business, except to the extent that any such defaults could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.11. Taxes. Each of Holdings and its Subsidiaries (including after giving effect to the Transactions) (i) has timely filed or caused to be timely filed all tax returns, statements, forms and reports (domestic or foreign) which are required to be filed (and all such tax returns were true and correct in all material respects when and as filed) and (ii) has timely paid all Taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than with respect to any Taxes (x) the amount of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves (or other sufficient provisions) in conformity with GAAP have been provided on the books of Holdings or one of its Subsidiaries (including after giving effect to the Transactions), as the case may be, and (y) which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect). 5.12. Subsidiaries. After giving effect to the consummation of the Transactions, (i) Holdings owns 100% of the capital stock of Borrower and has no direct or indirect Subsidiaries other than Atlantic Broadband Holdings, Inc., a Delaware corporation, Borrower and its Subsidiaries and (ii) the Subsidiaries of Borrower, their jurisdictions of incorporation, the number of units of each class of its Capital Stock authorized and the number outstanding and the number of units covered by all outstanding options, warrants, rights of conversion or purchase and similar rights, and their equity holders, in each case, as of the Closing Date shall be as set forth on Schedule 5.12. All Capital Stock of each Subsidiary of Borrower (i) that is a corporation is duly and validly issued and is fully paid and non-assessable and (ii) that is a limited liability company is duly and validly issued without any obligation to make additional capital contributions and in each case, is owned, of record and beneficially, by Borrower, directly or indirectly. 5.13. Ownership of Property; Liens. As of the Closing Date and as of the making of any extension of credit hereunder (subject to transfers and dispositions of property permitted under subsection 8.5), each of Holdings and its Subsidiaries has good and valid title (or, in the case of Intellectual Property, a valid license) to all of its material assets necessary for the conduct of its business (other than (x) Real Property and (y) minor irregularities or deficiencies in title which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect), in each case free and clear of   -63- -------------------------------------------------------------------------------- all Liens except Permitted Liens. With respect to each Mortgaged Property and each Real Property owned by Holdings and its Subsidiaries listed on Schedule 5.13, as of the Closing Date, each of Holdings or its applicable Subsidiary has (i) good and marketable fee title thereto, all of which are listed on Schedule 5.13 under the heading “Fee Properties” (each, a “Fee Property”), (ii) valid and enforceable leasehold interests in the leasehold estates in all of the real property leased by it that is used in the operations, or the business, of the Credit Parties and their Subsidiaries, which leased real property is listed on Schedule 5.13 under the heading “Leased Properties” (each, a “Leased Property”) and (iii) good and valid and enforceable rights to use the other real property, including easements, licenses, rights to access, rights-of-way and other real property interests, that are used in the operations of the Credit Parties and their subsidiaries, as listed on Schedule 5.13 under the heading “Other Real Property” (each an “Other Real Property”), in each case, free and clear of all Liens of any nature whatsoever, except (a) as to Fee Property, Permitted Encumbrances and (b) as to Leased Property, the terms and provisions of the respective lease therefor, including, without limitation, the matters set forth on Schedule 5.13, and any matters affecting the fee title and any estate superior to the leasehold estate related thereto. The Fee Properties, the Leased Properties and the Other Real Property constitute, as of the Closing Date, all of the material real property owned in fee or leased by Holdings and its Subsidiaries and used or held for use by Holdings and its Subsidiaries. No Credit Party has received notice of pending condemnation or similar proceedings affecting any of the Real Property and to each Credit Party’s knowledge no such action is currently contemplated or threatened in each case other than with respect to the proceedings in connection with the property located at 201 South Mechanic Street, Cumberland, Maryland. 5.14. ERISA. (a) 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. The present value of all accumulated benefit obligations of all underfunded Pension 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 an amount that could reasonably be expected to have a Material Adverse Effect the fair market value of the assets of all such underfunded Pension Plans. Each ERISA Entity is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan, except to the extent any noncompliance could not reasonably be expected to have a Material Adverse Effect. (b) Neither Holdings nor any of its Subsidiaries maintains or contributes to any benefit plan, program, policy, arrangement or agreement with respect to employees (or former employees) employed outside the United States under which Holdings or any of its Subsidiaries could incur any liability having a Material Adverse Effect. 5.15. Collateral Documents. (a) As of the Closing Date, the Security Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien on and security interest in all rights, title and interest of the Credit Parties in the pledged securities described therein and, when certificates representing or constituting the pledged securities described in the Security Agreement are delivered to the Administrative Agent, such security interest shall constitute a perfected first Lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged securities described therein (to the extent such matter is governed by the law of the United States or a jurisdiction therein). No filings or recordings are required in order to perfect the security interest created in the pledged securities described in the Security Agreement and the proceeds thereof other than filings on Form UCC-1 (which filings have been made) and no consent of any Person   -64- -------------------------------------------------------------------------------- including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Administrative Agent in any pledged securities or the exercise by the Administrative Agent of the voting or other rights provided for in the Security Agreement or the exercise of remedies in respect thereof. (b) As of the Closing Date, the Security Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien on and security interest in all right, title and interest of the Credit Parties in the collateral described therein (to the extent such matter is governed by the law of the United States or a jurisdiction therein), and UCC financing statements have been filed in each of the jurisdictions listed on Schedule 5.15(b), or arrangements have been made for such filing in such jurisdictions, and upon such filing or such other filings referenced in subsection 5.15(d), and upon the taking of possession or control by the Administrative Agent of any such collateral the security interests in which may be perfected only by possession or control (to the extent possession or control by the Administrative Agent is required by the Security Agreement), such security interests, subject to the existence of Permitted Liens, constitute perfected first priority Liens on, and security interests in, all right, title and interest of the debtor party thereto in the collateral described therein, except to the extent that a security interest cannot be perfected therein by the filing of a financing statement or the taking of possession under the UCC of the relevant jurisdiction (or, if a security interest can be perfected only by possession or control, to the extent possession or control by the Administrative Agent is not required pursuant to the Security Agreement). Each Credit Party has good and marketable title (or, in the case of Intellectual Property, a valid license) to all Collateral pledged by it under the Security Agreement, free and clear of all Liens except those described above in this clause (b) and except for Permitted Liens. (c) Each Mortgage is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in and Lien on the rights, title and interest of the applicable Credit Party thereto in the collateral described therein, and upon proper recording the Mortgages in the jurisdictions listed on Schedule 5.13 (or, in the case of a Mortgage delivered pursuant to subsection 7.9, the jurisdiction in which the property covered by such Mortgage is located), such security interests and Lien will, subject to the existence of Permitted Encumbrances, constitute first priority liens on, and perfected security interests in, all rights, title and interest of the debtor party thereto in the collateral described therein. (d) The recordation of the Security Agreement (or a short form thereof) in U.S. Patents and Trademarks in the United States Patent and Trademark Office together with filings on Form UCC-1 made pursuant to the Security Agreement are effective, under applicable law, to perfect the security interest, as collateral security for the payment and performance of the Loans and the other Obligations, granted to the Administrative Agent for the benefit of the Lenders in the registered trademarks and patents covered by such Security Agreement in U.S. Patents and Trademarks and the recordation of the Security Agreement in U.S. Copyrights with the United States Copyright Office together with filings on Form UCC-1 made pursuant to the Security Agreement are effective under federal law to perfect the security interest, as collateral security for the payment and performance of the Loans and the other Obligations, granted to the Administrative Agent for the benefit of the Lenders in the registered copyrights covered by such Security Agreement in U.S. Copyrights.   -65- -------------------------------------------------------------------------------- (e) As of the Closing Date, the Security Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien on and security interest in all rights, title and interest of the Credit Parties in the Commercial Motor Vehicles (as such term is defined in the Security Agreement) and any and all Accessions (as such term is defined in the UCC) thereto and notations on the Certificates of Title for each of the Commercial Motor Vehicles filed in each of the jurisdictions listed on Schedule 17 to the perfection certificate delivered pursuant to subsection 6.1(n) of the Original Credit Agreement have been made, and such security interests, subject to the existence of Permitted Liens, constitute perfected first priority Liens on, and security interests in, all right, title and interest of the debtor party thereto in the Commercial Motor Vehicles and Accessions (as defined in the UCC) thereto. 5.16. Copyrights, Patents, Permits, Trademarks and Licenses. Schedules 13(a), (b), (c) and (d) of the perfection certificate delivered pursuant to subsection 6.1(n) of the Original Credit Agreement sets forth a true and complete list as of the Closing Date after giving effect to the Transactions of all registered Intellectual Property owned by Holdings or any of its Subsidiaries, and, with respect to registered trademarks (if any), contains a list of all jurisdictions in which such trademarks are registered or applied for and all registration and application numbers. Except as disclosed in Schedules 13(a), (b), (c) and (d) of the perfection certificate delivered pursuant to subsection 6.1(n) of the Original Credit Agreement, as of the Closing Date after giving effect to the Transactions, Holdings or one of its Subsidiaries owns or has the right to use the Intellectual Property and applications therefor referred to in such schedule. Except as disclosed in Schedule 13(a), (b), (c) and (d) of the perfection certificate delivered pursuant to subsection 6.1(n) of the Original Credit Agreement, no claims are pending by any Person with respect to the ownership, validity, enforceability or of Holdings’ or any of its Subsidiary’s use of such Intellectual Property or applications therefor, challenging or questioning the validity or effectiveness of any of the foregoing, in any jurisdiction, domestic or foreign, except to the extent such claims, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.17. Environmental Matters. Except as set forth on Schedule 5.17 and except insofar as any exceptions to the following, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect: (a) the properties owned, leased or otherwise operated by Holdings or any of its Subsidiaries do not contain, and have not previously contained, therein, thereon or thereunder, including, without limitation, the soil and groundwater thereunder, any Hazardous Materials in amounts or concentrations that constitute a violation of, or could reasonably be expected to give rise to liability under, Environmental Laws; (b) There are no facts, circumstances or conditions that could reasonably be expected to (i) result in a violation of any Environmental Law by Holdings or any of its Subsidiaries that could interfere with the continued operation of, or impair the otherwise fair saleable value of the properties owned, leased or otherwise operated by Holdings or any of its Subsidiaries or (ii) result in a violation of or otherwise give rise to liability on the part of Holdings or any of its Subsidiaries under any Environmental Laws in respect of Hazardous Materials; (c) neither Holdings nor any of its Subsidiaries has received or is aware of any complaint, notice of violation, alleged violation or notice of investigation or of potential liability under Environmental Laws with regard to Holdings or any of its Subsidiaries, or any properties owned, leased or otherwise operated by any of them, nor does Holdings or any of its Subsidiaries have knowledge that any such action is being threatened;   -66- -------------------------------------------------------------------------------- (d) there are no administrative actions or judicial proceedings pending or, to the knowledge of any Credit Party, threatened under any Environmental Law to which Holdings or any of its Subsidiaries is or could reasonably be expected to be a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders or agreements to which Holdings or any of its Subsidiaries is a party, which could reasonably be expected to result in liability or costs on the part of Holdings or any of its Subsidiaries under any Environmental Law; (e) no Lien has been recorded or, to the knowledge of any Credit Party, threatened under any Environmental Law with respect to any Fee Property or assets of Holdings or any of its Subsidiaries and no Lien has been recorded or, to the knowledge of any Credit Party, threatened under any Environmental Law with respect to any other Real Property of Holdings or any of its Subsidiaries that could reasonably be expected to result in liability or costs on the part of Holdings or any of its Subsidiaries under any Environmental Law; (f) no Fee Property is (x) listed, or to the knowledge of any Credit Party proposed for listing, on the National Priorities List promulgated pursuant to the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or (y) listed on the Comprehensive Environmental Response, Compensation and Liability Information System List promulgated pursuant to CERCLA, or (z) included on any similar list maintained by any Governmental Authority and there is no such listing, or to the knowledge of any Credit Party proposed listing, with respect to any other Real Property of Holdings or any of its Subsidiaries that could reasonably be expected to result in liability or costs on the part of Holdings or any of its Subsidiaries under any Environmental Law; and (g) neither Holdings nor any of its Subsidiaries is required to take or finance any investigatory, response or other corrective action or is currently conducting any investigatory, response or other corrective action pursuant to any Environmental Law at any Real Property or at any other location, nor has any of Holdings or any of its Subsidiaries assumed by contract, agreement or operation of law any obligation of any other Person under any Environmental Law. 5.18. Accuracy and Completeness of Information. All factual information heretofore or contemporaneously furnished by or on behalf of Holdings or any of its Subsidiaries to the Administrative Agent, the Arranger or any Lender in writing (including all information contained in the Credit Documents and the Confidential Information Memorandum dated January 2004 delivered to the Lenders under the Original Credit Agreement in connection with the syndication of the Facilities (the “Confidential Information Memorandum”)) for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other factual information hereafter furnished by or on behalf of any such Persons in writing to the Administrative Agent, the Arranger or any Lender will be, true and accurate in all material respects on the date as of which such information is dated and, taken together, not incomplete by omitting to state any material fact necessary to make such information not misleading at such time in light of the circumstances under which such information was provided; provided that, with respect to projections Borrower represents only that the projections contained in such materials are based on good faith estimates and assumptions believed by Borrower to be reasonable and attainable at the time made. There   -67- -------------------------------------------------------------------------------- is no fact known to any Credit Party that could reasonably be expected to have a Material Adverse Effect or that would be material to an understanding of the financial condition, business, properties or prospects of any Credit Party that has not been expressly disclosed herein, in the other Credit Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Credit Documents. The Credit Parties understand that all such statements, representations and warranties shall be deemed to have been relied upon by the Lenders as a material inducement to make each extension of credit hereunder. 5.19. Labor Matters. Neither Holdings nor any of its Subsidiaries is engaged in any unfair labor practice. There is (i) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries or, to the knowledge of any Credit Party, threatened against Holdings or any of its Subsidiaries, before the National Labor Relations Board or any other Governmental Authority, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings or any of its Subsidiaries or, to the knowledge of any Credit Party after due inquiry, threatened against Holdings or any of its Subsidiaries, (ii) no strike, labor dispute, slowdown or stoppage pending against Holdings or any of its Subsidiaries or, to the knowledge of any Credit Party, after due inquiry, threatened against Holdings or any of its Subsidiaries and (iii) to the best knowledge of any Credit Party after due inquiry, no union representation question existing with respect to the employees of Holdings or any of its Subsidiaries and, to the knowledge of any Credit Party, no union organizing activities are taking place, except such as could not, with respect to any matter specified in clause (i), (ii) or (iii) above, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.20. Solvency. Immediately before and after the consummation of the Transactions and each extension of credit hereunder (including the Tranche B-1 Term Loans), each Credit Party was and will be Solvent. 5.21. Use of Proceeds. Borrower will use the proceeds of the Tranche B-1 Term Loans to repay in full Borrower’s Tranche B Term Loan under the Original Credit Agreement and all Revolving Credit Loans after the Closing Date for Permitted Acquisitions, working capital and general corporate purposes. 5.22. Regulation H. No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 5.23. [Reserved]. 5.24. Asset Purchase Documents; Representations and Warranties in Agreement. (a) Schedule 5.24(a) lists (i) each agreement relating primarily to the New Notes, and (ii) each material agreement and other document (as determined in Borrower’s reasonable judgment) entered into, executed or delivered or to become effective in connection with the acquisition of the System and Schedule 5.24(b) lists the Equity Documents, the Asset Purchase Agreement and each material exhibit, schedule, annex or other attachment to thereto. The Lenders have been furnished true and complete copies of all the Equity Documents and Acquisition Documentation to the extent executed and delivered on or prior to the Closing Date.   -68- -------------------------------------------------------------------------------- (b) All representations and warranties of Holdings and its Subsidiaries set forth in the Asset Purchase Agreement were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. 5.25. Capitalization. (a) The authorized Capital Stock of Holdings and Borrower consists of 1,000 common membership interests, 1,000 of which are issued and outstanding and 1,000 common membership interests, 1,000 of which are outstanding, respectively. All such outstanding common membership interests have been duly and validly issued without any obligation to make additional capital contributions and are free of preemptive rights. As of the Closing Date except as listed on Schedule 5.25(a), Holdings has no outstanding securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. (b) An accurate organizational chart, showing the ownership structure of Holdings and its Subsidiaries on the Closing Date, and after giving effect to the Transactions, is set forth on Schedule 5.25(b). 5.26. Indebtedness. Schedule 5.26 sets forth a true and complete list of all Indebtedness (other than Loans under this Agreement and the related Guarantees and the New Notes and the related Guarantees) of Holdings, Borrower and their respective Subsidiaries as of the Closing Date, and after giving effect to the Transactions, and which is to remain outstanding after giving effect to the incurrence of Loans on such date (excluding the Loans and the Letters of Credit, the “Existing Indebtedness”), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. The Obligations are “Senior Indebtedness” within the meaning of the indenture pursuant to which the New Notes are issued. 5.27. Anti-Terrorism Laws. (a) None of Holdings, any of its Subsidiaries or any of their respective Affiliates is in violation of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) None of Holdings, its Subsidiaries or any of their respective Affiliates or their respective brokers or other agents acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a Person or entity owned or controlled by, or acting for or on behalf of, any Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;   -69- -------------------------------------------------------------------------------- (iii) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a Person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list. None of Holdings or any of its Subsidiaries or, to the knowledge of Holdings, any of their respective brokers or other agents acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. SECTION 6. CONDITIONS PRECEDENT 6.1. Conditions to Amendment and Restatement. The obligation of each Tranche B-1 Lender to make its Tranche B-1 Term Loans on the Amendment and Restatement Date is subject to the satisfaction or waiver by such Tranche B-1 Lender immediately prior to or concurrently with the making of such Tranche B-1 Term Loans of each of the conditions in subsection 6.2 and the following conditions: (a) Agreement. The Administrative Agent shall have received a counterpart of this Agreement, duly executed and delivered by an Officer of Borrower, Holdings and each Subsidiary Guarantor. (b) Amendment Agreement. All conditions in Section 4 of the Amendment Agreement shall have been satisfied. 6.2. Conditions to All Loans and Letters of Credit. The obligation of (x) each Lender to make any Loan (other than any Revolving Credit Loan (i) the proceeds of which are to be used to repay Refunded Swing Line Loans or (ii) to be made as contemplated by subsections 3.8(b) and (c), which shall be made unless an event of the type described in paragraph (f) of Section 9 has occurred and is continuing) and (y) the Issuing Lender to issue any Letter of Credit, is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Representations and Warranties. Each of the representations and warranties made in or pursuant to Section 5 or which are contained in any other Credit Document shall be true and correct on and as of the date of such Loan or of the issuance of such Letter of Credit as if made on and as of such date (unless stated to relate to a specific earlier date, in which case, such representations and warranties shall be true and correct in all material respects as of such earlier date).   -70- -------------------------------------------------------------------------------- (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such Borrowing Date or after giving effect to such Loan to be made or such Letter of Credit to be issued on such Borrowing Date. Each borrowing by Borrower hereunder and the issuance of each Letter of Credit by the Issuing Lender hereunder shall constitute a representation and warranty by Borrower as of the date of such borrowing or issuance that the conditions in clauses (a) and (b) and of this subsection 6.2 have been satisfied. 6.3. [Reserved]. 6.4. Permitted Acquisitions. The obligation of the Lenders to make any Loan or otherwise extend any credit to Borrower, the proceeds of which will be used to make a Permitted Acquisition, is subject to the satisfaction of the conditions set forth in subsection 6.2 and to the further conditions precedent that: (i) Line of Business Compliance. Immediately after giving effect to such Permitted Acquisition, the Credit Parties would be in compliance with subsection 8.14. (ii) Satisfactory Environmental Reports. The Administrative Agent shall have received a Phase I environmental report with respect to any Permitted Acquisition the consideration for which is in excess of $10.0 million, to the extent reasonably required by the Administrative Agent the results of which shall be satisfactory to the Administrative Agent acting reasonably. (iii) Receipt of Applicable Acquisition Documents. With respect to any Permitted Acquisition the consideration for which is in excess of $10.0 million, the Administrative Agent shall have received the acquisition agreement and all other documents and agreements related to such Permitted Acquisition (the “Applicable Acquisition Documents”) and the terms and provisions thereof shall be in form and substance satisfactory to the Administrative Agent acting reasonably and such Permitted Acquisition shall be consummated in accordance with the terms of the Applicable Acquisition Documents and all Requirements of Law. (iv) Financial Statements. Borrower will use its reasonable best efforts to deliver to the Administrative Agent and the Lenders prior to the date of consummation of such Permitted Acquisition, financial statements of the entity to be acquired, including but not limited to audited balance sheets and reports of certified public accountants (in the case of an Acquisition involving total consideration in excess of $10 million); financial projections and budgets; and any other information and documents relating to the entity to be acquired, in each case as may be reasonably requested by the Administrative Agent. (v) Lien Searches. Borrower shall have delivered to the Administrative Agent, certified copies of lien search reports, tax lien, judgment lien and pending lawsuit searches or equivalent reports each of a recent date listing all effective financial statements or comparable documents that name the entity to be acquired or Subsidiary of the entity to be acquired as debtor and that are filed in those jurisdictions in which any property of each such Person is located and each such Person’s principal place of business is located, none of which encumber the Collateral covered by the Security Documents except for Permitted Liens. Borrower shall have provided evidence reasonably satisfactory to the Administrative Agent that all Liens applicable to the Capital   -71- -------------------------------------------------------------------------------- Stock of the entity to be acquired and Liens (other than Permitted Liens) on the property of the entity to be acquired and of each Subsidiary of the entity to be acquired have been released and terminated. (vi) Receipt of Security Interests. All Collateral to be acquired shall have been pledged pursuant to the Security Documents in accordance with subsection 7.9 hereof and the Lenders shall have a perfected first priority security interest therein subject to no Liens, except for the Liens created by the Securities Documents and Liens permitted under the Security Documents for such Collateral. SECTION 7. AFFIRMATIVE COVENANTS Holdings and Borrower hereby agree that, so long as any of the Commitments remain in effect, any Loan, Note or L/C Obligation remains outstanding and unpaid, any amount remains available to be drawn under any Letter of Credit (unless cash in an amount equal to such amount has been deposited to a cash collateral account established by the Administrative Agent) or any other amount is owing to any Lender or the Administrative Agent hereunder or under any of the other Credit Documents, Holdings and Borrower shall, and, in the case of the agreements contained in subsections 7.3 through 7.6, and 7.8 through 7.11, Borrower shall cause each of its Subsidiaries to: 7.1. Financial Statements. Furnish to the Administrative Agent (with sufficient copies for each Lender (which the Administrative Agent shall deliver promptly to each Lender)): (a) as soon as available, but in any event within 90 days after the end of each fiscal year of Holdings, a copy of the consolidated and consolidating balance sheet of Holdings and its Subsidiaries and each of Holdings’ reportable segments, in each case as at the end of such fiscal year and the related consolidated and consolidating statements of operations, members’ equity and cash flows for such fiscal year, setting forth in comparative form the figures for the previous year and accompanied by a report thereon, without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, or qualification which would affect the computation of financial covenants, of independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of Holdings, the unaudited consolidated and consolidating balance sheet of Holdings and its Subsidiaries and each of Holdings’ reportable segments, in each case as at the end of each such quarter and the related unaudited consolidated and consolidating statements of operations and cash flows for such quarterly period and the portion of the fiscal year of Holdings through such date, setting forth, to the extent applicable, in comparative form the figures for the corresponding quarter in, and year to date portion of, the previous year, and the figures for such periods in the budget prepared by Borrower and furnished to the Administrative Agent, certified by Holdings in an Officer’s Certificate executed on its behalf by a Responsible Officer of Holdings as fairly presenting the consolidated financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments);   -72- -------------------------------------------------------------------------------- (c) as soon as available, but in any event not later than 45 days after the beginning of each fiscal year of Holdings, a preliminary consolidated operating budget for Holdings and its Subsidiaries; and as soon as available, any material revision to or any final revision of any such preliminary annual operating budget or any such consolidated operating budget; and (d) within 45 days after the end of each fiscal month ending December 31, 2004, financial information regarding Holdings and its Subsidiaries and each of Holdings’ reportable segments, in each case consisting of consolidated and consolidating unaudited balance sheets as of the close of such month and the related consolidated and consolidating statements of income (on a consolidated basis only) for such month and that portion of the current fiscal year ending as of the close of such month, setting forth in comparative form the figures contained in the latest business plan provided for the current fiscal year, in each case certified by Holdings in an Officer’s Certificate executed on its behalf by a Responsible Officer of Holdings as fairly presenting the consolidated and consolidating financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments), all such financial statements described in subsections 7.1(a) and (b) to be complete and correct in all material respects (subject, in the case of interim statements, to normal year-end audit adjustments and the absence of footnotes) and to be prepared in reasonable detail and in accordance with GAAP. 7.2. Certificates; Other Information. Furnish to the Administrative Agent (with sufficient copies for each Lender, which the Administrative Agent shall promptly deliver to each Lender): (a) concurrently with the delivery of the consolidated financial statements referred to in subsection 7.1(a), a letter from the independent certified public accountants reporting on such financial statements stating that in making the examination necessary to express their opinion on such financial statements no knowledge was obtained of any Default or Event of Default under subsections 8.7 and 8.9, except as specified in such letter; (b) within 15 days of the delivery of the financial statements referred to in subsections 7.1(a) and (b) (except that the certificate referred to in clauses (iii) and (iv) below shall be delivered concurrently with such financial statements), an Officer’s Certificate in form and substance reasonably acceptable to the Administrative Agent stating that during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, Borrower has complied with the requirements of subsection 7.9), (ii) neither Holdings nor any of its Subsidiaries has changed its name or jurisdiction of organization without complying with the requirements of this Agreement and the Security Documents with respect thereto or otherwise stating that such information is included in the perfection certificate supplement delivered pursuant to subsection 7.2(j), (iii) Holdings and its Subsidiaries have observed or performed all of the covenants and other agreements, and satisfied every material condition, contained in this   -73- -------------------------------------------------------------------------------- Agreement and the other Credit Documents to be observed, performed or satisfied by it, and that the officer executing such Officer’s Certificate on Borrower’s behalf has obtained no knowledge of any Default or Event of Default, in each case, except as specified in such certificate, (iv) and showing in detail as of the end of the related accounting period the figures and calculations supporting such statement in respect of paragraph (d) of subsection 8.1, paragraphs (b) and (e) of subsection 8.3 and subsections 8.6 through 8.11 and any other calculations reasonably requested by the Administrative Agent with respect to the quantitative aspects of the other covenants contained herein; (c) promptly upon receipt thereof, copies of all final reports submitted to Holdings or any of its Subsidiaries by independent certified public accountants in connection with each annual, interim or special audit of the books of Holdings or any of its Subsidiaries made by such accountants, and any final comment letter submitted by such accountants to management in connection with their annual audit; (d) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available to the public generally by Holdings or any of its Subsidiaries, if any, and all regular and periodic reports and all final registration statements and final prospectuses, if any, filed by Holdings or any of its Subsidiaries with any securities exchange or with the SEC or any Governmental Authority succeeding to any of its functions; (e) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a management summary describing and analyzing the performance of Holdings and its Subsidiaries during the periods covered by such financial statements; (f) within 45 days after the end of each fiscal quarter, a summary of all Asset Sales during such fiscal quarter including the amount of all Net Proceeds from such Asset Sales not previously applied to prepayments of the Loans pursuant to the proviso to subsection 4.5(c), accompanied by an Officer’s Certificate of Holdings executed on its behalf by an Officer of Holdings to the effect that Holdings and its Subsidiaries intend to apply the Net Proceeds from such Asset Sales in accordance with clause (b) of the definition of Net Proceeds; (g) promptly, such additional financial and other information as the Administrative Agent may from time to time reasonably request; (h) promptly upon the occurrence of the APA Termination Date, notice thereof; (i) promptly, and in any event within three Business Days after an Officer of Holdings or Borrower obtains knowledge thereof, notice of the occurrence of any event which constitutes a Default or Event of Default specifying the nature and extent thereof and what action Borrower proposes to take with respect thereto; and (j) concurrently with the delivery of the Officer’s Certificate required pursuant to subsection 7.2(b), a perfection certificate supplement substantially in the form of Exhibit O-2 or a   -74- -------------------------------------------------------------------------------- statement in such Officer’s Certificate that there has been no change in the information included in the perfection certificate as most recently supplemented. 7.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations and liabilities of whatever nature, except (a) when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of Holdings or any of its Subsidiaries, as the case may be, (b) for delinquent obligations which do not have a Material Adverse Effect, (c) for trade and other accounts payable in the ordinary course of business which are not overdue for a period of more than 90 days or, if overdue for more than 90 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of Holdings or any of its Subsidiaries, as the case may be and (d) in the event any failure to discharge or otherwise satisfy any such obligation or liability results in the incurrence of a Lien against any of the collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions. 7.4. Conduct of Business and Maintenance of Existence. Except as disclosed in Schedules 5.13 and 5.16 and as otherwise permitted by subsections 8.4 and 8.5, preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all material rights, material privileges, franchises, copyrights, patents, trademarks and trade names necessary or desirable in the normal conduct of its business except for rights, privileges, franchises, copyrights, patents, trademarks and trade names the loss of which would not, in the aggregate, have a Material Adverse Effect; and comply with all applicable Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. This paragraph shall not be deemed to restrict Holdings or any of its Subsidiaries from abandoning or failing to pursue or enforce any Intellectual Property or registrations or applications therefor, which actions or inactions are taken in Holdings’ or its Subsidiary’s commercially reasonable discretion and would not, in the aggregate, have a Material Adverse Effect. 7.5. Maintenance of Property; Insurance. (a) Keep all Real Property, other property and assets useful and necessary in its business in good working order and condition (ordinary wear and tear excepted). (b) Subject to the other provisions of this subsection 7.5, maintain at its own expense with insurers that have an A.M. Best rating of A- or better insurance on all its property and assets in at least such amounts and with only such deductibles as are usually maintained by, and against at least such risks (to the extent relating to the Collateral such other insurance against such risks as the Administrative Agent and the Arranger may from time to time reasonably require) as are usually insured against in the same general area by, companies engaged in the same or a similar business, and in form, with terms and conditions, limits and deductibles as shall be acceptable to the Administrative Agent, and furnish to each Lender, upon written request of any Lender (made through the Administrative Agent), full information as to the insurance carried. (i) All Risk Property Insurance. Borrower shall maintain all risk property insurance covering against physical loss or damage, including but not limited to fire and extended coverage, collapse, flood, earth movement and comprehensive machinery breakdown coverage (including electrical malfunction and mechanical breakdown). Such insurance shall not contain any exclusion for resultant damage caused by faulty workmanship, design or materials. Coverage shall be   -75- -------------------------------------------------------------------------------- written on a replacement cost basis in an amount acceptable to the Administrative Agent. Such insurance policy shall contain an agreed amount endorsement waiving any coinsurance penalty and shall include expediting expense coverage in an amount not less than $1,000,000; and (ii) Business Interruption. As an extension of the coverage required under subsection (b)(i) above, Borrower shall maintain business interruption insurance in an agreed amount equal to twelve (12) months projected loss of net profits, continuing expenses (including debt service payments) and shall contain an agreed amount endorsement waiving any coinsurance penalty. Contingent business interruption shall also be included to cover the major suppliers and customers of Borrower. Coverage shall be included for extra expenses and service interruption in an amount not less than $1,000,000. Deductibles shall not exceed thirty (30) days; and (iii) Comprehensive General Liability Insurance. Borrower shall maintain comprehensive general liability insurance written on an occurrence basis with a limit of not less that $1,000,000. Such coverage shall include, but not be limited to, premises/operations, explosion, collapse, underground hazards, contractual liability, independent contractors, products/completed operations, property damage and personal injury liability coverages. Such insurance shall not exclude coverage for exemplary damages where insurable by law; and (iv) Workers’ Compensation/Employer’s Liability. Borrower shall maintain Workers’ Compensation insurance in accordance with statutory provisions covering accidental injury, illness or death of an employee of Borrower while at work or in the scope of his employment with Borrower and Employer’s Liability in an amount not less that $1,000,000. Such coverage shall not contain any occupational disease exclusions; and (v) Automobile Liability. Borrower shall maintain Automobile Liability insurance covering owned, non-owned, leased, hired or borrowed vehicles against bodily injury or property damage. Such coverage shall have a limit of not less than $1,000,000; and (vi) Excess/Umbrella Liability. The Lessee shall maintain excess or umbrella liability insurance in an amount not less than $25,000,000 written on an occurrence basis providing coverage limits excess of the insurance limits required under sections (b)(iii), (b)(iv) employer’s liability only, and (b)(v). Such insurance shall follow the form of the primary insurances and drop down in case of exhaustion of underlying limits and/or aggregates. Such insurance shall not exclude coverage for punitive or exemplary damages where insurable by law. (c) (A) Ensure that each insurance policy described in subsection 7.5(b) shall provide that (i) the Administrative Agent is permitted to pay any premium therefor within thirty (30) days after receipt of any notice stating that such premium has not been paid when due; (ii) subject to customary exceptions, all losses thereunder shall be payable notwithstanding any act or negligence of Holdings or any of its Subsidiaries or its agents or employees which otherwise might have resulted in a forfeiture of all or a part of such insurance payments; (iii) to the extent such insurance policy constitutes property insurance, Borrower is the named insured and the Administrative Agent and the Lenders shall be additional insureds, and all losses payable thereunder shall be payable to the Administrative Agent, as loss payee, pursuant to a standard non-contributory New York mortgagee endorsement and shall be in an amount at least sufficient to prevent coinsurance liability; (iv) with respect to liability insurance, the Administrative Agent and the Lenders shall be named as additional insureds. It shall be understood that any obligation   -76- -------------------------------------------------------------------------------- imposed upon Borrower, including but not limited to the obligation to pay premiums, shall be the sole obligation of Borrower and not that of the Administrative Agent or the Lenders; (v) with respect to the property policies described in subsections (b)(i) and (b)(ii), the interests of the Administrative Agent and the Lenders shall not be invalidated by any action or inaction of Borrower, or any other Person, and shall insure the Administrative Agent and the Lenders regardless of any breach or violation by Borrower, or any other Person, of any warranties, declarations or conditions of such policies; (vi) inasmuch as the liability policies described in subsections (b)(iii), (b)(iv), (b)(v) and (b)(vi) are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured; and (vii) such insurance shall be primary without right of contribution of any other insurance carried by or on behalf of the Administrative Agent and the Lenders with respect to its interests as such in this transaction and (B) use commercially reasonable efforts to ensure that each insurance policy described in subsection 7.5(b) will provide that (i) the insurers thereunder shall waive all rights of subrogation against the Administrative Agent and the Lenders, any right of setoff or counterclaim and any other right to deduction, whether by attachment or otherwise and (ii) it may not be modified, reduced, cancelled or otherwise terminated without at least thirty (30) days prior written notice to the Administrative Agent. (d) Not settle any claim under any insurance policies relating to any Destruction, if such claim involves any loss in excess of $5,000,000, without the prior written approval of the Administrative Agent, and Borrower shall cause each such policy to contain a provision to such effect. (e) At least ten (10) days prior to the expiration of any insurance policy or policies required by this subsection 7.5, deliver to the Administrative Agent such insurance policy or policies renewing or extending such expiring insurance policy or policies, renewal or extension insurance certificates or other reasonable evidence of renewal or extension providing that such insurance policy or policies are in full force and effect, in each case, as shall be reasonably satisfactory to the Administrative Agent. (f) Not purchase separate insurance policies concurrent in form or contributing in the event of loss with the insurance policies described in subsection 7.5(b), unless the Administrative Agent is included thereon as an additional insured and, if applicable, with loss payable to the Administrative Agent under an endorsement containing the provisions described in subsection 7.5(c) and to promptly notify the Administrative Agent whenever any such separate insurance policy is obtained and promptly deliver to the Administrative Agent the insurance policy or insurance certificate evidencing such insurance, in each case as shall be reasonably satisfactory to the Administrative Agent. (g) If there shall occur any Destruction involving any loss in excess of $5,000,000, promptly send to the Administrative Agent a notice setting forth the nature and extent of such Destruction; if there shall occur any Taking involving any loss in excess of $5,000,000, promptly notify the Administrative Agent upon receiving notice of such Taking or commencement of proceedings therefor. The Administrative Agent may participate in any proceedings or negotiations which might result in any Taking, and such Credit Party shall deliver or cause to be delivered to the Administrative Agent all instruments reasonably requested by it to permit such participation. Such Credit Party shall pay all reasonable fees, costs and expenses incurred by the Administrative Agent in connection with any Taking and in seeking and obtaining any award or payment on account thereof. The net insurance proceeds and net awards in respect of such Destruction or Taking are hereby assigned and shall be paid to the Administrative Agent. Such Credit Party shall take all steps necessary to notify the condemning authority of such   -77- -------------------------------------------------------------------------------- assignment. All net insurance proceeds in respect of any Destruction and net awards in respect of any Taking, shall be applied in accordance with the provisions of subsections 4.5(d) and 12.2. (h) In the event that the proceeds of any insurance claim are paid after the Administrative Agent has exercised its right to foreclose after an Event of Default, pay such proceeds to the Administrative Agent to satisfy any deficiency remaining after such foreclosure. (i) On the Closing Date and at Borrower’s option, (x) concurrently with the delivery of the consolidated financial statements referred to in subsection 7.1(a) or (y) at each policy renewal, but in any event not less than annually, Borrower shall provide to the Administrative Agent approved certification from each insurer or by an authorized representative of each insurer. Such certification shall identify the underwriters, the type of insurance, the limits, deductibles, and term thereof and shall specifically list the special provisions delineated in subsection 7.5(c) above, for such insurance required for this subsection 7.5(i). (j) At the Administrative Agent’s reasonable request and in any event no more that once per fiscal year, Borrower shall use its commercially reasonable efforts to cause Marsh USA, Inc. (or any of its affiliates) or such other independent insurance broker reasonably acceptable to the Administrative Agent, to furnish the Administrative Agent with an opinion stating that all premiums then due have been paid and that, in the opinion of such broker, the insurance then maintained by the Borrower is in accordance with this subsection. (k) In the event Borrower fails to take out or maintain the full insurance coverage required by this subsection 7.5, the Administrative Agent, upon 30 days’ prior notice (unless the aforementioned insurance would lapse within such period, in which event notice should be given as soon as reasonably possible) to Borrower of any such failure, may (but shall not be obligate to) take out the required policies of insurance and pay the premiums on the same. All amounts so advanced thereof by the Administrative Agent for such insurance shall become an additional obligation of Borrower to the Administrative Agent and the Lenders, and Borrower shall forthwith pay such amounts to the Administrative Agent, together with interest thereon from the date so advanced. (l) Notwithstanding anything to the contrary herein, no provision of this subsection 7.5 or any provision of this Agreement shall impose on the Administrative Agent and the Lenders any duty or obligation to verify the existence or adequacy of the insurance coverage maintained by Borrower, nor shall the Administrative Agent and the Lenders be responsible for any representations or warranties made by or on behalf of Borrower to any insurance broker, company or underwriter. The Administrative Agent, at its sole option, may obtain such insurance if not provided by Borrower and in such event, Borrower shall reimburse the Administrative Agent upon demand for the cost thereof together with interest. 7.6. Inspection of Property; Books and Records; Discussions; Lender Meetings. (a) 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 which permit financial statements to be prepared in conformity with GAAP and all Requirements of Law; and permit representatives of the Administrative Agent or any Lender upon reasonable notice (made through the Administration Agent and no more frequently than annually unless a Default or Event of Default shall have occurred and be continuing) to visit and inspect any of its properties or assets and examine and make abstracts from any of its books and   -78- -------------------------------------------------------------------------------- records (including without limitation insurance policies) at any reasonable time and upon reasonable notice, and to discuss the business, operations, assets and financial and other condition of Borrower and its Subsidiaries with officers and employees thereof and with their independent certified public accountants with prior reasonable notice to, and coordination with, the chief financial officer or the treasurer of Borrower. (b) Within 120 days after the close of each fiscal year of Holdings, hold a meeting (at a mutually agreeable location and time), which may be done by teleconference (at a mutually agreeable time), with all Lenders who choose to attend such meeting or teleconference, at which meeting or teleconference, as the case may be, shall be reviewed the financial results, the financial condition and the budgets presented of Holdings and its Subsidiaries and other relevant matters. 7.7. Notices. Promptly give notice to the Administrative Agent (to be distributed by the Administrative Agent to the Lenders): (a) of the occurrence of any Default or Event of Default; (b) of any (i) default or event of default under any instrument or other agreement, guarantee or collateral document of Holdings, Borrower or any of its Subsidiaries which default or event of default has not been waived and would have a Material Adverse Effect, or (ii) litigation, investigation (of which Borrower is aware) or proceeding which may exist at any time between Holdings, Borrower or any of its Subsidiaries and any Governmental Authority, or receipt of any notice of any environmental claim or assessment against Holdings, Borrower or any of its Subsidiaries by Governmental Authority, which in any such case would have a Material Adverse Effect; (c) of any litigation or proceeding against or insolvency of Holdings, Borrower or any of its Subsidiaries (i) in which more than $5,000,000 of the amount claimed is not covered by insurance or (ii) in which injunctive or similar relief is sought which if obtained would have a Material Adverse Effect; (d) promptly, upon 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 a Material Adverse Effect, a written notice specifying the nature thereof, what action Holdings, Borrower, its Subsidiaries or other ERISA Entity have taken, are taking or propose to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor, PBGC or Multiemployer Plan sponsor with respect thereto; (e) upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any ERISA Entity with the Internal Revenue Service with respect to each Pension Plan; (ii) the most recent actuarial valuation report for each Pension Plan; (iii) all notices received by any ERISA Entity from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Employee Benefit Plan as the Administrative Agent shall reasonably request;   -79- -------------------------------------------------------------------------------- (f) of any occurrence that Holdings or Borrower would be otherwise required to file on Form 8-K with the SEC (if Holdings or Borrower were subject to the filing requirements of the Exchange Act); and (g) of a Material Adverse Effect known to Borrower or any of its Subsidiaries. Each notice pursuant to this subsection 7.7 shall be accompanied by an Officer’s Certificate of Borrower executed on its behalf by a Responsible Officer of Borrower setting forth in reasonable detail the occurrence referred to therein and (in the cases of clauses (a) through (d), (f) and (g)) stating what action (if any) Borrower proposes to take with respect thereto. It is understood that, in an effort to comply with its covenants hereunder, Borrower may from time to time deliver notices of events (including events of the types described above) to the Administrative Agent and/or the Lenders, and that the notification of any event or events shall not constitute an admission or determination by Borrower that the event or events covered by such notice have resulted or will result in a Material Adverse Effect. 7.8. Environmental Laws. (a) Except to the extent the failure to do so would not, individually or in the aggregate, result in a Material Adverse Effect (i) comply with all Environmental Laws applicable to it, and obtain, comply with and maintain any and all Environmental Permits necessary for its operations as conducted and as planned; (ii) ensure that all of its tenants, subtenants, contractors, subcontractors and invitees comply with all Environmental Laws, and obtain, comply with and maintain any and all Environmental Permits, applicable to any of them; and (iii) comply in a timely manner with all orders and lawful directives regarding Environmental Laws issued to Borrower or any of its Subsidiaries by any Governmental Authority, other than such orders and lawful directives as to which an appeal or other challenge has been timely and properly taken in good faith and with respect to which reserves have been taken where necessary in accordance with GAAP. (b) (i) Reasonably and prudently manage any liabilities or potential liabilities that Borrower, any of the other Credit Parties, any of their respective operations (including, without limitation, disposal of Hazardous Materials), and any properties owned or leased by any of them, may be subject to under all applicable Environmental Laws; and (ii) ensure that Borrower and its Subsidiaries undertake reasonable efforts to identify, and evaluate, issues of compliance with and liability under Environmental Laws prior to acquiring, directly or indirectly, any ownership or leasehold interest in real property, or other interest in any real property that could reasonably be expected to give rise to Borrower or any of its Subsidiaries being subjected to liability under any Environmental Law as a result of such acquisition. (c) At the written request of the Administrative Agent or the Required Lenders, which request shall specify in reasonable detail the basis therefor, each Credit Party will provide, at such Credit Party’s sole cost and expense, an environmental assessment report concerning any real property now or hereafter owned, leased or otherwise operated by such Credit Party or any of its respective Subsidiaries, prepared by an environmental consulting firm reasonably satisfactory to the Administrative Agent, regarding the presence or absence of Hazardous Materials on, at, under or emanating from such real property and indicating the potential cost of any investigative, removal, remedial or other response action in connection with such Hazardous Materials pursuant to Environmental Law; provided that such request may be properly made only if (i) there has occurred and is continuing an Event of Default or (ii) the Administrative Agent or any of the Required Lenders reasonably believes that the Credit Party or its operations is not in compliance with or otherwise has liability under Environmental Law with respect to such Real Property, or that there has been a release of Hazardous Materials at, on, under of from any   -80- -------------------------------------------------------------------------------- such real property, and such noncompliance or release or related liabilities could reasonably be expected to form the basis of a claim pursuant to Environmental Law or to otherwise result in liability under Environmental Law, in each case which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect (in such events as are listed in this subparagraph, the environmental assessment shall focus upon the noncompliance, release or other circumstances, as applicable). If any Credit Party fails to provide the same within 45 days after such proper request is made, the Administrative Agent may order the same, and such Credit Party shall grant and hereby grants to the Administrative Agent and the Required Lenders and their agents access to such real property and specifically grants the Administrative Agent and the Required Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to perform such an assessment, all at such Credit Party’s sole cost and expense; and (d) Provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this subsection 7.8, to the extent such information is in the possession, custody or control of or is otherwise reasonably available to any Credit Party. 7.9. Additional Collateral and Guarantees. (a) Subject to subsection 7.9(d), with respect to any assets acquired after the Closing Date by Borrower or any of its Qualified Subsidiaries that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (but, in any event, excluding any assets described in paragraph (b) of this subsection), promptly (and in any event within 30 days after the acquisition thereof): (x) execute and deliver to the Administrative Agent such amendments or supplements to the relevant Security Documents or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties, a Lien on such properties or assets subject to no Liens other than Permitted Liens, and (y) take all actions reasonably necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. Each Credit Party shall otherwise take such actions and execute and/or deliver to the Administrative Agent such documents (including, without limitation, customary legal opinions) as the Administrative Agent shall require to confirm the validity, perfection and priority of the Lien of Security Documents against such after-acquired properties or assets. (b) With respect to any Person that is or becomes a wholly owned Subsidiary that has assets having either book value or fair market value in excess of $2,000,000, promptly (and in any event within 30 days after such Person becomes a Subsidiary or has such assets) (i) deliver to the Administrative Agent the certificates representing the Capital Stock of such Subsidiary, together with undated stock powers executed and delivered in blank by a duly authorized officer of Borrower or such Subsidiary, as the case may be, and all intercompany notes owing from such Subsidiary to any Credit Party, and (ii) cause such Subsidiary (x) to become a party to the Subsidiary Guarantee and the Security Agreement or such comparable documentation which is in form and substance reasonably satisfactory to the Administrative Agent, and (y) to take all actions reasonably necessary or advisable to cause the Lien created by the Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. (c) If (A) at any time any two or more wholly-owned Subsidiaries in the aggregate not otherwise subject to subsection 7.9(b) have assets having either a book value or fair market value in   -81- -------------------------------------------------------------------------------- excess of $10,000,000 or produce revenue in excess of 5% of total revenue of Borrower and the Subsidiaries, comply with subsection 7.9(b) within the time frames set forth in such subsection so that no two or more such Subsidiaries hold assets having either a book value or fair market value in excess of $10,000,000 or produce revenue in excess of 5% of total revenue of Borrower and the Subsidiaries or (B) any Subsidiary which is not a Guarantor guarantees any Indebtedness of Borrower or any of its Subsidiaries, comply immediately with subsection 7.9(b). (d) Upon the written request of the Administrative Agent, promptly grant to the Administrative Agent, within 60 days of such request, security interests and Mortgages in such owned or leased Real Property of Borrower and its wholly owned Subsidiaries as is acquired after the Closing Date by Borrower or such Subsidiary and that, together with any improvements thereon, individually have a fair market value of at least $1,000,000 and is not already subject to a mortgage in favor of a third party permitted to remain in place under subsection 8.2, as additional security for the Secured Obligations (as defined in the Mortgages). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Encumbrances and such other Liens reasonably acceptable to the Administrative Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Administrative Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Borrower shall otherwise take such actions and execute and/or deliver to the Administrative Agent such documents as the Administrative Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including, without limitation, a Title Policy, a Survey and local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent) in respect of such Mortgage) within 60 days of the written request of the Administrative Agent. 7.10. Post-Closing Collateral Matters. (a) Within 30 days after the Closing Date, the applicable Credit Parties shall obtain and deliver to the Administrative Agent (to the extent such items have not been provided as of the Closing Date) with respect to each of the Real Properties listed on Schedule 7.10, the following: (i) a duly executed and acknowledged Mortgage, together with such certificates, affidavits, questionnaires, instruments or returns and financing statements meeting the requirements of subsections 6.1(h)(i) and 6.1(h)(ii), in each case, of the Original Credit Agreement; (ii) policies or certificates of insurance as required by subsection 6.1(h)(iii) of the Original Credit Agreement; (iii) evidence reasonably acceptable to the Administrative Agent of payment of all applicable mortgage recording taxes, fees, charges, costs and expenses required for the recording of such Mortgage; (iv) a Title Policy; (v) such consents, approvals, estoppels, tenant subordination agreements or other instruments as required by subsection 6.1(h)(vi) of the Original Credit Agreement; and   -82- -------------------------------------------------------------------------------- (vi) an opinion of local counsel in the state in which the applicable Real Property is located in the form of Exhibit L-2 or otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Arranger. (b) Within 60 days after the Closing Date, the applicable Credit Parties shall obtain and deliver to the Administrative Agent a Survey with respect to each of the Mortgaged Properties. Upon obtaining said Survey, the applicable Credit Party shall cause to be delivered endorsements to the Title Policy delivered pursuant to subsection 7.10(a)(iv) above, removing the customary survey exceptions therein, providing the comprehensive and survey endorsements thereto as well as any other endorsements set forth in subsection 6.1(h)(v) of the Original Credit Agreement which were omitted as a result of the applicable Credit Parties failure to obtain a Survey contemporaneously with said Title Policy, within ten (10) Business Days after the delivery of said Survey. (c) Within 45 days after the Closing Date, the applicable Credit Parties shall use commercially reasonable efforts to obtain a subordination, non-disturbance and attornment agreement for each of the leaseholds of the applicable Credit Parties located at 162 Forman Landing Lane, Wye Mills, MD 21679 and 1960 Normandy Drive, Miami Beach, FL from all mortgagees or beneficiaries, as applicable, of the fee interest of such properties, on the Administrative Agent’s standard form or such other form reasonably satisfactory to the Administrative Agent. (d) To the extent that any legal description contained in any leasehold Mortgages delivered to the Administrative Agent on or about the Closing Date prove incorrect (as indicated in any Survey, title commitment or title update subsequently provided), the applicable Credit Parties shall cooperate, at their own cost and expense, in the amendment of any legal description to any such leasehold Mortgage or title insurance policy in respect thereof. (e) Within 60 days after the Closing Date, the applicable Credit Party shall cause the Title Policy delivered as of the Closing Date with respect to the Real Property located at 120 Southmont Boulevard, Johnstown, PA to be amended to add to the insured property thereunder the legal description of parcel 1 contained in Exhibit A to the Mortgage (“Parcel 1”) encumbering such Real Property (the “Southmont Boulevard Mortgage”) executed and delivered to the Administrative Agent as of the Closing Date, and in connection therewith, the applicable Credit Party shall cause (i) a Title Policy (or an amendment to such existing Title Policy with respect to he Southmont Boulevard Mortgage) to be issued in favor of the Administrative Agent with respect to Parcel 1 and (ii) cause all of the other conditions set forth in subsection 7.10(a) and 7.10(b) to be satisfied with respect Parcel 1. In the event that the legal description contained in the Southmont Boulevard Mortgage is incorrect based on the title commitment to be issued within 60 days after the Closing Date with respect thereto, the applicable Credit Party shall cooperate with the Administrative Agent, at the Credit Party’s sole cost and expense, to amend the Southmont Boulevard Mortgage to correct such legal description. 7.11. Compliance with Law. Conduct its business and affairs in compliance with all Laws applicable thereto except to the extent failure to do so would not, in the aggregate, have a Material Adverse Effect. 7.12. Security Interests; Further Assurances. Promptly, upon the reasonable request of Administrative Agent, at Borrower’s expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or   -83- -------------------------------------------------------------------------------- recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by Administrative Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby superior to and prior to the rights of all third Persons other than the holders of Permitted Liens and subject to other Liens except as permitted by the Security Documents, or obtain any consents, including, without limitation, landlord or similar lien waivers and consents, as may be necessary or appropriate in connection therewith. The Credit Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Security Documents continue to be perfected under the UCC or otherwise after the establishment of any Incremental Term Loan or Incremental Term Loan Commitments deliver or cause to be delivered to Administrative Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to Administrative Agent as Administrative Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by Administrative Agent or the Lenders of any power, right, privilege or remedy pursuant to any Credit Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority execute and deliver all applications, certifications, instruments and other documents and papers that Administrative Agent or the Lenders may be so required to obtain. If Administrative Agent or the Required Lenders determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of any Credit Party constituting Collateral, Borrower shall provide to Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA and are in form and substance satisfactory to Administrative Agent. 7.13. Required Interest Rate Agreements. Within 90 days after the Closing Date, enter into Interest Rate Agreements designed to protect Borrower against fluctuations in interest rates such that at least 50% of the aggregate principal amount of Consolidated Indebtedness for a period of at least 24 months from the Closing Date on terms and with counterparties reasonably satisfactory to the Administrative Agent. 7.14. Anti-Terrorism Law. None of Holdings or any of its Subsidiaries shall directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in subsection 5.27 above, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and Holdings and its Subsidiaries shall deliver to the Lenders any certification or other evidence requested from time to time by the Administrative Agent in its reasonable discretion, confirming the Loan Parties’ compliance with this subsection 7.14). 7.15. Embargoed Person. At all times throughout the term of the Loans, (a) none of the funds or assets of Holdings and its Subsidiaries that are used to repay the Loans shall, to the knowledge of any Credit Party, constitute property of, or shall be beneficially owned directly or indirectly by, any Person subject to sanctions or trade restrictions under United States law (“Embargoed Person” or “Embargoed Persons”) that is identified on (1) the “List of Specially Designated Nationals and Blocked Persons” (the “SDN List”) maintained by OFAC, and/or to the knowledge of any Credit Party, as of the date thereof, based upon reasonable inquiry by such Credit Party, on any other similar list (“Other List”)   -84- -------------------------------------------------------------------------------- maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in Holdings or any of its Subsidiaries (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders (collectively, “Executive Orders”), and (b) no Embargoed Person shall, to the knowledge of any Credit Party, have any direct interest, as of the Closing Date, based upon reasonable inquiry by any Credit Party, indirect interest, of any nature whatsoever in the Credit Parties, with the result that the investment in the Credit Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law. 7.16. Anti-Money Laundering. At all times throughout the term of the Loans, to the knowledge of any Credit Party, as of the Closing Date, based upon reasonable inquiry by such Credit Party, none of the funds of Holdings or any of its Subsidiaries that are used to repay the Loans shall be derived from any unlawful activity with the result that the making of the Loans would be in violation of law. 7.17. Payment of Taxes. Each of Holdings and its Subsidiaries shall timely file all tax returns required by any Governmental Authority and timely pay and discharge all Taxes imposed on it or on its income or profits or on any of its Property (except for any such Taxes (or tax returns with respect to such Taxes) (a) the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in accordance with GAAP and (b) which individually and in the aggregate are not reasonably expected to have a Material Adverse Effect). SECTION 8. NEGATIVE COVENANTS Holdings and Borrower hereby agree that they shall not, and Borrower shall not permit any of its Qualified Subsidiaries (except where Non-Qualified Subsidiaries are expressly restricted or “Subsidiaries” are referenced to) to, directly or indirectly, so long as any of the Commitments remain in effect or any Loan, Note or L/C Obligation remains outstanding and unpaid, any amount remains available to be drawn under any Letter of Credit (unless cash in an amount equal to such amount has been deposited to a cash collateral account established by the Administrative Agent) or any other amount is owing to any Lender or the Administrative Agent hereunder or under any other Credit Document (it being understood that each of the permitted exceptions to each of the covenants in this Section 8 is in addition to, and not overlapping with, any other of such permitted exceptions except to the extent expressly provided): 8.1. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) the Indebtedness outstanding on the Closing Date and disclosed in Schedule 5.26, and the Refinancing Indebtedness in respect thereof on terms and conditions taken as a whole no less favorable to Borrower and its Qualified Subsidiaries or the Lenders than the Indebtedness being Refinanced; (b) Indebtedness under the Credit Documents; (c) Contingent Obligations permitted by subsection 8.3;   -85- -------------------------------------------------------------------------------- (d) Indebtedness (i) of Borrower to any Subsidiary Guarantor, and (ii) of any Subsidiary Guarantor to Borrower or to any other Subsidiary Guarantor; provided if any Subsidiary would be required to comply with subsection 7.9(b) immediately after giving effect to the incurrence of any such Indebtedness and the application of the resulting proceeds, such Subsidiary shall deliver to the Administrative Agent all intercompany notes owing from such Subsidiary to any Credit Party within 10 days of the transaction giving rise to such requirement; (e) other unsecured Indebtedness of Borrower and its Qualified Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any time outstanding; (f) Indebtedness of Borrower and its Qualified Subsidiaries in respect of Financing Leases and Purchase Money Indebtedness of Borrower and its Qualified Subsidiaries to finance the purchase of fixed or capital assets in an amount which shall not exceed the purchase price of the assets purchased, and Refinancings thereof, in an aggregate amount not to exceed $5,000,000 at any one time outstanding and to the extent subsections 8.7 and 8.9 would not be contravened; (g) Indebtedness (i) of a Person assumed in connection with an Acquisition of such Person (or Indebtedness of such Person existing at the time such Person was acquired) so long as such Indebtedness was not incurred in anticipation of, or in connection with, such Acquisition, or (ii) to any one or more Persons selling the entity or assets acquired in an Acquisition (including seller earnouts) which such Indebtedness to any seller shall be on terms, conditions and pursuant to documentation reasonably satisfactory to the Administrative Agent; provided, however, Indebtedness under subsection 8.1(g)(i), and Refinancings thereof, shall not exceed $15,000,000 in the aggregate at any time outstanding and Indebtedness under subsections 8.1(g)(i) and (ii) shall not exceed $20,000,000 in the aggregate at any time outstanding; (h) Indebtedness in connection with surety bonds, letters of credit and performance bonds obtained in the ordinary course of business in connection with workers’ compensation obligations of Borrower and its Qualified Subsidiaries; (i) the New Notes (including any notes issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the New Notes); (j) Indebtedness under Hedge Agreements permitted by subsection 8.8; and (k) Holdings High Yield Notes. Holdings and Borrower hereby agree that they shall not, and Borrower shall not permit any of its Qualified Subsidiaries to designate, or permit or suffer to exist the designation of, any Indebtedness or other obligation, other than the Obligations, as “Designated Senior Indebtedness,” as such term   -86- -------------------------------------------------------------------------------- may be defined in the New Notes or the indenture under which they were issued, or effect or permit or suffer to exist any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate payment blockage periods under the New Notes or the indenture under which they were issued. 8.2. Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets, income or profits, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments or other governmental charges not yet delinquent or which are being contested in good faith and by appropriate proceedings if (i) adequate reserves with respect thereto are maintained on the books of Holdings, Borrower or the relevant Qualified Subsidiary, as the case may be, in accordance with GAAP, (ii) in the case of any such charge which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iii) all such Liens, individually and in the aggregate, are not reasonably expected to have a Material Adverse Effect; (b) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business in respect of obligations which are not yet delinquent or which are bonded or which are being contested in good faith and by appropriate proceedings if (i) adequate reserves with respect thereto are maintained on the books of Holdings, Borrower or the relevant Qualified Subsidiary, as the case may be, in accordance with GAAP and (ii) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (c) pledges or deposits made and Liens arising in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, tenders, trade or government contracts, leases, licenses, statutory obligations, surety and appeal bonds, performance bonds (including for Franchises) and other obligations of a like nature (in each case, other than for borrowed money) incurred in the ordinary course of business, deposits and/or escrow accounts in respect of Acquisitions or divestitures that are otherwise permitted hereunder, in each case for amounts not yet delinquent or, to the extent such amounts are so delinquent, such amounts are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted if (i) adequate reserves with respect thereto are maintained on the books of Holdings, Borrower or the relevant Subsidiary, as the case may be, in accordance with GAAP and (ii) in the case of any such Lien against any of the Collateral (A) such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (B) to the extent such Liens are not imposed by law, such Lien shall in no event encumber any Collateral other than cash and Cash Equivalents; (e) easements (including, without limitation, reciprocal easement agreements), rights-of-way, building, zoning and similar restrictions, utility agreements, covenants, reservations, restrictions, minor encroachments, and other similar minor encumbrances defects or irregularities in title which do not, individually or in the aggregate materially detract from the value of the Real Property to which it relates or, individually or in the aggregate, materially interfere with or adversely affect in any material respect the ordinary conduct of the business of Borrower and its Subsidiaries on the Real Property subject thereto or which are set forth in the title insurance policy delivered with respect to the Mortgaged Properties;   -87- -------------------------------------------------------------------------------- (f) Liens in favor of the Administrative Agent and the Lenders (or any Person party to an Interest Rate Agreement with Borrower who was a Lender or an Affiliate of a Lender at the date of entering into such Interest Rate Agreement with Borrower) pursuant to the Credit Documents, including Liens pursuant to the Credit Documents in respect of Interest Rate Agreements, and bankers’ liens arising by operation of law relating thereto; (g) Liens securing Indebtedness permitted by subsections 8.1(f) and (g)(i); provided that no such Lien incurred in connection with such Indebtedness shall extend to or cover other property of Borrower or such Subsidiary other than the respective property so acquired, and the principal amount of Indebtedness secured by any such Lien shall at no time exceed the original purchase price of such property; (h) Liens existing on the Closing Date after giving effect to the consummation of the Transactions and described in subsection 5.13 or Schedule 8.2(h); provided that no such Lien shall extend to or cover other assets or property of Borrower or its Qualified Subsidiaries other than the respective assets or property encumbered by such Lien on the Closing Date; (i) Liens on documents of title and the property covered thereby securing Indebtedness in respect of the Commercial L/Cs or other commercial letters of credit; (j) (i) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which Borrower or any of its Qualified Subsidiaries has easement rights or on any Leased Property and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings affecting any Real Property; (k) leases or subleases or licenses or sublicenses with respect to the assets or properties of Borrower or any of its Qualified Subsidiaries, in each case, entered into in the ordinary course of Borrower’s or such Qualified Subsidiary’s business so long as such leases or subleases affecting Mortgaged Property (i) are subordinate in all respects to the Liens granted and evidenced by the Security Documents and, in the case of any lease or sublease entered into after the Closing Date affecting any Mortgaged Property, such lease or sublease shall also be entered into in compliance with the provisions of the applicable Mortgage and (ii) do not, individually or in the aggregate, (A) interfere in any material respect with the ordinary conduct of the business of Borrower or any of its Qualified Subsidiaries or (B) materially impair the use (for its intended purposes) or the value of the assets or property subject thereto; (l) Liens on goods (and proceeds thereof) financed with drawings under commercial letters of credit securing reimbursement obligations in respect of such commercial letters of credit issued in accordance with the terms of this Agreement; (m) Permitted Encumbrances;   -88- -------------------------------------------------------------------------------- (n) Interests of lessors under operating leases and UCC financing statements in respect thereof; (o) banker’s liens and rights of set-off relating to deposit accounts; (p) interests of a licensor under a license agreement; (q) Liens on a Person or assets acquired in an Acquisition which were existing on the date of such Acquisition and not created in anticipation of such Acquisition; provided, however, that (1) such Liens do not extend beyond the assets of the Person or assets acquired and (2) any Indebtedness secured by such Liens is permitted by subsection 8.1(g); and (r) precautionary UCC financing statements filed against a Credit Party as lessee or sublessee or consignee; provided that no consensual Liens shall be permitted to exist, directly or indirectly, on any Securities Collateral (as defined in the Security Agreement), other than Liens granted pursuant to the Security Documents. 8.3. Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligation, except: (a) the Guarantees; (b) other guarantees by Borrower or any Qualified Subsidiary incurred in the ordinary course of business for an aggregate amount at any time outstanding not to exceed $5,000,000; (c) guarantees by Borrower or any Qualified Subsidiary of obligations of Borrower or any Qualified Subsidiary otherwise permitted hereunder; provided that, in each case, if the primary obligation being guaranteed is subordinated to the Loans or the Guarantees, such guarantees are subordinated to the Loans or the Guarantees on substantially the same basis as such primary obligation is subordinated; (d) Contingent Obligations existing on the Closing Date and described in Schedule 8.3(d) and Contingent Obligations relating to any Indebtedness permitted under subsection 8.1(a); (e) guarantees of obligations to third parties in connection with relocation of employees of Borrower or any of its Qualified Subsidiaries, in an amount which, together with all loans and advances made pursuant to subsection 8.6(f), shall not exceed $2,000,000 at any time outstanding; (f) Contingent Obligations in connection with workers’ compensation obligations, and in connection with performance, surety and appeal bonds, and similar obligations (including with respect to Franchises (as such term is defined in the Asset Purchase Agreement)) incurred in the ordinary course of business, of Borrower and its Qualified Subsidiaries;   -89- -------------------------------------------------------------------------------- (g) Hedge Agreements permitted by subsection 8.8 or otherwise entered into in the ordinary course of business to hedge obligations and not for speculative purposes; (h) endorsements for collection in the ordinary course of business; and (i) guarantees by the Subsidiary Guarantors of the New Notes. 8.4. Fundamental Changes. Enter into any merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or engage in any type of business other than of the same general type now conducted by it, except: (a) for the transactions otherwise permitted pursuant to paragraph (b), (g) or (h) of subsection 8.5 or pursuant to subsection 8.6, (b) any Subsidiary may be merged with and into Borrower or a Qualified Subsidiary, and (c) any Subsidiary of Borrower with a net book value not greater than $100,000 may be dissolved; provided that in connection with the foregoing, the appropriate Credit Parties shall take all actions necessary or reasonably requested by the Administrative Agent to maintain the perfection or perfect, as the case may be, protect and preserve the Liens on the Collateral granted to the Administrative Agent pursuant to the Security Documents and otherwise comply with the provisions of subsection 7.9 to the extent applicable. 8.5. Sale of Assets. Convey, sell, lease (other than a sublease of real property), assign, transfer or otherwise dispose of (including through a transaction of merger or consolidation of any Subsidiary) any of its property, business or assets (including, without limitation, other payments and receivables but excluding leasehold interests), whether now owned or hereafter acquired, except: (a) sales or other dispositions of inventory in the ordinary course of business; (b) that Borrower or any Subsidiary of Borrower may sell, lease, transfer, or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to, and any Qualified Subsidiary of Borrower merge with and into, Borrower or a Qualified Subsidiary, and Borrower or any Subsidiary of Borrower may sell or otherwise dispose of, or part with control of any or all of, the Capital Stock of any Subsidiary to a Qualified Subsidiary; provided that (i) Borrower shall not, directly or indirectly, transfer any substantial part of its assets pursuant to this paragraph and (ii) all actions necessary or reasonably requested by the Administrative Agent shall be taken by the appropriate Credit Parties to maintain the perfection or perfect, as the case may be, protect and preserve the Liens on the Collateral granted to the Administrative Agent pursuant to the Security Documents; (c) leases of Fee Properties and other real property owned in fee; provided that in the case of any lease of Mortgaged Property, such lease shall be subject to the provisions of the applicable Mortgage;   -90- -------------------------------------------------------------------------------- (d) any Taking or Destruction affecting any property or assets subject, however, to the proviso set forth in clause (c) of the definition of Net Proceeds; (e) substantially like-kind exchanges of real property or equipment; provided that only any cash in excess of $1,000,000 received by Borrower or any Qualified Subsidiary of Borrower in connection with such an exchange (net of all costs and expenses incurred in connection with such transaction or with the commencement of operation of real property received in such exchange and net of any other amounts described in clauses (w) through (z) of the definition of Net Proceeds) shall be deemed to be Net Proceeds and shall be applied in accordance with subsection 4.5(c) and, to the extent the real property or equipment subject to such exchange constituted Collateral under the Security Documents, then the property exchanged therefor shall be mortgaged or pledged contemporaneously with such exchange, as the case may be, for the benefit of the Secured Parties in accordance with subsection 7.9; (f) the sale or other disposition of any property or assets that, in the reasonable judgment of Borrower has become uneconomic, obsolete or worn out, and which is sold or disposed of in the ordinary course of business or the trade-in of equipment for equipment in better condition or of better quality; provided that, to the extent such properties or assets constituted Collateral, the net proceeds thereof shall be reinvested in properties or assets owned (or to be owned) by Borrower or its Qualified Subsidiaries having a fair market value at least equal to the amount of such net proceeds and any property or assets purchased with such net proceeds shall be mortgaged or pledged, as the case may be, to the Administrative Agent, for its benefit and for the benefit of the other Secured Parties, in accordance with subsection 7.9; (g) any sale or disposition of any interest in property or assets subject, however, to the proviso set forth in clause (b) of the definition of Net Proceeds; provided that the aggregate amount of Net Proceeds from such sales or dispositions shall not exceed $20,000,000 from and after the Closing Date; (h) the sale or other disposition of any property or assets the aggregate amount of the net proceeds received in respect of which shall not exceed $2,000,000 in any fiscal year; (i) Subsidiaries may (x) be dissolved in accordance with subsection 8.4 and (y) pay dividends in accordance with subsection 8.11; (j) Investments permitted by subsection 8.6; (k) licenses or sublicenses by Borrower or any of its Subsidiaries of software, Intellectual Property and general intangible and leases, licenses or subleases of other property in the ordinary course of business and which do not materially interfere with the business of Borrower or any of its Subsidiaries; (l) any disposition or dispositions (in an aggregate amount not to exceed $2,000,000 during the term of this Agreement) in connection with a Sale and Leaseback Transaction; and (m) any Asset Swap, provided that (i) no Default or Event of Default shall exist and be continuing before or after giving effect thereto, (ii) if and to the extent that Borrower and its   -91- -------------------------------------------------------------------------------- Qualified Subsidiaries receive consideration for the cable television system or systems (or portions thereof) and related assets transferred by them in connection with such Asset Swap that is in addition to the cable television systems (or portions thereof) and related assets received upon disposition thereof, such Asset Swap shall be deemed to be a disposition of assets and shall be permitted only if the provisions of subsections 8.5(g) or (h) and 4.5(c) shall be complied with in connection therewith and (iii) the aggregate book value of assets disposed of pursuant to Asset Swaps shall not exceed (x) prior to the first anniversary of the Closing Date, 10% or (y) thereafter, 20% of the aggregate book value of the combined consolidated total assets of Borrower and its Qualified Subsidiaries as reflected in the Pro Forma Financial Statements; provided that all sales, transfers, leases and other dispositions permitted hereby shall be made for fair value and for at least 85% cash consideration in the case of sales, transfers, leases and other dispositions permitted by clauses (f) (other than in the case of any trade-ins), (g), (h) and (l) (including for purposes of this calculation as cash consideration the amount of any liabilities (other than subordinated liabilities) assumed from Holdings or any of its Subsidiaries by a purchaser or other transferee). 8.6. Investments. Make any Investment in (including, without limitation, any acquisition of all or any substantial portion of the assets, and any acquisition of a business or a product line, of other companies), any Person (except to the extent permitted by subsection 8.3 or 8.7), except: (a) loans, advances or Indebtedness permitted by subsection 8.1(c) and 8.1(d); (b) Investments (i) by any Subsidiary in Borrower; (ii) by Borrower or by any Qualified Subsidiary in any Subsidiary (including to create any Subsidiary); provided that, in any such case, the requirements of subsection 7.9 are satisfied; (iii) by Borrower or by any Subsidiary in any Qualified Subsidiary financed with contributions of equity after the Closing Date directly or indirectly to the entity making such Investment; and (iv) by Holdings in Borrower; (c) Borrower and its Subsidiaries may invest in, acquire and hold Cash Equivalents; (d) Borrower and its Subsidiaries may make payroll advances in the ordinary course of business; (e) Borrower and its Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided that nothing in this clause (e) shall prevent Borrower or any of its Subsidiaries from offering such concessionary trade terms, or from receiving such investments, in connection with the bankruptcy or reorganization of their respective suppliers or customers or the settlement of disputes with such customers or suppliers arising in the ordinary course of business, as management deems reasonable in the circumstances;   -92- -------------------------------------------------------------------------------- (f) Borrower or any of its Subsidiaries may make travel and entertainment advances and relocation and other loans to officers and employees of Borrower or any of its Subsidiaries; provided that the aggregate principal amount of all such loans and advances outstanding at any one time, together with the guarantees of such loans and advances made pursuant to subsection 8.3(e), shall not exceed $2,000,000 at any one time outstanding; (g) other Investments by Borrower or any of its Qualified Subsidiaries not exceeding in the aggregate outstanding at any time (without giving effect to any write-downs or write-offs thereof, but net of any cash returns of capital, cash dividends and cash distributions received by Borrower or any Qualified Subsidiary in respect thereof) $5,000,000; provided, however, that at the time of making any such Investments no Default shall exist or would arise therefrom; (h) Borrower or any of its Qualified Subsidiaries may make Investments in joint ventures or other Persons engaged primarily in one or more businesses in which Borrower and its Qualified Subsidiaries are engaged or generally related thereto in an aggregate amount not to exceed $5,000,000 if on a Pro Forma Basis for such Investment, the Total Leverage Ratio would be less than 7.00:1.00 and greater than or equal to 5.00:1.00 or $20,000,000 if on a Pro Forma Basis for such Investment, the Total Leverage Ratio would be less than 5.00:1.00 (plus the sum of (i) any amounts dividended or distributed to Borrower or any Qualified Subsidiary by such joint ventures or other Persons and (ii) the net cash proceeds of any issuance of Capital Stock by Borrower to, or any capital contribution to Borrower which has not been used pursuant to subsection 8.6(b)(iii) for any period); provided that at the time of and after giving effect thereto no Default or Event of Default shall have occurred and be continuing; (i) [Reserved]; (j) transactions effected in accordance with subsection 8.5; (k) Investments existing as of Closing Date and set forth on Schedule 8.6; (l) Borrower or any of its Subsidiaries may make any Investment; provided that (i) subsection 8.14 would not be contravened thereby and (ii) such Investment is funded solely by the issuance of Capital Stock or from the proceeds of a substantially contemporaneous issuance of Capital Stock not required to be applied to the prepayment of the Loans pursuant to subsection 4.5(a) which has not been used pursuant to subsection 8.6(b)(iii); (m) Investments made in order to consummate Acquisitions; provided, however, that (u) no Default or Event of Default exists before or after giving effect to the Acquisition, (v) Holdings shall have delivered to the Administrative Agent revised financial projections for Holdings and its Subsidiaries on a consolidated basis giving pro forma effect to the Acquisition and such revised projections shall be reasonably acceptable to the Administrative Agent, (w) on a Pro Forma Basis, after giving effect to such Acquisition(s), (A) Holdings would be in compliance with subsections 8.9(A) and (B) and would have been in compliance with subsection 8.9(C) and (D) on the last day of the most recently completed fiscal quarter for which financial statements   -93- -------------------------------------------------------------------------------- have been or were required to be delivered pursuant to subsection 7.1 (assuming, for purposes of subsection 8.9, that such Acquisition had occurred on the first day of each period being tested) as evidenced in an Officers’ Certificate delivered to the Administrative Agent at least 10 days (or such shorter period as the Administrative Agent may agree) prior to the consummation of such Acquisition, accompanied by supporting schedules and data in reasonable detail, and (B) Holdings and Borrower can reasonably be expected to remain in compliance with such covenants through the final maturity date of the Loans and to have sufficient cash liquidity to conduct their business and pay their debts and other liabilities as they come due; (x) the aggregate amount of the Acquisition Consideration (which for each Acquisition shall be measured at the date of consummation thereof) for all Acquisitions consummated in any calendar year pursuant to this subsection 8.6(m) shall not exceed $25.0 million if on a Pro Forma Basis for such Acquisition, the Total Leverage Ratio would be less than 7.0:1.0 and not less than 5.5:1.0 or $50.0 million if on a Pro Forma Basis for such Acquisition the Total Leverage Ratio would be less than 5.5:1.0; (y) after giving pro forma effect to such Acquisition, the amount of the Available Revolving Credit Commitments is not less than $15,000,000; and (z) such Acquisition shall be effected through Borrower or a Qualified Subsidiary and the Person acquired shall be merged with or into a Borrower or a Qualified Subsidiary or shall be at the time of consummation thereof a Qualified Subsidiary (any such Acquisition in compliance with this subsection 8.6(m), a “Permitted Acquisition”); (n) the Transactions; and (o) any Investment arising from the acquisition by Borrower and its Qualified Subsidiaries of any cable television system or systems (or portions thereof) and related assets in connection with any Asset Swap, provided that (i) to the extent that Borrower and its Qualified Subsidiaries give consideration for the cable television system or systems (or portions thereof) and related assets acquired by them in connection with such Asset Swap that is in addition to the cable television system or systems (or portions thereof) and related assets transferred by them as consideration therefor, such Asset Swap shall be deemed to constitute an Investment and shall be permitted only if the provisions of subsections 8.6(g), (l) or (m) shall be complied with in connection therewith, (ii) immediately prior and after giving effect to such Investment no Default or Event of Default shall have occurred and be continuing and (iii) the aggregate book value of the assets acquired pursuant to this paragraph in any fiscal year of Borrower shall not exceed (x) prior to the first anniversary of the Closing Date, 10% or (y) thereafter, 20%, of the aggregate book value of the combined consolidated total assets of Borrower and its Qualified Subsidiaries as reflected in the Pro Forma Financial Statements. If any Subsidiary would be required to comply with subsection 7.9(b) immediately after giving effect to any investment permitted by subsection 8.6(b), such Subsidiary shall comply with the requirements of such subsection within 10 days of the transaction giving rise to such requirement.   -94- -------------------------------------------------------------------------------- 8.7. Capital Expenditures. Make or commit to make any Capital Expenditures, except that Borrower and its Qualified Subsidiaries may make or commit to make Capital Expenditures not exceeding the amount set forth below (the “Base Amount”) for each of the fiscal years or periods of Borrower set forth below:   Fiscal Year or Period    Base Amount Closing Date - December 31, 2004    $ 33,000,000 2005 - 2007    $ 30,000,000 2008 - Tranche B-1 Maturity Date    $ 32,000,000 provided that for any period set forth above, the Base Amount set forth above may be increased by a maximum of 50% of the Base Amount for any such period by carrying over to any such period any portion of the Base Amount (without giving effect to any increase) not spent in the immediately preceding period (the “CapEx Carryforward Amount”), and that Capital Expenditures in any period shall be deemed first made from the Base Amount applicable to such period. 8.8. Hedge Agreements. Enter into, create, incur, assume or suffer to exist any Hedge Agreements or obligations in respect thereof except in the ordinary course of business for non-speculative purposes or pursuant to subsection 7.13. 8.9. Financial Covenants. (A) Total Leverage Ratio. At any time during any period set forth below, permit the Total Leverage Ratio to be greater than the ratio set forth below opposite such period:   Period    Ratio Closing Date to December 31, 2004    7.90 January 1, 2005 to March 31, 2005    7.80 April 1, 2005 to June 30, 2005    7.70 July 1, 2005 to September 30, 2005    7.40 October 1, 2005 to December 31, 2005    7.00 January 1, 2006 to March 31, 2006    6.75 April 1, 2006 to June 30, 2006    6.50 July 1, 2006 to September 30, 2006    6.25 October 1, 2006 to December 31, 2006    6.00 January 1, 2007 to March 31, 2007    5.75 April 1, 2007 to September 30, 2007    5.50 October 1, 2007 to December 31, 2007    5.25 January 1, 2008 to June 30, 2008    5.00 July 1, 2008 to December 31, 2008    4.75 January 1, 2009 to Tranche B-1 Maturity Date    4.50   -95- -------------------------------------------------------------------------------- (B) Senior Leverage Ratio. At any time during any period set forth below, permit the Senior Leverage Ratio to be greater than the ratio set forth below opposite such period:   Period    Ratio Closing Date to December 31, 2004    5.60 January 1, 2005 to March 31, 2005    5.45 April 1, 2005 to June 30, 2005    5.30 July 1, 2005 to September 30, 2005    5.15 October 1, 2005 to December 31, 2005    5.00 January 1, 2006 to March 31, 2006    4.75 April 1, 2006 to June 30, 2006    4.50 July 1, 2006 to September 30, 2006    4.25 October 1, 2006 to December 31, 2006    4.00 January 1, 2007 to March 31, 2007    3.75 April 1, 2007 to September 30, 2007    3.50 October 1, 2007 to December 31, 2007    3.25 January 1, 2008 to June 30, 2008    3.00 July 1, 2008 to December 31, 2008    2.75 January 1, 2009 to Tranche B-1 Maturity Date    2.50 (C) Interest Coverage. For any two consecutive fiscal quarters ending on the dates or during any period set forth below (as applicable), permit the Consolidated Interest Coverage Ratio to be less than the ratio set forth below opposite such period:   Period    Ratio June 30, 2004 to September 30, 2004    1.50 October 1, 2004 to September 30, 2005    1.60 October 1, 2005 to December 31, 2006    1.75 January 1, 2007 to December 31, 2007    2.00 January 1, 2008 to June 30, 2008    2.25 July 1, 2008 to December 31, 2008    2.50 January 1, 2009 to December 31, 2009    2.75 January 1, 2010 to June 30, 2010    3.00 July 1, 2010 to December 31, 2010    3.25 January 1, 2011 to Tranche B-1 Maturity Date    4.00 (D) Fixed Charge Coverage Ratio. For any two consecutive fiscal quarters ending on the dates or during any period set forth below (as applicable), permit the Consolidated Fixed Charge Coverage Ratio to be less than the ratio set forth below opposite such period:   Period    Ratio December 31, 2005 to December 31, 2006    1.00 January 1, 2007 to June 30, 2007    1.05 July 1, 2007 to December 31, 2007    1.10 January 1, 2008 to June 30, 2008    1.20 July 1, 2008 to December 31, 2008    1.25 January 1, 2009 to June 30, 2009    1.35 July 1, 2009 to December 31, 2009    1.45 January 1, 2010 to June 30, 2010    1.70 July 1, 2010 to December 31, 2010    1.85 January 1, 2011 to Tranche B-1 Maturity Date    2.25   -96- -------------------------------------------------------------------------------- (E) Consolidated EBITDA. For any period set forth below, permit Consolidated EBITDA to be less than the amount set forth below opposite such period:   Period    Amount (in thousands) April 1, 2004 through June 30, 2004    $ 14,500 April 1, 2004 through September 30, 2004    $ 29,250 July 1, 2004 through December 31, 2004    $ 30,750 8.10. Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Qualified Subsidiary of Borrower to (a) make Dividend Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, Borrower or any other Subsidiary of Borrower, (b) make loans or advances to, or other Investments in, Borrower or any other Subsidiary of Borrower or (c) transfer any of its assets to Borrower or any other Subsidiary of Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Credit Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the disposition of all or substantially all of the Capital Stock or assets of such Subsidiary. 8.11. Dividends. Declare, make or pay any Dividend Payments on any shares of any class of Capital Stock, either directly or indirectly, except that: (a) Qualified Subsidiaries may pay Dividend Payments pro rata to the holders of their Capital Stock (giving effect to relative preferences and priorities); (b) Borrower and its Qualified Subsidiaries may pay or make Dividend Payments or distributions to any holder of its Capital Stock in the form of additional shares of Capital Stock of the same class and type; (c) Borrower and Holdings may make Dividend Payments so long as the proceeds thereof shall ultimately be used by Parent to make repurchase shares of Capital Stock of Parent owned by former, present or future employees of Borrower or its Qualified Subsidiaries or their assigns, estates and heirs; provided that the aggregate amount of Dividend Payments made by Borrower or Holdings pursuant to this paragraph (c) shall not in the aggregate exceed (i) $1,000,000 in any fiscal year or (ii) $5,000,000 during the term of this Agreement, plus any amounts contributed to Borrower as a result of resales of such repurchased shares of Capital Stock; (d) Holdings and Borrower may pay or make Dividend Payments or distributions during a period when such entity is treated as a partnership for federal, state or local income tax purposes and after such period, to the extent relating to the liability for such period, in an aggregate amount not to exceed the taxable income, calculated in accordance with applicable law, of   -97- -------------------------------------------------------------------------------- such entity with regard to such period multiplied by the highest combined published federal, state and local income tax rate applicable to corporations, which rate shall be certified to the Administrative Agent on an annual basis (or more frequently if the tax rate changes during any annual period) by the Borrower in an Officer’s Certificate of the Borrower executed on its behalf by a Responsible Officer of the Borrower; (e) Holdings and its Subsidiaries may pay or make Dividend Payments or distributions to one or more indirect parent companies to enable them to pay expenses incurred in the ordinary course of business; provided the aggregate amount of all Dividend Payments or distributions made pursuant to this subsection 8.11(e) shall not exceed $1,000,000 in any fiscal year; (f) Borrower may pay or make Dividend Payments or distributions to Holdings to enable Holdings to make interest payments on Holdings High Yield Notes as required; provided that on a Pro Forma Basis after giving effect to such Dividend Payments or distributions, Holdings would be in compliance with subsection 8.9(A), (B), (C) and (D); provided, further, that no Default or Event of Default exists and is continuing at the time of such Dividend Payments or distributions; and (g) on or before the 180th day after the Post Closing Certificate (as defined in the Asset Purchase Agreement) becomes conclusive, final and binding on Borrower under the Asset Purchase Agreement and any Net 3.3 Reduction Proceeds have been received by Borrower, Borrower and its Subsidiaries may pay or make Dividend Payments or distributions to Holdings (and Holdings may pay or make Dividend Payments or distributions to its equity securityholders) in an amount not to exceed the lesser of (i) such Net 3.3 Reduction Proceeds and (ii) $20,000,000 plus 33.33% of the amount of such Net 3.3 Reduction Proceeds in excess of $20,000,000; provided that (x) no Default or Event of Default exists before or after giving effect to any Dividend Payments or distributions made pursuant to this subsection 8.11(g) and (y) after giving pro forma effect to such Dividend Payments or distributions, the Available Revolving Credit Commitment is not less than $15,000,000. 8.12. Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate except for transactions which are otherwise permitted under this Agreement and which are upon fair and reasonable terms no less favorable to Borrower or such Qualified Subsidiary than it would obtain in a hypothetical comparable arm’s length transaction with a Person not an Affiliate; provided that nothing in this subsection 8.12 shall prohibit Borrower or its Qualified Subsidiaries from engaging in the following transactions: (1) transactions between or among Credit Parties, (2) the performance of Borrower’s or any Subsidiary’s obligations under any employment contract, collective bargaining agreement, employee benefit plan, related trust agreement or any other similar arrangement heretofore or hereafter entered into in the ordinary course of business, (3) the payment of fees, compensation and other benefits to, and customary indemnity and reimbursement provided on behalf of, employees, officers, directors or consultants of Holdings, Borrower or any Subsidiary in the ordinary course of business, (4) the maintenance of benefit programs or arrangements for employees, officers or directors, including, without limitation, vacation plans, health and life insurance plans, deferred compensation plans, and retirement or savings plans and similar plans, in each case, in the ordinary course of business, (5) transactions permitted by subsection 8.11 and (6) transactions existing on the Closing Date and included on Schedule 8.12 on the terms in effect on the Closing Date or pursuant to any amendment modification or replacement thereof not   -98- -------------------------------------------------------------------------------- disadvantageous to the Lenders in any material respect, the payment or reimbursement of all reasonable out-of-pocket expenses (including the reasonable fees, charges and disbursements of any counsel) incurred by ABRY or its Affiliates in connection with (A) the Transaction; (B) any amendments, modifications or waivers of the provisions of the Credit Documents, the Acquisition Documents or the Equity Documents (whether or not the transactions contemplated hereby or thereby shall be consummated or any such amendment, modification or waiver becomes effective) or (C) their investment in Parent and participation in the management and affairs of the Credit Parties not to exceed $2,000,000 per year in the aggregate. 8.13. Changes in Fiscal Year. Permit the fiscal year of Holdings and Borrower to end on a day other than on December 31 in any calendar year. 8.14. Lines of Business. Engage in any business, or cause or permit any Subsidiary (including any Non-Qualified Subsidiary) to engage in any business, except for those businesses in which Borrower and any of its Subsidiaries are engaged on the Closing Date (or which are substantially related thereto or are reasonable extensions thereof) or any activities then customarily undertaken by cable TV operators or Internet service providers; provided that the activities of Holdings shall be limited to (i) the ownership of the Capital Stock of Borrower and Atlantic Broadband Holdings, Inc., a Delaware corporation, (ii) performance of its obligations under the Credit Documents, (iii) actions required by law and (iv) the issuance of Holdings High Yield Notes and the performance of its obligations thereunder. 8.15. Amendments to Certain Documents. On or after the Closing Date, amend, modify, waive or terminate any provisions of any agreement listed on Schedule 5.24(a) or (b) in any such case in a manner which is materially adverse to Borrower or any of its Subsidiaries or the Lenders, without the consent of the Administrative Agent, which consent shall not be unreasonably withheld. 8.16. Prepayments and Amendments of Certain Debt. (a) Optionally prepay, retire, redeem, purchase, defease or exchange, or make or arrange for any mandatory prepayment, retirement, redemption, purchase or defeasance of any outstanding Indebtedness of Holdings and its Subsidiaries (other than (1) any refinancing of Indebtedness permitted by this Agreement, (2) the Obligations and (3) the conversion or exchange of Indebtedness for or into Capital Stock), (b) waive, amend, supplement, modify, terminate or release any of the provisions with respect to any Indebtedness of Holdings, Borrower or any of its Qualified Subsidiaries without the prior consent of the Administrative Agent, to the extent that any such waiver, amendment, supplement, modification, termination or release would be materially adverse to Holdings, Borrower or any of its Qualified Subsidiaries or the Lenders, (c) make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to New Notes, (d) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the New Notes (other than any such amendment, modification, waiver or other change that (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon and (ii) does not involve the payment of a consent fee), or (e) designate any Indebtedness (other than obligations of the Credit Parties pursuant to the Credit Documents) as “Designated Senior Indebtedness” for the purposes of the New Note Indenture. 8.17. Negative Pledges. Except with respect to prohibitions against other encumbrances on specific property encumbered to secure payment of particular Indebtedness permitted hereunder or prohibitions in license agreements under which Borrower or any of its Qualified Subsidiaries is the licensee, enter into any agreement prohibiting the creation or assumption of any Lien upon its properties   -99- -------------------------------------------------------------------------------- or assets, whether now owned or hereafter acquired, except pursuant to (a) the Credit Documents, (b) any other agreement that does not restrict in any manner (directly of indirectly) Liens created pursuant to the Credit Documents on property or assets of Borrower or any of its Qualified Subsidiaries (whether now owned or hereafter acquired) securing the Loans or any Interest Rate Agreement and does not require the direct or indirect granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of property of Borrower or any of its Qualified Subsidiaries to secure the Loans or any Interest Rate Agreement and (c) any industrial revenue or development bonds, acquisition agreement or operating leases of real property and equipment entered into in the ordinary course of business. Notwithstanding any of the foregoing, Indebtedness incurred by a Non-Qualified Subsidiary may contain a provision that no Lien on the assets of such Non-Qualified Subsidiary may exist unless such Indebtedness is equally and ratably secured with any other Indebtedness secured by such assets. 8.18. Sales and Leasebacks. Except as provided in subsection 8.5(l), enter into any arrangement with any Person providing for the leasing by Borrower or any Qualified Subsidiary of real or personal property that has been or is to be sold or transferred by Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Borrower or such Subsidiary. 8.19. Creation of Subsidiaries. None of Holdings or Borrower shall establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; provided that Borrower may establish or create one or more wholly owned Subsidiaries (and non-wholly owned Subsidiaries acquired in connection with a Permitted Acquisition or pursuant to Investments pursuant to subsection 8.6(h)) of Borrower without such consent so long as Borrower and its Subsidiaries comply with subsection 7.9 hereof. SECTION 9. EVENTS OF DEFAULT Upon the occurrence and during the continuance of any of the following events: (a) Holdings or Borrower shall fail to (i) pay any principal of any Loan or Note when due in accordance with the terms hereof or thereof or to reimburse the Issuing Lender in accordance with subsection 3.8 or (ii) pay any interest on any Loan or Note or any other amount payable under any Credit Document within three days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by any Credit Party in any Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Holdings or Borrower shall default in the observance or performance of any agreement contained in subsection 7.6(a), 7.7(a) or 7.9 or Section 8 of this Agreement; provided, that solely for the purpose of this subsection 9(c), any Net Proceeds received from a Permitted Issuance or contribution to capital that are used to repay Indebtedness subsequent to the end of any fiscal quarter, but prior to the date on which the Officer’s Certificate is delivered pursuant to subsection 7.2(b) with respect to such fiscal quarter, shall be deemed to have been received, such Indebtedness shall be deemed to have been repaid as of the last day of such fiscal quarter for the purpose of calculating total Indebtedness and such Indebtedness shall be deemed to have been repaid   -100- -------------------------------------------------------------------------------- as of the first day of the relevant period for the purpose of calculating Consolidated Interest Expense related thereto and if, after giving effect thereto Holdings and Borrower shall be in compliance with this subsection, Holdings and Borrower shall be deemed to have satisfied the requirements hereof as of the relevant date of determination with the same effect as though no failure to comply herewith at such date had occurred, and the applicable breach or default hereof which had occurred shall be deemed cured for all purposes of this Agreement; provided further that notwithstanding anything herein to the contrary, in no event shall Holdings be entitled to avail itself of the preceding proviso more than once in any consecutive four-quarter period; (d) Any Credit Party shall default in the observance or performance of any other agreement contained in any Credit Document and such default shall continue unremedied for a period of 30 days after Borrower’s receipt of written notice of such default from the Administrative Agent or any Lender; or (e) With respect to any Indebtedness, Interest Rate Agreement or Contingent Obligation which aggregate in excess of $5,000,000 (other than the Loans and L/C Obligations) (A) Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest on or other amounts in respect of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or Interest Rate Agreement or in the payment of any Contingent Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement or Contingent Obligation was created; or (ii) default (after giving effect to any applicable grace period) in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness, the party or parties to such Interest Rate Agreements or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause (determined without regard to whether any notice or lapse of time is required), such Indebtedness to become due prior to its stated maturity, such Interest Rate Agreement to be terminated, or such Contingent Obligation to become payable, (B) any such Indebtedness, Interest Rate Agreement or Contingent Obligation shall be declared due and payable, or required to be prepaid other than by regularly scheduled required repayment prior to the stated maturity thereof, or (C) any such Indebtedness, Interest Rate Agreement or Contingent Obligation shall mature and remain unpaid; or (f) (i) Holdings, Borrower or any of its Material Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or Holdings, Borrower or any of its Material Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, Borrower or any of its Material Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which results in the entry of an order for relief or any such adjudication or appointment which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry   -101- -------------------------------------------------------------------------------- thereof; or (iii) there shall be commenced against Holdings, Borrower or any of its Material Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, Borrower or any of its Material Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) Holdings, Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) An ERISA Event shall have occurred that in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against Holdings, Borrower or any of its Material Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $5,000,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within the time required by the terms of such judgment; or (i) Any Credit Document shall cease, for any reason, to be in full force and effect or Holdings or any of its Subsidiaries shall so assert in writing, or any Security Document shall cease to give the Administrative Agent for the benefit of the Secured Parties the rights, powers and privilege purported to be created thereby or cease to be effective to grant a perfected Lien on the Collateral described in such Security Document with the priority purported to be created thereby, subject to such exceptions as may be permitted therein or herein; or (j) There shall have occurred a Change of Control; or (k) Any non-monetary judgment, order or decree is entered against Holdings, Borrower or any of its Subsidiaries which does or would reasonably be likely to have a Material Adverse Effect, and there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) the New Notes shall cease, for any reason, to be validly subordinated to the Obligations, as provided in the indenture therefor, or any Credit Party, any Affiliate of any Credit Party, the trustee in respect of the New Notes or the holders of at least 25% in aggregate principal amount of the New Notes shall so assert; then, and in any such event, (x) if such event is an Event of Default specified in paragraph (f) above with respect to Holdings or Borrower, automatically (i) the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (ii) all obligations of Borrower in respect of the Letters of Credit, although contingent and unmatured, shall become immediately due and payable and the Issuing Lender’s obligations to issue the Letters of Credit shall immediately terminate and (y) if such event is any other Event of Default, so long as any such Event of Default shall be continuing, either or   -102- -------------------------------------------------------------------------------- both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to Borrower, declare the Commitments and the Issuing Lender’s obligations to issue the Letters of Credit to be terminated forthwith, whereupon the Commitments and such obligations shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to Borrower, (a) declare all or a portion of the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable, and (b) declare all or a portion of the obligations of Borrower in respect of the Letters of Credit, although contingent and unmatured, to be due and payable forthwith, whereupon the same shall immediately become due and payable and/or demand that Borrower discharge any or all of the obligations supported by the Letters of Credit by paying or prepaying any amount due or to become due in respect of such obligations. All payments under this Section 9 on account of undrawn Letters of Credit shall be made by Borrower directly to a cash collateral account established by the Administrative Agent for such purpose for application to Borrower’s reimbursement obligations under subsection 3.8 as drafts are presented under the Letters of Credit, (x) with the balance, if any, to be applied to Borrower’s obligations under this Agreement and the Notes as the Administrative Agent shall determine with the approval of the Required Lenders and (y) after all Letters of Credit have terminated in accordance with their terms (or been fully drawn upon), and after all obligations under this Agreement and the Notes have been paid in full (other than ongoing indemnity obligations where no demand for payment has been made), any excess amounts on deposit shall be returned to Borrower. Except as expressly provided above in this Section 9, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 10. THE AGENTS AND THE ISSUING LENDER 10.1. Appointment. Each Lender hereby irrevocably designates and appoints Société Générale as the Administrative Agent under this Agreement and each of the other Credit Documents and irrevocably authorizes Société Générale, as Administrative Agent for such Lender, to take such action on its behalf under the provisions of the Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of the Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Credit Documents or otherwise exist against any Agent. 10.2. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and each of the other Credit 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 Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care, except as otherwise provided in subsection 10.3. 10.3. Exculpatory Provisions. No Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Credit Documents (except for its or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof   -103- -------------------------------------------------------------------------------- contained in the Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, the Credit Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Credit Documents or for any failure of any Credit Party to perform its obligations thereunder. The Agents shall not 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, any Credit Document, or to inspect the properties, books or records of any Credit Party. 10.4. Reliance by Agents. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, entries maintained in the Register, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order 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 (including, without limitation, counsel to Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Credit Document unless it shall first receive such advice or concurrence of the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders) as it deems appropriate or 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 any Credit Document in accordance with a request of the Required Lenders (unless a higher percentage of Lenders is expressly required), 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. 10.5. Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received written notice from an Agent, a Lender or Borrower or any other Credit Party 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 Administrative Agent receives such a notice, the Administrative Agent shall promptly give notice thereof to the Lenders. The Administrative 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 Administrative Agent shall have received such directions, 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 in the best interests of the Lenders. 10.6. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that no Agent nor any officers, directors, employees, agents, attorneys-in-fact or Affiliates thereof has made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of the Credit Parties, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents   -104- -------------------------------------------------------------------------------- that it will, independently and without reliance upon any 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 analysis, appraisals and decisions in taking or not taking action under the Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Credit Parties which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 10.7. Indemnification. The Lenders agree to indemnify the Agents in their capacity as such (to the extent not reimbursed by the Credit Parties and without limiting the obligation of the Credit Parties to do so), ratably according to the respective amounts of their respective Commitments (or, to the extent such Commitments have been terminated, according to the respective outstanding principal amounts of the Loans and the L/C Obligations and the respective obligations, whether as Issuing Lender or a Participating Lender, under the Letter of Credit), from and against any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Lender which may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of the Commitments, the Credit Documents or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, claims, damages, liabilities and related expenses including the reasonable fees, charges and disbursements resulting solely from such Agent’s gross negligence or willful misconduct. The agreements in this subsection 10.7 shall survive the repayment of the Loans and all other amounts payable hereunder. 10.8. Agent in Its Individual Capacity. Each Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Credit Party as though such Agent were not an Agent hereunder. With respect to Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers, duties and liabilities under the Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include such Agent in its individual capacity. 10.9. Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders and Borrower. If the Administrative Agent shall resign as Administrative Agent under the Credit Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall, so long as no Event of Default has occurred and is continuing, be approved by Borrower, which shall not unreasonably withhold or delay its approval, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. If no successor agent has accepted appointment as the applicable Administrative Agent by the date which is   -105- -------------------------------------------------------------------------------- 30 days following the retiring Administrative Agent’s notice of registration, the retiring Administrative Agent’s registration shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of such Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under the Credit Documents. 10.10. Issuing Lender as Issuer of Letters of Credit. Each Revolving Credit Lender hereby acknowledges that the provisions of this Section 10 shall apply to the Issuing Lender, in its capacity as issuer of the Letters of Credit, in the same manner as such provisions are expressly stated to apply to the Administrative Agent, except that obligations to indemnify the Issuing Lender shall be ratable among the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitments and/or Incremental Revolving Commitments (or, if the Revolving Credit Commitments and Incremental Revolving Commitments have been terminated, the outstanding principal amount of their respective Revolving Credit Loans and L/C Obligations and their respective participating interests in the outstanding Letters of Credit). 10.11. Other Agents. Each Lender hereby acknowledges that none of the Syndication Agents, the Arranger, the Documentation Agent or any other Lender designated as “Agent” under the Original Credit Agreement, hereunder, herein or under any Credit Document has any liability hereunder other than its capacity as a Lender. Each party hereto agrees that each Agent not a signatory hereto shall be a third party beneficiary of the rights herein set forth applicable to such Agent. SECTION 11. MISCELLANEOUS 11.1. Amendments and Waivers. Except as otherwise expressly set forth in this Agreement, no Credit Document nor any terms thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection 11.1; provided that, prior to the Closing Date, no amendment, supplement, waiver or modification of this Agreement shall be permitted without the prior written consent of the Arranger and the Administrative Agent With the written consent of the Required Lenders, the Administrative Agent (acting at the request of the Required Lenders) and the applicable Credit Parties or their Subsidiaries may, from time to time, enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to any Credit Document to which they are parties or changing in any manner the rights of the Lenders or of any such Credit Party or its Subsidiaries thereunder or waiving, on such terms and conditions as the Administrative Agent may specify in such instrument, any of the requirements of any such Credit Document or any Default or Event of Default and its consequences; provided that: (a) no such waiver and no such amendment, supplement or modification shall release all or substantially all of the Collateral or release any Guarantor from its obligations under its Guarantee in any such case without the written consent of all Lenders; provided that, notwithstanding the foregoing, this paragraph (a) shall not be applicable to and no consent shall be required for (x) releases of Collateral in connection with any dispositions permitted by subsection 8.5, or (y) release of any Guarantor in connection with the sale or other disposition of a Guarantor (or all or substantially all of its assets) permitted by the Agreement;   -106- -------------------------------------------------------------------------------- (b) no such waiver and no such amendment, supplement or modification shall reduce the amount of or extend the date of any scheduled amortization payment of any Term Loan or forgive the principal amount or extend the final scheduled date of maturity of any Loan or Note (it being understood that subsection 4.5 does not provide for a final scheduled date of maturity of any Loan or Note), or extend the stated expiration date of any Letter of Credit beyond the Revolving Credit Termination Date as then in effect, or reduce the stated rate of any interest, fee or letter of credit commission payable hereunder (except in connection with the waiver of applicability of any post-default increase in interests, fees or letter of credit commission, and it being further understood and agreed that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest, fees or letter of credit commission for the purposes of this clause (b)) or extend the scheduled date of any payment of any interest, fee or commitment commission, or increase the amount of the Commitments except as a result of an Incremental Term Loan pursuant to this Agreement (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of mandatory reductions in the Commitments shall not constitute an increase in the Commitments of any Lender), or modify subsection 4.12, subsection 11.7(a) or subsection 12.3 in each case without the written consent of each Lender whose obligations, Revolving Credit Commitments and/or Incremental Revolving Commitments, as the case may be, held hereunder are being directly modified thereby and all of the Lenders under the Revolving Credit Facility may extend the Revolving Credit Termination Date (it being understood that the consent of no other Lender or Agent need be obtained); (c) no such waiver and no such amendment, supplement or modification shall amend, modify or waive any provision of this subsection 11.1 (except for technical amendments with respect to additional extensions of credit pursuant to this Agreement which afford the protections to such additional extensions of credit of the type provided to the Loans and the Commitments on the Closing Date) or reduce any percentage specified in the definition of Required Lenders (it being understood that, with the written consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Loans and Revolving Credit Commitments are included in the Closing Date), or consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all Lenders; (d) no such waiver and no such amendment, supplement or modification shall change the allocation of payments between the Term Loan Facilities pursuant to subsection 4.7 without the written consent of the Majority Facility Lenders in respect of each Term Loan Facility adversely affected thereby (it being understood and agreed that, with the consent of the Required Lenders, additional extensions of term loans may be included for purposes of allocation of payments pursuant to subsection 4.7 on substantially the same basis as either the Tranche A Term Loans or Tranche B-1 Term Loans (as agreed by Borrower and the Required Lenders) are treated on the Closing Date); (e) no such waiver and no such amendment, supplement or modification shall reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the written consent of all Lenders under such Facility;   -107- -------------------------------------------------------------------------------- (f) no such waiver and no such amendment, supplement or modification affecting the then Administrative Agent or Issuing Lender shall amend, modify or waive any provision of Section 10 without the written consent of such Administrative Agent or Issuing Lender, as the case may be; (g) without the consent of any other Agent or of any Lender, the Credit Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Credit Document) enter into any amendment, modification or waiver of any Credit Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional Property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any Property or so that the security interests therein comply with applicable law; and (h) with respect to any Incremental Facility, the related Incremental Loan Amendment, and any waiver, consent or other amendment to any term or provision of this Agreement necessary or advisable to effectuate any Incremental Facility or any provision thereof in accordance with the terms of, or the intent of, this Agreement, shall be effective when executed by the Borrower, the Administrative Agent and each Incremental Term Lender making the related Incremental Term Commitment or Incremental Revolving Lender making the related Incremental Revolving Commitment, as the case may be; provided, further, that notwithstanding anything to the contrary, any such waiver and any such amendment, supplement or modification described in this subsection 11.1 shall apply equally to each of the Lenders and shall be binding upon each Credit Party and its Subsidiaries, the Lenders, the Administrative Agent and the Issuing Lender and all future holders of the Notes and the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as a new Letter of Credit. In the case of any waiver, the Credit Parties, the Lenders, the Administrative Agent and Issuing Lender shall be restored to their former position and rights hereunder and under the outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. The Administrative Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. If, in connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all affected Lenders, the consent of the Required Lenders is obtained but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this subsection 11.1 being referred to as a “Non-Consenting Lender”), then, so long as the Lender acting as the Administrative Agent has agreed in writing, at Borrower’s request, the Administrative Agent or an Eligible Assignee reasonably acceptable to the Administrative Agent shall have the right, subject to compliance with subsection 11.6, to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s request, sell and assign to the Lender acting as the Administrative Agent or such Eligible Assignee, all of the Commitments and Loans of such Non-Consenting Lender for an amount equal to the   -108- -------------------------------------------------------------------------------- principal balance of all Loans held by the Non-Consenting Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment and Acceptance. 11.2. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy or telex, if one is listed), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when sent, confirmation of receipt received, or, in the case of telex notice, when sent, answerback received, addressed as follows in the case of Borrower or any other Credit Party, the Administrative Agent, the Arranger and as set forth in Schedule I in the case of any Lender, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes:   Holdings and Borrower:    c/o Atlantic Broadband Group, LLC One Batterymarch Park 4th Floor Quincy, MA 02169 Attention: Chief Financial Officer Telecopy: (617) 786-8803 Telephone: (617) 786-8800 with a copy of notices (that will not constitute notice to Holdings or Borrower) to:    Kirkland & Ellis LLP 153 East 53rd St. NY, NY 10022 Fax: 212-446-4900 Attn: John L. Kuehn, Esq. The Administrative Agent and Swing Line Lender:    Société Générale 1221 Avenue of the Americas New York, NY 10020 Attention: Mark Vigil Telecopy: (212) 278-6146 Telephone: (212) 278-7350 The Arranger:    Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center 250 Vesey Street New York, NY 10080 Fax: (212) 738-1957 Attn: Cecile Baker, Vice President   -109- -------------------------------------------------------------------------------- with a copy of notices (that will not constitute notice to the Arranger) to:    Cahill Gordon & Reindel LLP 80 Pine Street New York, NY 10005 Attn: Susanna M. Suh, Esq. Fax: (212) 269-5420 ; provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsections 3.4, 3.5, 4.1, 4.2, 4.3 and 4.4 shall not be effective until received and; provided, further, that the failure to provide the copies of notices to Borrower provided for in this subsection 11.2 shall not result in any liability to the Administrative Agent. 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. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.4. Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the Letters of Credit and the Notes and the making of the extensions of credit hereunder. 11.5. Payment of Expenses and Taxes; Indemnification. (a) Borrower agrees to pay (i) all reasonable out-of-pocket expenses incurred by each of the Agents and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Credit Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated or any such amendment, modification or waiver becomes effective), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Lenders in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Agents, the Issuing Lender or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Agents, the Issuing Lender or any Lender, in connection with the enforcement or protection of their rights in connection with the Credit Documents, including their rights under this subsection 11.5, or in connection with the Loans made, or Letters of Credit issued or drawn 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) The Credit Parties agree to indemnify the Agents, the Issuing Lender and each Lender, and each of their Affiliates, officers, directors, employees, agents, trustees, advisors and controlled parties 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 reasonable fees, charges and disbursements of any counsel (and environmental consultants or professionals) 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 Credit Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Credit Documents of   -110- -------------------------------------------------------------------------------- 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 an Issuing Lenders 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, at, under or from any Mortgaged Property or any other property currently or formerly owned, leased or otherwise operated by Borrower or any of its Subsidiaries, or any liability under Environmental Laws related in any way to Borrower or any of its Subsidiaries, (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 bad faith, gross negligence, breach of this Agreement or other Credit Documents or willful misconduct of such Indemnitees or (v) any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes (other than withholding taxes), if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, any Credit Document and any such other documents. (c) To the extent that a Credit Party fails to pay any amount required to be paid by them to an Agent or an Issuing Lender under paragraph (a) or (b) of this subsection 11.5, each Lender severally agrees to pay to such Agent or each Revolving Credit Lender agrees to pay such Issuing Lender, as the case may be, such Lender’s or Revolving Credit Lender’s, as the case may be, 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 such Agent or such Issuing Lender in its capacity as such. For purposes hereof, a Lender’s or Revolving Credit Lender’s “pro rata share” shall be determined based upon its share of the sum of the aggregate amount of the total Loans and Revolving Credit Commitments or Revolving Credit Loans and Revolving Credit Commitments, as the case may be, at the time. (d) To the extent permitted by applicable law, no Credit Party shall assert, and each Credit Party 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, Letter of Credit or the use of the proceeds thereof. (e) All amounts due under this subsection 11.5 shall be payable promptly after written demand therefor. (f) The Credit Parties shall indemnify the Administrative Agent, the Lenders and each Issuer for, and hold the Administrative Agent, the Lenders and each Issuing Lender harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against the Administrative Agent, the Lenders and the Issuing Lenders for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of Borrower or any of Borrower’s Subsidiaries in connection with the transactions contemplated by this Agreement.   -111- -------------------------------------------------------------------------------- (g) The Credit Parties agree that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this subsection 11.5) or any other Credit Document shall (i) survive payment in full of the Obligations, (ii) survive the release of all or any portion of the Collateral and (iii) inure to the benefit of any Person that was at any time an Indemnitee under this Agreement or any other Credit Document. 11.6. Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Credit Parties, the Lenders, each Agent, all future holders of the Notes and the Loans, and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking, lending or investment business and in accordance with applicable law, at any time sell to one or more banks or other entities (“Participants”) participating interests in any Loan owing to such Lender, any participating interest in the Letters of Credit of such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender hereunder. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Credit Documents. Borrower agrees that if amounts outstanding under this Agreement and the Notes 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 setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note; provided that such right of setoff shall be subject to the obligation of such Participant to share with the Lenders, and the Lenders agree to share with such Participant, as provided in subsection 11.7. Borrower also agrees that each Participant shall be entitled to the benefits of subsections 3.10, 4.14 and 4.15 with respect to its participation in the Letters of Credit and in the Commitments and the Loans outstanding from time to time as if it were a Lender; provided that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred, except in the case of subsection 4.14, where the entitlement to greater payments results from a Change in Law after such Participant became a Participant. Each Lender agrees that the participation agreement pursuant to which any Participant acquires its participating interest (or any other document) may afford voting rights to such Participant, or any right to instruct such Lender with respect to voting hereunder, only with respect to matters requiring the consent of either all of the Lenders hereunder or all of the Lenders holding the relevant Term Loans or Revolving Credit Commitments and/or Incremental Revolving Commitments subject to such participation. (c) Subject to paragraph (g) of this subsection 11.6, any Lender may at any time and from time to time, in the ordinary course of its commercial banking, lending or investment business and in accordance with applicable law,   -112- -------------------------------------------------------------------------------- (i) assign all or any part of its rights and obligations under this Agreement relating to the Term Loans and the Term Notes to any Lender or any Affiliate or Approved Fund of any Lender pursuant to an Assignment and Acceptance executed by such Assignee and such assigning Lender, and delivered to the Administrative Agent (for its acceptance and recording in the Register (as defined below)); (ii) assign, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed), all or any part of its rights and obligations under this Agreement relating to the Revolving Credit Loans, the Revolving Credit Commitment and/or any Incremental Revolving Commitments and the Revolving Credit Notes to any Lender or any Affiliate thereof pursuant to an Assignment and Acceptance executed by such Assignee and such assigning Lender and the Administrative Agent, and delivered to the Administrative Agent for its acceptance and recording in the Register; and (iii) assign to one or more Eligible Assignees, all or any part of its rights and obligations under this Agreement and the Notes pursuant to an Assignment and Acceptance executed by such Assignee and such assigning Lender (and, in the case of an Eligible Assignee that is not then a Lender or an Affiliate or Approved Fund of a Lender, by Borrower (to the extent such assignment is not in connection with assignments by the Arranger or any of its Affiliates in connection with the syndication of the Tranche B-1 Term Loans that have not been converted from Tranche B Loans under the Original Credit Agreement within the first 30 days after the Amendment and Restatement Date and so long as no Event of Default shall have occurred and be continuing) and the Administrative Agent), and delivered to the Administrative Agent for its acceptance and recording in the Register. Each sale pursuant to clause (iii) of this subsection 11.6(c) shall be in a principal amount of at least $1,000,000 (or such lesser amounts as the Administrative Agent and Borrower may determine) unless the assigning Lender is transferring all of its rights and obligations. In the event of a sale of less than all of such rights and obligations, such Lender after any such sale shall retain Commitments and/or Loans and/or L/C Participating Interests aggregating at least $1,000,000 (or in such lesser amount as the Administrative Agent and Borrower may determine). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent of the interest transferred, as reflected in 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 a transferor Lender’s rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of the indemnification provisions set forth in subsection 11.5). (d) The Administrative Agent, which for purposes of this subsection 11.6(d) only shall be deemed to be the agent of Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive in the absence of manifest error, and Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan or other   -113- -------------------------------------------------------------------------------- obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by Borrower, the Arranger or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and by Borrower and the Administrative Agent to the extent required by paragraph (c) of this subsection 11.6), together with payment to the Administrative Agent of a registration and processing fee of $3,500 if the Assignee is not a Lender or Affiliate of such Lender prior to the execution of such Assignment and Acceptance and $1,000 otherwise, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and Borrower (and no such assignment shall become effective unless and until so recorded); provided that, in the case of contemporaneous assignments by a Lender to more than one fund managed by the same investment advisor or an Affiliate of such investment advisor (which funds are not then Lenders hereunder), only a single $3,500 fee shall be payable for all such contemporaneous assignments. On or prior to such effective date, Borrower at its own expense, shall execute and deliver to the Administrative Agent (in exchange for any or all of the Term Notes or Revolving Credit Notes of the assigning Lender, if any (or if any Note is lost, an affidavit of such loss and indemnity satisfactory to Borrower)) new Term Notes or Revolving Credit Notes, as the case may be, to the order of such Assignee (if requested) in an amount equal to the Revolving Credit Commitment and/or Incremental Revolving Commitment or the Term Loans, as the case may be, assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment or any Term Loans hereunder, new Term Notes or Revolving Credit Notes, as the case may be, to the order of the assigning Lender in an amount equal to the Commitment or such Term Loans, as the case may be, retained by it hereunder (if requested). Such new Notes shall be dated the Closing Date in respect of Tranche A Term Notes or Revolving Credit Notes and the Amendment and Restatement Date in respect of Tranche B-1 Term Notes and shall otherwise be in the form of the Notes replaced thereby. (f) Each Agent and the Lenders agree that they will use reasonable efforts to protect the confidentiality of any confidential information concerning Holdings, Borrower and its Subsidiaries and Affiliates. Each Credit Party authorizes each Lender to disclose (i) to its employees, officers, Affiliates and advisors, who shall be bound by the confidentiality provisions hereof, (ii) to any regulatory authority as required by law or to any quasi-regulatory authority (including the National Association of Insurance Commissioners), (iii) in connection with any enforcement or other legal action, (iv) to any Participant or Assignee (each, a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning Holdings and its Subsidiaries which has been delivered to such Lender by or on behalf of any Credit Party pursuant to this Agreement or which has been delivered to such Lender by or on behalf of any Credit Party in connection with such Lender’s credit evaluation of Holdings and its Subsidiaries prior to becoming a party to this Agreement; provided that each Lender shall cause its respective prospective and actual Transferees to agree in writing to protect the confidentiality of any confidential information concerning each Credit Party and its Subsidiaries and Affiliates, (v) as has become generally available to the public, (vi) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or   -114- -------------------------------------------------------------------------------- their successors, and (vii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding; provided, however, that each Credit Party acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. (g) If, pursuant to this subsection 11.6, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the terms of this Agreement including without limitation subsection 4.14(d). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection 11.6 concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law; 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. (i) Notwithstanding anything to the contrary contained herein, any Lender (the “Granting Lender”) may grant to a special purpose funding vehicle (an “SPV”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and Borrower, the option to provide to Borrower all or any part of any Loan that the Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan, (ii) if an SPV 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 an Loan by an SPV 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 SPV 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 SPV, it will not institute against, or join any other person in instituting against, such SPV 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 subsection 11.6(i), any SPV may (i) with notice to, but without the prior written consent of, Borrower 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 in writing by Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis, subject to and in accordance with subsection 11.6(f), any 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 SPV. This section may not be amended without the written consent of any adversely affected SPV. 11.7. Adjustments; Set-off. (a) If any relevant Lender (a “benefited Lender”) shall at any time receive any payment of all or part of any of its Loans or L/C Participating Interests, as the case   -115- -------------------------------------------------------------------------------- may be, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 9, or otherwise) in a greater proportion than any such payment to and collateral received by any other relevant Lender (other than in accordance with any provision hereof expressly providing for payments to be made only to an individual Lender or to the Lenders of a particular Facility), if any, in respect of such other relevant Lender’s Loans or L/C Participating Interests, as the case may be, or interest thereon, such benefited Lender shall purchase for cash from the other relevant Lenders such portion of each such other relevant Lender’s Loans or L/C Participating Interests, as the case may be, or shall provide such other relevant Lenders 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 relevant Lenders; provided that if all or any portion of such excess payment or benefits is 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 each Lender so purchasing a portion of another Lender’s Loans and/or L/C Participating Interests may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. The Administrative Agent shall promptly give Borrower notice of any set-off; provided that the failure to give such notice shall not affect the validity of such set-off. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to any Credit Party, any such notice being expressly waived by each Credit Party to the extent permitted by applicable law, upon the occurrence of any Event of Default to set off and apply against any indebtedness, whether matured or unmatured, of any Credit Facility to such Lender, any amount owing from such Lender to any Credit Party, at or at any time after, the happening of any of the above mentioned events. As security for such indebtedness, any Credit Party hereby grants to each Lender a continuing security interest in any and all deposits, accounts or moneys of any Credit Party then or thereafter maintained with such Lender, subject in each case to subsection 11.7(a) of this Agreement. The aforesaid right of set-off may, to the extent permitted by applicable law, be exercised by such Lender against any Credit Party or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of any Credit Party, or against anyone else claiming through or against any Credit Party or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Lender prior to the making, filing or issuance, or service upon such Lender of, or of notice of, any such petition; assignment for the benefit of creditors; appointment or application for the appointment of a receiver; or issuance of execution, subpoena, order or warrant. Each Lender agrees promptly to notify Borrower and the Administrative 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. 11.8. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with Borrower and the Administrative Agent. This Agreement shall become effective with respect to Borrower, the Administrative Agent and the Lenders when the Administrative Agent shall have received copies of this Agreement executed by Borrower, the Administrative Agent and the Lenders, or, in the case of any Lender, shall have received telephonic confirmation from such Lender   -116- -------------------------------------------------------------------------------- stating that such Lender has executed counterparts of this Agreement or the signature pages hereto and sent the same to the Administrative Agent. 11.9. Governing Law; Third Party Rights. This Agreement and the Notes and the rights and obligations of the parties under this Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. This Agreement is solely for the benefit of the parties hereto and their respective successors and assigns, and, except as set forth in subsection 11.9, no other Persons shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement. The designation of any Agent by the Administrative Agent in connection with the syndication hereof shall entitle such Agents to certain rights as third-party beneficiaries as provided herein, without any further act by any party hereto. 11.10. Submission to Jurisdiction; Waivers. (a) Each party to this Agreement hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any of the other Credit Documents, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in subsection 11.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) Each party hereto unconditionally waives trial by jury in any legal action or proceeding referred to in paragraph (a) above and any counterclaim therein. 11.11. Marshaling; Payments Set Aside. None of the Administrative Agent, any Lender or any Issuing Lender shall be under any obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the Obligations. To the extent that Borrower makes a payment or payments to the Administrative Agent, the Lenders or the Issuing Lender or any such Person receives payment from the proceeds of the Collateral or exercises its rights of set-off, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.   -117- -------------------------------------------------------------------------------- 11.12. Interest. Each provision in this Agreement and each other Credit Document is expressly limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be paid, by Borrower for the use, forbearance or detention of the money to be loaned under this Agreement or any other Credit Document or otherwise (including any sums paid as required by any covenant or obligation contained herein or in any other Credit Document which is for the use, forbearance or detention of such money), exceed that amount of money which would cause the effective rate of interest to exceed the highest lawful rate permitted by applicable law (the “Highest Lawful Rate”), and all amounts owed under this Agreement and each other Credit Document shall be held to be subject to reduction to the effect that such amounts so paid or agreed to be paid which are for the use, forbearance or detention of money under this Agreement or such other Credit Document shall in no event exceed that amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate. Notwithstanding any provision in this Agreement or any other Credit Document to the contrary, if the maturity of the Loans or the obligations in respect of the other Credit Documents are accelerated for any reason, or in the event of any prepayment of all or any portion of the Loans or the obligations in respect of the other Credit Documents by Borrower or in any other event, earned interest on the Loans and such other obligations of Borrower may never exceed the Highest Lawful Rate, and any unearned interest otherwise payable on the Loans or the obligations in respect of the other Credit Documents that is in excess of the Highest Lawful Rate shall be canceled automatically as of the date of such acceleration or prepayment or other such event and (if theretofore paid) shall, at the option of the holder of the Loans or such other obligations, be either refunded to Borrower or credited on the principal of the Loans. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Borrower and the Lenders shall, to the maximum extent permitted by applicable law, amortize, prorate, allocate and spread, in equal parts during the period of the actual term of this Agreement, all interest at any time contracted for, charged, received or reserved in connection with this Agreement. 11.13. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.14. Integration. This Agreement and the other Credit Documents (and those provisions of the commitment letter dated September 3, 2003 among Holdings and the Agents that expressly by its terms survive the execution and delivery of the Original Credit Agreement) represent the entire agreement of the Credit Parties, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof and thereof not expressly set forth or referred to herein or in the other Credit Documents. 11.15. Acknowledgments. Each Credit Party hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Credit Party arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between the Administrative Agent and the Lenders,   -118- -------------------------------------------------------------------------------- on one hand, and each Credit Party, 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 Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among any Credit Party and the Lenders. 11.16. New York Mortgage. The Mortgage encumbering Real Property located in the State of New York (the “NY Mortgage”) shall at all times secure the Secured Amount (as defined in the NY Mortgage), which has been advanced hereunder, and shall not secure any future advances. The NY Mortgage provides that any repayments of the Loans at any time shall, to the extent that the principal balance of the Loans at such time equals or exceeds the aggregate Secured Amount of the NY Mortgage (the “New York Term Loan Amount”), be allocated to reduce the principal amounts secured by Mortgages covering Real Property located outside of the State of New York. Therefore, so long as the principal balance of the Loans at any time equals or exceeds the New York Term Loan Amount, the principal amount of the Loans secured by the NY Mortgage shall be deemed to equal the Secured Amount; and, to the extent that the principal balance of the Loans at any time is less than the New York Term Loan Amount, then the aggregate Secured Amount of the NY Mortgage shall be permanently reduced by the difference between the New York Term Loan Amount and the principal balance at such time of the Loans. SECTION 12. COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS 12.1. Collateral Account. (a) The Administrative Agent is hereby authorized to establish and maintain at its office at 560 Lexington Avenue, New York, New York 10022, Attn: Anna Lapiccola, in the name of the Administrative Agent and pursuant to a Control Agreement, a restricted deposit account designated “Atlantic Broadband Finance, LLC — Collateral Account” with respect to which the Administrative Agent shall at all times have “control” (as defined in Section 9-104 of the UCC). Each Credit Party shall (subject to the limitations set forth in the definition of Net Proceeds and subsection 8.5) deposit into the Collateral Account from time to time (A) the cash proceeds of any of the Collateral (including pursuant to any disposition thereof) to the extent contemplated herein or in any other Credit Document, (B) the cash proceeds of any Taking or Destruction with respect to Collateral, (C) any cash in respect of any Collateral to which the Collateral Agent is entitled pursuant to the Credit Documents, and (D) any cash such Credit Party is required to pledge as additional collateral security hereunder pursuant to the Credit Documents. (b) The balance from time to time in the Collateral Account shall constitute part of the Collateral and shall not constitute payment of the Obligations until applied as hereinafter provided. So long as no Event of Default has occurred and is continuing or will result therefrom, the Administrative Agent shall within one Business Day of receiving a request of the applicable Credit Party for release of cash proceeds constituting (A) net insurance proceeds or net awards from the Collateral Account remit such cash proceeds on deposit in the Collateral Account to or upon the order of such Credit Party, so long as such Credit Party has satisfied the conditions relating thereto set forth in subsection 12.2, (B) net cash proceeds from any sale or other disposition of Collateral from the Collateral Account, remit such cash proceeds on deposit in the Collateral Account, so long as such Credit Party has satisfied the conditions relating thereto set forth in subsection 12.2 and (C) with respect to the L/C Sub-Account at such time as all Letters of Credit   -119- -------------------------------------------------------------------------------- shall have been terminated and all of the liabilities in respect of the Letters of Credit have been paid in full. At any time following the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified herein, shall) in its (or their) discretion apply and provide notice to Borrower of such application or cause to be applied (subject to collection) the balance from time to time outstanding to the credit of the Collateral Account to the payment of the Obligations in the manner specified in subsection 12.3 hereof subject, however, in the case of amounts deposited in the L/C Sub-Account, to the provisions of subsection 12.1(d). The Credit Parties shall have no right to withdraw, transfer or otherwise receive any fund deposited in the Collateral Account except to the extent specifically provided herein. (c) Amounts on deposit in the Collateral Account shall be invested from time to time in Cash Equivalents as the applicable Credit Party (or, after the occurrence and during the continuance of an Event of Default, the Administrative Agent) shall determine, which Cash Equivalents shall be held in the name and be under the control of the Administrative Agent (or any sub-agent); provided that at any time after the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Lenders as specified herein, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Cash Equivalents and to apply or cause to be applied the proceeds thereof to the payment of the Obligations in the manner specified in subsection 12.3 hereof. (d) Amounts deposited into the Collateral Account as cover for liabilities in respect of Letters of Credit under any provision of this Agreement requiring such cover shall be held by the Administrative Agent in a separate sub-account designated as the “L/C Sub-Account” (the “L/C Sub-Account”) and, notwithstanding any other provision hereof to the contrary, all amounts held in the L/C Sub-Account shall constitute collateral security first for the liabilities in respect of Letters of Credit outstanding from time to time and second as collateral security for the other Obligations hereunder until such time as all Letters of Credit shall have been terminated and all of the liabilities in respect of Letters of Credit have been paid in full. 12.2. Proceeds of Destruction, Taking and Collateral Dispositions. (a) So long as no Event of Default shall have occurred and be continuing, in the event there shall be any net award in respect of any Taking or net insurance proceeds in respect of any Destruction or net cash proceeds from any sale or disposition of Collateral of the type contemplated in subsection 8.5(g), the applicable Credit Party shall have the right, at such Credit Party’s option, to apply such net award or net insurance proceeds within twelve months from the date of the applicable Destruction or Taking (or, in the case of such disposition, to apply such net cash proceeds within twelve months from the date of such disposition) to reinvest in properties or assets owned (or to be owned) by Borrower or its Subsidiaries having a fair market value at least equal to the amount of such net insurance proceeds or net awards or net cash proceeds, as the case may be, in accordance with the applicable provisions of this Agreement or to repair, replace or restore any property in respect of which such Net Proceeds were paid, no later than 180 days following the date of receipt of such proceeds; provided that if the property subject to such Destruction or Taking constituted Collateral under the Security Documents, then all property purchased with the Net Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the Administrative Agent, for its benefit and for the benefit of the other Secured Parties in accordance with subsections 7.9 and 7.12. In the event such Credit Party elects so to reinvest such net insurance proceeds or net awards or net cash proceeds, as the case may be, such Credit Party shall deliver to the Administrative Agent (A) a written notice of such election and (B) an Officers’ Certificate stating that (1) the net insurance proceeds or net awards, as the case may be, shall be utilized so to reinvest in Collateral in the manner contemplated by the proviso set forth in clause (b) of the definition of Net Proceeds, or the net   -120- -------------------------------------------------------------------------------- cash proceeds shall be utilized so to reinvest in Collateral in the manner contemplated by the proviso set forth in subsection 8.5(g), as the case may be, and (2) no Event of Default (or in the case of any net award in respect of any Taking or net insurance proceeds in respect of any Destruction, no Event of Default under paragraphs (a), (e), (f), (g) or (h) of Section 9) has occurred and is continuing (the items described in clauses (1) and (2) of this sentence, collectively, the “Investment Election Notice”). In the event such net awards, net insurance proceeds or net cash proceeds, as the case may be, shall be in an amount less than $5,000,000, upon receipt of an Investment Election Notice, the Administrative Agent shall release such net insurance proceeds or net awards or net cash proceeds to such Credit Party in accordance with the provisions of subsection 12.1(b) hereof. (b) In the event there shall be any net awards or net insurance proceeds or net cash proceeds, as the case may be, in an amount equal to or greater than $5,000,000, the Administrative Agent shall not release any part of such net awards or net insurance proceeds or net cash proceeds, as the case may be, until the applicable Credit Party has furnished to the Administrative Agent (i) an Officers’ Certificate setting forth: (1) a brief description of the reinvestment to be made, (2) the dollar amount of the expenditures to be made, or costs incurred by such Credit Party in connection with such reinvestment and (3) each request for payment shall be made on at least one (1) Business Day’s prior notice to the Administrative Agent and such request shall state that the properties or assets acquired in connection with such reinvestment have a fair market value at least equal to the amount of such net awards or net insurance proceeds or net cash proceeds, as the case may be, requested to be released from the Collateral Account and (ii) all security agreements and Mortgages and other items required by the provisions of subsection 7.9 to, among other things, subject such reinvestment properties or assets to the Lien of the Security Documents in favor of the Administrative Agent, for its benefit and for the benefit of the other Secured Parties. 12.3. Application of Proceeds. The proceeds received by the Administrative Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Administrative Agent of its remedies shall be applied, together with any other sums then held by the Administrative Agent pursuant to this Agreement, promptly by the Administrative Agent as follows: FIRST, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including, without limitation, compensation to the Administrative Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by the Administrative Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; SECOND, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including, without limitation, compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full; THIRD, without duplication of amounts applied pursuant to clauses FIRST and SECOND above, to the indefeasible payment in full in cash, pro rata, of (i) interest, principal and   -121- -------------------------------------------------------------------------------- other amounts constituting Obligations (other than the obligations arising under the Interest Rate Agreements) in each case equally and ratably in accordance with the respective amounts thereof then due and owing and (ii) the obligations arising under the Interest Rate Agreements in accordance with the terms of the Interest Rate Agreements; and FOURTH, the balance, if any, to the Person lawfully entitled thereto (including the applicable Credit Party or its successors or assigns). In the event that any such proceeds are insufficient to pay in full the items described in clauses FIRST through THIRD of this subsection 12.3, the Credit Parties shall remain liable for any deficiency. [This space intentionally left blank]   -122- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by their proper and duly authorized officers as of the day and year first above written.   ATLANTIC BROADBAND FINANCE, LLC By:     Name:   Title:     -123- -------------------------------------------------------------------------------- ATLANTIC BROADBAND HOLDINGS I, LLC By:     Name:   Title:     -------------------------------------------------------------------------------- ATLANTIC BROADBAND MANAGEMENT, LLC ATLANTIC BROADBAND (MIAMI), LLC ATLANTIC BROADBAND (DELMAR), LLC ATLANTIC BROADBAND (PENN), LLC ATLANTIC BROADBAND FINANCE, INC. By:     Name:   Title:   -------------------------------------------------------------------------------- MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,     As Sole Lead Arranger and Book Runner By:     Name:   Title:     MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,     As Co-Syndication Agent By:     Name:   Title:   -------------------------------------------------------------------------------- MERRILL LYNCH CAPITAL CORPORATION By:     Name:   Title:   -------------------------------------------------------------------------------- SOCIÉTÉ GÉNÉRALE,     as Administrative Agent By:     Name:   Title:   -------------------------------------------------------------------------------- GENERAL ELECTRIC CAPITAL CORPORATION,     as Co-Syndication Agent and Documentation Agent By:     Name:   Title:   -------------------------------------------------------------------------------- CREDIT LYONNAIS NEW YORK BRANCH,     as Agent By:     Name:   Title:  

-------------------------------------------------------------------------------- Exhibit 10.1   PROMISSORY NOTE Principal $1,125,000.00 Loan Date 03-31-2006 Maturity 07-31-2006 Loan No *** Call / Coll M100S / GOs Account 00000122565 Officer 32405 Initials References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. Borrower: Siboney Learning Group Inc Siboney Corporation 325 Kirkwood RR #300 St Louis, MO 63122 Lender: Southwest Bank of St. Louis St Louis Region Commercial Lending 13205 Manchester Road Des Peres, MO 63131       Principal Amount: $1,125,000.00 Initial Rate: 7.750% Date of Note: March 31, 2006       PROMISE TO PAY. Siboney Learning Group Inc and Siboney Corporation (“Borrower”) jointly and severely promise to pay to Southwest Bank of St. Louis (“Lender”), or order, in lawful money of the United States of America, the principal amount of One Million One Hundred Twenty-five Thousand & 00/100 Dollars ($1,125,000.00), together with interest on the unpaid principal balance from March 31, 2006, until paid in full.   PAYMENT. Borrower will pay this loan in one principal payment of $1,125,000.00 plus interest on July 31, 2006. This payment due on July 31, 2006, will be for all principal and all accrued interest not yet paid. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning April 30, 2006, with all subsequent interest payments to be due on the last day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied to Accrued Interest, Credit Life Premiums, Principal, Late Charges, and Escrow. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.   VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is Lender’s Prime Rate (the “Index”). This is the rate Lender charges, or would charge, on 90-day unsecured loans to the most creditworthy corporate customers. This rate may or may not be the lowest rate available from Lender at any given time. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each Index rate change and will become effective without notice to the Borrower. If the Index becomes unavailable during the term of the Note, the Lender may substitute a comparable Index. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 7.750% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index, resulting in an initial rate of 7.750% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.   PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under The payment schedule. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. Any written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Southwest Bank of St. Louis, St Louis Region Commercial Lending, 13205 Manchester Road, Des Peres, MO 63131.   LATE CHARGE. If a payment is more than 15 days late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment.   INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 3.000 percentage points over the Index. The interest rate will not exceed the maximum rate permitted by applicable law.   DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note:   Payment Default. Borrower fails to make any payment when due under this Note.   Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.   Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to repay this Note or perform Borrower’s obligations under this Note or any of the related documents.   False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.   Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.   Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help,       -------------------------------------------------------------------------------- PROMISSORY NOTE Loan No: 12030954-10000-298 (Continued) Page 2    repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.   Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the guarantor’s estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default.   Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.   Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.   Insecurity. Lender in good faith believes itself insecure.   LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.   ATTORNEYS FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expanses whether or not there is a lawsuit, including attorneys’ fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.   GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Missouri without regard to it conflicts of law provisions. This Note has been accepted by Lender in the State of Missouri.   CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of St Louis County, State of Missouri.   DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.   RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.   SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.   GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower, Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be made on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lander’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.   ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.       -------------------------------------------------------------------------------- PROMISSORY NOTE Loan No: 12030954-10000-298 (Continued) Page 3    JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.   PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE.   BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.   BORROWER: SIBONEY LEARNING GROUP INC By: /s/ William D. Edwards                                             William D. Edwards, President of Siboney Learning Group Inc By: /s/ Timothy J. Tegeler                                     Timothy J. Tegeler, Chief Executive Officer of Siboney Learning Group Inc     By: /s/ Rebecca Braddock                                             Rebecca Braddock, Secretary of Siboney Learning Group Inc               SIBONEY CORPORATION       By: /s/ William D. Edwards                                             William D. Edwards, President of Siboney Learning Group Inc By: /s/ Timothy J. Tegeler                                     Timothy J. Tegeler, Chief Executive Officer of Siboney Learning Group Inc         By: /s/ Rebecca Braddock                                             Rebecca Braddock, Secretary of Siboney Learning Group Inc          

Exhibit 10.45 Director’s Compensation Summary We pay no additional remuneration to our employees who also serve as directors of our General Partner. During the 2006 fiscal year, each director of our General Partner who was not (i) an employee of our General Partner the Partnership or a Subsidiary, or (ii) a shareholder or employee of ETE (such person being referred to as a Director Participant) received an annual retainer of $20,000, plus $2,000 per board meeting attended, and is reimbursed for any travel, lodging and other out-of-pocket expenses related to meeting attendance or otherwise related to service on the board. Each Director Participant who served as a member or chairman of a designated committee received from $5,000 to $7,500 annually, depending upon the position and the committee, plus $1,000 per committee meeting attended. In addition, Director Participants received an Initial Director’s Grant of 2,000 units upon their initial election or appointment to the Board, and an Annual Director’s Grant on September 1 of each year equal to $15,000 divided by the fair market value of a Common Unit on September 1, provided that such director is in office on such date. Director’s Grants vest ratably over a three-year period. Effective October 17, 2006, the Compensation Committee of the Board of Directors of our General Partner recommended, and the Board of Directors approved, a change to the compensation of directors. Each Director Participant will receive an annual retainer of $40,000, and is reimbursed for any expenses related to meeting attendance or service on the board. In addition, each Director Participant will receive an Initial Director’s Grant upon their initial election or appointment to the board, and an Annual Director’s Grant of units. The Annual Director’s Grant on October 17, 2006 was 540 units, which is $25,000 divided by the fair market value of Common Units on that date, rounded up to the nearest increment of 10 units. All subsequent Annual Director’s Grants will be measured at September 1 of each year. Director’s Grants vest ratably over a three-year period. Director Participants serving on a designated committee will receive an additional annual retainer and meeting fees of $1,200 per committee meeting. Each member of the Audit Committee will receive $10,000 annually and the Chairman will receive $15,000 annually. Each member of the Compensation Committee will receive $5,000 annually and the Chairman will receive $7,500 annually.

Exhibit 10.10   March 8, 2006   Good Harbor Partners Acquisition Corp. 4100 North Fairfax Drive Arlington, VA 22203   HCFP/Brenner Securities LLC 888 Seventh Avenue, 17th Floor New York, New York 10106   Re:        Initial Public Offering   Ladies and Gentlemen:   The undersigned securityholder of Good Harbor Partners Acquisition Corp. (the “Company”), in consideration of HCFP/Brenner Securities LLC’s (“Brenner”) willingness to underwrite an initial public offering of the securities of the Company (the “IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 10 hereof):   1. The undersigned waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund as a result of such liquidation with respect to its Insider Securities (each a “Claim”) and hereby waives any Claim it may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever.   2. The undersigned will not submit to the Company for consideration, or vote for the approval of, any Business Combination which involves a company which is affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to Brenner that the business combination is fair to the Company’s stockholders from a financial perspective.   3. Neither the undersigned, nor any affiliate (“Affiliate”) of the undersigned will be entitled to receive and will not accept any compensation or fees of any kind, including finder’s and consulting fees, prior to, or for services they rendered in order to effectuate, the Business Combination.   4. Neither the undersigned nor any of its Affiliates will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned or any Affiliate of the undersigned originates a Business Combination.   5. The undersigned agrees not to sell any of its Insider Securities until the Company’s completion of a Business Combination.   6. The undersigned has agreed to vote any shares of Class B common stock it holds or hereafter acquires in favor of any proposed Business Combination approved by the Company’s Board of Directors.   7. The undersigned represents and warrants that it:   (a) is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction; -------------------------------------------------------------------------------- Good Harbor Partners Acquisition Corp. HCFP/Brenner Securities LLC September 14, 2005 Page 2   (b) has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and it is not currently a defendant in any such criminal proceeding; and   (c) has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.   8. The undersigned has full right and power, without violating any agreement by which it is bound, to enter into this letter agreement and to be a security holder of the Company.   9. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to Brenner and its legal representatives or agents (including any investigative search firm retained by Brenner) any information they may have about the undersigned’s background and finances (“Information”). Neither Brenner nor its agents shall be violating my right of privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage whatsoever in that connection.   10. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business selected by the Company; (ii) “Insiders” shall mean all officers, directors and securityholders of the Company immediately prior to the IPO; (iii) “Insider Securities” shall mean all of the shares of common stock, Class W Warrants and Class Z Warrants (and all shares of common stock underlying such securities) of the Company owned by an Insider prior to the IPO; and (iv) “Trust Fund” shall mean that portion of the net proceeds of the IPO placed in trust for the benefit of the holders of the shares of Class B common stock issued in the Company’s IPO as contemplated by the Company’s prospectus relating to the IPO.   SBLS, LLC By:   /s/ Stuart Benson --------------------------------------------------------------------------------     Stuart Benson

[GRAPHIC OMITTED][GRAPHIC OMITTED] Date: March 2, 2006 To: RAMP Series 2006-NC2 Trust, acting through U.S. Bank National Association, not in its individual capacity but solely in its capacity as Trustee for the benefit of the RAMP Series 2006-NC2 Trust EP-MN-WS3D 60 Livingston Avenue St. Paul, MN 55107 Attention: RAMP Series 2006-NC2 Trust Telephone no: (651) 495-3880 Facsimile no.: (651) 495-8090 Cc: Josie Knorr Facsimile no: (952) 352-0503 Our Reference: Global No. N453839N Re: Interest Rate Cap Transaction Ladies and Gentlemen: The purpose of this letter agreement is to set forth the terms and conditions of the Transaction entered into between Deutsche Bank AG ("DBAG") and RAMP Series 2006-NC2 Trust, acting through U.S. Bank National Association, not in its individual capacity, but solely as Trustee for the benefit of RAMP Series 2006-NC2 Trust ("Counterparty") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the Agreement specified below. The definitions and provisions contained in the 2000 ISDA Definitions (the "Definitions") as published by the International Swaps and Derivatives Association, Inc. are incorporated by reference herein. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. For purposes of this Transaction, any capitalized and undefined terms contained herein (other than the capitalized terms the definitions of which are contained in the Definitions) shall have the meanings ascribed to them in the Pooling and Servicing Agreement dated as of February 1, 2006 (the "Pooling and Servicing Agreement") relating to the RAMP Series 2006-NC2 Trust Mortgage Asset-Backed Pass-Through Certificates, Series 2006-NC2, which is hereby incorporated by reference into this Confirmation. 1. This Confirmation evidences a complete and binding agreement between DBAG ("Party A") and Counterparty ("Party B") as to the terms of the Transaction to which this Confirmation relates. This Confirmation, together with all other documents referring to the ISDA Form, as defined below, confirming the Transaction entered into between us shall supplement, form a part of, and be subject to an agreement in the form of the 1992 ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form") (as may be amended, modified or supplemented from time to time, the "Agreement") as if we had executed an agreement on the Trade Date of the first such Transaction between us in such form, with the Schedule thereto specifying only that (a) the governing law is the laws of the State of New York, without reference to choice of law doctrine, and (b) the Termination Currency is U.S. Dollars. In the event of any inconsistency between the terms of this Confirmation, and the terms of the Agreement, this Confirmation will prevail for the purpose of this Transaction. 2. The terms of the particular Transaction to which this Confirmation relates are as follows:- Notional Amount: With respect to any Calculation Period, the lesser of: (i) as set forth in Exhibit I, which is attached hereto and incorporated by reference into this Confirmation, and (ii) The outstanding principal balance of the Class A Certificates, Class B Certificates, and Class M Certificates immediately prior to the last day of such calculation period Trade Date: February 27, 2006 Effective Date: March 2, 2006 Termination Date: January 25, 2011, subject to adjustment in accordance with the Following Business Day Convention. Fixed Amounts: Fixed Amount Payer: Counterparty Fixed Amount Payer Payment Date: March 2, 2006 Fixed Amount: USD 8,960,000 Floating Amounts: Floating Rate Payer: DBAG Cap Rate: 4.60 percent Floating Rate Payer Period End Dates: The 25th day of each month of each year, commencing March 25, 2006, through and including the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate Payer Payment Dates: Two Business Days prior to each Floating Rate Payer Period End Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate Option: USD-LIBOR-BBA Designated Maturity: One month Spread: None Floating Rate Day Count Fraction: Actual/360 Floating Rate for initial Calculation Period: 4.63313 percent Reset Dates: The first Business Day in each Calculation Period. Compounding: Inapplicable Business Days: New York Administration Fee: Counterparty agrees to pay USD 23,000 to DBAG for value on the Effective Date. -------------------------------------------------------------------------------- 3. ACCOUNT DETAILS: USD DBAG Payment Instructions: Account With: DB Trust Co. Americas, New York SWIFT Code BKTRUS33 Favor Of: Deutsche Bank AG, New York Account Number: 01 473 969 Reference: N453839N f USD Counterparty Payment Instructions: Account With: U.S. Bank National Association ABA No: 091000022 Account Number: 1731-0332-2058 Reference: RAMP Series 2006-NC2 Trust OBI: Attn: Josh Wilkening Ref. Account No. 792978000 4. OFFICES: The Office for DBAG for this Transaction is New York. The Office of Counterparty for this Transaction is St. Paul, MN 5. CALCULATION AGENT: DBAG 6. REPRESENTATIONS. Each party will be deemed to represent to the other party on the date on which it enters into this Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for this Transaction):- (i) NON-RELIANCE. It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction; it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction. Notwithstanding the foregoing, the parties agree that U.S. Bank National Association has executed this letter agreement pursuant to the direction received by it pursuant to the Pooling and Servicing Agreement. (ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the risks of this Transaction. Notwithstanding the foregoing, the parties agree that the U.S. Bank National Association has executed this letter agreement pursuant to the direction received by it pursuant to the Pooling and Servicing Agreement. (iii) STATUS OF PARTIES. The other party is not acting as a fiduciary for, or an adviser to it in respect of this Transaction. 7. ISDA FORM. (a) "Specified Entity" means, in relation to DBAG, for the purpose of Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii) and Section 5(b)(iv): Not Applicable. (b) "Specified Entity" means, in relation to the Counterparty, for the purpose of Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii) and Section 5(b)(iv): Not Applicable. (c) "Specified Transaction" will have the meaning specified in Section 14 of the ISDA Form. (d) Sections 5(a)(ii) through 5(a)(vi), Section 5(a)(vii)(2) and Sections 5(b)(ii) and 5(b)(iii) of the ISDA Form will not apply to DBAG or the Counterparty. (e) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) of the ISDA Form will not apply to DBAG or the Counterparty. (f) The "Automatic Early Termination" provision of Section 6(a) of the ISDA Form will not apply to DBAG or the Counterparty. (g) The ISDA Form will be governed by, and construed in accordance with, the laws of the State of New York without reference to its conflict of laws provisions (except for Sections 5-1401 and 5-1402 of the New York General Obligations Law). (h) The phrase "Termination Currency" means United States Dollars. (i) For the purpose of Section 6(e) of the ISDA Form, Market Quotation and Second Method will apply. (j) Section 12(a)(ii) of the ISDA Form is deleted in its entirety. (k) Party A may assign or transfer its rights and obligations hereunder to any entity so long as the Rating Agency Condition is satisfied. This Transaction shall not be amended or modified pursuant to Section 9(b) of the ISDA Form unless the Rating Agency Condition is satisfied. (l) Notwithstanding any provision of this Transaction or any other existing or future agreement, each party irrevocably waives any and all rights it may have to set off, net, recoup or otherwise withhold or suspend or condition payment or performance of any obligation between it and the other party hereunder against any obligation between it and the other party under any other agreements. The provisions for Set-off set forth in Section 6(e) of the Agreement shall not apply for purposes of this Transaction. 8. LIMITATION OF LIABILITY. Notwithstanding anything herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this letter agreement is executed and delivered by U.S. Bank National Association ("U.S. Bank"), not individually or personally, but solely as Trustee of the RAMP Series 2006-NC2 Trust, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the RAMP Series 2006-NC2 Trust is made and intended not as personal representations, undertakings and agreements by U.S. Bank but is made and intended for the purpose of binding only the RAMP Series 2006-NC2 Trust, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this paragraph shall relieve U.S. Bank from performing its duties and obligations under the Pooling and Servicing Agreement in accordance with the standard of care set forth therein, and (d) under no circumstances shall U.S. Bank be personally liable for the payment of any indebtedness or expenses of the RAMP Series 2006-NC2 Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the RAMP Series 2006-NC2 Trust under this letter agreement or any other related documents. 9. ADDITIONAL PROVISIONS. Downgrade of Party A. If a Ratings Event (as defined below) shall occur and be continuing with respect to Party A, then Party A shall (A) within 5 Business Days of such Ratings Event, give notice to Party B of the occurrence of such Ratings Event, and (B) use reasonable efforts to transfer (at its own cost) Party A's rights and obligations hereunder to another party, subject to satisfaction of the Rating Agency Condition (as defined below). Unless such a transfer by Party A has occurred within 20 Business Days after the occurrence of a Ratings Event, Party A shall immediately, at its own cost, post Eligible Collateral (as designated in the approved Credit Support Annex), to secure Party B's exposure or potential exposure to Party A, and such Eligible Collateral shall be provided in accordance with a Credit Support Annex to be attached hereto and made a part hereof. The Eligible Collateral to be posted and the Credit Support Annex to be executed and delivered shall be subject to the Rating Agency Condition. Valuation and posting of Eligible Collateral shall be made weekly. Notwithstanding the addition of the Credit Support Annex and the posting of Eligible Collateral, Party A shall continue to use reasonable efforts to transfer its rights and obligations hereunder to an acceptable third party; provided, however, that Party A's obligations to find a transferee and to post Eligible Collateral under such Credit Support Annex shall remain in effect only for so long as a Ratings Event is continuing with respect to Party A. For the purpose hereof, a "Ratings Event" shall occur with respect to Party A if the long-term and short-term senior unsecured deposit ratings of Party A cease to be at least A and A-1 by Standard & Poor's Ratings Service ("S&P") and at least A1 and P-1 by Moody's Investors Service, Inc. ("Moody's") and at least A and F1 by Fitch, Inc. ("Fitch"), to the extent such obligations are rated by S&P and Moody's and Fitch. If a Ratings Withdrawal (as defined below) shall occur and be continuing with respect to Party A, then Party A shall within 2 Business Days of such Ratings Withdrawal, (A) give notice to Party B of the occurrence of such Ratings Withdrawal, and (B) (i) transfer (at its own cost) Party A's rights and obligations hereunder to another party, subject to satisfaction of the Rating Agency Condition or (ii) obtain a guaranty of its obligations hereunder from another party, subject to the satisfaction of the Rating Agency Condition, and such guaranty shall remain in effect only for so long as a Ratings Withdrawal is continuing with respect to Party A. For the purpose hereof, a "Ratings Withdrawal" shall occur with respect to Party A if the long-term and short-term senior unsecured deposit ratings of Party A are withdrawn by S&P or cease to be at least A-3 and BBB- by S&P. "Rating Agency Condition" means, with respect to any action taken or to be taken, a condition that is satisfied when S&P, Moody's and Fitch have confirmed in writing that such action would not result in the downgrade, qualification (if applicable) or withdrawal of the rating then assigned by such Rating Agency to the Certificates. 10. ADDITIONAL TERMINATION EVENT. The failure by Party A to post Eligible Collateral in accordance with Section 9 hereof or to transfer its rights and obligations hereunder in accordance with Section 9 shall constitute an Additional Termination Event for which Party A shall be the sole Affected Party. 11. NON-PETITION. DBAG hereby irrevocably and unconditionally agrees that it will not institute against, or join any other person in instituting against or cause any other person to institute against the Counterparty, any bankruptcy, reorganization, arrangement, insolvency, or similar proceeding under the laws of the United States, or any other jurisdiction for the non-payment of any amount due hereunder or any other reason until the payment in full of the certificates issued by the Counterparty under the Pooling and Servicing Agreement and the expiration of a period of one year plus ten days (or, if longer, the applicable preference period) following such payment. 12. TAX REPRESENTATIONS. (a) Payer Representations. For the purpose of Section 3(e) of the ISDA Agreement, Party A and Party B will make the following representations: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of the Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on: (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of the Agreement; (ii) the satisfaction of the agreement contained in Section 4(a)(iii) of the Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(iii) of the Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) Payee Representations. For the purpose of Section 3(f) of the Agreement, each of Party A and Party B make the following representations. The following representation will apply to Party A: Party A is a "foreign person" within the meaning of the applicable U.S. Treasury Regulations concerning information reporting and backup withholding tax (as in effect on January 1, 2001), unless Party A provides written notice to Party B that it is no longer a foreign person. In respect of each Transaction it enters into through an office or discretionary agent in the United States or which otherwise is allocated for United States federal income tax purposes to such United States trade or business, each payment received or to be received by it under such Transaction will be effectively connected with its conduct of a trade or business in the United States. The following representation will apply to Party B: U.S. Bank National Association is the Trustee under the Pooling and Servicing Agreement. 13. NON-RECOURSE PROVISIONS. Notwithstanding anything to the contrary contained herein, none of Party B or any of its officers, directors, or shareholders (the "Non-recourse Parties") shall be personally liable for the payment by or on behalf of the RAMP Series 2006-NC2 Trust hereunder, and Party A shall be limited to a proceeding against the Collateral or against any other third party other than the Non-recourse Parties, and Party A shall not have the right to proceed directly against the RAMP Series 2006-NC2 Trust for the satisfaction of any monetary claim against the Non-recourse Parties or for any deficiency judgment remaining after foreclosure of any property included in such Collateral and following the realization of the Collateral, any claims of Party A shall be extinguished. 14. DOCUMENTS TO BE DELIVERED. For the purpose of Section 4(a) (i) and 4(a) (iii): (1) Tax forms, documents, or certificates to be delivered are: --------------------------------- -------------------------- --------------------------------------- PARTY REQUIRED TO DELIVER FORM/DOCUMENT/ DATE BY WHICH TO BE DELIVERED DOCUMENT CERTIFICATE --------------------------------- -------------------------- --------------------------------------- --------------------------------- -------------------------- --------------------------------------- Party A and Any document required or Promptly after the earlier of (i) Party B reasonably requested to reasonable demand by either party or allow the other party to (ii) learning that such form or make payments under this document is required Agreement without any deduction or withholding for or on the account of any Tax or with such deduction or withholding at a reduced rate --------------------------------- -------------------------- --------------------------------------- (2) Other documents to be delivered are: ------------------------ --------------------------- ------------------------- -------------------- PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION DELIVER DOCUMENT CERTIFICATE DELIVERED 3(D) REPRESENTATION ------------------------ --------------------------- ------------------------- -------------------- ------------------------ --------------------------- ------------------------- -------------------- Party A and Party B Any documents to evidence Upon the execution and Yes the authority of the delivery of this delivering party for it Agreement and such to execute and deliver Confirmation. this Confirmation. ------------------------ --------------------------- ------------------------- -------------------- ------------------------ --------------------------- ------------------------- -------------------- Party A and Party B A certificate of an Upon the execution and Yes authorized officer of the delivery of this party, as to the Confirmation. incumbency and authority of the respective officers of the party signing this Confirmation. ------------------------ --------------------------- ------------------------- -------------------- ------------------------ --------------------------- ------------------------- -------------------- Party A Legal opinion(s) with Within 5 Local Business No respect to such party and Days of execution hereof its Credit Support Provider, if any, for it, reasonably satisfactory in form and substance to the other party relating to the enforceability of the party's obligations under this Agreement. ------------------------ --------------------------- ------------------------- -------------------- ------------------------ --------------------------- ------------------------- -------------------- Party A A copy of the most recent To be made available on Yes annual report of such www.deutsche-bank.de/ir/en/ party (only if available) as soon as available and its Credit Support and in any event within Provider, if any, 90 days after the end containing in all cases of each fiscal year of audited consolidated Party A financial statements for each fiscal year certified by independent certified public accountants and prepared in accordance with generally accepted accounting principles in the United States or in the country in which such party is organized. ------------------------ --------------------------- ------------------------- -------------------- ------------------------ --------------------------- ------------------------- -------------------- Party B Each other report or Promptly upon request Yes other document required by Party A, or with to be delivered by or to respect to any Party B under the terms particular type of of the Pooling and report or other Servicing Agreement, document as to which other than those required Party A has previously to be delivered directly made request to receive by the Trustee to Party A all reports or thereunder. documents of that type, promptly upon delivery or receipt of such report or document by Party B. ------------------------ --------------------------- ------------------------- -------------------- 15. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS TRANSACTION. 16. ELIGIBLE CONTRACT PARTICIPANT. Each party represents to the other party that it is an "eligible contract participant" as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended. 17. NOTICE BY FACSIMILE TRANSMISSION. Section 12(a) of the ISDA Form is hereby amended by deleting the parenthetical "(except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system)." 18. FULLY-PAID PARTY PROTECTED. Notwithstanding the terms of Sections 5 and 6 of the ISDA Form, if Party B has satisfied its payment obligations under Section 2(a)(i) of the ISDA Form, then unless Party A is required pursuant to appropriate proceedings to return to Party B or otherwise returns to Party B upon demand of Party B any portion of such payment, the occurrence of an event described in Section 5(a) of the ISDA Form with respect to Party B with respect to this Transaction shall not constitute an Event of Default or Potential Event of Default with respect to Party B as the Defaulting Party. For purposes of the Transaction to which this letter agreement relates, Party B's only payment obligation under Section 2(a)(i) of the ISDA Form is to pay the Fixed Amount on the Fixed Amount Payer Payment Date. -------------------------------------------------------------------------------- Please confirm that the foregoing correctly sets forth the terms and conditions of our agreement by returning an executed copy of this letter agreement to the attention of Derivative Documents via facsimile to 44 20 7545 9761, or via e-mail to [email protected]. Yours sincerely, DEUTSCHE AG, NEW YORK BRANCH By: _________________________________________ Name: Title: By: _________________________________________ Name: Title: Confirmed as of the date above: RAMP SERIES 2006-NC2 TRUST By: U.S. Bank National Association not in its individual capacity but solely in its capacity as Trustee for the benefit of the RAMP Series 2006-NC2 Trust By: __________________________________________ Name: Title: -------------------------------------------------------------------------------- EXHIBIT I With respect to calculating a Floating Amount for any Calculation Period falling within the periods set forth below, the Notional Amount and Cap Rate shall be the amount set forth opposite the relevant period and underneath the caption Notional Amount and Cap Rate, as follows: FROM AND INCLUDING* TO BUT EXCLUDING* NOTIONAL AMOUNT (USD) Effective Date 25-Mar-06 745,180,000.00 25-Mar-06 25-Apr-06 741,630,189.83 25-Apr-06 25-May-06 734,468,415.92 25-May-06 25-Jun-06 725,197,219.14 25-Jun-06 25-Jul-06 713,822,983.97 25-Jul-06 25-Aug-06 700,363,068.64 25-Aug-06 25-Sep-06 684,859,710.73 25-Sep-06 25-Oct-06 667,361,777.97 25-Oct-06 25-Nov-06 647,944,178.35 25-Nov-06 25-Dec-06 627,158,697.70 25-Dec-06 25-Jan-07 605,170,041.76 25-Jan-07 25-Feb-07 582,501,141.64 25-Feb-07 25-Mar-07 560,671,744.48 25-Mar-07 25-Apr-07 539,650,484.65 25-Apr-07 25-May-07 519,402,719.71 25-May-07 25-Jun-07 499,886,480.81 25-Jun-07 25-Jul-07 481,075,212.70 25-Jul-07 25-Aug-07 462,962,221.99 25-Aug-07 25-Sep-07 445,521,201.47 25-Sep-07 25-Oct-07 428,729,537.32 25-Oct-07 25-Nov-07 412,155,924.39 25-Nov-07 25-Dec-07 393,418,774.12 25-Dec-07 25-Jan-08 366,297,734.79 25-Jan-08 25-Feb-08 341,173,272.07 25-Feb-08 25-Mar-08 317,916,974.11 25-Mar-08 25-Apr-08 296,575,789.72 25-Apr-08 25-May-08 278,250,244.16 25-May-08 25-Jun-08 266,052,771.15 25-Jun-08 25-Jul-08 254,384,947.73 25-Jul-08 25-Aug-08 243,223,197.48 25-Aug-08 25-Sep-08 232,557,169.88 25-Sep-08 25-Oct-08 222,351,970.68 25-Oct-08 25-Nov-08 212,587,107.88 25-Nov-08 25-Dec-08 203,243,019.05 25-Dec-08 25-Jan-09 194,301,035.64 25-Jan-09 25-Feb-09 185,748,996.68 25-Feb-09 25-Mar-09 177,563,709.19 25-Mar-09 25-Apr-09 176,622,919.70 25-Apr-09 25-May-09 169,385,660.79 25-May-09 25-Jun-09 162,457,435.31 25-Jun-09 25-Jul-09 155,824,621.68 25-Jul-09 25-Aug-09 149,477,222.59 25-Aug-09 25-Sep-09 143,399,530.12 25-Sep-09 25-Oct-09 137,579,698.76 25-Oct-09 25-Nov-09 132,006,415.68 25-Nov-09 25-Dec-09 126,668,876.41 25-Dec-09 25-Jan-10 121,556,761.63 25-Jan-10 25-Feb-10 116,660,256.14 25-Feb-10 25-Mar-10 111,969,900.71 25-Mar-10 25-Apr-10 107,476,702.88 25-Apr-10 25-May-10 103,114,064.95 25-May-10 25-Jun-10 98,840,211.73 25-Jun-10 25-Jul-10 94,745,138.54 25-Jul-10 25-Aug-10 90,821,084.63 25-Aug-10 25-Sep-10 87,060,635.45 25-Sep-10 25-Oct-10 83,456,706.93 25-Oct-10 25-Nov-10 80,002,530.44 25-Nov-10 25-Dec-10 76,691,638.48 25-Dec-10 Termination Date 73,516,970.13 * For Floating Amounts: All dates listed above (with the exception of the Effective Date) are subject to adjustment in accordance with the Following Business Day Convention

Exhibit 10.4 [Form of Award Exempt from 409A (to be used when Grantee will not reach Retirement before the last Vesting Date)] CHIQUITA BRANDS INTERNATIONAL, INC. STOCK AND INCENTIVE PLAN RESTRICTED STOCK AWARD AND AGREEMENT Congratulations! You have been awarded a restricted stock award under the Chiquita Stock and Incentive Plan (the “Plan”). GRANT: Chiquita Brands International, Inc., a New Jersey corporation (the “Company”), hereby awards to you (the “Grantee” named below) restricted shares of the Company’s Common Stock (“Shares”), subject to the forfeiture provisions and other terms of this Agreement. The Shares will be issued at no cost to you on the date[s] set forth below, provided that you have a vested right to such Shares as described below. Please read this Agreement carefully and return an executed copy as requested below. Unless otherwise defined in this Agreement, capitalized terms have the meanings specified in the Plan.   Grantee:   No. of Shares:   Grant Date:   Vesting Date[s]:   VESTING AND DELIVERY OF SHARES: [All of the Shares will vest on [date]] or [The Shares will vest between the Grant Date and [last vesting date] with [% or number of shares] vesting on [dates]] or, if earlier, upon a Change in Control of the Company (the “Vesting Date”); subject, however, to the forfeiture provisions set forth below. If you Separate from Service because of your death or Disability, all the Shares subject to this award will vest on the date of your Separation from Service. On [the][each] Designated Payment Date or as soon as reasonably practicable thereafter, the Company will deliver to you a certificate representing the Shares which vested on such date. A “Separation from Service” generally means your termination of employment with the Company and all of its Subsidiaries. [The] [A] “Designated Payment Date” is generally defined in the Plan as [the][each] Vesting Date or, if earlier, the date you Separate from Service because of your death or Disability. NO RIGHTS AS SHAREHOLDER PRIOR TO VESTING: Prior to the date Shares are issued to you, you will have no rights as a shareholder of the Company with respect to the Shares subject to this award. FORFEITURE OF SHARES: In the event you Separate from Service for any reason (other than as a result of your death or Disability) prior to [the] [any] Vesting Date, then all unvested Shares subject to this award will be forfeited as of the date of your Separation from Service and any rights with respect to such forfeited Shares will immediately cease. CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION: In consideration of your receipt of this award, you agree as follows: (a) During your employment with the Company or by any of its Subsidiaries, and after the termination of your employment for any reason, voluntary or involuntary, you will hold in a fiduciary capacity for the sole benefit of the Company all information, knowledge or data relating to the Company or any of its Subsidiaries and their respective businesses and investments, including investments in joint ventures, which information, knowledge or data the Company or any of its Subsidiaries consider to be proprietary, confidential, or not public knowledge (including but not limited to trade secrets) that you obtain or have previously obtained during your employment by the Company or any of its Subsidiaries (“Proprietary, Confidential or Non-Public Information”). During your employment with the Company or by any of its Subsidiaries, and after the termination of your employment for any reason, voluntary or involuntary, you will not directly or indirectly use, communicate, divulge or disseminate any Proprietary, Confidential or Non-Public Information for any purpose not authorized by the Company or any of its Subsidiaries, or for any purpose not related to the performance of your work for the Company or any of its Subsidiaries. At any time requested by the Company or any of its Subsidiaries, and in any event immediately upon the termination of your employment for any reason, voluntary or involuntary, you shall return all copies of all documents, materials or information in any form, written or electronic or otherwise, that constitute, contain, refer or relate to any Proprietary, Confidential or Non-Public Information. (b) During your employment with the Company or any of its Subsidiaries and for a period of two years after the termination of your employment with the Company or any of its Subsidiaries for any reason, voluntary or involuntary, you will not, without the written consent of the Company, directly or indirectly, engage in, invest in or participate in any business or activity conducted by any company listed or described in Exhibit A, attached hereto (the “Competing Business”), whether as an employee, officer, director, partner, joint venturer, consultant, independent contractor, agent, representative, shareholder (other than as a holder of less than five percent (5%) of any class of publicly traded securities of any such Competing Business) or in any other capacity.   - 1 - -------------------------------------------------------------------------------- (c) During your employment with the Company or any of its Subsidiaries and for a period of one year after the termination of your employment with the Company or any of its Subsidiaries for any reason, voluntary or involuntary, you will not, without the written consent of the Company, directly or indirectly, solicit, entice, persuade or induce, or attempt to solicit, entice, persuade or induce (i) any customer, supplier, distributor or other person or entity that has a business relationship, contractual or otherwise, with the Company or any of its Subsidiaries (or any of their respective joint ventures) to direct or transfer away from the Company or any of its Subsidiaries (or such joint ventures) or eliminate, interfere with, disrupt, reduce or modify to the detriment of the Company or any of its Subsidiaries (or such joint ventures) any business, patronage or source of supply, or (ii) any person to leave the employment of the Company or any of its Subsidiaries (or any such joint ventures) (other than persons employed in a clerical, non-professional or non-managerial position). (d) You understand and agree that the restrictions set forth above, including, without limitation, the duration and scope of such restrictions, are reasonable and necessary to protect the legitimate business interests of the Company and its Subsidiaries. You further agree that the Company will be entitled to seek and obtain injunctive relief against you in the event of any actual or threatened breach of such restrictions, and you hereby consent to the exercise of personal jurisdiction and venue in a federal or state court of competent jurisdiction located in Hamilton County, Ohio, and you agree not to initiate any legal action relating to the subject matter hereof in any other forum. You understand and agree that this Agreement shall be construed and enforced in accordance with the laws of the State of Ohio applicable to contracts executed in and to be performed in that State. If any provision of this Agreement is determined to be unenforceable or unreasonable by any Court, then such provision will be modified or omitted only to the extent necessary to make such provision and the remaining provisions of this Agreement enforceable. TAXES: You must pay all applicable U.S. federal, state, local and foreign taxes resulting from the grant of this award and the issuance of the Shares. The Company has the right to withhold, and the Company will withhold at your request, all applicable taxes due by reducing the number of Shares otherwise deliverable under this award or withholding from future earnings (including salary, bonus or any other payments.) In advance of [the][each] date on which the Shares become issuable, you may elect to pay the withholding amounts due by delivering to the Company a number of the Shares that you own that have a fair market value on that date equal to the amount of the payroll withholding taxes due. CONDITIONS: This award is intended to be exempt from Section 409A of the Internal Revenue Code. It is to be governed by and subject to the terms and conditions of the Plan, which contains important provisions of this award and forms a part of this Agreement. A copy of the Plan is being provided to you, along with a summary of the Plan. If there is any conflict between any provision of this Agreement and the Plan, this Agreement will control, unless the provision is not permitted by the Plan, in which case the provision of the Plan will apply. Your rights and obligations under this Agreement are also governed by and are subject to applicable U.S. laws and foreign laws. AGREEMENT: To acknowledge your agreement to the terms and conditions of this award, please sign and return one copy of this Agreement to the Corporate Secretary’s Office, Attention: Barbara Howland.   CHIQUITA BRANDS INTERNATIONAL, INC.       Complete Grantee Information below:   Kevin Holland, Senior Vice President, Human Resources       Home Address (including country) By:                   Date Agreed To:                                 U.S. Social Security Number (if applicable)   - 2 -

EXHIBIT 10.60 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT to that certain Employment Agreement between CONSUMER PROGRAMS INCORPORATED, a Missouri corporation (the “Corporation”) and GARY W. DOUGLASS (the “Executive”), dated as of April 8, 2002 (the “Employment Agreement”) is entered into as of this 25th day of April 2006. WHEREAS, as a result of a Change of Control in March 2004, Executive is entitled to receive an Annual Bonus in cash at least equal to the highest bonus paid to him in any of the three fiscal years immediately prior to the date of the Change of Control; and WHEREAS, Executive’s highest cash bonus in any of the three fiscal years preceding the Change of Control was Sixty-three Thousand Five Hundred Seventy-seven Dollars ($63,577.00), paid for fiscal year 2002 (the “Guaranteed Bonus”); and WHEREAS, the Corporation and Executive desire to amend the Employment Agreement to provide for an alternative to the Guaranteed Bonus for Fiscal Year 2006; NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the Corporation and Executive hereby agree to amend the Employment Agreement as follows:       1.    Subsection 5(b) of the Employment Agreement shall be amended in its entirety to read as follows:   (i) After a Change of Control, in addition to the Base Salary, the Executive shall be awarded for each Fiscal Year during the Term of Employment an annual bonus (the "Annual Bonus") (pursuant to any bonus plan or program of the Corporation, any incentive plan or program of the Corporation, or otherwise) in cash at least equal to the highest bonus paid or payable to the Executive in respect of any of the Fiscal Years during the three Fiscal Years immediately prior to the date of the Change of Control. Prior to a Change of Control, the amount of the Executive's Annual Bonus shall be determined in accordance with the Corporation's regular practice. Executive's Annual Bonus Plan for the Corporation's Fiscal Year 2002 is set forth on Exhibit B, attached hereto and incorporated herein.   (ii)  Notwithstanding the provisions of subsection 5(b)(i) above, the Executive shall waive his right to receive the Guaranteed Bonus for the Corporation’s Fiscal Year 2006 and, in lieu thereof, shall be entitled to participate in the CPI Corp. Performance Plan, adopted as of April 14, 2005 (the “Performance Plan”) for Fiscal Year 2006. As a participant in the Performance Plan, Executive shall receive a minimum Annual Bonus of Forty Thousand Dollars ($40,000) for Fiscal Year 2006 (the “Minimum Bonus”). If the Executive receives only the Minimum Bonus for Fiscal Year 2006, the entire amount shall be paid to him in cash. If the amount earned by the Executive for Fiscal Year 2006 exceeds the Minimum Bonus, the Executive shall make an election to receive either (1) the total amount in such combination of cash and/or restricted shares as shall be determined by the CPI Corp. Compensation Committee in its sole discretion in a manner consistent with the treatment of other Executives who participate in the Performance Plan for Fiscal Year 2006 or (2) the Minimum Bonus in cash.   (iii)  For Fiscal Year 2007 and each fiscal year thereafter during the Term of Employment, Executive shall be entitled to receive an Annual Bonus in cash at least equal to the Guaranteed Bonus amount of Sixty-Three Thousand Five Hundred Seventy-seven Dollars ($63,577.00).   2.    Unless otherwise defined in this Amendment, the defined terms used herein shall have the meanings ascribed to them in the Employment Agreement.          3.    The Employment Agreement, as modified by this First Amendment, is hereby ratified and affirmed.               IN WITNESS WHEREOF, the parties have executed this First Amendment to the Employment Agreement as of the date first written above.   CONSUMER PROGRAMS INCORPORATED By: /s/ Paul Rasmussen _____________________________________         Paul Rasmussen, Chief Executive Officer        /s/ Gary W. Douglass _____________________________________ Gary W. Douglass

  Exhibit 10(ae) $2,000,000,000 Senior and Subordinated Bank Notes Distribution Agreement March 13, 2006 Citigroup Global Markets Inc. 388 Greenwich Street New York, New York 10013 Keefe, Bruyette & Woods, Inc. 787 7th Avenue New York, New York 10019 Lehman Brothers Inc. 745 Seventh Avenue, Fifth Floor New York, New York 10019 Merrill Lynch, Pierce, Fenner & Smith Incorporated World Financial Center North Tower New York, New York 10281 Sandler O’Neill & Partners, L.P. 919 Third Avenue, 6th Floor New York, New York 10022 Ladies and Gentlemen:      Compass Bank, an Alabama banking corporation (the “Bank”), and Compass Bancshares, Inc., a Delaware corporation (the “Holding Company”), confirm their agreement with each of you (individually an “Agent” and collectively, the “Agents”) on the terms set forth in this agreement with respect to the issuance and sale by the Bank of its bank notes (the “Securities”) in an aggregate principal amount outstanding at any one time of up to $2,000,000,000.      Subject to the terms and conditions stated herein and to the reservation by the Bank of the right to sell Securities directly on its own behalf, the Bank hereby (i) appoints each Agent as an agent of the Bank for the purpose of soliciting and receiving offers to purchase Securities from the Bank pursuant to Section 3(a) hereof and (ii) agrees that, except as otherwise contemplated herein, whenever it determines to sell Securities directly to any Agent as principal, it will enter into a separate agreement (each, a “Terms Agreement”), substantially in the form of Annex I hereto, relating to such sale in accordance with Section 3(b) hereof. This Distribution Agreement shall not be construed to create either an obligation on the part of the Bank to sell any Securities or an obligation of any of the Agents to purchase Securities as principal.      The Securities will be issued under a issuing and paying agency agreement, dated as of March 13, 2006 (the “Issuing Agency Agreement”), between the Bank and Compass Bank, as   --------------------------------------------------------------------------------   Issuing and Paying Agent (the “Issuing and Paying Agent”). The Securities shall have the maturity ranges, interest rates, if any, redemption provisions, if any, and other terms set forth in the Offering Circular referred to below as it may be amended or supplemented from time to time, and the specific maturity, interest rate, if any, redemption provisions, if any, and other terms set forth in, with respect to any particular issuance of the Securities, the final pricing supplement (the “Final Pricing Supplement”) with respect to such issuance and the summary of terms of each such issuance of Securities (a “Term Sheet”). The Securities will be issued, and the terms and rights thereof established, from time to time by the Bank in accordance with the Issuing Agency Agreement.      1. The Bank represents and warrants to each Agent as of the date hereof, as of the date of each acceptance by the Bank of an offer for the purchase of Securities (whether to the Agent as principal or through the Agent as agent), as of the date of each delivery of Securities (whether to such Agent as principal or through such Agent as agent) (the date of each such delivery to an Agent as principal being hereafter referred to as a “Settlement Date”), as of the Applicable Time (as defined below) and as of the times the Offering Circular (as defined below) shall be amended or supplemented or there is filed with the Securities and Exchange Commission (the “Commission”) or any bank regulatory agency any document incorporated by reference into the Offering Circular or the Disclosure Package (as defined below) (each of the times referenced above being referred to hereafter as a “Representation Date”), as follows:      (a) An offering circular, dated March 13, 2006 (the “Offering Circular”), including the Annual Report of the Holding Company on Form 10-K for the fiscal year ended December 31, 2005; and its Current Reports on Form 8-K dated January 3, 2006 and January 17, 2006, as well as the Bank’s quarterly reports regarding its financial condition and operations on Federal Financial Institutions Examination Council Form 31 (“Call Reports”) for periods in the years 2003, 2004 and 2005, which are incorporated by reference in or otherwise made a part of the Offering Circular and the Disclosure Package, has been prepared in connection with the offering of the Securities; any reference to the Offering Circular shall be deemed to refer to and include (i) the Holding Company’s most recent Annual Report on Form 10-K and all subsequent documents filed with the United States Securities and Exchange Commission (the “Commission”) pursuant to Section 13(a), 13(c) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or prior to the date of the Offering Circular and (ii) the Bank’s Call Reports for the periods referred to above and all Call Reports subsequently filed with the Federal Financial Institutions Examination Council (the “FFIEC”) on or prior to the date of the Offering Circular; any reference to the Offering Circular as amended or supplemented as of any specified date shall be deemed to include (i) any documents filed under the Exchange Act after the date of the Offering Circular and prior to such date and (ii) any documents filed with the FFIEC after the date of the Offering Circular and prior to such date; all documents filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act and so deemed to be included in the Offering Circular or any amendment or supplement thereto are hereinafter called the “Exchange Act Reports”; all documents filed with the FFIEC and so deemed to be included in the Offering Circular or any amendment or supplement thereto are hereinafter called the “Call Reports”; the Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the 2 --------------------------------------------------------------------------------   applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder; the Call Reports, when they were or are filed with the FFIEC, conformed or will conform in all material respects to the applicable requirements of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the FFIEC. (A) The Offering Circular, together with a Final Pricing Supplement, and any amendments or supplements thereto do not and, as of the applicable Representation Date, will not, and the Exchange Act Reports and Call Reports did not and will not, as of their respective dates, include an untrue statement of a material fact or omit 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; (B) the Disclosure Package as of its date or as of the Applicable Time will not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and (C) any individual Supplemental Offering Materials (as defined below), when considered together with the Disclosure Package, will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions in the Offering Circular and the Disclosure Package made in reliance upon and in conformity with information furnished in writing to the Bank by an Agent expressly for use therein.      “Applicable Time” means such time as agreed between the Bank and the Agents to whom or through whom the applicable issue of Securities are being sold in (i) a Terms Agreement, or (ii) any other written agreement of the Bank and such Agents.      “Disclosure Package” means, with respect to any particular issuance of Securities, the (i) Offering Circular, together with (ii) any preliminary pricing supplement (a “Preliminary Pricing Supplement”) used in connection with the issue of such Securities and (iii) a Term Sheet used in connection with the issue of such Securities (or otherwise as identified as being part of the Disclosure Package in a Terms Agreement or any other written agreement of the Bank and the Agents to whom or through whom the applicable issue of Securities are being sold).      (b) The Bank has been duly incorporated and is an existing banking corporation in good standing under the laws of the State of Alabama, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular; and the Bank is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification.      (c) Each subsidiary of the Bank has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular; and each subsidiary of the Bank is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; all of the 3 --------------------------------------------------------------------------------   issued and outstanding capital stock of each subsidiary of the Bank has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Bank, directly or through subsidiaries, is owned free from liens, encumbrances and defects.      (d) Each “significant subsidiary” of the Bank (as such term is defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended (the “Securities Act”)) (each a “Significant Subsidiary” and, collectively, the “Significant Subsidiaries”) has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Circular and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not have a material adverse effect on the Bank and its subsidiaries taken as a whole; except as otherwise disclosed in the Offering Circular, all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Bank, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of the Significant Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Significant Subsidiary. The other subsidiaries of the Bank other than Significant Subsidiaries, considered in the aggregate as a single subsidiary, do not constitute a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the Securities Act.      (e) The Bank has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Bank have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Holding Company (except for directors’ qualifying shares, if any), free and clear of all liens, encumbrances, equities or claims.      (f) The Securities have been duly authorized and, when issued, delivered and paid for pursuant to this Agreement, the Issuing Agency Agreement and any relevant Terms Agreement will have been duly executed, authenticated, issued and delivered will conform to the descriptions thereof in the Offering Circular, a Final Pricing Supplement and the Disclosure Package and will constitute valid and legally binding obligations of the Bank enforceable against the Bank in accordance with their terms and entitled to the benefits provided by the Issuing Agency Agreement under which they are to be issued, subject to bankruptcy, liquidation, insolvency, reorganization, receivership, conservatorship, moratorium and other laws of general applicability relating to or affecting the rights of creditors generally or of creditors of depository institutions the accounts of which are insured by the FDIC and to general equity principles; the Issuing Agency Agreement has been duly authorized, executed and delivered by the Bank and constitutes a valid and legally binding instrument, enforceable against the Bank in accordance with its terms, subject to bankruptcy, liquidation, insolvency, reorganization, receivership, conservatorship, moratorium and other laws of general applicability relating 4 --------------------------------------------------------------------------------   to or affecting the rights of creditors generally or of creditors of depository institutions the accounts of which are insured by the FDIC and to general equity principles.      (g) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement, the Offering Circular, a Final Pricing Supplement or the Disclosure Package in connection with the issuance and sale of the Securities by the Bank except such as have been made with the Federal Reserve Bank of Atlanta or such other regulatory agencies and such as may be required under state securities law.      (h) The execution, delivery and performance of the Issuing Agency Agreement and this Agreement do not, and the completion, execution and issuance of each particular Security in accordance with the Issuing Agency Agreement, the sale by the Bank of such Security in accordance with this Agreement, the Offering Circular, a Final Pricing Supplement and the Disclosure Package 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, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Bank or any subsidiary of the Bank or any of their properties, or any agreement or instrument to which the Bank or any such subsidiary is a party or by which the Bank or any such subsidiary is bound or to which any of the properties of the Bank or any such subsidiary is subject, or the charter or by-laws of the Bank or any such subsidiary, and the Bank has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.      (i) This Agreement (including any agreement with respect to the offering and sale of particular Securities) has been duly authorized, executed and delivered by the Bank.      (j) The Bank and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Bank or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Bank and its subsidiaries taken as a whole.      (k) The Bank and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Bank or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the Bank and its subsidiaries taken as a whole. 5 --------------------------------------------------------------------------------        (l) Except as disclosed in the Offering Circular, there are no pending actions, suits or proceedings against or affecting the Bank, any of its subsidiaries or any of their respective properties that, if determined adversely to the Bank or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Bank and its subsidiaries taken as a whole, or would materially and adversely affect the ability of the Bank to perform its obligations under the Issuing Agency Agreement or this Agreement, or which are otherwise material in the context of the sale of the Securities; and to the Bank’s knowledge, no such actions, suits or proceedings are threatened.      (m) The financial statements included or incorporated by reference in the Offering Circular and the Disclosure Package present fairly the financial position of the Bank and its respective consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Circular and the Disclosure Package, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. The financial data included in the incorporated Call Reports has been prepared in conformity with the regulatory accounting principles and instructions of the FFIEC consistently applied throughout the periods involved.      (n) Except as disclosed in the Offering Circular, since the date of the latest financial statements included in the Offering Circular there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Bank and its subsidiaries taken as a whole and except as disclosed in or contemplated by the Offering Circular, there has been no dividend or distribution of any kind declared, paid or made by the Bank on any class of its capital stock.      (o) The statements set forth in the Offering Circular under the caption “Description of Bank Notes”, insofar as they purport to constitute a summary of the terms of the Securities, and under the captions “Supervision, Regulation and Other Matters,” “Certain United States Federal Income Tax Consequences” and “Plan of Distribution”, insofar as they purport to describe the provisions of the laws, regulations and documents referred to therein, are accurate and complete in all material respects;      (p) The obligations of the Bank under the Securities that are Senior Bank Notes rank pari passu with its other unsecured, unsubordinated liabilities, except deposit obligations;      (q) The Bank is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Offering Circular and the Disclosure Package, will not be an “investment company,” as defined in the Investment Company Act of 1940.      (r) The Securities are exempt securities under Section 3(a)(2) of the Securities Act of 1933, as amended (the “Act”), and neither registration of the Securities under the Act nor qualification of an indenture under the Trust Indenture Act of 1939, as amended 6 --------------------------------------------------------------------------------   (the “Trust Indenture Act”), is required in connection with the offer, sale, issuance or delivery of the Securities as contemplated by this Agreement;      (s) The Bank is an insured bank under the provisions of the Federal Deposit Insurance Act, as amended (“FDIA”), and no proceedings for the termination of such insurance are pending or, to threatened.      2. The Holding Company represents and warrants to, and agrees with, each Agent that:      (a) The Holding Company has authorized the Bank to incorporate by reference in the Offering Circular the Exchange Act Reports; the Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder; and the Offering Circular, a Final Pricing Supplement, the Disclosure Package and any Supplemental Offering Materials, and any amendments or supplements thereto, as each pertains to the Holding Company, and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit 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; provided, however, that this representation and warranty shall not apply to any statements or omissions in the Offering Circular, a Final Pricing Supplement, the Disclosure Package or any Supplemental Offering Materials made in reliance upon and in conformity with information furnished in writing to the Bank by an Agent expressly for use therein.      (b) The Holding Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular, and is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Holding Company Act”).      (c) PricewaterhouseCoopers, who have certified certain financial statements of the Holding Company and its consolidated subsidiaries, are independent accountants as required by the Act and the rules and regulations of the Commission thereunder.      (d) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement, the Offering Circular, a Final Pricing Supplement or the Disclosure Package in connection with the issuance and sale of the Securities by the Bank except such as have been made with the Federal Reserve Bank of Atlanta or such other regulatory agencies and such as may be required under state securities law.      (e) The execution, delivery and performance of this Agreement does not, and the completion, execution and issuance of each particular Security in accordance with the Issuing Agency Agreement, the sale by the Bank of such Security in accordance with this 7 --------------------------------------------------------------------------------   Agreement, the Offering Circular, a Final Pricing Supplement and the Disclosure Package 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, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Holding Company or any subsidiary of the Holding Company or any of their properties, or any agreement or instrument to which the Holding Company or any such subsidiary is a party or by which the Holding Company or any such subsidiary is bound or to which any of the properties of the Holding Company or any such subsidiary is subject, or the charter or by-laws of the Holding Company or any such subsidiary, and the Bank has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.      (f) This Agreement (including any agreement with respect to the offering and sale of particular Securities) has been duly authorized, executed and delivered by the Holding Company.      (g) Except as disclosed in the Offering Circular, there are no pending actions, suits or proceedings against or affecting the Holding Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Holding Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Holding Company and its subsidiaries taken as a whole, or would materially and adversely affect the ability of the Holding Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Securities; and to the Holding Company’s knowledge, no such actions, suits or proceedings are threatened.      (h) As of the date hereof, to the knowledge of the Holding Company, there is and has been no failure on the part of the Holding Company and any of the Holding Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications, it being understood that the management of the Holding Company has not conducted an evaluation of such compliance for any period after December 31, 2005.      3. (a) On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, each of the Agents hereby severally and not jointly agrees, as agent of the Bank, to use its reasonable efforts to solicit and receive offers to purchase the Securities from the Bank upon the terms and conditions set forth in the Offering Circular, a Final Pricing Supplement and the Disclosure Package, each as amended or supplemented from time to time. So long as this Agreement shall remain in effect with respect to any Agent, except as provided below, the Bank shall not, without the consent of such Agent, solicit or accept offers to purchase, or sell, any debt securities (other than deposit obligations) with a maturity at the time of original issuance of 7 days or more except pursuant to this Agreement, any Terms Agreement or except in connection with a firm commitment underwriting pursuant to an underwriting agreement that does not provide for a continuous offering of 8 --------------------------------------------------------------------------------   medium-term debt securities. However, the Bank reserves the right to sell, and may solicit and accept offers to purchase, Securities directly on its own behalf in transactions with other persons (provided such sales are in accordance with the applicable law), and, in the case of any such sale not resulting from a solicitation made by any Agent, no commission will be payable with respect to such sale. It is understood that if from time to time the Bank is approached by a prospective agent offering to solicit a specific purchase of Securities, the Bank may also engage such agent with respect to such specific purchase; provided that the Agents are given notice of such purchase promptly, including the terms thereof, in each case after the purchase is agreed; provided further, however that such agent shall make in writing the representations and agreements of an Agent set forth herein and that the Bank and such agent shall otherwise agree to be bound by the terms and conditions of this Agreement. These provisions shall not limit Section 5(e) hereof or any similar provision included in any Terms Agreement.      Procedural details relating to the issue and delivery of Securities, the solicitation of offers to purchase Securities and the payment in each case therefor shall be as set forth in the Administrative Procedure attached hereto as Annex II as it may be amended from time to time by written agreement between the Agents and the Bank (the “Administrative Procedure”). The provisions of the Administrative Procedure shall apply to all transactions contemplated hereunder other than those made pursuant to a Terms Agreement. Each Agent and the Bank agree to perform the respective duties and obligations specifically provided to be performed by each of them in the Administrative Procedure. The Bank will furnish to the Issuing and Paying Agent a copy of the Administrative Procedure as from time to time in effect.      The Bank reserves the right, in its sole discretion, to instruct the Agents to suspend at any time, for any period of time or permanently, the solicitation of offers to purchase the Securities from the Bank. As soon as practicable, but in any event not later than one business day in New York City, after receipt of notice from the Bank, the Agents will suspend solicitation of offers to purchase Securities from the Bank until such time as the Bank has advised the Agents that such solicitation may be resumed. During such period, the Bank shall not be required to comply with the provisions of Sections 5(h) and 5(i). Upon advising the Agents that such solicitation may be resumed, however, the Bank shall simultaneously provide the documents required to be delivered by Sections 5(h) and 5(i), and the Agents shall have no obligation to solicit offers to purchase the Securities until such documents have been received by the Agents. In addition, any failure by the Bank to comply with its obligations hereunder, including without limitation its obligations to deliver the documents required by Sections 5(h) and 5(i), shall automatically terminate the Agents’ obligations hereunder, including without limitation their obligations to solicit offers to purchase the Securities hereunder as agent or to purchase Securities hereunder as principal.      The Bank agrees to pay each Agent a commission, at the time of settlement of any sale of a Security by the Bank as a result of a solicitation made by such Agent, in an amount equal, except as otherwise agreed by the Bank and such Agent, to the following applicable percentage of the principal amount of such Security sold: 9 --------------------------------------------------------------------------------                         SENIOR NOTES   SUBORDINATED NOTES     PERCENT OF   PERCENT OF MATURITY RANGES   PRINCIPAL AMOUNT   PRINCIPAL AMOUNT From 7 days to less than 9 months   To be negotiated at time of sale.   NA From 9 months to less than 1 year     .125 %   NA From 1 year to less than 18 months     .150 %   NA From 18 months to less than 2 years     .200 %   NA From 2 years to less than 3 years     .250 %   NA From 3 years to less than 4 years     .350 %   NA From 4 years to less than 5 years     .450 %   NA From 5 years to less than 6 years     .500 %     .500 % From 6 years to less than 7 years     .550 %     .550 % From 7 years to less 10 years     .600 %     .600 % From 10 years to less than 12 years     .625 %     .650 % From 12 years to less than 15 years     .625 %     .675 % From 15 years to less than 20 years     .700 %     .750 % From 20 years to less than 30 years     .750 %     .875 % From 30 years and greater   Negotiated at time of sale   Negotiated at time of sale      (b) Each sale of Securities to any Agent as principal shall be made in accordance with the terms of this Agreement and (unless the Bank and such Agent shall otherwise agree) a Terms Agreement which will provide for the sale of such Securities to, and the purchase thereof by, such Agent. A Terms Agreement may also specify certain provisions relating to the reoffering of such Securities by such Agent. The commitment of any Agent to purchase Securities as principal, whether pursuant to any Terms Agreement or otherwise, shall be deemed to have been made on the basis of the representations and warranties of the Bank and the Holding Company herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify the principal amount of Securities to be purchased by any Agent pursuant 10 --------------------------------------------------------------------------------   thereto, the price to be paid to the Bank for such Securities, any provisions relating to rights of, and default by, underwriters acting together with such Agent in the reoffering of the Securities and the time and date and place of delivery of and payment for such Securities. Such Terms Agreement shall also specify any requirements for opinions of counsel, accountants’ letters and officers’ certificates pursuant to Section 5 hereof.      (c) For each sale of Securities to an Agent as principal that is not made pursuant to a Terms Agreement, the procedural details relating to the issue and delivery of such Securities and payment therefor shall be as set forth in the Administrative Procedure. For each such sale of Securities to an Agent as principal that is not made pursuant to a Terms Agreement, the Bank agrees to pay such Agent a commission (or grant an equivalent discount) as provided in Section 3(a) hereof and in accordance with the schedule set forth therein.      Each time and date of delivery of and payment for Securities to be purchased by an Agent as principal, whether set forth in a Terms Agreement or in accordance with the Administrative Procedure, is referred to herein as a “Time of Delivery”.      4. The documents required to be delivered pursuant to Section 7 hereof on the Commencement Date (as defined below) shall be delivered to the Agents at the offices of Mayer, Brown, Rowe & Maw LLP, 71 South Wacker Drive, Chicago, Illinois, at 11:00 a.m., New York City time, on the date of this Agreement, which date and time of such delivery may be postponed by agreement between the Agents and the Bank but in no event shall be later than the day prior to the date on which solicitation of offers to purchase Securities is commenced or on which any Terms Agreement is executed (such time and date being referred to herein as the “Commencement Date”).      5. The Bank and the Holding Company covenant and agree, jointly and severally, with each Agent:      (a) (i) To make no amendment or supplement to the Offering Circular, Disclosure Package or a Final Pricing Supplement (excluding any Exchange Act Reports or Call Reports) (A) prior to the Commencement Date which shall be disapproved by any Agent promptly after reasonable notice thereof or (B) after the date of any Terms Agreement or other agreement by an Agent to purchase Securities as principal and prior to the related Time of Delivery which shall be disapproved by any Agent party to such Terms Agreement or so purchasing as principal promptly after reasonable notice thereof; (ii) to prepare, with respect to any Securities to be sold through or to such Agent pursuant to this Agreement, a Preliminary Pricing Supplement, a Term Sheet (if requested) and a Final Pricing Supplement, and a Terms Agreement (if requested), with respect to such Securities in a form previously approved by such Agent; (iii) to make no amendment or supplement to the Offering Circular or the Disclosure Package (excluding any Exchange Act Reports or Call Reports) at any time prior to having afforded each Agent a reasonable opportunity to review and comment thereon; (iv) to file promptly, in the case of the Bank, all Call Reports required to be filed by the Bank pursuant to the applicable rules and regulations of the Federal Reserve Board and the FFIEC; (v) to file promptly, in the case of the Holding Company, all reports and any definitive proxy or information 11 --------------------------------------------------------------------------------   statements required to be filed by the Holding Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act; (vi) to advise each of the Agents as promptly as practicable of the institution by any federal or state bank or securities regulatory authority of any proceedings in respect of the Offering Circular, a Final Pricing Supplement or the Disclosure Package (including any proceeding relating to any Exchange Act Reports or Call Reports) or the offering of the Securities and to use its best efforts to prevent the issuance of any order interfering with the offering of the Securities and to obtain as soon as possible its lifting, if issued and (vii) to use best efforts to prevent the issuance of any order or similar action interfering with the offering or sale of the Securities or the use of the Offering Circular, a Final Pricing Supplement or the Disclosure Package and, if issued, to use best efforts to obtain as soon as possible the withdrawal thereof;      (b) Promptly from time to time to take such action as such Agent may reasonably request (i) to qualify the Securities for offering and sale under the securities laws of such jurisdictions as such Agent may designate and (ii) to comply with such laws so as to permit the continuance of sales and dealings therein for as long as may be necessary to complete the distribution or sale of the Securities; provided, however, that in connection therewith the Bank shall not be required to qualify as a foreign corporation, file a general consent to service of process in any jurisdiction or subject itself to taxation as a foreign corporation in any jurisdiction in which it is not otherwise so subject;      (c) To furnish such Agent with a copy of the Offering Circular, a Final Pricing Supplement and the Disclosure Package and each amendment or supplement thereto signed by an authorized officer of the Bank and of the Holding Company, and additional copies of the Offering Circular, a Final Pricing Supplement and the Disclosure Package, and each amendment or supplement thereto (except as may be provided in the Administrative Procedure), in such quantities as such Agent may reasonably request from time to time; and if, at any time while this Agreement is in effect, or, in the event this Agreement is terminated, at any time an Agent is holding Securities it purchased as principal, any event shall have occurred as a result of which the Offering Circular, a Final Pricing Supplement and the Disclosure Package as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made existing at any Representation Date or the time it is delivered to a purchaser not misleading, or, if for any other reason it shall be necessary or required during such same period to amend or supplement the Offering Circular, a Final Pricing Supplement or the Disclosure Package, to promptly notify such Agent and request such Agent, in its capacity as agent of the Bank, to suspend solicitation of offers to purchase Securities from the Bank (and, if so notified, such Agent shall cease such solicitations as soon as practicable, but in any event not later than one business day later); and upon the request of an Agent, shall promptly prepare and furnish without charge an amendment or supplement to the Offering Circular, a Final Pricing Supplement or the Disclosure Package, as applicable, as then amended or supplemented that will correct such statement or omission; 12 --------------------------------------------------------------------------------        (d) So long as any Securities are outstanding, to furnish to such Agent copies of all reports or other communications (financial or other) furnished to the Holding Company’s stockholders, and deliver to such Agent as soon as they are available, copies of any reports and financial statements not otherwise available through the Commission’s or the Holding Company’s website furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Holding Company is listed;      (e) From the date of any Terms Agreement with such Agent or other agreement by such Agent to purchase Securities as principal and continuing to and including the later of (i) the termination of the trading restrictions for the Securities purchased thereunder, as notified to the Bank by such Agent and (ii) the related Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Bank (other than deposit obligations) which both mature more than 7 days after such Time of Delivery and are substantially similar to the Securities, without the prior written consent of such Agent;      (f) That each acceptance by the Bank of an offer to purchase Securities hereunder (including any purchase by such Agent as principal not pursuant to a Terms Agreement), and each execution and delivery by the Bank of a Terms Agreement with such Agent, shall be deemed to be an affirmation to such Agent that the representations and warranties of the Bank and the Holding Company contained in or made pursuant to this Agreement are true and correct as of the date of such acceptance or of such Terms Agreement, as the case may be, as though made at and as of such date, and an undertaking that such representations and warranties will be true and correct as of the settlement date for the Securities relating to such acceptance or as of the Time of Delivery relating to such sale, as the case may be, as though made at and as of such date (except that such representations and warranties shall be deemed to relate to the Offering Circular, a Final Pricing Supplement and the Disclosure Package, each as amended and supplemented relating to such Securities);      (g) That each time the Bank sells Securities to such Agent as principal pursuant to a Terms Agreement and such Terms Agreement specifies the delivery of an opinion or opinions by Mayer, Brown, Rowe & Maw LLP, counsel to the Agents, as a condition to the purchase of Securities pursuant to such Terms Agreement, the Bank shall furnish to such counsel such papers and information as they may reasonably request to enable them to furnish to such Agent the opinion or opinions referred to in Section 7(a) hereof;      (h) That each time the Offering Circular or the Disclosure Package shall be amended or supplemented (other than (x) by a Preliminary or Final Pricing Supplement or Term Sheet providing solely for the interest rates or maturities of the securities or the principal amount of securities remaining to be sold or similar changes, (y) as a result of the filing of a Call Report with the FFIEC or (z) as a result of the filing with the Commission a Current Report on Form 8-K or Quarterly Report on Form 10-Q, but specifically including as a result of filing with the Commission an Annual Report on Form 10-K) and each time the Bank sells Securities to such Agent as principal pursuant 13 --------------------------------------------------------------------------------   to a Terms Agreement and such Terms Agreement specifies the delivery of an opinion under this Section 5(h) as a condition to the purchase of Securities pursuant to such Terms Agreement, the Bank shall furnish or cause to be furnished forthwith to such Agent written opinions of Jerry W. Powell, General Counsel and Secretary of the Holding Company and Balch & Bingham LLP or other counsel for the Bank approved as satisfactory to such Agent (provided that such approval shall not be unreasonably withheld), dated the date of such amendment, supplement or Time of Delivery relating to such sale, as the case may be, in form satisfactory to such Agent, to the effect that such Agent may rely on the opinion of such counsel referred to in Section 7(b) hereof which was last furnished to such Agent to the same extent as though it were dated the date of such letter authorizing reliance (except that the statements in such last opinion shall be deemed to relate to the Offering Circular and the Disclosure Package, each as amended and supplemented to such date) or, in lieu of such opinion, an opinion of the same tenor as the opinion of such counsel referred to in Section 7(b) hereof but modified to relate to the Offering Circular and the Disclosure Package, each as amended and supplemented to such date;      (i) That each time the Offering Circular or the Disclosure Package shall be amended or supplemented (other than (x) by a Preliminary or Final Pricing Supplement or Term Sheet providing solely for the interest rates or maturities of the securities or the principal amount of securities remaining to be sold or similar changes, (y) as a result of the filing of a Call Report with the FFIEC or (z) as a result of the filing with the Commission a Current Report on Form 8-K or Quarterly Report on Form 10-Q, but specifically including as a result of filing with the Commission an Annual Report on Form 10-K), and each time the Bank sells Securities to such Agent as principal and the applicable Terms Agreement specifies the delivery of a certificate under this Section 5(i) as a condition to the purchase of Securities pursuant to such Terms Agreement, the Bank shall furnish or cause to be furnished forthwith to such Agent a certificate, dated the date of such supplement, amendment or Time of Delivery relating to such sale, as the case may be, in such form and executed by such officers of the Bank as shall be satisfactory to such Agent (provided that any of the Chief Executive Officer, Chief Financial Officer, Treasurer or Executive Vice President, Treasury Division, or any other officer as authorized by the Board of Directors shall be deemed as satisfactory to such Agent), to the effect that the statements contained in the certificates referred to in Section 7(e) hereof which were last furnished to such Agent are true and correct at such date as though made at and as of such date (except that such statements shall be deemed to relate to the Offering Circular and the Disclosure Package, each as amended and supplemented to such date) or, in lieu of such certificate, certificates of the same tenor as the certificates referred to in said Section 7(e) modified to relate to the Offering Circular and the Disclosure Package, each as amended and supplemented to such date;      (j) That each time that the Offering Circular is amended or supplemented to (x) include additional financial information (other than by an amendment or supplement relating solely to the issuance and/or offering of securities other than the Securities) or (y) (in connection with the purchase of Securities from the Bank by one or more Agents as principal) the Bank sells Securities to one or more Agents as principal, the Bank shall furnish or cause to be furnished promptly to each of the Agents a comfort letter of 14 --------------------------------------------------------------------------------   independent public accountants, dated the date of the filing with the Commission or the date of such amendment or supplement, as applicable, or the date of such sale, as the case may be, in form satisfactory to each of the Agents;      (k) To offer to any person who has agreed to purchase Securities from the Bank as the result of an offer to purchase solicited by such Agent the right to refuse to purchase and pay for such Securities if, on the related settlement date fixed pursuant to the Administrative Procedure, any condition set forth in Section 7(c) or 7(d) hereof shall not have been satisfied (it being understood that the judgment of such person with respect to the impracticability or inadvisability of such purchase of Securities shall be substituted, for purposes of this Section 5(k), for the respective judgments of an Agent with respect to certain matters referred to in Section 7(c) and 7(d), and that such Agent shall have no duty or obligation whatsoever to exercise the judgment permitted under Sections 7(c) and 7(d) on behalf of any such person);      (l) The Bank will not, unless the Bank obtains the prior written consent of the Agents to whom or through whom a particular issue of Securities is to be sold, use any Supplemental Offering Materials with respect to such Securities. As used herein, “Supplemental Offering Materials” means any “written communication” (within the meaning of the regulations of the Commission under the Securities Act), other than the Offering Circular and the Disclosure Package, prepared by or on behalf of the Bank, or used or referred to by the Bank, that constitutes an offer to sell or a solicitation of an offer to buy the Securities, including without limitation any such written communication that would, if the sale of the Securities were conducted as a public offering pursuant to a registration statement filed with the Commission, constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act; and      (m) On the date hereof, the Holding Company shall have executed a letter agreement with the Agents, dated the date hereof (the “Letter Agreement”), in substantially the form of Exhibit A hereto.      6. The Bank covenants and agrees with each Agent that the Bank will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Bank’s counsel and accountants in connection with the issuance of the Securities, in connection with the preparation and printing of the Offering Circular, the Disclosure Package, any Supplemental Offering Materials and any Preliminary or Final Pricing Supplements or Term Sheets, and all other amendments and supplements thereto, and the mailing and delivering of copies thereof to such Agent; (ii) the reasonable fees, disbursements and expenses of counsel for the Agents in connection with the establishment of the program contemplated hereby, any opinions to be rendered by such counsel hereunder and under any Terms Agreement and the transactions contemplated hereunder and under any Terms Agreement; (iii) the cost of printing, producing or reproducing this Agreement, any Terms Agreement, any Issuing Agency Agreement, any Blue Sky and Legal Investment Memoranda, closing documents (including any compilation thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iv) all reasonable expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Agents in connection with such qualification and in 15 --------------------------------------------------------------------------------   connection with the Blue Sky and legal investment surveys; (v) any fees charged by securities rating services for rating the Securities; (vi) the cost of preparing the Securities; (vii) the fees and expenses of any Issuing and Paying Agent and any agent of any Issuing and Paying Agent and any transfer or paying agent of the Bank and the fees and disbursements of counsel for any Issuing and Paying Agent or such agent in connection with any Issuing Agency Agreement and the Securities; (viii) any advertising expenses connected with the solicitation of offers to purchase and the sale of Securities so long as such advertising expenses have been approved by the Bank; and (ix) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. Except as provided in Sections 8 and 9 hereof, each Agent shall pay all other expenses it incurs.      7. The obligation of any Agent, as agent of the Bank, at any time (“Solicitation Time”) to solicit offers to purchase the Securities and the obligation of any Agent to purchase Securities as principal, pursuant to any Terms Agreement or otherwise, shall in each case be subject, in such Agent’s discretion, to the condition that all representations and warranties and other statements of the Bank and the Holding Company herein (and, in the case of an obligation of an Agent under a Terms Agreement, in or incorporated by reference in such Terms Agreement) are true and correct at and as of the Commencement Date and any applicable date referred to in Section 5(i) hereof that is prior to such Solicitation Time or Time of Delivery, as the case may be, and at and as of such Solicitation Time or Time of Delivery, as the case may be, the condition that prior to such Solicitation Time or Time of Delivery, as the case may be, the Bank shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions:      (a) Mayer, Brown, Rowe & Maw LLP, counsel to the Agents, shall have furnished to such Agent (i) such opinion or opinions, dated the Commencement Date, with respect to such matters as such Agent may reasonably request, and (ii) if and to the extent requested by such Agent, with respect to each applicable date referred to in Section 5(g) hereof that is on or prior to such Time of Delivery an opinion or opinions, dated such applicable date, to the effect that such Agent may rely on the opinion or opinions which were last furnished to such Agent pursuant to this Section 7(a) to the same extent as though it or they were dated the date of such letter authorizing reliance (except that the statements in such last opinion or opinions shall be deemed to relate to the Offering Circular, as amended and supplemented to such date) or, in lieu of such an opinion or opinions, an opinion or opinions of the same tenor as the opinion or opinions referred to in clause (i) but modified to relate to the Offering Circular, as amended and supplemented to such date; and in each case such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;      (b) (A) Balch & Bingham LLP, special counsel for the Bank, or other counsel for the Bank approved as satisfactory to such Agent (provided that such approval shall not be unreasonably withheld), shall have furnished to such Agent their written opinions, dated the Commencement Date and dated each applicable date referred to in Section 5(h) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, each in form and substance satisfactory to such Agent, to the effect that: 16 --------------------------------------------------------------------------------             (i) The Bank has been duly incorporated and is an existing banking corporation in good standing under the laws of the State of Alabama, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular and the Disclosure Package. The Holding Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular and the Disclosure Package and is duly registered as a bank holding company under the Holding Company Act;           (ii) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement, the Offering Circular, a Final Pricing Supplement or the Disclosure Package in connection with the issuance and sale of the Securities by the Bank except such as have been made with the Federal Reserve Bank of Atlanta or such other regulatory agencies and such as may be required under state securities law.           (iii) The statements set forth in the Offering Circular under the caption “Description of Bank Notes”, insofar as they purport to constitute a summary of the terms of the Securities, and under the caption “Supervision, Regulation and Other Matters”, insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and complete in all material respects.           (iv) The statements set forth in the Offering Circular under the caption “Certain United States Federal Income Tax Consequences” insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto are accurate and complete in all material respects.           (v) The Exchange Act Reports (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder; and such counsel has no reason to believe that any of such documents (other than the financial statements and related schedules therein, as to which such counsel need express no view), when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading.           (vi) No registration of the Securities under the Act is required for the offer and sale of the Securities by the Agents by virtue of the exemption provided by Section 3(a)(2) of the Act; and no qualification of an indenture under the Trust Indenture Act is required with respect thereto.           (vii) The Bank is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Offering 17 --------------------------------------------------------------------------------   Circular, a Final Pricing Supplement and the Disclosure Package, will not be an “investment company,” as defined in the Investment Company Act of 1940.           (viii) To the best knowledge of such counsel, no order directed to any document incorporated by reference in the Offering Circular and the Disclosure Package has been issued and no challenge has been made to the accuracy or adequacy of any such document by any regulatory or other government agency.      (B) Jerry W. Powell, General Counsel and Secretary of the Holding Company or other counsel for the Bank satisfactory to such Agent, shall have furnished to such Agent their written opinion dated the Commencement Date and dated each applicable date referred to in Section 5(h) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, each in form and substance satisfactory to such Agent, to the effect that:           (i) The Bank has been duly incorporated and is an existing banking corporation in good standing under the laws of the State of Alabama, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular and the Disclosure Package and the Bank is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; and the Holding Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular and the Disclosure Package and is duly registered as a bank holding company under the Holding Company Act;           (ii) The Bank has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Bank have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Holding Company (except for directors’ qualifying shares, if any), free and clear of all liens, encumbrances, equities or claims.           (iii) To the best of such counsel’s knowledge and except as disclosed in the Offering Circular, there are no pending actions, suits or proceedings against or affecting the Bank, the Holding Company or any of their subsidiaries or any of their respective properties that, if determined adversely to the Bank, the Holding Company or any of their subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Bank and its subsidiaries or the Holding Company and its subsidiaries, as the case may be, taken as a whole, or would materially and adversely affect the ability of the Bank or the Holding Company, as the case may be, to perform its obligations under the Issuing and Paying Agency Agreement or this Agreement, or which are otherwise material in the context of the sale of the Securities; and the best of such counsel’s knowledge, no such actions, suits or proceedings are threatened. 18 --------------------------------------------------------------------------------             (iv) This Agreement and any applicable Terms Agreement have been duly authorized, executed and delivered by the Holding Company and the Bank.           (v) The Securities have been duly authorized by the Bank and, when the terms of the Securities and of their issue and sale have been duly established in accordance with this Agreement and the Issuing Agency Agreement so as not to violate any applicable law or agreement or instrument then binding on the Bank, and the Securities have been duly executed and issued by the Bank and duly authenticated by the Issuing and Paying Agent in accordance with the Issuing Agency Agreement, and upon payment and delivery in accordance with this Agreement, will constitute valid and legally binding obligations of the Bank enforceable against the Bank in accordance with their terms and entitled to the benefits provided by the Issuing Agency Agreement, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting the rights of creditors generally or of creditors of depository institutions the accounts of which are insured by the FDIC and to general equity principles (in rendering the opinion set forth in this paragraph (vi), such counsel may assume that, at the time of any issuance and sale of any of the Securities, the Board of Directors of the Bank (or any committee thereof acting pursuant to authority properly delegated to such committee by the Board of Directors) has not taken any action to rescind or otherwise reduce its prior authorization of the issuance of the Securities and an officer of the Bank, as stated in the resolutions of the Board of Directors (or any such committee) relating to the Securities, has executed and delivered such Securities).           (vi) The Issuing Agency Agreement has been duly authorized, executed and delivered by the Bank and constitutes a valid and legally binding agreement of the Bank, enforceable against the Bank in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the rights of creditors generally or of creditors of depository institutions the accounts of which are insured by the FDIC and to general equity principles.           (vii) The execution, delivery and performance of the Issuing Agency Agreement and this Agreement do not, and the completion, execution and issuance of each particular Security in accordance with the Issuing Agency Agreement, the sale by the Bank of such Security in accordance with this Agreement 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, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Holding Company, the Bank or any subsidiary of the Bank or the Holding Company or any of their properties, or any agreement or instrument to which the Bank or the Holding Company or any such subsidiary is a party or by which the Holding Company, the Bank or any such subsidiary is bound or to which any of the properties of the Holding Company, the Bank or any such subsidiary is subject, or the charter or by-laws of the Holding Company, the Bank or any such subsidiary, and the Bank has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement. 19 --------------------------------------------------------------------------------             (viii) To the best knowledge of such counsel, no order directed to any document incorporated by reference in the Offering Circular or the Disclosure Package has been issued and no challenge has been made to the accuracy or adequacy of any such document by any regulatory or other government agency.           (ix) The obligations of the Bank under the Securities that are Senior Bank Notes rank pari passu with its other unsecured and unsubordinated liabilities, except deposit obligations           (x) The Bank is an insured bank under the applicable provisions of the FDIA.           (xi) Each Significant Subsidiary has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Circular and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not have a material adverse effect on the Bank and its subsidiaries taken as a whole; except as otherwise disclosed in the Offering Circular, all of the issued and outstanding capital stock of each Significant Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Bank, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of the Significant Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Significant Subsidiary.      (C) Any legal opinion delivered pursuant to this Section 7 shall also include the following statement (or shall be accompanied by a letter including): “No facts have come to our attention that cause us to believe that as of the Applicable Time, the Disclosure Package (except for the financial statements and related schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which we need make no statement) included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of circumstances under which they were made, not misleading. “      (c) There shall not have occurred from (A) the date of the most recent financial statements included in the Offering Circular, in the case of the following clause (i), or (B) the date of any acceptance of an offer to purchase Securities, in the case of the following clauses (ii) — (v), to the related settlement date, (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Bank, Holding Company or any of their subsidiaries which, in the judgment of such Agent, as to itself only (or, in the case of a syndicated issue, as to the entire syndicate if the bookrunning lead managing Agent(s) so terminate), is material and adverse and makes it impractical or inadvisable to proceed with the solicitation by such Agent of offers to purchase Securities from the 20 --------------------------------------------------------------------------------   Bank or the purchase by such Agent of Securities from the Bank as principal, as the case may be, on the terms and in the manner contemplated in the Offering Circular, a Final Pricing Supplement and the Disclosure Package; (ii) any downgrading in the rating of any debt securities of the Bank or Holding Company by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Bank or Holding Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any 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 Bank or Holding Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. Federal or New York authorities; or (v) any outbreak or escalation of major 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 sole judgment of such Agent, as to itself only (or, in the case of a syndicated issue, as to the entire syndicate if the bookrunning lead managing Agent(s) so terminate), the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with solicitations of offers to purchase Securities or the purchase of the Securities from the Bank as principal or enforce contracts for the sale of Securities pursuant to the applicable terms Agreement or otherwise, as the case may be, on the terms and the manner contemplated in the Offering Circular, a Final Pricing Supplement and the Disclosure Package.      (d) With respect to any Security denominated in a currency other than the U.S. dollar, more than one currency or a composite currency or any Security the principal or interest of which is indexed to such currency, currencies or composite currency, there shall not have occurred a suspension or material limitation in foreign exchange trading in such currency, currencies or composite currency by a major international bank, a general moratorium on commercial banking activities in the country or countries issuing such currency, currencies or composite currency, the outbreak or escalation of hostilities involving, the occurrence of any material adverse change in the existing financial, political or economic conditions of, or the declaration of war or a national emergency by, the country or countries issuing such currency, currencies or composite currency or the imposition or proposal of exchange controls by any governmental authority in the country or countries issuing such currency, currencies or composite currency.      (e) The Bank shall have furnished or caused to be furnished to such Agent certificates of officers of the Bank and of the Holding Company dated the Commencement Date and each applicable date referred to in Section 5(i) hereof in such form and executed by such officers of the Bank and of the Holding Company as shall be satisfactory to such Agent (provided that any of the Chief Executive Officer, Chief Financial Officer, Treasurer or Executive Vice President, Treasury Division, or any other officer as authorized by the Board of Directors shall be deemed as satisfactory to such Agent) to the accuracy of the representations and warranties of the Bank and the Holding Company herein at and as of the Commencement Date or such applicable date, as the case may be, as to the performance by the Bank and the Holding Company of all of their 21 --------------------------------------------------------------------------------   respective obligations hereunder to be performed at or prior to the Commencement Date or such applicable date, as the case may be, as to the matters set forth in subsection (c) of this Section 7, and as to such other matters as such Agent may reasonably request.      (f) Each Agent shall have received a comfort letter, satisfactory to each Agent, from the Bank’s independent certified public accountants.      8. (a) The Bank and the Holding Company, jointly and severally will indemnify and hold harmless each Agent against any losses, claims, damages or liabilities, joint or several, to which such Agent may become subject, under the Act or otherwise, 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 Disclosure Package, a Final Pricing Supplement or any Supplemental Offering Materials, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such Agent for any legal or other expenses reasonably incurred by such Agent in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Bank and the Holding Company will not be liable to such Agent 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 or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the Bank and the Holding Company by such Agent specifically for use in the Offering Circular, the Disclosure Package, a Final Pricing Supplement or any Supplemental Offering Materials, unless such loss, claim, damage or liability arises out of the offer or sale of Securities occurring after the Agent has notified the Bank and the Holding Company in writing that such information should no longer be used therein, it being understood and agreed that the only such information furnished by any Agent consists of the information described as such in subsection (b) below.           (b) Each Agent will severally and not jointly indemnify and hold harmless the Bank or the Holding Company against any losses, claims, damages or liabilities to which the Bank or the Holding Company may become subject, under the Act or otherwise, 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 Disclosure Package, a Final Pricing Supplement or any Supplemental Offering Materials, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Bank and the Holding Company by such Agent specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Bank and the Holding Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, unless such loss, claim, damage or liability arises out of the offer or sale of Securities occurring after the Agent has notified the Bank and the Holding Company in writing that such information should no longer be used in the 22 --------------------------------------------------------------------------------   Offering Circular, the Disclosure Package, a Final Pricing Supplement or any Supplemental Offering Materials, it being understood and agreed that the only such information furnished by any Agent consists of the following information in the Offering Circular, the Disclosure Package, a Final Pricing Supplement or any Supplemental Offering Materials furnished on behalf of each Agent: the information contained in the fifth and twelfth paragraphs in the Offering Circular under the caption “Plan of Distribution”.           (c) Promptly after receipt by an indemnified party under this Section 8 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 subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but 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 subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action 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 any claims that are the subject matter of such action.           (d) If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (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 subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Bank and the Holding Company on the one hand and any Agent on the other from the offering pursuant to this Agreement of the Securities which are the subject of the action 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 Bank and the Holding Company on the one hand and any 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 Bank and the Holding Company on the one hand and any Agent on the other shall be deemed to be in the same proportions as the total net proceeds from the offering pursuant to this Agreement of the Securities which are the subject of the action (before deducting expenses) received by the Bank and the Holding Company bear to the total discounts and commissions received by such Agent from the offering of such Securities pursuant to this Agreement. 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 23 --------------------------------------------------------------------------------   information supplied by the Bank or the Holding Company on the one hand or by any such 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 subsection (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 subsection (d). Notwithstanding the provisions of this subsection (d), no Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities which are the subject of the action and which were distributed to the public through it pursuant to this Agreement or upon resale of Securities purchased by it from the Bank 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. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of each Agent in this subsection (d) to contribute are several, in the same proportion which the amount of the Securities which are the subject of the action and which were distributed through such Agent pursuant to this Agreement bears to the total amount of such Securities distributed through all of the Agents pursuant to this Agreement, and not joint.           (e) The obligations of the Bank and the Holding Company under this Section 8 shall be in addition to any liability which the Bank or the Holding Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls each Agent within the meaning of the Act; and the obligations of each Agent under this Section 8 shall be in addition to any liability which each Agent may otherwise have and shall extend, upon the same terms and conditions, to each office and director of the Bank and to each person, if any, who controls the Bank within the meaning of the Act.      9. Each Agent, in soliciting offers to purchase Securities from the Bank and in performing the other obligations of such Agent hereunder (other than in respect of any purchase by an Agent as principal, pursuant to a Terms Agreement or otherwise), is acting solely as agent for the Bank and not as principal. Each Agent will make reasonable efforts to assist the Bank in obtaining performance by each purchaser whose offer to purchase Securities from the Bank was solicited by such Agent and has been accepted by the Bank, but such Agent shall not have any liability to the Bank in the event such purchase is not consummated for any reason. If the Bank shall default on its obligation to deliver Securities to a purchaser whose offer it has accepted, the Bank shall (i) hold each Agent harmless against any loss, claim or damage arising from or as a result of such default by the Bank and (ii) notwithstanding such default, pay to the Agent that solicited such offer any commission to which it would be entitled in connection with such sale.      10. The respective indemnities, agreements, representations, warranties and other statements by any Agent, the Bank and the Holding Company set forth in or made pursuant to this Agreement shall remain in full force and effect regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Agent or any controlling person of any Agent, or the Bank, the Holding Company or any officer or director or any controlling person of the Bank or the Holding Company, and shall survive each delivery of and payment for any of the Securities. 24 --------------------------------------------------------------------------------        11. The provisions of this Agreement relating to the solicitation of offers to purchase Securities from the Bank may be suspended and this Agreement may be terminated at any time by the Bank as to any Agent or by any Agent as to such Agent upon the giving of written notice of such suspension or termination to such Agent or the Bank, as the case may be. In the event of such suspension or termination with respect to any Agent, (x) this Agreement shall remain in full force and effect with respect to any Agent as to which such suspension or termination has not occurred, (y) this Agreement shall remain in full force and effect with respect to the rights and obligations of any party which have previously accrued or which relate to Securities which are already issued, agreed to be issued or the subject of a pending offer at the time of such suspension or termination and (z) in any event, this Agreement shall remain in full force and effect insofar as the fourth paragraph of Section 3(a), and Sections 5(c), 5(d), 5(e), 6, 8, 9 and 10 hereof are concerned.      12. Except as otherwise specifically provided herein or in the Administrative Procedure, all statements, requests, notices and advices hereunder shall be in writing, or by telephone if promptly confirmed in writing, and shall be sufficient in all respects when delivered or sent by facsimile transmission or registered mail as follows: if to Citigroup Global Markets Inc. to 388 Greenwich Street, New York, New York 10013, attention of Medium-Term Note Department, Facsimile (212) 816-7912, and if to Keefe, Bruyette & Woods, Inc. to 787 7th Avenue, New York, New York 10019, Facsimile (212) 541-6644, Attention: Debt Capital Markets, and if to Lehman Brothers Inc. to Lehman Brothers Inc., Attention: Debt Capital Markets, Financial Institutions Group, 745 Seventh Avenue, New York, New York 10019, Facsimile (212) 526-0943, Attention: MTN Product Origination (with a copy to the General Counsel at the same address) and if to Merrill Lynch, Pierce, Fenner & Smith Incorporated to World Financial Center, North Tower, 11th Floor, New York, New York 10281, Facsimile (212) 449-0599, Attention: Product Management Department, and if to Sandler, O’Neill & Partners, L.P. to 919 Third Avenue, 6th Floor, New York, New York 10022, and if to the Bank or the Holding Company to Compass Bank, 15 South 20th Street Plaza Level, Birmingham, Alabama 35233, Attention: Treasurer, Facsimile (205) 297-5521.      13. This Agreement and any Terms Agreement shall be binding upon, and inure solely to the benefit of, each Agent, the Bank and the Holding Company, and to the extent provided in Sections 8, 9 and 10 hereof, the officers and directors of the Bank and the Holding Company and any person who controls any Agent or the Bank or the Holding Company, and their respective personal representatives, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement or any Terms Agreement. No purchaser of any of the Securities through or from any Agent hereunder shall be deemed a successor or assign by reason merely of such purchase.      14. The Bank acknowledges and agrees that (i) any purchase and sale of Securities pursuant to this Agreement and any Terms Agreement, including the determination of terms of the Securities and any related discounts and commissions, are arm’s-length commercial transactions between the Bank, on the one hand, and the Agent(s), on the other hand, (ii) in connection with the offerings contemplated hereby and the process leading to any such transaction each Agent is and has been acting solely as a principal and is not the agent (except to the extent expressly set forth herein) or fiduciary of the Bank or its shareholders, creditors, employees or any other party, (iii) no Agent has assumed or will assume an advisory or fiduciary 25 --------------------------------------------------------------------------------   responsibility in favor of the Bank with respect to the offerings contemplated hereby or the process leading thereto (irrespective of whether such Agent has advised or is currently advising the Bank on other matters) and no Agent has any obligation to the Bank with respect to any offering contemplated hereby except the obligations expressly set forth in this Agreement, (iv) the Agent(s) and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Bank, and (v) no Agent has provided any legal, accounting, regulatory or tax advice with respect to the offerings contemplated hereby and the Bank has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate      15. Time shall be of the essence in this Agreement and any Terms Agreement.      16. This Agreement and any Terms Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.      17. This Agreement and any Terms Agreement may be executed by any one or more of the parties hereto and thereto in any number of counterparts, each of which shall be an original, but all of such respective counterparts shall together constitute one and the same instrument. 26 --------------------------------------------------------------------------------        If the foregoing is in accordance with your understanding, please sign and return to us counterpart signatures hereof, whereupon this letter and the acceptance by each of you thereof shall constitute a binding agreement between the Bank and each of you in accordance with its terms.                           Very truly yours,                               COMPASS BANK                               By:   /s/ Richard O. Hughes                    Name: Richard O. Hughes                 Title: Executive Vice President                               COMPASS BANCSHARES, INC.                               By:   /s/ Richard O. Hughes                    Name: Richard O. Hughes                 Title: Executive Vice President                       Accepted in New York, New York, as of the date hereof:                               CITIGROUP GLOBAL MARKETS INC.                               By:   /s/ S. Kenneth McPhail                    Name: S. Kenneth McPhail                 Title: Managing Director                               KEEFE, BRUYETTE & WOODS, INC.                               By:   /s/ Maurice Beshcian IV                    Name: Maurice Beshcian IV                 Title: Managing Director                               LEHMAN BROTHERS INC.                               By:   /s/ John Jedlicka                    Name: John Jedlicka                 Title: Managing Director                               MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED                               By:   /s/ Jason Brownstein                    Name: Jason Brownstein                 Title: Vice President                               SANDLER, O’NEILL & PARTNERS, L.P.                               By:   /s/ Robert A. Kleinart                    Name: Robert A. Kleinart                 Title: Officer             27 --------------------------------------------------------------------------------   EXHIBIT A Holding Company Letter Agreement Dear Sirs:      Compass Bancshares, Inc. (the “Holding Company”), a bank holding company with securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in order to induce you (each referred to as an “Agent” and collectively referred to as the “Agents”) to enter into a Distribution Agreement of even date herewith (the “Agreement”) with respect to the issue and sale from time to time by Compass Bank, an Alabama banking corporation (the “Bank”), of up to $2,000,000,000 principal amount of its senior and subordinated debt obligations not insured by the Federal Deposit Insurance Corporation called Bank Notes (the “Notes”), hereby agrees with the Agents as follows (capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement).      1. Representations and Warranties.      The Holding Company represents and warrants to each Agent as follows:      (a) Authorization to Incorporate by Reference. The Holding Company has authorized the Bank to incorporate by reference in the Offering Circular (i) its Annual Report on Form 10-K for the year ended December 31, 2005, (ii) its Current Reports on Form 8-K dated January 3, 2006 and January 17, 2006 and (ii) any reports filed by it with the Securities and Exchange Commission (the “Commission”) pursuant to Section 13 or 15(d) of the Exchange Act and the rules and regulations thereunder subsequent to the date hereof and prior to the termination of the offering of the Notes (collectively, the “Incorporated Documents”).      (b) Incorporated Documents; Financial Statements. The Incorporated Documents, at the time they were or hereafter are filed by the Holding Company with the Commission complied or when so filed will comply, as the case may be, in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder, and, when read together with the other information in the Offering Circular (as of each applicable Representation Date) and the Disclosure Package as of the Applicable Time, did not and will not contain an untrue statement of a material fact or omit 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 or are made, not misleading.      (c) Due Organization, Valid Existence and Good Standing. The Holding Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware and is licensed, registered or qualified to conduct the business in which it is engaged in each jurisdiction in which the conduct of its business or its ownership or the leasing of property requires such license, registration or qualification, except to the extent that the failure to be so licensed, registered or qualified or to be in good standing would not have a material adverse effect on the Holding Company and its subsidiaries taken as a whole. 1 --------------------------------------------------------------------------------        (d) Authorization of Agreement. The Agreement and this Letter Agreement have been duly authorized by all necessary corporate action on the part of the Holding Company.      (e) No Material Adverse Change. Except as set forth or contemplated in the Offering Circular, since the date of its latest financial statements included or incorporated by reference in the Offering Circular, there has not been any material adverse change in the financial condition, business or results of operations of the Holding Company and its subsidiaries on a consolidated basis.      2. Representations and Warranties to Survive Delivery.      All representations and warranties contained in this Letter Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Agents or any controlling person of the Agents, or by or on behalf of the Holding Company and shall survive each delivery of and payment for any of the Notes.      3. Termination.      This Letter Agreement may be terminated for any reason without notice, at any time the Agreement is contemporaneously terminated in its entirety in accordance with the provisions thereof. In the event of such termination, the provisions of Section 2 hereof shall remain in effect.      4. Notices.      All notices and other communications related to this Letter Agreement shall be delivered in accordance with the provisions of Section 13 of the Agreement and, if to the Holding Company or the Bank, shall be delivered to Compass Bank, 15 South 20th Street Plaza Level, Birmingham, Alabama 35233, Attention: Treasurer, Facsimile Transmission No. (205) 297-5521.      5. Governing Law.      This Letter Agreement and the rights and obligations of the parties shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within such State. 2 --------------------------------------------------------------------------------        If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Holding Company a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between you and the Holding Company in accordance with its terms.                           Very truly yours,                               COMPASS BANCSHARES, INC.                               By:                       Name:                 Title:                       Accepted in New York, New York, as of the date hereof:                               CITIGROUP GLOBAL MARKETS INC.                               By:                       Name:                 Title:                               KEEFE, BRUYETTE & WOODS, INC.                               By:                       Name:                 Title:                               LEHMAN BROTHERS INC.                               By:                       Name:                 Title:                               MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED                               By:                       Name:                 Title:                               SANDLER, O’NEILL & PARTNERS, L.P.                               By:                       Name:                 Title:             3 --------------------------------------------------------------------------------   ANNEX I Compass Bank Bank Notes Terms Agreement                     , 20 [Citigroup Global Markets Inc 388 Greenwich Street New York, New York 10013 Keefe, Bruyette & Woods, Inc. 787 7th Avenue New York, New York 10019 Lehman Brothers Inc. 745 Seventh Avenue, Fifth Floor New York, New York 10019 Merrill Lynch, Pierce, Fenner & Smith Incorporated World Financial Center North Tower New York, New York 10281 Sandler O’Neill & Partners, L.P. 919 Third Avenue, 6th Floor New York, New York 10022] Ladies and Gentlemen:      Compass Bank (the “Bank”) proposes, subject to the terms and conditions stated herein and in the Distribution Agreement, dated March 13, 2006 (the “Distribution Agreement”), between the Bank and Compass Bancshares, Inc. on the one hand and Citigroup Global Markets Inc., Keefe, Bruyette & Woods, Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler, O’Neill & Partners, L.P., on the other, to issue and sell to [Name(s) of Agent(s)] (the “Agents”) the securities specified in the Schedule hereto (the “Purchased Securities”). Each of the provisions of the Distribution Agreement not specifically related to the solicitation by the Agents, as agents of the Bank, of offers to purchase Securities is incorporated herein by reference in its entirety, and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. Nothing contained herein or in the Distribution Agreement shall make any party hereto an agent of the Bank or make such party subject to the provisions therein relating to the solicitation of offers to purchase Securities from the Bank, solely by virtue of its execution of this Terms Agreement. Each of the representations and warranties set forth therein shall be deemed to have been made at and as of the date of this Terms Agreement, except that each representation and warranty in Sections 1 and 2 of the Distribution Agreement which makes reference to the Offering Circular shall be deemed to be a representation and warranty as of the date of the Distribution Agreement I-1 --------------------------------------------------------------------------------   in relation to the Offering Circular (as therein defined), and also a representation and warranty as of the date of this Terms Agreement in relation to the Offering Circular as amended and supplemented to relate to the Purchased Securities. Each of the representations and warranties which makes reference to the Disclosure Package shall be deemed to have been made at and as of the Applicable Time.      Subject to the terms and conditions set forth herein and in the Distribution Agreement incorporated herein by reference, the Bank agrees to issue and sell to [Name(s) of Agent(s)] and [Name(s) of Agent(s)] agree[s] to purchase from the Bank the Purchased Securities, at the time (the “Settlement Date”) and place, in the principal amount and at the purchase price set forth in the Schedule hereto.      [In the event the Bank and a syndicate of Agents have entered into this Terms Agreement and one or more of the Agents shall fail to purchase the Securities which it or they are obligated to purchase (the “Defaulted Securities”) at the Settlement Date, then the nondefaulting Agents shall have the right, within 24 hours thereafter, to make arrangements for one of them or one or more other Agents or placement agents to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; provided, however, that if such arrangements shall not have been completed within such 24-hour period, then:      (a) if the aggregate principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of Securities to be so purchased by all of such Agents on the Settlement Date, the nondefaulting Agents shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective initial purchase obligations bear to the purchase obligations of all nondefaulting Agents, or      (b) if the aggregate principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of Securities to be so purchased by all of such Agents on the Settlement Date, such agreement shall terminate without liability on the part of any nondefaulting Agent.      No action taken pursuant to this shall relieve any defaulting Agent from liability in respect of its default.      In the event of any such default which does not result in a termination of such agreement, either the nondefaulting Agents or the Bank shall have the right to postpone the Settlement Date for a period not exceeding seven days in order to effect any required changes in the Offering Circular or the Distribution Agreement or in any other documents or arrangements.] I-2 --------------------------------------------------------------------------------        If the foregoing is in accordance with your understanding, please sign and return to us [___] counterparts hereof, and upon acceptance hereof by you this letter and such acceptance hereof, including those provisions of the Distribution Agreement incorporated herein by reference, shall constitute a binding agreement among you, the Bank and the Holding Company.                           COMPASS BANK                               By:                       Name:                 Title:                               COMPASS BANCSHARES, INC.                               By:                       Name:                 Title:                       Accepted                               [Name(s) of Agent(s)]                               By:                       Name:                 Title:             I-3 --------------------------------------------------------------------------------   Schedule to Annex I Title of Purchased Securities:      [ %] Bank Notes Aggregate Principal Amount:      [$............... or units of other Specified Currency] [Price to Public:] Purchase Price by [Name(s) of Agent(s)]:      % of the principal amount of the Purchased Securities[, plus accrued interest from ............ to         ...........] [and accrued amortization, if any, from .............. to .............] Method of and Specified Funds for Payment of Purchase Price:      [By certified or official bank check or checks, payable to the order of the Bank, in [[New York] [Clearing House] [immediately available] funds]      [By wire transfer to a bank account specified by the Bank in [next day] [immediately available] funds] Applicable Time: Time of Delivery: Disclosure Package: Supplemental Offering Materials: Closing Location for Delivery of Securities: Maturity: Interest Rate: [ %] Interest Payment Dates:      [months and dates] Documents to be Delivered:      The following documents referred to in the Distribution Agreement shall be delivered as a condition to the Closing:       [(1) The opinion or opinions of counsel to the Agents referred to in Section 5(g).]         [(2) The opinion of counsel to the Bank referred to in Section 5(h).] I-4 --------------------------------------------------------------------------------         [(3) The officers’ certificate referred to in Section 5(i).]         [(4) The accountants’ letter(s) referred to in Section 5(j).] Other Provisions (including Syndicate Provisions, if applicable): I-5 --------------------------------------------------------------------------------   ANNEX II Compass Bank Administrative Procedure      This Administrative Procedure relates to the Securities defined in the Distribution Agreement, dated [      ], 2006 (the “Distribution Agreement”), among Compass Bank (the “Bank”), Compass Bancshares, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Keefe, Bruyette & Woods, Inc., Lehman Brothers Inc. and Sandler, O’Neill & Partners, L.P. (together, the “Agents”), to which this Administrative Procedure is attached as Annex II. Defined terms used herein and not defined herein shall have the meanings given such terms in the Distribution Agreement, the Offering Circular, a Final Pricing Supplement and the Disclosure Package, each as amended or supplemented or the Issuing Agency Agreement.      The procedures to be followed with respect to the settlement of sales of Securities directly by the Bank to purchasers solicited by an Agent, as agent, are set forth below. The terms and settlement details related to a purchase of Securities by an Agent, as principal, from the Bank will be set forth in a Terms Agreement pursuant to the Distribution Agreement, unless the Bank and such Agent otherwise agree as provided in Section 3(b) of the Distribution Agreement, in which case the procedures to be followed in respect of the settlement of such sale will be as set forth below. Notwithstanding the foregoing, the Bank and an Agent or syndicate of Agents may mutually agree to any other method of settlement of sales of Securities, either in connection with a sale of Securities directly by the Bank to purchasers solicited by an Agent, as agent, or a purchase of Securities by an Agent, as principal, from the Bank. An Agent, in relation to a purchase of a Security by a purchaser solicited by such Agent, is referred to herein as the “Selling Agent” and, in relation to a purchase of a Security by such Agent as principal other than pursuant to a Terms Agreement, as the “Purchasing Agent”.      The Bank will advise each Agent in writing of those persons with whom such Agent is to communicate regarding offers to purchase Securities and the related settlement details.      Each Security will be issued only in fully registered form and will be represented by either a global security (a “Global Security”) delivered to The Depository Trust Company (the “Depositary”) and recorded in the book-entry system maintained by the Depositary (a “Book-Entry Security”) or a certificate issued in definitive form (a “Certificated Security”) by the Issuing and Paying Agent, as agent for the Depositary, delivered to a person designated by an Agent, as set forth in the applicable Final Pricing Supplement and Term Sheet. An owner of a Book-Entry Security will not be entitled to receive a certificate representing such a Security, except as provided in the Issuing Agency Agreement.      Book-Entry Securities may be issued in accordance with the Administrative Procedure set forth in Part I hereof, and Certificated Securities may be issued in accordance with the Administrative Procedure set forth in Part II hereof, in either case except as may otherwise be mutually agreed upon by the Bank and an Agent or syndicate of Agents. II-1 --------------------------------------------------------------------------------   PART I: ADMINISTRATIVE PROCEDURE FOR BOOK-ENTRY SECURITIES      In connection with the qualification of the Book-Entry Securities for eligibility in the book-entry system maintained by the Depositary, the Issuing and Paying Agent will perform the custodial; document control and administrative functions described below (or as otherwise agreed), in accordance with its respective obligations under a Letter of Representation from the Bank and the Issuing and Paying Agent to the Depositary, dated the date hereof, and a Medium-Term Note Certificate Agreement between the Issuing and Paying Agent and the Depositary, dated as of [       ] (the “Certificate Agreement”), and its obligations as a participant in the Depositary, including the Depositary’s Same-Day Funds Settlement System (“SDFS”). Posting Rates by the Bank:      The Bank and the Agents will discuss from time to time the rates of interest per annum to be borne by and the maturity of Book-Entry Securities that may be sold as a result of the solicitation of offers by an Agent. The Bank may establish a fixed set of interest rates and maturities for an offering period (“posting”). If the Bank decides to change already posted rates, it will promptly advise the Agents to suspend solicitation of offers until the new posted rates have been established with the Agents. Acceptance of Offers by the Bank:      Each Agent will promptly advise the Bank by telephone or other appropriate means of all reasonable offers to purchase Book-Entry Securities, other than those rejected by such Agent. Each Agent may, in its discretion reasonably exercised, reject any offer received by it in whole or in part. Each Agent also may make offers to the Bank to purchase Book-Entry Securities as a Purchasing Agent. The Bank will have the sole right to accept offers to purchase Book-Entry Securities and may reject any such offer in whole or in part.      The Bank will promptly notify the Selling Agent or Purchasing Agent, as the case may be, of its acceptance or rejection of an offer to purchase Book-Entry Securities. If the Bank accepts an offer to purchase Book-Entry Securities, it will confirm such acceptance in writing to the Selling Agent or Purchasing Agent, as the case may be, and the Issuing and Paying Agent. Communication of Sale Information to the Bank by Agent and Settlement Procedures:      A. After the acceptance of an offer by the Bank, the Selling Agent or Purchasing Agent, as the case may be, will communicate promptly, but in no event later than the time set forth under “Settlement Procedure Timetable” below, the following details of the terms of such offer (the “Sale Information”) to the Bank by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means:   (1)   Principal Amount of Book-Entry Securities to be purchased;     (2)   If a Fixed Rate Book-Entry Security, the interest rate and initial interest payment date;     (3)   Trade Date; II-2 --------------------------------------------------------------------------------     (4)   Settlement Date;     (5)   Maturity Date;     (6)   Specified Currency and, if the Specified Currency is other than U.S. dollars, the applicable Exchange Rate for such Specified Currency (it being understood that currently the Depositary accepts deposits of Global Securities denominated in U.S. dollars only);     (7)   Indexed Currency, the Base Rate and the Exchange Rate Determination Date, if applicable;     (8)   Issue Price;     (9)   Selling Agent’s commission or Purchasing Agent’s discount, as the case may be;     (10)   Net Proceeds to the Bank;     (11)   If a redeemable Book-Entry Security, such of the following as are applicable:   (i)   Redemption Commencement Date,     (ii)   Initial Redemption Price (% of par), and     (iii)   Amount (% of par) that the Redemption Price shall decline (but not below par) on each anniversary of the Redemption Commencement Date;   (12)   If a Floating Rate Book-Entry Security, such of the following as are applicable:   (i)   Interest Rate Basis,     (ii)   Index Maturity,     (iii)   Spread or Spread Multiplier,     (iv)   Maximum Rate,     (v)   Minimum Rate,     (vi)   Initial Interest Rate,     (vii)   Interest Reset Dates,     (viii)   Calculation Dates,     (ix)   Interest Determination Dates,     (x)   Interest Payment Dates,     (xi)   Regular Record Dates, and     (xii)   Calculation Agent;   (13)   Name, address and taxpayer identification number of the registered owner(s);     (14)   Denomination of certificates to be delivered at settlement;     (15)   Book-Entry Security or Certificated Security; and II-3 --------------------------------------------------------------------------------     (16)   Selling Agent or Purchasing Agent.      B. After receiving the Sale Information from the Selling Agent or Purchasing Agent, as the case may be, the Bank will communicate such Sale Information to the Issuing and Paying Agent by facsimile transmission or other acceptable written means. The Issuing and Paying Agent will assign a CUSIP number to the Global Security from a list of CUSIP numbers previously delivered to the Issuing and Paying Agent by the Bank representing such Book-Entry Security and then advise the Bank and the Selling Agent or Purchasing Agent, as the case may be, of such CUSIP number.      C.      (1) In the event the Bank is considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent will enter a pending deposit message through the Depositary’s Participant Terminal System, providing the following settlement information to the Depositary, and the Depositary shall forward such information to such Agent and Standard & Poor’s Corporation:   a.   The applicable Sale Information;     b.   CUSIP number of the Global Security representing such Book-Entry Security;     c.   Whether such Global Security will represent any other Book-Entry Security (to the extent known at such time);     d.   Number of the participant account maintained by the Depositary on behalf of the Selling Agent or Purchasing Agent, as the case may be;     e.   The interest payment period; and     f.   Initial Interest Payment Date for such Book-Entry Security, number of days by which such date succeeds the record date for the Depositary’s purposes (or, in the case of Floating Rate Securities which reset daily or weekly, the date five calendar days immediately preceding the applicable Interest Payment Date and, in the case of all other Book-Entry Securities, the Regular Record Date, as defined in the Security) and, if calculable at that time, the amount of interest payable on such Interest Payment Date.      (2) In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent and the Bank will provide the following settlement information to the Depositary in such manner as is mutually agreed upon by the Issuing and Paying Agent and the Bank, and as acceptable to the Depositary, and the Depositary shall forward such information to such Agent and Standard & Poor’s Corporation:   a.   The applicable Sale Information;     b.   CUSIP number of the Global Security representing such Book-Entry Security;     c.   Whether such Global Security will represent any other Book-Entry Security (to the extent known at such time);     d.   Number of the participant account maintained by the Depositary on behalf of the Selling Agent or Purchasing Agent, as the case may be and only if applicable;     e.   The interest payment period; and II-4 --------------------------------------------------------------------------------     f.   Initial Interest Payment Date for such Book-Entry Security, number of days by which such date succeeds the record date for the Depositary’s purposes (or, in the case of Floating Rate Securities which reset daily or weekly, the date five calendar days immediately preceding the applicable Interest Payment Date and, in the case of all other Book-Entry Securities, the Regular Record Date, as defined in the Security) and, if calculable at that time, the amount of interest payable on such Interest Payment Date.      The Issuing and Paying Agent and the Bank will provide to the Depositary a Letter of Representation, the Global Security as referenced in D below and the Offering Circular, Final Pricing Supplement and/or Term Sheet, as applicable (or any portion thereof), and any other information as the Depositary may request or require (including any questionnaire as may be requested by the Depositary and as not otherwise supplied by the Agent), in order to provide the information identified in this subsection C(2).      D. The Issuing and Paying Agent will complete and authenticate the Global Security previously delivered by the Bank representing such Book-Entry Security.      E. (1) In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent will deliver the executed and authenticated Global Security representing such Book-Entry Security to the Depositary.           (2) In the event the Bank is considered a “fast settlement bank” with the Depositary, the Depositary will credit such Book-Entry Security to the Issuing and Paying Agent’s participant account at the Depositary.      F. The Issuing and Paying Agent will enter an SDFS deliver order through the Depositary’s Participant Terminal System, or in such other manner as mutually agreed upon by the Issuing and Paying Agent and the Bank, and as acceptable to the Depositary, instructing the Depositary to (i) debit such Book-Entry Security to the Issuing and Paying Agent’s participant account and credit such Book-Entry Security to such Agent’s participant account and (ii) debit such Agent’s settlement account and credit the Issuing and Paying Agent’s settlement account for an amount equal to the price of such Book-Entry Security less such Agent’s commission. The entry of such a deliver order shall constitute a representation and warranty by the Issuing and Paying Agent to the Depositary that (a) the Global Security representing such Book-Entry Security has been issued and authenticated and (b) the Issuing and Paying Agent is holding such Global Security pursuant to the Certificate Agreement. In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent agrees to enter the SDFS deliver order described in this Section F in a manner other than through the Depositary’s Participant Terminal System.      G. Such Agent will enter an SDFS deliver order through the Depositary’s Participant Terminal System, or in such other manner as mutually agreed upon by the Bank and the Agent, and as acceptable to the Depositary, instructing the Depositary (i) to debit such Book-Entry Security to such Agent’s participant account and credit such Book-Entry Security to the participant accounts of the participants with respect to such Book-Entry Security and (ii) to debit II-5 --------------------------------------------------------------------------------   the settlement accounts of such participants and credit the settlement account of such Agent for an amount equal to the price of such Book-Entry Security. In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Agent will enter the SDFS deliver order described in this Section F in a manner other than through the Depositary’s Participant Terminal System.      H. In the event the Bank is considered a “fast settlement bank” with the Depositary, transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures “F” and “G” (if applicable) will be settled in accordance with SDFS operating procedures in effect on the settlement date. In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent and the Agent will settle transfers of funds in a manner as mutually agreed to by the parties.      I. Upon confirmation of receipt of funds, the Issuing and Paying Agent will transfer to the account of the Bank maintained at the Bank or such other account as the Bank may have previously specified to the Issuing and Paying Agent, in funds available for immediate use in the amount transferred to the Issuing and Paying Agent in accordance with Settlement Procedure “F”.      J. Such Agent will confirm the purchase of such Book-Entry Security to the purchaser either by transmitting to the participants with respect to such Book-Entry Security a confirmation order or orders through the Depositary’s institutional delivery system or by mailing a written confirmation to such purchaser.      K. Upon request, the Issuing and Paying Agent will send to the Bank a statement setting forth the principal amount of Book-Entry Securities outstanding as of that date under the Issuing and Paying Agency Agreement.      L. The Depositary will, at any time, upon request of the Bank or the Issuing and Paying Agent, promptly furnish to the Bank or the Issuing and Paying Agent a list of the names and addresses of the participants for whom the Depositary has credited Book-Entry Securities. Preparation of Final Pricing Supplement and Term Sheet:      If the Bank accepts an offer to purchase a Book-Entry Security, it will prepare a Final Pricing Supplement and Term Sheet reflecting the terms of such Book-Entry Security and arrange to have delivered to the Selling Agent or Purchasing Agent, as the case may be, at least ten copies of such Final Pricing Supplement and Term Sheet, not later than 5:00 p.m., New York City time, on the Business Day following the Trade Date (as defined below), or if the Bank and the purchaser agree to settlement on the Business Day following the date of acceptance of such offer, not later than noon, New York City time, on such date. Delivery of Confirmation and Offering Circular and Disclosure Package: to Purchasers by Selling Agent:      The Selling Agent will deliver to the purchaser of a Book-Entry Security a written confirmation of the sale and delivery and payment instructions. In addition, the Selling Agent will deliver to such purchaser or its agent the Offering Circular, as amended or supplemented II-6 --------------------------------------------------------------------------------   (and a Final Pricing Supplement) in relation to such Book-Entry Security prior to or together with the earlier of the delivery to such purchaser or its agent of (a) the confirmation of sale or (b) the Book-Entry Security. The Bank shall provide a copy of the Disclosure Package (as not otherwise available through the Commission’s, the Holding Company’s or FFIEC’s website) as promptly as practicable to the Selling Agents for delivery to each purchaser or its agent. Date of Settlement:      The receipt by the Bank of immediately available funds in payment for a Book-Entry Security and the authentication and issuance of the Global Security representing such Book-Entry Security shall constitute “settlement” with respect to such Book-Entry Security. All orders of Book-Entry Securities solicited by a Selling Agent or made by a Purchasing Agent and accepted by the Bank on a particular date (the “Trade Date”) will be settled on a date (the “Settlement Date”) which is the third Business Day after the Trade Date pursuant to the “Settlement Procedure Timetable” set forth below, unless the Bank and the purchaser agree to settlement on another Business Day which shall be no earlier than the next Business Day after the Trade Date. Settlement Procedure Timetable:      For orders of Book-Entry Securities solicited by a Selling Agent and accepted by the Bank for settlement on the third Business Day after the Trade Date, Settlement Procedures “A” through “J” set forth above shall be completed as soon as possible but not later than the respective times (New York City time) set forth below: Settlement Procedure Timetable:           A - B   3:00 p.m.   on the Trade Date C   4:00 p.m.   on the Trade Date D   3:00 p.m.   on the Business Day immediately preceding the Settlement Date E1   9:00 a.m.   on the Settlement Date E2   10:00 a.m.   on the Settlement Date F - H   1:30 p.m.   on the Settlement Date I - J   5:00 p.m.   on the Settlement Date      If the initial interest rate for a Floating Rate Book-Entry Security has not been determined at the time that Settlement Procedure “A” is completed, Settlement Procedures “B” and “C” shall be completed as soon as such rate has been determined. Settlement Procedure “H” 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 Security is rescheduled or canceled, the Issuing and Paying Agent, upon obtaining knowledge thereof, will deliver to the Depositary, through the Depositary’s Participant Terminal System, a cancellation message to such effect as soon as practicable. II-7 --------------------------------------------------------------------------------   Failure to Settle:      If the Issuing and Paying Agent fails to enter an SDFS deliver order with respect to a Book-Entry Security pursuant to Settlement Procedure “F”, the Issuing and Paying Agent may deliver to the Depositary, through the Depositary’s Participant Terminal System, as soon as practicable a withdrawal message instructing the Depositary to debit such Book-Entry Security to the Issuing and Paying Agent’s participant account, provided that the Issuing and Paying Agent’s participant account contains a principal amount of the Global Security representing such Book-Entry Security that is at least equal to the principal amount to be debited. If a withdrawal message is processed with respect to all the Book-Entry Securities represented by a Global Security, the Issuing and Paying Agent will mark such Global Security “canceled”, make appropriate entries in the Issuing and Paying Agent’s records and send such canceled Global Security to the Bank. The CUSIP number assigned to such Global Security shall, in accordance with CUSIP Service Bureau procedures, be canceled and not immediately reassigned. If a withdrawal message is processed with respect to one or more, but not all, of the Book-Entry Securities represented by a Global Security, the Issuing and Paying Agent will exchange such Global Security for two Global Securities, one of which shall represent such Book-Entry Security or Securities and shall be canceled immediately after issuance and the other of which shall represent the remaining Book-Entry Securities previously represented by the surrendered Global Security and shall bear the CUSIP number of the surrendered Global Security.      If the purchase price for any Book-Entry Security is not timely paid to the participants with respect to such Book-Entry Security by the beneficial purchaser thereof (or a person, including an indirect participant in the Depositary, acting on behalf of such purchaser), such participants and, in turn, the Agent for such Book-Entry Security may enter deliver orders through the Depositary’s Participant Terminal System debiting such Book-Entry Security to such participant’s account and crediting such Book-Entry Security to such Agent’s account and then debiting such Book-Entry Security to such Agent’s participant account and crediting such Book-Entry Security to the Issuing and Paying Agent’s participant account and shall notify the Bank and the Issuing and Paying Agent thereof. Thereafter, the Issuing and Paying Agent will (i) immediately notify the Bank of such order and the Bank shall transfer to such Agent funds available for immediate use in an amount equal to the price of such Book-Entry Security which was credited to the account of the Bank maintained at the Issuing and Paying Agent in accordance with Settlement Procedure I, and (ii) deliver the withdrawal message and take the related actions described in the preceding paragraph. If such failure shall have occurred for any reason other than default by the applicable Agent to perform its obligations hereunder or under the Distribution Agreement, the Bank will reimburse such Agent on an equitable basis for the loss of its use of funds during the period when the funds were credited to the account of the Bank.      Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Security, the Depositary may take any actions in accordance with its SDFS operating procedures then in effect. In the event of a failure to settle with respect to one or more, but not all, of the Book-Entry Securities to have been represented by a Global Security, the Issuing and Paying Agent will provide, in accordance with Settlement Procedure “D”, for the authentication and issuance of a Global Security representing the other Book-Entry Securities to have been represented by such Global Security and will make appropriate entries in its records. The Bank II-8 --------------------------------------------------------------------------------   will, from time to time, furnish the Issuing and Paying Agent with a sufficient quantity of Securities. In the event the Bank is not considered a “fast settlement bank” with the Depositary, the Issuing and Paying Agent, the Bank and the Agent will mutually agree to an alternative resolution of any failure to settle in the event the above procedure(s) is not available. PART II: ADMINISTRATIVE PROCEDURE FOR CERTIFICATED SECURITIES Posting Rates by Bank:      The Bank and the Agents will discuss from time to time the rates of interest per annum to be borne by and the maturity of Certificated Securities that may be sold as a result of the solicitation of offers by an Agent. The Bank may establish a fixed set of interest rates and maturities for an offering period (“posting”). If the Bank decides to change already posted rates, it will promptly advise the Agents to suspend solicitation of offers until the new posted rates have been established with the Agents. Acceptance of Offers by Bank:      Each Agent will promptly advise the Bank by telephone or other appropriate means of all reasonable offers to purchase Certificated Securities, other than those rejected by such Agent. Each Agent may, in its discretion reasonably exercised, reject any offer received by it in whole or in part. Each Agent also may make offers to the Bank to purchase Certificated Securities as a Purchasing Agent. The Bank will have the sole right to accept offers to purchase Certificated Securities and may reject any such offer in whole or in part.      The Bank will promptly notify the Selling Agent or Purchasing Agent, as the case may be, of its acceptance or rejection of an offer to purchase Certificated Securities. If the Bank accepts an offer to purchase Certificated Securities, it will confirm such acceptance in writing to the Selling Agent or Purchasing Agent, as the case may be, and the Issuing and Paying Agent. Communication of Sale Information to Bank by Agent:      After the acceptance of an offer by the Bank, the Selling Agent or Purchasing Agent, as the case may be, will communicate the following details of the terms of such offer (the “Sale Information”) to the Bank by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means:   (1)   Principal Amount of Certificated Securities to be purchased;     (2)   If a Fixed Rate Certificated Security, the interest rate and initial interest payment date;     (3)   Trade Date;     (4)   Settlement Date;     (5)   Maturity Date;     (6)   Specified Currency and, if the Specified Currency is other than U.S. dollars, the applicable Exchange Rate for such Specified Currency;     (7)   Indexed Currency, the Base Rate and the Exchange Rate Determination Date, if applicable;     (8)   Issue Price; II-9 --------------------------------------------------------------------------------     (9)   Selling Agent’s commission or Purchasing Agent’s discount, as the case may be;     (10)   Net Proceeds to the Bank;     (11)   If a redeemable Certificated Security, such of the following as are applicable:   (i)   Redemption Commencement Date,     (ii)   Initial Redemption Price (% of par), and     (iii)   Amount (% of par) that the Redemption Price shall decline (but not below par) on each anniversary of the Redemption Commencement Date;   (12)   If a Floating Rate Certificated Security, such of the following as are applicable:   (i)   Interest Rate Basis,     (ii)   Index Maturity,     (iii)   Spread or Spread Multiplier,     (iv)   Maximum Rate,     (v)   Minimum Rate,     (vi)   Initial Interest Rate,     (vii)   Interest Reset Dates,     (viii)   Calculation Dates,     (ix)   Interest Determination Dates,     (x)   Interest Payment Dates,     (xi)   Regular Record Dates, and     (xii)   Calculation Agent;   (13)   Name, address and taxpayer identification number of the registered owner(s);     (14)   Denomination of certificates to be delivered at settlement;     (15)   Book-Entry Security or Certificated Security; and     (16)   Selling Agent or Purchasing Agent. Preparation of Final Pricing Supplement and Term Sheet by Bank:      If the Bank accepts an offer to purchase a Certificated Security, it will prepare a Final Pricing Supplement and Term Sheet reflecting the terms of such Certificated Security and arrange to have delivered to the Selling Agent or Purchasing Agent, as the case may be, at least ten copies of such Final Pricing Supplement and Term Sheet, not later than 5:00 p.m., New York City time, on the Business Day following the Trade Date, or if the Bank and the purchaser agree to settlement on the date of acceptance of such offer, not later than noon, New York City time, on such date. Delivery of Confirmation and Offering Circular to Purchaser by Selling Agent:      The Selling Agent will deliver to the purchaser of a Certificated Security a written confirmation of the sale and delivery and payment instructions. In addition, the Selling Agent will deliver to such purchaser or its agent the Offering Circular, as amended or supplemented (including the Final Pricing Supplement and Term Sheet) in relation to such Certificated Security prior to or together with the earlier of the delivery to such purchaser or its agent of (a) the confirmation of sale or (b) the Certificated Security. II-10 --------------------------------------------------------------------------------   Date of Settlement:      All offers of Certificated Securities solicited by a Selling Agent or made by a Purchasing Agent and accepted by the Bank will be settled on a date (the “Settlement Date”) which is the third Business Day after the date of acceptance of such offer, unless the Bank and the purchaser agree to settlement (a) on another Business Day after the acceptance of such offer or (b) with respect to an offer accepted by the Bank prior to 10:00 a.m., New York City time, on the date of such acceptance. Instruction from Bank to Issuing and Paying Agent for Preparation of Certificated Securities:      After receiving the Sale Information from the Selling Agent or Purchasing Agent, as the case may be, the Bank will communicate such Sale Information to the Issuing and Paying Agent by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means.      The Bank will instruct the Issuing and Paying Agent by facsimile transmission or other acceptable written means to authenticate and deliver the Certificated Securities no later than 2:15 p.m., New York City time, on the Settlement Date. Such instruction will be given by the Bank prior to 3:00 p.m., New York City time, on the Business Day immediately preceding the Settlement Date unless the Settlement Date is the date of acceptance by the Bank of the offer to purchase Certificated Securities in which case such instruction will be given by the Bank by 11:00 a.m., New York City time. Preparation and Delivery of Certificated Securities by Issuing and Paying Agent and Receipt of Payment Therefor:      The Issuing and Paying Agent will prepare each Certificated Security and appropriate receipts that will serve as the documentary control of the transaction.      In the case of a sale of Certificated Securities to a purchaser solicited by a Selling Agent, the Issuing and Paying Agent will, by 2:15 p.m., New York City time, on the Settlement Date, deliver the Certificated Securities to the Selling Agent for the benefit of the purchaser of such Certificated Securities against delivery by the Selling Agent of a receipt therefor. On the Settlement Date the Selling Agent will deliver payment for such Certificated Securities in immediately available funds to the Bank in an amount equal to the issue price of the Certificated Securities less the Selling Agent’s commission; provided that the Selling Agent reserves the right to withhold payment for which it has not received funds from the purchaser. The Bank shall not use any proceeds advanced by a Selling Agent to acquire securities.      In the case of a sale of Certificated Securities to a Purchasing Agent, the Issuing and Paying Agent will, by 2:15 p.m., New York City time, on the Settlement Date, deliver the Certificated Securities to the Purchasing Agent against delivery of payment for such Certificated Securities in immediately available funds to the Bank in an amount equal to the issue price of the Certificated Securities less the Purchasing Agent’s discount. II-11 --------------------------------------------------------------------------------   Failure of Purchaser to Pay Selling Agent:      If a purchaser (other than a Purchasing Agent) fails to make payment to the Selling Agent for a Certificated Security, the Selling Agent will promptly notify the Issuing and Paying Agent and the Bank thereof by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means. The Selling Agent will immediately return the Certificated Security to the Issuing and Paying Agent. Immediately upon receipt of such Certificated Security by the Issuing and Paying Agent, the Bank will return to the Selling Agent an amount equal to the amount previously paid to the Bank in respect of such Certificated Security. The Bank will reimburse the Selling Agent on an equitable basis for its loss of the use of funds during the period when they were credited to the account of the Bank. The Issuing and Paying Agent will cancel the Certificated Security in respect of which the failure occurred, make appropriate entries in its records and, unless otherwise instructed by the Bank, destroy the Certificated Security. II-12

Exhibit 10.2 FIRST AMENDMENT OF EMPLOYMENT AGREEMENT OF CHARLES A. HINRICHS This Amendment Agreement (the “Amendment”) is effective as of July 25, 2006 the “Amendment Date”), as to the Employment Agreement (“the Agreement”) by and between Smurfit-Stone Container Corporation (the “Company”), and Charles A. Hinrichs (the “Executive”). WHEREAS, the Company and the Executive entered into an Employment Agreement effective as of April 1, 2002, (the “Employment Agreement”); and WHEREAS, the Company has promoted the Executive to the position of Senior Vice President and Chief Financial Officer; and WHEREAS, the Company and the Executive now desire to amend the Employment Agreement to reflect the Executive’s promotion and the other terms and conditions of this employment; NOW THEREFORE, in consideration of the mutual terms, convenants and conditions stated in this Agreement, the Company and the Executive hereby agree to amend the Employment Agreement, effective as of July 25, 2006, as follows: 1.      By substituting the title “Senior Vice President and Chief Financial Officer” following for the title “Vice President and Chief Financial Officer” each place where the latter title appears in the Employment Agreement. 2.      By adding Section 6(d) to the Employment Agreement as follows: (d)   Gross-Up Payment by the Company.   In the event that any payment, benefit or distribution by or on behalf of 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) (the “Payments”) is (i) determined to be an “excess parachute payment” pursuant to Code Section 280G or any successor or substitute provision of the Code, with the effect that the Executive is liable for the payment of the excise tax described in Code Section 4999 or any successor or substitute provision of the Code, or (ii) determined to render the Executive liable for the payment of the excise tax described in Code Section 409A or any successor or substitute provision of the Code (such excise tax under such Section 409A or excise tax under such Section 4999 being hereinafter referred to as an “Excise Tax”), then the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the total Payments and any federal, state -------------------------------------------------------------------------------- and local income and employment taxes and Excise Tax on the Gross-Up Payment, shall be equal to the total Payments. (i)     All determinations required to be made under this paragraph (d), and the assumptions to be utilized in arriving at such determination, shall be made by the certified public accounting firm used for auditing purposes by the Company immediately prior to the Executive’s employment termination (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive. The Company shall pay all fees and expenses of the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Company and the Executive, except as provided in subparagraph (ii) below. (ii)    As a result of the uncertainty in the application of Code Sections 280G and 4999 and Code Section 409A at the time of the initial determination by the Accounting Firm hereunder, it is possible that the Internal Revenue Service (“IRS”) or other agency will claim that a greater or lesser Excise Tax is due. In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in Excise Tax and/or a federal, state or local income or employment tax deduction) plus interest on the amount of such repayment at 120% of the rate provided in Code Section 1274(b)(2)(B). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) at the time that the amount of such excess if finally determined. The Executive and the Company shall each reasonable cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the total Payments. The Company shall pay all fees and expenses of the Executive relating to a claim by the IRS or other agency. 3.      By substituting the following for Section 7(f) of the Employment Agreement: (f)   Non-Competition.   The Executive agrees that so long as he is employed by the Company and for a period of two (2) years thereafter (the “Period”), he shall not, without the prior written consent of the Company, participate or engage in, directly or indirectly (as an owner, partner, employee, officer, director, independent contractor, consultant, advisor or in any other capacity calling for the rendition of services, advice, or acts of management, operation or control), any business that, during the Period, is competitive with the Business Conducted by the Company or any of its Affiliates within -------------------------------------------------------------------------------- the United States, Canada, Mexico, and China (hereinafter, the “Geographic Area”) and which business the Company was engaged (either actively as a going concern or in the process of developing to market) within the preceding two years of the Executive’s employment with the Company. IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the date first above written.   SMURFIT-STONE CONTAINER CORPORATION       /s/ Charles A. Hinrichs   By: /s/Craig A. Hunt Charles A. Hinrichs   Its: Senior Vice President, General Counsel and Secretary   --------------------------------------------------------------------------------

  Exhibit 10.17 March 3, 2006 Coconut Palm Acquisition Corp. 595 South Federal Highway, Suite 600 Boca Raton, FL 33432 Attention: Richard C. Rochon Ladies and Gentlemen:      This is to confirm the engagement of Morgan Joseph & Co. Inc. (“MJ”) to render financial advisory and investment banking services to your Company (the “Company”) in connection with its possible acquisition (the “Acquisition”) directly or through an affiliate, of substantially all of the assets or stock of an initial platform company (the “Target”). In that connection, MJ will:      (i) familiarize itself to the extent it deems appropriate and feasible with the business, operations, properties, financial condition, management and prospects of the Target, it being understood that MJ shall, in the course of such familiarization, rely entirely upon information as may be supplied by the Company and by the Target without independent investigation;      (ii) if requested, advise and assist the Company with respect to the Acquisition in developing a strategy for marketing and positioning the Acquisition to the Company’s shareholders, including (x) the possible price or price range that might reasonably be offered by the Company, (y) the nature and terms of the consideration to be offered and (z) other terms and conditions in connection with the Acquisition;      (iii) advise and assist management of the Company in making appropriate presentations to the Company’s shareholders concerning the Acquisition, if requested by the Company; and      (iv) render such other financial advisory and investment banking services as may from time to time be agreed upon by MJ and the Company.      If during the term of this engagement or within twelve months after the termination of MJ’s engagement hereunder an Acquisition is consummated, then MJ shall be paid a cash fee at the closing of the Acquisition equal to $1,000,000.      In addition to any fees payable hereunder, MJ shall be reimbursed by the Company on a monthly basis for its out-of-pocket expenses (including legal fees and disbursements) in connection with this engagement without regard to whether an Acquisition is consummated.   --------------------------------------------------------------------------------   Richard C. Rochon March 3, 2006 Page 2 of 4      The Company agrees to indemnify MJ and certain other entities and persons as set forth in Schedule A attached hereto and incorporated by reference into this agreement.      This engagement shall continue in effect until March 3, 2007 or upon such date as mutually agreed upon by the Company and MJ, except that the indemnification agreement referred to above and set forth in Schedule A attached and the provisions of the paragraphs hereof regarding compensation and reimbursement shall survive the term of this engagement.      This letter agreement contains the entire agreement between you and us concerning our engagement by you, and no modifications of this agreement or waiver of the terms and conditions hereof will be binding upon you or us, unless approved in writing by each of you and us. This letter agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws. The Company irrevocably and unconditionally submits to the exclusive jurisdiction of any State or Federal court sitting in New York City over any action, suit or proceeding arising out of or relating to this letter agreement. The Company irrevocably and unconditionally waives any objection to the laying of venue of any such action, suit or proceeding brought in any such court and any claim that any such action, suit or proceeding has been brought in an inconvenient forum. Each of Morgan Joseph and the Company (on its own behalf and, to the extent permitted by law, on behalf of its shareholders) waives any right to trial by jury in any action, suit or proceeding arising out of or relating to this letter agreement.      Please confirm that the foregoing is in accordance with your understandings and agreements with MJ by signing and returning to us the duplicate of this letter enclosed herewith.             Very truly yours, MORGAN JOSEPH & CO. INC.       By:   /s/ Roger T. Briggs, Jr.         Roger T. Briggs, Jr.        Vice Chairman                  CONFIRMED AND AGREED: COCONUT PALM ACQUISITION CORP.       By:   /s/ Richard C. Rochon         Richard C. Rochon        Chairman and Chief Executive Officer      --------------------------------------------------------------------------------             Richard C. Rochon March 3, 2006 Page 3 of 4 SCHEDULE A      This Schedule A is incorporated by reference into Morgan Joseph & Co. Inc.’s engagement letter dated March 3, 2006 (the “Engagement Letter”) with Coconut Palm Acquisition Corp. (the “Company”) in connection with the matter or matters described in such Engagement Letter.      The Company agrees to indemnify and hold harmless Morgan Joseph and its affiliates and their respective directors, managers, officers, employees, agents and controlling persons (each, with Morgan Joseph, an “Indemnified Person”) from and against all losses, claims, damages, liabilities or expenses (or actions or proceedings, including security holder actions or proceedings, in respect thereof), joint and several, related to or arising out of such engagement or the rendering of additional services by Morgan Joseph as requested by the Company that are related to the services rendered under the Engagement Letter, or Morgan Joseph’s role in connection therewith (collectively, a “Claim” and/or “Loss”), and will reimburse each Indemnified Person promptly for all expenses (including counsel fees and expenses) as they are incurred by an Indemnified Person in connection with the investigation of, preparation for, or defense of any pending or threatened Claim, or any such action or proceeding arising therefrom, whether or not such Indemnified Person is a formal party to any such lawsuit or other proceeding (“Proceeding”) and whether or not such Proceeding is initiated by or brought on the Company’s behalf.      An Indemnified Person is not entitled to the foregoing indemnification to the extent such Claim is finally judicially determined to have resulted from such Indemnified Person’s gross negligence or willful misconduct.      The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company or any person asserting claims on the Company’s behalf or in the Company’s right for or in connection with such engagement, except to the extent that such Claim is finally judicially determined to have resulted from such Indemnified Person’s gross negligence or willful misconduct. In no event, regardless of the legal theory advanced, shall any Indemnified Person be liable for any consequential, indirect or incidental or special damages of any nature.      If the indemnity or reimbursement referred to above is, for any reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold each Indemnified Person harmless, the Company agrees to contribute to amounts paid or payable by an Indemnified Person in respect of such Indemnified Person’s Losses so that each Indemnified Person ultimately bears only a portion of such Losses as is appropriate (i) to reflect the relative benefits received by each such Indemnified Person, respectively, on the one hand and the Company (and the Company security holders) on the other hand, or (ii) if the allocation on that basis is not permitted by applicable law, to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each such Indemnified Person, respectively, and the Company as well as any other relevant equitable considerations; provided, however, that in no event shall the aggregate contribution of all Indemnified Persons to all Losses exceed the amount of the fee actually received by Morgan Joseph pursuant to the Engagement Letter.      The Company agrees that without Morgan Joseph’s prior written consent the Company will not enter into any settlement or compromise of, or consent to, any judgment in a Proceeding arising out of the transactions contemplated by the Engagement Letter and in which Morgan Joseph or any other Indemnified Person could reasonably be likely to be an actual or potential party to such Proceeding, unless such settlement, compromise or judgment (i) includes an explicit and unconditional release from   --------------------------------------------------------------------------------   Richard C. Rochon March 3, 2006 Page 4 of 4 the party bringing such Proceeding of all Indemnified Persons from all liability arising therefrom and (ii) the amount involved in any such settlement, compromise, consent or termination is paid in full directly by the Company or on behalf of the Company, and such compromise settlement, consent or termination does not (x) acknowledge any liability of or wrongdoing by an Indemnified Person, (y) adversely affect the business of an Indemnified Person, or (z) limit the future conduct of an Indemnified Person whether by injunction, consent decree or other decree or otherwise.      Promptly after an Indemnified Person’s receipt of notice of the commencement of any Proceeding, an Indemnified Person shall notify the Company in writing of the commencement thereof, but omission so to notify the Company will not relieve the Company from any liability which the Company may have to such Indemnified Person, except the Company’s obligations to indemnify to the extent that the Company suffers actual prejudice as a result of such failure, but shall not relieve the Company from the Company’s obligation to provide reimbursement of expenses (including counsel fees and expenses). The Company further agrees that the Indemnified Persons are entitled to retain separate counsel of their choice in connection with any of the matters in respect of which indemnification, reimbursement or contribution may be sought under this Agreement, and the reasonable fees and expenses of such counsel shall be included in the indemnification hereunder.      The Company will pay to Morgan Joseph and each Indemnified Person, in addition to the other fees and expenses payable to it, the charges as incurred and as reasonably determined by Morgan Joseph for any time of any officers, directors or employees of Morgan Joseph devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters or otherwise with respect to hearings, trials, pretrial matters and other proceedings in any way relating to, or referred to in, or arising out of the Engagement Letter or Morgan Joseph’s role in connection therewith. The Company will also pay the fees and expenses of the Indemnified Person’s counsel in connection with the matters referred to in this paragraph.      The foregoing shall be in addition to any rights that Morgan Joseph may have at common law or otherwise. The Engagement Letter including this Schedule A shall be binding upon and inure to the benefit of Company’s successors, assigns, heirs, and personal representatives, and upon Morgan Joseph and any other Indemnified Person and their respective successors, assigns, heirs and personal representatives.      It is understood that, in connection with Morgan Joseph’s engagement, Morgan Joseph may also be requested to act for the Company in one or more additional capacities, and that the terms of any such additional engagement may be embodied in one or more separate written or oral agreements. The obligations set forth in this Schedule A shall apply to each of Morgan Joseph’s engagements by the Company and any modification of any of such engagements, and shall remain in full force and effect following their completion or termination.      The provisions of this Schedule A may not be amended or modified except in writing and shall be governed by and construed in accordance with the laws of the State of New York. The Company hereby consents to personal jurisdiction and service and venue in any court in which any claim which is subject to the provisions of this Schedule A is brought against an Indemnified Person. MORGAN JOSEPH HEREBY AGREES, AND THE COMPANY HEREBY AGREES FOR ITSELF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF THE COMPANY’S SECURITYHOLDERS, TO WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTERCLAIM OR ACTION ARISING OUT OF THIS ENGAGEMENT LETTER, INCLUDING THE PROVISIONS OF THIS SCHEDULE A, OR MORGAN JOSEPH’S PERFORMANCE THEREUNDER.  

-------------------------------------------------------------------------------- EXHIBIT 10.1   AMENDMENT TO PRIVATE LABEL CREDIT CARD PROGRAM AGREEMENT   This Amendment to Private Label Credit Card Program Agreement ("Amendment") is entered into as of this 21st day of December, 2005 ("Effective Date") by and between Stage Stores, Inc. and Specialty Retailers (TX) LP (collectively referred to as "Stage") with their principal offices at 10201 Main Street, Houston, TX 77025 and World Financial Network National Bank ("Bank").   R E C I T A L S : WHEREAS, Stage and Bank entered into an Amended and Restated Private Label Credit Card Program Agreement dated as of March 5, 2004, as amended by the Student Program Addendum effective June 1, 2004 (collectively, the "Agreement"); and WHEREAS, Stage and Bank now desire to amend the Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1.     Definitions; References. Each term used herein which is not defined herein shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement amended hereby. 2.     Amounts Qualifying for Reimbursement from Stage Marketing Fund and Peebles Marketing Fund. Schedule 2.5(b)(1) is hereby amended as follows: "Postage in excess of 30%" under In-eligible Expenses now includes the following explanation: "The 30% figure shall be increased (subject to a cap of 45%) by the same percentage as any percentage increase as the first class postal rate. For example: presume the first class postal rate increased by $0.02, from $0.37 to $0.39, in January 2006. That equals a 5.4% increase (2/37 = 0.54). The aforementioned 30% would increase to 35.4%. Presume further that the postal rate increased by another $0.02 in 2007, meaning an increase of 5.1% (2/39 = 0.51). The 35.4% figure would increase to 40.5%. 3.     Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. 1.     Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all of such counterparts shall together constitute one and the same instrument. The provisions included in this Amendment shall be effective as of the Effective Date set forth above. -------------------------------------------------------------------------------- 2.     Entire Agreement. As hereby amended and supplemented, the Agreement shall remain in full force and effect.   IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers.   WORLD FINANCIAL NETWORK   STAGE STORES, INC. NATIONAL BANK                 By: /s/ Daniel T. Groomes   By: /s/ Richard E. Stasyszen Name: Daniel T. Groomes   Name: Richard E. Stasyszen Title: President   Title: Senior Vice President-Finance and Controller                 SPECIALTY RETAILERS (TX) LP, a Texas Limited partnership                 By: SRI General Partner LLC, a Nevada limited liability company, its General Partner                           By: /s/ Richard E. Stasyszen       Name: Richard E. Stasyszen       Title: Manager     2 --------------------------------------------------------------------------------

SECURITY AGREEMENT BY AND BETWEEN AULT GLAZER BODNAR ACQUISITION FUND LLC AND PATIENT SAFETY TECHNOLOGIES, INC. Ault Glazer Bodnar Acquisition Fund, LLC (“Secured Party”) and Patient Safety Technologies, Inc., a Delaware corporation (“Debtor”) agree as follows on January 19, 2006:   1.    GRANT OF SECURITY INTEREST.   1.1   The Debtor, jointly and severally, hereby grants to the Secured Party a security interest in personal property and fixtures, inventory, products and proceeds (including proceeds of proceeds, the “Collateral”) of Debtor, as security for:   1.1.1   The satisfaction and the prompt and full performance of all of Debtor’s obligations under that certain Secured Promissory Note (the “Note”) dated January 19, 2006 in the principal amount of eighty five thousand dollars ($85,000.00) plus interest at the rate of seven percent (7% ) per annum, as the Note may be amended, modified, or extended from time to time (including, without limitation, the obligation to make payments of principal and interest thereon); and 1.1.2   The full, faithful, true and exact performance and observance of all of the obligations, covenants and duties of Debtor under this Security Agreement, as the same may be amended, modified, or extended from time to time. 2.    DEFAULT. Any of the following events shall constitute an event of default hereunder: 2.1  The failure by Debtor to make full and timely payment when due of any sum as required to be paid to Secured Party under the Note after any applicable notice of non-payment provided for in the Note has been given, and any period within which to cure the non-payment has elapsed, if applicable. A true and correct copy of the Note is attached hereto as Exhibit “A” and incorporated herein by this reference.   2.2   The failure by Debtor to fully and timely perform any covenant, agreement, obligation or duty imposed on Debtor by this Security Agreement or any other agreement by and between Debtor and Secured Party now existing or hereinafter made. 2.3   The filing by Debtor of any petition, or commencement by Debtor of any proceeding, under the Bankruptcy Act or any state insolvency law. 2.4   The making by Debtor of any general assignment for the benefit of creditors. 2.5   The filing of any petition, or commencement of any proceeding, under the Bankruptcy Act or any state insolvency law, against Debtor, or the appointment of any receiver or trustee, which petition, proceeding or appointment is not fully and completely discharged, dismissed or vacated within sixty (60) days. 1   --------------------------------------------------------------------------------   2.6   Any warranties made by Debtor are untrue in any material respect, or any schedule, statement, report, notice, or writing furnished by Debtor to the Secured Party are untrue in any material respect on the date as of which the facts set forth are stated or certified. 3.   INSPECTION OF RECORDS. Secured Party shall have the right without notice to inspect all financial books, records and reports of Debtor at Debtor’s premises or wherever the same may be maintained during normal business hours.   4.    REMEDIES UPON DEFAULT.   4.1   Upon the occurrence of an event of default, in addition to any and all other remedies at law or in equity available to Secured Party, Debtors hereby authorize and empower Secured Party, at Secured Party’s option and without notice to Debtor, except as specifically provided herein (and, to the extent necessary, hereby irrevocably appoint Secured Party as Debtor’s attorney-in-fact for such purposes): 4.1.1  To require Debtor to assemble any and all of the Collateral and make the same available to Secured Party at the premises wherein the same is located, or any other place designated by Secured Party; Secured Party may enter upon any premises where any of the Collateral is located and may take possession of the same without judicial process and without the need to post any bond or security as an incident thereto; and 4.1.2   To sell, assign, transfer and deliver the whole or any part of the Collateral at public or private sale, for cash, upon credit, or for future delivery, in bulk or item by item, at such prices and upon such terms as are commercially reasonable, given the nature of the Collateral and the market therefor, with or without warranties, without the necessity of the Collateral being present at any such sale or in view of the prospective purchasers thereof, and without any presentment, demand for performance, protest, notice of protest, or notice of dishonor except as set forth herein, any other such advertisement, presentment, demand or notice being expressly waived by Debtors to the extent permitted by law. At any public sale or sales of the Collateral, Secured Party or Secured Party’s assigns may bid for and purchase all or any part of the Collateral offered for sale and upon compliance with the terms of such sale, may hold, exploit and dispose of such Collateral discharged from all claims of Debtor, except to the extent that Debtor has rights in the proceeds of such sale or sales, and free from any right or redemption, all of which are hereby expressly waived and released, and may in paying the purchase price thereof, in lieu of cash assignment at the face amount thereof, together with any interest accrued thereon, all or any part of unpaid principal or interest or both, payable under the Note. Secured Party may also purchase all or any part of the Collateral at any private sale thereof to the extent that such Collateral is customarily sold in a recognized market or is the subject of a widely or regularly distributed standard price quotation. Upon conclusion of any such public or private sale, Secured Party may execute and deliver a bill of sale to the assets so sold, in the name of Debtor. Secured Party may use Debtor’s premises for the purpose of conducting of any such sale. Secured Party shall give Debtor seven (7) days’ notice, in writing, of the time and place thereof, and in the case of a public sale, the date thereof and the name of the purchaser. Notice shall be deemed given when deposited in the United States mail, postage prepaid, certified or registered, and addressed to Debtor at 1800 Century Park East, Suite 200, Los Angeles, CA 90067. Secured Party shall only be required to publish an advertisement of a public sale, which advertisement may be published in a newspaper of general circulation no later than seven (7) days prior to the date of sale, and an advertisement so published shall be deemed commercially reasonable if it merely gives the place, time, and date of sale, merely identifies the Collateral by classification without describing quantity or quality; provided, however that such advertisement may, at Secured Party’s option, contain additional information. Debtor acknowledges that Secured Party may accept any offer received, provided it is commercially reasonable, that Secured Party, at Secured Party’s option, need not approach more than one possible purchaser, and that Secured Party shall, to the fullest extent permitted by law, be relieved from all liability or claim for inadequacy of price if the manner and terms of sale comply with the terms of this Security Agreement. 2   --------------------------------------------------------------------------------   4.2   In the event of any such sale by Secured Party of all or any of said Collateral on credit, or for future delivery, such property so sold may be retained by Secured Party until the selling price is paid by the purchaser. Secured Party shall incur no liability in case of the failure of the purchaser to take up and pay for the property so sold. In case of any such failure, said Collateral may be again, and from time to time, sold.   4.3   In the event of any such sale or disposition, the proceeds thereof shall be applied first to the payment of the expenses of the sale, commissions, actual attorneys’ fees, and all other charges paid or incurred by Secured Party in taking, holding, selling , advertising, or otherwise preparing such Collateral for sale or otherwise in connection with maintaining the security of such Collateral, including any taxes or other charges imposed by law upon the Collateral and/or the ownership, holding or transfer thereof; secondly, to pay, satisfy and discharge all indebtedness of Debtor to Secured Party secured hereby then due and payable pursuant to the Note; thirdly, to the extent that Debtor may still have monetary obligations to Secured Party not yet due and payable, Secured Party may retain any surplus as collateral for the payment of such sums when due; and fourthly, if all of the secured obligations are then discharged and satisfied, to pay the surplus, if any, to Debtor. Secured Party shall look only to the assets of the business then operated and/or owned by Debtor to satisfy any and all claims, defaults or breaches regarding the Note and shall not in any event, look to any other assets of Debtor to satisfy same. 4.4   Secured Party shall not be liable or responsible for safeguarding the Collateral, or any portion thereof, or maintaining the condition thereof, or for any loss or damage thereto and diminution in value of the Collateral either through loss or non-collection. Secured Party shall not be liable or responsible for any act or default of any carrier or warehouseman or of any other person, other than that occasioned by the gross negligence and willful misconduct of Secured Party.   5.   REPRESENTATIONS AND WARRANTIES.  Debtor represents and warrants that this Security Agreement has been duly and validly authorized, executed and delivered by Debtor and constitutes a valid and binding agreement, enforceable in accordance with its terms, and the execution and delivery of this Security Agreement do not violate, or constitute a default (with or without the giving of notice, the passage of time, or both) under any order, judgment, agreement, contract, or instrument to which Debtor is a party or by which Debtor is affected or may be bound. Debtor represents that Debtor will at all times maintain the Collateral in good state of repair and condition consistent with good business practice, including replacement of damaged, destroyed, or obsolete parts thereof, will pay any and all taxes thereon or applicable thereto prior to delinquency, and shall maintain at all times insurance thereon against risk of fire and other such risks as are covered by “extended coverage”, theft, burglary and vandalism. Such policy or policies shall provide that any loss thereunder and proceeds payable thereunder shall be payable to Secured Party as Secured Party’s interest may appear. 3   --------------------------------------------------------------------------------     6.   INDEMNITY. In the case of any adverse claim with respect to the Collateral or any portion thereof arising out of any act done, or permitted or acquiesced in by Debtor, Debtor indemnifies and agrees to hold Secured Party harmless from and against any and all claims, losses, liabilities, damages, expenses, costs and actual attorneys’ fees incurred by Secured Party in or by virtue of exercising any right, power or remedy of Secured Party hereunder or defending, protecting, enforcing or prosecuting the security interest hereby created. Any such loss, cost, liability, damage or expense so incurred shall be repaid upon demand by Secured Party and until so paid shall be deemed a secured obligation hereunder.   7.    NO WAIVER BY SECURED PARTY. Any forbearance, failure, or delay by Secured Party in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power, or remedy, and any single or partial exercise of any right, power, or remedy of Secured Party shall not preclude the later exercise of any other right, power, or remedy, each of which shall continue in full force and effect until such right, power, or remedy is specifically waived by an instrument in writing, executed by Secured Party.   8.    EFFECTIVENESS OF AGREEMENT.This Security Agreement and Debtors’ duties and obligations and Secured Party’s powers to dispose of the Collateral, and all other rights, powers and remedies granted to Secured Party hereunder shall remain in full force and effect until Debtor has satisfied and discharged all of Debtor’s obligations to Secured Party secured thereby.   9.    WAIVER BY DEBTOR. All provisions of law, in equity and by statute providing for, relating to, or pertaining to pledges or security interests and the sale of pledged property or property in which a security interest is granted, or which prescribe, prohibit, limit or restrict the right to, or conditions, notice or manner of sale, together with all limitations of law, in equity, or by statute, on the right of attachment in the case of secured obligations, are hereby expressly waived by Debtor to the fullest extent Debtor may lawfully waive same.   10.   RELEASE OF COLLATERAL. Upon payment in full by Debtor, in lawful money of the United States of America, to Secured Party at the address set forth in the Note of all amounts secured hereby, and performance of all other obligations of Debtor under this Security Agreement, together with any interest thereon and any costs and expenses incurred by Secured Party in the enforcement of this Security Agreement or of any of Secured Party’s rights hereunder, or in the enforcement of any other agreements (whether heretofore or hereafter entered into) between Debtor and Secured Party, or any of the rights of Secured Party thereunder, and upon the request of Debtor therefore, Secured Party will deliver to Debtor, at Debtor’s sole cost and expense, such termination statements and such other documents of release, reconveyance and reassignments as shall be sufficient to discharge Debtor of the liabilities secured hereby and to terminate and release the security interest in the Collateral created hereby.   4   --------------------------------------------------------------------------------   11.    MISCELLANEOUS.    11.1   This Security Agreement and all of the rights and duties in connection herewith shall be governed by and construed in accordance with the laws of the State of California thereof without giving effect to principles governing conflicts of law. 11.2   This Security Agreement and all of its terms and provisions shall be binding upon the heirs, successors, transferees and assigns of each of the parties hereto. 11.3   In the event any portion of this Security Agreement is held invalid, the remaining portions shall remain in full force and effect as if that invalid portion had never been a part hereof. 11.4   In the event litigation is commenced to enforce or interpret this Security Agreement, or any provision hereof, the prevailing party shall be entitled to recover its actual costs and attorneys’ fees. 11.5   This Security Agreement may be amended only by written consent of each of the parties hereto. 11.6   Any and all notices, demands, requests, or other communications required or permitted by this Security Agreement or by law to be served on, given to, or delivered to any party hereto by any other party to this Security Agreement shall be in writing and shall be deemed duly served, given, or delivered when personally delivered to the party, or in lieu of such personal delivery, when deposited in the United States mail, first-class postage prepaid addressed to the party at the address herein appearing. 11.7   This Security Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein and supercedes all prior and contemporaneous agreements, representations and understandings of the parties. No waiver of any of the provisions of this Security Agreement shall be deemed, or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 11.8   This Security Agreement may be executed simultaneously 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. The exhibits attached hereto are made a part hereof and incorporated herein. 5   --------------------------------------------------------------------------------   11.9    Nothing in this Security Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Security Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Security Agreement intended to relieve or discharge the obligations or liability of any third persons to any party to this Security Agreement, nor shall any provision give any third person any right of subrogation or action against any party to this Security Agreement. 11.10   Each party’s obligations under this Security Agreement is unique. If any party should default in its obligations under this Security Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages; accordingly, the non-defaulting party, in addition any other available rights or remedies, may sue in equity for specific performance without the necessity of posting a bond or other security, and the parties each expressly waive the defense that a remedy in damages will be adequate. 11.11   All representations, warranties and agreements of the parties contained in this Security Agreement, or in any instrument, certificate, opinion or other writing provided for in it, shall survive the completion of all acts contemplated herein. 11.12   Whenever the context of this Security Agreement requires, the masculine gender includes the feminine or neuter gender, and the singular number includes the plural. 11.13   As used herein, the word “days” shall refer to calendar day, including holidays, weekends, non-business days, etc. 11.14   The captions contained herein do not constitute part of this Security Agreement and are used solely for convenience and shall in no way be used to construe, modify, limit or otherwise affect this Security Agreement.       [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]     6   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Security Agreement is executed on the date first set forth above at Los Angeles County, California. DEBTOR SECURED PARTY PATIENT SAFETY TECHNOLOGIES, INC. AULT GLAZER BODNAR   ACQUISITION FUND, LLC       BY: Ault Glazer Bodnar & Company /s/ Louis Glazer MD                                          Investment Management, LLC, Managing Member BY: Louis Glazer, M.D., Ph.G.   TITLE: Chairman and Chief Executive   Officer /s/ Milton Ault                                                      BY: Milton “Todd” Ault III   TITLE: Managing Member                                       7   --------------------------------------------------------------------------------  

Exhibit 10.35 SEPARATION AGREEMENT AND GENERAL RELEASE   1.    Agreement. This Separation Agreement and General Release (“Agreement”) is entered into by and between Iomega Corporation, a Delaware corporation, on behalf of itself and each of its subsidiaries (“Iomega” or the “Company”), and Anna Aguirre (“Employee”) for the purpose of amicably concluding their employment relationship. By entering into this agreement neither party admits any deficiency, wrongdoing or liability, expressly or by implication.   2.    Last Working Day. Employee’s last regular working day at Iomega will be June 30, 2006 (“Last Working Day”). The effective date of Employee’s termination of employment with Iomega will be June 30, 2006 (the “Termination Date”).   3. Consideration.   (a)  Iomega shall make a total special severance payment to Employee in the amount of $142,500.00, less necessary federal, state and other withholdings to be paid in bi-weekly increments over approximately nine months, beginning on the first regular payroll cycle after receipt of this fully executed Agreement, provided Employee provides any assistance related to the business of Iomega that the Company requests during those months, performs satisfactorily through the Last Working Day, and complies with the Iomega Employee Information Guide through Employee’s Termination Date. Employee acknowledges and agrees that no payments hereunder constitute compensation under the 401(k) plan eligible for elected deferrals and matching contributions.   (b)  Iomega shall pay to Employee $12,074.00 less necessary federal, state and other withholdings to be paid in a lump sum payment, which is equivalent to the cost of COBRA for a nine month period, based on Employee’s current health insurance benefits through Iomega.   (c) Iomega will provide executive outplacement services to Employee as determined by Iomega. (d)  Employee will retain her currently assigned laptop computer, mobile telephone and mobile telephone number. After the Termination Date, all billing related to the mobile telephone will become the responsibility of the Employee. (e) The amounts and provisions set forth in Section 3 (a) through (d) above will be paid or implemented after receipt of a fully executed and unchanged copy of this Agreement and the expiration of the Age Release Period described in this Agreement. These payments shall be in full satisfaction of any and all claims Employee may have arising directly or indirectly from his/her employment and separation from Iomega and shall also be consideration for the other promises contained herein. Employee acknowledges and understands that, except as described in Section 3 of this Agreement, Employee will not be entitled to receive from Iomega any other severance or termination allowance or any other compensation or payment, including any other payments for any sales commissions or bonuses or other consideration.   4.    Participation in Benefit and Other Programs. Employee will be entitled to participate through the Termination Date in all employee benefit programs and policies generally available to Iomega employees, in which Employee is eligible to participate, including stock option vesting, health insurance, and Iomega’s 401(k) plan (if applicable), as allowed by law.   Employee acknowledges and agrees that, under the terms of any outstanding stock option agreement(s) between Employee and Iomega, the vesting of any options to purchase company stock granted to employee will cease as of the Termination Date, and Employee has a period of three months following the Termination Date   Exec Sep Agreement Over 40 1 Revised March 2006   --------------------------------------------------------------------------------   within which to exercise any vested options. Any vested options not exercised within the three month period shall expire and thereafter not be exercisable. All unvested options will be canceled on Employee’s Termination Date. No unearned bonuses or other incentive compensation will be due Employee.   5.    Re-Employment by Iomega. Employee agrees that if employee becomes re-employed with Iomega or is assigned to Iomega as a temporary or contract Employee while Employee is receiving payments pursuant to this Agreement, Employee shall waive any remaining payments otherwise due hereunder, without affecting any other terms of the Agreement.   6. Release of Claims. (a)        General Release. In consideration of the payments and other valuable consideration under the terms of this Agreement, Employee hereby knowingly, voluntarily, and irrevocably agrees to fully, unconditionally, completely and forever release Iomega, and all of Iomega’s predecessors and successors, and their officers, directors, shareholders, agents, employees and representatives, and all parent, subsidiary and affiliated companies, together with their employees, officers, directors and shareholders (the “Released Parties”), from any and all rights and claims, including, without limitation, demands, causes of action, charges, complaints, promises, grievances, losses, damages, liabilities, debts, or injuries, whether known or unknown, contingent or matured, at law or in equity or in arbitration, which Employee holds or has ever held against Iomega resulting from any act, obligation, or omission occurring on or prior to the date Employee signs this Agreement (“Released Claims”), including, but not limited to, any Released Claims connected with or arising out of Employee’s employment, or separation therefrom, or terms of such employment or employment separation by Iomega; employee benefit plans whether or not arising under the Employee Retirement Income Security Act of 1974, as amended; any claims whether or not arising under any local, state or federal law or regulation, public policy or common law (including, without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, the California Fair Employment and Housing Act, the California Family Rights Act, the California Labor Code, Title 34 and 34A of the Utah Code Annotated, and the laws and regulations of the State of Colorado) or any state, federal or local statute, regulation, public policy, contract or tort principle in any way governing or regulating Employee’s employment, or termination, or terms of employment or termination by Iomega. Released Claims expressly include any and all rights of Employee under the Company’s Management Incentive Plan (MIP), and any and all rights to receive any further sales commissions, bonuses, or other compensation from Iomega. It is expressly understood that – except for the consideration stated in Section 3 above, no further payments are due to Employee under the MIP or any other Iomega compensation or bonus plan. It is expressly agreed and understood that this Agreement is a general release. Nothing contained in this Agreement is a waiver of any rights or claims that may arise after the date of execution by Employee or which, as a matter of law, cannot be released or waived. This release does not include a release of claims for unemployment or worker's compensation benefits.   (b)        Age Discrimination Release. In addition to the waivers and releases contained in the preceding paragraph, and in consideration of the payments provided above, Employee also specifically releases Iomega from any and all liabilities, claims, causes of action, demand for damages or remedies of any kind, including claims for attorneys’ fees and legal costs, arising under the Age Discrimination in Employment Act of 1967, as amended, related to or arising out of his/her employment or termination from employment with Iomega up to and including the date of this Agreement. Employee is advised to consult with an attorney regarding this Agreement. Employee also acknowledges that prior to signing this Agreement Employee has 45 days from the date of his receipt of the Agreement within which to consider it and to consult with an attorney of his/her choice regarding it. Should Employee nevertheless elect to execute this Agreement sooner than 45 days after she/he has received it, Employee specifically and voluntarily waives the right to claim or allege that she/he has not been allowed by Iomega or by any circumstances beyond his/her control to consider the Agreement for a full 45 days. Employee also acknowledges and agrees that this Agreement will not become effective or enforceable until after seven (7) days from the date it is signed by Employee (“Age Release Period”). During the Age   Exec Sep Agreement Over 40 2 Revised March 2006   --------------------------------------------------------------------------------   Release Period Employee understands and agrees that she/he may revoke the provisions of this Section by delivering written notice of this revocation to Sheree Lupton, Director of Human Resources, Iomega Corporation, 1821 West Iomega Way, Roy, UT 84067. This provision is not intended to change or affect current law regarding the knowing and voluntary nature of releases, including but not limited to the law regarding the knowing and voluntary nature of releases under the Older Workers Benefit Protection Act.   Employee also acknowledges that he/she has received information regarding the ages and job titles of other employees within his/her department who have also been affected by this reduction in force, as well as the ages and job titles of the employees within his/her department who were not selected for reduction. This information is attached as Exhibit A to this Agreement.   7.    Section 1542 Waiver. Employee does expressly waive all benefits and rights granted to her/ him pursuant to California Civil Code section 1542, which reads as follows: A general release does not extend to claims which the creditor does not know of or suspect to exist in his/ her favor at the time of executing the release, which if known by him/ her must have materially affected his/ her settlement with the debtor. Employee does certify that she/ he has read all of this Agreement, including the Agreement provisions contained herein and the quoted California Civil Code section, and that she/ he fully understands all of the same. Employee hereby expressly agrees that this Agreement shall extend and apply to all unknown, unsuspected, and unanticipated injuries and damages, as well as those that are now disclosed. 8.    No Further Action. Employee irrevocably and absolutely agrees that she/ he will not prosecute or allow to be prosecuted on her/ his behalf, in any administrative agency, whether federal or state, or any court, whether federal or state, any claim or demand of any type related to the matters released above in Section 6a, it being the intention of the parties that with the execution by Employee of this Agreement, Iomega, and all of Iomega’s predecessors and successors, and their officers, directors, shareholders, agents, employees and representatives, and all parent, subsidiary and affiliated companies, together with their employees, officers, directors and shareholders will be absolutely, unconditionally and forever discharged of and from any obligations to or on behalf of Employee related in any way to the matters discharged therein.   9.    No Admission of Fault. Iomega and Employee agree that this Agreement in whole or in part shall not be admissible in any legal or quasi-legal proceeding as evidence of or admission by Company of any violation of its policies or procedures or local, state or federal law or regulation. Further, Company expressly denies any violation of any of its policies, procedures, local, state or federal laws or regulations.   10.  Return of Documents. Employee will immediately return to Iomega all documents, records and materials, relating to Iomega’s business, to the extent that any such documents have not yet been returned to Iomega, whether stored electronically or in written or printed form, or otherwise, including but not limited to records, notes, memoranda, computer storage media, drawings, reports, files, software materials, notebooks, rolodex files, telephone lists, computer or data processing disks and tapes, marketing plans, financial plans and studies, customer lists, names of business contacts, policies and procedures, and any materials prepared, compiled or acquired by Employee relating to any aspect of Iomega or its business, products, plans or proposals and all copies thereof, in Employee’s or related party’s possession, custody or control, whether prepared by Employee or others. Employee also agrees to participate in an exit interview upon the termination of Employee’s employment with Iomega.   11.  Non-Disclosure. Employee acknowledges his or her obligations under a written agreement regarding employee use of corporate information executed by Employee at the beginning of her/his employment, which is still in effect.     Exec Sep Agreement Over 40 3 Revised March 2006   --------------------------------------------------------------------------------     12.  Employee Inventions. Employee acknowledges that certain innovations, products and processes invented or discovered by Employee during Employee’s employment with Iomega are the property of Iomega and have been assigned to Iomega under a written agreement regarding employee use of corporate information executed by Employee at the beginning of her/his employment, which is still in effect.   13.  Non-Disparagement. Employee agrees not to disparage, orally or in writing, Iomega, its officers, employees, management, operations, products, designs, or any other aspects of Iomega’s affairs to any third person or entity.   14.  Non-Solicitation of Employees. Employee agrees that for one year following Employee’s Termination Date, Employee shall not, directly or indirectly, in any capacity (including but not limited to, as an individual, a sole proprietor, a member of a partnership, a stockholder, investor, officer, or director of a corporation, an employee, agent, associate, or consultant of any person, firm or corporation or other entity) hire any person from, attempt to hire any person from, or solicit, induce, persuade, or otherwise cause any person to leave his or her employment with Iomega.   15.  Remedies. The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement by negotiation. The parties recognize that irreparable injury to Iomega will result from a material breach of this Agreement, and that monetary damages will be inadequate to rectify such injury. Accordingly, notwithstanding anything to the contrary, Iomega shall be entitled to one or more preliminary or permanent orders: (i) restraining or enjoining any act which would constitute a material breach of Sections 8, 10, 12, 14, and 17 of this Agreement, and (ii) compelling the performance of any obligation which, if not performed, would constitute a material breach of this Agreement. Employee expressly acknowledges that Iomega is prepared to vigorously enforce this Agreement, and that violation of this Agreement could result in the assessment of damages and other legal remedies against Employee and any of Employee’s subsequent employers. Any breach by Employee of this Agreement shall, in addition to other remedies which may be available Iomega, result in the immediate release of Iomega from any obligations it may have to provide further payments under this Agreement, except as may be required by applicable law.   16.  Party’s Bear Own Costs. Each party shall bear the cost of, and shall be responsible for, its own attorneys’ and accountants’ fees and costs, if any, in connection with the negotiation and execution of this Agreement.   17.  Agreement is Confidential. Employee further agrees that the terms and conditions of this Agreement are strictly confidential and shall not be discussed with, disclosed or revealed to any other persons, whether within or outside Iomega, except professional advisors with whom Employee may consult regarding this Agreement and Employee’s immediate family members, unless disclosure is compelled by subpoena or other legal process.   18.  Entire Agreement. This Agreement and any exhibits hereto constitute the entire understanding of the parties, except for the agreement regarding employee use of corporate information executed by Employee at the beginning of her/his employment, which is still in effect. Employee warrants that he or she: (a) has read and fully understands this Agreement and any exhibits hereto; (b) has had the opportunity to consult with legal counsel of his or her own choosing and have the terms of this Agreement fully explained; (c) is not executing this Agreement in reliance on any promises, representations or inducements other than those contained herein; and (d) is executing this Agreement voluntarily, free of any duress or coercion.   19.  Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.       Exec Sep Agreement Over 40 4 Revised March 2006   --------------------------------------------------------------------------------     20.  Governing Law. This Agreement shall be interpreted, construed and governed in accordance with the laws of the State of California without giving effect to the choice of law rules thereof. Any litigation arising from this Agreement shall only be filed in a court of competent jurisdiction located within the County of San Diego, California. Employee hereby consents to this exclusive venue and personal jurisdiction.   21.  Nonassignment. Employee warrants that no person other than Employee is entitled to assert any claim based on or arising out of any alleged wrong suffered by Employee in or as a consequence with or severance of employment from Company and that employee has not assigned or transferred or purported to assign or transfer to any person or entity any claim Employee now has or may have against Company or any portion thereof or interest therein.   22. Acknowledgement by Employee. Employee acknowledges and understands the terms and conditions of this document and has been given ample opportunity to consult with legal counsel and/or advisors before signing it. By Employee’s signature, Employee agrees to the terms set forth above.   Employee has 45 Days following receipt of this Agreement, to sign below, thereby indicating acceptance of the terms and conditions of this Agreement. Employee must not sign prior to Termination Date. If Employee does not accept such terms and conditions by such date, this offer shall expire at that time.  After signing, the Agreement must be promptly returned by hand-delivery, mail, or shipped by overnight delivery to Sheree Lupton, Director, Human Resources, 1821 West Iomega Way, Roy, Utah before any payment shall be made.     EMPLOYEE     Dated: _06-30-06 __________ __/s/ Anna Aguirre _______________________________       IOMEGA CORPORATION     Dated: _07-05-06__________ __/s/ Sheree Lupton ______________________________   Sheree Lupton,     Director of Human Resources         Exec Sep Agreement Over 40 5 Revised March 2006      

Exhibit 10.o AMENDMENT TO THE TORO COMPANY DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS This Amendment is made to The Toro Company Deferred Compensation Plan for Non-Employee Directors, as previously amended and restated effective July 20, 2000 (the “Plan”).  All defined terms shall have the meanings set forth in the Plan.  This Amendment is effective October 16, 2006, unless otherwise stated herein. In no event will this Amendment apply to any amounts earned and vested as of December 31, 2004.  All provisions of the Plan not amended by this Amendment shall remain in full force and effect. 1.                                      Section 3.1(a) shall be amended to read as follows: (a)           Cash Account. (i)  A Participant’s Cash Account shall be credited with Directors Fees deferred pursuant to a valid Deferral Election and shall be further credited with earnings (which may include losses in principal value) at a rate and in a manner authorized by the Committee from time to time; provided that beginning January 1, 2007, and until changed by subsequent action of the Committee, the earnings rate for all Participants (except as otherwise provided in (ii) below) shall be based on a Participant’s selection from the following funds: American Century Large Company Value American Funds Growth Fund of America Artisan Mid Cap Fidelity Diversified International ICM Small Company JPMorgan Mid Cap Value JPMorgan Prime Money Market Fund STI Class Small Cap Growth Vanguard Total Bond Index Vanguard Institutional Index Prior to a Change in Control, the method for determining the earnings rate may be changed at any time, at the discretion of the Committee.  After a Change in Control, the Trustee shall have authority to change the method for determining the earnings rate. (ii)  Notwithstanding the foregoing provisions in paragraph (i) above, all current Participants shall be given a one-time election, until October 31, 2006, to: (A)                              Allocate all funds in all accounts, past and future, so that the earnings rate is based on The Toro Company Stable Return Fund Measure; or -------------------------------------------------------------------------------- (B)                                Allocate all funds in all accounts, past and future, so that the earnings rate is based on the rate of return from one or more of the funds provided for in (a) above. If such a Participant does not make an election, the earnings rate applicable to all of such Participant’s accounts, past and future, shall be based on the Stable Return Fund Measure. 2.                                      Section 4.2(b) shall be amended to read as follows: (b)           Subject to the following sentence, an election may be changed to an allowable alternative payment period by submitting a new election to the Committee, in a form approved by the Committee, provided that an election submitted less than one year before the distribution is to commence shall not be given effect.  Effective January 1, 2008, a Participant may change his or her election only one time after making an initial election with respect to distributions under this Plan.  Subject to the foregoing, the most recent effective election received by the Committee shall govern the payment.  If a Participant does not make a valid election with respect to the payment of benefits, then such benefits shall be payable in a single distribution.  The single distribution shall be made, or installment payments shall commence, on or around the 15th day of January immediately after the calendar year in which the Participant retires. 3.             A new Section 6.5 shall be added as follows: 6.5          Section 409A The Plan is intended to comply with Section 409A of the Code and any official regulations or other guidance issued thereunder, to the extent Section 409A is applicable to the Plan.  Notwithstanding any other provision of the Plan, the Plan shall be interpreted, operated and administered in a manner consistent with such intention, and shall be deemed to be amended (and any deferrals and distributions thereunder shall be deemed to be modified) to the extent the Company deems necessary to comply with Section 409A and any official regulations or other guidance issued thereunder and to avoid (a) the predistribution inclusion in income of amounts deferred under the Plan and (b) the imposition of any additional tax or interest with respect thereto. *  *  * The Company has caused this Amendment to be executed on the date indicated below. THE TORO COMPANY                     Dated: 12/19/2006   By: /s/ J. Lawrence McIntyre        Its: Vice President, Secretary and General Counsel   --------------------------------------------------------------------------------

EXHIBIT 10.1 2006 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF ALBEMARLE CORPORATION Section 1: Purpose. The Purpose of the 2006 Stock Compensation Plan for Non-Employee Directors of Albemarle Corporation (hereinafter referred to as the “Plan”) is to enable the Corporation to pay part of the compensation of its non-employee Directors in shares of the Corporation’s common stock. Section 2: Effective Date. This Plan shall be effective upon the approval of the Plan by the stockholders of the Corporation. Section 3: Administration. This Plan shall be administered by the Corporate Governance and Social Responsibility Committee of the Board of Directors (hereinafter referred to as the “Committee”). The Committee may interpret the Plan, establish administrative regulations to further the purpose of the Plan and take any other action necessary to the proper operation of the Plan. All decisions and acts of the Committee shall be final and binding upon all Participants. Section 4: Participation. Each non-employee who is a Director of the Corporation on the Effective Date of the Plan or who thereafter becomes a Director of the Corporation shall be a Participant in the Plan (hereinafter referred to as a “Participant”) until the non-employee director is no longer serving as a non-employee Director of the Corporation. Section 5: Limit on Shares. No more than 75,000 shares of the Corporation’s Common Stock (hereinafter referred to as the “Shares”) may be issued under this Plan, subject to adjustment under Section 8.4 hereof. Section 6: Grant of Shares. On the first business days of January, April, July and October each year, the Corporation will grant to each Participant 100 Shares. The Board shall have the authority to increase the amount of Shares issued to each Director during a calendar year but in no event shall more than 1000 Shares be issued to a Participant during any calendar year. Section 7: Amendment, Suspensions or Termination. The Board of Directors may amend, suspend or terminate the Plan, but no such amendment shall, (i) increase the number of Shares that may be granted to any Participant under this Plan, except as provided in Section 6 hereof, or (ii) increase the total number of Shares that may be granted under this Plan; provided, however, that the Plan may not be amended more than once every six months other than to comply with changes in the Internal Revenue Code of 1986, as amended, or any rules or regulations promulgated thereunder. Any amendment of this Plan shall comply with the rules of the New York Stock Exchange or such other primary exchange on which the Shares are then traded. Section 8: Miscellaneous. 8.1: Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for re-election by the Corporation’s stockholders. -------------------------------------------------------------------------------- 8.2: Shares granted under the Plan may be newly-issued shares or shares which are reacquired by the Corporation on the open market. 8.3: Shares granted pursuant to the Plan shall be in addition to any annual retainer, attendance fees or other compensation payable to a Participant. 8.4: In the event of any change in capital, shares of capital stock, or any special distribution to the stockholders, the Board of Directors shall make equitable adjustments in the number of Shares that have been, or thereafter may be, granted to Participants. 8.5: The Plan shall be interpreted in accordance with, and the enforcement of the Plan shall be governed by, the laws of the state of Virginia.

EXHIBIT 10.2 WIND TURBINE SUPPLY AGREEMENT between MADISON GAS AND ELECTRIC COMPANY as Buyer and VESTAS-AMERICAN WIND TECHNOLOGY, INC. as Supplier for the TOP OF IOWA PHASE III PROJECT Dated as of September 29, 2006   ARTICLE 1. DEFINITIONS AND RULES OF INTERPRETATION 1.1 Definitions 1.2 Recitals, Articles, Sections and Exhibits 1.3 Gender 1.4 Successors and Assigns 1.5 Day 1.6 Grammatical Forms 1.7 References to Documents ARTICLE 2. CONDITIONS PRECEDENT 2.1 Conditions Precedent to Supplier’s Obligations 2.2 Conditions Precedent to Commencement of Equipment Supply Obligations at Project Site   ARTICLE 3. SUPPLIER’S OBLIGATIONS 3.1 Supplier’s Obligations to Perform the Equipment Supply Obligations 3.2 Exclusions from Equipment Supply Obligations 3.3 Supplier Permits 3.4 Financing Cooperation 3.5 Security of Turbine Equipment 3.6 Contracts, Documents, and Other Deliverables. 3.7 Project Schedule 3.8 Delivery of Wind Turbine Components. 3.9 Commissioning and Final Completion. 3.10 Consumable Parts 3.11 Standard of Performance of Equipment Supply Obligations 3.12 Supplier’s Manager 3.13 Subcontractors and Vendors 3.14 Cooperation of Supplier, Buyer and BOP Contractors 3.15 Supplier Safety Program 3.16 Emergencies 3.17 Cooperation Regarding Commercial Operation 3.18 Liens. 3.19 Taxes 3.20 Technical Advisors. ARTICLE 4. CONTRACT PRICE AND PAYMENT 4.1 Contract Price. 4.2 Payment of Contract Price 4.3 Fuel Adjustments 4.4 Equipment Option Adjustment 4.5 Invoicing. 4.6 Disputed Payments 4.7 Late Payments ARTICLE 5. BUYER’S OBLIGATIONS 5.1 Buyer’s Obligation to Accept and Pay for Equipment Supply Obligations 5.2 Notice to Proceed 5.3 Buyer’s Obligation to Complete Balance of Plant 5.4 Scheduling 5.5 Right of Access. 5.6 Transportation Access. 5.7 Loading, Unloading and Delivery Device Return 5.8 Installation, Assembly, Erection and Mechanical Completion of Turbine Equipment 5.9 Qualifications; Operation 5.10 BOP Contractors 5.11 Cooperation of Supplier, Buyer and BOP Contractors 5.12 Cooperation Regarding Punch List 5.13 Site Storage of Wind Turbines, Equipment and Materials 5.14 Buyer Permits 5.15 Security of Turbine Equipment and Safety 5.16 Traffic 5.17 Standard of Performance of Balance of Plant Work 5.18 Contracts, Documents, and Other Deliverables. 5.19 Buyer’s Manager 5.20 Taxes 5.21 Inspection of Balance of Plant Work 5.22 Hazardous Site Conditions 5.23 Soil and Subsurface Conditions 5.24 FAA Lighting 5.25 Tower Foundation Templates ARTICLE 6. SCHEDULE 6.1 Commencement 6.2 Delivery Delays. 6.3 Final Completion, SCADA Completion and Punch List 6.4 Payment of Liquidated Damages 6.5 Liquidated Damages Not a Penalty 6.6 Sole and Exclusive Remedy ARTICLE 7. PROJECT COMPLETION 7.1 Wind Turbine Mechanical Completion 7.2 Wind Turbine Commissioning Completion 7.3 Final Completion 7.4 SCADA Completion 7.5 Buyer Milestone Completion, Notification and Approval. 7.6 Mechanical Completion Date 7.7 Supplier Milestone Completion, Notification and Approval. 7.8 Punch List Preparation ARTICLE 8. TITLE, RISK OF LOSS, CARE, CUSTODY AND CONTROL  AND SECURITY INTEREST   8.1 Transfer of Title and Risk of Loss 8.2 Purchase Money Security Interest. ARTICLE 9. LICENSE AGREEMENT 9.1 Grant of License 9.2 No Copies 9.3 Proprietary Notices 9.4 No Reverse Engineering 9.5 Prohibited Uses 9.6 Restrictions on Transfer 9.7 Owned by Supplier 9.8 Government End Users 9.9 Export Restrictions ARTICLE 10. EXCUSABLE EVENTS 10.1 Excusable Events 10.2 Change Order for Excusable Event 10.3 Procedures upon Excusable Event or Force Majeure 10.4 Burden of Proof 10.5 Contract Price Adjustments Due to Force Majeure Events ARTICLE 11. CHANGE ORDERS 11.1 Change Order 11.2 Change Order Process 11.3 No Change ARTICLE 12. INSURANCE ARTICLE 13. LIMITATIONS ON LIABILITY 13.1 Overall Limitation of Liability 13.2 Consequential Damages 13.3 Releases Valid in All Events 13.4 Survival ARTICLE 14. CONFIDENTIALITY AND PUBLICITY 14.1 Confidential Information. 14.2 Publicity 14.3 Survival ARTICLE 15. REPRESENTATIONS AND WARRANTIES OF SUPPLIER 15.1 Due Organization; Valid Existence; Qualified to do Business 15.2 Due Authorization 15.3 Execution and Delivery 15.4 Governmental Approvals 15.5 Permits ARTICLE 16. REPRESENTATIONS AND WARRANTIES OF BUYER 16.1 Due Organization; Valid Existence; Qualified to do Business 16.2 Due Authorization 16.3 Execution and Delivery 16.4 Governmental Approvals 16.5 Permits 16.6 Accuracy of Information 16.7 Correct Project Commercial Information ARTICLE 17. DEFAULT AND TERMINATION 17.1 Supplier Defaults 17.2 Buyer Defaults 17.3 Cure of an Event of Default 17.4 Event of Default Remedies. 17.5 Termination For Buyer Event of Default 17.6 Termination For Supplier Event of Default 17.7 Termination For Force Majeure Event 17.8 Limitations on Transfer of Title Upon Termination 17.9 Surviving Obligations ARTICLE 18. INDEMNIFICATION FOR THE EQUIPMENT SUPPLY OBLIGATIONS  AND INDEMNIFICATION FOR INFRINGEMENT   18.1 Indemnification By Buyer 18.2 Indemnification By Supplier 18.3 Comparative Negligence 18.4 Indemnity from Liens 18.5 Indemnification Procedure 18.6 Buyer’s Hazardous Substance Indemnity 18.7 Infringement Indemnification 18.8 Availability of Insurance 18.9 Survival ARTICLE 19. ARBITRATION 19.1 Arbitration Procedure 19.2 Attorneys’ Fees 19.3 Performance During Dispute 19.4 Third Parties 19.5 Language 19.6 Survival ARTICLE 20. GENERAL PROVISIONS 20.1 Waiver 20.2 Right of Waiver 20.3 Successors and Assigns 20.4 Notices 20.5 Governing Law 20.6 Consent to Jurisdiction 20.7 Amendments 20.8 Entire Agreement 20.9 Certain Expenses 20.10 Conflicting Provisions 20.11 No Partnership Created 20.12 Survival 20.13 Further Assurances 20.14 Counterparts 20.15 NO IMPLIED WARRANTIES 20.16 Headings 20.17 No Rights in Third Parties 20.18 Severability 20.19 Joint Effort 20.20 Effectiveness 20.21 English Language Documents 20.22 Notices, Consents and Approvals in Writing List of Exhibits Exhibit A Scope Description and Division 1.1 Supplier’s Scope of Supply 1.2 Buyer’s Scope of Supply and Work 1.3 Detailed Task Identification and Division in Relation to Interfaces 1.4 Permits 1.5 Lifting and Rigging Tools Exhibit B Supplier Milestones and Project Schedule B.1 Supplier Milestones B.2 Project Schedule Exhibit C Pricing and Invoicing C.1 Contract Price Specification C.2 Payment Schedule C.3 Form of Application for Payment C.4 Supplier’s Account Information Exhibit D Turbine Equipment Specification D.1 Wind Turbine Specification D.1.1 General Specification V82 – 1,65 MW D.1.2 Wind Turbine Single-Line Diagram D.1.3 Electrical Data D.1.4 Advanced Grid (LVRT) Option D.1.5 Low Temperature Package D.1.6 Power Factor Correction D.2 SCADA System Technical Specification D.2.1 SCADA System Description D.2.2 VestasOnline Business Solutions Hardware Specification D.2.3 VestasOnline Business Solutions Software Specification D.3 Tower D.3.1 Tower Drawing D.3.2 Tower Foundation Loads, Conduit Placement, Grounding Requirements and Template Ring Drawing D.4 Installation Manual Exhibit E Balance of Plant Specifications E.1 Access, Offloading and Storage Specifications E.2 Fiber Cable Handling Instructions E.3 Fiber Optic Layout Exhibit F Forms of Documents to be Executed and Delivered F.1 On Effective Date F.1.1 Form of Service Agreement F.1.2 Form of Warranty Agreement F.2 Before Commencement Date F.2.1 Form of Notice to Proceed F.2.2 Form of Buyer Parent Guaranty F.2.3 Form of Supplier Parent Guaranty F.2.4 Insurance Requirements F.3 During Delivery, Mechanical Completion and Commissioning F.3.1 Form of Change Order F.3.2 Form of Shipping Certificate F.3.3 Form of Delivery Certificate F.3.4 Form of Delayed Delivery Certificate F.3.5 Mechanical Completion Checklist F.3.6 Form of Mechanical Completion Certificate F.3.7 Commissioning Completion Checklist F.3.8 Form of Commissioning Completion Certificate F.3.9 Form of Delayed Commissioning Completion Certificate F.3.10 Form of Final Completion Certificate F.3.11 Form of Delayed Final Completion Certificate F.3.12 SCADA Completion Checklist F.3.13 Form of SCADA Completion Certificate Exhibit G List of Technical Documentation and Technical Documentation Delivery Schedule G.1 Supplier Documents and Deliverables G.2 BOP Documents and Deliverables Exhibit H Buyer’s Information H.1 List of Wind Turbine Coordinates H.2 Site Plan H.3 Site Description H.4 Climatic Data Sheet H.5 Grid Connection Form H.6 Electrical One-Line Diagram Exhibit I Supplier Safety Program and Site Rules I.1 Supplier Safety Program I.2 Supplier Site Rules Exhibit J Unloading and Loading Time Periods, Delivery Device Return Schedule and Demurrage Charges Exhibit K Customer Training WIND TURBINE SUPPLY AGREEMENT THIS WIND TURBINE SUPPLY AGREEMENT is made and entered into as of September 29, 2006 (the “Effective Date”) by and between Vestas-American Wind Technology, Inc., a California corporation (hereinafter “Supplier”), and Madison Gas and Electric Company, a Wisconsin corporation (hereinafter “Buyer”).  Buyer and Supplier are sometimes hereinafter referred to individually as a “Party” and together as the “Parties.” RECITALS: A. WHEREAS, Buyer is developing a certain wind turbine electric generating facility in Town of Joice, Worth County, Iowa (the “Project”) located at the site described in Exhibit  (the “Project Site”). B. WHEREAS, Buyer wishes to obtain and Supplier wishes to supply the Turbine Equipment, as described herein, and to perform certain commissioning work, as described herein, for the Project, on the terms and subject to the conditions of this Agreement. C. WHEREAS, Supplier wishes to grant to Buyer, and Buyer wishes to receive from Supplier, a non-exclusive, limited license to use certain of Supplier’s intellectual property on the terms and subject to the conditions of this Agreement. D. WHEREAS, upon completion of certain supply and commissioning activities, as described herein, Buyer wishes to procure from Supplier and Supplier wishes to provide certain warranties and maintenance services in accordance with the Warranty Agreement and the Service Agreement being executed concurrently herewith. NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE 2. DEFINITIONS AND RULES OF INTERPRETATION 2.1 Definitions .  Initially-capitalized terms used in this Agreement (including the preamble and Recitals hereto) without other definition shall have the meanings specified below: “AAA” has the meaning set forth in Section . “Access Roads” means the access roads identified in Exhibit  and more particularly described in Exhibit . “Actual Hedge Rate” has the meaning set forth in Section . “Actual Hedging Date” has the meaning set forth in Section . “Adjustable Portion” has the meaning set forth in Section . “Affiliate” means, as to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person in question.  For the purposes of this definition, the concept of “control,” when used with respect to any specified Person, shall signify the possession of the power to direct the management and policies of such Person, whether through the ownership of voting securities or partnership or other ownership interests or otherwise. “Agreement” means this Wind Turbine Supply Agreement including all Exhibits attached hereto, as the same may be amended, modified or supplemented from time to time, and any Change Orders agreed to by the Parties. “Alternate Delivery Location” has the meaning set forth in Section . “Anticipated Delivery Date” means the anticipated date for delivery of the relevant Component as specified in the Project Schedule on the Effective Date. “Anticipated Hedging Date” has the meaning set forth in Section . “Applicable Laws” means all laws, ordinances, statutes, rules, regulations, orders, and decrees of any Governmental Authority having jurisdiction over the Parties hereto, the Project or the Parties’ obligations under this Agreement as the same may be modified, amended or repealed from time to time. “Application for Payment” has the meaning set forth in Section . “Arbitration Notice” has the meaning set forth in Section . “Balance of Plant Specifications” means the specifications set forth in Exhibit  and . “Balance of Plant Work” has the meaning set forth in Section . “Blade Set” means the Hub and a complete set of three (3) blades for a Wind Turbine. “BOP Contract” means any contract, term sheet, memorandum of understanding or other agreement, whether oral or written, between Buyer and any BOP Contractor. “BOP Contractor” means those Persons, other than Supplier, with whom Buyer contracts or subcontracts, to perform work in connection with the Project, including sub-subcontractors.  “BOP Contractors” may also include Buyer in the event Buyer elects to perform any work in connection with the Project. “BOP Documents and Deliverables” has the meaning set forth in Section . “BOP Requirements” has the meaning set forth in Section . “Builder’s All- Risk Policy” has the meaning set forth in Exhibit . “Business Day” means every day other than a Saturday, Sunday or a day on which banks are required or authorized by law or executive order to close in the State of Oregon, the State of New York or the State in which the Project is located. “Buyer” has the meaning set forth in the preamble to this Agreement. “Buyer Event of Default” has the meaning set forth in Section . “Buyer Indemnified Party” has the meaning set forth in Section . “Buyer Parent” means MGE Energy, Inc., a Wisconsin corporation. “Buyer Parent Guaranty” means the guaranty issued by Buyer Parent substantially in the form of Exhibit . “Buyer Permits” has the meaning set forth in Section . “Buyer Responsible Parties” has the meaning set forth in Section . “Buyer’s Manager” has the meaning set forth in Section . “Change in Law” means (A) after the Effective Date, the enactment, adoption, promulgation, modification or repeal of any Applicable Law; or (B) the imposition of any material conditions on the issuance or renewal of any applicable Permit after the Effective Date (notwithstanding the general requirements contained in any applicable Permit at the time of application or issue to comply with future laws, ordinances, codes, rules, regulations or similar legislation). “Change Order” has the meaning set forth in Section . “Change Order Information” has the meaning set forth in Section . “Climatic Data Sheet” means the fully completed climatic data sheet attached as Exhibit . “Collateral” has the meaning set forth in Section . “Collection Line” means the underground electrical lines and above ground electrical lines with which the Project is to be interconnected, complete with junction boxes, splices and other hardware. “Commencement Date” has the meaning set forth in Section . “Commissioning” means the performance of those activities described on the Commissioning Completion Checklist prior to Commissioning Completion. “Commissioning Completion” has the meaning set forth in Section . “Commissioning Completion Certificate” means a certificate in the form of Exhibit . “Commissioning Completion Checklist” means the checklist attached as Exhibit . “Commissioning Completion Date” means the earlier of (i) the date on which Commissioning Completion occurs or is deemed to have occurred for a Wind Turbine or (ii) the date on which Supplier submits a Delayed Commissioning Completion Certificate to Buyer for a Wind Turbine in accordance with Section 4.2.4. “Completion Certificate” means a Shipping Certificate, a Delivery Certificate, a Delayed Delivery Certificate, a Commissioning Completion Certificate, a Delayed Commissioning Completion Certificate, a Final Completion Certificate, a Delayed Final Completion Certificate, a SCADA Completion Certificate, as applicable. “Component” means a Turbine Nacelle, blade, Hub or Tower section, as applicable. “Confidential Information” has the meaning set forth in Section . “Contract Documents” means, collectively, this Agreement, the Warranty Agreement and the Service Agreement, as each may be amended from time to time. “Contract Price” has the meaning set forth in Section , as the same may be adjusted from time to time pursuant to the terms hereof. “Conversion Rate” means the Dollar to Euro exchange rate from an internationally recognized bank of good reputation selected by Buyer obtained by Supplier at the time of any conversion pursuant to clause (ii) of the last sentence of Section 4.1.2. “Crane Pads” means the crane pads at the locations described in Exhibit . “Delay Liquidated Damages” has the meaning set forth in Section . “Delayed Commissioning Completion Certificate” means a certificate in the form of Exhibit . “Delayed Delivery Certificate” means a certificate in the form of Exhibit . “Delayed Final Completion Certificate” means a certificate in the form of Exhibit . “Delivery Certificate” means a certificate in the form of Exhibit  or . “Delivery Devices” mean the parts container, the Hub stands, the nootenbooms, the frames and racks for the blades and Turbine Nacelles and such other items listed on . “Delivery Payment” means the payment described in Section  hereof. “Delivery Point” means (i) the location(s) at the Project Site, including the Storage and Lay-down Areas or the Crane Pads, designated by Buyer  (ii) the Alternate Delivery Location, if Buyer requests that Supplier conclude its delivery obligation with respect to any Turbine Equipment at such Alternate Delivery Location or (iii) any other location mutually agreed to in writing by the Parties after the Effective Date. “Disclosing Party” has the meaning set forth in Section . “Dispute” has the meaning set forth in Section . “Dollar” or “$” means a dollar of the US. “Down Payment” has the meaning set forth in Section . “Down Payment Percentage” has the meaning set forth in Section . “Effective Date” has the meaning set forth in the preamble to this Agreement. “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, environmental release or threatened environmental release of any Hazardous Substance or to health and safety matters, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq.; the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. §§ 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. §§ 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq.; and any state and local counterparts or equivalents, in each case as amended from time to time. “Equipment Supply Obligations” has the meaning set forth in Section . “EURO” means the single lawful currency of the participating member states of the European Union. “Event of Default” means either a Buyer Event of Default or a Supplier Event of Default, as applicable. “Ex Works” means the completed manufacturing and assembly of the Turbine Equipment, or any Component thereof, (except to the extent further assembly thereof on the Project Site is contemplated by the Technical Specifications or the Balance of Plant Specifications) and made available for transportation from Supplier’s or the applicable Vendor’s manufacturing facilities to the Project Site. “Excusable Event” has the meaning set forth in Section . “FAA Lighting” means any obstruction or other warning light systems to be placed on the Turbine Equipment. “Final Completion” has the meaning set forth in Section . “Final Completion Certificate” means a certificate in the form of Exhibit . “Final Completion Date” means the earlier of (i) the date on which Final Completion is achieved or deemed to have been achieved or (ii) the date on which Supplier submits a Delayed Final Completion Certificate to Buyer in accordance with Section . “Financing Party” means any and all lenders providing senior or subordinated construction, interim or long-term debt financing or refinancing to Buyer for the purchase, installation or operation of the Turbine Equipment or the Project. “Force Majeure Event” means any event which is not within the reasonable control of the Party affected, and with the exercise of due diligence, could not reasonably be prevented, avoided or removed by such Party, and does not result from such Party’s negligence or the negligence of its agents, employees or subcontractors, which causes the Party affected to be delayed, in whole or in part, or unable to partially or wholly perform its obligations under this Agreement (other than a lack of funds or finances or any obligation for the payment of money), including: natural disasters; landslides; drought; fire; flood; extreme weather conditions, including those affecting visibility; during a time when Wind Turbines are to be Commissioned or during start-up testing: wind speeds greater than 20m/s or less than 4m/s; during a time work is to be performed in a Hub: wind speeds greater than 15m/s; at all other times work is to be performed on the Turbine Equipment, wind speeds greater than 20m/s; ambient temperatures are outside of the operating parameters for the Wind Turbines described in the Technical Specifications; the interconnected electricity transmission or distribution system, including applicable substations, operating outside of the operating parameters of the Wind Turbines described in the Technical Specifications; wind shear; earthquake; lightning; hail; hurricanes; tornados; tsunamis; ice and ice storms; perils of sea; volcanic activity; epidemic; war (whether declared or undeclared) or other armed conflict; acts of God or the public enemy; riot; explosions; civil disturbance; sabotage; strikes, lockouts or labor disputes (except for strikes, lockouts or labor disputes isolated to the Party claiming Force Majeure); vandalism; terrorism or threats of terrorism; action, ruling, decree or injunction of a Governmental Authority; blockades; accidents in shipping or transportation (but solely to the extent such accident would itself be a Force Majeure Event if the Person shipping or transporting were a party hereto); and the closing of or congestion (beyond reasonably foreseeable levels) in any harbor, dock, port, canal or area adjunct thereto.  Force Majeure Events include the failure of a subcontractor or supplier to furnish labor, services, materials or equipment in accordance with its contractual obligations (but solely to the extent such failure is itself due to a Force Majeure Event).  Force Majeure Events shall not include (a) a Party’s financial inability to perform under this Agreement, (b) a failure of equipment except if caused by a Force Majeure Event, (c) unavailability of spare parts except if caused by a Force Majeure Event or (d) sabotage by employees, agents or any subcontractors of the Party claiming the Force Majeure Event. “Fuel Price” means the 30-day rolling average price of bunker fuel IFO380 in Rotterdam as published on the web site http://www.bunkerworld.com/markets/prices/nl/rtm/30day (or if such price shall cease to be published, such other price as may be reasonably agreed by Buyer and Supplier). “Fuel Price ED” means the Fuel Price for the 30-day period ending on the Effective Date, being $275.50 per metric ton. “Fuel Price EWD” means the Fuel Price for the last 30-day period for which the Fuel Price is published ending prior to the date of Ex Works of the last Wind Turbine for the Project. “Governmental Authority” means any federal, state, local, municipal or other governmental, regulatory, administrative, judicial, public or statutory instrumentality, court or governmental tribunal, agency, commission, authority, body or entity, or any political subdivision thereof, having legal jurisdiction over the matter or Person in question. “Guaranteed Delivery Dates” means the applicable guaranteed delivery date set forth in the Project Schedule as the same may be modified in accordance with the terms and conditions of this Agreement. “Hazardous Substances” means all explosive or radioactive substances or wastes and all 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. “Hedging Bank” means any internationally recognized bank of good reputation, as may be reasonably selected by Supplier. “Hub” means the hub of a Wind Turbine to which the blades are attached, as described in . “INCOTERMS 2000” means the International Rules for the Interpretation of Trade Terms as prepared by the International Chamber of Commerce and as may be amended, supplemented or replaced from time to time. “Indemnified Party” has the meaning set forth in Section . “Indemnifying Party” has the meaning set forth in Section . “Initial Response Period” has the meaning set forth in Section . “Installation Manual” means the installation manual attached as Exhibit . “Intellectual Property” means recognized protectable intellectual property of Supplier or Supplier Parent, their respective Affiliates or third parties from whom Supplier has obtained rights, such as patents, copyrights, corporate names, trade names, trademarks, trade dress, service marks, applications for any of the foregoing, software, firmware, trade secrets, mask works, industrial design rights, rights of priority, know how, design flows, methodologies and any and all intangible protectable proprietary information that is legally recognized. “Interconnecting Utility” means Interstate Power and Light Company. “LIBOR” means the one month London Interbank Offered Rate published in The Wall Street Journal on the last Business Day of the most recent calendar month. “Licensed Materials” means (i) training processes and the contents of service and maintenance manuals, including any updates thereto, and (ii) software and firmware, if any, contained within the Turbine Equipment, including any updates thereto. “Lien” means, with respect to any property or asset, any mortgage, deed of trust, lien, pledge, charge, security interest, or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected or effective under Applicable Law, as well as the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. “Lifting and Rigging Tools” means those tools set forth on Exhibit . “Losses” means any and all claims, judgments, demands, damages, fines, losses, liabilities, interest, awards, penalties, causes of action, litigation, lawsuits, administrative proceedings, administrative investigations, costs and expenses, including, reasonable attorneys’ fees, court costs, and other reasonable costs of suit arbitration, dispute resolution or other similar proceedings. “Maximum Level” has the meaning set forth in Section 4.1.2. “Maximum Liability” means the Contract Price without giving effect to reductions of the Contract Price due to Supplier’s payment of liquidated damages, if any, under this Agreement. “Mechanical Completion” has the meaning set forth in Section . “Mechanical Completion Certificate” means a certificate in the form of Exhibit . “Mechanical Completion Checklist” means the checklist attached as Exhibit . “Mechanically Complete Wind Turbine” means a Wind Turbine that has achieved Mechanical Completion pursuant to Section . “Notice to Proceed” means a Written Notice in the form of Exhibit  issued by Buyer in accordance with this Agreement directing Supplier to commence the Equipment Supply Obligations under this Agreement. “Operating Manual” means the complete system of instructions and procedures for the operation and maintenance of the Turbine Equipment, which consists of: (a) the Operation & User Manual, Content & Documentation Guideline, V82-1.65 Mk2 & NM82/1650 Ver. 2, DLH 22000582-01; (b) the Service Manual, V82-1.65 vers, DLH 22000341-03 EN, 2005-07-01; (c) Electrical Line Diagrams, V82-1.65 MW 600V 60HZ UL Tropical -20deg.C & Arctic; and (d) any safety and service bulletins issued by Supplier from time to time. “Outside Commencement Date” means the date that is the latest of (i) two (2) Business Days following delivery of the executed Supplier Parent Guaranty pursuant to Section 3.6.3, (ii) two (2) Business Days following delivery of the certificates of insurance from Supplier contemplated in Article 12 and Exhibit F.2.4 and (iii) seven (7) days after the Effective Date. “Overpayment” has the meaning set forth in Section . “Party” or “Parties” has the meaning set forth in the preamble to this Agreement. “Payment Schedule” means the schedule for payment of the Contract Price as set forth in Exhibit . “Permanent Grid Energization” means the ability of the Collection Line and the electricity transmission grid to which the Project is to be interconnected (i) to accept delivery, on a sustainable basis, of electricity generated by each Wind Turbine and (ii) to deliver sufficient electrical power to each Wind Turbine to allow Commissioning to occur. “Permanent Grid Energization Date” means the date set forth in the Project Schedule for achieving Permanent Grid Energization. “Permit” means any valid waiver, exemption, variance, franchise, permit, authorization, license or similar order of or from, or filing or registration with, or notice to, any Governmental Authority having jurisdiction over the matter in question. “Person” means any individual, corporation, partnership, limited liability company, association, joint stock company, trust, unincorporated organization, joint venture, governmental or political subdivision or agency thereof. “Project” has the meaning set forth in Recital A. “Project Schedule” means the schedule attached hereto as Exhibit  as the same may be modified from time to time in accordance with Section . “Project Site” has the meaning set forth in Recital A. “Project Site Data” means the Project Site data gathered or prepared by or on behalf of Buyer and provided to Supplier consisting of (a) the information contained in Exhibit H, (b) complete wind resource and relevant site data (including the topographic characteristics of the Project Site), (c) a summary of historical climatic conditions at the Project Site available to Buyer for the Project Site, including a one-year wind data series with ten (10) minute statistics from a representative position on the Project Site, (d) a fully complete set of the data required for the Climatic Data Sheet, and (e) a wind rose and data on extreme wind and turbulence conditions. “Prudent Wind Industry Practices” means, in connection with the design and construction of wind power generation systems of a type and size and having geographical and climatic attributes similar to the Project, those practices, methods, specifications and standards of safety, performance, dependability, efficiency and economy generally recognized by industry members in the United States as good and proper, and such other practices, methods or acts which, in the exercise of reasonable judgment by those reasonably experienced in the industry in light of the facts known at the time a decision is made, would be expected to accomplish the result intended at a reasonable cost and consistent with Applicable Laws, reliability, safety and expedition.  Prudent Wind Industry Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to be a spectrum of good and proper practices, methods and acts. “Punch List” has the meaning set forth in Section . “Punch List Holdback Amount” has the meaning set forth in Section . “Real Property Rights” means all rights in or to real property, including leases, agreements for use or access, Permits, easements, licenses, rights of way, and utility and railroad crossing rights required to be obtained or maintained in connection with construction or operation of the Project on the Project Site and transmission of electricity to the point of delivery. “Receiving Party” has the meaning set forth in Section . “Rules” has the meaning set forth in Section . “Sales Taxes” means all sales, services, use or similar taxes (including any and all items of withholding, deficiency, penalty, interest or assessment related thereto) imposed by any Governmental Authority in connection with the purchase of the Turbine Equipment, the Equipment Supply Obligations or the performance of Supplier’s other obligations under this Agreement. “SCADA Completion” has the meaning set forth in Section . “SCADA Completion Certificate” means a certificate in the form of Exhibit . “SCADA Completion Checklist” means the checklist attached as Exhibit . “SCADA System” means the remote control and monitoring system for the Wind Turbines, as more particularly described in Exhibit . “Service Agreement” means that certain Service and Maintenance Agreement dated as of the date hereof by and between Buyer and Supplier for the Turbine Equipment. “Shipping Certificate” means a certificate in the form of Exhibit . “Site Plan” means the design and layout for the Project, as set forth on Exhibit . “Soil or Subsurface Condition” means any soil, geotechnical and subsurface conditions including geological conditions, types of surface or subsurface soil, the presence of caverns or voids, religious artifacts, archaeological items, biological matter, the presence of Hazardous Substances at the Project Site or Alternate Delivery Location, the location and condition of underground pipelines and conduits or other manmade structures, materials or equipment. “Storage and Lay-down Areas” means the storage and lay-down areas at the locations described in  as more particularly described in Exhibit . “Subcontract” means any contract, agreement, purchase order, arrangement or understanding between Supplier and a Subcontractor in respect of the Equipment Supply Obligations. “Subcontractors” means any subcontractor of services to Supplier in connection with the performance of Equipment Supply Obligations at the Project Site. “Supplier” has the meaning set forth in the preamble to this Agreement. “Supplier Documents and Deliverables” has the meaning set forth in Section . “Supplier Event of Default” has the meaning set forth in Section . “Supplier Indemnified Party” has the meaning set forth in Section . “Supplier Milestones” means delivery of the Turbine Equipment, Commissioning Completion, Final Completion, SCADA Completion and such other milestones identified in Exhibit  for which Supplier is responsible for achieving. “Supplier Parent” means Vestas Wind Systems A/S, a company organized under the laws of the Kingdom of Denmark. “Supplier Parent Guaranty” means the guaranty of Supplier Parent substantially in the form of Exhibit . “Supplier Permits” has the meaning set forth in Section . “Supplier Requirements” has the meaning set forth in Section . “Supplier Responsible Parties” has the meaning set forth in Section . “Supplier’s Manager” has the meaning set forth in Section . “Taxes” means any and all forms of taxation, charges, duties, imposts, levies and rates whenever imposed by the US or the State in which the Project is located or any other Governmental Authority (other than income taxes and Sales Taxes), including withholding taxes, corporation tax, capital gains tax, capital transfer tax, inheritance tax, water rates, value added tax, customs duties, capital duty, excise duties, betterment levy, stamp duty, stamp duty reserve tax, national insurance, social security or other similar contributions, and generally any tax, duty, impost, levy, rate or other amount and any interest, penalty or fine in connection therewith. “Technical Specifications” means the technical specifications for the Turbine Equipment as set forth in . “Third Party Controversy” has the meaning set forth in Section . “Tower” means a steel tubular tower on which a Wind Turbine will be mounted, including all ladders, platforms, internal lighting, safety equipment and all parts and assemblies necessary for a complete turbine tower, all as described in Exhibit , but specifically excluding bolts, nuts and washers for the Tower Foundation anchors. “Tower Foundations” means the foundations for the Towers at the locations described in Exhibit . “Tower Foundation Requirements” means the requirements for the Tower Foundations set forth in Exhibit , including bolt configurations consistent with the Tower Foundation Templates, conduit placement, grounding requirements and foundation load specifications. “Tower Foundation Templates” means the Tower Foundation template rings identified in Exhibit . “Turbine Equipment” means the Wind Turbines, Towers in the quantities described in Exhibit , and all other materials and equipment incorporated into the Project by Supplier pursuant to this Agreement.  The term “Turbine Equipment” specifically does not include (a) components comprising the Balance of Plant Work, (b) any authorizations otherwise necessary or appropriate for the erection, ownership or operation of the Project or (c) any rights or authorizations necessary for the production, delivery or sale of electrical power produced by the Wind Turbines, including any Real Property Rights and rights under any power purchase agreements. “Turbine Nacelle” means the turbine nacelle component of a Wind Turbine, including gearbox, generator, blade pitch controls and nacelle yaw controls, and associated control and ancillary equipment, but excluding the blades, Hubs and Towers. “US” means the United States of America. “Vendors” means any supplier of equipment to Supplier or its Affiliates in connection with the performance of the Equipment Supply Obligations. “Warranty Agreement” means that certain Warranty Agreement dated as of the date hereof by and between Buyer and Supplier for the Turbine Equipment. “Wind Turbine” means the wind turbine generators purchased by Buyer and supplied by Supplier under this Agreement, each including the following: a Turbine Nacelle, a Blade Set, controller, control panels, and anemometers, all as more particularly described in Exhibit . “Written Notice” means written notice to any Party to this Agreement which is delivered to the other Party in accordance with the terms of Section  hereof. 2.2 Recitals, Articles, Sections and Exhibits .  References to Recitals, Articles, Sections and Exhibits are, unless otherwise indicated, to Recitals of, Articles of, Sections of and Exhibits to this Agreement.  All Exhibits attached to this Agreement are incorporated herein by this reference and made a part hereof for all purposes.  References to an Exhibit shall mean the referenced Exhibit and any sub-exhibits, sub-parts, components or attachments included therewith. 2.3 Gender .  As used in this Agreement, the masculine gender shall include the feminine and neuter and the singular number shall include the plural, and vice versa. 2.4 Successors and Assigns .  Unless expressly stated otherwise, references to a Person includes its successors and permitted assigns and, in the case of a Governmental Authority, any Person succeeding to its functions and capacities. 2.5 Day .  As used in this Agreement, references to “days” shall mean calendar days, unless the term “Business Days” is used.  If the time for performing an obligation under this Agreement expires on a day that is not a Business Day, the time shall be extended until that time on the next Business Day. 2.6 Grammatical Forms .  As used in this Agreement, where a word or phrase is specifically defined, other grammatical forms of such word or phrase have corresponding meanings; the words “herein,” “hereunder” and “hereof” refer to this Agreement, taken as a whole, and not to any particular provision of this Agreement; “including” means “including, for example and without limitation,” and other forms of the verb “to include” are to be interpreted similarly. 2.7 References to Documents .  As used in this Agreement, all references to a given agreement, instrument or other document shall be a reference to that agreement, instrument or other document as modified, amended, supplemented and restated through the date as of which such reference is made.  Any term defined or provision incorporated in this Agreement by reference to another document, instrument or agreement shall continue to have the meaning or effect ascribed thereto whether or not such other document, instrument or agreement is in effect. ARTICLE 3. CONDITIONS PRECEDENT 3.1 Conditions Precedent to Supplier’s Obligations .  Supplier’s obligation to commence performance of any obligations under this Agreement shall be conditioned upon the satisfaction or waiver of the conditions listed below.  If any condition precedent is not met and Supplier does not waive the condition precedent in writing, then Supplier shall have the right, notwithstanding the cure provisions for Events of Default set forth in Section , to immediately cancel this Agreement, and thereafter shall have no further obligation or liability hereunder. (i) Buyer shall have paid to Supplier the non-refundable Down Payment in accordance with Section ; and (ii) Buyer shall have obtained and delivered the Buyer Parent Guaranty to Supplier in accordance with Section . 3.2 Conditions Precedent to Commencement of Equipment Supply Obligations at Project Site .  Supplier’s obligation to commence and complete the Equipment Supply Obligations at the Project Site shall be conditioned upon the satisfaction or waiver of the conditions listed below.  If any condition precedent is not met and Supplier does not waive the condition precedent in writing, then Supplier shall have the right to terminate this Agreement pursuant to Section  of this Agreement. (i) Buyer shall have obtained any and all Real Property Rights in and to the Project Site necessary for Supplier to perform its Equipment Supply Obligations; (ii) Buyer shall have obtained all Buyer Permits necessary for Supplier to perform its Equipment Supply Obligations; and (iii) Buyer shall have delivered the Down Payment, Notice to Proceed and Buyer Parent Guaranty such that the Commencement Date occurs on or before the Outside Commencement Date. ARTICLE 4. SUPPLIER’S OBLIGATIONS 4.1 Supplier’s Obligations to Perform the Equipment Supply Obligations .  Subject to, and in accordance with, the terms and conditions of this Agreement, Supplier hereby agrees to perform, or cause to be performed, all of the following (collectively, the “Equipment Supply Obligations”): 4.1.1 sell, procure, supply, transport, deliver to the Delivery Point, test, start-up and Commission the Turbine Equipment and take such other actions with respect to the Turbine Equipment determined by Supplier, in its sole discretion, as necessary to accomplish the foregoing, all as further described in Exhibits  and ; and 4.1.2 procure, provide and pay for all materials, equipment, machinery, tools, consumables, labor, transportation, supervision, management, administration and other services and items incidental in performing the foregoing. 4.2 Exclusions from Equipment Supply Obligations .  Notwithstanding anything herein to the contrary, Supplier shall not be responsible for unloading, storing, assembling, erecting, or installing any Turbine Equipment, materials or parts at the Project Site, and Supplier’s performance obligations shall be excused to the extent that the Buyer does not fulfill its obligations to pay the Contract Price or any portion thereof. 4.3 Supplier Permits .  Supplier shall obtain and maintain those Permits specifically identified in Exhibit  as being Supplier’s responsibility (the “Supplier Permits”); provided, however, that Buyer shall, at no cost or expense to it, cooperate with Supplier’s reasonable requests to assist Supplier in obtaining the Supplier Permits.  Supplier shall have no responsibility to obtain any other Permits necessary for Buyer to perform its obligations hereunder or to construct, own, operate or maintain the Project; provided, however, that Supplier shall, at no cost or expense to it, cooperate with Buyer’s reasonable requests to assist Buyer in obtaining such Permits.  Reasonably promptly following receipt thereof, Supplier shall deliver copies to Buyer of all such Supplier Permits that are reasonably likely to have an impact on Buyer’s performance of its obligations under this Agreement. 4.4 Financing Cooperation .  Supplier shall provide such cooperation as Buyer may reasonably request in connection with obtaining financing for the Project; provided, however, that such cooperation does not adversely affect the rights or increase the duties of Supplier under this Agreement or cause Supplier to incur additional expenses in the performance of its obligations hereunder. 4.5 Security of Turbine Equipment .  Until the Turbine Equipment has been delivered to the Delivery Point, Supplier shall take reasonable steps to protect the Turbine Equipment, and all equipment and materials to be delivered by Supplier to Buyer against damage and theft.  If Buyer’s property is at any time in Supplier’s possession or under Supplier’s control while performing the Equipment Supply Obligations, Supplier shall use reasonable care to protect Buyer’s property. 4.6 Contracts, Documents, and Other Deliverables. 4.6.1 Warranty Agreement.  Supplier shall execute and deliver to Buyer concurrently herewith the Warranty Agreement, in the form of Exhibit . 4.6.2 Service Agreement.  Supplier shall execute and deliver to Buyer concurrently herewith the Service Agreement, in the form of Exhibit . 4.6.3 Supplier Parent Guaranty.  As a material inducement to Buyer to enter into this Agreement, Supplier shall cause to be executed and delivered to Buyer no later than seven (7) days after receipt of the Notice to Proceed, the Supplier Parent Guaranty. 4.6.4 Documents to be Delivered.  Supplier shall deliver to Buyer the documents and deliverables identified in Exhibit  (the “Supplier Documents and Deliverables”) in accordance with the schedule set forth therein. 4.6.5 Tower Foundation Templates.  Not later than sixty (60) days following the Effective Date, Buyer may elect to purchase Tower Foundation Templates from Supplier at a price equal to Twenty Thousand Dollars ($20,000) per Tower Foundation Template by providing Written Notice of such election to Supplier indicating the number of Tower Foundation Templates to be purchased.  If Buyer timely elects to purchase Tower Foundation Templates from Supplier, (i) Supplier shall deliver such Tower Foundation Templates to the Delivery Point by the date that is twelve (12) weeks prior to the first Anticipated Delivery Date and (ii) Buyer shall pay to Supplier the amount set forth in an invoice for Tower Foundation Templates within seven (7) calendar days following receipt thereof and reimburse Supplier for the actual and documented costs of shipping the Tower Foundation Templates to the Delivery Point.   4.6.6 Lifting and Rigging Tools.  Not later than sixty (60) days following the Effective Date, Buyer may elect to order Lifting and Rigging Tools from Supplier at a price equal to Fifteen Thousand Dollars ($15,000) per container of Lifting and Rigging Tools per month by providing Written Notice of such election to Supplier that indicates the number of Lifting and Rigging Tool containers to be furnished and the length of time for which Buyer requests to use such Lifting and Rigging Tools.  If Buyer timely elects to order such Lifting and Rigging Tools, (i) Supplier shall deliver such Lifting and Rigging Tools to the Delivery Point by the date that is four (4) weeks prior to the first Anticipated Delivery Date and (ii) Buyer shall pay to Supplier the amount set forth in an invoice for Lifting and Rigging Tools within seven (7) calendar days following receipt thereof and reimburse Supplier for the actual and documented costs of shipping the Lifting and Rigging Tools to the Delivery Point.  At the expiration of the period for which such Lifting and Rigging Tools are furnished, Buyer shall repack all Lifting and Rigging Tools and either (i) make such Lifting and Rigging Tools available for pick-up at a single location at the Project Site and reimburse Supplier for the actual and documented costs of shipping the Lifting and Rigging Tools from the Delivery Point or (ii) deliver such Lifting and Rigging Tools to the location designated by Supplier in Portland, Oregon at its own cost and expense.  Buyer shall be responsible for any loss or damage to the Lifting and Rigging Tools and shall return such Lifting and Rigging Tools in the same condition as when received from Supplier, ordinary wear and tear excepted. 4.7 Project Schedule .  Attached hereto as Exhibit  is the initial Project Schedule.  Supplier shall deliver the Turbine Equipment to the Delivery Point, by the applicable Guaranteed Delivery Dates set forth in the Project Schedule.  The other dates for performance of Supplier Milestones are estimated, and not guaranteed, dates.  Neither the Project Schedule nor any milestone date contained therein, including any Guaranteed Delivery Date or the Permanent Grid Energization Date, may be changed unless the same has been modified by a duly executed Change Order. 4.8 Delivery of Wind Turbine Components. 4.8.1 Delivery Arrangements.  Supplier shall deliver the Turbine Equipment to the Delivery Point, DDP, according to INCOTERMS 2000, Supplier shall present a signed Delivery Certificate for countersignature by Buyer in respect of any Component delivered to the Delivery Point hereunder (or, if applicable, the Alternate Delivery Location), and Buyer shall have the right to make reasonable inspections of such equipment to verify the content and condition of the Turbine Equipment deliveries prior to countersigning same.  In the event that Buyer fails to respond to a request for countersignature of a Delivery Certificate within one (1) Business Day, Buyer shall be deemed to have countersigned such certificate.   4.8.2 Early Deliveries.  Upon reasonable advance Written Notice to Buyer, Supplier may deliver any Component to the Delivery Point in advance of the Anticipated Delivery Date if there is adequate storage and security available at the Delivery Point and such early deliveries do not unreasonably interfere with the work to be performed by Buyer and the BOP Contractors.  Supplier shall pay any and all costs associated with such early delivery (including the cost of storage and security) from the date of such early delivery until the Anticipated Delivery Date. 4.8.3 Delayed Delivery.  Without limiting the general provisions of  and , if delivery by Supplier of any Component to the Delivery Point is prevented or delayed (or is reasonably anticipated to be prevented or delayed) after the applicable Anticipated Delivery Date due to an Excusable Event, Supplier shall be entitled to a Change Order in accordance with  and .  Such Change Order shall, among other things, designate a temporary alternate delivery location (the “Alternate Delivery Location”) and provide for cost and schedule adjustments as reasonably necessary to compensate Supplier for the costs and delays associated therewith. 4.9 Commissioning and Final Completion. 4.9.1 Mechanical Completion and Commissioning. (i) Mechanical Completion.  Buyer shall complete the assembly, erection, installation and grid connection of the Turbine Equipment delivered hereunder in accordance with the Installation Manual and the procedures contained in the Mechanical Completion Checklist, and, upon completion thereof, shall provide to Supplier a Mechanical Completion Certificate.  Such Mechanical Completion Certificate shall be approved or disputed by Supplier in accordance with the provisions of Section .  Buyer shall accomplish Mechanical Completion of the Wind Turbines by the relevant dates set forth in the Project Schedule and in such sequence and quantities such that Buyer shall not provide to Supplier more than two (2) Mechanically Completed Wind Turbines per Business Day and no more than six (6) Mechanically Completed Wind Turbines within any seven (7) day period. (ii) Commissioning.  Not later than seven (7) Business Days after the Mechanical Completion of the applicable Wind Turbine occurs, Supplier shall commence and complete Commissioning of such Mechanically Complete Wind Turbines in accordance with the procedures contained in the Commissioning Completion Checklist; provided, however, that (i) Supplier shall not be obligated to commence Commissioning of a Wind Turbine unless Buyer provides Supplier with appropriate access required therefor and unless Buyer has fully performed its obligations under Section  hereof, and (ii) Supplier shall not be obligated to achieve Commissioning Completion for more than six (6) Wind Turbines within any seven (7) day period.  Upon completion of Commissioning of a Wind Turbine, Supplier shall provide Buyer with a Commissioning Completion Certificate, which shall be approved or disputed by Buyer in accordance with the provisions of Section . 4.9.2 Final Completion.  Following successful completion or deemed completion of the Commissioning of all of the Wind Turbines, Supplier shall deliver to Buyer for countersignature a Final Completion Certificate, which Buyer shall approve or dispute in accordance with the provisions of Section . 4.9.3 SCADA System.  Supplier shall supply and commission the SCADA System for the Project in accordance with the procedures contained in the SCADA Completion Checklist and, upon completion thereof, shall provide to Buyer a SCADA Completion Certificate.  Such SCADA Completion Certificate shall be approved or disputed by Buyer in accordance with the provisions of Section . 4.9.4 Dispute.  Any dispute under this Section  shall be resolved in accordance with . 4.10 Consumable Parts .  Supplier shall provide all consumable parts necessary or appropriate to perform the Equipment Supply Obligations and achieve Final Completion. 4.11 Standard of Performance of Equipment Supply Obligations .  Supplier shall perform the Equipment Supply Obligations and all of its obligations hereunder in a workmanlike manner, using new materials, and in compliance, in all material respects, with Applicable Laws, the Supplier Permits, those Buyer Permits, copies of which were delivered to Supplier pursuant to Section , Prudent Wind Industry Practices, the Technical Specifications and the other requirements of this Agreement (collectively, the “Supplier Requirements”), all as more particularly described herein.  If the standards or requirements derived from the foregoing are inconsistent, Supplier shall perform its obligations in accordance with the requirements of the most stringent rule, standard, criteria or guideline.  If there are any conflicts between or among the standards or requirements derived from the foregoing, Supplier shall promptly notify Buyer of the conflict and the Parties shall cooperate and negotiate in good faith such modifications to this Agreement as are necessary to resolve the conflict. 4.12 Supplier’s Manager .  Supplier shall appoint a single representative, and shall provide prompt Written Notice thereof to Buyer, to act as its manager and coordinator of this Agreement on Supplier’s behalf (the “Supplier’s Manager”).  To the extent practicable, the Supplier’s Manager shall not be replaced without reasonable prior Written Notice to Buyer.  The Supplier’s Manager shall (i) act as the liaison for Supplier’s communications with Buyer, (ii) be responsible for receiving all reports due under this Agreement from Buyer and delivering all reports due hereunder to Buyer, (iii) have authority to act on behalf of Supplier and (iv) have the experience and authority to make reasonably prompt means and methods decisions at the Project Site on a real time basis.  All communications given to or received from the Supplier’s Manager shall be binding on Supplier.  The Supplier’s Manager shall coordinate all activities of Supplier at the Project Site, including reporting activities, scheduling activities, communication activities, and administration.  Notwithstanding the foregoing, the Supplier’s Manager shall not have authority to amend or to modify any of the provisions of this Agreement. 4.13 Subcontractors and Vendors .  Supplier may locate and procure the services of such Subcontractors and Vendors as in Supplier’s reasonable judgment may be necessary to complete Supplier’s duties and obligations pursuant to this Agreement; provided, however, that no such engagement shall relieve Supplier of any of its duties, responsibilities, obligations or liabilities hereunder.  As between Buyer and Supplier, Supplier shall be solely responsible for the acts, omissions or defaults of its Subcontractors and Vendors engaged pursuant to this Section .  Nothing in this Agreement shall be construed to impose on Buyer any obligation, liability or duty to a Subcontractor or Vendor engaged pursuant to this Section , or to create any contractual relationship between any such Subcontractor or Vendor and Buyer, including any obligation to pay or to see to the payment of any moneys due any such Subcontractor or Vendor.  No Subcontractor or Vendor is intended to be nor shall be deemed a third party beneficiary of this Agreement. 4.14 Cooperation of Supplier, Buyer and BOP Contractors .  Buyer and Supplier acknowledge that, concurrently with the performance of the Equipment Supply Obligations under this Agreement, BOP Contractors will be performing the Balance of Plant Work on behalf of Buyer pursuant to the BOP Contracts.  During performance of the Equipment Supply Obligations at the Project Site, Supplier shall not unreasonably interfere with BOP Contractors performing Balance of Plant Work and shall cooperate with each BOP Contractor in the performance of the BOP Contractors’ duties under the BOP Contracts to the extent reasonably required to achieve the performance of the BOP Contractors’ obligations under the BOP Contracts and Supplier’s obligations under this Agreement in a timely and efficient manner. 4.15 Supplier Safety Program .  During performance of the Equipment Supply Obligations at the Project Site, Supplier shall, and shall cause its Subcontractors and their respective agents and employees to, comply with Supplier’s safety program attached as Exhibit I.1 and Supplier’s site rules attached as Exhibit I.2. 4.16 Emergencies .  In the event of an emergency endangering life or property, Supplier shall promptly notify Buyer of any such emergency. 4.17 Cooperation Regarding Commercial Operation .  Supplier and Buyer recognize that, following Commissioning Completion of any particular Wind Turbine, Buyer shall be commencing commercial operation of such Wind Turbine, and Supplier shall be continuing completion of Punch List items with respect to the Wind Turbine. Supplier agrees that, during the completion of the Punch List items, it shall make reasonable efforts to minimize interference with the commercial operation of any such Wind Turbine and the Project generally. 4.18 Liens. 4.18.1 No Liens.  Supplier shall not assume, create or suffer to be created by any employee, Subcontractor or Vendor any Lien on the Project Site, the Project, or any portion thereof arising from performance of the Equipment Supply Obligations or Supplier’s obligations hereunder; provided, however, that the foregoing shall not limit Supplier’s or any Subcontractor’s or Vendor’s remedies against Buyer arising under this Agreement or Applicable Law from any due and unpaid liabilities of Buyer arising under this Agreement, including Liens arising therefrom (including mechanic’s Liens and filings permitted by Section ). 4.18.2 Discharge of Liens.  If any Subcontractor or Vendor files a Lien against the Project Site, the Project, or any portion thereof arising from performance of the Equipment Supply Obligations or Supplier’s obligations hereunder in breach of Supplier’s obligations under Section , then Supplier shall: (i) promptly, following receipt of written notice of such Lien or of Supplier’s becoming aware of the assertion of such Lien, provide Written Notice thereof to Buyer; and (ii) as soon as reasonably practicable, but in no event later than ten (10) Business Days after the date that Supplier receives written notice that the Lien was filed, (a) pay or discharge, and discharge of record, any such Lien for or in respect of the Equipment Supply Obligations or performance of Supplier’s obligations hereunder, (b) pay the appropriate amount into court in order to have the Lien vacated or (c) provide, in its sole discretion, a bond or letter of credit from a surety or commercial bank reasonably acceptable to Buyer in an amount and on terms and conditions reasonably acceptable to Buyer to protect against such Lien; provided, however, that if Supplier has provided evidence reasonably satisfactory to Buyer that Supplier has legitimate defenses regarding any such Lien and has promptly pursued the defense of such Lien, Supplier shall have one hundred and twenty (120) Business Days after receiving written notice of the Lien to take any of the actions described in clauses (a), (b) and (c) of this Section 3.18.2. 4.19 Taxes .  Supplier shall pay directly all Taxes, including any customs duties, imposts or levies assessed by reason of Supplier’s shipment of the Turbine Equipment to the Delivery Point, incurred in connection with the performance of the Equipment Supply Obligations.  Buyer shall cooperate with reasonable requests of Supplier in any efforts by Supplier to obtain exemption from, or to minimize, any such Taxes. 4.20 Technical Advisors. 4.20.1 Supplier shall provide one (1) or more technical advisors to Buyer at the Project Site for up to forty (40) consecutive days in accordance with Section .  To the extent that the technical advisors are required to remain at the Project Site beyond such period of time, Buyer shall pay Supplier for additional time as reasonably documented by Supplier in accordance with Supplier’s then-current rate schedule for field labor technicians.  Any payment due from Buyer under this Section  must be made within thirty (30) days following receipt of an invoice from Supplier therefor. 4.20.2 The technical advisors provided to Buyer in accordance with Section  shall provide advice, consultation and clarification to Buyer with respect to the Installation Manual, Mechanical Completion Checklist and the other Technical Specifications.  Notwithstanding the foregoing, Supplier does not assume any installation, management or supervision responsibilities for the Project or the Balance of Plant Work. 4.20.3 Buyer shall identify the dates during which the technical advisors are to be at the Project Site which, except as set forth in Section , shall be consecutive days.  Buyer shall provide Supplier with at least eight (8) weeks advance Written Notice of the requested arrival date of the technical advisors and shall confirm the scheduled arrival date of the technical advisors two (2) weeks prior to such date. 4.20.4 In the event that the work at the Project Site for which Buyer wishes the technical advisors to be present is delayed for more than one (1) day for any reason not caused by Supplier, Buyer may elect to either (i) continue to have the technical advisors at the Project Site, in which case such days shall count as days that the technical advisors are required to be present at the Project Site in accordance with Section  notwithstanding the fact that the technical advisors may not be providing any advice during such period, or (ii) request that the technical advisors depart from the Project Site and return to the Project Site at a later date.  In the case of the foregoing clause (ii), Buyer shall pay for all travel expenses associated with the technical advisors traveling to and from the Project Site in the event that Buyer exercises such option, Buyer shall provide Supplier with seven (7) days’ advance Written Notice of the requested return date of the technical advisors. ARTICLE 5. CONTRACT PRICE AND PAYMENT 5.1 Contract Price. 5.1.1 Components of Contract Price.  Buyer shall pay to Supplier in the manner and at the times specified in this Article 4, the Contract Price, as adjusted pursuant to Section .  The “Contract Price” shall be the sum of Twenty Million Three Hundred Fifty-Seven Thousand Five U.S. Dollars ($20,357,005) and Seventeen Million Thirty-One Thousand Six Hundred EUROs (€17,031,600).  Subject to the last sentence of Section 4.1.2, the EURO portion of the Contract Price (the “Adjustable Portion”) shall be converted and calculated in Dollars as contemplated in Section  such that, from and after the Actual Hedging Date, the Contract Price shall be stated in Dollars only. 5.1.2 Hedging. Provided that Supplier has received the Down Payment pursuant to Section 4.2.1 and subject to the provisions of this Section 4.1.2,  Supplier shall enter into hedging arrangements with the Hedging Bank for the Adjustable Portion of the unpaid Contract Price on the Business Day immediately following Supplier’s receipt of the Down Payment (the “Anticipated Hedging Date”).  A representative of each Party shall participate in a conference call commencing at 9:10AM EST on the Anticipated Hedging Date.  On the date of receipt of the Down Payment, Supplier shall provide dial-in information for the conference call. On the conference call, Supplier shall verbally provide an indicative quotation of a “Hedging Rate” (defined as the amount of Dollars per EURO 100.00 i.e. EURO/Dollar rate) from a Hedging Bank to Buyer.  Buyer shall (a) instruct Supplier to hedge the Adjustable Portion on or about 10:00AM EST that same Business Day at the then available Hedging Rate, (b) instruct Supplier to hedge the Adjustable Portion on or about 10:00AM EST that same Business Day at the then available Hedging Rate, provided such Hedging Rate does not exceed Buyer’s desired maximum EURO/Dollar level for the Hedging Rate (the “Maximum Level”), which Maximum Level must be confirmed in writing via email to Supplier prior to 9:30AM EST or (c) instruct Supplier not to hedge.  If Supplier is instructed to hedge pursuant to clause (a) or (b) above, Supplier shall obtain quotations from two (2) Hedging Banks selected by Supplier and shall effect the hedge for the Adjustable Portion with the Hedging Bank providing the lowest Hedging Rate (the applicable hedge rate obtained from the Hedging Bank, the “Actual Hedge Rate” and the date of such arrangement, the “Actual Hedging Date”)  If Buyer has communicated a Maximum Level in accordance with clause (b) above, and the Hedging Rate offered by the two (2) Hedging Banks on or about 10:00AM EST exceeds the Maximum Level, the hedge will NOT be effected.  If, pursuant to clause (b) or (c) above, the hedge is not effected, the procedure specified in this Section 4.1.2 may, at Buyer’s written request (in the form of an e-mail), be repeated on each of the three (3) consecutive Business Days immediately following the Anticipated Hedging Date until Supplier enters into the hedge at the direction of Buyer or Buyer withdraws its election to make the payments in Dollars only. All hedging costs incurred in connection with hedging the Adjustable Portion are to be paid by Buyer and are incorporated into the Actual Hedge Rate.  All references herein to the Contract Price from and after the Actual Hedging Date shall mean the Contract Price as adjusted pursuant to this Section 4.1.  If Buyer fails to provide written notice that it wishes to continue the hedging process after a failure to hedge on the Anticipated Hedging Date, or instructs Supplier not to hedge on each of the following three (3) Business Days after the Anticipated Hedging Date, or the hedge is not effected because a Maximum Level has been established and exceeded on each of the following three (3) Business Days, (i) Buyer shall be deemed to have withdrawn its election to make payments in Dollars only and shall pay the Contract Price in both Dollars and EUROs pro rata according to how the prices are stated herein (by applying each percentage to be paid under this Agreement to both the Dollar and EURO portions of the Contract Price) and (ii) on or before the immediately following Business Day, Supplier shall convert the portion of the Down Payment not attributable to the Dollar portion into EUROs at the Conversion Rate and invoice Buyer for or credit to Buyer, as applicable, an amount equal to the difference between the amount of EUROs received following such conversion and the amount of EUROs that would have been payable on the Effective Date had Buyer paid the Down Payment in Dollars and EUROs pro rata according to how the prices are stated herein. 5.2 Payment of Contract Price .  The Contract Price shall be paid to Supplier in accordance with this , the Payment Schedule and otherwise as follows: 5.2.1 Down Payment.  On the Effective Date, Buyer shall pay to Supplier, as a non-refundable down payment, the Down Payment in Dollars in the amount set forth in .  If Supplier enters into the hedging arrangements contemplated in Section 4.1.2, then (i) on the first Business Day after the Actual Hedging Date, Supplier will submit to Buyer an invoice for an amount equal to the percentage of the Contract Price as of the Effective Date attributable to the Down Payment (the “Down Payment Percentage”) multiplied by the difference, if any, between the Contract Price on the Effective Date and the Contract Price on the Actual Hedging Date and (ii) Buyer shall pay to Supplier the amount invoiced pursuant to clause (i) of this sentence within seven (7) days of receipt of such invoice; provided, however, that if the Contract Price on the Actual Hedging Date is less than the Contract Price on the Effective Date, then Supplier shall credit to Buyer’s next payment due under this Agreement the amount by which the payment made by Buyer pursuant to the first sentence of this Section  exceeds the Down Payment Percentage multiplied by the Contract Price on the Actual Hedging Date.  The payment made by Buyer pursuant to the first sentence of this Section  together with such additional payment or credit made pursuant to the second sentence of this Section , if any, shall be the non-refundable “Down Payment.”  As of the Effective Date, the Down Payment is and shall be non-refundable; provided, however, that the foregoing shall not limit (a) Buyer’s right to recover amounts from Supplier as a result of a claim for damages resulting from the termination of this Agreement by Buyer for a Supplier Event of Default and (b) the return to Buyer of the unused portion of the Down Payment in the event of a termination of this Agreement due to a Force Majeure Event pursuant to the terms of Section . 5.2.2 Shipping Payment.  Each payment set forth in the Payment Schedule that is based on Turbine Equipment, or any Component thereof, being shipped shall be paid as a pro rata portion based on the number of Components shipped (or in the case of Towers, the number of Tower sections shipped), and shall be due upon presentation of a copy of a bill of lading (or other applicable transport documentation evidencing shipment) respecting such Turbine Equipment, together with a commercial invoice for such payment. 5.2.3 Delivery Payment.  Each payment set forth in the Payment Schedule that is based on delivery of Turbine Equipment, or any Component thereof, to the Delivery Point shall be paid as a pro rata portion based on the number of Components delivered to the Delivery Point (or in the case of Towers, the number of Tower sections delivered to the Delivery Point), and shall be due when the applicable Components are delivered to the Delivery Point, as evidenced by a Delivery Certificate executed by Supplier and countersigned or deemed countersigned by Buyer; provided, however, that in the event that such Turbine Equipment, or any Component thereof, has not been delivered to the Delivery Point within thirty (30) days following its scheduled arrival at the Delivery Point due to an Excusable Event, then such amount shall be due upon execution and delivery to Buyer of a Delayed Delivery Certificate.  Notwithstanding any payment pursuant to a Delayed Delivery Certificate, Supplier shall remain obligated to achieve delivery in accordance with the terms and conditions of this Agreement (other than the obligation to deliver by the Guaranteed Delivery Dates). 5.2.4 Wind Turbine Commissioning Completion.  Each payment set forth in the Payment Schedule that is based on Commissioning Completion of the Wind Turbines shall be paid as a pro rata portion based on the number of Wind Turbines achieving Commissioning Completion when the applicable Wind Turbine(s) have achieved Commissioning Completion, as evidenced by a Commissioning Completion Certificate; provided, however, that in the event that such Wind Turbine has not been Commissioned within sixty (60) days following the date of the Delivery Certificate or the Delayed Delivery Certificate, as applicable, due to an Excusable Event, then such amount shall be due upon execution and delivery to Buyer of a Delayed Commissioning Completion Certificate. Notwithstanding any payment pursuant to a Delayed Commissioning Completion Certificate, Supplier shall remain obligated to achieve Commissioning Completion in accordance with the terms and conditions of this Agreement. 5.2.5 Final Completion.  Any payment set forth in the Payment Schedule that is based on Final Completion shall be paid when Final Completion has been achieved, as evidenced by a Final Completion Certificate, and shall include payment of the undisputed outstanding balance of the Contract Price and any and all other undisputed sums due and not yet paid to Supplier hereunder (other than the Punch List Holdback Amount); provided, however, that in the event that Final Completion has not been achieved within sixty (60) days following the date of the final Commissioning Completion Certificate or Delayed Commissioning Completion Certificate, as applicable, due to an Excusable Event, then such amount shall be due upon execution and delivery to Buyer of a Delayed Final Completion Certificate; provided, further, that if (a) Commissioning Completion of any Wind Turbine has not been achieved within ninety (90) days following the applicable anticipated Commissioning Completion Date set forth on the Project Schedule, and (b) all of the other conditions to Final Completion set forth in Section  have been satisfied with respect to the Wind Turbines that have achieved Commissioning Completion, then Buyer shall pay Supplier an amount equal to the pro rata portion of the Final Completion payment allocable to such Wind Turbines that have achieved Commissioning Completion; and provided, further, that any remaining portion of the payment set forth in the Payment Schedule that is based on Final Completion shall be invoiced when the applicable Wind Turbines achieve Commissioning Completion.  Notwithstanding any payment pursuant to a Delayed Final Completion Certificate, Supplier shall remain obligated to achieve Final Completion in accordance with the terms and conditions of this Agreement. 5.2.6 Payment and Release of Punch List Holdback Amount.  The Parties shall agree upon a value for each Punch List item, and Buyer shall be permitted to hold back one hundred fifty percent (150%) of such agreed value (the “Punch List Holdback Amount”) until such Punch List item has been completed.  Upon completion of a Punch List item, Buyer shall pay Supplier the Punch List Holdback Amount for such item within seven (7) days following receipt of an invoice from Supplier. 5.3 Fuel Adjustments .  If the Fuel Price EWD is greater than one hundred five percent (105%) of the Fuel Price ED or is less than ninety-five percent (95%) of the Fuel Price ED, then, within fifteen (15) days following the date of Ex Works of the last Wind Turbine, Supplier shall submit to Buyer a calculation of any additional amounts payable or credits to Buyer as a result of an increase or decrease in the price of bunker fuel between the Effective Date and the date of Ex Works of the last Wind Turbine for the Project.  Such calculation shall be made in accordance with the following formula: (A * B * C ) Where, A = $1,314,106 (the portion of the Contract Price attributable to ocean freight) B = 0.113 (the percentage of ocean freight attributable to fuel) and C = (Fuel Price EWD - Fuel Price ED) / Fuel Price ED. Within five (5) days following receipt of Supplier’s calculation, Buyer shall approve or dispute the calculation.  If Buyer approves the calculation and such amount is positive, Buyer shall pay to Supplier the amount set forth in the calculation within seven (7) calendar days following its approval thereof.  If Buyer approves the calculation and such amount is negative, Supplier shall apply a credit in such amount to the remaining portion of the Contract Price.  If Buyer disputes the calculation and the Parties are unable to resolve the dispute, either Party may submit the matter to arbitration in accordance with the provisions of . 5.4 Equipment Option Adjustment .  Not later than thirty (30) days following the Effective Date, Buyer shall have the right to irrevocably cancel either or both of the Advanced Grid (LVRT) Option described on Exhibit D.1.4 and the Power Factor Correction described on Exhibit D.1.6 for all of the Wind Turbines by providing Written Notice thereof to Supplier.   If Buyer timely elects to cancel the Advanced Grid (LVRT) for all of the Wind Turbines,  the Parties shall execute a Change Order to (i) reduce the Contract Price by an amount equal to One Hundred Thirty-Two Thousand Two Hundred Ten EUROs (€132,210), (ii) credit the remaining portion of the Contract Price (after giving effect to such reduction) by an amount equal to Thirty-Three Thousand Fifty-Two EUROs (€33,052) and (iii) amend Exhibit A.1 to delete the Advanced Grid (LVRT) Option from the Equipment Supply Obligations effective as of the Effective Date.  If Buyer timely elects to cancel the Power Factor Correction for all Wind Turbines, the Parties shall execute a Change Order to (i) reduce the Contract Price by an amount equal to Ninety-Two Thousand Seven Hundred EUROs (€92,700), (ii) credit the remaining portion of the Contract Price (after giving effect to such reduction) by an amount equal to Twenty-Three Thousand One Hundred Seventy-Five EUROs (€23,175) and (iii) amend Exhibit A.1 to delete the Power Factor Correction from the Equipment Supply Obligations effective as of the Effective Date.  If Supplier enters into hedging arrangements pursuant to Section 4.1.2, all amounts designated in EUROs shall be converted into Dollars at the Actual Hedge Rate for purposes of any reductions of and/or credits to the Contract Price contemplated in this Section 4.4. 5.5 Invoicing. 5.5.1 Supplier shall, not more than two (2) times per month, prepare for Buyer and submit to Buyer an application for payment in the form of Exhibit  (the “Application for Payment”) specifying (i) each Supplier Milestone for which payment is sought, along with documentation related to such Supplier Milestone, and (ii) the total payment sought in the Application for Payment. 5.5.2 Within seven (7) calendar days after receipt of each Application for Payment, Buyer shall pay directly to the account of Supplier designated on Exhibit , or such other account designated in writing by Supplier after the Effective Date, the amounts due under this Agreement and set forth in such Application for Payment. 5.6 Disputed Payments .  If a dispute arises regarding the payments to be made to Supplier or Buyer hereunder, Buyer or Supplier, as applicable, shall pay all undisputed amounts, and Buyer and Supplier shall attempt in good faith to resolve the dispute as promptly as reasonably practicable and, if unsuccessful, shall utilize the dispute resolution provisions in  to resolve the payment dispute. 5.7 Late Payments .  Any amount owed by a Party hereunder beyond the date that such amount first becomes due and payable under this Agreement shall accrue interest from the date that it first became due and payable until the date that it is paid at the lesser of (a) LIBOR plus four percent (4%) per annum or (b) the maximum rate permitted by Applicable Law. ARTICLE 6. BUYER’S OBLIGATIONS 6.1 Buyer’s Obligation to Accept and Pay for Equipment Supply Obligations .  Subject to, and in accordance with, the terms and conditions of this Agreement, Buyer shall accept delivery of, purchase and pay for the Turbine Equipment and the other Equipment Supply Obligations performed hereunder. 6.2 Notice to Proceed .  Buyer shall deliver to Supplier the Notice to Proceed on or before the Outside Commencement Date. 6.3 Buyer’s Obligation to Complete Balance of Plant .  Subject to, and in accordance with, the terms and conditions of this Agreement, Buyer hereby agrees to perform, or cause to be performed, all of the following (collectively, the “Balance of Plant Work”): 6.3.1 purchase, procure, supply, transport, deliver to the Project Site (except as otherwise provided in Section ), unload, assemble, construct, erect, install, test, start-up, commission, complete, and integrate with the Turbine Equipment all balance of plant equipment and work and take such other actions with respect to the Balance of Plant Work as necessary to accomplish the foregoing, all as further described in this  and Exhibits  and ; 6.3.2 perform, and coordinate with Supplier, and/or the BOP Contractors, those obligations related to interfacing the activities described in Section  and Exhibit  with the Turbine Equipment; 6.3.3 design and construct all Tower Foundations in accordance with the Tower Foundation Requirements and assemble, erect and install all Towers in accordance with Supplier’s Installation Manual; 6.3.4 before Mechanical Completion of the first Wind Turbine, cause all telephone lines, data lines, cabling and wiring necessary for the interconnection of the SCADA System to be installed in accordance with Exhibits  and  and to meet Supplier’s standard SCADA System specifications set forth in Exhibit ; 6.3.5 achieve Mechanical Completion in accordance with Section 3.9.1(i); 6.3.6 provide a permanent power supply sufficient to perform the Commissioning of the Wind Turbines no later than the commencement of Commissioning required for the Wind Turbines as contemplated in the Project Schedule; 6.3.7 arrange with the Interconnecting Utility to accept electricity generated by the Wind Turbines during Commissioning and provide all electricity necessary to conduct such testing; 6.3.8 perform, and coordinate with Supplier and/or the BOP Contractors, all other work and services required in connection with the activities described in this Section  consistent with Buyer’s obligations under Section ; and 6.3.9 procure, provide and pay for all materials, equipment, machinery, tools, consumables, labor, transportation, supervision, administration and other services and items incidental in performing the foregoing. 6.4 Scheduling .  Buyer shall perform, or cause BOP Contractors to perform, the Balance of Plant Work, including achieving Permanent Grid Energization by the Permanent Grid Energization Date, in accordance with the Project Schedule.  If Buyer fails to achieve Permanent Grid Energization by the Permanent Grid Energization Date and such failure results in an increase in Supplier’s costs and/or impacts Supplier’s ability to meet any Supplier Milestone in accordance with the Project Schedule or by the Guaranteed Delivery Dates, Supplier shall be entitled to a Change Order increasing the Contract Price and extending the date for completion of any Supplier Milestones commensurate with such delay and added cost, including overtime charges for labor and equipment. 6.5 Right of Access. 6.5.1 Buyer shall have acquired, as of the Effective Date, and shall thereafter maintain, all rights to use the Project Site and all necessary consents and all other agreements regarding the land which provide rights to use and access the Project Site sufficient to allow Supplier to perform the Equipment Supply Obligations in accordance with the Project Schedule. 6.5.2 Buyer shall provide Supplier with access to and within the Project Site at all times and without prior notice as reasonably necessary to perform the Equipment Supply Obligations, including access to each Wind Turbine location, the Crane Pads, and the Storage and Lay-down Areas.  Buyer shall ensure that all Storage and Lay-down Areas, Crane Pads and Access Roads on the Project Site comply with the standards set forth in Exhibit  and  and shall be responsible for the maintenance of the same, including snow removal and, if required, sanding. 6.6 Transportation Access. 6.6.1 Buyer shall provide Supplier with access to the Project Site, and shall prepare and provide access to the foundation pad locations, in each case broad and strong enough and otherwise sufficient to permit access, turn-around and egress by heavy trucks and cranes and otherwise meeting the requirements set forth in Exhibit .  Buyer shall pay for all costs associated with its failure to comply with the requirements set forth in Exhibit , including but not limited to, costs of towing vehicles at the Project Site and any damage to transportation vehicles that might result. Buyer shall be responsible for taking any extraordinary measures that might be required if the local roads are inadequate for transportation of the Turbine Equipment and shall be liable for all costs associated with such extraordinary measures.  If any damage to the public roads occurs during transportation of the Turbine Equipment, Buyer shall pay directly, or promptly reimburse Supplier for, any and all fines and/or repair costs associated with such damage except to the extent that such damage is caused by the negligence or willful misconduct of Supplier or Supplier’s Subcontractors. 6.7 Loading, Unloading and Delivery Device Return 6.7.1 At the Project Site. Upon delivery to the Project Site, Buyer shall unload, or cause to be unloaded, the Turbine Equipment from each delivery truck within the unloading time period specified for each type of component set forth in .  If Buyer fails to unload, or cause such Turbine Equipment to be unloaded within the applicable time provided in , Buyer shall pay the applicable demurrage or stand-by charges set forth in  that are attributable to Buyer’s late unloading, or failure to cause such unloading.  Notwithstanding the foregoing, Buyer shall not be responsible for payment of any such demurrage or stand-by charges if Supplier delivers Turbine Equipment prior to its Anticipated Delivery Date pursuant to Section  unless Buyer has provided its prior written approval for such delivery. 6.7.2 Delivery Devices.  Buyer shall be responsible, at its sole cost and expense, for repacking all Delivery Devices and shall either, in accordance with the schedule set forth in , (i) make such Delivery Devices available for pick-up and transportation by Supplier at a Storage and Lay-down Area or (ii) deliver such Delivery Devices to the port designated by Supplier at its own cost and expense.  Buyer shall be responsible for any loss or damage to the Delivery Devices and shall return such Delivery Devices in the same condition as when received from Supplier, ordinary wear and tear excepted.  If Buyer fails to timely repackage or make available for pick-up a Delivery Device, Buyer shall pay the applicable demurrage or stand-by charges set forth in  and any other charges, costs or expenses that are attributable to Buyer’s failure to repackage or make available for pick-up such Delivery Device. 6.8 Installation, Assembly, Erection and Mechanical Completion of Turbine Equipment .  Supplier’s obligations with respect to Commissioning hereunder are expressly conditioned upon (a) Buyer’s timely installation, assembly, erection and Mechanical Completion of the Turbine Equipment in accordance with the Technical Specifications, Section , the Installation Manual, and the other BOP Requirements and (b) Buyer’s timely completion of the Balance of Plant Work, including, without limitation, roads constructed in accordance with Exhibit  and Exhibit .  Any deficiencies in, or nonconformance to, the standards set forth in this Agreement, the Technical Specifications, Installation Manual or the other BOP Requirements, in the installation, assembly, erection and Mechanical Completion of the Turbine Equipment identified by Supplier to Buyer that could reasonably be expected to impede Commissioning shall be corrected by Buyer prior to Supplier’s obligation to commence Commissioning. 6.9 Qualifications; Operation .  Buyer and each of its BOP Contractors shall at all times during performance of the Balance of Plant Work be qualified and capable of performing the Balance of Plant Work in accordance with the terms of this Agreement and shall hold all material licenses and professional certifications required in connection therewith.  Buyer shall provide sufficient information and training so that the operator of the Project is qualified and capable of properly operating the Turbine Equipment in compliance with the Operating Manual and Supplier’s standard procedures and technical bulletins. 6.10 BOP Contractors .  Buyer and Supplier acknowledge that, concurrently with the performance of the Equipment Supply Obligations under this Agreement, BOP Contractors will be performing the Balance of Plant Work on behalf of Buyer pursuant to the BOP Contracts.  Buyer shall provide Supplier with a list of the names and notice addresses of all BOP Contractors within thirty (30) days following the Effective Date or as soon as is practicable thereafter, and shall update such list as additional BOP Contractors are hired by Buyer.  Buyer shall require that BOP Contractors performing work at the Project Site maintain reasonable levels and types of insurance consistent with Prudent Wind Industry Practices.  The engagement or use of any BOP Contractor shall not relieve Buyer of any of its duties, responsibilities, obligations or liabilities hereunder.  As between Buyer and Supplier, Buyer shall be solely responsible for the acts, omissions or defaults of its BOP Contractors and any other Persons for which Buyer or any such BOP Contractor is responsible.  Nothing in this Agreement shall be construed to impose on Supplier any obligation, liability or duty to a BOP Contractor or any other Persons for which Buyer or any such BOP Contractor is responsible, or to create any contractual relationship between any such Persons and Supplier including an obligation pay or to see to the payment of any moneys due any such Persons.  No BOP Contractor or any other Persons for which Buyer or any such BOP Contractor is responsible is intended to be nor shall be deemed a third party beneficiary of this Agreement. 6.11 Cooperation of Supplier, Buyer and BOP Contractors .  Buyer shall not, and shall cause all BOP Contractors not to, unreasonably interfere with and to cooperate with Supplier in the performance of Supplier’s duties under this Agreement to the extent reasonably required to achieve the performance of the BOP Contractors’ obligations under the BOP Contracts and Supplier’s obligations under this Agreement in a timely and efficient manner. 6.12 Cooperation Regarding Punch List .  Supplier and Buyer recognize that, following Commissioning Completion of any given Wind Turbine, Buyer shall commence commercial operation of such Wind Turbine, and Supplier may be in the process of completing Punch List items at the Wind Turbine.  During this time, Buyer shall make reasonable efforts to minimize interference with Supplier’s completion of the Punch List items; provided, however, that the foregoing shall not limit Supplier’s obligations under Section . 6.13 Site Storage of Wind Turbines, Equipment and Materials .  Buyer shall provide appropriate lay down and storage areas as more fully described in Exhibit E.1 and  for use by Supplier in performance of the Equipment Supply Obligations under this Agreement and the other Contract Documents. 6.14 Buyer Permits .  Buyer shall obtain and maintain all Permits necessary for the execution and completion of the Equipment Supply Obligations in accordance with the Project Schedule, the Balance of Plant Work, and any other Permits necessary to develop, construct, install, engineer, operate or maintain the Project (other than the Supplier Permits) (collectively, the “Buyer Permits”).  Supplier shall, at no cost or expense to it, reasonably cooperate with Buyer with respect to obtaining any Buyer Permits.  Reasonably promptly following receipt thereof, Buyer shall deliver copies to Supplier of all such Buyer Permits that are reasonably likely to have an impact on Supplier’s performance of the Equipment Supply Obligations. 6.15 Security of Turbine Equipment and Safety .  From and after the date the Turbine Equipment is delivered to the Delivery Point, Buyer shall take all reasonable steps to protect the Turbine Equipment, and all related equipment, material and parts.  Prior to assembling, installing and erecting the Turbine Equipment, and related equipment, material and parts, Buyer shall wrap and seal such equipment in a manner that would ensure the security and protection of the same from the elements, including dust and moisture, and from damage due to any other cause.  Buyer shall use the same care to protect the Turbine Equipment, and all related equipment, material and parts, at any time in its possession or under its control as an ordinarily prudent person operating a project of a size and nature similar to the Project would use with its own property, but in any event shall not use less than reasonable care, and shall be responsible for any damage to such property resulting from its failure to use such care.  Buyer shall, and shall cause all of its employees, agents and the BOP Contractors to, comply with the safety program attached as Exhibit I.1 and the site rules attached as Exhibit I.2, any safety procedures established by Supplier and any regulations and rules, including safety rules, established by Buyer and/or any BOP Contractors. 6.16 Traffic .  Buyer shall be responsible for coordinating and managing traffic flow to and within the Project Site and shall cooperate with Supplier and manage such traffic such that it does not unreasonably interfere with, impede or otherwise delay performance of Supplier’s obligations hereunder. 6.17 Standard of Performance of Balance of Plant Work .  Buyer shall perform, or cause to be performed, the Balance of Plant Work and all of its obligations hereunder, including those obligations related to the construction of Tower Foundations, the assembly, erection and installation of the Turbine Equipment and interfacing the same with the Balance of Plant Work, in a workmanlike manner, using new materials, and in compliance, in all material respects, with Applicable Laws, the Buyer Permits, those Supplier Permits, copies of which were delivered to Buyer pursuant to Section , Prudent Wind Industry Practices, the Technical Specifications, the Installation Manual, the Balance of Plant Specifications, and the other requirements of this Agreement (collectively, the “BOP Requirements”), all as more particularly described herein.  If the standards or requirements derived from the foregoing are inconsistent, Buyer shall perform, or cause to be performed, its obligations in accordance with the requirements of the most stringent rule, standard, criteria or guideline.  If there are any conflicts between or among the standards or requirements derived from the foregoing, Buyer shall promptly notify Supplier of the conflict and the Parties shall cooperate and negotiate in good faith such modifications to this Agreement as are necessary to resolve the conflict. 6.18 Contracts, Documents, and Other Deliverables. 6.18.1 Warranty Agreement.  Buyer shall execute and deliver to Supplier concurrently herewith the Warranty Agreement, in the form of Exhibit . 6.18.2 Service Agreement.  Buyer shall execute and deliver to Supplier concurrently herewith the Service Agreement, in the form of Exhibit . 6.18.3 Buyer Parent Guaranty.  As a material inducement to Supplier to enter into this Agreement, Buyer shall deliver to Supplier the Buyer Parent Guaranty. 6.18.4 BOP Deliverables.  Buyer shall deliver to Supplier each of the documents and deliverables identified in Exhibit  (the “BOP Documents and Deliverables”) in accordance with the schedule set forth therein.  Supplier may as an accommodation to Buyer, but is not obligated to, review and comment on any such BOP Documents and Deliverables.  To the extent that Supplier reviews and comments on such BOP Documents and Deliverables, Buyer shall independently determine whether to accommodate such comments.  Buyer shall notify Supplier of such determination, provided that Supplier shall have no liability therefor. 6.19 Buyer’s Manager .  Buyer shall appoint a single representative, and shall provide prompt Written Notice thereof to Supplier, to act as its manager and coordinator of this Agreement on Buyer’s behalf (the “Buyer’s Manager”).  To the extent practicable, the Buyer’s Manager shall not be replaced without reasonable prior Written Notice to Supplier.  The Buyer’s Manager (i) shall act as the liaison for Buyer’s communications with Supplier, (ii) shall be responsible for receiving all reports due under this Agreement from Supplier and delivering all reports due hereunder to Supplier, (iii) shall have authority to act on behalf of Buyer and (iv) shall have the experience and authority to make reasonably prompt means and methods decisions at the Project Site on a real time basis.  All communications given to or received from the Buyer’s Manager shall be binding on Buyer.  Notwithstanding the foregoing, the Buyer’s Manager shall not have authority to amend or to modify any of the provisions of this Agreement.  The Buyer’s Manager shall coordinate all activities of Buyer and the BOP Contractors at the Project Site, including reporting activities, scheduling activities, communication activities, and administration. 6.20 Taxes .  Buyer shall (i) pay directly all Taxes related to performance of any work other than the Equipment Supply Obligations and (ii) remit to Supplier all amounts payable for Sales Taxes within seven (7) days following receipt of an invoice therefor and reasonable documentation supporting the calculation thereof; provided, however, that Buyer shall not be responsible for any customs duties, imposts or levies assessed by reason of Supplier’s shipment of the Turbine Equipment to the Delivery Point. Supplier shall cooperate with reasonable requests of Buyer in any efforts by Buyer to obtain exemption from, or to minimize, any such Taxes and Sales Taxes. 6.21 Inspection of Balance of Plant Work .  During performance of the Balance of Plant Work, Buyer shall make periodic inspections of the Balance of Plant Work in order to verify material compliance with Section 5.17 and to verify completion of the Balance of Plant Work as detailed in the Project Schedule and shall, or shall cause the BOP Contractors to, deliver to Supplier monthly written progress reports with respect to that portion of the Balance of Plant Work which would reasonably be expected to have a direct impact on Supplier’s ability to timely perform the Equipment Supply Obligations.  Buyer shall inspect or cause to be inspected all materials and equipment it incorporates or causes to be incorporated in the Turbine Equipment and shall reject those items determined by Buyer or Supplier not to be in compliance with Applicable Laws or the requirements of this Agreement. 6.22 Hazardous Site Conditions .  In the event Supplier encounters any Hazardous Substance or other hazardous conditions at the Project Site which have not been rendered harmless, Supplier shall immediately stop work in the area affected and report the condition to Buyer. Buyer shall, at its sole cost and expense, remove or render harmless, or take other actions necessary to remedy the hazards associated with, any such Hazardous Substance or other hazardous conditions other than such Hazardous Substance or other hazardous conditions brought on the Project Site, or caused by, Supplier or its Subcontractors.  The Equipment Supply Obligations in the affected area shall not be resumed until Buyer has complied with the foregoing obligation.  Further, if such an event results in an increase in Supplier’s costs and/or impacts Supplier’s ability to meet any Supplier Milestone in accordance with the Project Schedule or by the Guaranteed Delivery Dates, Supplier shall be entitled to a Change Order increasing the Contract Price and extending the Project Schedule and Guaranteed Delivery Dates commensurate with such delay and added cost, including overtime charges for labor and equipment. 6.23 Soil and Subsurface Conditions .  Prior to commencement of any Equipment Supply Obligations at the Project Site, Buyer shall evaluate or cause to be evaluated the Soil and Subsurface Conditions (including the presence of caverns or voids) where the Equipment Supply Obligations are to be performed and inform Supplier of any area of sensitivity identified.  As between Supplier and Buyer, Buyer shall be solely responsible for any and all delays, additional costs or unintended consequences of any Soil or Subsurface Condition.  In the event a Soil or Subsurface Condition delays or results in additional cost to perform the Equipment Supply Obligations or otherwise adversely impacts Supplier or performance of the Equipment Supply Obligations, Buyer shall grant Supplier a Change Order increasing the Contract Price and extending the Project Schedule and Guaranteed Delivery Dates commensurate with such delay and added cost, including overtime charges for labor and equipment, and take such other actions as are reasonably necessary to remedy the adverse impacts on Supplier or performance of the Equipment Supply Obligations resulting from the Soil or Subsurface Conditions. 6.24 FAA Lighting .  Buyer shall supply any FAA Lighting required to be placed on  the Turbine Equipment.  Buyer shall install such FAA Lighting on the Turbine Equipment and coordinate with Supplier with respect to the placement of any brackets for such FAA Lighting on the Turbine Nacelle. 6.25 Tower Foundation Templates .  In the event Buyer does not elect to purchase Tower Foundation Templates from Supplier pursuant to Section 3.6.6 hereof, Buyer shall supply and use, or require its BOP Contractors to use, Tower Foundation Templates conforming to the requirements set forth in Exhibit D.3.2. ARTICLE 7. SCHEDULE 7.1 Commencement .  Supplier shall commence the Equipment Supply Obligations on the date on which all of the following conditions have been satisfied: (i) Supplier has received the Buyer Parent Guaranty, (ii) Supplier has received the Notice to Proceed and (iii) Buyer has paid in full the Down Payment pursuant to Section  (the “Commencement Date”). 7.2 Delivery Delays. 7.2.1 Delivery Deadline.  Supplier shall deliver the Turbine Equipment on or before the applicable Guaranteed Delivery Dates; provided, however, that, without limitation of any rights to an extension of the Guaranteed Delivery Dates or any other dates in the Project Schedule Supplier may have hereunder, the Parties acknowledge that each Guaranteed Delivery Date is subject to adjustment pursuant to the Change Order provisions of . 7.2.2 Delivery Delay Liquidated Damages.  If delivery of the applicable Component has not occurred by the applicable Guaranteed Delivery Date, due to Supplier’s failure to perform its obligations under this Agreement for reasons other than an Excusable Event, Supplier will be liable to Buyer for damages for each day after such Guaranteed Delivery Date until the date of delivery of such Turbine Equipment in either of the following amounts (“Delay Liquidated Damages”): (i) if Buyer and its BOP Contractor are not fully mobilized on the applicable Guaranteed Delivery Date to perform Balance of Plant Work at the Project Site, an amount equal to:  (i) Seventy-Five Dollars ($75) per day for each Tower section not delivered by the applicable Guaranteed Delivery Date, (ii) Two Hundred Twenty-Five Dollars ($225) per day for each Turbine Nacelle not delivered by the applicable Guaranteed Delivery Date, and (iii) Two Hundred Twenty-Five Dollars ($225) per day for each Blade Set not delivered by the applicable Guaranteed Delivery Date; provided that in no event shall the aggregate amount of liquidated damages payable during such period exceed Seven Hundred Fifty Dollars ($750) per complete Wind Turbine and Tower per day;  or (ii) if Buyer and its BOP Contractor are fully mobilized on the applicable Guaranteed Delivery Date to perform Balance of Plant Work at the Project Site, an amount equal to:  (i) Two Hundred Fifty Dollars ($250) per day for each Tower section not delivered by the applicable Guaranteed Delivery Date, (ii) Five Hundred Fifty Dollars ($500) per day for each Turbine Nacelle not delivered by the applicable Guaranteed Delivery Date, and (iii) Five Hundred Fifty Dollars ($500) per day for each Blade Set not delivered by the applicable Guaranteed Delivery Date; provided that in no event shall the aggregate amount of liquidated damages payable during such period exceed Two Thousand Dollars ($2,000) per complete Wind Turbine and Tower per day. In either case, such amounts shall be calculated at the end of each week after the applicable Guaranteed Delivery Date until the date of delivery of the applicable Component, and shall be credited to Buyer in accordance with Section  no later than thirty (30) days thereafter. 7.2.3 Outside Delivery Date; Partial Termination Right.  In the event that Supplier fails to deliver the final component of Turbine Equipment required for the assembly, erection and installation of a complete Wind Turbine by the date that is nine (9) months following the Guaranteed Delivery Date therefor for reasons other than an Excusable Event, Buyer shall have the right to terminate the remaining obligations under this Agreement solely with respect to such undelivered complete Wind Turbine if such failure is not remedied within thirty (30) days following receipt of Written Notice thereof to Supplier.  For the avoidance of doubt, any termination by Buyer pursuant to the preceding sentence shall be a partial termination and shall apply only with respect to all complete Wind Turbines that have not been delivered prior to the relevant date, and the Parties’ respective obligations under this Agreement with respect to all Wind Turbines that have been delivered prior to the relevant date, including the obligations of Supplier to achieve the Supplier Milestones in accordance with this Agreement and the obligations of Buyer to make payments in connection therewith, shall continue in full force and effect. 7.2.4 Maximum Liability for Delay Liquidated Damages.  Supplier’s aggregate liability for any and all Delay Liquidated Damages as set forth in Section  shall be limited to a maximum of fifteen percent (15%) of the Maximum Liability. 7.3 Final Completion, SCADA Completion and Punch List .  Supplier shall exercise commercially reasonable efforts to achieve Final Completion, SCADA Completion and completion of any Punch List items by relevant dates set forth in the Project Schedule, provided that if the foregoing are not achieved by the relevant dates, Supplier shall thereafter continue to use commercially reasonable efforts to achieve Final Completion, SCADA Completion and completion of any Punch List items, as applicable, as soon as reasonably practicable.  Without limiting Supplier’s obligation to achieve Final Completion, SCADA Completion and completion of any Punch List items, failure by Supplier to achieve Final Completion, SCADA Completion, and completion of any Punch List items by the relevant dates set forth in the Project Schedule shall not be a breach under this Agreement. 7.4 Payment of Liquidated Damages .  Any and all amounts due from Supplier for liquidated damages hereunder shall be treated as a reduction in the Contract Price.  All reductions in the Contract Price shall be effected through the issuance of a Change Order.  In the event the Contract Price so reduced results in the amounts previously paid to Supplier pursuant to this Agreement exceeding the Contract Price (the difference being the “Overpayment”), then Supplier shall refund to Buyer the Overpayment on the date on which such liquidated damages were credited to Buyer hereunder. 7.5 Liquidated Damages Not a Penalty .  The Parties acknowledge and agree that because of the unique nature of the Turbine Equipment and the unavailability of substitute equipment, it is difficult or impossible to determine with precision the amount of damages that would or might be incurred by Buyer as a result of Supplier’s failure to deliver the Turbine Equipment by the Guaranteed Delivery Date.  It is understood and agreed by the Parties that (a) Buyer shall be damaged by failure of Supplier to meet such obligations, (b) it would be impracticable or extremely difficult to fix the actual damages resulting therefrom, (c) any sums which would be payable under this  are in the nature of liquidated damages, and not a penalty, and are fair and reasonable, and (d)each payment represents a reasonable estimate of fair compensation for the losses that may reasonably be anticipated from each such failure, and shall, without duplication, be the sole and exclusive measure of damages with respect to any such failure by Supplier. 7.6 Sole and Exclusive Remedy .  Except as set forth in Section 6.2.3, payment of Delay Liquidated Damages shall, without duplication, constitute the sole and exclusive remedy of Buyer and the sole and exclusive liability and measure of damages of Supplier with respect to Supplier’s failure, if any, to deliver the Turbine Equipment on or before the Guaranteed Delivery Dates.  Once payment of such liquidated damages has been made, Supplier shall be relieved of any further liability in respect thereof.  Notwithstanding anything herein to the contrary, including Section , Buyer shall have no right to terminate this Agreement should Supplier fail to deliver the Turbine Equipment by the Guaranteed Delivery Dates, provided that Supplier is complying with or has complied with its obligation to credit or pay to Buyer the relevant liquidated damages applicable under this . ARTICLE 8. PROJECT COMPLETION 8.1 Wind Turbine Mechanical Completion .  “Mechanical Completion” shall occur on a per Wind Turbine basis and shall be achieved when (a) the relevant Wind Turbine and associated Tower is assembled, erected, installed and connected to the Interconnecting Utility’s grid in accordance with the Applicable Laws and this Agreement; (b) Buyer has installed, or caused to be installed, all necessary materials and equipment with respect to such Wind Turbine and associated Tower substantially in accordance with the Technical Specifications and applicable quality assurance procedures and checked for adjustment, rotation and lubrication; (c) each item on the Mechanical Completion Checklist has been satisfied in accordance with this Agreement; and (d) the Wind Turbine is ready to commence Commissioning. 8.2 Wind Turbine Commissioning Completion .  “Commissioning Completion” shall occur on a per Wind Turbine basis and shall be achieved when each item on the Commissioning Completion Checklist has been satisfied in accordance with this Agreement. 8.3 Final Completion .  “Final Completion” shall be achieved when all of the following have been satisfied in accordance with this Agreement: 8.3.1 All of the Wind Turbines have achieved Commissioning Completion; 8.3.2 A Punch List for the Equipment Supply Obligations has been prepared and agreed upon between Buyer and Supplier; and 8.3.3 All Supplier Documents and Deliverables required to be delivered hereunder to Buyer on or before Final Completion have been delivered to Buyer. 8.4 SCADA Completion .  “SCADA Completion” shall be achieved when each item on the SCADA Completion Checklist has been satisfied in accordance with this Agreement. 8.5 Buyer Milestone Completion, Notification and Approval. 8.5.1 Notification and Approval.  When Buyer believes that it has achieved Mechanical Completion set forth under Section , Buyer shall so notify Supplier in writing by delivering to Supplier the Mechanical Completion Certificate indicating the date on which Mechanical Completion was achieved and the identity of the relevant Wind Turbine(s) achieving such Mechanical Completion, together with the supporting documentation identified in Section .  Promptly thereafter, Supplier shall conduct those investigations and inspections as it deems necessary or appropriate to determine whether Mechanical Completion has in fact been achieved.  If Supplier believes that Mechanical Completion has been achieved, Supplier shall countersign and return to Buyer a copy of the Mechanical Completion Certificate within five (5) Business Days following receipt of the Mechanical Completion Certificate. 8.5.2 Disputed Mechanical Completion.  If Supplier reasonably believes that Mechanical Completion has not been achieved, Supplier shall, within the time period contemplated in Section , execute and deliver to Buyer Written Notice and description of the alleged deficiencies.  Following receipt of such Written Notice, Buyer shall, at its sole cost and expense, take such actions as it deems necessary to correct the alleged deficiencies and shall thereafter redeliver the Mechanical Completion Certificate to Supplier.  Supplier shall have three (3) Business Days following receipt of each subsequent Mechanical Completion Certificate to notify Buyer, in writing, of any remaining alleged deficiencies to be corrected by Buyer as a condition to achieving Mechanical Completion.  The foregoing procedures shall be repeated until Mechanical Completion has in fact been achieved.  If Supplier fails to respond to Buyer’s Written Notice within the five (5) or three (3) Business Day period set forth in Sections  and , the Mechanical Completion Certificate shall be deemed to have been accepted. 8.6 Mechanical Completion Date .  The date of achievement of Mechanical Completion shall be the date on which Buyer delivers to Supplier the Mechanical Completion Certificate that is ultimately accepted by Supplier or deemed to have been accepted. 8.7 Supplier Milestone Completion, Notification and Approval. 8.7.1 Notification and Approval.  When Supplier believes that it has achieved any of the Supplier Milestones set forth under Sections , , or , Supplier shall so notify Buyer in writing by delivering to Buyer the applicable Completion Certificate indicating the date on which such Supplier Milestone was achieved, the identity of the relevant Wind Turbine(s) achieving such Supplier Milestone together with supporting documentation identified in Sections , , or , as applicable.  Promptly thereafter, Buyer shall conduct those investigations and inspections as it deems necessary or appropriate to determine if the relevant Supplier Milestone has in fact been achieved.  If Buyer believes that the applicable Supplier Milestone referenced in the applicable Completion Certificate has been achieved, Buyer shall countersign and return to Supplier a copy of the relevant Completion Certificate within five (5) Business Days following receipt of the relevant Completion Certificate (the “Initial Response Period”). 8.7.2 Disputed Supplier Milestone Completion.  If Buyer reasonably believes that the applicable Supplier Milestone referenced in the applicable Completion Certificate has not been achieved, Buyer shall, within the Initial Response Period, execute and deliver to Supplier a Written Notice and description of the alleged deficiencies.  Following receipt of such Written Notice, Supplier shall, at its sole cost and expense, take such actions as it deems necessary to correct the alleged deficiencies and shall thereafter redeliver the relevant Completion Certificate to Buyer.  Buyer shall have three (3) Business Days following receipt of each subsequent Completion Certificate for each Supplier Milestone to notify Supplier, in writing, of any remaining alleged deficiencies to be corrected by Supplier as a condition to achieving the relevant Supplier Milestone.  The foregoing procedures shall be repeated until the relevant Supplier Milestone has in fact been achieved.  If Buyer fails to respond to Supplier’s Written Notice within the relevant five (5) or three (3) Business Day period set forth in Sections  and this , the applicable Completion Certificate shall be deemed to have been accepted. 8.7.3 Supplier Milestone Completion Date.  The date of achievement of each Supplier Milestone shall be the date on which Supplier delivers to Buyer the relevant Completion Certificate that is ultimately accepted by Buyer or deemed to have been accepted. 8.8 Punch List Preparation .  Prior to the Final Completion Date, Buyer and Supplier shall inspect the Wind Turbines, and on the basis thereof Supplier shall prepare a list of the outstanding items of Equipment Supply Obligations that remain to be completed (the “Punch List”) and provide it to Buyer for review.  The Punch List may not include any items that could reasonably be expected to prevent the safe and continuous operation of the applicable Wind Turbine in accordance with the Supplier Requirements and the Operating Manual.  Buyer shall review and comment on the Punch List provided by Supplier not later than five (5) days after receipt, and Supplier shall issue a revised Punch List to Buyer that takes account of or responds to Buyer’s comments not later than five (5) days after Supplier’s receipt of such comments.  The Parties shall also agree upon a schedule for Supplier’s completion of the Punch List items that will allow Supplier to complete such Punch List items within a reasonable period of time without unreasonably interfering with the operation of the Project. ARTICLE 9. TITLE, RISK OF LOSS, CARE, CUSTODY AND CONTROL AND SECURITY INTEREST 9.1 Transfer of Title and Risk of Loss .  Risk of loss and care, custody and control of all or any portion of the Wind Turbines and related Turbine Equipment shall pass to Buyer upon the date such Wind Turbines and related Turbine Equipment, or portions thereof, are delivered to the Delivery Point.  Title to all or any portion of the Wind Turbines and related Turbine Equipment shall pass to Buyer upon the later of (i) the date such Wind Turbines and related Turbine Equipment, or portions thereof, are delivered to the Delivery Point and (ii) the date Buyer pays that portion of the Contract Price payable pursuant to Section  that is attributable to such Wind Turbines and related Turbine Equipment, or portions thereof. 9.2 Purchase Money Security Interest. 9.2.1 Grant of Security Interest.  Buyer hereby grants to Supplier, and Supplier hereby retains, a purchase money security interest and all applicable sellers’ liens in and to the Turbine Equipment for the Project, now owned or hereafter acquired by Buyer, including any modifications thereto or replacements thereof, together with all products and proceeds of the foregoing (the “Collateral”), as security until such Turbine Equipment is paid for in full.  Buyer authorizes Supplier to make any and all filings with the appropriate Governmental Authorities it deems necessary to evidence or to perfect and protect the security interest granted pursuant to this Section .  If requested by Supplier, Buyer shall, at its expense, promptly execute, and, after an assignment or delegation pursuant to Section  hereof, shall cause the assignee to execute and deliver to Supplier, any and all documents or instruments to enable Supplier to exercise and enforce its rights and remedies hereunder and as a secured party under the Uniform Commercial Code in effect in any applicable jurisdiction and to perfect and protect the security interest granted pursuant to this Section , including the execution of financing statements and fixture filings (and amendments thereto) and the delivery to Supplier of property waivers in a form acceptable to Supplier.  Supplier may exercise its remedies against some or all of the Collateral and in such order as it shall choose in its sole discretion. 9.2.2 Rights to Collateral .  Any sale, assignment or transfer of the Collateral, regardless of when any such sale, assignment or transfer occurs, shall be subject to the security interest of Supplier therein. ARTICLE 10. LICENSE AGREEMENT 10.1 Grant of License .  The Licensed Materials, including those that are contained within or accompany the Turbine Equipment, are not being sold to Buyer, but rather are being licensed in accordance with the terms and conditions of this Agreement.  The Licensed Materials, including any updates thereto, contain Intellectual Property owned by Supplier and its licensors, including works protectable under Title 17 of the United States Code, and Buyer agrees not to make any copies of the Licensed Materials except as permitted herein.  Subject to Buyer’s ongoing compliance with the terms of this Agreement (including timely payment of all amounts owed hereunder and compliance with Section ) and upon delivery by Supplier of the Turbine Equipment to Buyer, Supplier grants to Buyer a non-exclusive, royalty-free and non-transferable (except as permitted herein) limited license to use the Licensed Materials at the Project Site solely to support its permitted use of the Turbine Equipment and solely in accordance with the terms of this Agreement.  The license granted pursuant to this Agreement shall be paid-up after Buyer has paid the Contract Price in full to Supplier.  Buyer understands and agrees that such license does not include any right to modify the Licensed Materials or to sell, sublicense, license, rent, assign, transfer, deploy or otherwise make available the Licensed Materials, in whole or in part, to any third party except as specifically set forth in this Agreement.  However, Buyer is permitted to disclose the Licensed Materials to third party contractors who have a need to know such Licensed Materials solely for Buyer’s use and operation of the Turbine Equipment and in accordance with the terms of this Agreement; provided, that such third parties shall first execute a confidentiality agreement consistent with this  containing restrictions on disclosure at least as restrictive as this  (and such third party contractors shall not be permitted to disclose the Licensed Materials to any other third party). 10.2 No Copies .  Except as otherwise permitted by this Agreement, Buyer shall not make any copies of the Licensed Materials without obtaining express written permission from Supplier. 10.3 Proprietary Notices .  Buyer agrees not to remove or permit to be removed any proprietary notices that appear on or with the Licensed Materials.  Buyer also agrees to include on and with the Licensed Materials a written notice stating: “Confidential and Proprietary Information of Vestas-American Wind Technology.  Access and Use Restricted by License” or such other or additional notice as Supplier may prescribe. 10.4 No Reverse Engineering .  The Licensed Materials contain trade secrets of Supplier or its licensors.  In order to protect the Licensed Materials, Buyer shall not modify, translate, decompile, reverse engineer, decrypt, extract, disassemble or otherwise reduce or attempt to reduce the Licensed Materials to source code form.  Buyer will ensure, both during and (if Buyer still has possession of the Licensed Materials) after the performance of this Agreement, that (a) Persons who are not bound by a confidentiality agreement consistent with this Agreement shall not have access to the Licensed Materials, and (b) Persons who are so bound are put on written notice that the Licensed Materials contain trade secrets, owned by and proprietary to Supplier or its licensors. 10.5 Prohibited Uses .  Buyer shall not make any use of the Licensed Materials except as expressly authorized by this . 10.6 Restrictions on Transfer .  The Licensed Materials covered by this license are inseparable from the Turbine Equipment being furnished pursuant to this Agreement.  As a result, subject to payment in full of the Contract Price, the license and all obligations contained herein, shall transfer with any transfer of the Project, the Turbine Equipment or any component or portion thereof, as permitted herein.  On such a transfer and as a condition thereof, the transferee shall assume, and Buyer shall secure from such transferee in writing an assumption agreement to be bound by, the terms and conditions of this license.  Buyer shall not market or distribute the Licensed Materials.  Buyer may assign its rights under this Agreement, including any rights in the Licensed Materials, to a Financing Party or to any other person succeeding to the ownership of the Turbine Equipment in accordance with Section .  Buyer shall indemnify, defend and hold harmless Supplier, Supplier Parent, Supplier’s Affiliates, and their respective officers, directors, members, agents and employees from and against any damage, injury or loss resulting from the failure of Buyer to comply with the foregoing. 10.7 Owned by Supplier .  All right, title and interest in and to the Licensed Materials (including all Intellectual Property therein) and all copies thereof shall remain the sole property of Supplier or its licensors.  Buyer acquires no rights or licenses to any Intellectual Property of Supplier or its Affiliates except to the Licensed Materials as expressly granted under this Agreement for operation of the Turbine Equipment. 10.8 Government End Users .  The software portion of the Licensed Materials is a “commercial item,” as that term is defined at 48 CFR 2.101 (Oct 1995), consisting of “commercial computer software” and “commercial computer software documentation,” as such terms are used in 48 CFR 12.212 (Sep 1995) and in the event the Licensed Materials are provided to the US Government, such Licensed Materials shall be provided to the US Government only as a commercial end item. Consistent with 48 CFR 12.212 and 48 CFR 227.7202 1 through 227.7202 4 (June 1995), all US Government end users acquire the software with only those license rights set forth herein. 10.9 Export Restrictions .  Buyer acknowledges that the Licensed Materials may be subject to the US Export Administration Laws and Regulations.  Buyer may not export or re-export the Licensed Materials (nor any direct product therefrom) in violation of the US export laws. Buyer certifies that Buyer is not on the US Department of Commerce’s Denied Persons List or affiliated lists or on the US Department of Treasury’s Specially Designated Nationals List.  To the extent required, Buyer will abide by any and all notices regarding export and agrees not to remove or allow any third party to remove such notices.  Buyer’s obligation under this Section  will survive the expiration or termination of this Agreement. ARTICLE 11. EXCUSABLE EVENTS 11.1 Excusable Events .  Supplier shall be entitled to an adjustment in the Contract Price and/or the Project Schedule (including the Guaranteed Delivery Dates) upon the occurrence of an Excusable Event, to the extent that such Excusable Event increases the cost of Supplier’s performance of the Equipment Supply Obligations or materially adversely affects the Equipment Supply Obligations such that Supplier’s performance of the Equipment Supply Obligations is temporarily or permanently prevented or delayed; provided, Supplier complies with Sections  and .  For the purposes of this Agreement, an “Excusable Event” shall mean and refer to: 11.1.1 delays or interference with the Equipment Supply Obligations resulting from the acts or omissions of Buyer, any BOP Contractor, or any of their subcontractors, suppliers, employees or other parties for whom either may be liable; 11.1.2 subject to Section , the occurrence of a Force Majeure Event; 11.1.3 events concerning Soil or Subsurface Conditions described under Section ; 11.1.4 events concerning Hazardous Substances, or other hazardous conditions, in either case as described in Section ; 11.1.5 a Change in Law of the US or of the State of Iowa; 11.1.6 the failure of Buyer to acquire any of the Real Property Rights or the Buyer Permits, including the failure to acquire such Real Property Rights or Buyer Permits in a timely fashion so that Supplier may perform the Equipment Supply Obligations; 11.1.7 stoppages in the Equipment Supply Obligations which occur pursuant to the terms and provisions of Section ; 11.1.8 failure of Buyer or any BOP Contractor to complete the Balance of Plant Work in accordance with the BOP Requirements or the Project Schedule; 11.1.9 any acts or omissions by Buyer or any person or entity directly or indirectly engaged or instructed by it which are not in compliance with the requirements of this Agreement, including any task required for the completion of the Project and not forming part of the work to be performed by Supplier; or 11.1.10 suspension or stoppages of the Equipment Supply Obligations instructed by or on behalf of Buyer. 11.2 Change Order for Excusable Event .  If Supplier is entitled to an adjustment in the Contract Price, the Project Schedule and/or the Guaranteed Delivery Dates for any reason hereunder, then Supplier and Buyer shall execute a Change Order to effect the same. 11.3 Procedures upon Excusable Event or Force Majeure .  If Supplier, as a result of an Excusable Event, or Buyer, as a result of the occurrence of a Force Majeure Event, is rendered wholly or partially unable to perform its obligations under this Agreement, such Party shall comply with the following: 11.3.1 the affected Party shall give the other Party Written Notice describing the particulars of the occurrence, with Written Notice given promptly after the occurrence of the event, and in no event more than five (5) Business Days after the affected Party becomes aware that such occurrence is an Excusable Event or Force Majeure Event; provided, however, that any failure of the affected Party to provide such Written Notice shall not waive, prejudice or otherwise affect such Party’s right to relief under this  except that any extension of the Project Schedule shall be calculated from the date five (5) Business Days prior to the date on which the affected Party gives Written Notice under this Section ; 11.3.2 the affected Party shall give the other Party Written Notice estimating the event’s expected duration and probable impact on the performance of such Party’s obligations hereunder, and such affected Party shall continue to furnish timely regular reports with respect thereto during the continuation of the event; 11.3.3 the suspension of performance shall be of no greater scope and of no longer duration than is reasonably required by the event; 11.3.4 no liability of either Party which arose before the occurrence of the event causing the suspension of performance shall be excused as a result of the occurrence; 11.3.5 the affected Party shall exercise all reasonable efforts to mitigate or limit damages to the other Party, promptly taking appropriate and sufficient corrective action, including the expenditure of all reasonable sums of money; 11.3.6 the affected Party shall use all reasonable efforts to continue to perform its obligations hereunder and to correct or cure the event excusing performance; and 11.3.7 when the affected Party is able to resume performance of the affected obligations under this Agreement, the affected Party shall promptly resume performance and give the other Party Written Notice to that effect, and a Change Order shall be executed by Buyer and Supplier under  to account for the actual effect, if any, on the affected Party’s performance of its obligations by the event. 11.4 Burden of Proof .  The burden of proof as to whether an Excusable Event or a Force Majeure Event has occurred and whether such event excuses a Party from performance under this Agreement shall be upon the Party claiming such Excusable Event or Force Majeure Event. 11.5 Contract Price Adjustments Due to Force Majeure Events .  Supplier shall not be entitled to any adjustment to the Contract Price as a result of a loss with respect to any Turbine Equipment as to which risk of loss has not yet transferred to Buyer, except to the extent that such loss is, or would have been, as the case may be, covered by the Builder’s All-Risk Policy required to be maintained by Buyer pursuant to Exhibit  and (A) Buyer fails to maintain such Builder’s All-Risk Policy as required hereunder or (B) an insolvency event occurs with respect to the insurer issuing the Builder’s All-Risk Policy, in either event to the extent resulting in a deficiency in the insurance proceeds paid under the Builder’s All-Risk Policy as a result of such loss.  Supplier shall be entitled to any insurance proceeds payable under the Builder’s All-Risk Policy on account of a loss suffered with respect to the Turbine Equipment, or any component or portion thereof, as to which risk of loss has not yet transferred to Buyer, and in the event Buyer receives any such insurance proceeds, Buyer shall promptly pay such amounts to Supplier to the extent such proceeds relate to such loss. ARTICLE 12. CHANGE ORDERS 12.1 Change Order .  A “Change Order” is a written instrument signed by Buyer and Supplier in the form of Exhibit , stating their mutual agreement upon all of the following: (i) a change in the Equipment Supply Obligations, if any; (ii) the amount of the adjustment in the Contract Price, if any; and/or (iii) the extent of the adjustment, if any, to the Project Schedule, including the Guaranteed Delivery Dates.  Upon receiving a Change Order, Supplier shall diligently perform the work set forth therein in accordance with and subject to all of the Supplier Requirements. 12.2 Change Order Process .  In addition to circumstances set forth herein where the Parties are entitled to a Change Order, Buyer or Supplier may request changes in the Equipment Supply Obligations within the scope of this Agreement consisting of additions, deletions, or other revisions to the Equipment Supply Obligations; provided, however, that Buyer shall not be entitled to change the number or the type of Wind Turbines or Towers.  If either Buyer or Supplier wishes to change the Equipment Supply Obligations, it shall submit a change request to the other Party in writing.  If the requested change relates to a change to the Equipment Supply Obligations or results from a condition in which Supplier is entitled to a Change Order under this Agreement, then within ten (10) Business Days following receipt or delivery, as applicable, of the requested change, the requesting Party shall submit a detailed proposal to the other Party stating (i) the increase or decrease, if any, in the Contract Price and changes to the Payment Schedule that would result from such change, and (ii) the effect, if any, upon the Project Schedule and/or Guaranteed Delivery Dates by reason of such proposed change (collectively, the “Change Order Information”).  If the proposed change relates to any other matter, the requesting Party, at the time the request for the change is made, shall provide the proposed Change Order Information.  Within five (5) Business Days following receipt of the Change Order Information, the Parties shall meet and, acting reasonably, negotiate in good faith a mutually acceptable Change Order in accordance with the principles set forth herein.  Following agreement on the terms and conditions of the Change Order, the Parties shall execute the same.  If the Parties do not agree upon the terms and conditions of the Change Order, and the proposed change relates to circumstances in which a Party is entitled to a Change Order under this Agreement, then either Party may submit the matter to arbitration pursuant to . 12.3 No Change .  Supplier shall not be obligated to proceed with any change in the Equipment Supply Obligations requested by Buyer unless and until a Change Order is executed by the Parties in relation to such change.  Further, Supplier shall not be required to implement a requested change in the Equipment Supply Obligations by Buyer if (i) Supplier reasonably believes the implementation of such change could impair its ability to comply with any of the warranties or the covenants set forth in the Contract Documents or (ii) Buyer fails to provide any payment security required in connection with any executed Change Order.  Supplier shall not proceed with any change in the Equipment Supply Obligations contemplated by a Change Order until Buyer has approved in writing the proposed adjustments or has expressly authorized Supplier in writing to perform the Change Order prior to such approval. ARTICLE 13. INSURANCE Supplier and Buyer shall maintain or cause to be maintained the insurance described in Exhibit F.2.4 and shall otherwise comply with the terms and conditions set forth in Exhibit F.2.4. ARTICLE 14. LIMITATIONS ON LIABILITY 14.1 Overall Limitation of Liability .  Notwithstanding anything to the contrary contained in any of the Contract Documents and without modification of other limits of liability set forth herein or therein, in no event shall Supplier, Supplier Parent and their Affiliates be liable, alone or in the aggregate, to Buyer for any damages, claims, demands, suits, causes of action, losses, costs, expenses and/or liabilities in excess of an amount equal to one hundred percent (100%) of the Maximum Liability regardless of whether such liability arises out of breach of contract, guaranty or warranty, tort, product liability, indemnity, contribution, strict liability or any other legal theory; provided, however, that the preceding limitation of liability shall not apply to, and no credit shall be issued against such liability for: (a) Supplier’s indemnity obligations set forth in  solely as they relate to claims by third parties; or (b) liabilities resulting from (i) the gross negligence of Supplier or its Subcontractors or (ii) willful misconduct of Supplier or its Subcontractors.  Any damages, claims, demands, suits, causes of action, losses, costs, expenses and/or liabilities of Supplier, Supplier Parent and their Affiliates arising under this Agreement and the Warranty Agreement shall be applied towards the foregoing aggregate liability cap (i.e., shall reduce Supplier’s liability under this Agreement on a Dollar for Dollar basis).  The limits on the amount of insurance required to be maintained hereunder pursuant to  shall not operate to limit Supplier’s liability under this Agreement. 14.2 Consequential Damages .  Notwithstanding anything to the contrary contained in this Agreement, Buyer and Supplier waive all claims against each other (and against the parent companies and Affiliates of each, and their respective members, shareholders, officers, directors, agents and employees) for any consequential, incidental, indirect, special, exemplary or punitive damages (including loss of actual or anticipated profits, revenues or product; loss by reason of shutdown or non-operation; increased expense of operation, borrowing or financing; loss of use or productivity; and increased cost of capital) arising out of this Agreement; and, regardless of whether any such claim arises out of breach of contract, guaranty or warranty, tort, product liability, indemnity, contribution, strict liability or any other legal theory, and Buyer and Supplier each hereby releases the other and each of such Persons from any such liability.  Notwithstanding the provisions of this Section 7.2, any liquidated damages payable by Supplier under this Agreement shall not be deemed consequential damages. 14.3 Releases Valid in All Events .  Except in cases of fraud, the Parties intend that the waivers and disclaimers of liability, releases from liability, limitations and apportionments of liability, and indemnity and hold harmless provisions expressed throughout this Agreement shall apply even in the event of the negligence (in whole or in part), strict liability, tort liability, fault or breach of contract (including other legal bases of responsibility such as fundamental breach) of the Party whose liability is released, disclaimed or limited by any such provision, and shall extend to such Party’s Affiliates and their respective partners, shareholders, directors, officers, employees and agents.  Notwithstanding anything herein to the contrary, no waiver, disclaimer, release, limitation or indemnity shall apply or be effective in the event of the willful misconduct, gross negligence or criminal act of the Party attempting to enforce such provision. 14.4 Survival .  The provisions of this  shall survive the termination or expiration of this Agreement. ARTICLE 15. CONFIDENTIALITY AND PUBLICITY 15.1 Confidential Information. 15.1.1 A Party (the “Disclosing Party”) may disclose to the other Party (the “Receiving Party”) certain non-public information of a sensitive commercial nature, including the terms and conditions of this Agreement and all technical, product, marketing, financial, personnel, planning, and other information (“Confidential Information”).  Confidential Information marked “confidential,” “proprietary,” or similar language may be orally so designated or may not be marked or designated but is nevertheless non-public information of such Disclosing Party.  Confidential Information is received by the Receiving Party in confidence and in trust.  Accordingly, the Receiving Party shall use the Disclosing Party’s Confidential Information only as expressly permitted by this Agreement, and shall limit the disclosure of Confidential Information to consultants, auditors, employees, subcontractors or agents of the Receiving Party or any Financing Party who have a need to know such Confidential Information for purposes expressly authorized by this Agreement and who are bound in writing by confidentiality terms no less restrictive than those contained herein; provided, that the Receiving Party shall use commercially reasonable efforts to coordinate with the Disclosing Party prior to the dissemination of Confidential Information to such parties and shall give the Disclosing Party a reasonable opportunity to object to such dissemination on the grounds that the proposed type or category of Confidential Information is not being disseminated on a “need-to-know” basis.  The Receiving Party shall provide to the Disclosing Party copies of its written confidentiality agreements entered into with its consultants, auditors, employees, subcontractors or agents (and in the case of Buyer, the Financing Party) prior to any disclosure to such parties.  Nothing in this Section  shall prohibit either Party from disclosing to third parties the fact that it has entered into this Agreement with the other Party and disclosing the number of Wind Turbines being purchased or sold and the model number of the Wind Turbines, or to the extent disclosure of information is required in connection with either Party’s application for Permits.  Notwithstanding anything to the contrary contained herein, the Receiving Party may disclose Confidential Information to the extent required to comply with an order of a Governmental Authority with appropriate jurisdiction or as required to be disclosed under Applicable Law or any securities exchange requirement, provided that: (i) if the Receiving Party receives such an order, it shall promptly provide a copy of such order to the Disclosing Party, and the Disclosing Party shall have the right to seek to obtain a protective order or other remedy preventing or limiting disclosure.  If such protective order or other remedy is not obtained, the Receiving Party shall furnish only that portion of the Confidential Information that it is advised in writing by counsel that it is legally required to disclose.  The Receiving Party shall use diligent efforts to cooperate with the Disclosing Party in its efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information; and (ii) if the Receiving Party is required to make a disclosure of Confidential Information pursuant to any Applicable Law or any securities exchange requirement, the Receiving Party shall first seek confidential treatment of such Confidential Information, and in all such cases, the Disclosing Party shall have the right to approve the description of such Confidential Information being disclosed. The Receiving Party shall notify the Disclosing Party immediately if the Receiving Party learns of any misappropriation or misuse of the Confidential Information and shall cooperate with the Disclosing Party to prevent such misappropriation or misuse.  The Receiving Party shall return to the Disclosing Party all Confidential Information upon written request or upon expiration or termination of this Agreement and shall certify in writing that it has done so. 15.2 Publicity .  Neither Buyer nor Supplier shall publish any drawing, photograph, video or film or directly or indirectly disclose any information relating to the Equipment Supply Obligations to the press, radio, television or other news media without the prior written consent of the other Party (which consent shall not be unreasonably withheld or delayed) and subject to such reasonable conditions as may be prescribed by such Party. 15.3 Survival .  The provisions of Section  shall survive the termination or expiration of this Agreement. ARTICLE 16. REPRESENTATIONS AND WARRANTIES OF SUPPLIER As of the Effective Date, Supplier hereby represents and warrants to Buyer as follows: 16.1 Due Organization; Valid Existence; Qualified to do Business .  Supplier is a corporation duly organized under the laws of California, qualified to conduct business in Iowa, and is validly existing and in good standing under the laws of California. 16.2 Due Authorization .  The execution, delivery and performance of this Agreement by Supplier has been duly authorized by all necessary corporate action on the part of Supplier and does not and will not require the consent of any trustee or holder of any indebtedness or other obligation of Supplier or any other party to any other agreement with Supplier. 16.3 Execution and Delivery .  This Agreement has been duly executed and delivered by Supplier.  This Agreement constitutes the legal, valid and binding obligation of Supplier enforceable against it in accordance with its terms, except to the extent limited by bankruptcy, insolvency or other similar laws relating to the rights of creditors, or by general principles of equity. 16.4 Governmental Approvals .  No governmental authorization, approval, order, license, permit, franchise or consent, and no registration, declaration or filing with any Governmental Authority is required on the part of Supplier in connection with the execution, delivery or performance of this Agreement, except those which have already been obtained or which Supplier anticipates will be timely obtained in the ordinary course of performance of this Agreement. 16.5 Permits .  Supplier is (or will be prior to performing any Equipment Supply Obligations at the Project Site) the holder of all Supplier Permits required to permit it to operate or conduct its business now and as contemplated by this Agreement. ARTICLE 17. REPRESENTATIONS AND WARRANTIES OF BUYER As of the Effective Date, Buyer represents and warrants to Supplier as follows: 17.1 Due Organization; Valid Existence; Qualified to do Business .  Buyer is a corporation, duly organized under the laws of Wisconsin, qualified to conduct business in Iowa, and is validly existing and in good standing under the laws of Wisconsin. 17.2 Due Authorization .  The execution, delivery and performance of this Agreement by Buyer has been duly authorized by all necessary action on the part of Buyer and does not and will not require the consent of any trustee or holder of any indebtedness or other obligation of Buyer or any other party to any other agreement with Buyer. 17.3 Execution and Delivery .  This Agreement has been duly executed and delivered by Buyer.  This Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except to the extent limited by bankruptcy, insolvency or other similar laws relating to the rights of creditors, or by general principles of equity. 17.4 Governmental Approvals .  No governmental authorization, approval, order, license, permit, franchise or consent, and no registration, declaration or filing with any Governmental Authority is required on the part of Buyer in connection with the execution, delivery or performance of this Agreement, except those which have already been obtained or which Buyer anticipates will be timely obtained in the ordinary course of performance of this Agreement. 17.5 Permits .  Buyer is (or will be prior to Supplier performing any Equipment Supply Obligations at the Project Site) the holder of all Buyer Permits required to permit it to operate or conduct its business now and as contemplated by this Agreement. 17.6 Accuracy of Information .  All information provided to Supplier by Buyer related to the Project and the Project Site, including the Climatic Data Sheet and the Project Site Data, to the best of Buyer’s knowledge, is true, accurate, correct and complete in all material respects, and Buyer has no knowledge of any other information that would render the Project Site Data inaccurate or misleading in any material respect. 17.7 Correct Project Commercial Information .  All assumptions and projections supplied to Supplier and relating to the calculation of any of the Project’s capacity output, including the anticipated Project output, are Buyer’s reasonable and good faith estimates, and all information and data supplied to Supplier are accurate. ARTICLE 18. DEFAULT AND TERMINATION 18.1 Supplier Defaults .  The occurrence of any one or more of the following events shall constitute an event of default by Supplier hereunder (a “Supplier Event of Default”): 18.1.1 Supplier fails to pay to Buyer any payment required under this Agreement which is not in dispute, and such failure continues for ten (10) days after receipt of Written Notice of such failure; 18.1.2 Any representation or warranty of Supplier contained in this Agreement shall prove to be false or misleading at the time such representation or warranty is made and has a material adverse effect on either Party’s ability to perform its obligations hereunder, and such false or misleading representation or warranty and material adverse effect continues uncured for thirty (30) days after receipt of Written Notice from Buyer; 18.1.3 Supplier or Supplier Parent voluntarily commences bankruptcy, insolvency, reorganization, stay, moratorium or similar debtor-relief proceedings, or shall have become insolvent or generally does not pay its debts as they become due, or admits in writing its inability to pay its debts, or makes an assignment for the benefit of creditors and, with respect to Supplier Parent, Supplier has not delivered to Buyer another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Buyer to replace the Supplier Parent Guaranty; 18.1.4 Insolvency, receivership, reorganization, bankruptcy, or similar proceedings shall have been commenced against Supplier or Supplier Parent and such proceedings remain undismissed or unstayed for a period of ninety (90) days and, with respect to Supplier Parent, Supplier has not delivered to Buyer another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Buyer to replace the Supplier Parent Guaranty; 18.1.5 Supplier Parent disavows its obligations under the Supplier Parent Guaranty or Supplier fails to cause the Supplier Parent Guaranty to be maintained in full force and effect in accordance with its terms and such disavowal or failure continues for ten (10) days after receipt of Written Notice of such disavowal or failure and Supplier has not delivered to Buyer another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Buyer to replace the Supplier Parent Guaranty; or 18.1.6 Except as otherwise expressly provided for in this Section , Supplier is in material breach of its obligations under this Agreement (other than obligations for which liquidated damages are available therefor) and such material breach continues uncured for thirty (30) days after receipt of Written Notice from Buyer. 18.2 Buyer Defaults .  The occurrence of any one or more of the following events shall constitute an event of default by Buyer hereunder (a “Buyer Event of Default”): 18.2.1 Buyer fails to pay to Supplier any payment required under this Agreement which is not in dispute, and such failure continues for ten (10) days after receipt of Written Notice of such failure; 18.2.2 Any representation or warranty of Buyer contained in this Agreement shall prove to be false or misleading at the time such representation or warranty is made and has a material adverse affect on either Party’s ability to perform its obligations hereunder, and such false or misleading representation or warranty and material adverse effect continues uncured for thirty (30) days after receipt of Written Notice from Supplier; 18.2.3 Buyer or Buyer Parent voluntarily commences bankruptcy, insolvency, reorganization, stay, moratorium or similar debtor-relief proceedings, or shall have become insolvent or generally does not pay its debts as they become due, or admits in writing its inability to pay its debts, or makes an assignment for the benefit of creditors and, with respect to Buyer Parent, Buyer has not delivered to Supplier another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Supplier to replace the Buyer Parent Guaranty; 18.2.4 Insolvency, receivership, reorganization, bankruptcy, or a similar proceeding shall have been commenced against Buyer or Buyer Parent and such proceeding remains undismissed or unstayed for a period of ninety (90) days and, with respect to Buyer Parent, Buyer has not delivered to Supplier another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Supplier to replace the Buyer Parent Guaranty; 18.2.5 Buyer Parent disavows its obligations under the Buyer Parent Guaranty or Buyer fails to cause the Buyer Parent Guaranty to be maintained in full force and effect in accordance with its terms and such disavowal or failure continues for ten (10) days after receipt of Written Notice of such disavowal or failure and Buyer has not delivered to Supplier another guaranty, bank bond or a letter of credit in a form reasonably acceptable to Supplier to replace the Buyer Parent Guaranty; 18.2.6 Except as otherwise expressly provided for in this Section , Buyer is in material breach of its obligations under this Agreement and such material breach continues uncured for thirty (30) days after receipt of Written Notice from Supplier; 18.2.7 The Collateral or any part thereof is sold, transferred, assigned, or otherwise disposed of in any manner by Buyer prior to payment in full of the Contract Price unless, prior to such sale or transfer, Buyer has provided to Supplier alternate liquid security reasonably acceptable to Supplier; or 18.2.8 The Collateral or any part thereof is seized or otherwise attached by anyone pursuant to any legal process or other means, including distress, enforcement, execution or any other step or proceeding with similar effect, other than as a result of a breach by Supplier of its representations, warranties or obligations hereunder and other than Liens permitted pursuant to Section , and the same is not released, bonded, satisfied, discharged or vacated within the shorter of a period of (a) fifteen (15) Business Days or (b) ten (10) Business Days less than such period as would permit such property or any part thereof to be sold pursuant thereto. 18.3 Cure of an Event of Default .  An Event of Default shall be deemed cured only if such default shall be remedied within the relevant time period, if any, specified in Sections  and  after Written Notice has been sent to the defaulting Party from the non-defaulting Party specifying the default and demanding that the same be remedied (provided that failure of a Party to provide such notice shall not be deemed a waiver of such default).  Notwithstanding the foregoing, in the event of a Supplier Event of Default under Sections , , or  or a Buyer Event of Default under Sections ,  or , if such default is not reasonably capable of cure within the applicable time period specified thereunder but such default is reasonably capable of cure within the additional cure period set forth in this Section , then the default shall not be deemed an Event of Default if the defaulting Party commences to remedy the default within the relevant cure period set forth therein and thereafter diligently pursues such remedy until such default is fully cured; provided, however, that in no event shall such additional period of time for the defaulting Party to effect a cure for any such default exceed sixty (60) days.  Notwithstanding anything contained herein, there shall be no additional cure period allowed for a breach by Supplier under Section  or by Buyer under Section .  Buyer agrees that it shall not terminate this Agreement in respect of any Supplier Event of Default under Section  occurring with respect to Supplier, but not Supplier Parent, if Supplier Parent shall have (i) cured in all material respects all such Supplier Events of Default (other than any default under Sections  or ) and (ii) if there is then also a Supplier Event of Default under Section  or , irrevocably assumed this Agreement and the other Contract Documents.  Any such assumption shall be pursuant to a written agreement reasonably acceptable to Buyer.  Supplier agrees that it shall not terminate this Agreement in respect of any Buyer Event of Default under Section  occurring with respect to Buyer, but not Buyer Parent, if Buyer Parent shall have (i) cured in all material respects all such Buyer Events of Default (other than any default under Sections  or ) and (ii) if there is then also a Buyer Event of Default under Sections ‎ or , irrevocably assumed this Agreement and the other Contract Documents.  Any such assumption shall be pursuant to a written agreement reasonably acceptable to Supplier. 18.4 Event of Default Remedies. 18.4.1 Termination.  Upon the occurrence of an Event of Default and following any applicable cure period without the defaulting Party having cured such Event of Default, the non-defaulting Party, without prejudice to any remedy provided herein or otherwise available at law or in equity, may, by Written Notice to the defaulting Party, terminate this Agreement.  Except as provided in Section , termination of this Agreement shall be without prejudice to any other rights or remedies which a Party may have against the other, and no termination of this Agreement shall constitute a waiver, release or estoppel by either Party of any right, action or cause of action it may have against the other. 18.4.2 Right to Suspend Performance.  In addition to the right to terminate pursuant to Section , upon the occurrence of a Buyer Event of Default, Supplier shall have the right to stop performance of the Equipment Supply Obligations or any portion thereof until such Buyer Event of Default has been cured, in which case Supplier shall be entitled to a Change Order for any increased costs and for any required extension to the Project Schedule and Guaranteed Delivery Dates attributable to the suspension of the Equipment Supply Obligations. 18.4.3 Force Majeure Termination.  If the Equipment Supply Obligations, or a material portion thereof, is delayed or interrupted for more than six (6) months by reason of a Force Majeure Event, either Party may terminate this Agreement by providing thirty (30) days Written Notice thereof to the other Party and thereafter neither Party shall have any further obligations or liabilities hereunder, subject to Section . 18.5 Termination For Buyer Event of Default .  In the event that this Agreement is terminated by Supplier pursuant to Section : 18.5.1 Supplier shall immediately (a) discontinue the Equipment Supply Obligations, (b) conduct an inventory of the equipment and materials related to the Equipment Supply Obligations on the Project Site or en route to the Project Site, (c) remove its personnel and equipment related to the Equipment Supply Obligations from the Project Site, (d) remove from the Project Site and dispose of all waste, rubbish and debris associated with the Equipment Supply Obligations, and (e) take such steps, at Buyer’s sole cost and expense, as are reasonably necessary to preserve, inventory and protect that portion of the Turbine Equipment to which Buyer is expected to take title under Section  that is completed or in progress and is at the Project Site, stored off-site, or in transit; 18.5.2 Buyer shall, within ten (10) Business Days following receipt of an invoice therefor, pay Supplier (i) for all Turbine Equipment delivered, that portion of the Equipment Supply Obligations performed and all other amounts due hereunder through and including the date of such termination in accordance with the requirements of this Agreement, reduced by any amounts previously paid by Buyer, (ii) for the reasonable out-of-pocket expense of negotiating and paying termination costs under Subcontracts and purchase orders, storage costs, transportation costs and all other costs incurred by Supplier that are reasonably necessary for the preservation, protection or disposition of the Equipment Supply Obligations (including unused equipment and the Turbine Equipment), (iii) for any loss sustained to or upon any equipment, materials, tools, construction equipment and machinery, (iv) all reasonable costs of demobilization of personnel and equipment; and (v) liquidated damages in the amount of fifteen percent (15%) of that portion of the Contract Price remaining unpaid after Buyer makes the payment required under the foregoing clause (i). 18.5.3 Upon making the foregoing payment and subject to Section , Buyer shall take exclusive possession of and title to all Turbine Equipment paid for and completed or partially completed through the date of termination, and thereafter, may finish the Equipment Supply Obligations and complete the Project.  Any such Equipment Supply Obligations performed by or on behalf of Buyer shall be excluded from any warranties given hereunder and under the Warranty Agreement. 18.5.4 The Parties acknowledge and agree that because of the unique nature of the Project, the Turbine Equipment, the schedule for completion and the uncertainty of substitute alternative purchasers, it is impracticable or extremely difficult to determine with precision the amount of damages that would or might be incurred by Supplier as a result of Supplier terminating this Agreement due to a Buyer Event of Default.  It is understood and agreed by the Parties that (a) Supplier shall be damaged by such termination, (b) it would be impracticable or extremely difficult to fix the actual damages resulting therefrom, (c) any sums which would be payable under clause (v) of Section  are in the nature of liquidated damages, and not a penalty, and are fair and reasonable, and (d) each such payment represents a reasonable estimate of fair compensation for the losses that may reasonably be anticipated from such termination. 18.6 Termination For Supplier Event of Default .  In the event that this Agreement is terminated by Buyer pursuant to Section : 18.6.1 Supplier shall immediately (a) discontinue the Equipment Supply Obligations, (b) conduct an inventory of the equipment and materials related to the Equipment Supply Obligations on the Project Site or en route to the Project Site, (c) remove its personnel and equipment from the Project Site, (d) remove from the Project Site and dispose of all waste, rubbish and debris associated with the Equipment Supply Obligations, (e) execute any documents or instruments reasonably requested by Buyer related to the assignment to Buyer of Supplier’s Subcontracts (provided, however, that notwithstanding anything herein to the contrary, in the case of the purchase order for the Wind Turbines with Supplier Parent (or its Affiliates), Supplier shall only be required to assign a separately created, stand-alone purchase order for the supply of such Wind Turbines and not the purchase order issued by Supplier pursuant to the “frame agreement” (nor the “frame agreement” itself) between Supplier and Supplier Parent which, among other things, includes the exclusive license to sell the wind turbines in North America), (f) assign, to the extent assignable, all Supplier Permits then held by Supplier pertaining to the Project as Buyer may reasonably direct, and (g) take such steps, at Supplier’s sole cost and expense, as are reasonably necessary to preserve, inventory and protect that portion of the terminated Equipment Supply Obligations to which Buyer is expected to take title under Section  that is completed or in progress and is at the Project Site, stored off-site, or in transit; 18.6.2 Buyer shall, within ten (10) Business Days following receipt of an invoice therefor, pay Supplier for all Turbine Equipment delivered, that portion of the Equipment Supply Obligations performed and all other amounts due hereunder through and including the date of such termination in accordance with the requirements of this Agreement, reduced by any amounts previously paid by Buyer; provided that if the Down Payment exceeds the amount payable to Supplier pursuant to this sentence, Supplier shall refund to Buyer the portion of the Down Payment in excess of such payment to Supplier.  The reasonable out-of-pocket expenses of negotiating and paying termination costs under terminated subcontracts and purchase orders, storage costs, transportation costs and all other costs incurred which are reasonably necessary for the preservation, protection or disposition of the terminated Equipment Supply Obligations (including unused equipment and the Wind Turbines), any loss sustained to or upon any equipment, materials, tools, construction equipment and machinery and all reasonable costs of demobilization of personnel and equipment shall be borne by Supplier. In addition, Supplier shall be liable for, and shall pay to Buyer, any costs in excess of the Contract Price reasonably incurred by Buyer to complete the Equipment Supply Obligations, or any portion thereof, not completed by Supplier; 18.6.3 Subject to Section 17.8, Buyer shall take exclusive possession of and title to all Equipment Supply Obligations paid for and completed or partially completed through the date of termination, and the associated Turbine Equipment, including all or any part thereof delivered or en route to the Project Site, and, thereafter, may complete the Project.  Any such work performed by or on behalf of Buyer shall be excluded from any warranties given hereunder and under the Warranty Agreement. 18.7 Termination For Force Majeure Event .  In the event that this Agreement is terminated by either Party pursuant to Section : 18.7.1 Supplier shall immediately (a) discontinue the Equipment Supply Obligations, (b) conduct an inventory of the equipment and materials related to the Equipment Supply Obligations on the Project Site or en route to the Project Site, (c) remove its personnel and equipment from the Project Site, (d) remove from the Project Site and dispose of all waste, rubbish and debris associated with the Equipment Supply Obligations, (e) execute any documents or instruments reasonably requested by Buyer related to the assignment to Buyer of Supplier’s Subcontracts (provided, however, that notwithstanding anything herein to the contrary, in the case of the purchase order for the Wind Turbines with Supplier Parent (or its Affiliates), Supplier shall only be required to assign a separately created, stand-alone purchase order for the supply of such Wind Turbines and not the purchase order issued by Supplier pursuant to the “frame agreement” (nor the “frame agreement” itself) between Supplier and Supplier Parent which, among other things, includes the exclusive license to sell the wind turbines in North America), (f) assign, to the extent assignable, all Supplier Permits then held by Supplier pertaining to the Project as Buyer may reasonably direct, and (g) take such steps, at Buyer’s sole cost and expense, as are reasonably necessary to preserve, inventory and protect that portion of the Equipment Supply Obligations to which Buyer is expected to take title under Section  that is completed or in progress until the same is delivered to the Project Site; 18.7.2 Buyer shall, within ten (10) Business Days following receipt of an invoice therefor, make a termination payment to Supplier for (i) all Turbine Equipment delivered, that portion of the Equipment Supply Obligations performed and all other amounts due hereunder through and including the date of such termination in accordance with the requirements of this Agreement, reduced by any amounts previously paid by Buyer, (ii) all reasonable out-of-pocket expenses of negotiating and paying termination costs under Subcontracts and purchase orders, storage costs, transportation costs and all other costs incurred which are reasonably necessary for the preservation, protection or disposition of the Equipment Supply Obligations (including unused equipment and the Turbine Equipment), (iii) any loss sustained to or upon any equipment, materials, tools, construction equipment and machinery and (iv) all reasonable costs of demobilization of personnel and equipment; provided that if the Down Payment exceeds the amount payable to Supplier pursuant to this sentence, Supplier shall refund to Buyer the portion of the Down Payment in excess of such payment to Supplier; and 18.7.3 Upon making the foregoing payment and subject to Section , Buyer shall have the option to take exclusive possession of and title to all Turbine Equipment paid for and completed or partially completed through the date of termination, including all or any part thereof delivered or en route to the Project Site. 18.8 Limitations on Transfer of Title Upon Termination .  Notwithstanding anything in this  to the contrary, but subject to Section , upon termination of this Agreement Buyer shall not take title to any partially manufactured Wind Turbines or Towers; provided, however, that Buyer shall receive a credit equal to that portion of the Contract Price paid by Buyer and attributable to any partially manufactured Wind Turbine or Tower to which Buyer did not receive title prior to termination. 18.9 Surviving Obligations .  Termination or expiration of this Agreement, except as otherwise provided in any provision of this Agreement expressly limiting the liability of either Party, shall not relieve either Buyer or Supplier of any obligations or liabilities for (i) Losses to the other Party arising out of or caused by acts or omissions of such Party prior to the effectiveness of such termination or expiration or arising out of such termination or expiration, or (ii) the Equipment Supply Obligations or other services hereunder already performed by a Party prior to the date of termination.  This  shall survive the termination or expiration of this Agreement. ARTICLE 19. INDEMNIFICATION FOR THE EQUIPMENT SUPPLY OBLIGATIONS AND INDEMNIFICATION FOR INFRINGEMENT 19.1 Indemnification By Buyer .  Buyer hereby agrees to indemnify, defend and hold harmless Supplier and the Subcontractors and any of their respective officers, agents, shareholders, partners, members, Affiliates, employees, representatives, consultants, advisors and/or their respective assigns (each a “Supplier Indemnified Party”), from and against any and all Losses incurred or suffered by Supplier or any Supplier Indemnified Party for (a) any violation of any Applicable Law or Permit to be complied with hereunder by any Buyer Responsible Party; (b) injury to or death of persons including employees of Buyer; (c) any loss of or physical damage to the property of any Supplier Indemnified Party or any third parties, to the extent not covered by Supplier’s insurance, and to the extent arising out of or resulting from  (i) any misuse of the Turbine Equipment by Buyer after the delivery of the Turbine Equipment to the Delivery Point, (ii) the intentional or negligent acts or omissions of Buyer, its subcontractors, or any Person or entity directly employed by either of them, or any Person or entity for whose acts any of them are liable during the performance of the Balance of Plant Work (collectively, “Buyer Responsible Parties”), or (iii) claims by third parties regarding the Turbine Equipment or the performance thereof after the Commissioning Completion Date which claims are not attributable to defects or breach of warranties by Supplier hereunder or under the Warranty Agreement; and (d) any failure of any Buyer Responsible Party to pay for Taxes or Sales Taxes for which Buyer is responsible pursuant to this Agreement; provided, however, that Buyer shall have no liability for any Losses to the proportionate extent resulting from any Supplier Responsible Party’s performance or non-performance under this Agreement or the negligence or willful misconduct of any Supplier Responsible Party. 19.2 Indemnification By Supplier .  Supplier hereby agrees to indemnify, defend and hold harmless Buyer and any Financing Party and any of their respective officers, agents, shareholders, partners, members, employees, representatives, consultants, advisors and/or their respective assigns (each a “Buyer Indemnified Party”), from and against any and all Losses incurred or suffered by Buyer or any Buyer Indemnified Party for (a) any violation of any Applicable Law or Permit to be complied with hereunder by any Supplier Responsible Party; (b) injury to or death of persons including employees of Supplier; (c) any loss of or physical damage to the property of any Buyer Indemnified Party or any third parties to the extent not covered by Buyer’s insurance, and to the extent they are the result of the intentional or negligent acts or omissions of Supplier, its Subcontractors or any Person or entity directly employed by either of them, or any Person or entity for whose acts any of them are liable during the performance of Supplier’s obligations under this Agreement (collectively, the “Supplier Responsible Parties”); and (d) any failure of any Supplier Responsible Party to pay for Taxes for which Supplier is responsible pursuant to this Agreement; provided, however, that Supplier shall have no liability for damages to the proportionate extent resulting from any Buyer Responsible Party’s performance or non-performance under this Agreement or the negligence or willful misconduct of any Buyer Responsible Party.  The Parties agree that obligations giving rise to the payment of liquidated damages under this Agreement shall not give rise to a claim of indemnity under this Section . 19.3 Comparative Negligence .  It is the intent of the Parties that where, as between the Parties, negligence is determined to have been joint or contributory, principles of comparative negligence will be followed and each Party shall bear the proportionate cost of any loss, damage, expense or liability attributable to that Party’s negligence. 19.4 Indemnity from Liens .  Supplier shall indemnify and protect Buyer, the Financing Party, and their respective Affiliates, officers, directors, members, agents and employees from and against all Liens (a) arising from the performance of the Equipment Supply Obligations by Supplier or its Subcontractors or Vendors and (b) in respect of the Turbine Equipment, in each case other than those Liens that Supplier is permitted to maintain hereunder or for which Supplier has provided security pursuant to Section 3.18.2 and Liens created by or arising through Buyer. 19.5 Indemnification Procedure .  When a Party hereunder (“Indemnifying Party”) is required to indemnify the other Party (“Indemnified Party”) in accordance with this , the Indemnifying Party shall assume on behalf of such Indemnified Party, and conduct with due diligence and in good faith, the defense of any claim against such Party, whether or not the Indemnifying Party shall be joined therein, and the Indemnified Party shall cooperate with the Indemnifying Party in such defense.  The Indemnifying Party shall be in charge of the defense and settlement of such claim; provided, however, that without relieving the Indemnifying Party of its obligations hereunder or impairing the Indemnifying Party’s right to control the defense or settlement thereof, the Indemnified Party may elect to participate through separate counsel in the defense of any such claim, but the fees and expenses (including attorneys’ fees and legal costs) shall be at the expense of such Indemnified Party.  Notwithstanding the foregoing, in the event that (a) the Indemnified Party shall have reasonably concluded, acting in good faith and on the advice of counsel, that there exists a material conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of the defense of such claim, (b) the Indemnifying Party shall not have employed counsel to assume the defense of such claim within a reasonable time after Written Notice from the Indemnified Party of the commencement of an action thereon or (c) the Indemnifying Party fails to contest such claim in good faith by appropriate proceedings within a reasonable time following written demand therefor from the Indemnified Party, then in any such event the Indemnified Party shall be entitled, upon Written Notice to the Indemnifying Party, to assume control of the defense or settlement of such claim and shall be entitled to use its own counsel, the fees and expenses (including reasonable attorneys’ fees and legal costs) of which shall be paid or reimbursed by the Indemnifying Party to the Indemnified Party.  No Indemnifying Party shall settle any such claims or actions in a manner which would require any action or forbearance from action by any Indemnified Party without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. 19.6 Buyer’s Hazardous Substance Indemnity .  Buyer shall indemnify, defend and hold harmless Supplier, Supplier Parent and their respective officers, directors, employees, agents, Affiliates, and representatives, from and against any and all claims, demands, suits, liabilities, injuries (personal or bodily), property damage, causes of action, losses, costs, expenses, damages or penalties, including court costs and reasonable attorneys’ fees, arising out of, or resulting from, or occasioned by or in connection with any Hazardous Substance existing at the Project Site as of the Effective Date, or introduced to the Project Site after the Effective Date by any Person other than Supplier or its Subcontractors or their respective agents and employees. 19.7 Infringement Indemnification .  Supplier shall indemnify, defend and hold Buyer harmless from and against any and all claims that any sale or use of the Turbine Equipment or licensing of Supplier’s Intellectual Property to Buyer hereunder constitutes patent or copyright infringement or improper use of other proprietary rights (including any license on other intellectual property rights, whether by way of copyright or otherwise), unless such alleged infringement or improper use is (a) at the direction of Buyer, (b) the combination of the item with other products, materials, equipment, parts or apparatus and not approved by Supplier acting reasonably, or (c) a failure to promptly install an update.  Notwithstanding Section , Supplier shall have sole control of the defense and settlement of any and all such claims.  Furthermore, should any such claim materially impair Supplier’s performance of the Equipment Supply Obligations or continued operations, then Supplier shall use all reasonable efforts to procure, at its own expense, the right to continue its performance of the Equipment Supply Obligations, including, without limitation, at its own election (1) modifying infringing Turbine Equipment to make it non-infringing, (2) procuring right of continued use, or (3) substituting such Turbine Equipment with non-infringing equipment satisfying all technical specifications applicable to such Turbine Equipment.  This Section  states the entire liability and obligation of Supplier or any affiliate with respect to infringement or claims of infringement or any patent, copyright, trade secret or other intellectual property right by the Turbine Equipment or Licensed Materials. 19.7.1 This Section  does not apply to, and Supplier assumes no liability with respect to, claims for patent infringement made in relation to Turbine Equipment modified or caused to be modified by Buyer after delivery to the Delivery Point, to the extent that such claims relate, in whole or in part, to (a) Buyer’s modification of the Turbine Equipment made without Supplier’s written consent, (b) the combination of the item with other products, materials, equipment, parts or apparatus and not approved by Supplier acting reasonably, or (c) a failure to promptly install an update required by Supplier. 19.7.2 Buyer shall notify Supplier in writing as soon as Buyer shall receive notice of any claims alleging infringement of patents or other proprietary rights occurring in connection with Supplier’s performance of the Equipment Supply Obligations, and shall provide Supplier with all information in its possession relevant to such claim.  In turn, Supplier shall notify Buyer as soon as practical in writing of any claims which Supplier may receive alleging infringement of patents or other proprietary rights which may affect Supplier’s performance of the Equipment Supply Obligations under this Agreement or Buyer’s right to own, operate and maintain the Turbine Equipment. 19.8 Availability of Insurance .  Notwithstanding anything to the contrary in this , neither Party will be required to provide any indemnification to the other Party for any Losses when and to the extent that insurance proceeds are available therefor. 19.9 Survival .  The indemnities set forth in this  shall survive the termination or expiration of this Agreement. ARTICLE 20. ARBITRATION 20.1 Arbitration Procedure .  Any controversy, claim or dispute between the Parties hereto arising out of or related to this Agreement, or the alleged breach, termination, or invalidity hereof (“Dispute”), will be submitted for arbitration before a single arbitrator in accordance with the provisions contained herein and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) in effect at the time of the arbitration (“Rules”) (but such arbitration shall not be required to be conducted under the auspices of AAA); provided, however, that notwithstanding any provisions of such Rules, the Parties shall have the right to take depositions (up to three (3) per Party) and obtain documents from the other Party regarding the subject matter of the arbitration.  Experts retained by a Party for the Dispute shall prepare reports in accordance with Fed. R. Civ. P. 26, which reports shall be exchanged as directed by the arbitrator.  Further discovery of expert witnesses shall be permitted at the discretion of the arbitrator.  If the Parties cannot agree upon an arbitrator within twenty (20) days following the service of the Arbitration Notice, then the arbitrator shall be selected pursuant to 9 U.S.C. sec. 5 or applicable state law.  Any Party desiring arbitration shall serve on the other Party, its notice of intent to arbitrate (“Arbitration Notice”).  The Arbitration Notice shall be made within a reasonable time after the Dispute has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such Dispute would be barred by the applicable statute of limitations.  All arbitration shall take place in the City of Chicago, Illinois, unless otherwise agreed to by the Parties.  Each Party shall be required to exchange documents to be used in the arbitration proceeding not less than fifteen (15) days prior to the arbitration or as directed by the arbitrator.  The Parties shall use all commercially reasonable efforts to conclude the arbitration as soon as practicable.  The arbitrator shall determine all questions of fact and law relating to any Dispute hereunder, including but not limited to whether or not any Dispute is subject to the arbitration provisions contained herein.  The arbitration proceedings provided hereunder are hereby declared to be self executing, and it shall not be necessary to petition a court to compel arbitration.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. 20.2 Attorneys’ Fees .  In any arbitration or litigation to enforce the provisions of this Agreement, the prevailing Party in such action shall be entitled to the recovery of its reasonable legal fees and expenses (including reasonable attorneys’ fees and legal costs), fees of the arbitrator, costs and expenses such as expert witness fees, as fixed by the arbitrator or court without necessity of noticed motion. 20.3 Performance During Dispute .  Subject to Section  with respect to termination of this Agreement and to Supplier’s right to suspend performance of the Equipment Supply Obligations as provided in Section , while any controversy, dispute or claim arising out of or relating to this Agreement is pending, Buyer and Supplier shall continue to perform their obligations hereunder notwithstanding such controversy, dispute or claim. 20.4 Third Parties .  If a controversy, claim, dispute or difference arises between Buyer and Supplier which is subject to the arbitration provisions hereunder and there exists or later arises a controversy, claim, dispute or difference between Buyer and/or Supplier and any third party arising out of or related to the same transaction or series of transactions (“Third Party Controversy”), Buyer or Supplier shall be entitled to require that (i) the other Party be joined as a party to any arbitration of such Third Party Controversy being pursued with such third party and Supplier or Buyer (as the case may be) shall permit, and cooperate in, such joinder or (ii) the third party be joined as a party to the arbitration proceeding hereunder; provided, however, that for purposes of clause (i) above the third party must be a party to an agreement with Supplier or Buyer, or Affiliate of Supplier or Buyer, which provides for arbitration of disputes thereunder in accordance with rules and procedures substantially the same in all material respects as provided for herein; and provided, further that, for purposes of clause (ii) above, the third party consents to such joinder within ten (10) days after an Arbitration Notice has been filed.  Once a third party is joined to a dispute hereunder pursuant to this Section , such third party shall be entitled to treatment as a Party for purposes of the arbitration procedures of this . 20.5 Language .  All arbitration proceedings shall be conducted in the English language. 20.6 Survival .  The provisions set forth in this  shall survive the termination or expiration of this Agreement. ARTICLE 21. GENERAL PROVISIONS 21.1 Waiver .  No delay or omission by the Parties in exercising any right or remedy provided for herein shall constitute a waiver of such right or remedy nor shall it be construed as a bar to or waiver of any such right or remedy on any future occasion. 21.2 Right of Waiver .  Each Party, in its sole discretion, shall have the right, but shall have no obligation, to waive, defer or reduce any of the requirements to which the other Party is subject under this Agreement at any time; provided, however, that neither Party shall be deemed to have waived, deferred or reduced any such requirements unless such action is in writing and signed by the waiving Party.  A Party’s exercise of any rights hereunder shall apply only to such requirements and on such occasions as such Party may specify and shall in no event relieve the other Party of any requirements or other obligations not so specified. 21.3 Successors and Assigns .  This Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of Supplier and Buyer.  This Agreement, and any rights or obligations hereunder, may only be assigned or otherwise transferred in whole, and not in part, and must be assigned with the other Contract Documents.  Further, neither Party may assign this Agreement, or any rights or obligations hereunder, except: (i) upon the prior written consent of the other Party, which consent shall not be unreasonably withheld, provided that Supplier shall have no obligation to consent to any assignment unless the proposed assignee or transferee is (A) a creditworthy entity with a net worth at least equal to the net worth of Buyer on the date of assignment or transfer and (B) not a wind turbine manufacturer or an Affiliate of a wind turbine manufacturer; (ii) to an Affiliate upon prior Written Notice to the other Party, provided, however, that in the case of Buyer, such Affiliate is not a wind turbine manufacturer or an Affiliate of a wind turbine manufacturer; (iii) to a Financing Party as collateral security upon prior Written Notice to the other Party; or (iv) upon prior Written Notice to the other Party to any entity succeeding to all or substantially all of such Party’s assets.  Notwithstanding the foregoing, upon any assignment of this Agreement by either Party, the Buyer Parent Guaranty or the Supplier Parent Guaranty, as applicable, will remain in full force and effect until Supplier or Buyer, as applicable, is issued and accepts alternate payment security.  No assignment or other transfer shall relieve either Party of its respective obligations hereunder.  Any assignment not in conformity with this Agreement shall be null and void and shall be deemed to be a material breach of this Agreement.  For purposes of this Agreement, an assignment shall be deemed to include any transfer or sale of all or substantially all of the assets or business of a Party or a merger, consolidation or other transaction that results in a change in control of a Party. 21.4 Notices .  Any notice or invoice required or authorized to be given hereunder or any other communications between the Parties provided for under the terms of this Agreement shall be in writing (unless otherwise provided) and shall be served personally or by reputable next Business Day express courier service or by facsimile transmission addressed to the relevant Party at the address stated below or at any other address notified by that Party to the other as its address for service.  Any notice so given personally shall be deemed to have been served on delivery, any notice so given by express courier service shall be deemed to have been served the next Business Day after the same shall have been delivered to the relevant courier, and any notice so given by facsimile transmission shall be deemed to have been served on transmission and receipt of confirmation of successful transmission during normal business hours.  As proof of such service it shall be sufficient to produce a receipt showing personal service, the receipt of a reputable courier company showing the correct address of the addressee or an activity report of the sender’s facsimile machine showing the confirmation of successful transmission. The Parties’ addresses for notice and service are: To Buyer: Madison Gas and Electric Company 133 South Blair Street Madison, WI  53703 Attention:  Gregory A. Bollom, Assistant Vice President – Energy Planning Telephone:  (608) 252-4748 Facsimile:  (608) 252-7098     To Supplier: Vestas-American Wind Technology, Inc. 1881 SW Naito Parkway, Ste. 100 Portland, OR 97201 Attention: President Telephone: (503) 327-2000 Facsimile:  (503) 327-2001 21.5 Governing Law .  This Agreement and all matters arising hereunder or in connection herewith shall be governed by, interpreted under, construed and enforced in accordance with the laws of the State of New York, without regard to conflicts of law principles (other than Section 5-1401 of the New York General Obligations Law). 21.6 Consent to Jurisdiction .  Each of the Parties hereby irrevocably consents and agrees that any legal action or proceedings brought to enforce any arbitral award granted pursuant to  may be brought in the United States or New York state courts located in the borough of Manhattan, City of New York and by execution and delivery of this Agreement, each of the Parties hereby (i) accepts the jurisdiction of the foregoing courts for purposes of enforcement of any such arbitral award, (ii) irrevocably agrees to be bound by any final judgment (after any appeal) of any such court with respect thereto, and (iii) irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceedings with respect hereto brought in any such court, and further irrevocably waives to the fullest extent permitted by law any claim that any such suit, action or proceedings brought in any such court has been brought in an inconvenient forum.  Each of the Parties agrees that a final judgment (after any appeal) 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 to the extent provided by law. 21.7 Amendments .  This Agreement may be modified or amended only by an instrument in writing signed by the Parties hereto. 21.8 Entire Agreement .  This Agreement and the other Contract Documents contain the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous discussions, agreements and commitments between the Parties with respect thereto, and any prior and contemporaneous confidentiality agreements executed by the Parties in respect of the transactions contemplated by this Agreement and the other Contract Documents, and there are no agreements or understandings between the Parties respecting the subject matter hereof or thereof, whether oral or written, other than those set forth herein or therein and neither Party has relied upon any representation, express or implied not contained in this Agreement. 21.9 Certain Expenses .  If Supplier incurs any out-of-pocket cost or expense (including attorneys’ fees) in connection with any collateral assignment to or cooperation with any Financing Party, Buyer shall pay Supplier for such reasonable costs and expenses upon demand therefor. 21.10 Conflicting Provisions .  In the event of any inconsistencies between this Agreement and the other Contract Documents, the following order of precedence in the interpretation hereof or resolution of such conflict hereunder shall prevail: (i) duly authorized and executed Change Orders and written amendments to this Agreement executed by both Parties, in reverse chronological order, with recent Change Orders and written amendments having priority over earlier Change Orders and written amendments. (ii) this Agreement; (iii) the Warranty Agreement; (iv) the Service Agreement; (v) the Exhibits hereto; and (vi) drawings produced and delivered pursuant hereto (in respect of which, precedence shall be given to drawings of a larger scale over those of smaller, figured dimensions on the drawings shall control over scaled dimensions, and noted materials shall control over undimensioned graphic indications). 21.11 No Partnership Created .  Supplier is an independent contractor and nothing contained herein shall be construed as constituting any relationship with Buyer other than that of purchaser and independent contractor, nor shall it be construed as creating any relationship whatsoever between Buyer and Supplier, including employer/employee, partners or joint venture parties. 21.12 Survival .  All provisions of this Agreement that are expressly or by implication to come into or continue in force and effect after the expiration or termination of this Agreement shall remain in effect and be enforceable following such expiration or termination.  The provisions of this  shall survive expiration or termination of this Agreement. 21.13 Further Assurances .  Supplier and Buyer agree to provide such information, execute and deliver any instruments and documents and to take such other actions as may be necessary or reasonably requested by the other Party which are not inconsistent with the provisions of this Agreement and which do not involve the assumptions of obligations other than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of this Agreement.  Until such time as a debt or equity financing with respect to the Project shall be in place, all references herein to the Financing Party, and all requirements for the concurrence, consent or approval of any such Party for any action or inaction hereunder, shall be of no force and effect. 21.14 Counterparts .  This Agreement may be executed by the Parties in one or more counterparts, all of which taken together, shall constitute one and the same instrument.  The facsimile signatures of the Parties shall be deemed to constitute original signatures, and facsimile copies hereof shall be deemed to constitute duplicate originals. 21.15 NO IMPLIED WARRANTIES .  THE WARRANTIES OF SUPPLIER SET FORTH IN THIS AGREEMENT, THE SERVICE AGREEMENT AND IN THE WARRANTY AGREEMENT ARE SUPPLIER’S SOLE AND EXCLUSIVE WARRANTIES AND ARE MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND SUPPLIER MAKES NO OTHER WARRANTIES TO BUYER, EITHER EXPRESS OR IMPLIED, FOR PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CUSTOM, USAGE OR OTHERWISE.  THERE ARE NO OTHER WARRANTIES, AGREEMENTS, ORAL OR WRITTEN, OR UNDERSTANDINGS THAT EXTEND BEYOND THOSE SET FORTH HEREIN, IN THE SERVICE AGREEMENT AND IN THE WARRANTY AGREEMENT, AND NO OTHER WARRANTY, ORAL OR WRITTEN, WHICH MIGHT HAVE BEEN GIVEN BY AN EMPLOYEE, AGENT OR REPRESENTATIVE OF SUPPLIER IS AUTHORIZED BY SUPPLIER. 21.16 Headings .  The headings to Articles, Sections and Exhibits of this Agreement are for ease of reference only and in no way define, describe, extend or limit the scope of intent of this Agreement or the intent of any provision contained herein.  Similarly, the references to “Buyer” and “Supplier” in this Agreement are shorthand used for convenience only, and shall not alter the fact that Vestas-American Wind Technology, Inc. is licensing, not selling, the Licensed Material to Madison Gas and Electric Company, in accordance with . 21.17 No Rights in Third Parties .  Except as otherwise expressly provided herein, this Agreement and all rights hereunder are intended for the sole benefit of the Parties hereto and shall not imply or create any rights on the part of, or obligations to, any other Person. 21.18 Severability .  The invalidity of one or more phrases, sentences, clauses, Sections or Articles contained in this Agreement shall not affect the validity of the remaining portions of this Agreement so long as the material purposes of this Agreement can be determined and effectuated. 21.19 Joint Effort .  Preparation of this Agreement has been a joint effort of the Parties and the resulting document shall not be construed more severely against one of the Parties than against the other.  Any rule of construction that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement, or any amendments or Exhibits hereto. 21.20 Effectiveness .  This Agreement shall be effective on, and shall be binding upon, the Parties hereto upon the full execution and delivery of this Agreement, as of the Effective Date. 21.21 English Language Documents .  Any document, manual, certificate or notice required or authorized to be given hereunder for the operation of the Project shall be provided in the English language. 21.22 Notices, Consents and Approvals in Writing .  Except as otherwise expressly provided herein, any consents, authorizations, notices and approvals contemplated herein shall be in writing. [SIGNATURES FOLLOW] IN WITNESS WHEREOF, this Agreement has been executed and delivered by the duly authorized representatives of Buyer and Supplier as of the date first written above. VESTAS-AMERICAN WIND TECHNOLOGY, INC., a California corporation By: /s/ Jens Solby Name:  Jens Solby Title:  President By: /s/ Stephen Wieland Name:  Stephen Wieland Title:  Business Development Manager MADISON GAS AND ELECTRIC COMPANY, a Wisconsin corporation By: /s/ Scott A. Neitzel Name:  Scott Neitzel Title:  Vice President – Energy Supply

  Exhibit 10.1 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS. AMENDMENT NO. 2 TO DISTRIBUTION, PATENT & TRADEMARK LICENSE, MARKETING AND SUPPLY AGREEMENT      This Amendment Agreement (this “Amendment No. 2”) is entered into as of the 18th day of August 2006, by and between Kos Pharmaceuticals, Inc., a Florida corporation (“Kos”), and Merck KGaA, an entity organized under German law and registered in the commercial registry of the local court of Darmstadt under HRB 6164 (“Merck”). Recitals      A. Kos and Merck are parties to that certain Distribution, Patent & Trademark License, Marketing and Supply Agreement entered into as of October 23, 2002, as amended (the “Agreement”).      B. The Agreement provides for certain rights and obligations with respect to two Kos products: Niaspan® and Advicor®.      C. Due to changed circumstances and other mutual considerations, the Parties desire to amend the Agreement to remove Advicor from the Agreement in all respects, while leaving the Agreement in place solely with respect to Niaspan.      D. Except as otherwise stated herein, terms defined in the Agreement shall have the same meanings when used herein. Unless otherwise stated, references to Sections herein are to Sections in the Agreement and references to Appendices are to Appendices to the Agreement. Amendment Agreement      The Parties hereby agree that henceforth any and all references contained in the Agreement shall hereby be modified or revised as follows:      1. The term “Product(s)” shall mean Niaspan and shall not mean or include Advicor or any other product. Where the phrases “both Products” or “Niaspan or Advicor” or “Niaspan and Advicor” or similar phrases are used, these shall be understood to be references to Niaspan only.      2. Clause (ii) is deleted from Section 1.22 (definition of “Initial Indications”).      3. “ or, as applicable, **** of Advicor” is stricken from the first sentence of Section 1.27 (definition of “Minimum Transfer Price”).      4. The term “New Products” shall mean any product or proposed product, other than the Products and Product Improvements or Kos’ Niaspan/simvastatin combination products (it being understood and agreed that notwithstanding the foregoing, Kos shall not enter into an arrangement with any Third-Party for the development or commercialization of a Niaspan/simvastatin combination product on terms that, when taken as a whole, are materially   --------------------------------------------------------------------------------   more favorable to such Third-Party, than the terms that Kos has offered to Merck previously), which contains, in any dosage form and/or formulation ****.      5. The sentence “Similarly, Advicor will be the ‘Associated Product’ for a Product Improvement that is associated with Advicor in such manner.” and all following it in Section 1.36 (definition of “Product Improvements”) are stricken.      6. Clause (iv) of Section 3.2(b) is stricken.      7. The following clauses relating to milestones are stricken from the table in Section 5.2, and in no event shall any such milestone be, or become, payable, whether or not any related event has occurred prior to (or occurs following) the effectiveness of this Amendment:       Marketing Authorization of Advicor for 1st line indication in a Top Market   **** per Top Market ****   Marketing Authorization of Advicor for 2nd line indication in a Top Market   **** per Top Market **** Any additional references to Advicor in such table shall also be stricken therefrom.      8. Section 5.5(b) is stricken.      9. The parties will, following execution of this Amendment No. 1, attempt to establish mutually agreeable **** in Section 9.2 due to the fact, that Niaspan will remain the only Product covered by the Agreement following the removal of Advicor, pursuant hereto. If and when ****, as contemplated hereunder, are established by the Steering Committee pursuant to Section 9.2, such **** shall relate solely to **** of Niaspan and shall no longer include any component reflecting **** of Advicor.      10. Any reference to Advicor shall be stricken from Section 9.3      11. Section 11.1(b) is stricken.      12. The phrase “ and **** for Advicor” is stricken from Section 11.7(f), and the next following sentence in that Section shall read: “Kos shall inform Merck in writing of any deviation from the aforementioned **** .”      13. The phrase “ shall be at least **** for Advicor and” is stricken from Section 11.11.      14. Section 17.4 is stricken. Accordingly, Merck hereby notifies Kos that no further reimbursements will become due to Merck under Section 17.4, and agrees to immediately return the letter of credit specified in Section 5.1 to Kos and to assist Kos, as reasonably requested by Kos, to immediately terminate the letter of credit referred to in Section 5.1. -2- --------------------------------------------------------------------------------        15. The addresses set forth in Section 21 with respect to notices to Kos are updated to be as follows: Kos Pharmaceuticals, Inc: 1 Cedar Brook Drive Cranbury, NJ 08512 Facsimile: (609) 495-0916 Attention: Adrian Adams President & CEO -3- --------------------------------------------------------------------------------         Copy to:   Andrew I. Koven, Executive Vice President, General Counsel and Corporate Secretary 1 Cedar Brook Drive Cranbury, NJ 08512 Facsimile: (609) 495-0916      16. Appendix A is stricken.      17. The Indications for Advicor set forth in Appendix B are stricken.      18. Appendix D shall be stricken in its entirely and replaced with the Appendix D attached hereto.      19. The entries with respect to Advicor in bottles and Advicor in blister packs are stricken from Appendix E.      20. Except as modified in this Amendment No. 1, the Agreement remains in full force and effect in accordance with its terms. The provisions of Sections 22 and 23 of the Agreement apply to this Amendment as if fully set out herein. [Signature page follows] -4- --------------------------------------------------------------------------------   NOW THEREFORE, the Parties, through their authorized officers, have executed this Amendment as of the date first written above.             KOS PHARMACEUTICALS, INC.       By:   /s/ Andrew I. Koven     September 6, 2006         Name:   Andrew I. Koven        Title:   Executive Vice President, General Counsel and Corporate Secretary        MERCK KGaA       By:   /s/ Christian Velmer         Name:   Christian Velmer        Title:   Senior Vice President Commercial Unit CM Care & Operations        MERCK KGaA       By:   /s/ Philipp R. Buehler         Name:   Philipp R. Buehler        Title:   Legal Counsel Corporate Legal Department    -5-

  Exhibit 10.52 SEPARATION AGREEMENT           THIS SEPARATION AGREEMENT (this “Agreement”), dated as of October 31, 2005 by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and MARJORIE A. HURLEY, PHARM.D (“Dr. Hurley”). Background           Dr. Hurley serves as a senior executive of the Company and is a party to a Change of Control Agreement with the Company dated as of October 7, 2002 (the “COC Agreement”). Dr. Hurley’s employment with the Company will cease effective as of the date of this Agreement, and, in connection with that cessation and in recognition of Dr. Hurley’s contributions to the Company, and in consideration for her relinquishment of her rights under the COC Agreement, the Company has agreed to provide certain payments and benefits to Dr. Hurley as set forth herein. Except as otherwise provided herein, this Agreement replaces and supersedes the COC Agreement. Terms           NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:      1. Definitions. Unless otherwise defined herein, capitalized terms used in this Agreement have the same meaning as defined in the COC Agreement.      2. Cessation of Employment.           2.1. Timing. Dr. Hurley’s employment with the Company will cease as of the date of this Agreement.           2.2. Payments, Rights and Benefits. In connection with the cessation of Dr. Hurley’s employment:                2.2.1. the Company will pay Dr. Hurley $95,027.90 in twelve substantially equal installments, with the first such installment to be paid as soon as administratively practicable following the date this Agreement becomes irrevocable;                2.2.2. the Company will continue to provide medical benefits to Dr. Hurley (and, if covered immediately prior to such termination, her spouse and dependents) for a period of 12 months commencing today at a monthly cost to Dr. Hurley equal to Dr. Hurley’s monthly contribution toward the cost of such coverage immediately prior to such termination of employment;                2.2.3. Dr. Hurley (and, if then covered, her spouse and dependents) will be deemed to have a COBRA qualifying event as a result of the termination of his (or their) medical benefits on October 31, 2006 (or earlier pursuant to Section 3 below) and, subject to the limitations and requirements of COBRA, may elect COBRA continuation coverage at that time; provided, however, that Dr. Hurley will be solely responsible for the payment of the applicable   --------------------------------------------------------------------------------   premium due with respect to any COBRA continuation coverage elected by her (or her spouse or dependents)                2.2.4. the Company will pay to Dr. Hurley, at the time designated for payment to all Company employees, a pro rata portion of any bonus earned by Dr. Hurley for 2005 in accordance with the criteria that would be applicable if she remained employed at the time of consideration;                2.2.5. notwithstanding any contrary provisions of any other agreement or plan, the portion of any option to purchase common stock of the Company held by Dr. Hurley and that is vested and exercisable immediately prior to the cessation of her consulting services under Section 3.1 will remain exercisable until the first anniversary of such cessation and, to the extent not exercised prior to that time, will then immediately expire; and                2.2.6. pursuant to Section 2 of the Restricted Share Unit Agreements dated March 3, 2005, effective immediately upon termination of employment, all otherwise unvested Restricted Stock Units issued pursuant to such Agreements (“RSUs”) will become vested, and all RSUs issued under such Agreements will be settled pursuant to Section 5 of such Agreements.           2.3. Acknowledgements. Dr. Hurley acknowledges that: (a) the payments, rights and benefits set forth in Section 2 of this Agreement constitute full settlement of all of her rights with respect to all Restricted Stock Units awarded to her, (b) she has no entitlement under the COC Agreement or any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Agreement, the Company does not and will not have any other liability or obligation to her. Dr. Hurley further acknowledges that, in the absence of her execution of this Agreement, the payments, rights and benefits specified in this Agreement would not otherwise be due to her.      3. Consulting; Cooperation.           3.1. Consulting. Dr. Hurley will provide consulting services to the Company as determined from time to time by consensus between her and the Company’s management. It is initially anticipated that Dr. Hurley will provide 8 hours of services per week between now and December 31, 2005, as may be extended by mutual agreement. Upon presentation of proper invoice the Company will pay Dr. Hurley, in addition to the amounts otherwise payable under this Agreement, $1,500 per day for services performed. This consulting arrangement may be discontinued by Dr. Hurley or the Company at any time for any reason upon written notice. In performing the consulting services hereunder, Dr. Hurley will act as an independent contractor for all purposes, including payroll tax purposes, and will no longer be an employee of the Company for any purpose.           3.2. Cooperation. Dr. Hurley further agrees that, subject to reimbursement of her reasonable expenses (but without payment of additional compensation), she will cooperate with the Company to accomplish an orderly transition of her duties to other employees of the Company, and with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which she was involved during her employment with -2- --------------------------------------------------------------------------------   Company. The Company agrees to provide reasonable advance notice of the need for such assistance and/or cooperation and will exercise reasonable efforts to schedule such matters so as to avoid interfering with Dr. Hurley’s personal and other professional obligations provided that, unless otherwise agreed to by Dr. Hurley, such services will not require in excess of an aggregate of 10 hours in any given month. Dr. Hurley’s assistance or cooperation under this Section 3.2 will not constitute “Service” with respect to any equity incentive granted to her by the Company.      4. Release and Covenant Not to Sue.           4.1. Dr. Hurley hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present (collectively, the “Released Persons”), from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Agreement, out of her employment by the Company or the cessation thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Pennsylvania Human Relations Act, 43 P.S. §951 et seq. or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law.           4.2. Dr. Hurley expressly represents that she has not filed a lawsuit or initiated any other administrative proceeding against the Released Persons and that she has not assigned any claim against the Released Persons to any other person or entity. Dr. Hurley further promises not to initiate a lawsuit or to bring any other claim against the Released Persons arising out of or in any way relating to her employment by the Company or the cessation of that employment.           4.3. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Agreement, (b) claims solely to enforce Section 2.2 of this Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and Dr. Hurley or under any similar agreement or (d) claims solely to enforce the terms of any stock option award agreement between Dr. Hurley and the Company (as the same may have been modified by Sections 2.2.2 of this Agreement).           4.4. This Agreement will not prevent Dr. Hurley from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by Dr. Hurley for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.           4.5. Dr. Hurley acknowledges receipt of information regarding the job titles and ages of employees in her organizational unit whose employment is and is not expected to cease on or about the date of this Agreement, which information is provided in accordance with the requirements of federal law and is summarized on the attached Exhibit A. -3- --------------------------------------------------------------------------------        5. Restrictive Covenants. Dr. Hurley agrees and acknowledges that Section 6 of the COC Agreement (the “Restrictive Covenants”) will survive the cessation of her employment. The parties agree that the “Restricted Period” for purposes of the application of the Restrictive Covenants will end on April 7, 2006. Dr. Hurley affirms that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company, that she received adequate consideration in exchange for agreeing to those provisions and that she will abide by those provisions.      6. Non-Disparagement. The Company (meaning, solely for this purpose, Company’s directors and executive officers and other individuals authorized to make official communications on Company’s behalf) will not disparage Dr. Hurley or Dr. Hurley’s performance or otherwise take any action which could reasonably be expected to adversely affect Dr. Hurley’s personal or professional reputation. Similarly, Dr. Hurley will not disparage Company or any of its directors, officers, agents, employees or affiliates or otherwise take any action which could reasonably be expected to adversely affect the reputation of the Company or the personal or professional reputation of any of the Company’s directors, officers, agents, employees or affiliates.      7. Rescission Right. Dr. Hurley expressly acknowledges and recites that (a) she has read and understands this Agreement in its entirety, (b) she has entered into this Agreement knowingly and voluntarily, without any duress or coercion; (c) she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Agreement before signing it; (d) she was provided 45 calendar days after receipt of this Agreement to consider its terms before signing it; and (e) she is provided seven (7) calendar days from the date of signing to terminate and revoke this Agreement, in which case this Agreement shall be unenforceable, null and void. Dr. Hurley may revoke this Agreement during those seven (7) days by providing written notice of revocation to the Company at the address specified below in Section 9.8. In the event of such revocation, Dr. Hurley’s employment will remain terminated, and the applicable provisions of Employment Agreement will be in full force and effect.      8. Challenge. Notwithstanding any provision of this Agreement, the payments, rights and benefits described herein are conditioned on Dr. Hurley’s compliance with this Agreement and the Restrictive Covenants. If Dr. Hurley violates or challenges the enforceability of any provisions of this Agreement or the Restrictive Covenants, no further payments, rights or benefits under this Agreement will be due to Dr. Hurley.      9. Miscellaneous.           9.1. No Admission of Liability. This Agreement is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company to Dr. Hurley. There have been no such violations, and the Company specifically denies any such violations.           9.2. No Reinstatement. Dr. Hurley agrees that she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future. -4- --------------------------------------------------------------------------------             9.3. No Liability of Officers and Directors. The obligations of the Company under this Agreement are intended to its obligations alone and are not intended to give create any vicarious liability for the Company’s officers and directors. Therefore, intending to be bound by this provision, Dr. Hurley hereby waives any right to claim payment of amounts owed to her pursuant to this Agreement, now or in the future, from directors or officers of the Company if the Company becomes insolvent.           9.4. Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. The rights of Dr. Hurley hereunder are personal to Dr. Hurley and may not be assigned by her.           9.5. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.           9.6. Enforcement. Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and Dr. Hurley and the Company hereby consent to the personal and exclusive jurisdiction of such courts and hereby waive any objections that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.           9.7. Waivers; Separability. The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party. 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. 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 will remain in full force and effect.           9.8. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Company, to: Neose Technologies, Inc. 102 Witmer Road Horsham PA 19044 Attn: General Counsel Fax: 215-315-9100 -5- --------------------------------------------------------------------------------   If to Employee, to: Marjorie A. Hurley                                                                               or to such other address as may be specified in a notice given by one party to the other party hereunder.           9.9. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties relating to the cessation of Dr. Hurley’s employment with the Company and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including (except as otherwise provided herein) the COC Agreement. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.           9.10. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes or other amounts required to be withheld pursuant to any applicable law.           9.11. Headings Descriptive. The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.           9.12. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.           IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.             NEOSE TECHNOLOGIES, INC.       By:   /s/ C. Boyd Clarke       C. Boyd Clarke        President & Chief Executive Officer        MARJORIE A. HURLEY, PHARM.D.                     /s/ Marjorie A. Hurley           -6- --------------------------------------------------------------------------------   Exhibit 10.57 Exhibit A Required ADEA Disclosures      The job titles and ages of employees who have been selected are as follows:           Vice President/Senior Vice President     46, 58   Executive Vice President     61        The job titles and ages of employees in the same job classifications who have not been selected are as follows:           Vice President,/Senior Vice President     38, 47, 52   Executive Vice President     44, 63   A-1

Exhibit 10.4 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE 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 APPLICABLE STATE SECURITIES LAWS 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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. HYDROGEN CORPORATION   WARRANT         Warrant No. 1     Original Issue Date: [    ], 2006   HYDROGEN CORPORATION, a Nevada corporation (the “Company”), hereby certifies that, for value received, CD Investment Partners, Ltd. or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of 50,000 shares of common stock, $0.001 par value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price equal to $6.60 per share (as adjusted from time to time as provided herein, the “Exercise Price”), at any time and from time to time from and after the Original Issue Date and through and including [            ], 2011 (the “Expiration Date”), and subject to the following terms and conditions: This Warrant is issued pursuant to that certain Securities Purchase Agreement, dated May 2, 2006, by and between the Company and CD Investment Partners, Ltd. (the “Purchase Agreement”). All warrants represented by this Warrant are referred to herein, collectively, as the “Warrants.”   1.  Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement.    2.  List of Warrant Holders. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time). The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.   -1- --------------------------------------------------------------------------------     3.  List of Transfers. (a) In addition to the restrictions noted in the legend set forth on the first page of this Warrant, this Warrant and the Warrant Shares are subject to the restrictions on transfer set forth in the Purchase Agreement. (b) The Company shall register any such transfer of all or any portion of this Warrant in the Warrant Register, upon (i) surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein and (ii) if the Registration Statement is not effective, (x) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company, to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (y) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making the representations and certifications set forth in Section 3.2(b), (c) and (d) of the Purchase Agreement, to the Company at its address specified in the Purchase Agreement. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. Notwithstanding the foregoing, to the extent a Holder desires to transfer this Warrant to a non-affiliate after the effectiveness of the Registration Statement and the Commission notifies the Company in writing that it is not permitted to use a prospectus supplement to change the selling stockholder table to reflect the new transferee, then such transferee shall not be entitled to the registration rights associated with the underlying Warrant Shares but shall be entitled to all other rights as a Holder hereunder, including the right to exercise this Warrant on a “cashless” exercise basis pursuant to Section 10(b) hereof.   4.  Exercise and Duration of Warrants.   (a)  All or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Original Issue Date and through and including the Expiration Date. Subject to Section 11 hereof, at 5:00 p.m., New York City time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.   -2- --------------------------------------------------------------------------------   (b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “Exercise Notice”), completed and duly signed, together with the aggregate Exercise Price for the number of Warrant Shares to be issued pursuant to such exercise, and (ii) if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price as provided above shall constitute the Holder’s certification to the Company that its representations contained in Section 3.2(b), (c) and (d) of the Purchase Agreement are true and correct as of the Exercise Date as if remade in their entirety (or, in the case of any transferee Holder that is not a party to the Purchase Agreement, such transferee Holder’s certification to the Company that such representations are true and correct as to such assignee Holder as of the Exercise Date). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.    5.  Delivery of Warrant Shares.   (a)  Upon exercise of this Warrant, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (provided that, if the Registration Statement is not effective and the Holder directs the Company to deliver a certificate for the Warrant Shares in a name other than that of the Holder or an Affiliate of the Holder, it shall deliver to the Company on the Exercise Date an opinion of counsel reasonably satisfactory to the Company to the effect that the issuance of such Warrant Shares in such other name may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws), a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144(k) under the Securities Act. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.   (b)  If by the close of the third Trading Day after delivery of an Exercise Notice, the Company fails to deliver to the Holder a certificate representing the required number of Warrant Shares in the manner required pursuant to Section 5(a), and if after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s request and in the Holder’s sole discretion, either (1) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate or (2) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares, times (B) the closing bid price of a share of Common Stock on the date of the event giving rise to the Company’s obligation to deliver such certificate.     -3- --------------------------------------------------------------------------------   (c)  To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.   6.  Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.   7.  Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.     -4- --------------------------------------------------------------------------------   8.  Reservation of Warrant Shares. The Company covenants that it will initially reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, one hundred twenty percent (120%) of the number of Warrant Shares which are initially issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder. The Company further covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.   9.  Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.   (a)  Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.   (b)  Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.   -5- --------------------------------------------------------------------------------   (c) Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.   (d)  Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.   (e)  Subsequent Equity Sales.       (i) Except as provided in subsection (e)(iii) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (e)(ii)(l) through (e)(ii)(4) hereof, deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issue or sale, then and in each such case (a “Trigger Issuance”) the then-existing Exercise Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to a price determined as follows:   -6- --------------------------------------------------------------------------------     Adjusted Exercise Price = (A x B) + D   A+C                        where “A” equals the number of shares of Common Stock outstanding, including Additional Shares of Common Stock (as defined below) deemed to be issued hereunder, immediately preceding such Trigger Issuance; “B” equals the Exercise Price in effect immediately preceding such Trigger Issuance; “C” equals the number of Additional Shares of Common Stock issued or deemed issued hereunder as a result of the Trigger Issuance; and “D” equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance; provided, however, that in no event shall the Exercise Price after giving effect to such Trigger Issuance be greater than the original Exercise Price.   For purposes of this subsection (e), “Additional Shares of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection (e), other than Excluded Issuances (as defined in subsection (e)(iii) hereof).   (ii)  For purposes of this subsection 9(e), the following subsections (e)(ii)(l) to (e)(ii)(4) shall also be applicable:   (1) Issuance of Rights or Options. In case at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called “Options” and such convertible or exchangeable stock or securities being called “Convertible Securities”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Exercise Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price. Except as otherwise provided in subsection 9(e)(ii)(3), no adjustment of the Exercise Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.     -7- --------------------------------------------------------------------------------     (2) Issuance of Convertible Securities. In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Exercise Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price, provided that (a) except as otherwise provided in subsection 9(e)(ii)(3), no adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of subsection 9(e).     (3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 9(e)(ii)(l) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 9(e)(ii)(l) or 9(e)(ii)(2), or the rate at which Convertible Securities referred to in subsections 9(e)(ii)(l) or 9(e)(ii)(2) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such event shall forthwith be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the termination of any Option for which any adjustment was made pursuant to this subsection 9(e) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 9(e) (including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the Company), the Exercise Price then in effect hereunder shall forthwith be changed to the Exercise Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued.     -8- --------------------------------------------------------------------------------     (4)  Stock Dividends. Subject to the provisions of this Section 9(e), in case the Company shall declare a dividend or make any other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or Convertible Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.   (5) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the gross amount received by the Company therefor. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company. In case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or Convertible Securities (the “Additional Rights”) are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determined using the Black-Scholes option pricing model or another method mutually agreed to by the Company and the Holder). The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Holder as to the fair market value of the Additional Rights. In the event that the Board of Directors of the Company and the Holder are unable to agree upon the fair market value of the Additional Rights, the Company and the Holder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Holder.     -9- --------------------------------------------------------------------------------   (6)  Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (7)  Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection (e).   (iii)    Notwithstanding the foregoing, no adjustment will be made under this paragraph (e) in respect of: (i) the issuance of securities upon the exercise or conversion of any Common Stock or Common Stock Equivalents issued by the Company prior to the date hereof, (ii) the grant of options, warrants or other Common Stock Equivalents under any duly authorized Company stock option, restricted stock plan or stock purchase plan whether now existing or hereafter approved by the Company and its stockholders in the future stock issuable thereunder, the terms set forth therein, or the exercise price set forth therein) and the issuance of Common Stock in respect thereof, (iii) the issuance of securities in connection with a Strategic Transaction, (iv) the issuance of securities to vendors, (v) the issuance of securities in a transaction described in Section 9(a) or 9(b), or (vi) the issuance of securities in a firm commitment underwritten offering at a price per share at or above the then current market price per share. For purposes of this paragraph, a “Strategic Transaction” means a transaction or relationship in which (1) the Company issues shares of Common Stock to a Person which the Board of Directors of the Company determined in good faith is, itself or through its Subsidiaries, an operating company in a business synergistic with the business of the Company (or a stockholder thereof) and (2) the Company expects to receive benefits in addition to the investment of funds, but shall not include (x) a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to a Person whose primary business is investing in securities or (y) issuances to lenders.   (iv) Upon any adjustment to the Exercise Price pursuant to Section 9(e)(i) above, the number of Warrant Shares purchasable hereunder shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the Exercise Price in effect immediately prior to such adjustment and the denominator of which shall be the Exercise Price in effect immediately thereafter. (f) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.     -10- --------------------------------------------------------------------------------   (g)  Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s Transfer Agent.   (h)  Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating, or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give the Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.   10.  Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners:   (a)  Cash Exercise. The Holder may deliver immediately available funds; or   (b)  Cashless Exercise. If an Exercise Notice is delivered at a time when a registration statement permitting the Holder to resell the Warrant Shares is required to be effective and is not then effective or the prospectus forming a part thereof is not then available to the Holder for the resale of the Warrant Shares, then the Holder may notify the Company in an Exercise Notice of its election to utilize cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:   X = Y [(A-B)/A]     -11- --------------------------------------------------------------------------------   where:   X = the number of Warrant Shares to be issued to the Holder.   Y = the number of Warrant Shares with respect to which this Warrant is being exercised.   A = the average of the closing prices of a share of Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date.   B = the Exercise Price.   For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.   11.  Limitations on Exercise. Notwithstanding anything to the contrary contained herein, this Warrant shall not be exercisable by the Holder hereof to the extent (but only to the extent) that, if exercisable by the Holder, the Holder, any of its affiliates, or any other Person (as defined in the Purchase Agreement) which may be deemed to be acting as a group in concert with the Holder or any of its affiliates for the purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, would beneficially own in excess of 4.99% (the “Applicable Percentage”) of the outstanding shares of common stock of the Company. To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-a-vis other convertible, exercisable or exchangeable securities owned by the Holder) and of which warrants shall be exercisable (as among all warrants owned by the Holder) shall, subject to such Applicable Percentage limitation, be determined by the Holder on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined by the Holder in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Applicable Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Applicable Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of common stock of the Company shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its common stock.     -12- --------------------------------------------------------------------------------   12.  No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable Trading Market on the Exercise Date.   13.  Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such notices or communications shall be: (i) if to the Company, to HydroGen Corporation, 10 East 40th Street, Room 3405, New York, New York 10016, Attn: Chief Executive Officer or to facsimile number (212) 672-0393 (or such other address as the Company shall indicate in writing in accordance with this Section) or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register (or such other address as the Company shall indicate in writing in accordance with this Section).   14.  Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.   15.  Miscellaneous.   (a)  This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.     -13- --------------------------------------------------------------------------------   (b)  All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (“Proceedings”) (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts 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 Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 Warrant 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. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of this Warrant, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in connection with the investigation, preparation and prosecution of such Proceeding.   (c)  The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.   (d)  In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.   (e)  Other than as provided in Section 9(h) or otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]     -14- --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.             HYDROGEN CORPORATION         By:     ___________________________   Name:       Title:         --------------------------------------------------------------------------------   EXERCISE NOTICE HYDROGEN CORPORATION WARRANT DATED _________________, 2006   Ladies and Gentlemen: (1) The undersigned hereby elects to purchase _________ shares of Common Stock pursuant to the above-referenced Warrant. Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.    (2) The Holder intends that payment of the Exercise Price shall be made as (check one):   Cash Exercise under Section 10   Cashless Exercise under Section 10 (3) If the Holder has elected a Cash Exercise, the holder shall pay the sum of $_______ to the Company in accordance with the terms of the Warrant. (4) Pursuant to this Exercise Notice, the Company shall deliver to the Holder _____________ Warrant Shares in accordance with the terms of the Warrant.   (5) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 11 of this Warrant to which this notice relates.     --------------------------------------------------------------------------------   HYDROGEN CORPORATION WARRANT ORIGINALLY ISSUED _____________, 2006 WARRANT NO. _____________ FORM OF ASSIGNMENT   [To be completed and signed only upon transfer of Warrant]   FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                              the right represented by the within Warrant to purchase                  shares of Common Stock to which the within Warrant relates and appoints                              attorney to transfer said right on the books of the Company with full power of substitution in the premises.         Dated:                        ,         _____________________________     (Signature must conform in all respects to name of holder as specified on the face of the Warrant)       _____________________________     Address of Transferee       _____________________________       _____________________________         In the presence of:   _____________________________       --------------------------------------------------------------------------------    

AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT      This Amendment No. 1 to Revolving Credit Agreement dated as of June 15, 2006 (this “Agreement”) is entered into among ICON Health & Fitness, Inc., a Delaware corporation (the “Borrower”), the other Credit Parties signatory hereto, the lenders party hereto (the “Lenders”) and Bank of America, N.A., as agent for the Lenders (the “Administrative Agent”). Capitalized terms used herein but not defined herein shall have the meanings provided in the Credit Agreement (as defined below). W I T N E S S E T H:      WHEREAS, the Credit Parties, the Lenders and the Administrative Agent are parties to that certain Revolving Credit Agreement dated as of October 31, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”); and      WHEREAS, the Credit Parties have requested that the Administrative Agent and the Lenders amend certain provisions of the Credit Agreement on the terms and conditions hereafter set forth.      NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:      SECTION 1.   Amendments. As of the Effective Date, the Credit Agreement is hereby amended as follows:           1.1 The definition of “Consolidated EBITDA” contained in Section 1.1 of the Credit Agreement is hereby amended by deleting clause (a) contained therein and substituting in lieu thereof the following:   “(a)consolidated net income (including losses (but excluding gains) from discontinued operations)”             1.2 The definition of “Consolidated EBITDA” contained in Section 1.1 of the Credit Agreement is hereby further amended by relettering clause c(vi) therein as (c)(viii) and by adding a new clause (c)(vi) and a new clause (c)(vii) thereto, immediately following clause (c)(v), as follows:   “(vi) with respect to the Fiscal Quarter ended May 31, 2006, actual restructuring charges incurred by the Credit Parties in connection with the closure of the NordicTrack retail store operations during such period in an amount not to exceed $12,500,000,     (vii) with respect to the Fiscal Quarters ending September 3, 2005, December 3, 2005, March 4, 2006, May 31, 2006 and September 2, 2006, actual operating losses incurred by the Credit Parties in connection with the discontinued NordicTrack retail store operations not to exceed (A) $2,500,000 for the Fiscal Quarter ending September 3, 2005, (B) $1,700,000 for the Fiscal Quarter ending December 3, 2005, (C) $0 for the Fiscal Quarter ending March 4, 2006, (D) $1,800,000 for the Fiscal Quarter ending May 31, 2006 and (E) $800,000 for the Fiscal Quarter ending September 2, 2006,”             1.3 Section 8.2(h) of the Credit Agreement is hereby amended by deleting clause (ii) of such Section in its entirety and substituting therefor the following:   “(ii) made after the Closing Date in an aggregate amount not to exceed (x) $8,000,000 during the period commencing on June 15, 2006 and ending on May 31, 2007, and (y) $5,000,000 at all other times (in each case, excluding accrued interest and fees on such advances); provided that, such Indebtedness is evidenced by intercompany notes in form and substance reasonably satisfactory to the Administrative Agent and such notes are pledged to the Administrative Agent under the Collateral Assignment of Intercompany Notes as security for the Obligations.”        SECTION 2.   Condition Precedent; Effective Date. The effective date of this Agreement shall be June 15, 2006 (the “Effective Date”); provided that it shall be a condition to the effectiveness of this Agreement that the Administrative Agent shall have received (which receipt may be by facsimile transmission) on or before the Effective Date: (a) counterparts of this Agreement, executed by the Credit Parties and the Required Lenders; (b) a duly executed copy of an amendment to the Back Bay Loan Agreement containing terms substantially identical to the terms of this Agreement; (c) intercompany notes evidencing the Indebtedness of the Borrower’s European Subsidiaries to the Borrower, together with appropriate endorsements and (d) a duly executed copy of an amendment to the Collateral Assignment of Intercompany Notes, in each case, in form and substance reasonably satisfactory to the Administrative Agent.      SECTION 3.   Borrower Representations and Warranties. Each Credit Party hereby represents and warrants that (a) this Agreement constitutes its legal, valid and binding obligation, enforceable against such Credit Party in accordance with the terms hereof, (b) after giving effect to this Agreement, (i) the representations and warranties contained in the Credit Agreement are correct in all material respects as though made on and as of the date of this Agreement, and (ii) no Default or Event of Default has occurred and is continuing.      SECTION 4.   Reference to and Effect on the Credit Agreement.         4.1 Upon the effectiveness of this Agreement, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Credit Agreement, as modified hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement, as modified hereby.         4.2 Except as specifically set forth in Section 1 hereof, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.         4.3 The execution, delivery and effectiveness of this Agreement shall not operate or be construed as a waiver or forbearance with respect to any Defaults or Events of Default under the Credit Agreement which may now or hereafter exist, or the waiver of any right, power or remedy which the Administrative Agent and the Lenders may have with respect thereto under the Credit Agreement or applicable law. The Lenders hereby reserve any and all rights which may now or hereafter exist in favor of the Lenders under the Credit Agreement.      SECTION 5.   Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.      SECTION 6.   Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of laws provisions) of the Commonwealth of Massachusetts.      SECTION 7.   Section Titles. The section titles contained in this Agreement are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. (Signature pages follow) --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to the Revolving Credit Agreement to be duly executed and delivered as of the date first above written.     ICON HEALTH & FITNESS, INC.               By: /s/ S. Fred Beck       --------------------------------------------------------------------------------       Name: S. Fred Beck       Title:   Chief Financial Officer       HF HOLDINGS, INC.               By: /s/ S. Fred Beck       --------------------------------------------------------------------------------       Name: S. Fred Beck       Title:   Chief Financial Officer       ICON INTERNATIONAL HOLDINGS, INC.               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Secretary       UNIVERSAL TECHNICAL SERVICES               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Secretary       FREE MOTION FITNESS, INC.               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Secretary       ICON IP, INC.               By: /s/ S. Fred Beck       --------------------------------------------------------------------------------       Name: S. Fred Beck       Title:   Chief Financial Officer       NORDICKTRACK, INC.               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Secretary   --------------------------------------------------------------------------------     510152 N.B. LTD.               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Vice President and Secretary       ICON DU CANADA INC./ICON OF CANADA INC.               By: /s/ Brad H. Bearnson       --------------------------------------------------------------------------------       Name: Brad H. Bearnson       Title:   Secretary   --------------------------------------------------------------------------------     BANK OF AMERICA, N.A. individually and as Administrative Agent, Issuing Lender and Cash Management Bank               By: /s/ Christopher Godfrey       --------------------------------------------------------------------------------       Name: Christopher Godfrey       Title:   Senior Vice President       GMAC COMMERCIAL FINANCE, LLC               By: /s/ Robert F. McIntyre       --------------------------------------------------------------------------------       Name: Robert F. McIntyre       Title:    Director       THE CIT GROUP/BUSINESS CREDIT, INC.               By: /s/ Jang S. Kim       --------------------------------------------------------------------------------       Name: Jang S. Kim       Title:   Vice President       WELLS FARGO FOOTHILL, LLC               By: /s/ Yelena Kravduck       --------------------------------------------------------------------------------       Name: Yelena Kravduck       Title:   AVP       MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.               By: /s/ Thomas Bukowski       --------------------------------------------------------------------------------       Name: Thomas Bukowski       Title:   Director       LASALLE BUSINESS CREDIT, LLC               By: /s/ Steven Chalmers       --------------------------------------------------------------------------------       Name: Steven Chalmers       Title:   Vice President       SIEMENS FINANCIAL SERVICES, INC.               By:       --------------------------------------------------------------------------------       Name:       Title:     

Exhibit 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, effective as of January 1, 2006, by and between Sohu.com Inc., a Delaware corporation, and Charles Zhang, an individual (the “Employee”). 1. Definitions. Capitalized terms used herein and not otherwise defined in the text below will have the meanings ascribed thereto on Annex 1. 2. Employment; Duties. (a) The Company agrees to employ the Employee in the capacity and with such responsibilities as are generally set forth on Annex 2. (b) The Employee hereby agrees to devote his or her full time and best efforts in such capacities as are set forth on Annex 2 on the terms and conditions set forth herein. Notwithstanding the foregoing, the Employee may engage in other activities, such as activities involving professional, charitable, educational, religious and similar types of organizations, provided that that the Employee complies with the Employee Non-competition, Non-solicitation, Confidential Information and Work Product Agreement attached hereto as Annex 3 (the “Employee Obligations Agreement”) and such other activities do not interfere with or prohibit the performance of the Employee’s duties under this Agreement, or conflict in any material way with the business of the Company or of its subsidiaries and affiliates. (c) The Employee will use best efforts during the Term to ensure that the Company’s business and those of its subsidiaries and affiliates are conducted in accordance with all applicable laws and regulations of all jurisdictions in which such businesses are conducted. 3. Compensation. (a) Base Annual Income. During the Term, the Company will pay the Employee an annual base salary as set forth on Annex 2, payable monthly pursuant to the Company’s normal payroll practices. (b) Discretionary Bonus. During the Term, the Company, in its sole discretion, may award to the Employee an annual bonus based on the Employee’s performance and other factors deemed relevant by the Company’s Board of Directors. (c) Stock Options. The Employee will be eligible to participate in any stock option or other incentive programs available to officers or employees of the Company. (d) Reimbursement of Expenses. The Company will reimburse the Employee for reasonable expenses incurred by the Employee in the course of, and necessary in connection with, the performance by the Employee of his duties to the Company, provided that such expenses are substantiated in accordance with the Company’s policies.   -1- -------------------------------------------------------------------------------- 4. Other Employee Benefits. (a) Vacation; Sick Leave. The Employee will be entitled to such number of weeks of paid vacation each year as are set forth on Annex 2, the taking of which must be in accordance with the Company’s standard vacation policy. Unless otherwise approved by the Company’s Board of Directors, vacation that is not used in a particular year may only be carried forward to subsequent years in accordance with the Company’s policies in effect from time to time. The Employee will be eligible for sick leave in accordance with the Company’s policies in effect from time to time. (b) Healthcare Plan. The Company will arrange for membership in the Company’s group healthcare plan for the Employee, the Employee’s spouse and the Employee’s children under 18 years old, in accordance with the Company’s standard policies from time to time with respect to health insurance and in accordance with the rules established for individual participation in such plan and under applicable law. (c) Life and Disability Insurance. The Company will provide term life and disability insurance payable to the Employee, in each case in an amount up to a maximum of one times the Employee’s base salary in effect from time to time, provided however, that such amount will be reduced by the amount of any life insurance or death or disability benefit coverage, as applicable, that is provided to the Employee under any other benefit plans or arrangements of the Company. Such policies will be in accordance with the Company’s standard policies from time to time with respect to such insurance and the rules established for individual participation in such plans and under applicable law. (d) Other Benefits. Pursuant to the Company’s policies in effect from time to time and the applicable plan rules, the Employee will be eligible to participate in the other employee benefit plans of general application, which may include, without limitation, housing allowance or reimbursement, tuition fees for the Employee’s children at an international level school and tax equalization and which, in any event, shall include the benefits at the levels set forth on Annex 2. 5. Certain Representations, Warranties and Covenants of the Employee. (a) Related Company Positions. The Employee agrees that the Employee and members of the Employee’s immediate family will not have any financial interest directly or indirectly (including through any entity in which the Employee or any member of the Employee’s immediate family has a position or financial interest) in any transactions with the Company or any subsidiaries or affiliates thereof unless all such transactions, prior to being entered into, have been disclosed to the Board of Directors and approved by a majority of the independent members of the Board of Directors and comply with all other Company policies and applicable law as may be in effect from time to time. The Employee also agrees that he or she will inform the Board of Directors of the Company of any transactions involving the Company or any of its subsidiaries or affiliates in which senior officers, including but not limited to the Employee, or their immediate family members have a financial interest. (b) Discounts, Rebates or Commissions. Unless expressly permitted by written policies and procedures of the Company in effect from time to time that may be   -2- -------------------------------------------------------------------------------- applicable to the Employee, neither the Employee nor any immediate family member will be entitled to receive or obtain directly or indirectly any discount, rebate or commission in respect of any sale or purchase of goods or services effected or other business transacted (whether or not by the Employee) by or on behalf of the Company or any of its subsidiaries or affiliates, and if the Employee or any immediate family member (or any firm or company in which the Employee or any immediate family member is interested) obtains any such discount, rebate or commission, the Employee will pay to the Company an amount equal to the amount so received (or the proportionate amount received by any such firm or company to the extent of the Employee’s or family member’s interest therein). 6. Term; Termination. (a) Unless sooner terminated pursuant to the provisions of this Section 6, the term of this Agreement (the “Term”) will commence on the date hereof and end on December 31, 2008. (b) Voluntary Termination by the Employee. Notwithstanding anything herein to the contrary, the Employee may voluntarily Terminate this Agreement by providing the Company with ninety (90) days’ advance written notice (“Voluntary Termination”), in which case, the Employee will not be entitled to receive payment of any severance benefits or other amounts by reason of the Termination other than accrued salary and vacation through the date of the Termination. The Employee’s right to all other benefits will terminate as of the date of Termination, other than any continuation required by applicable law. Without limiting the foregoing, if, in connection with a Change in Control, the surviving entity or successor to Sohu’s business offers the Employee employment on substantially equivalent terms to those set forth in this Agreement and such offer is not accepted by the Employee, the refusal by the Employee to accept such offer and the subsequent termination of the Employee’s employment by the Company shall be deemed to be a voluntary termination of employment by the Employee and shall not be treated as a termination by the Company without Cause. (c) Termination by the Company for Cause. Notwithstanding anything herein to the contrary, the Company may Terminate this Agreement for Cause by written notice to the Employee, effective immediately upon the delivery of such notice. In such case, the Employee will not be entitled to receive payment of any severance benefits or other amounts by reason of the Termination other than accrued salary and vacation through the date of the Termination. The Employee’s right to all other benefits will terminate, other than any continuation required by applicable law. (d) Termination by the Employee with Good Reason or Termination by the Company without Cause. Notwithstanding anything herein to the contrary, the Employee may Terminate this Agreement for Good Reason, and the Company may Terminate this Agreement without Cause, in either case upon thirty (30) days’ advance written notice by the party Terminating this Agreement to the other party and the Termination shall be effective as of the expiration of such thirty (30) day period. If the Employee Terminates with Good Reason or the Company Terminates without Cause, the Employee will be entitled to continue to receive payment of severance benefits equal to the Employee’s monthly base salary in effect on the date of Termination for the shorter of (i) six (6)   -3- -------------------------------------------------------------------------------- months and (ii) the remainder of the Term of this Agreement (the “Severance Period”), provided that the Employee complies with the Employee Obligations Agreement during the Severance Period and executes a release agreement in the form requested by the Company at the time of such Termination that releases the Company from any and all claims arising from or related to the employment relationship and/or such Termination. Such payments will be made ratably over the Severance Period according to the Company’s standard payroll schedule. The Employee will also receive payment of the bonus for the remainder of the year of the Termination, but only to the extent that the bonus would have been earned had the Employee continued in employment through the end of such year, as determined in good faith by the Company’s, Board of Directors or its Compensation Committee based on the specific corporate and individual performance targets established for such fiscal year, and only to the extent that bonuses are paid for such fiscal year to other similarly situated employees. Health insurance benefits with the same coverage provided to the Employee prior to the Termination (e.g., medical, dental, optical, mental health) and in all other material respects comparable to those in place immediately prior to the Termination will be provided at the Company’s expense during the Severance Period. The Company will also continue to carry the Employee on its Directors and Officers insurance policy for six (6) years following the Date of Termination at the Company’s expense with respect to insurable events which occurred during the Employee’s term as a director or officer of the Company, with such coverage being at least comparable to that in effect immediately prior to the Termination Date; provided, however, that (i) such terms, conditions and exceptions will not be, in the aggregate, materially less favorable to the Employee than those in effect on the Termination Date and (ii) if the aggregate annual premiums for such insurance at any time during such period exceed two hundred percent (200%) of the per annum rate of premium currently paid by the Company for such insurance, then the Company will provide the maximum coverage that will then be available at an annual premium equal to two hundred percent (200%) of such rate. (e) Termination by Reason of Death or Disability. A Termination of the Employee’s employment by reason of death or Disability shall not be deemed to be a Termination by the Company (for or without Cause) or by the Employee (for or without Good Reason). In the event that the Employee’s employment with the Company Terminates as a result of the Employee’s death or Disability, the Employee or the Employee’s estate or representative, as applicable, will receive all accrued salary and accrued vacation as of the date of the Employee’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. In addition, the Employee or the Employee’s estate or representative, as applicable, will receive the bonus for the year in which the death or Disability occurs to the extent that a bonus would have been earned had the Employee continued in employment through the end of such year, as determined in good faith by the Company’s, Board of Directors or its Compensation Committee based on the specific corporate and individual performance targets established for such fiscal year, and only to the extent that bonuses are paid for such fiscal year to other similarly situated employees. (f) Misconduct After Termination of Employment. Notwithstanding the foregoing or anything herein the contrary, if the Employee after the termination of his employment violates or fails to fully comply with the Employee Obligations Agreement,   -4- -------------------------------------------------------------------------------- thereafter (1) the Employee shall not be entitled to any payments from the Company, (2) any insurance or other benefits that have continued shall terminate immediately, (3) the Employee shall promptly reimburse to the Company all amounts that have been paid to the Employee pursuant to this Section 6; and (4) if the Employee would not, in the absence of such violation or failure to comply, have been entitled to severance payments from the Company equal to at least six (6) months’ base salary, pay to the Company an amount equal to the difference between six (6) months’ base salary and the amount of severance pay measured by base salary reimbursed to the Company by the Employee pursuant to clause 3 of this sentence. 7. Option-Related Provisions. (a) Termination by the Company Without Cause after a Change in Control. If Company Terminates this Agreement without Cause within twelve (12) months following a Change in Control, the vesting and exercisability of each of the Employee’s outstanding stock options or other stock-based incentive awards (“Awards”) will accelerate such that the Award will become fully vested and exercisable upon the effectiveness of the Termination, and any repurchase right of the Company with respect to shares of stock issued upon exercise of the Award will completely lapse, in each case subject to paragraph (c) below (“Forfeiture of Options for Misconduct”). (b) Termination other than by the Company Without Cause after a Change in Control. If the Employee’s employment with the Company Terminates for any reason, unless the Company Terminates this Agreement without Cause within twelve (12) months following a Change in Control, the vesting and exercisability of each of the Employee’s outstanding Awards shall cease upon the effectiveness of the Termination, such that any unvested Award shall be cancelled. (c) Forfeiture of Options for Misconduct. If the Employee fails to comply with the terms of this Agreement, the Employee Obligations Agreement, or the written policies and procedures of the Company, as the same may be amended from time to time, or acts against the specific instructions of the Board of Directors of the Company or if this Agreement is terminated by the Company for Cause (each a “Penalty Breach”), the Employee will forfeit any Awards that have been granted to him or to which the Employee may be entitled, whether the same are then vested or not, and the same shall thereafter not be exercisable at all, and all shares of common stock of the Company, if any, purchased by the Employee pursuant to the exercise of Awards and still then owned by the Employee may be repurchased by the Company, at its sole discretion, at the price paid by the Employee for such shares of common stock. The terms of all outstanding option grants are hereby amended to conform with this provision. 8. Employee Obligations Agreement. By signing this Agreement, the Employee hereby agrees to execute and deliver to the Company the Employee Obligations Agreement, and such execution and delivery shall be a condition to the Employee’s entitlement to his rights under this Agreement. 9. Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Delaware if the dispute is resolved therein, and in accordance with the laws of the People’s Republic of China (“China”) if the dispute is resolved therein or in any other jurisdiction other than the State of   -5- -------------------------------------------------------------------------------- Delaware, in each case exclusive of such jurisdiction’s principles of conflicts of law. If, under the applicable law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion will be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement; the invalidity of any such portion will not affect the force, effect and validity of the remaining portion hereof. 10. Notices. All notices, requests and other communications under this Agreement will be in writing (including facsimile or similar writing and express mail or courier delivery or in person delivery, but excluding ordinary mail delivery) and will be given to the address stated below:     (a) if to the Employee, to the address or facsimile number that is on file with the Company from time to time, as may be updated by the Employee;     (b) if to the Company: Sohu.com Inc. Level15, Vision International Center No. 1 Unit Zhongguancun East Road Haidian District Beijing 100084 People’s Republic of China Attention:    Carol Yu                       Chief Financial Officer fax: (86-10) 62702155 with a copy to: Goulston & Storrs 400 Atlantic Avenue Boston, MA 02110 Attention: Timothy B. Bancroft fax: (617) 574-4112 or to such other address or facsimile number as either party may hereafter specify for the purpose by written notice to the other party in the manner provided in this Section 10. All such notices, requests and other communications will be deemed received: (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section 10 if confirmation of receipt is received; (ii) if given by express mail or courier delivery, five (5) days after sent; and (iii) if given in person, when delivered. 11. Miscellaneous. (a) Entire Agreement. This Agreement constitutes the entire understanding between the Company and the Employee relating to the subject matter hereof and   -6- -------------------------------------------------------------------------------- supersedes and cancels all prior and contemporaneous written and oral agreements and understandings with respect to the subject matter of this Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. (b) Modification; Waiver. No provision of this Agreement may be modified, waived or discharged unless modification, waiver or discharge is agreed to in writing signed by the Employee and such officer of the Company as may be specifically designated by its Board of Directors. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. (c) Successors; Binding Agreement. This Agreement will be binding upon and will inure to the benefit of the Employee, the Employee’s heirs, executors, administrators and beneficiaries, and the Company and its successors (whether direct or indirect, by purchase, merger, consolidation or otherwise), subject to the terms and conditions set forth herein. (d) Withholding Taxes. All amounts payable to the Employee under this Agreement will be subject to applicable withholding of income, wage and other taxes to the extent required by applicable law. (e) Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect. (f) Language. This Agreement is written in the English language only. The English language also will be the controlling language for all future communications between the parties hereto concerning this Agreement. (g) Counterparts. This Agreement may be signed in any number of counterparts, each of which will be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Dispute Resolution. Either party may bring a legal action arising out of, or relating to this Agreement in any court of the State of Delaware in the United States of America and each party hereby expressly and irrevocably waives any claim or defense in any action or proceeding brought in said jurisdictions based on any alleged lack of personal jurisdiction, improper venue, forum non conveniens, or any similar basis. Except as relates to the enforcement of the Employee Obligations Agreement (Section 8(b) of which provides that the party initiating a claim may bring such claim in the courts of either the State of Delaware or in the courts of China, at such party’s option), any dispute, controversy or claim arising out of or relating to this Agreement may also be submitted to arbitration administered by the International Chamber of Commerce (“ICC”). The award rendered in such an arbitration proceeding will be final and binding and judgment on the award rendered may be entered in any court having jurisdiction over the parties. Such arbitration shall be held in Hong Kong and shall be conducted in accordance with the ICC International Arbitration Rules, except as may be modified by the following: (a) The number of arbitrators will be three, one of whom will be appointed by the party asserting a claim against the other party or parties, one of whom will be appointed by the party or parties (acting together), as the case may be, against whom a claim has been asserted, and the third of whom will be selected by mutual agreement, if possible, within thirty days after the selection of the second arbitrator.   -7- -------------------------------------------------------------------------------- (b) The language of the arbitration will be conducted in the English language and any foreign-language documents presented at such arbitration will be accompanied by an English translation thereof that shall be prepared at the expense of the party seeking to present such document. (c) Any award of the arbitrators (i) will be in writing, (ii) will state the reasons upon which such award is based and (iii) may include an award of costs, including reasonable attorneys’ fees and disbursements. (d) The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing party’s actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement. (e) Notwithstanding the foregoing, any party may apply to any court having jurisdiction over the parties to obtain injunctive relief in order to maintain the status quo until such time as an arbitration award may be rendered or the dispute, controversy or claim may be otherwise resolved. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]   -8- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of April 24, 2006 and effective January 1, 2006.   Signature of Employee:     Sohu.com Inc. /s/ Charles Zhang     By:   /s/ Carol Yu     Name:   Carol Yu Printed name of employee:     Title:   Chief Financial Officer Charles Zhang         -9- -------------------------------------------------------------------------------- Annex 1 Certain Definitions “Cause” means:     (i) willful misconduct or gross negligence by the Employee, or any willful or grossly negligent omission to perform any act, resulting in injury to the Company or any subsidiaries or affiliates thereof;     (ii) misconduct or negligence of the Employee that results in gain or personal enrichment of the Employee to the detriment of the Company or any subsidiaries or affiliates thereof;     (iii) breach of any of the Employee’s agreements with the Company, including those set forth herein and in the Employee Obligations Agreement, and including, but not limited to, the repeated failure to perform substantially the Employee’s duties to the Company or any subsidiaries or affiliates thereof, excessive absenteeism or dishonesty;     (iv) any attempt by the Employee to assign or delegate this Agreement or any of the rights, duties, responsibilities, privileges or obligations hereunder without the prior approval of the Board of Directors of the Company (except in respect of any delegation by the Employee of his employment duties hereunder to other employees of the Company in accordance with its usual business practice);     (v) the Employee’s indictment or conviction for, or confession of, a felony or any crime involving moral turpitude under the laws of the United States or any State thereof, or under the laws of China, or Hong Kong;     (vi) declaration by a court that the Employee is insane or incompetent to manage his business affairs;     (vii) habitual drug or alcohol abuse which materially impairs the Employee’s ability to perform his duties; or     (viii) filing of any petition or other proceeding seeking to find the Employee bankrupt or insolvent. “Change in Control” means the occurrence of any of the following events:     (i) any person (within the meaning of Section 13(d) or Section 14(d)(2) of the Securities Exchange Act of 1934) other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company, becomes the direct or beneficial owner of securities representing fifty percent (50%) or more of the combined voting power of the Company’s then-outstanding securities;   -10- --------------------------------------------------------------------------------   (ii) during any period of two (2) consecutive years after the date of this Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Company, and all new directors (other than directors designated by a person who has entered into an agreement with the Company to effect a transaction described in (i), (iii), or (iv) of this definition) whose election or nomination to the Board was approved by a vote of at least two-thirds of the directors then in office, cease for any reason to constitute at least a majority of the members of the Board;     (iii) the effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;     (iv) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets; or     (v) there occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement. “Company” means Sohu.com Inc and, unless the context suggests to the contrary, all of its subsidiaries and related companies. “Disability” means the Employee becomes physically or mentally impaired to an extent which renders him unable to perform the essential functions of his job, with or without reasonable accommodation, for a period of six consecutive months, or an aggregate of nine months in any two year period. “Good Reason” means the occurrence of any of the following events without the Employee’s express written consent, provided that the Employee has given notice to the Company of such event and the Company has not remedied the problem within fifteen (15) days:     (i) any significant change in the duties and responsibilities of the Employee inconsistent in any material and adverse respect with the Employee’s title and position (including status, officer positions and reporting requirements), authority, duties or responsibilities as contemplated by Annex 2 to this Agreement. For the purposes of this Agreement, because of the evolving nature of the Employer’s business, the Company’s changing of Employee’s reporting relationships and department(s) will not be considered a significant change in duties and responsibilities;   -11- --------------------------------------------------------------------------------   (ii) any material breach by the Company of this Agreement, including without limitation any reduction of the Employee’s base salary or the Company’s failure to pay to the Employee any portion of the Employee’s compensation; or     (iii) the failure, in the event of a Change in Control in which the Company is not the surviving entity, of the surviving entity or the successor to the Company’s business to assume this Agreement pursuant to its terms or to offer the Employee employment on substantially equivalent terms to those set forth in this Agreement. “Termination” (and any similar, capitalized use of the term, such as “Terminate”) means, according to the context, the termination of this Agreement or the Employee’s ceasing to render employment services.   -12- -------------------------------------------------------------------------------- Annex 2 Particular Terms of Employee’s Employment   Title(s):    Chief Executive Officer Reporting Requirement:    The Employee will report to the Company’s Board of Directors. Responsibilities:    Such duties and responsibilities as are ordinarily associated with the Employee’s title(s) in a United States publicly-traded corporation and such other duties as may be specified by the Board of Directors from time to time. Base Salary:    US$230,000 per year # of Weeks of Paid Vacation per Year: 15 days Other Benefits: Monthly housing allowance or reimbursement after tax of US $4,583.33 per month, tax equalization on salary and bonus to 15%, health, life and disability insurance and tuition fees for the Employee’s children as per company policy and bonus as specifically approved each year.   -13- -------------------------------------------------------------------------------- Annex 3 FORM OF EMPLOYEE NON-COMPETITION, NON-SOLICITATION, CONFIDENTIAL INFORMATION AND WORK PRODUCT AGREEMENT In consideration of my employment and the compensation paid to me by Sohu.com Inc., a Delaware corporation, or a subsidiary or other affiliate or related company thereof (Sohu.com Inc. or any such subsidiary or related company or other affiliate referred to herein individually and collectively as “SOHU”), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I agree as follows: 1. Non-Competition. During my employment with SOHU and continuing after the termination of my employment for the longer of (i) one year after the termination of my employment with SOHU for any reason and (ii) such period of time as SOHU is paying to me any severance benefits, (the “Noncompete Period”), I will not, on my own behalf, or as owner, manager, stockholder (other than as stockholder of less than 2% of the outstanding stock of a company that is publicly traded or listed on a stock exchange), consultant, director, officer or employee of or in any other manner connected with any business entity, participate or be involved in any Competitor without the prior written authorization of the Board of Directors of SOHU. “Competitor” means any business of the type and character of business in which SOHU engages or proposes to engage and may include, without limitation, an individual, company, enterprise, partnership enterprise, government office, committee, social organization or other organization that, in any event, produces, distributes or provides the same or substantially similar kind of product or service as SOHU. On the date of this Employee Non-competition, Non-solicitation, Confidential Information and Work Product Agreement (this “Agreement”), “Competitor” includes without limitation: Sina.com, Yahoo Inc., Tom.com, Netease.com Inc., Linktone, Kong Zhong Corporation, Google Inc., Shanda Interactive Entertainment Ltd., Tencent Inc. and Baidu.com, Inc. 2. Nonsolicitation. During the Noncompete Period, I will not, either for my own account or for the account of any other person: (i) solicit, induce, attempt to hire, or hire any employee or contractor of SOHU or any other person who may have been employed or engaged by SOHU during the term of my employment with SOHU unless that person has not worked with SOHU within the six months following my last day of employment with SOHU; (ii) solicit business or relationship in competition with SOHU from any of SOHU’s customers, suppliers or partners or any other entity with which SOHU does business; (iii) assist in such hiring or solicitation by any other person or business entity or encourage any such employee to terminate his or her employment with SOHU; or (iv) encourage any such customer, supplier or partner or any other entity to terminate its relationship with SOHU. 3. Confidential Information. (a) While employed by SOHU and indefinitely thereafter, I will not, directly or indirectly, use any Confidential Information (as hereinafter defined) other than pursuant to my employment by and for the benefit of SOHU, or disclose any such Confidential Information to anyone outside of SOHU or to anyone within SOHU who has not been authorized to receive such information, except as directed in writing by an authorized representative of SOHU.   -14- -------------------------------------------------------------------------------- (b) “Confidential Information” means all trade secrets, proprietary information, and other data and information, in any form, belonging to SOHU or any of their respective clients, customers, consultants, licensees or affiliates that is held in confidence by SOHU. Confidential Information includes, but is not limited to computer software, the structure of SOHU’s online directories and search engines, business plans and arrangements, customer lists, marketing materials, financial information, research, and any other information identified or treated as confidential by SOHU or any of their respective clients, customer, consultants, licensees or affiliates. Notwithstanding the foregoing, Confidential Information does not include information which SOHU has voluntarily disclosed to the public without restriction, or which is otherwise known to the public at large. 4. Rights in Work Product. (a) I agree that all Work Product (as hereinafter defined) will be the sole property of SOHU. I agree that all Work Product that constitutes original works of authorship protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act and, therefore, the property of SOHU. I agree to waive, and hereby waive and irrevocably and exclusively assign to SOHU, all right, title and interest I may have in or to any other Work Product and, to the extent that such rights may not be waived or assigned, I agree not to assert such rights against SOHU or its licensees (and sublicensees), successors or assigns. (b) I agree to promptly disclose all Work Product to the appropriate individuals in SOHU as such Work Product is created in accordance with the requirements of my job and as directed by SOHU. (c) “Work Product” means any and all inventions, improvements, developments, concepts, ideas, expressions, processes, prototypes, plans, drawings, designs, models, formulations, specifications, methods, techniques, shop-practices, discoveries, innovations, creations, technologies, formulas, algorithms, data, computer databases, reports, laboratory notebooks, papers, writings, photographs, source and object codes, software programs, other works of authorship, and know-how and show-how, or parts thereof conceived, developed, or otherwise made by me alone or jointly with others (i) during the period of my employment with SOHU or (ii) during the six month period next succeeding the termination of my employment with SOHU if the same in any way relates to the present or proposed products, programs or services of SOHU or to tasks assigned to me during the course of my employment, whether or not patentable or subject to copyright or trademark protection, whether or not reduced to tangible form or reduced to practice, whether or not made during my regular working hours, and whether or not made on SOHU premises. 5. Employee’s Prior Obligations. I hereby certify I have no continuing obligation to any previous employer or other person or entity which requires me not to disclose any information to SOHU.   -15- -------------------------------------------------------------------------------- 6. Employee’s Obligation to Cooperate. At any time during my employment with SOHU and thereafter upon the request of SOHU, I will execute all documents and perform all lawful acts that SOHU considers necessary or advisable to secure its rights hereunder and to carry out the intent of this Agreement. Without limiting the generality of the foregoing, I agree to render to SOHU or its nominee all reasonable assistance as may be required:     (a) In the prosecution or applications for letters patent, foreign and domestic, or re-issues, extensions and continuations thereof;     (b) In the prosecution or defense of interferences which may be declared involving any of said applications or patents;     (c) In any administrative proceeding or litigation in which SOHU may be involved relating to any Work Product; and     (d) In the execution of documents and the taking of all other lawful acts which SOHU considers necessary or advisable in creating and protecting its copyright, patent, trademark, trade secret and other proprietary rights in any Work Product. The reasonable out-of-pocket expenses incurred by me in rendering such assistance at the request of SOHU will be reimbursed by SOHU. If I am no longer an employee of SOHU at the time I render such assistance, SOHU will pay me a reasonable fee for my time. 7. Termination; Return of SOHU Property. Upon the termination of my employment with SOHU for any reason, or at any time upon SOHU’s request, I will return to SOHU all Work Product and Confidential Information and notes, memoranda, records, customer lists, proposals, business plans and other documents, computer software, materials, tools, equipment and other property in my possession or under my control, relating to any work done for SOHU, or otherwise belonging to SOHU, it being acknowledged that all such items are the sole property of SOHU. Further, before obtaining my final paycheck, I agree to sign a certificate stating the following: “Termination Certificate This is to certify that I do not have in my possession or custody, nor have I failed to return, any Work Product (as defined in the Employee Non-competitition, Non-solicitation, Confidential Information and Work Product Agreement between me and Sohu.com Inc. (“SOHU”)) or any notes, memoranda, records, customer lists, proposals, business plans or other documents or any computer software, materials, tools, equipment or other property (or copies of any of the foregoing) belonging to SOHU.” 8. General Provisions. (a) This Agreement contains the entire agreement between me and SOHU with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings related to the subject matter hereof, whether written or oral. This Agreement may not be modified except by written agreement signed by SOHU and me.   -16- -------------------------------------------------------------------------------- (b) This Agreement will be governed by and construed and enforced in accordance with, the laws of the State of Delaware, U.S.A. if the dispute is resolved therein, and in accordance with the laws of the People’s Republic of China (“China”) if the dispute is resolved therein or in any other jurisdiction other than the State of Delaware, in either case without giving effect to the conflicts of laws rules of such jurisdiction. I consent to jurisdiction and venue in any court in the State of Delaware or any other country having jurisdiction over me for the purposes of any action relating to or arising out of this Agreement or any breach or alleged breach thereof, and to service of process in any such action by certified or registered mail, return receipt requested. Without limiting the foregoing, I specifically consent to jurisdiction and venue in any court in China for the purposes of any action relating to or arising out of this Agreement or any breach or alleged breach thereof that occurs in whole or in part in China. (c) In the event that any provision of this Agreement will be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time, over too large a geographic area, over too great a range of activities, it will be interpreted to extend only over the maximum period of time, geographic area or range of activities as to which it may be enforceable. (d) If, after application of paragraph (c) above, any provision of this Agreement will be determined to be invalid, illegal or otherwise unenforceable by any court of competent jurisdiction, the validity, legality and enforceability of the other provisions of this Agreement will not be affected thereby. Any invalid, illegal or unenforceable provision of this Agreement will be severed, and after any such severance, all other provisions hereof will remain in full force and effect. (e) SOHU and I agree that either of us may waive or fail to enforce violations of any part of this Agreement without waiving the right in the future to insist on strict compliance with all or parts of this Agreement. (f) My obligations under this Agreement will survive the termination of my employment with SOHU regardless of the manner of or reasons for such termination, and regardless of whether such termination constitutes a breach of any other agreement I may have with SOHU. My obligations under this Agreement will be binding upon my heirs, executors and administrators, and the provisions of this Agreement will inure to the benefit of the successors and assigns of SOHU. (g) I agree and acknowledge that the rights and obligations set forth in this Agreement are of a unique and special nature and necessary to ensure the preservation, protection and continuity of SOHU’s business, employees, Confidential Information, and intellectual property rights. Accordingly, SOHU is without an adequate legal remedy in the event of my violation of any of the covenants set forth in this Agreement. I agree, therefore, that, in addition to all other rights and remedies, at law or in equity or otherwise, that may be available to SOHU, each of the covenants made by me under this Agreement shall be enforceable by injunction, specific performance or other equitable relief, without any requirement that SOHU have to post a bond or that SOHU have to prove any damages.   -17- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned employee and SOHU have executed this Employee Non-competition, Non-solicitation, Confidential Information and Work Product Agreement. Effective as of January 1, 2006 and signed on April 24, 2006   Signature of Employee:     Sohu.com Inc. /s/ Charles Zhang     By:   /s/ Carol Yu     Name:   Carol Yu Printed name of employee:     Title:   Chief Financial Officer Charles Zhang         -18-

  EXHIBIT 10.20 GRAN TIERRA ENERGY INC. FORM OF SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of June 20, 2006 and is by and among GRAN TIERRA ENERGY INC., a Nevada corporation, with its principal office at 300, 611-10th Avenue S.W. Floor, 610-8th Avenue S.W., Calgary, Alberta CANADA (the “Company”), and each investor listed on Schedule 1 hereto (each such investor individually, a “Purchaser” and, collectively, the “Purchasers”). WHEREAS, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, units of its securities at a purchase price of $1.50 per Unit, each “Unit” comprising one share of its authorized but unissued shares of common stock, $0.001 par value per share, of the Company (including any securities into which or for which such shares may be exchanged for, or converted into, pursuant to any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event the “Common Stock”), and a warrant (“Warrants”) to purchase one-half of a share of Common Stock at an exercise price equal to $0.875, in the form attached hereto as Exhibit A, in each case as are set forth on the signature page(s) attached hereto and executed by each such Purchaser, for an aggregate purchase price of up to $75,000,000 (the “Aggregate Proceeds”) on the terms and subject to the conditions set forth in this Agreement and the Subscription Agreement in the form attached to the Confidential Offering Memorandum dated as of June 1, 2006, as supplemented, and as executed by each Purchaser; and WHEREAS, prior to entering into this Agreement, the Company, Sanders Morris Harris, Inc. and Sterling Bank, as Escrow Agent (the “Escrow Agent”), have entered into an Escrow Agreement dated the date hereof and attached as Exhibit B (the “Escrow Agreement”), pursuant to which the Company has deposited any Aggregate Proceeds received by the Company into an escrow account (the “Escrow Account”) for release to the Company subject to the closing of the Argosy Acquisition; and WHEREAS, simultaneously with entering into this Agreement, the Company and the Purchasers are entering into that certain Registration Rights Agreement, dated as of the date hereof and attached as Exhibit C hereto (the “Registration Rights Agreement”), pursuant to which the Company shall register for resale the Shares (as defined below) on the terms set forth therein; NOW THEREFORE, in consideration of the mutual agreements, representations, warranties and covenants herein contained, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following respective meanings: (a) “Acquisitions” means the Argosy Acquisition and the acquisition of oil and gas interests and related assets from Golden Oil Corporation pursuant to the Farm In Agreement dated as of May 15, 2006. -------------------------------------------------------------------------------- (b) “Affiliate” means any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a Person, as such terms are used and construed under Rule 144 (as defined below). (c) “Argosy Acquisition” means the acquisition of (i) all of the limited partnership interests of Argosy Energy International, a Utah limited partnership (“Argosy”), (ii) all of the outstanding capital stock of Argosy Energy Corp., a Delaware corporation (“AEC”) and (iii) all of Crosby’s rights with respect to Crosby’s original purchase of interests in Argosy (collectively the “Argosy Interests”) pursuant to the Securities Purchase Agreement dated as of May 25, 2006 by and among the Company and Crosby Capital, L.L.C., a Texas limited liability company. (d) “Board” means the board of directors of the Company. (e) “Closing Date” means the date hereof. (f) “Engineer” has the meaning set forth in Section 3.17. (g) “Environmental Laws” has the meaning set forth in Section 3.14. (h) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and all of the rules and regulations promulgated thereunder. (i) “Exchangeable Shares” means the shares of Gran Tierra Goldstrike Inc., a subsidiary of the Company, which are exchangeable into shares of Common Stock of the Company. (j) “GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America. (k) “Majority Purchasers” has the meaning set forth in Section 8.11. (l) “Mandatory Effective Date” means the earlier of (i) the date that is one hundred twenty (120) days after the Closing Date or (ii) the date that the registration statement required to be filed by the Company under the Securities Act pursuant to the terms of the Registration Rights Agreement becomes effective. (m) “Material Adverse Effect” means any event, occurrence or development that has had, or that could reasonably be expected to have, individually or in the aggregate with other events, occurrences or developments, a material adverse effect on the assets, liabilities (contingent or otherwise), business, affairs, operations, prospects or condition (financial or otherwise) of the Company. (n) “Other Offerings” has the meaning set forth in Section 2.1. 2 -------------------------------------------------------------------------------- (o) “Person” (whether or not capitalized) means an individual, entity, partnership, limited liability company, corporation, association, trust, joint venture, unincorporated organization, and any government, governmental department or agency or political subdivision thereof. (p) “Placement Agent” means Sanders Morris Harris Inc. (q) “Reserve Reports” has the meaning set forth in Section 3.17. (r) “Rule 144” means Rule 144 promulgated under the Securities Act and any successor or substitute rule, law or provision. (s) “SEC” means the Securities and Exchange Commission. (t) “SEC Documents” has the meaning set forth in Section 3.7. (u) “Securities” means the Shares, the Warrants and Warrant Shares. (v) “Securities Act” means the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder. (w) “Shares” means the shares of Common Stock issued and sold by the Company to the Purchasers hereunder. (x) “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ SmallCap Market or the NASD OTC Bulletin Board on which the Common Stock is or will be listed or quoted for trading on the date in question.  (y) “Transaction Documents” means, collectively, this Agreement, the Registration Rights Agreement and the Warrant. (z) “Transfer Agent Instructions” means the Irrevocable Transfer Agent Instructions, in substantially the form of Exhibit E, executed by the Company and delivered to and acknowledged in writing by the Company’s transfer agent (aa) “Unit” has the meaning set forth in the recitals to this Agreement. (bb) “Unit Price” means $1.50 per Unit. (cc) “Warrants” shall have meaning set forth in the recitals to this Agreement. (dd) “Warrant Shares” means the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants.   3 -------------------------------------------------------------------------------- 2. Purchase and Sale of Shares and Warrants. 2.1 Purchase and Sale of Shares and Warrants. Subject to and upon the terms and conditions set forth in this Agreement, the Company agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees, severally and not jointly, (i) to purchase from the Company, at the Closing, the number of Units representing the number of Shares and Warrants to acquire Warrant Shares set forth opposite such Purchaser’s name on Schedule 1 hereto, at the Unit Price and (ii) to pay the purchase price set forth opposite such Purchaser’s name on Schedule 1 hereto. The Purchasers and the Company agree that the Company may sell to other investors Units at the Unit Price in offerings (the “Other Offerings”) concurrent with the sale by the Company to the Purchasers hereunder; provided, however, that the terms and agreements provided to such other investors (or any other investor) relating to the Other Offerings shall not be more favorable than the terms and agreements provided to the Purchasers in the Transaction Documents. The aggregate purchase price payable, severally and not jointly, by the Purchasers under this Agreement and all the other investors under the Other Offerings, to the Company, whether directly or through release of funds pursuant to the terms of the Escrow Agreement, for all of the Units shall be a minimum of $65,000,000 and a maximum of $75,000,000. 2.2 Closing. Subject to and upon the terms and conditions set forth in this Agreement, the closing of the transactions contemplated under this Agreement (the “Closing”) shall take place at 10:00 am (Eastern Time) at the offices of Andrews Kurth LLP, 450 Lexington Avenue, New York, NY 10017, on the Closing Date, or on such other date and at such time as may be agreed upon between the Purchasers, on the one hand, and the Company, on the other hand. At the Closing, the Company shall deliver to the Escrow Agent on behalf of each Purchaser, or at the direction of any Purchaser, to such Purchaser directly, a single stock certificate and a Warrant (or more, if reasonably requested by the Purchaser), registered in the name of such Purchaser or such Purchaser’s designee, representing the number of Shares and Warrants, respectively, purchased by such Purchaser against payment of the purchase price by wire transfer of immediately available funds to the Escrow Account designated by the Escrow Agent, or with the Company’s consent, directly to the Company. 2.3 Placement Agent’s Fee. Upon the release of funds from the Escrow Account in accordance with the Escrow Agreement, the Company shall pay to the Placement Agent a placement agent fee in connection with the transactions contemplated hereunder in the amount of seven percent (7%) Aggregate Proceeds, by wire transfer in accordance with the engagement letter by and among the Company and the Placement Agent. 3. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser, as of the date hereof and as of the Closing Date as follows: 3.1 Incorporation. Each of the Company and the Subsidiaries (as defined in Section 3.20 below) is a corporation or other entity duly organized, validly existing and in good standing under the laws of the State of Nevada (or such other applicable jurisdiction of incorporation or formation as is indicated on Schedule 3.20), and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or the character of the 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, would not result in a Material Adverse Effect. Each of the Company and the Subsidiaries has all requisite corporate power and authority to own its properties, to carry on its business as now conducted, to enter into the Transaction Documents to which it is a party and to carry out the transactions contemplated hereby and thereby. Neither the Company nor any of the Subsidiaries is in violation of any of the provisions of its Certificate of Incorporation (or other charter document) or By-laws. 4 -------------------------------------------------------------------------------- 3.2 Capitalization. Immediately prior to the consummation of the transactions to be effected at the Closing, the authorized capital stock of the Company consists of (a) 300,000,000 shares of Common Stock, of which 27,600,985 shares were issued and outstanding as of the date hereof and 16,984,124 shares of Common Stock are reserved for issuance upon the exercise of Exchangeable Shares, and (b) 1 share of special voting stock through which the holders of Exchangeable Shares may exercise their voting rights through a trustee and (c) 25,000,000 shares of Preferred Stock, of which no shares are issued and outstanding as of the date hereof. Immediately after the consummation of the transactions contemplated hereby, the authorized and outstanding capital stock of the Company shall be as set forth in the preceding sentence except that there shall be 77,600,985 shares of Common Stock issued and outstanding (assuming an aggregate $75,000,000 of Units issued to the Purchasers and all other investors as described in Section 2.1 and assuming there is no exercise of outstanding Exchangeable Shares or the Warrants issued to the Purchasers and all the other investors described in Section 2.1). After giving effect to the transactions contemplated hereby, all shares of the Company’s issued and outstanding capital stock have been duly authorized, are validly issued and outstanding, are fully paid and nonassessable, have been issued in compliance with all applicable securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and conform in all material respects to the description thereof contained in the SEC Documents (as defined in Section 3.7). Except as set forth in Schedule 3.2 to the Disclosure Schedule, there are no existing options, warrants, calls, puts, preemptive (or similar) rights, subscriptions or other rights, agreements, arrangements or commitments of any character obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of the capital stock of the Company or other equity interests in the Company or any securities convertible into or exchangeable for such shares of capital stock or other equity interests, including the Securities, and there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests. The issue and sale of the Securities will not obligate the Company to issue or sell, pursuant to any pre-emptive right or otherwise, shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. With respect to each subsidiary, (i) all of the issued and outstanding shares of the Subsidiary’s capital stock have been duly authorized, are validly issued and outstanding, are fully paid and nonassessable, have been issued in compliance with applicable securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and (ii) there are no outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of the Subsidiary’s capital stock or any such options, rights, convertible securities or obligations. There are no agreements of which the Company is aware, other than the Transaction Documents, relating to the voting of the Company’s voting securities or restrictions on the transfer of the Company’s capital stock. 5 -------------------------------------------------------------------------------- 3.3 Registration Rights. Except as set forth on Schedule 3.3 to the Disclosure Schedule, the Company has not granted or agreed to grant to any Person any right (including “piggy-back” and demand registration rights) to have any capital stock or other securities of the Company registered with the SEC or any other government authority. 3.4 Authorization. All corporate action on the part of the Company, its officers and directors and its stockholders necessary for the authorization, execution, delivery and performance of the Transaction Documents and the consummation of the transactions (including, without limitation, the sale and delivery of the Shares and Warrants and upon exercise of the Warrants, the issuance of the Warrant Shares) contemplated herein and therein has been taken. When executed and delivered by the Company, each of the Transaction Documents shall constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and by general equitable principles. The Company has all requisite corporate power and authority to enter into the Transaction Documents and to carry out and perform its obligations under their respective terms. 3.5 Valid Issuance of the Shares and the Warrant Shares. The Shares and Warrants have been duly authorized and will be validly issued, fully paid and nonassessable and not subject to any encumbrances, preemptive rights or any other similar contractual rights of the stockholders of the Company or any other Person. The Warrant Shares have been duly authorized and when issued and paid for in accordance with its terms will be validly issued, fully-paid and non-assessable and not subject to any encumbrances, preemptive rights or any other similar contractual rights of the stockholders of the Company or any other Person. The Company has reserved from its duly authorized capital stock the number of shares of Common Stock issuable upon execution of this Agreement and upon proper exercise of the Warrants. 3.6 Financial Statements. The Company has made available to the Purchasers true and complete copies of the audited consolidated balance sheet of the Company and the Subsidiaries as of December 31, 2005 (the “Balance Sheet”) and the related consolidated income statement, consolidated statement of cash flows and consolidated statement of stockholders’ equity of the Company for the twelve (12) months then ended. All of the financial statements described above are hereinafter referred to, collectively, as the “Financial Statements”. The Financial Statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods covered thereby, subject, to normal year-end adjustments (which individually and in the aggregate are not material) and to the absence of footnotes thereto, and present fairly, in all material respects, the financial position of the Company and the Subsidiaries and the results of operations and cash flows as of the date and for the periods indicated therein. The firm of Deloitte & Touche LLP, which has expressed its opinion with respect to the consolidated financial statements included in the Company’s Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2005, is an independent accountant as required by the Securities Act and the rules and regulations promulgated thereunder. 6 -------------------------------------------------------------------------------- 3.7 SEC Documents.  The Company has filed all reports (the “SEC Documents”) required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof and the Form 10-KSB, as amended, for the year ended December 31, 2005 and the Form 10-QSB for the three months ended March 31, 2006 on a timely basis or has timely filed for a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Documents, when filed, 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; provided, the Company has not received a final determination with respect to comments from the SEC to the Company’s 10-KSB/A for the year ended December 31, 2005 relating to the extent of financial disclosure required by Item 310(a) of Regulation S-B regarding the Company’s predecessor financial statements, but the Company and its independent auditor believe in good faith that the disclosure provided to date conforms with the requirements of the Exchange Act. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company is a party or to which the property or assets of the Company are subject are included as part of or specifically identified in the SEC Documents to the extent required by the rules and regulations of the SEC as in effect at the time of filing. The Company has prepared and filed with the SEC all filings and reports required by the Securities Act and the Exchange Act to make the Company’s filings and reports current in all respects. 3.8 Consents. Except for (a) the filing and effectiveness of any registration statement required to be filed by the Company under the Securities Act pursuant to the terms of the Registration Rights Agreement and (b) any required state “blue sky” law filings in connection with the transactions contemplated under the Transaction Documents, all consents, approvals, orders and authorizations required on the part of the Company in connection with the execution or delivery of, or the performance of the obligations under the Transaction Documents, and the consummation of the transactions contemplated herein and therein, have been obtained and will be effective as of the date hereof. The execution and delivery by the Company of the Transaction Documents, the consummation of the transactions contemplated herein and therein, and the issuance of the Securities, do not require the consent or approval of the stockholders of, or any lender to, the Company. 7 -------------------------------------------------------------------------------- 3.9 No Conflict; Compliance With Laws. (a) The execution, delivery and performance by the Company of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance of the Securities do not and will not (i) conflict with or violate any provision of the Certificate of Incorporation (or other charter documents) or By-laws of the Company or any of the Subsidiaries, (ii) breach, conflict with or result in any violation of or default (or an event that with notice or lapse of time or both would become a default) or cause the creation of any lien or encumbrance upon any assets of the Company under, or give rise to a right of termination, amendment, acceleration or cancellation (with or without notice or lapse of time, or both) of any obligation, contract, commitment, lease, agreement, mortgage, note, bond, indenture or other instrument or obligation to which the Company or any of the Subsidiaries is a party or by which they or any of their properties or assets are bound, except in each case to the extent such breach, conflict, violation, default, termination, amendment, acceleration or cancellation does not, and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (iii) breach, conflict with or result in any violation of or default (or an event that with notice or lapse of time or both could become a default) of any statute, law, rule, regulation, order, ordinance or restriction applicable to the Company, the Subsidiaries or any of their properties or assets, or any judgment, writ, injunction or decree of any court, judicial or quasi-judicial tribunal applicable to the Company, the Subsidiaries or any of their properties or assets, or (iv) require from the Company any notice to, declaration or filing with, or consent or approval of any governmental authority or other third party other than pursuant to federal or state securities or blue sky laws. (b) Neither the Company nor any of the Subsidiaries (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any of the Subsidiaries), nor has the Company or any of the Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties or assets is bound (whether or not such default or violation has been waived), or (ii) is in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as does not, and could not, reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (c) Neither the Company nor its Subsidiaries is conducting its business in violation of any applicable law, rule or regulation of the jurisdictions in which it is conducting its business, including, without limitation, any applicable Environmental Laws or regulations, except any violations which would not have a Material Adverse Effect. 3.10 Brokers or Finders. Except as provided in Section 2.3, neither the Company nor any of the Subsidiaries owes any fee to any broker or finder in connection with the transactions contemplated by the Transaction Documents, and neither the Company nor any of the Subsidiaries has incurred, or shall incur, directly or indirectly, any liability for any brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Transaction Documents, or any transaction contemplated hereby or thereby. 8 -------------------------------------------------------------------------------- 3.11 OTC Bulletin Board. The Company’s Common Stock is currently quoted on the OTC Bulletin Board. 3.12 No Actions. Except as described in the SEC Documents, there are no legal or governmental actions, suits or proceedings pending and, to the Company’s knowledge, there are no governmental or regulatory inquiries or investigations, nor are there any legal or governmental threatened actions, suits, claims, proceedings or investigations against or involving the Company or any of the Subsidiaries. 3.13 No Undisclosed Liabilities; Indebtedness. Since the date of the Balance Sheet, the Company and the Subsidiaries have incurred no liabilities or obligations, whether known or unknown, asserted or unasserted, fixed or contingent, accrued or unaccrued, matured or unmatured, liquidated or unliquidated, or otherwise, except for liabilities or obligations that, individually or in the aggregate, do not or would not reasonably be expected to have a Material Adverse Effect and other than liabilities and obligations arising in the ordinary course of business. Except for indebtedness reflected in the Balance Sheet, the Company has no indebtedness outstanding as of the date hereof. The Company is not in default with respect to any outstanding indebtedness or any instrument relating thereto. 3.14 Environmental. Except as disclosed in Schedule 3.14 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. 3.15 Contracts. There is no material contract or agreement required by the Exchange Act and the rules or regulations promulgated thereunder to be described in or filed as an exhibit to the SEC Documents that the Company was required to file with the SEC pursuant to the reporting requirements which is not described or filed therein as required. All contracts, agreements, instruments and other documents filed as an exhibit to the SEC Documents are legal, valid, and binding obligations and in full force and effect and are enforceable by the Company in accordance with their respective terms as of the date hereof, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and by general equitable principles. To the Company’s knowledge, as of the date hereof, neither the Company nor any other party is in breach of or default under any of such contracts, agreements, instruments or documents, except for such failures to be in full force and effect and such breaches or defaults that would not reasonably be expected to have a Material Adverse Effect. 9 -------------------------------------------------------------------------------- 3.16 Title to Assets. The Company and its Subsidiaries have (1) good and indefeasible title to all of their owned interests in the oil and gas properties described in the SEC Documents, (2) good and indefeasible title in fee simple to all other real property owned by the Company or any of its Subsidiaries and (3) good title to all personal property owned by the Company or any of its Subsidiaries, in each case, free and clear of all liens, encumbrances and defects, except (i) as described in Schedule 3.16 to the Disclosure Schedule, (ii) liens securing taxes and other governmental charges not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books, or inchoate and unperfected liens securing claims of materialmen, mechanics and similar persons, arising in the ordinary course of business for amounts not overdue or being diligently contested in good faith by appropriate proceedings, (iii) liens and encumbrances under oil and gas leases, options to lease, operating agreements, utilization and pooling agreements, participation and drilling concessions agreements and gas sales contracts, securing payment of amounts not yet due and payable and of a scope and nature customary in the oil and gas industry, (iv) liens, encumbrances and defects that do not, individually or in the aggregate, materially affect the value of such properties, taken as a whole, or materially interfere with the use made or proposed to be made of such properties, taken as a whole, by the Company or its Subsidiaries; except as described in Schedule 3.16 in the Disclosure Schedule, the leases, options to lease, drilling concessions or other arrangements held by the Company and its Subsidiaries reflect in all material respects the right of the Company and its Subsidiaries to explore the unexplored and undeveloped acreage described in the SEC Documents, and the care taken by the Company and its Subsidiaries with respect to acquiring or otherwise procuring such leases, options to lease, drilling concessions and other arrangements was generally consistent with standard industry practices for acquiring or procuring leases to explore acreage for hydrocarbons; and any real property and buildings held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such real property and buildings by the Company or its Subsidiaries with which the Company and the Subsidiaries are in compliance in all material respects. 3.17 Reserves. Gaffney, Cline and Associates (the “Engineer”), whose reserve evaluations are referenced or appear, as the case may be, in the SEC Documents were, as of December 31, 2005, and are, as of the date hereof, independent engineers with respect to the Company and its Subsidiaries; and the historical information underlying the estimates of the reserves of the Company and its Subsidiaries supplied by the Company to the Engineer for the purposes of preparing the reserve reports of the Company referenced in the SEC Documents (the “Reserve Reports”), including, without limitation, production volumes, sales prices for production, contractual pricing provisions under oil or gas sales or marketing contracts or under hedging arrangements, costs of operations and development, and working interest and net revenue information relating to the Company’s ownership interests in properties, was true and correct on the date that each such Reserve Reports was prepared in all material respects in accordance with customary industry practices. 10 -------------------------------------------------------------------------------- 3.18 Labor Relations. No labor or employment dispute exists or, to the knowledge of the Company, is imminent or threatened, with respect to any of the employees or consultants of the Company that has, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 3.19 Intellectual Property. The Company is the sole and exclusive owner of, or has the exclusive right to use, all right, title and interest in and to all material foreign and domestic patents, patent rights, trademarks, service marks, trade names, brands, copyrights (whether or not registered and, if applicable, including pending applications for registration) and other proprietary rights or information, owned or used by the Company (collectively, the “Rights”), and in and to each material invention, software, trade secret, and technology used by the Company or any of the Subsidiaries (the Rights and such other items, the “Intellectual Property”), and the Company owns and has the right to use the same, free and clear of any claim or conflict with the rights of others (subject to the provisions of any applicable license agreement). Except as set forth on Schedule 3.19 to the Disclosure Schedule, there have been no written claims made against the Company or any of the Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any of the Intellectual Property, and, to the Company’s knowledge, there are no reasonable grounds for any such claims. 3.20 Subsidiaries; Joint Ventures. Except for the subsidiaries listed on Schedule 3.20 to the Disclosure Schedule (the “Subsidiaries”), the Company has no subsidiaries and (i) does not otherwise own or control, directly or indirectly, any other Person and (ii) does not hold equity interests, directly or indirectly, in any other Person. Except as described in the SEC Documents or on Schedule 3.20, the Company is not a participant in any joint venture, partnership, or similar arrangement material to its business. 3.21 Taxes. The Company and each of the Subsidiaries has filed (or has had filed on its behalf), will timely file or will cause to be timely filed, or has timely filed for an extension of the time to file, all material Tax Returns (as defined below) required by applicable law to be filed by it or them prior to or as of the date hereof, and such Tax Returns are, or will be at the time of filing, true, correct and complete in all material respects. Each of the Company and the Subsidiaries has paid (or has had paid on its behalf) or, where payment is not yet due, has established (or has had established on its behalf and for its sole benefit and recourse) or will establish or cause to be established in accordance with United States generally accepted accounting principles on or before the date hereof an adequate accrual for the payment of, all material Taxes (as defined below) due with respect to any period ending prior to or as of the date hereof. “Taxes” shall mean any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, goods and services, license, value added, capital, net worth, payroll, profits, franchise, transfer and recording taxes, fees and charges, and any other taxes, assessment or similar charges imposed by the Internal Revenue Service or any taxing authority (whether state, county, local or foreign) (each, a “Taxing Authority”), including any interest, fines, penalties or additional amounts attributable to or imposed upon any such taxes or other assessments. “Tax Return” shall mean any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority, including information returns, any documents with respect to accompanying payments of estimated Taxes, or with respect to or accompanying requests for extensions of time in which to file any such return, report, document, declaration or other information. There are no claims or assessments pending against the Company or any of the Subsidiaries for any material alleged deficiency in any Tax, and neither the Company nor any of the Subsidiaries has been notified of any material proposed Tax claims or assessments against the Company or any of the Subsidiaries. No Tax Return of the Company or any of the Subsidiaries is or has been the subject of an examination by a Taxing Authority. Each of the Company and the Subsidiaries has withheld from each payment made to any of its past or present employees, officers and directors, and any other person, the amount of all material Taxes and other deductions required to be withheld therefrom and paid the same to the proper Taxing Authority within the time required by law. 11 -------------------------------------------------------------------------------- 3.22 Transfer Taxes. On the Closing Date, all stock transfer or other Taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to the Purchasers hereunder, will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been complied with. 3.23 Pensions and Benefits. (a) Schedule 3.23(a) to the Disclosure Schedule contains a true and complete list of each “employee benefit plan” within the meaning of Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including, without limitation, multiemployer plans within the meaning of Section 3(37) of ERISA, and all retirement, profit sharing, stock option, stock bonus, stock purchase, severance, fringe benefit, deferred compensation, and other employee benefit programs, plans, or arrangements, whether or not subject to ERISA, under which (i) any current or former directors, officers, employees or consultants of the Company has any present or future right to benefits and which are contributed to, sponsored by or maintained by the Company or any of the Subsidiaries, or (ii) the Company or any of the Subsidiaries has any present or future liability. All such programs, plans, or arrangements shall be collectively referred to as the “Company Plans.” Each Company Plan is included as part of or specifically identified in the SEC Documents to the extent required by the rules and regulations of the SEC as in effect at the time of filing. (b) (i) Each Company Plan has been established and administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended (the “Code”), and other applicable laws, rules and regulations; (ii) each Company Plan which is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and has received a favorable determination letter as to its qualification (or if maintained pursuant to a prototype form of instrument the sponsor thereof has received a favorable opinion letter as to its qualification), and to the Company’s knowledge nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification; and (iii) no Company Plan provides retiree health or life insurance benefits (whether or not insured), and neither the Company nor the Subsidiaries have any obligations to provide any such retiree benefits other than as required pursuant to Section 4980B of the Code or other applicable law. 12 -------------------------------------------------------------------------------- (c) No Company Plan is a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA) or a plan subject to the minimum funding requirements of Section 302 or ERISA or Section 412 of the Code or Title IV of ERISA, and neither the Company, the Subsidiaries, nor any member of their Controlled Group has any liability or obligation in respect of, any such multiemployer plan or plan. With respect to any Company Plan and to the Company’s knowledge, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or threatened, and (ii) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation, the Internal Revenue Service or other governmental agencies are pending, threatened or in progress. 3.24 Private Placement; Communications with Purchasers; Press Releases. (a) Assuming the correctness of the representations and warranties of the Purchasers set forth in Section 4 hereof, the offer, issuance, sale and delivery of the Securities to the Purchasers as contemplated hereby is exempt from the registration requirements of the Securities Act and the qualification or registration provisions of applicable state securities laws. (b) Neither the Company nor any person acting on the Company’s behalf has sold or offered to sell or solicited any offer to buy the Securities by means of any form of general solicitation or advertising. Neither the Company nor any of its Affiliates nor any person acting on the Company’s behalf has taken, directly or indirectly, at any time within the past six (6) months, and will not hereafter take, any action independent of the Placement Agent, to sell, offer for sale or solicit any offers to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the sale or issuance of the Securities, as contemplated hereby or (ii) cause the offering or issuance of the Securities pursuant to any of the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions. None of the Company or any of the Subsidiaries is a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980. No consent, license, permit, waiver, approval or authorization of, or designation, declaration, registration or filing with, the SEC or any state securities regulatory authority is required in connection with the offer, sale, issuance or delivery of the Securities other than the possible filing of Form D with the SEC. The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by this Agreement, the Registration Rights Agreement and the Escrow Agreement, other than as specified in this Agreement, the Registration Rights Agreement or the Escrow Agreement. (c) The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of material fact or omit 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 and when made, not misleading. 13 -------------------------------------------------------------------------------- 3.25 Material Changes. Except as set forth on Schedule 3.25 to the Disclosure Schedule, since the date of the Balance Sheet, the Company has conducted its business only in the ordinary course, consistent with past practice, and since such date there has not occurred: (i) a Material Adverse Effect; (ii) any amendments or changes in the charter documents or by-laws of the Company or the Subsidiaries; (iii) any: (A) incurrence, assumption or guarantee by the Company or the Subsidiaries of any debt for borrowed money other than (1) equipment leases made in the ordinary course of business, consistent with past practice and (2) any such incurrence, assumption or guarantee with respect to an amount of $50,000 or more that has not been disclosed in the SEC Documents; (B) issuance or sale of any securities convertible into or exchangeable for securities of the Company other than to directors, employees and consultants pursuant to existing equity compensation or stock purchase plans of the Company; (C) issuance or sale of options or other rights to acquire from the Company or the Subsidiaries, directly or indirectly, securities of the Company or any securities convertible into or exchangeable for any such securities, other than options issued to directors, employees and consultants in the ordinary course of business, consistent with past practice; (D) issuance or sale of any stock, bond or other corporate security other than to directors, employees and consultants pursuant to existing equity compensation or stock purchase plans of the Company; (E) acquisition of any assets, or sale, assignment or transfer of any of its intangible assets, except in the ordinary course of business, consistent with past practice, or cancellation of any debt or claim except in the ordinary course of business, consistent with past practice; (F) waiver of any right of substantial value whether or not in the ordinary course of business; (G) material change in officer compensation, except in the ordinary course of business and consistent with past practice; or (H) other commitment (contingent or otherwise) to do any of the foregoing; (iv) loss, destruction or damage to any property of the Company, whether or not insured; (v) any creation, sufferance or assumption by the Company or any of the Subsidiaries of any lien on any asset or any making of any loan, advance or capital contribution to or investment in any Person, in an aggregate amount which exceeds $50,000 outstanding at any time; (vi) any entry into, amendment of, relinquishment, termination or non-renewal by the Company or the Subsidiaries of any material contract, license, lease, transaction, commitment or other right or obligation, other than in the ordinary course of business, consistent with past practice; (vii) any transfer or grant of a right with respect to the Intellectual Property Rights owned or licensed by the Company or the Subsidiaries, except as among the Company and the Subsidiaries; or (viii) any commitment (contingent or otherwise) to do any of the foregoing. 3.26 Regulatory Permits. The Company and the Subsidiaries possess all certificates, approvals, authorizations and permits issued by the appropriate federal, state, local or foreign governmental or regulatory authorities necessary to conduct their businesses as described in the SEC Documents, except where the failure to possess such permits does not, and could not have, individually or in the aggregate, a Material Adverse Effect (the “Material Permits”), and all such permits, licenses, orders, franchises and other rights and privileges are in full force and effect and, to the knowledge of the Company, no suspension or cancellation of any of them is threatened, and none of such permits, licenses, orders, franchises or other rights and privileges will be affected by the consummation of the transactions contemplated by the Transaction Documents, and the Company has not received any written notice of proceedings relating to the revocation or modification of any Material Permits except as described in the SEC Documents. 14 -------------------------------------------------------------------------------- 3.27 Transactions with Affiliates and Employees. Except as set forth in the SEC Documents, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company, is presently a party to any transaction or agreement with the Company (other than for services as employees, officers and directors) exceeding $60,000, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed. 3.28 Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary for the business in which the Company and the Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew existing insurance coverage for itself and the Subsidiaries as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary or appropriate to continue business. 3.29 Solvency. Based on the consolidated financial condition of the Company and the Subsidiaries as of the date hereof, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known and contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted, including its capital needs taking into account the particular capital requirements of the business conducted by the Company, projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debts when such amounts are required to be paid. The Company has no present intention to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). 3.30 Sarbanes-Oxley Act. The Company is, and at the Closing Date will be, in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it at such time. 3.31 Internal Accounting Controls. Except as disclosed in the SEC Documents, 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, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorizations, (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, and (v) the Company is otherwise in compliance with the Securities Act, the Exchange Act and all other rules and regulations promulgated by the SEC and applicable to the Company, including such rules and regulations to implement the Sarbanes-Oxley Act of 2002, as amended. 15 -------------------------------------------------------------------------------- 3.32 Investment Company. The Company is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 3.33 Questionable Payments. Neither the Company nor, to the Company’s knowledge, any of its Subsidiaries or current or former stockholders, directors, officers, employees, agents or other persons acting on behalf of the Company, has on behalf of the Company or in connection with its businesses (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature. 3.34 Changes in Governmental or Political Climates. To the Company’s knowledge, there have not been any changes in laws and regulations, including those related to taxes, royalty rates, permitted production rates, import, export and use of products, and environmental protection, expropriation or reduction of entitlements to produce oil and natural gas, or refusal to extend exploration, production or development contracts, or any proposals for the foregoing, which would have a Material Adverse Effect on the Company in any of the locations where the Company conducts its business or in which the assets relating to Acquisitions are located or the business of the Acquisitions is conducted. 3.35 Price of Common Stock. The Company has not taken, and will not take any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Securities. 3.36 Acquisitions. The purchase agreements or other relevant transaction documents for each of the Acquisitions have been duly executed and are in full force and effect. No default has occurred or is continuing thereunder, and, to the best of the Company’s knowledge, all of the conditions precedent to the closing of the Acquisitions for each of the parties thereto can be satisfied promptly after the Closing Date with no material waiver granted.  3.37 Certain Registration Matters. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 4 of this Agreement, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers under the Transaction Documents. The Company is eligible to register its Common Stock for resale by the Purchasers under Form SB-2 promulgated under the Securities Act. Except as specified in Section 3.3 and except with respect to the Purchasers and the investors in Other Offerings contemplated by Section 2.1, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not been satisfied. 16 -------------------------------------------------------------------------------- 3.38 Listing Requirements. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, eligible for quotation of the Common Stock on a Trading Market. The issuance and sale of the Securities under the Transaction Documents does not contravene the rules and regulations of the Trading Market.   3.39 Disclosure. Neither the Company nor, to the Company’s knowledge, any other Person acting on its behalf and at the direction of the Company, has provided to any Purchaser or its agents or counsel any information that in the Company’s reasonable judgment, at the time such information was furnished, constitutes material, non-public information, except such information as may have been disclosed to certain Board members, who are affiliated with certain Purchasers, in their capacity as directors of the Company. On or before 9:00 a.m., Eastern Standard Time, on the first business day after the date hereof, the Company shall issue a press release announcing the execution of the Transaction Documents, and on or before 5:30 p.m., Eastern Standard Time, on the first business day after the date hereof, the Company shall file a Current Report on Form 8-K describing the material terms of the transactions contemplated by the Transaction Documents, and attaching as an exhibit to such Form 8-K a form of this Agreement. Other than with respect to certain Board members, who are affiliated with certain Purchasers, in their capacity as directors of the Company, or to Purchasers who have executed confidentiality agreements between such Purchaser and the Company, no Purchaser will to the Company’s knowledge be in possession of material, non-public information concerning the Company. The Company understands and confirms that each Purchaser will rely on the representations and covenants contained herein in effecting the transactions contemplated by the Transaction Documents, and in the securities of the Company after the Closing. All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Transaction Documents and the Schedules to this Agreement furnished by or on behalf of the Company, is true and correct and does not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or the Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 4. 17 -------------------------------------------------------------------------------- 4. Representations and Warranties of the Purchasers. Each Purchaser represents and warrants, severally (as to itself) and not jointly, to the Company as follows: 4.1 Authorization. All action on the part of such Purchaser and, if applicable, its officers, directors, managers, members, shareholders and/or partners necessary for the authorization, execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Escrow Agreement, and the consummation of the transactions contemplated herein and therein, has been taken. When executed and delivered, each of the Transaction Documents will constitute the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and by general equitable principles. Such Purchaser has all requisite corporate or limited partnership, as the case may be, power and authority to enter into each of the Transaction Documents, and to carry out and perform its obligations under the terms of hereof and thereof. 4.2 Purchase Entirely for Own Account. Such Purchaser certifies and represents to the Company that the Securities to be received by the Purchaser hereunder will be acquired for the Purchaser’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and the Purchaser has no present intention of selling, granting any participation in or otherwise distributing the same, in violation of the Securities Act. Such Purchaser is not a registered broker dealer or an entity engaged in the business of being a broker dealer. Such Purchaser and the Company acknowledge that nothing contained in this Section 4.2 shall be construed as a restriction or other limitation on such Purchaser’s ability to sell or hedge the Securities purchased hereunder at any time following the Closing Date other than for restrictions or limitations imposed by the Securities Act or applicable state securities laws. 4.3 Investor Status; Etc. Such Purchaser certifies and represents to the Company that it is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act and was not organized for the purpose of acquiring any of the Shares. Such Purchaser’s financial condition is such that it is able to bear the risk of holding the Shares for an indefinite period of time and the risk of loss of its entire investment. Such Purchaser has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of its investment in the Company. 4.4 Securities Not Registered. Such Purchaser understands that the Securities have not been registered under the Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act, and that the Securities must continue to be held by such Purchaser unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. Such Purchaser understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. 4.5 No Conflict. The execution and delivery of the Transaction Documents by such Purchaser, and the consummation of the transactions contemplated hereby and thereby, will not conflict with or result in any violation of or default by such Purchaser (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (i) any provision of the organizational documents of such Purchaser or (ii) any agreement or instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to such Purchaser. 18 -------------------------------------------------------------------------------- 4.6 Brokers. Such Purchaser has not retained, utilized or been represented by any broker or finder in connection with the transactions contemplated by this Agreement. 4.7 Consents. All consents, approvals, orders and authorizations required on the part of such Purchaser in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein by such Purchaser have been obtained and are effective as of the date hereof. 4.8 Disclosure of Information. Such Purchaser believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Shares. Such Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares and the business, properties, prospects and financial condition of the Company. 4.9 Short Sale. Such Purchaser represents that after the date that such Purchaser learned of the terms of this transaction and prior to the date hereof, neither it nor any Person over which the Purchaser has direct control, have made any net short sales of, or granted any option for the purchase of or entered into any hedging or similar transaction with the same economic effect as a net short sale, in the Common Stock. 5. Conditions Precedent. 5.1. Conditions to the Obligation of the Purchasers to Consummate the Closing. The obligation of each Purchaser to consummate the Closing and to purchase and pay for the Shares and Warrants to be purchased by it is subject to the satisfaction (or waiver by such Purchaser) of the following conditions precedent: (a) The representations and warranties of the Company contained herein shall be true and correct on and as of the date hereof and as of the Closing Date. The Company shall have performed or complied with all obligations and conditions herein required to be performed or complied with by the Company on or prior to the Closing Date. (b) There shall have been no material adverse change (actual or threatened) in the assets, liabilities (contingent or otherwise), affairs, business, operations, prospects, or condition (financial or otherwise) of the Company prior to the Closing Date. (c) There shall have been sold to Purchasers and to other investors Units for an aggregate purchase price of at least $65,000,000 and no more than $75,000,000. (d) No proceeding challenging the Transaction Documents, or the transactions contemplated hereby or thereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted before any court, arbitrator or governmental body, agency or official or shall be pending against or involving the Company. 19 -------------------------------------------------------------------------------- (e) The sale of the Securities to the Purchasers shall not be prohibited by any law, rule, governmental order or regulation. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any governmental or administrative agency or of or with any other Person with respect to any of the transactions contemplated hereby or under any Transaction Document (including, without limitation, all filings and approvals, if any, required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) shall have been duly obtained or made and shall be in full force and effect. (f) All instruments and corporate proceedings of the Company in connection with the transactions contemplated by the Transaction Documents shall be satisfactory in form and substance to such Purchaser, and such Purchaser shall have received copies (executed or certified, as may be appropriate) of all documents which any Purchaser may have reasonably requested in connection with such transactions. (g) Such Purchaser shall have received from McGuireWoods LLP, outside counsel to the Company, an opinion addressed to such Purchaser, dated the Closing Date and substantially in the form of Exhibit D hereto. (h) The Registration Rights Agreement shall have been duly executed and delivered to such Purchaser by the Company. Unless otherwise waived by the Company and such Purchaser, the Escrow Agreement shall have been duly executed and delivered to such Purchaser by the Company and the Escrow Agent. (i) Such Purchaser shall have received from the Company an original stock certificate evidencing the purchase of the Shares for the number of Shares of Common Stock set forth opposite such Purchaser’s name on Schedule 1 hereto and an original warrant evidencing the number of Warrant Shares set forth opposite such Purchaser’s name on Schedule 1 hereto. (j) The Company shall have delivered, in form and substance satisfactory to such Purchaser, a certificate dated the Closing Date and signed by the secretary or another appropriate executive officer of the Company, certifying (i) that attached copies of the Certificate of Incorporation, the By-Laws and resolutions of the Board approving the Transaction Documents and the transactions contemplated thereby, are all true, complete and correct and remain in full force and effect as of the date hereof and as of the Closing Date, and (ii) as to the incumbency and specimen signature of each officer of the Company executing the Transaction Documents and any other document delivered in connection herewith on behalf of the Company. (k) The Company shall deliver to such Purchaser, a certificate in form and substance satisfactory to such Purchaser, dated the Closing Date and signed by the Company’s chief executive officer, certifying that (i) the representations and warranties of the Company contained in Section 3 hereof are true and correct in all respects on the Closing Date and (ii) the Company has performed and complied with all of the agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Company on or before the Closing Date. 20 -------------------------------------------------------------------------------- (l) Such Purchaser shall have received duly executed Transfer Agent Instructions acknowledged by the Company’s transfer agent. (m) The purchase agreement for each of the Acquisitions shall have been duly executed and be in full force and effect as of the Closing Date, and no default shall have occurred and be continuing thereunder as of the Closing Date, and to the best of the Company’s knowledge, all of the conditions precedent to the Acquisitions for each of the parties thereto shall have been satisfied with no material waiver granted as of the Closing Date. (n) All Financial Statements of the Company and each of its Subsidiaries shall have been provided or made available to such Purchaser on or before the Closing Date. 5.2. Conditions to the Obligation of the Company to Consummate the Closing. The obligation of the Company to consummate the Closing and to issue and sell the Shares and Warrants to each Purchaser at the Closing is subject to the satisfaction of the following conditions precedent: (a) The representations and warranties of such Purchaser contained herein shall be true and correct in all respects on and as of the Closing Date. (b) The Registration Rights Agreement shall have been executed and delivered by the Purchasers. (c) Such Purchaser shall have performed all obligations and conditions herein required to be performed or complied with by such Purchaser on or prior to the Closing Date. (d) No proceeding challenging the Transaction Documents, or the transactions contemplated hereby or thereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted before any court, arbitrator or governmental body, agency or official or shall be pending against or involving such Purchaser. (e) The sale of the Securities by the Company shall not be prohibited by any law, rule, governmental order or regulation. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any governmental or administrative agency or of any other Person with respect to any of the transactions contemplated hereby by such Purchaser shall have been duly obtained or made and shall be in full force and effect. (f) All instruments and corporate proceedings in connection with the transactions contemplated by this Agreement to be consummated by such Purchaser at the Closing shall be satisfactory in form and substance to the Company, and the Company shall have received counterpart originals, or certified or other copies of all documents, including without limitation records of corporate or other proceedings, with respect to such Purchaser, which it may have reasonably requested in connection therewith. 21 -------------------------------------------------------------------------------- 6.  Certain Covenants and Agreements. 6.1. Transfer of Securities. (a) Other than as set forth in Section 6.1(b) below, each Purchaser agrees severally (as to itself only) and not jointly that it shall not sell, assign, pledge, transfer or otherwise dispose of or encumber any of the Shares or the Warrant Shares, except (i) pursuant to an effective registration statement under the Securities Act, (ii) to an Affiliate (so long as such Affiliate agrees to be bound by the terms and provisions of this Agreement as if, and to the fullest extent as, such Purchaser), or (iii) pursuant to an available exemption from registration under the Securities Act (including sales permitted pursuant to Rule 144) and applicable state securities laws and, if requested by the Company, upon delivery by such Purchaser of either an opinion of counsel of such Purchaser reasonably satisfactory to the Company to the effect that the proposed transfer is exempt from or does not require registration under the Securities Act and applicable state securities laws or a representation letter of such Purchaser reasonably satisfactory to the Company setting forth a factual basis for concluding that such proposed transfer is exempt from or does not require registration under the Securities Act and applicable state securities laws. Any transfer or purported transfer of the Shares or the Warrant Shares in violation of this Section 6.1 shall be void. The Company shall not register any transfer of the Shares in violation of this Section 6.1. The Company may, and may instruct any transfer agent for the Company, to place such stop transfer orders as may be required on the transfer books of the Company in order to ensure compliance with the provisions of this Section 6.1. (b) 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 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 applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. 22 -------------------------------------------------------------------------------- 6.2. Legends. (a) To the extent applicable, each certificate or other document evidencing the Shares and the Warrant Shares shall be endorsed with the legend set forth below, and each Purchaser covenants that, except to the extent such restrictions are waived by the Company, it shall not transfer the shares represented by any such certificate without complying with the restrictions on transfer described in this Agreement and the legends endorsed on such certificate (and a stop-transfer order may be placed against the Warrants): “THE SHARES REPRESENTED BY HIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE ISSUANCE TO THE HOLDER OF SHARES REPRESENTED BY HIS CERTIFICATE IS NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT. THE SHARES REPRESENTED BY HIS CERTIFICATE HAVE BEEN ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THEIR RESALE IS REGISTERED UNDER THE ACT, OR (2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.” The Purchaser further acknowledges and agrees that the Warrants shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against the Warrants): “THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THE RESALE HEREOF IS REGISTERED UNDER THE ACT, OR (2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.” (b) The legends set forth in Section 6.2(a) shall be removed from the certificates evidencing the Securities, (i) while a registration statement covering the resale of such Securities is effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144, (iii) if such Securities are eligible for sale under Rule 144(k) (and the holder of such Securities has submitted a written request for removal of the legend indicating that the holder has complied with the applicable provisions of Rule 144 or such judicial interpretation or pronouncement), 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) (and the holder of such Securities has submitted a written request for removal of the legend indicating that such legend is not required under applicable requirements of the Securities Act (including such judicial interpretations and pronouncements). The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly upon the occurrence of any of the events in clauses (i), (ii), (iii) or (iv) above to effect the removal of the legend on certificates evidencing the Securities and shall also cause its counsel to issue a “blanket” legal opinion to the Company’s transfer agent promptly after the effective date of any registration statement covering the resale of the Securities, if required by the Company’s transfer agent, to allow sales without restriction pursuant to an effective registration statement. The Company agrees that at such time as such legend is no longer required under this Section 6.2(b), it will, no later than three (3) business days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing the Securities issued with a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all restrictive and other legends; provided that in the case of removal of the legend for reasons set forth in clause (iii) above, the holder of such Securities has submitted a written request for removal of the legend indicating that the holder has complied with the applicable provisions of Rule 144. 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. 23 -------------------------------------------------------------------------------- (c) If the Company shall fail for any reason or for no reason to remove the legends set forth in this Section 6.2 within three (3) Business Days following the delivery by a holder to the Company or the Company’s transfer agent of a certificate representing the Securities issued with a restrictive legend, and if on or after such Business Day the holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder of shares of Common Stock issuable upon such exercise that the holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the holder’s request and in the holder’s discretion, either (i) pay cash to the holder in an amount equal to the holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the holder a certificate or certificates representing such shares of Common Stock and pay cash to the holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing bid price of the Common Stock on the date of exercise. 6.3 Publicity. Except to the extent required by applicable laws, rules, regulations or stock exchange requirements or this Agreement, neither (i) the Company, the Subsidiaries or any of their Affiliates nor (ii) any Purchaser or any of its Affiliates shall, without the written consent of the other, make any public announcement or issue any press release with respect to the transactions contemplated by this Agreement. Other than as provided in this Agreement, in no event will either (i) the Company, the Subsidiaries or any of their Affiliates or (ii) any Purchaser or any of its Affiliates make any public announcement or issue any press release with respect to the transactions contemplated by this Agreement without consulting with the other party, to the extent feasible, as to the content of such public announcement or press release. 6.4 Material, Nonpublic Information. Except as required by law or pursuant to an effective confidentiality agreement between the Company and a Purchaser, the Company and its directors, officers, employees and agents shall not provide any such Purchaser with any material non-public information regarding the Company or any of the Subsidiaries at any time after the Closing, except such information as may be required to be disclosed to certain Board members, who are affiliated with certain Purchasers, in their capacity as directors of the Company. In the event of a breach of the foregoing covenant following the Mandatory Effective Date, or in the event that Company is legally required to make certain disclosures to any Purchaser (and does so) following the Mandatory Effective Date, then in addition to any other remedy provided in the Transaction Documents or in equity or at law, each Purchaser to whom information has been disclosed (whether as a result of breach or as required by law) may request, in writing, that the Company promptly (but in no event more than five (5) business days after the date of such writing) publicly disclose, by press release, SEC filing, or otherwise, an appropriate summary of the information that, in such Purchaser’s reasonable judgment, constitutes the then material non-public information. After such five (5) business-day period, the Purchaser(s) who was or were in receipt of such material non-public information shall be automatically authorized to make all of the information, or any portion thereof, available to the public generally, without incurring any liability to the Company for such disclosure. 24 -------------------------------------------------------------------------------- 6.5 Filing of Information. 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 pursuant to all applicable securities laws, including the Exchange Act for the two (2) year period following the Closing Date. At any time if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and make publicly available in accordance with paragraph (c) of Rule 144 such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Shares may reasonably request to satisfy the provisions of Rule 144 applicable to the issuer of securities relating to transactions for the sale of securities pursuant to Rule 144. 6.6 Additional Issuance. The Company shall not issue any capital stock or other securities in connection with the raising of additional financing or capital until all of the Shares and the Warrant Shares have been registered for resale pursuant to an effective registration statement and otherwise in accordance with the terms set forth in the Registration Rights Agreement; provided; however, that the foregoing shall not prohibit the Company from issuing shares of Common Stock or securities convertible into or exercisable for Common Stock: (i) Units at the Unit Price to investors as contemplated by and in accordance with Section 2.1 in concurrent private placements (for the avoidance of doubt, the aggregate purchase price of any and all issuances pursuant to this Section 6.6(i) and Section 2.1 shall not exceed $75,000,000); (ii) upon conversion of the Warrants or other securities issuable upon conversion of securities outstanding on the date hereof, (iii) to employees, consultants, officers or directors of the Company pursuant to stock option, stock purchase or stock bonus plans or agreements or other stock incentive plans or arrangements approved by the Board, which are in existence as of the date hereof, (iv) pursuant to the acquisitions currently contemplated by the Company as of the date of this Agreement, of the business entities or properties of Argosy Energy International, Companía General de Combustibles and Golden Oil Corporation, provided that any and all such issuances shall not exceed 3,000,000 shares of capital stock or other securities, (v) pursuant to other acquisitions of other business entities or business segment of any such entities by the Company by merger, purchase of substantially all the assets or other reorganization or corporate partnering agreement if such issuance is approved by the Board and by the prior written consent of the Majority Purchasers, (vi) in connection with any stock split, stock dividend or recapitalization of the Company, and (vii) in connection with lease lines, bank loans, corporate partnering or other similar transactions, provided such issuances described in this clause (vii) are not primarily for the purpose of equity financing and are approved by the Board. 25 -------------------------------------------------------------------------------- 6.7 Use of Proceeds. The Company covenants and agrees that all of the proceeds from the sale of the Shares and Warrants, which shall initially be delivered into the Escrow Account in accordance with the Escrow Agreement, or otherwise delivered by a Purchaser to the Company, on the Closing Date shall be used by the Company to (i) fund each of the Acquisitions, including the Argosy Acquisition the closing of which shall be a condition to release of funds under the Escrow Agreement, (ii) potential acquisitions and (iii) for general working capital purposes. 6.8 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 Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers. 6.9 Reservation of Common Stock for Issuance; Listing of Shares. The Company agrees to reserve from its duly authorized capital stock the total number of shares of Common Stock issuable upon execution of this Agreement and upon the exercise of the Warrants. The Company agrees that at any time, if and when its shares of Common Stock are listed on The American Stock Exchange, that it will use reasonable efforts to promptly list and qualify the Shares and the Warrant Shares for trading on The American Stock Exchange. 6.10 Required Approvals. As promptly as practicable after the date of this Agreement, the Company shall make, or cause to be made, all filings with any governmental or administrative agency or any other Person necessary to consummate the transactions contemplated hereby. 7. Indemnification. 7.1 By the Company. The Company agrees to indemnify, defend and hold harmless each Purchaser and its Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (collectively, the “Purchaser Indemnitees”) to the fullest extent permitted by law from and against any and all claims, losses, liabilities, damages, deficiencies, judgments, assessments, fines, settlements, costs or expenses (including interest, penalties and reasonable fees, disbursements and other charges of counsel) (collectively, “Losses”) based upon, arising out of or otherwise in respect of any breach by the Company of any representation, warranty, covenant or agreement of the Company contained in the Transaction Documents, or for any Losses claimed by the Company’s stockholders, the Placement Agent or any other broker or placement agent. 26 -------------------------------------------------------------------------------- 7.2 Claims. All claims for indemnification by a Purchaser Indemnitee pursuant to this Section 7 shall be made as follows: (a) If a Purchaser Indemnitee has incurred or suffered Losses for which it is entitled to indemnification under this Section 7, then such Purchaser Indemnitee shall give prompt written notice of such claim (a “Claim Notice”) to the Company. Each Claim Notice shall state the amount of claimed Losses (the “Claimed Amount”), if known, and the basis for such claim. (b) Within 30 days after delivery of a Claim Notice, the Company (the “Indemnifying Party”) shall provide to each Purchaser Indemnitee (the “Indemnified Party”), a written response (the “Response Notice”) in which the Indemnifying Party shall: (i) agree that all of the Claimed Amount is owed to the Indemnified Party, (ii) agree that part, but not all, of the Claimed Amount (the “Agreed Amount”) is owed to the Indemnified Party, or (iii) contest that any of the Claimed Amount is owed to the Indemnified Party. The Indemnifying Party may contest the payment of all or a portion of the Claimed Amount only based upon a good faith belief that all or such portion of the Claimed Amount does not constitute Losses for which the Indemnified Party is entitled to indemnification under this Section 7. If no Response Notice is delivered by the Indemnifying Party within such 30-day period, then the Indemnifying Party shall be deemed to have agreed that all of the Claimed Amount is owed to the Indemnified Party. (c) If the Indemnifying Party in the Response Notice agrees (or is deemed to have agreed) that all of the Claimed Amount is owed to the Indemnified Party, then the Indemnifying Party shall owe to the Indemnified Party an amount equal to the Claimed Amount to be paid in the manner set forth in this Section 8. If the Indemnifying Party in the Response Notice agrees that part, but not all, of the Claimed Amount is owed to the Indemnified Party, then the Indemnifying Party shall owe to the Indemnified Party an amount equal to the agreed amount set forth in such Response Notice to be paid in the manner set forth in this Section 8. The parties agree that the foregoing shall not be deemed to provide that the Indemnifying Party is entitled to make a binding determination regarding any disputed amounts owed to an Indemnified Party, unless such Indemnified Party accepts and agrees to such determination, and both the Indemnified Party and Indemnifying Party shall retain all rights and remedies available to such party hereunder. (d) No delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any actual prejudice caused by or arising out of such delay. 7.3. Payment of Claims. An Indemnifying Party shall make payment of any portion of any Claimed Amount that such Indemnifying Party has agreed in a Response Notice that it owes to an Indemnified Party, or that such Indemnifying Party is deemed to have agreed it owes to such Indemnifying Party, said payment to be made within thirty (30) days after such Response Notice is delivered by such Indemnifying Party or should have been delivered by such Indemnifying Party, as the case may be. 27 -------------------------------------------------------------------------------- 7.4. Limitations. (a) Time for Claims. No Indemnifying Party will be liable for any Losses hereunder arising out of a breach of representation or warranty unless a written claim for indemnification is given by the Indemnified Party to the Indemnifying Party on or prior to the third anniversary of the date on which the registration statement covering the resale of the Shares initially became effective. (b) Maximum Amount. Notwithstanding anything contained herein to the contrary, no Indemnifying Party will be liable for any Losses to any Purchaser Indemnitee hereunder in excess of the portion of the aggregate purchase price hereunder actually paid by the related Purchaser. 7.5 Applicability; Exclusivity. Notwithstanding any term to the contrary in this Section 7, the indemnification and contribution provisions of the Registration Rights Agreement shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. The parties hereby acknowledge and agree that in addition to remedies of the parties hereto in respect of any and all claims relating to any breach or purported breach of any representation, warranty, covenant or agreement that is contained in this Agreement pursuant to the indemnification provisions of this Section 8, all parties shall always retain the right to pursue and obtain injunctive relief in addition to any other rights or remedies hereunder. 8. Miscellaneous Provisions. 8.1 Rights Cumulative. Each and all of the various rights, powers and remedies of the parties shall be considered to be cumulative with and in addition to any other rights, powers and remedies which such parties may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy shall neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such party. 8.2 Pronouns. All pronouns or any variation thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. 8.3 Notices. (a) 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 if sent by certified or registered mail (return receipt requested), overnight courier or telecopy (with confirmation of receipt), or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder. An electronic communication (“Electronic Notice”) shall be deemed written notice for purposes of this Section 8.3 if sent with return receipt requested to the electronic mail address specified by the receiving party either in this Section 8.3 or on Schedule 1 hereto. Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives verification of receipt by the receiving party.   28 -------------------------------------------------------------------------------- (b) All correspondence to the Company shall be addressed as follows: Gran Tierra Energy Inc. 300, 611-10th Avenue S.W. Floor, 610-8th Avenue S.W. Calgary, Alberta CANADA Attention: James Hart, Chief Financial Officer Facsimile: (403) 265-3242 [email protected] with copies to: McGuireWoods LLP 3145 Avenue of the Americas New York, NY 10105 Attention: Louis W. Zehil, Esq. Telecopier: (212) 548-2175 [email protected] (c) All correspondence to the Purchasers shall be addressed pursuant to the contact information set forth on Schedule 1 attached hereto. (d) Any entity may change the address to which correspondence to it is to be addressed by notification as provided for herein. 8.4 Captions. The captions and paragraph headings of this Agreement are solely for the convenience of reference and shall not affect its interpretation. 8.5 Severability. Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties hereto. 8.6 Governing Law. This Agreement shall be governed by and construed in accordance with the internal and substantive laws of the State of New York and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction. 8.7 Consent to Jurisdiction; Venue. Each party hereby irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Agreement shall be brought in a state court located in New York, New York; (ii) consents to the jurisdiction of any such court in any suit, action or proceeding; and (iii) waives any objection which such party may have to the laying of venue of any such suit, action or proceeding in any such court. 29 -------------------------------------------------------------------------------- 8.8 Agent for Service. Each of the parties hereto irrevocably consents to the appointment of CT Corporation for the service of process, pleading, notices or other papers with respect to the Company. 8.9 Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement. 8.10 Expenses. The Company and the Purchasers shall be responsible for their respective expenses (including, without limitation, their respective fees and expenses of their counsel) incurred by them in connection with the negotiation and execution of, and closing under, this Agreement except that the Company shall be obligated to pay or reimburse the legal fees and expenses of one counsel to the lead Purchasers, not in excess of $25,000. 8.11 Assignment. The rights and obligations of any party hereto shall inure to the benefit of and shall be binding upon the successors and permitted assigns of such party. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of Purchasers who hold a majority of the outstanding Shares (the “Majority Purchasers”). Each Purchaser may assign or transfer any or all of its rights under this Agreement to any Person provided that such assignee or transferee agrees in writing to be bound, with respect to the transferred Shares, Warrants or Warrant Shares, by the provisions hereof that apply to such assigning or transferring Purchaser; whereupon such assignee or transferee shall be deemed to be a “Purchaser” for all purposes of this Agreement. 8.12 Survival. The respective representations and warranties given by the parties hereto shall survive the Closing Date and the consummation of the transactions contemplated herein, without regard to any investigation made by any party. The respective covenants and agreements agreed to by a party hereto shall survive the Closing Date and the consummation of the transactions contemplated herein in accordance with their respective terms and conditions. 8.13 Entire Agreement. This Agreement, together with the Subscription Agreement executed by each Purchaser, constitutes the entire agreement between the parties hereto respecting the subject matter hereof and supersedes all prior agreements, negotiations, understandings, representations and statements respecting the subject matter hereof, whether written or oral. 8.14 Amendments. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provisions of this Agreement shall be effective only if made or given in writing and signed by the Company and the Majority Purchasers; provided that any amendment, supplement, modification or waiver that is materially and disproportionately adverse to any particular Purchaser (as compared to all Purchasers as a group) shall require the consent of such Purchaser. 30 -------------------------------------------------------------------------------- 8.15 No Third Party Rights. This Agreement is intended solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any Person (including, without limitation, any stockholder or debt holder of the Company) other than the parties hereto; provided, that each of the Purchaser Indemnitees that are not Purchasers are entitled to all rights and benefits as third party beneficiaries of Article 7 of this Agreement. 8.16 Independent Nature of Purchaser’s Obligations and Rights. The obligations of the Purchasers 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 the Transaction Documents. Nothing contained herein, 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 by the Transaction Documents, including a "group" (as that term is used in Section 13(d) of the 1934 Act) in negotiating and entering into this Agreement or purchasing the Common Stock and the Warrants or acquiring, disposing of or voting any of the Common Stock or the shares of Common Stock issuable upon the exercise of the Warrants.  The Company hereby confirms that it understands and agrees that the Purchasers are not acting as part of any such group. Each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. 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 be necessary for any other Purchaser to be joined as an additional party to any proceeding for such purpose. 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.   8.17 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. The parties hereto confirm that any facsimile copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof. 8.18 Waiver of Jury Trial. Each of the Company and the Purchasers hereby waives any right to a trial by jury in any action, lawsuit or proceeding to enforce or defend any right under this Agreement or any amendment, instrument, document or agreement delivered or to be delivered in connection with this Agreement and agrees that any action, lawsuit or proceeding will be tried before a court and not before a jury. [Signature Pages Follow] 31 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement under seal as of the day and year first above written.           GRAN TIERRA ENERGY INC.               By:       -------------------------------------------------------------------------------- Dana Coffield   President and Chief Executive Officer   32 --------------------------------------------------------------------------------         PURCHASERS:                     -------------------------------------------------------------------------------- Purchaser Signature                                                

  Exhibit 10.1 INFINITY ENERGY RESOURCES, INC. 2006 EQUITY INCENTIVE PLAN FORM OF NONQUALIFIED STOCK OPTION AGREEMENT      This Nonqualified Stock Option Agreement (the “Agreement”), made as of the ___day of ___, 200___, by and between Infinity Energy Resources, Inc., a corporation duly formed and existing under the laws of Delaware (the “Company”), and ___(the “Participant”).      WHEREAS, the Company desires to encourage and enable the Participant to acquire a proprietary interest in the Company through the ownership of the Company’s common stock, par value US$0.0001 per share (the “Common Stock”) pursuant to the terms and conditions of the 2006 Equity Incentive Plan (the “Plan”) and this Agreement. Such ownership will provide the Participant with a more direct stake in the future of the Company and encourage the Participant to remain with the Company and/or its Affiliates, as applicable.      NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties agree as follows:      1. DEFINITIONS. For purposes of this Agreement, all capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Plan.      2. GRANT OF OPTION. The Company hereby grants to the Participant a Nonqualified Stock Option (the “Option”) to purchase ___Shares at the exercise price (the “Exercise Price”) of $  per share, subject to the terms and conditions of this Agreement and the Plan.      3. OPTION TERM. The Option granted hereby shall expire on ___, 201___(the “Expiration Date”), unless sooner terminated or modified under the provisions of this Agreement or the Plan. Except as otherwise set forth herein, the Option may not be exercised after the Expiration Date.      4. VESTING. The Option shall vest as follows:       No. of Options   Vesting Date 100%   On the one year anniversary of the grant date   --------------------------------------------------------------------------------   5. EMPLOYMENT TERMINATION: DEATH; DISABILITY; RETIREMENT; CAUSE.      (a) If the services of the Participant are terminated for any reason other than death, disability, retirement, Change in Control, or cause (in each case as defined below), the portion of this Option to purchase Common Stock that is not vested on the date of such termination of service shall terminate and be forfeited on such date of termination; however, the vested portion of this Option shall be exercisable by the Participant at any time on or prior to the earlier of (i) the Expiration Date or (ii) the three month anniversary of the date of such termination of service. Any portion of this Option not exercised within the period described in the preceding sentence, for whatever reason, shall terminate.      (b) In the event of the death or disability (as defined in Section 6(f) of the Plan) of the Participant, the unvested portion of this Option shall immediately terminate and be forfeited, and the vested portion of the Option on such date shall be exercisable at any time on or prior to the 12 month anniversary of such date by the beneficiary designated by the Participant for such purpose (the “Designated Beneficiary”) or if no Designated Beneficiary shall be appointed or if the Designated Beneficiary shall predecease the Participant, by the Participant’s personal representatives, heirs or legatees. Any portion of the Option not exercised within the period described in the preceding sentence, for whatever reason, shall terminate.      (c) In the event of the retirement of the Participant pursuant to Section 6(e) of the Plan, this Option shall be exercisable by such Participant at any time on or prior to the earlier of (i) the stated expiration date of the Option, or (ii) the three month anniversary of the date of such retirement.      (d) In the event the service of the Participant is terminated for cause as defined in Section 6(i) of the Plan, this Option (including any vested portion) shall be forfeited as of the date of termination.      6. CHANGE IN CONTROL. In the event of a Change in Control, the Company shall give the Participant notice thereof and this Option, whether or not currently vested and exercisable, shall become immediately vested and exercisable immediately prior to the effective date of the Change in Control, and the Board shall have the power and discretion to provide alternatives regarding the terms and conditions for the exercise of, or modification of, this Option in accordance with the Plan.      “Change in Control” as used in this Agreement shall mean the first to occur of the following events specified in (i), (ii), (iii), (iv), (v) or (vi) (but no event other than the specified events): (i) any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding voting securities (other than (x) the Company, (y) any subsidiary of the Company, (z) one or more employee benefit plans maintained by the Company), or (xx) any noteholders or warrantholders under the Securities Purchase Agreement dated as of January 13, 2005 among Infinity, Inc., the 2 --------------------------------------------------------------------------------   predecessor of the Company, and HFTP Investment L.L.C., AG Domestic Convertibles, L.P. and AG Offshore Convertibles Ltd., as further amended, supplemented and modified (the “Promethean Purchase Agreement”)); (ii) any noteholders or warrantholders under the Promethean Purchase Agreement, whether individually or as a group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) become the owner, directly or indirectly, of outstanding voting securities (including voting securities acquired on conversion of notes or exercise of warrants) of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding voting securities; (iii) three or more Directors of the Company, whose election or nomination for election is not approved by a majority of the applicable Incumbent Board, are elected within any single twelve month period to serve on the Board; (iv) members of the applicable Incumbent Board cease to constitute a majority of the Board; (v) the consummation of a merger or consolidation of the Company with or into any other corporation or entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization own less than 50% of the outstanding voting securities of the surviving entity (or its parent) following the consolidation, merger or reorganization or (vi) the consummation of a sale, lease or other disposition of all or substantially all of the assets of the Company. For purposes of this Section, the terms “person” and “beneficial owner” shall have the meanings set forth in Rule 13d-3 of the Exchange Act and in the regulations promulgated thereunder. For purposes of this paragraph, “Incumbent Board” shall mean (i) members of the Board of Directors of the Company as of the date hereof, to the extent that they continue to serve as members of the Board, and (ii) any individual who becomes a member of the Board after the date hereof, if such individual’s election or nomination for election as a Director was approved by a vote of at least seventy-five percent (75%) of the then applicable Incumbent Board.      7. NON-ASSIGNABILITY. The Option granted hereby and any right arising thereunder may not be transferred, assigned, pledged or hypothecated (whether by operation of law or otherwise), except by will or the applicable laws of descent and distribution, and the Option and any right arising thereunder shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Option not specifically permitted herein or in the Plan shall be null and void and without effect. An Option may be exercised solely by the Participant during his or her lifetime, or following his or her death pursuant to Section 5(b) hereof.      8. MODE OF EXERCISE. The Option may be exercised in whole or in part. Common Stock purchased upon the exercise of the Option shall be paid for in full at the time of such purchase. Such payment shall be made in cash or by wire transfer in immediately available funds in either event denominated in U.S. dollars. Upon receipt of notice of exercise and payment in accordance with procedures to be established by the Board, the Company or its agent shall deliver to the person exercising the Option (or his or her designee) a certificate for such Common Stock. 3 --------------------------------------------------------------------------------        9. RECAPITALIZATION. The number of shares of Common Stock covered by this Option and the exercise price shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock as set forth in the Plan; provided, however, that any fractional shares resulting from any such adjustment shall be eliminated. The Board may also make any other changes, including changes in the classes of securities available, to the extent it is deemed necessary or desirable to preserve the intended benefits of the Plan for the Company and the Participants in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction. Notwithstanding any other provision of the Plan or this Agreement, the Board may cause the Option granted hereunder to be canceled in consideration of a cash payment or alternative stock award made to the holder of such canceled Option equal in value to the fair market value of such canceled Option.      10. PLAN CONTROLLING. This Agreement is intended to conform in all respects with the requirements of the Plan. Inconsistencies between the requirements of this Agreement and the Plan shall be resolved according to the terms of the Plan. The Participant acknowledges receipt of a copy of the Plan.      11. RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant shall not have any rights as a stockholder with respect to any Common Stock subject to the Option prior to the date on which he is recorded as the holder of such Common Stock on the records of the Company.      12. WITHHOLDING TAXES. The Company shall have the right to require Participants or their beneficiaries or legal representatives to remit to the Company an amount sufficient to satisfy any United States federal, state and local withholding tax requirements, including upon the grant, vesting or exercise of this Option. Whenever payments under the Plan or this Agreement are to be made to any Participant in cash, such payments shall be net of any amounts sufficient to satisfy all applicable taxes, including without limitation, all applicable United States federal, state and local withholding tax requirements to be withheld or submitted by the Company concerning such payments. The Board may, in its sole discretion, permit a Participant to satisfy his or her tax withholding obligation either by (i) surrendering Common Stock owned by the Participant or (ii) having the Company withhold from Common Stock otherwise deliverable to the Participant. Common Stock surrendered or withheld shall be valued at its Fair Market Value as of the date on which income is required to be recognized for income tax purposes.      13. NO LIABILITY OF BOARD COMMITTEE MEMBERS. No member of the Board or any Committee or their designees shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Board or a Committee nor for any mistake of judgment made in good faith. 4 --------------------------------------------------------------------------------        14. GOVERNING LAW. This Agreement and all rights arising hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the Delaware.      NEITHER THE PLAN NOR THIS AGREEMENT SHALL BE CONSTRUED AS GIVING THE PARTICIPANT THE RIGHT TO BE RETAINED IN THE EMPLOY OR SERVICE OF THE COMPANY OR ANY AFFILIATE THEREOF, NOR SHALL THEY INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY OR ANY AFFILIATE THEREOF, AS APPLICABLE, TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE AT ANY TIME WITH OR WITHOUT CAUSE. * * * * *      Executed as of the day and year first above written.             INFINITY ENERGY RESOURCES, INC.       By:           Name:           Title:                     PARTICIPANT       By:           Name:                 5

EXHIBIT 10.28.3 THIRD AMENDMENT THIS THIRD AMENDMENT, dated as of February 28, 2006 (this "Third Amendment"), to the Existing Credit Agreement referred to below is among GLOBAL SIGNAL OPERATING PARTNERSHIP, a Delaware limited partnership (the "Borrower"), and the Lenders parties hereto. W I T N E S S E T H: WHEREAS, the Borrower, the lenders from time to time party thereto (the "Lenders") and Bank of America, N.A. ("Bank of America"), as L/C Issuer and as administrative agent (in such capacity, the "Administrative Agent"), are parties to the Second Amended and Restated Credit Agreement, dated as of April 15, 2005 (as amended, supplemented, amended and restated or otherwise modified prior to the date hereof, the "Existing Credit Agreement"); WHEREAS, the Borrower has requested that the Lenders amend the Existing Credit Agreement in certain respects as more specifically set forth herein; and WHEREAS, the Lenders have agreed, subject to the terms and conditions set forth herein, to amend the Existing Credit Agreement as more specifically set forth herein (the Existing Credit Agreement, as amended by this Third Amendment, being referred to as the "Credit Agreement"); NOW, THEREFORE, in consideration of the agreements herein contained, and for other valuable consideration the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows. 1.    Defined Terms.    Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as therein defined. 2.    Amendments to the Existing Credit Agreement (a)    Definitions. (i)    Section 1.01 of the Existing Credit Agreement is hereby amended by adding the following definitions in appropriate alphabetical order: "Permitted Securitization II" means any transaction that may be entered into by Global Acquisitions, Global Acquisitions II, Pinnacle Towers and each of their subsidiaries pursuant to which they securitize or otherwise finance their respective Towers or Tower Properties and any assets related thereto in a rated term transaction; provided that there shall be no recourse under such transaction to the Borrower or any other Subsidiary of the Borrower. (ii)    Section 1.01 of the Existing Credit Agreement is hereby amended by deleting in its entirety the definition of "Excluded Subsidiary" contained therein and substituting therefor the following: "Excluded Subsidiary" means each of Global Signal Holdings I LLC, Global Signal Holdings II LLC, Global Signal Holdings III LLC, Global Signal Holdings IV LLC, Global Signal Holdings V LLC, Global Signal Services LLC, Towers Finco LLC, Towers Finco II LLC, Towers Finco III LLC, Pinnacle Towers, Global Acquisitions, Global Acquisitions II and each of their respective Subsidiaries. "Excluded Subsidiaries" shall mean, collectively, each Excluded Subsidiary. 3.    Representations and Warranties.    In order to induce the Lenders to execute and deliver this Third Amendment, the Borrower hereby represents and warrants to each Lender and the Administrative Agent, as follows: -------------------------------------------------------------------------------- (a)    the representations and warranties set forth in Article V of the Credit Agreement, and in each other Loan Document, are true and correct in all material respects on and as of the date hereof and on and as of the Third Amendment Effective Date (as hereinafter defined), except to the extent that any such statement expressly relates to an earlier date (in which case such statement was true and correct on and as of such earlier date); and (b)    no Default or Event of Default has occurred and is continuing. 4.    Effectiveness.    This Third Amendment shall become effective only upon the first date upon which each of the following conditions shall have been satisfied (such date, the "Third Amendment Effective Date"): (a)    receipt by the Administrative Agent of duly executed counterparts of this Third Amendment which, when taken together, bear the signatures of the Borrower, the Required Lenders and the acknowledgment of the Administrative Agent; and (b)    payment of all expenses required pursuant to Section 6 of this Third Amendment. 5.    Continuing Effect of the Existing Credit Agreement.    Except as expressly set forth herein, the amendments provided herein shall not by implication or otherwise limit, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Existing Credit Agreement or any other Loan Document, nor shall they constitute a waiver of any Event of Default, nor shall they alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Existing Credit Agreement or any other Loan Document. Each of the amendments provided herein shall apply and be effective only with respect to the provisions of the Existing Credit Agreement specifically referred to by such amendments. Except as expressly amended herein, the Existing Credit Agreement and the other Loan Documents shall continue in full force and effect in accordance with the provisions thereof. As used in the Existing Credit Agreement, the terms "Agreement", "herein", "hereinafter", "hereunder", "hereto" and words of similar import shall mean, from and after the date hereof, the Credit Agreement. 6.    Expenses.    The Borrower shall pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and the Lenders in connection with the preparation, negotiation, execution, delivery and enforcement of this Third Amendment. 7.    Counterparts.    This Third Amendment may be executed by the parties hereto in any number of separate counterparts (including telecopied counterparts), each of which shall be deemed to be an original, and all of which taken together shall be deemed to constitute one and the same instrument. 8.    GOVERNING LAW.    THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned has caused this Third Amendment to be duly executed and delivered by its proper and duly authorized officer as of the day and year first written above. [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif]   [spacer.gif] GLOBAL SIGNAL OPERATING PARTNERSHIP, L.P., as Borrower   [spacer.gif] By:   Global Signal GP LLC, its Managing General Partner   [spacer.gif] By: [spacer.gif] /s/ Jeffrey A. Klopf   [spacer.gif] Name: Jeffrey A. Klopf   [spacer.gif] Title:   Executive Vice President, General Counsel and Secretary [spacer.gif] [spacer.gif] LENDERS: [spacer.gif] BANK OF AMERICA, N.A. [spacer.gif] By: /s/ Todd Shipley [spacer.gif] Name: Todd Shipley [spacer.gif] Title: Senior Vice President [spacer.gif] MORGAN STANLEY ASSET FUNDING INC., [spacer.gif] By: /s/ Barbara Isaacman [spacer.gif] Name: Barbara Isaacman [spacer.gif] Title: VP ACKNOWLEDGED AND ACCEPTED: BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Todd Shipley Name: Todd Shipley Title: Senior Vice President --------------------------------------------------------------------------------

Exhibit 10.22   JOINDER   TSG Holdings Corp.   Joinder   To the Securities Holders Agreement   and   Registration Rights Agreement   TSG Holdings Corp. 11311 McCormick Road Suite 260 Hunt Valley, MD  21031-1437   Gentlemen and Ladies:   In connection with the undersigned’s receipt from the estate of David T. Merchant of 53.191 shares of Common Stock and 4.46809 shares of Series A 10% Cumulative Compounding Preferred Stock of TSG Holdings Corp., a Delaware corporation (the “Company”), which are represented by Certificate No. C30 and Certificate No. AP30, respectively (together the “Shares”), the undersigned hereby represents and warrants to, and agrees and covenants with, you as follows:   1.             BY THIS INSTRUMENT THE UNDERSIGNED SHALL BE BOUND BY THE TERMS AND CONDITIONS OF THE SECURITIES HOLDERS AGREEMENT, DATED AS AUGUST 21, 2003 (THE “SECURITIES HOLDERS AGREEMENT”), BY AND AMONG THE COMPANY, BRUCKMANN, ROSSER, SHERRILL & CO. II, L.P., A DELAWARE LIMITED PARTNERSHIP (“BRS”), ING FURMAN SELZ INVESTORS III L.P., A DELAWARE LIMITED PARTNERSHIP (“ING FURMAN SELZ”), ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD., A BERMUDA CORPORATION (“ING BARINGS GLOBAL”), ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC, A DELAWARE LIMITED LIABILITY COMPANY (“ING BARINGS U.S.) AND THE OTHER SIGNATORIES THERETO. THE UNDERSIGNED HEREBY AGREES THAT IT SHALL BE A “PERMITTED TRANSFEREE” UNDER THE TERMS OF THE SECURITIES HOLDERS AGREEMENT, AND SHALL TAKE THE SHARES SUBJECT TO AND BE FULLY BOUND BY THE TERMS OF THE SECURITIES HOLDERS AGREEMENT WITH THE SAME EFFECT AS IF IT WERE A “MANAGEMENT INVESTOR” AS SUCH TERM IS DEFINED THEREIN. THE UNDERSIGNED FURTHER AGREES THAT THE SHARES SHALL CONTINUE TO BE CONSIDERED “MANAGEMENT SECURITIES” FOR PURPOSES OF THE SECURITIES HOLDERS AGREEMENT, AND WILLIAM P. WALTERS SHALL BE CONSIDERED THE MANAGEMENT INVESTOR WITH RESPECT TO SUCH MANAGEMENT SECURITIES.   2.             BY THIS INSTRUMENT THE UNDERSIGNED ALSO SHALL BE BOUND BY THE TERMS AND CONDITIONS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF AUGUST 21, 2003 BY AND AMONG THE COMPANY, BRS, ING FURMAN SELZ, ING BARINGS GLOBAL, ING BARINGS U.S., AND THE OTHER SIGNATORIES THERETO (THE “REGISTRATION RIGHTS AGREEMENT,” AND TOGETHER WITH THE SECURITIES HOLDERS AGREEMENT, THE “AGREEMENTS”). THE UNDERSIGNED HEREBY AGREES THAT IT SHALL TAKE THE   --------------------------------------------------------------------------------   SHARES SUBJECT TO AND BE FULLY BOUND BY THE TERMS OF THE REGISTRATION RIGHTS AGREEMENT WITH THE SAME EFFECT AS IF IT WERE A “MANAGEMENT INVESTOR” AS SUCH TERM IS DEFINED THEREIN. THE UNDERSIGNED FURTHER AGREES THAT THE SHARES SHALL BY DEEMED TO BE “REGISTRABLE SECURITIES” FOR PURPOSES OF THE REGISTRATION RIGHTS AGREEMENT, AND THE UNDERSIGNED SHALL BE DEEMED TO BE A HOLDER OF “REGISTRABLE SECURITIES” FOR PURPOSES THEREOF.   3.             THE UNDERSIGNED HAS READ AND UNDERSTANDS EACH OF THE PROVISIONS OF EACH OF THE AGREEMENTS.   4.             THE UNDERSIGNED HAS FULL LEGAL RIGHT, POWER AND AUTHORITY TO ENTER INTO THIS JOINDER AND TO PERFORM ITS OBLIGATIONS HEREUNDER WITHOUT THE NEED FOR THE CONSENT OF ANY OTHER PERSON.   5.             THIS JOINDER HAS BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED AND CONSTITUTES THE VALID AND BINDING OBLIGATION ENFORCEABLE AGAINST THE UNDERSIGNED IN ACCORDANCE WITH THE TERMS HEREOF.   6.             THE SHARES ARE BEING ACQUIRED BY THE UNDERSIGNED SOLELY FOR ITS OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO ANY FURTHER DISTRIBUTION THEREOF THAT WOULD VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. THE UNDERSIGNED WILL NOT DISTRIBUTE THE SHARES IN VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE SECURITIES LAWS OF ANY STATE.   7.             THE UNDERSIGNED UNDERSTANDS THAT THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR REGISTERED FOR RESALE UNDER THE SECURITIES LAWS OF ANY STATE AND MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS OR BECOMES AVAILABLE.   8.             THE UNDERSIGNED AGREES THAT THE CERTIFICATES REPRESENTING THE SHARES SHALL BEAR THE FOLLOWING LEGENDS OR SIMILAR LEGENDS:   THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.   THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF A SECURITIES HOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, AS AMENDED FROM TIME TO TIME (THE “SECURITIES HOLDERS AGREEMENT”), A COPY OF WHICH AGREEMENT IS ON FILE AT   2 --------------------------------------------------------------------------------   THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE OR OTHERWISE DISPOSABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.   9.             IN ADDITION TO THE LEGENDS REQUIRED BY SECTION 8 ABOVE, THE FOLLOWING LEGEND SHALL APPEAR ON CERTIFICATES REPRESENTING MANAGEMENT SECURITIES (AS DEFINED IN THE SECURITIES HOLDERS AGREEMENT), PROVIDED, THAT THE COMPANY’S FAILURE TO CAUSE CERTIFICATES REPRESENTING MANAGEMENT SECURITIES TO BEAR SUCH LEGEND SHALL NOT AFFECT THE COMPANY’S PURCHASE OPTION DESCRIBED IN SECTION 4.3 THEREIN:   THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A PURCHASE OPTION OF THE COMPANY APPLICABLE TO “MANAGEMENT SECURITIES” AS DESCRIBED IN THE SECURITIES HOLDERS AGREEMENT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.   10.           THE UNDERSIGNED AGREES THAT A NOTATION WILL BE MADE IN THE APPROPRIATE TRANSFER RECORDS OF THE COMPANY WITH RESPECT TO THE RESTRICTIONS ON TRANSFER OF THE SHARES REQUIRED UNDER OR PURSUANT TO THE AGREEMENTS.   11.           THE UNDERSIGNED HAS EXECUTED THIS JOINDER AND DECLARE THAT THE INFORMATION CONTAINED HEREIN IS CURRENT, COMPLETE AND ACCURATE AND MAY BE RELIED UPON BY THE COMPANY.     Very truly yours,            /s/ William P. Walters     William P. Walters         Dated: August 3, 2004           Agreed and Accepted:       TSG HOLDINGS CORP.           By:   /s/ Robert M. Jakobe       Name: Robert M. Jakobe     Title: Chief Financial Officer     3 --------------------------------------------------------------------------------

Exhibit 10.12 MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH TECHNOLOGY LICENSE CONTRACT Article 1.00 - Preliminary Provisions. 1.01 DATE. The effective date of this contract is June 1, 1997. 1.02 PARTIES. There are two parties to this contract. They are: (a) MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH, a Minnesota charitable corporation, located at 200 First Street SW, Rochester, Minnesota 55905-0001 (called "MAYO" in this contract), and (b) MARCO-HI-TECH J.V. Ltd. (called the "COMPANY" in this contract). 1.03 PURPOSE OF CONTRACT. Certain inventions have been made in connection with MAYO's research, patient care, and education programs. By assignment of the inventions from the inventors, MAYO owns certain patent-rights. Through an agreement with the University of Pittsburgh, Mayo has certain exclusive rights to license patents assigned to the University of Pittsburgh. MAYO intends to grant licenses to use its and the University of Pittsburgh's patent rights for the development of products, processes, and methods for public use and benefit. The COMPANY intends to develop marketable products, processes, and methods for public use and benefit within the Territory described in this contract, by using the Licensed Product. Both parties acknowledge that MAYO has carefully selected the COMPANY because of the COMPANY's unique characteristics which make the COMPANY especially suitable as a licensee of the invention. The COMPANY enters this licensing contract with MAYO for use of the Licensed Product and licensed patent, on an exclusive basis, subject only: (a) to MAYO's right to make, have made, and use the Licensed Product and Licensed Patent on a royalty-free basis within its. and its Affiliates' own programs; and (b) to the rights, if any, of the United States government. The parties believe that the only commerciallypractical way of developing products and processes for public use and benefit using the Licensed Invention is an exclusive licensing arrangement. Article 2.00 - Definitions. 2.01 LICENSED PATENT means U.S. patent numbers 5,547,960; 5,104,880; 5,106,979; and 4,929,731 and any continuations now exisitng or in process. 2.02 AFFILIATE means a legal entity controlled by, or controlling, another legal entity, or which is an Affiliate of an Affiliate, or an Affiliate of an Affiliate of an Affiliate. "Control" means direct or indirect beneficial ownership of at least fifty (50) percent of the voting stock of a corporation; direct or indirect, ownership of at least fifty (50) percent of the income of a legal entity; or possession of at least fifty-(50) percent of the voting rights of the members of a nonprofit or nonstock corporation. MAYO's Affiliates include, but are not limited to: Mayo Foundation; Rochester Methodist Hospital; Saint Marys Hospital; Mayo Clinic Jacksonville, Florida; St. Luke's Hospital, Jacksonville, Florida; Mayo Clinic Scottsdale, Arizona; Memorial Hospital-North, Scottsdale, Arizona; Mayo Regional Practices, P.C., Decorah, Iowa; and Mayo Regional Practices of Wisconsin, Ltd. 2.03 FIELD OF USE means medicine. 2.04 LICENSE QUARTER begins on the date in Section 1.01 of this contract, and thereafter begins on the first day of each January, April, July, and October during the term of this contract. 2.05 LICENSE YEAR begins on the date in Section 1.01 of this contract, and thereafter begins on the first day of each January during the term of this contract. -Page 1 of 9- 2.06 MATERIAL BREACH means breaches of this contract which are specified in this contract as being material breaches, and in addition any breach of this contract which the non-breaching party in the exercise of its good-faith discretion determines is so injurious to the relationship between the parties that this contract should be liable to immediate Termination. 2.07 MAYO INFORMATION means all information embodied in the Licensed Product, or expressly marked, labeled, referenced in writing, or otherwise designated by MAYO as confidential, which is disclosed to the COMPANY by MAYO, relating in any way to MAYO's markets, customers, patents, inventions, products, procedures, designs, plans, organization, employees, or business in general, but not including: (a) information which, before disclosure becomes part of the public domain through no action or fault of the COMPANY; or (b) information which the COMPANY can show by sufficient proof was in its possession before disclosure by MAYO to the COMPANY and was not acquired, directly or indirectly, from MAYO; or (c) information which was received by the COMPANY from a third party having a legal right to transmit such information. 2.08 NET SALES means the value collected or owed for the Licensed Product shipped by the COMPANY, less sales or excise or use taxes shown on the face of the invoice; less credits for defective or returned Licensed Products; and less all regular trade and discount allowances. 2.9 TERMINATION of this contract means the ending, expiration, rescission, or any other discontinuation of this contract for any reason whatsoever. 2.10 TERRITORY means worldwide. 2.11 NATURAL PRODUCT means Huperzine A derived from a natural source such as, but not limited to, Huperzia sellata and/or any analogues of Huperzine A who's production, synthesis, or structure does not infringe on a claim of the Licensed Patent. 2.12 LICENSED PRODUCT means any product that is covered by a claim of a Licensed Patent. Article 3.00 - Grant of Rights. 3.01 GRANT. Subject only to the exceptions described in Section 1.03 of this contract, MAYO grants to the COMPANY an exclusive license under the Licensed Patent to make, have made, use, and sell the Licensed Product in the Territory within the Field of Use, according to the terms of this contract. 3.02 PURCHASE. MAYO may, at its sole option, purchase the Licensed Product and/or Natural Product in any reasonable quantity at 30% lower than the best wholesale price from the COMPANY for use and resale in its own, wholly owned pharmacies. 3.03 CONFIDENTIALITY. The COMPANY acknowledges that all MAYO Information is confidential and proprietary to MAYO. The COMPANY agrees not to use any MAYO Information during the term of this contract, and for three (3) years after the Termination of this contract, for any purpose otherr than as permitted or required under this contract. The COMPANY also agrees not to disclose or to provide any MAYO Information to any third party, and to take all reasonable measures to prevent any such disclosure by its employees, agents, contractors, or consultants during the term of this contract, and for three (3) years after its Termination. -Page 2 of 9- (a) At MAYO's request, the COMPANY shall cooperate, to a reasonable level, with MAYO, except financially, in any legal actions taken by MAYO to protect its rights in the Licensed Invention and in the MAYO Information. (b) Any Violation of the COMPANY's obligations stated in this Section 3.03 is a Material Breach of this contract. Article 4.00 - Consideration and Royalties. 4.01 CONSIDERATION. Promptly upon execution of this contract, the COMPANY shall pay MAYO an up-front royalty in the amount of eighty-two thousand five hundred dollars ($82,500.00) as consideration for entering into the contract. This initial royalty is nonrefundable and is not an advance against any royalties otherwise due under this contract. 4.02 ROYALTIES. The COMPANY shall pay MAYO a royalty according to the following: (a) Five percent (5%) of the Net Sales of any Licensed Product sold by the COMPANY in the Territory. (b) One percent (1%) of the Net Sales of any Natural Product sold by the COMPANY in the Territory during the period between the effective date of this agreement. and May 29, 2007. The royalties due under this Section 4.02 are payable as described in Section 5.01. Beginning in the year, COMPANY receives FDA approval for a Natural Product or Licensed Product, if the total royalties in any single License Year do not equal or exceed the minimum annual royalty for that License Year as indicated in this Section 4.02, then the COMPANY shall pay MAYO the difference between the amount paid in royalties for that License Year and the minimum annual royalty for that License Year. It is a Material Breach of this contract if such payment is not received by MAYO on or before 1 February following the end of the License Year to which such payment applies. Minimum annual royalty $300,000.00 4.03 MILESTONE ROYALTIES. The COMPANY will pay MAYO a milestone royalty in the amount set forth below, no later than thirty (30) days after the occurrence of each corresponding event designated below. Milestone Event Milestone Royalty --------------- ----------------- FDA approval of an IND for each natural $25,000.00 product or product that infringes on patent 4,929,731 or 5,106,979 -and any product that is covered by the claims of patents 5,547,960; 5,104,880 Start of Phase III Clinical Trials for $200,000.00 each natural product or product that infringes on patent 4,929,731 or 5,106,979 and any product that is covered by the claims of patents 5,547,960; 5,104,880 Filing of NDA Clinical Trials for each $300,000.00 natural product or product that infringes on patent 4,929,731 or 5,106,979 and any product that is covered by the claims of patents 5 547 960; 5 i 0ri H0, FDA approval of a NDA for each natural $2,700,000.00 product or product that infringes on patent 4,929,731 or 5,106,979 and any product that is covered by the claims of patents 5,547,960; 5,104,880 -Page 3 of 9- 4.04 LICENSED MAINTENANCE ROYALTY. The COMPANY will pay MAYO ten thousand dollars ($10,000.00) on or before December 31 of each year until such time as COMPANY obtains FDA approval for either a Natural Product or Licensed Product. 4.05 OPTION. COMPANY shall have the option to license any patents that issue as a result of continuations, continuations-in-part, divisional or foreign applications filed based on the Licensed Patent Said option will expire 120 days after COMPANY is notified that patents have issued, unless payment of fifteen thousand dollars ($15,000.00) for each issued patent is not received. Upon receipt of payment, MAYO and COMPANY will amend the definition of Licensed Patent, (section 2.01 of this agreement) to include the newly issued patent. 4.06 TAXES. The COMPANY is responsible for all taxes (other than net income taxes), duties, import deposits, assessments, and other governmental charges, however designated, which are now or hereafter will be imposed by any authority in or for the Territory, (a) by reason of the performance by MAYO of its obligations under this contract, or the payment of any amounts by the COMPANY to MAYO under this contract; (b) based on the Licensed Invention or use of the Licensed Invention; or (c) which relate to the import of the Licensed Invention into the Territory. 4.07 NO DEDUCTIONS. All payments to be made by the COMPANY to MAYO under this contract represent net amounts MAYO is entitled to receive, and shall not be subject to any deductions or offsets for any reason whatsoever. If such payments become subject to taxes, duties, assessments, or fees of any kind levied in the Territory, such payments from the COMPANY shall be increased to the extent that MAYO actually receives the net amounts due under this contract. 4.08 U.S. CURRENCY. All payments to MAYO under this contract shall be made by draft drawn on a United States bank, and payable in United States dollars. Article 5.00 - Accounting and Reports. 5.01 PAYMENT. The COMPANY will deliver to MAYO on or before the following dates: 1 February, 1 May, 1 August, and 1 November, a written report stating Net Sales during the preceding License Quarter on which royalties are to be based, or upon written or verbal request from MAYO, a written report stating the status of development of the Licensed Invention, and of preparations to market the Licensed Invention if marketing has not yet begun. Each such report shall be accompanied by the royalty payment due for such License Quarter, as provided in Section 4.02. 5.02 ACCOUNTING. The COMPANY shall keep complete, true, and accurate books of accounts and records for the purpose of showing the derivation of all royalties payable to MAYO under this contract. Such books and records shall be kept at the COMPANY's principal place of business for at least three (3) years after the end of the License Year to which they pertain, and shall be open at all reasonable times for inspection by a representative of MAYO for verification of royalty statements or compliance. with other aspects of this contract. The MAYO representative shall treat as confidential all relevant matters and shall be a person or firm reasonably acceptable to the COMPANY. MAYO may specify that its representative shall be an independent Certified Public Accountant. If any inspection indicates the royalty payments due MAYO have been undercalculated by the COMPANY by the lesser of either: (a) ten (10) or more percent, or (b) ten thousand dollars ($10,000,00), for any License Year, then the COMPANY shall promptly reimburse MAYO for all costs incurred in connection with the inspection. Failure to reimburse MAYO in such an instance, upon MAYO's demand is a Material Breach of this contract. Article 6.00 - Warranties and Indemnification. 6.01 USE OF NAME AND LOGO. The COMPANY shall not use publicly for publicity, promotion, or otherwise, any logo, name, trade name, service mark, or trademark of MAYO or its Affiliates, including, but not limited to, the terms "Mayo®," "Mayo Clinic®," or any simulation, abbreviation, or adaptation of the -Page 4 of 9- same, or the name of any MAYO employee or agent, without MAYO's prior, written, express consent. MAYO may withhold such consent in MAYO's absolute discretion. The licensee shall not register nor attempt to register in any jurisdiction in the world any trademark or servicemark that includes the word "MAYO" in any language or alphabet, or that includes any word or symbol confusingly similar to any of MAYO's marks, nor shall licensee use any such word or mark in commerce anywhere in the world without MAYO's prior, express, written consent. Violation of this Section 6.01 is a Material Breach of this contract, entitling MAYO to appropriate equitable or legal relief. 6.02 MAYO PATENTS. Except as expressly provided in this contract, nothing shall be construed as: (a) a warranty or representation by MAYO as to the validity or scope of any patents contained in the Licensed Product; (b) an obligation to bring or to prosecute actions against third parties for infringement of patent; or (c) conferring by implication, estoppel, or otherwise any patents of MAYO. 6.03 NO WARRANTIES. MAYO HAS NOT MADE AND PRESENTLY MAKES NO PROMISES, GUARANTEES, REPRESENTATIONS OR WARRANTIES OF ANY NATURE, DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, REGARDING THE MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, SUITABILITY, DURABILITY, CONDITION, QUALITY, OR ANY OTHER CHARACTERISTIC OF THE LICENSED PRODUCT. THE COMPANY TAKES THE LICENSED PRODUCT "AS IS," "WITH ALL FAULTS," AND "WITH ALL DEFECTS," AND EXPRESSLY WAIVES ALL RIGHTS TO MAKE ANY CLAIM WHATSOEVER AGAINST MAYO FOR MISREPRESENTATION OR FOR BREACH OF PROMISE, GUARANTEE, OR WARRANTY OF ANY KIND RELATING TO THE LICENSED PRODUCT. 6.04 INDEMNIFICATION. The COMPANY shall defend, indemnify, and hold harmless MAYO and MAYO's Affiliates from all liability, demands, damages, expenses, losses, fees (including attorneys' fees) and settlements, for death, personal injury, illness, or property damage arising out of: (a) use by the COMPANY of inventions or information furnished under this contract; and (b) use, sale, or other disposition of Licensed Product by the COMPANY or its transferees. As used in Sections 6.04 (a) and (b), and 6.05, MAYO and its Affiliates include the trustees, officers, agents, and employees of MAYO and its Affiliates, and the COMPANY includes not only its Affiliates' as defined in this contract, but also any of its contractors and subcontractors. The COMPANY shall, during the term of this contract, carry occurrence-based liability insurance with policy limits of at least five million dollars ($5,000,000.00). In addition, such policy shall name MAYO as an additional-named insured. 6.05 WAIVER OF SUBROGATION. The COMPANY expressly waives any right of subrogation that it may have against MAYO resulting from any claim, demand, liability, judgment, settlement, costs, fees (including attorneys' fees), and expenses for which the COMPANY has agreed to indemnify MAYO and its Affiliates or hold MAYO and its Affiliates harmless under Section 6.04 of this contract. 6.06 ADDITIONAL WAIVERS. THE COMPANY AGREES THAT MAYO SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN FURNISHING PRODUCTS OR SERVICES, OR A-NY OTHER PERFORMANCE UNDER THIS CONTRACT, UNLESS RESULTING FROM MAYO'S NEGLIGENCE OR WILFUL AND WANTON MISCONDUCT. IN NO EVENT SHALL MAYO'S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL LOSSES OR DAMAGES, EVEN IF MAYO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO CASE SHALL MAYO'S LIABILITY FOR DAMAGES OF ANY TYPE EXCEED THE TOTAL ROYALTIES WHICH HAVE ACTUALLY BEEN PAID TO MAYO BY THE COMPANY AS OF THE DATE OF FILING OF THE ACTION AGAINST MAYO WHICH RESULTS IN THE SETTLEMENT OR AWARD OF DAMAGES. -Page 5 of 9- Article 7.00 - Term and Termination. 7.01 TERM. The term of this contract is for the life of the last of any patents that may issue for the Licensed Product. 7.02 TERMINATION. If the COMPANY defaults in the payment of any royalty, fees, payment, or in the making of any report; or makes a false report; or commits another Material Breach of this contract, MAYO may, at its sole option, terminate this contract ten (10) days after written notice to the COMPANY unless the COMPANY has cured the Material Breach to Mayo's satisfaction. Termination being effective upon mailing or personal delivery of such notice. 7.03 CHALLENGE BY OR INSOLVENCY OF COMPANY. MAYO may terminate this contract immediately upon written notice to the COMPANY if the COMPANY ceases conducting business in the normal course, becomes insolvent or bankrupt, makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets, or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors. 7.04 INFRINGEMENT OF THIRD PARTY RIGHTS. If the COMPANY discontinues manufacturing or marketing the Licensed Invention because of proof of infringement of the rights of a third party, then this contract may be terminated upon written notice from the COMPANY, accompanied by written proof of the infringement claims, said proof shall be written opinions of infringement by two patent attorneys, one of which shall be chosen by COMPANY, the other by MAYO. 7.05 SURVIVAL. The following obligations survive the Termination of this contract: (a) the COMPANY's obligation to supply reports covering the time period up to the date of Termination; (b) MAYO's right to receive payments, fees, and royalties (including minimum royalties) accrued or accruable for payment at the time of any Termination; (c) the COMPANY's obligation to maintain records, and MAYO's right to have those records inspected; (d) any cause of action or claim of MAYO, accrued or to accrue, because of any action or omission by the COMPANY; (e) the COMPANY's obligations stated in Sections 3.03 and 6.04 of this contract; and (f) the COMPANY's obligation to return all materials given to it by MAYO. Article 8.00 - Best Efforts. 8.01 REPRESENTATIONS OF THE COMPANY. The COMPANY has represented to MAYO, to induce MAYO to enter into this contract, that the COMPANY is experienced in the development, production, quality control, service, manufacture, marketing, and sales of products similar to the Licensed Product, and that it will commit itself to a thorough, vigorous, and diligent program of marketing and developing the Licensed Product. The Company, at a minimum, shall meet the schedule set forth in Attachement A. (a) If at any time during the term of this contract, MAYO, in the exercise of its sole discretion concludes for any reason that the COMPANY is not exercising, or is presently unable to exercise, its best efforts in the development, production, quality control, service, manufacture, marketing, or sales of the Licensed Product, then MAYO may terminate this contract 45 days after written notice to the COMPANY, unless COMPANY reasonably, in MAYO's opinion, has convinced MAYO that it is capable of continuing the development, production, quality control, service, manufacture, marketing, or sales of Licensed Product. -Page 6 of 9- Article 9.00 - Patents. 9.01 PATENT NUMBERS. The COMPANY shall mark all Licensed Product units sold in the United States with any applicable United States patent numbers, and all Licensed Product units sold in countries other than the United States with any applicable patent numbers of the country of sale. All Licensed Product units shipped to or sold in other countries in the Territory shall be marked in such a manner as to conform with the patent laws and other laws of the country of manufacture or sale. 9.02 INFRINGEMENT BY THIRD PARTY. The COMPANY shall promptly inform MAYO of any suspected infringement of any licensed patent rights by a third party, and MAYO and the COMPANY shall have the right to institute an action for infringement of the licensed patent rights against such third party consistent with the following: (a) If MAYO and the COMPANY agree to institute suit jointly, then the suit shall be brought in the names of both parties. The costs of litigation, including attorneys' fees, shall be borne equally, and recoveries, if any, whether by judgment, award, decree, arbitration, or settlement, shall be shared equally. The COMPANY shall exercise control over such action, provided, however, that MAYO may, if it so desires, be represented by counsel of its own selection, and at its own expense. (b) In the absence of an agreement to institute a suit jointly, MAYO may institute suit and, at its option, join the COMPANY as a plaintiff. MAYO shall bear the entire cost of such litigation, including attorneys' fees, and shall be entitled to retain the entire amount of any recovery by way of judgment, award, decree, arbitration, or settlement. The COMPANY shall cooperate reasonably with MAYO, except financially, in such litigation. (c) In the absence of an agreement to institute a suit jointly, and if MAYO determines not to institute a suit, as provided in paragraph (b) of this Section 9.02, then the COMPANY may institute suit and, at its option, join MAYO as a plaintiff. The COMPANY shall bear the entire cost of such litigation, including attorneys' fees, and shall be entitled to retain the entire amount of any recovery by way of judgment, award, decree, arbitration, or settlement. MAYO shall cooperate reasonably with the COMPANY, except financially, in such litigation. (d) If either party institutes a suit under this Section and then decides to abandon the suit, it shall first provide timely written notice to the other party of its intention to abandon the suit, and the other party, if it wishes, may continue prosecution of such suit, provided, however, that the sharing of expenses and of any recovery in such suit shall be agreed-upon separately by the parties. 9.03 PATENTS. MAYO shall pursue patent coverage and maintain patents for the Licensed Product, and COMPANY agrees to reimburse MAYO for all related costs, expenses, and fees., Any patents resulting from the Licensed Product or based upon the Licensed Product shall be applied-for on behalf of MAYO, and all rights shall be assigned to MAYO. 9.04 INVALID PATENTS. In the event any Licensed Patent is found to be invalid by the United States Patent Office or an appropriate court of law then COMPANY shall not be required to pay royalties on Licensed Products once covered by the claims of a Licensed Patent. Article 10.00 - General Provisions. 10.01 ASSIGNMENT AND SUBCONTRACT. The COMPANY is strictly prohibited from assigning or subcontracting (other than for product development or product distribution) any of its obligations or rights under this contract without MAYO's prior, express, written consent, which consent may be withheld in MAYO's sole discretion. Any other attempted assignment or subcontract is void. This contract is personal to the COMPANY. -Page 7 of 9- 10.02 WAIVER. No part of this contract may be waived except by the further written agreement of the parties. Forbearance in any form from demanding the performance of a duty owed under this contract is not a waiver of that duty. Until complete performance of a duty owed under this contract is accomplished, the party to which that duty is owed may invoke any remedy under this contract or under law, despite its past forbearance in demanding performance of that duty. 10.03 GOVERNING LAW AND JURISDICTION. This contract is made and performed in Minnesota. It is governed by Minnesota law, but specifically not including Article 2 of the Uniform Commercial Code as enacted in Minnesota. This is nova contract for the sale of goods. In addition, no Minnesota conflictsof-law or choice-of-laws provisions apply to this contract. To the extent the substantive and procedural law of the United States would apply to this contract, it supersedes the application of Minnesota law. The exclusive fora for actions between the parties in connection with this contract are the State District Court sitting in Olmsted County, Minnesota, or the United States Court for the District of Minnesota. 10.04 HEADINGS. The headings of articles and sections used in this document are for convenience of reference only, and are not a part of this contract. 10.05 NOTICES. Any notice required to be given under this contract is properly provided if in writing and either personally delivered, or sent by express or certified mail, postage prepaid, to the parties at the following addresses, unless other addresses are provided consistent with this Section 10.5: Mayo Foundation for Medical Education and Research 200 First Street SW Rochester, Minnesota 55905-0001 Attn: Office of Technology Transfer, Mayo Medical Ventures COMPANY: Marco Hi-Tech J.V. Ltd. Empire State Building 350 Fifth Avenue, Suite 4301 New York, NY 10118 Unless otherwise expressly specified in this contract, notices sent by mail are considered effective upon the earlier of: the fifth (5th) day after dispatch (or the tenth (10th) day after dispatch if dispatched by air mail other than in the United States) or the day of actual receipt. Notices personally delivered are considered effective upon the date of delivery. It is the responsibility of the party giving notice to obtain a receipt for delivery of the notice, if that party considers such a receipt advisable. 10.06 LIMITATION OF RIGHTS CREATED. This contract is intended only to benefit the two parties to it. They have no intention to create any interests for any other party. Specifically, no interests are intended to be created for any customer, patient, research subjects, or other persons (or their relatives, heirs, dependents, or personal representatives) by or upon whom the Licensed Invention may be used. 10.07 INDEPENDENT CONTRACTORS. In the performance of their respective duties under this contract, the parties are independent contractors of each other. Neither is the agent, employee, or servant of the other. Each is responsible only for its own conduct. 10.08 ENTIRE CONTRACT. This document states the entire contract between the parties. about its subject matter. All past and contemporaneous discussions, agreements, proposals, promises', warranties, representations, guarantees, correspondence, and understandings, whether oral or written, formal or informal, are entirely superseded by this contract. -Page 8 of 9- 10.09 UNENFORCEABLE PROVISION. The unenforceability of any part of this contract will not affect any other part. This contract will be construed as if the unenforceable parts had been omitted. 10.10 CHANGES TO CONTRACT. No part of this contract, including this Section 10.10, may be changed except in writing, through another document signed by both parties. 10.11 CONSTRUCTION. Both parties agree to all of the terms of this contract. Both parties execute this contract only after reviewing it thoroughly. That one party or the other may have drafted all or a part of this contract will not cause this contract to be read more strictly against the drafting party. This contract, and any changes to it, will be interpreted on the basis that both parties contributed equally to the drafting of each of its parts. 10.12 NONDISCLOSURE. Neither party shall disclose any of the terms of this contract without the express, prior, written consent of the other party, or unless required by law, MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH: Signed: /s/ Rick F. Colvin --------------------------------------------- Printed Name: Rick F. Colvin --------------------------------------- Title: Assistant Treasurer ---------------------------------------------- Date: May 27, 1997 ---------------------------------------------- COMPANY: Signed: --------------------------------------------- Printed Name: -------------------------------------- Title: --------------------------------------------- Date: ----------------------------------------------- -Page 9 of 9- AMENDMENT NO. 2 TO THE TECHNOLOGY LICENSE CONTRACT BETWEEN MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH AND MARCO HI-TECH J.V. LTD Effective as of September 26, 2001, the Technology License Contract dated June 1, 1997 between Mayo Foundation for Medical Education and Research (MAYO) and Marco Hi-Tech J. V. Ltd. "COMPANY"), as amended by Amendment No. 1 effective October 1, 1998, (the "Contract") is hereby amended and the parties agree as follows: 1. Article 4.02 (b) is amended to indicate that the 1 % royalty on Net Sales of any Natural Product shall be due and payable by Company to MAYO from the effective date of the Contract until the termination or expiration of the Contract 2.LICENSEE hereby assigns all rights, title and interest in and to U.S. Patent Application No 09/551, 520 entitled "TRANSDERMAL HUPERZINE COMPOSITIONS AND METHOD FOR THE TREATMENT OF ALZHEIMER'S DISEASE AND OTHER DISORDERS" to MAYO. Further, COMPANY agrees to cooperate with MAYO in signing and executing such documents as may reasonably be necessary to accomplish said assignment In the event said patent application issues and the Contract between Mayo and COMPANY is terminated prior to the end of the term of the issued patent, MAYO agrees that COMPANY shall have an option to obtain a royalty free, nonexclusive license to continue to practice and use said patent. 3.Article 2.01 is deleted, in its entirety, and replaced with the following: "LICENSED PATENT (S) means U. S. patent numbers 5,547,960; 5,104,880; 5,106,979; 4,929,731; 5,663,344; and pending U.S. patent application 09/551,520." 4.Article 2.03 is deleted, in its entirety, and replaced with the following: "FIELD OF USE means the medical applications and use of Huperzine A." 5.Article 4.05 is hereby amended to indicate that the Company's Option described therein shall be to license any subsequent patents, which may issue from the LICENSED PATENT (S) within the FIELD OF USE (as amended above). 6. Subject to COMPANY's exclusive right to develop and commercialize the LICENSED PATENT (S) within the FI N,LD OF USE under this Contract, COMPANY understands and agrees that: a) MAYO may enter into subsequent licensing and/or commercial development agreements with one or more third parties for the rights to U.S. patent numbers 5,547,960 ("C-10 ANALOGS OF HUPERZINE A"); 5,104,880 ("HUPERZINE" A ANALOGS AS SCETYLCHOLINESTERASE INHIBITORS"), and/or for rights to the LICENSED PATENT(S) that are outside the scope of the FIELD OF USE (as amended above), including, but not limited to, licensing rights for the development and commercialization of Huperzine A Analogs, C-10 Analogs of 1 Huperzine A, and other compounds thereof, and b) in connection therewith, MAYO may represent and disclose the existence of an exclusive license contract for the FIELD OF USE. The amount of the annual maintenance fee royalty due and payable under Article 4.04 of the contract is hereby reduced from $10,000 to $5,000. 7.MAYO agrees to pay to COMPANY a percentage of any Net Royalties received by MAYO from a third party that are the result of the commercial sale of any Huperzine A Analog, C-10 Analog product or product of any compound thereof as follows: the percentage payable by MAYO to COMPANY shall be 25% of any Net Royalties received that are the result of the commercial product sales over $500,000. 8.The title of ATTACHMENT A is amended to indicate that it is the "SCHEDULE OF EVENTS AND DEVELOPMENT TIMELINE FOR HUPERZINE A". 9.The timeline contained in ATTACHMENT A is amended to indicate the date for filing of an IND application with the FDA to be on or before February 28, 2002. 10. The timeline contained in ATTACHMENT A is amended to indicate the date for beginning clinical trials-Phase I to be or before December 30, 2002 and the date for beginning clinical trials-Phase TT and TTY +n be nn nr before December JV, LVVV. 11.Article 8.01 (a) is amended to include the following additional paragraph: "In the event COMPANY fails to file an IND application with the FDA on or before February 28, 2002, this Contract shall automatically terminate without further notice to COMPANY by MAYO; provided, however, that COMPANY may, before the IND filing deadline, make payment to MAYO of an extension fee of $25,000 to extend the IND fling date one additional three (3) month period. ,Thereafter, this Contract shall automatically terminate without further notice to COMPANY by MAYO if the COMPANY fails to file an IND filing with the FDA prior to the end of the three (3) month extension period. COMPANY may obtain additional three (3) month extensions of the IND filing deadline upon advance payment to MAYO of a $25,000 extension fee for each additional three (3) month extension period." 12-Article 3.01 is amended to indicated that the rights granted therein are granted to COMPANY and COMPANY AFFILIATES (subject to the definition of AFFILIATES contained in Article 2.02). 13.The last sentence of the first paragraph of Article 8.01 is amended to read as follows: "The COMPANY and/or COMPANY AFFILIATES, at a minimum, shall meet the schedule set forth in Attachment A (as amended by this Amendment No. 2)." 14.Article 8.01(a) is amended to indicate that the "best efforts" requirement therein may be satisfied by COMPANY and/or COMPANY AFFILIATES. Terms of this Amendment No. 2 supersede any conflicting or inconsistent terms in the Contract. All other provisions of the Contract remain in full force and effect. 2 [Signature page for AMENDMENT NO. 2 TO THE TECHNOLOGY LICENSE CONTRACT BETWEEN MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH AND MARCO HI-TECH J.V. LTD ] MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH /s/ Rick F. Colvin --------------------------------------------- Signature Rick F. Colvin --------------------------------------- Name Assistant Treasurer ---------------------------------------------- Title: 9/26/01 ---------------------------------------------- Date: MARCO HI-TECH J. V.LTD. /s/ Alan Kestenbaum --------------------------------------------- Signature Alan Kestenbaum --------------------------------------- Name Vice President ---------------------------------------------- Title: 10/1701 ---------------------------------------------- Date: 3

EXHIBIT 10.2   IPSCO Inc. 2005 Form 10-K   AMENDED EFFECTIVE December 31, 2002   IPSCO INC. DEFERRED SHARE UNIT PLAN FOR DIRECTORS   1.                                      INTRODUCTION   1.1                                 Purpose   The IPSCO Inc. Deferred Share Unit Plan for Directors has been established to provide directors of the Company with the opportunity to acquire share equivalent units convertible to cash or Common Shares upon their ceasing to act as directors. Acquiring such units will allow directors to participate in the long-term success of the Company and will promote a greater alignment of interests between the directors and the shareholders.   1.2                                 Definitions   For purposes of the Plan:   (a)                                  “Additional Fees” means the Chairman of the Board of Directors annual fee, Chairman of a Committee annual fee, per Board Meeting fee (for either in person or by telephone attendance) and per Committee Meeting fee payable in addition to the Annual Retainer to Eligible Directors pursuant to the Compensation Plan;   (b)                                 “Annual Retainer” means the annual retainer payable to an Eligible Director in each year as determined by the Board from time to time in its discretion, for service as a member of the Board during a calendar year and which, for the year 2000, shall be U.S.$28,000;   (c)                                  “Applicable Withholding Taxes” means any and all taxes and other source deductions or other amounts which the Company is required by law to withhold from any amounts to be paid or credited hereunder;   (d)                                 “Award Date” means each date on which Deferred Share Units are credited to an Eligible Director in accordance with Section 3.1, which shall be, unless otherwise determined by the Committee, the last business day of each calendar quarter of each year;   --------------------------------------------------------------------------------   (e)                                  “Award Market Value” means the last sale price of a board lot of Common Shares on The Toronto Stock Exchange on the last trading day on such Exchange prior to the Award Date on which there was a trade of a board lot of Common Shares;   (f)                                    “Board” means the board of directors of the Company;   (g)                                 “Committee” means the committee of the Board responsible for recommending to the Board the compensation of the Eligible Directors, which at the effective date of the Plan is the Nomination and Governance Committee;   (h)                                 “Common Shares” means the common shares of the Company;   (i)                                     “Company” means IPSCO Inc.;   (j)                                     “Compensation Plan” means the compensation plan for directors of the Company approved by the Board, effective January 1, 2000, as amended from time to time;   (k)                                  “Deferred Share Unit” means a unit equivalent in value to a Common Share, credited by means of a bookkeeping entry in the books of the Company in accordance with Section 3;   (l)                                     “Deferred Share Unit Amount” has the meaning given thereto in Section 4.1;   (m)                               “Dividend Equivalents” means a bookkeeping entry whereby each Deferred Share Unit is credited with the equivalent amount of the dividend paid on a Common Share in accordance with Section 3.3;   (n)                                 “Dividend Market Value” means the last sale price of a board lot of Common Shares on The Toronto Stock Exchange on the last trading day on such Exchange prior to a dividend payment date on which there was a trade of a board lot of Common Shares;   (o)                                 “Elected Fees” has the meaning ascribed to such term in Section 3.1;   (p)                                 “Election Form” means a document substantially in the form of Schedule “A” to this Plan;   (q)                                 “Eligible Director” means a person who is, at the relevant time, a director or former director of the Company who is not an employee of the Company or any of its subsidiaries;   (r)                                    “Plan” means this IPSCO Inc. Deferred Share Unit Plan for Directors, as amended from time to time;   --------------------------------------------------------------------------------   (s)                                  “Redemption Date” means the date upon which an Eligible Director ceases to be a member of the Board; and   (t)                                    “Redemption Value” means the last sale price of a board lot of Common Shares on The Toronto Stock Exchange on the last trading day on such Exchange prior to the Redemption Date on which there was a trade of a board lot of Common Shares.   1.3                                 Effective Date of Plan   The effective date of the Plan shall be January 1, 2000 or such later date as the Board may determine.   2.                                      ADMINISTRATION   2.1                                 Administration of the Plan   The Plan shall be administered by the Board of Directors which shall, without limitation, have full and final authority in its discretion, but subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Board of Directors may delegate any or all of its authority with respect to the administration of the Plan and any or all of the rights, powers and discretions with respect to the Plan granted to it hereunder to the Committee or such other committee of directors of the Company as the Board of Directors may designate and upon such delegation the Committee or other committee of directors, as the case may be, as well as the Board of Directors, shall be entitled to exercise any or all of such authority, rights, powers and discretions with respect to the Plan. The directors of the Company may fully participate in voting and in other deliberations or proceedings of the Board of Directors in respect of the Plan, notwithstanding: (i) the eligibility of the directors to participate in the Plan; and (ii) that the directors may hold Deferred Share Units granted pursuant to the Plan.   2.2                                 Determination of Value if Common Shares Not Publicly Traded   Should Common Shares no longer be publicly traded at the relevant time such that the Redemption Value and/or the Award Market Value and/or the Dividend Market Value cannot be determined in accordance with the formulae set out in the definitions of those terms, such values shall be determined by the Committee in good faith.   2.3                                 Taxes and Other Source Deductions   The Company shall be authorized to deduct from any amount to be paid or credited hereunder any Applicable Withholding Taxes in such manner as the Company determines.   --------------------------------------------------------------------------------   3.                                      DEFERRED SHARE UNITS   3.1                                 Award of Deferred Share Units   Each Eligible Director shall be credited with Deferred Share Units in respect of one-half, of such director’s Annual Retainer or the full amount of the Annual Retainer if so elected pursuant to Section 3.2(a) and the amount elected with respect to payment of Additional Fees, if any, made by each Eligible Director pursuant to Section 3.2(b) (collectively the “Elected Fees”), in each case in the manner set forth in this Plan. All Deferred Share Units to be credited to an Eligible Director will be credited to an account maintained for the Eligible Director on the books of the Company. Deferred Share Units will be credited to an Eligible Director in respect of the Annual Retainer and Elected Fees, if any, earned in the calendar quarter ended on the Award Date. The number of Deferred Share Units (including fractional Deferred Share Units) to be credited as of each Award Date shall be determined by dividing (a) the amount of the applicable portion of the Annual Retainer and Elected Fees, if any, to be credited in Deferred Share Units on that Award Date by (b) the Award Market Value.   3.2                                 Election   Each Eligible Director shall have the right to elect once each calendar year whether such director wishes to receive: (a) all of such director’s Annual Retainer; and/or (b) all or half of such director’s Additional Fees for the immediately succeeding year in the form of Deferred Share Units. This election shall be made by completing, signing and delivering to the Secretary of the Company the Election Form: (i) in the case of an existing director, by the end of the calendar year preceding the year to which such election is to apply; or (ii) in the case of a new director, as soon as possible after the director’s appointment. In each case, the election, when made, shall only apply prospectively with respect to the Eligible Director’s Annual Retainer and Additional Fees yet to be earned. Where no election is made with respect to the remaining Annual Retainer or Additional Fees, such fees will remain in the form of a cash payment.   3.3                                 Credits for Dividends   An Eligible Director’s account shall be credited with Dividend Equivalents in the form of additional Deferred Share Units on each dividend payment date in respect of which ordinary course cash dividends are paid on Common Shares. Such Dividend Equivalents shall be computed by dividing: (a) the amount obtained by multiplying the amount of the dividend declared and paid per Common Share by the number of Deferred Share Units recorded in the Eligible Director’s account on the record date for the payment of such dividend, by (b) the Dividend Market Value, with fractions computed to three decimal places.   3.4                                 Reporting of Deferred Share Units   Statements of the Deferred Share Unit accounts will be provided to the Eligible Directors at least annually.   --------------------------------------------------------------------------------   4.                                      REDEMPTION OF DEFERRED SHARE UNITS   4.1                                 Redemption of Deferred Share Units   (a)                                  An Eligible Director shall be entitled on the Redemption Date to redeem the Deferred Share Units credited to the Eligible Director’s account for an amount (the “Deferred Share Unit Amount”) equal to the product that results from multiplying (i) the number of Deferred Share Units recorded in the Eligible Director’s account on the Redemption Date by (ii) the Redemption Value of the Common Shares. Upon payment in full of the value of the Deferred Share Unit Amount, the Deferred Share Units shall be cancelled.   (b)                                 The Deferred Share Unit Amount payable to an Eligible Director, less any Applicable Withholding Taxes, may be used to acquire Common Shares on the open market through an independent broker designated by the Eligible Director (the “Designated Broker”) or may be paid in cash to the Eligible Director, at the Eligible Director’s option. Notwithstanding the foregoing, the Company may, in its discretion, (i) pay the Deferred Share Unit Amount, less any Applicable Withholding Taxes, in cash if the Company considers that purchase of the Common Shares and delivery thereof to an Eligible Director in a jurisdiction would require the Company to comply with legal requirements of the jurisdiction applicable to the Eligible Director or the Company with respect to the purchase of Common Shares, or (ii) subject to the receipt of any necessary shareholder and regulatory approvals, issue to the Eligible Director such number of Common Shares as equals the number of Deferred Share Units recorded in the Eligible Director’s account on the Redemption Date. If the Company issues Common Shares as aforesaid, such shares will be issued in consideration for the past services of the Eligible Director to the Company and the entitlement of the Eligible Director under this Plan shall be satisfied in full by such issuance of Common Shares. The Company will also make a cash payment, less any Applicable Withholding Taxes, to the Eligible Director with respect to the value of fractional Deferred Share Units standing to the Eligible Director’s credit after the maximum number of whole Common Shares has been issued by the Company as described above.   (c)                                  If the Eligible Director has elected, and the Company has determined, that payment of the Deferred Share Unit Amount be made in the form of Common Shares purchased on the open market through a Designated Broker, as described in Section 4.1 (b) above, the Company will calculate the number of whole Common Shares to be purchased by the Designated Broker on the open market on behalf and for the benefit of the Eligible Director. The number of Common Shares will be determined by dividing (i) the Deferred Share Unit Amount payable, less any Applicable Withholdings Taxes, by (ii) the Redemption Value of a Common Share as determined on the Redemption Date. On the Redemption Date or, if the Redemption Date is not a trading date for shares on the Toronto Stock Exchange, on the next such trading date, the Company shall advise the Designated Broker of the specified number of whole Common Shares to be purchased on behalf of the Eligible Director. The Designated Broker will purchase the specified number of whole Common Shares as soon practicable after being notified by the Company. On or before the date of settlement with respect to the purchase of the Common Shares by the Designated Broker, the Company, acting as agent for the Eligible Director, will pay the purchase price of the specified number of   --------------------------------------------------------------------------------   Common Shares to the Designated Broker, together with any reasonable brokerage fees or commissions related thereto. The Company will also make a cash payment, less any Applicable Withholdings Taxes, to the Eligible Director with respect to the value of fractional Deferred Share Units still standing to the Eligible Director’s credit after the maximum number of whole Common Shares has been purchased as described above.   (d)                                 Notwithstanding the preceding paragraphs, if an Eligible Director becomes an employee of the Company or any of its subsidiaries, such Eligible Director’s Plan eligibility will be suspended. In such a circumstance, the director shall not be eligible to be credited with additional Deferred Share Units (other than Dividend Equivalents credited under Section 3.3 on the Deferred Share Units credited to such Eligible Director prior to the date of becoming such an employee) and shall not be eligible for redemption of Deferred Share Units as set out in the preceding paragraph until the later of the date of cessation of employment with the Company or any of its subsidiaries and the date on which the director ceases to be a member of the Board (the “Separation Date”). The date for redemption of the Deferred Share Units in these circumstances shall be the Separation Date and such date shall be deemed to be the Redemption Date for purposes of the redemption of the Deferred Share Units.   4.2                                 Death of Eligible Director Prior to Redemption   Upon the death of an Eligible Director prior to the redemption of the Deferred Share Units credited to the account of such Eligible Director under the Plan, the beneficiary, or, in the absence of a valid designation of a beneficiary, the estate of such Eligible Director, shall be entitled to redeem the Deferred Share Units in accordance with Section 4.1. For greater certainty, the Deferred Share Unit Amount payable shall be equivalent to the amount which would have been paid to the Eligible Director pursuant to and subject to Section 4.1, calculated as if the Eligible Director had previously ceased to be a director of the Company on the day prior to his or her death. The beneficiary or estate, as the case may be, shall be entitled to select the Redemption Date and the manner of payment in satisfaction of Deferred Share Units in the same manner as the Eligible Director would have been permitted to do so had he or she survived and ceased to be a director of the Company on the day prior to his or her death. Notwithstanding the foregoing, the Company may, in its discretion, (i) pay the Deferred Share Unit Amount, less any Applicable Withholding Taxes, in cash if the Company considers that purchase of the Common Shares and delivery thereof to an Eligible Director’s beneficiary or estate, as the case may be, in a jurisdiction would require the Company to comply with legal requirements of the jurisdiction applicable to the beneficiary, the estate or the Company with respect to the purchase of Common Shares, or (ii) subject to the receipt of any necessary shareholder and regulatory approvals, issue to the beneficiary or estate, as the case may be, such number of Common Shares as equals the number of Deferred Share Units recorded in the beneficiary’s or estate’s account on the Redemption Date.   --------------------------------------------------------------------------------   5.                                      GENERAL   5.1                                 Adjustments to Deferred Share Units   In the event of the declaration of any stock dividend, a subdivision, consolidation, reclassification, exchange, or other change with respect to the Common Shares, or a merger, consolidation, spin-off, or other distribution (other than ordinary course cash dividends) of the Company’s assets to its shareholders, the account of each Eligible Director and the Deferred Share Units outstanding under the Plan shall be adjusted in such manner, if any, as the Board may in its discretion deem appropriate to reflect the event. However, no amount will be paid to, or in respect of, an Eligible Director under the Plan or pursuant to any other arrangement, and no Deferred Share Units will be granted to such Eligible Director to compensate for a downward fluctuation in the price of Common Shares, nor will any other form of benefit be conferred upon, or in respect of, an Eligible Director for such purpose.   5.2                                 Designation of Beneficiary   An Eligible Director may, by written notice to the Secretary of the Company, designate a person to receive the benefits payable under the Plan on the Eligible Director’s death, and may also by written notice to the Secretary of the Company alter or revoke such designation from time to time, subject always to the provisions of any applicable law. Such written notice shall be in such form and shall be executed in such manner as the Committee in its discretion may from time to time determine.   5.3                                 Amendment, Suspension, or Termination of Plan   (a)                                  The Board may from time to time amend or suspend the Plan in whole or in part and may at any time terminate the Plan. However, any such amendment, suspension, or termination shall not adversely affect the right of any Eligible Director with respect to Deferred Share Units credited to such Eligible Director at the time of such amendment, suspension or termination, without the consent of the affected Eligible Director.   (b)                                 If the Board terminates the Plan, no new Deferred Share Units will be credited to the account of an Eligible Director, but previously credited Deferred Share Units shall remain outstanding, shall be entitled to Dividend Equivalents as provided under section 3.3, and be paid in accordance with the terms and conditions of the Plan existing at the time of termination. The Plan will finally cease to operate for all purposes when the last remaining Eligible Director receives payment, in cash or Common Shares, in satisfaction of all Deferred Share Units recorded in the Eligible Director’s account.   5.4                                 Compliance with Laws   The administration of the Plan shall be subject to and performed in conformity with all applicable laws and any applicable regulations of a duly constituted authority. Should the Committee, in its sole discretion, determine that it is not feasible or desirable to honour an election in favour of Deferred Share Units due to such laws or regulations, its obligation shall be satisfied by means of an equivalent cash payment (equivalence being determined on a before-tax basis).   --------------------------------------------------------------------------------   5.4                                 Reorganization of the Company   The existence of any Deferred Share Units shall not affect in any way the right or power of the Company or its shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, or any amalgamation, combination, merger or consolidation involving the Company or to create or issue any bonds, debentures, shares or other securities of the Company or the rights and conditions attaching thereto or to effect the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise.   5.6                                 General Restrictions and Assignment   (a)                                  Except as required by law, the rights of an Eligible Director under the Plan are not capable of being anticipated, assigned, transferred, alienated, sold, encumbered, pledged, mortgaged or charged and are not capable of being subject to attachment or legal process for the payment of any debts or obligations of the Eligible Director.   (b)                                 Rights and obligations under the Plan may be assigned by the Company to a successor in the business of the Company.   5.5                                 No Right to Service   Neither participation in the Plan nor any action taken under the Plan shall give or be deemed to give any Eligible Director a right to continued appointment as a member of the Board and shall not interfere with any right of the shareholders of the Company to remove any Eligible Director as a member of the Board at any time.   5.8                                 No Shareholder Rights   Under no circumstances shall Deferred Share Units be considered Common Shares or shares of any other class of the Company, nor entitle any Eligible Director to exercise voting rights or any other rights attaching to the ownership of Common Shares, nor shall any Eligible Director be considered the owner of the Common Shares by virtue of the award of Deferred Share Units.   5.9                                 Governing Law   The Plan shall be governed by, and interpreted in accordance with, the laws of the Province of Saskatchewan and the laws of Canada applicable therein.   --------------------------------------------------------------------------------   5.60                           Interpretation   In this text words importing the singular meaning shall include the plural and vice versa, and words importing the masculine shall include the feminine and neuter genders.   5.11                           Severability   The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision and any invalid or unenforceable provision shall be severed from this Plan.   --------------------------------------------------------------------------------   SCHEDULE “A”   IPSCO INC. DEFERRED SHARE UNIT PLAN FOR DIRECTORS (the “Plan”)   ANNUAL ELECTION FORM   1.                                      Annual Retainer   I understand that one-half of my Annual Retainer will be received by me in the form of Deferred Share Units. I elect to receive the balance of my Annual Retainer as follows (please check either Box “A” or Box “B”):   A.   o   in Deferred Share Units               - or -               B.   o   in cash.   2.                                      Additional Fees   I elect to receive my Additional Fees as follows (please check either Box “A” or Box “B”):   A.   o   50% in cash and 50% in Deferred Share Units               - or -               B.   o   in Deferred Share Units   3.                                      Designation of Beneficiary   In accordance with the terms of the Plan, I hereby revoke any designation of beneficiary heretofore made by me under the Plan, and hereby appoint as designated beneficiary to receive any payment in accordance with the Plan that may fall due after my death:                                                                                                                              [insert full name]; provided, however, that if the above named beneficiary predeceases me such payment shall be made to my estate.   4.                                      I understand that:   •                                          All capitalized terms shall have the meanings attributed to them under the Plan. •                                          All payments will be net of any Applicable Withholding Taxes.     )     Witness Signature ) Eligible Director Signature     )       )     Witness Name (please print) ) Eligible Director Name (please print)     )       )         Date     Until this Election Form is returned to the General Counsel of the Company, 50% of the Annual Retainer will be received in the form of Deferred Share Units and the remaining 50% Annual Retainer as well as the Additional Fees will be paid in cash.   --------------------------------------------------------------------------------

  Exhibit 10.3 STOCK OPTION AGREEMENT (Incentive Stock Option Grant to Executive Officers)      THIS AGREEMENT is made as of                     , by and between DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation (the “Company”), and                     , an individual (the “Holder”). W I T N E S S E T H:      WHEREAS, the Company desires to provide the Holder with an option to purchase                      (___) Common Shares, without par value, of the Company (“Shares”), pursuant to the Company’s 2004 Equity-Based Award Plan (the “Plan”); and      WHEREAS, the Holder desires to accept such option.      NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the parties hereto hereby agree as follows:      1. Grant of Option. The Company does hereby irrevocably grant to the Holder, and the Holder does hereby accept, the right and option (the “Option”) to purchase, at the option of the Holder,                      (___) Shares at the exercise price per Share of $                     and upon and subject to the other terms and conditions hereof and the Plan.      2. Term of the Option; Vesting. The Option is exercisable, in whole or in part, once vested, in accordance with the following schedule. If the Holder is then employed by the Company, the Option shall vest as follows: Date                    No. of Shares Vesting Shares for which the Option has become exercisable shall be referred to herein as “Vested Shares,” and Shares for which the Option has not become exercisable shall be referred to herein as “Unvested Shares.” The Option shall terminate on the tenth anniversary of the date hereof and must be exercised, if at all and to the extent exercisable, on or before such date and shall not thereafter be exercisable, notwithstanding anything herein to the contrary. Notwithstanding anything contained herein to the contrary, it shall be a condition to the Holder’s right to exercise the Option with respect to any Vested Shares that there shall have been filed with the Securities and Exchange Commission an effective registration statement on Form S-8 (or such other form as the Company shall deem necessary) with respect to the Shares to be received upon exercise.      3. Exercise. Subject to the other terms and conditions hereof, the Option shall be exercisable from time to time by written notice to the Company (in the form required by the Company) which shall:   (a)   state that the Option is thereby being exercised, the number of Shares with respect to which the Option is being exercised, each person in whose name any   --------------------------------------------------------------------------------         certificates for the Shares should be registered and such person’s address and social security number;   (b)   be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by anyone other than the Holder, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the Option under the Plan and all applicable laws and regulations; and     (c)   be accompanied by such representations, warranties or agreements with respect to the investment intent of such person or persons exercising the Option as the Company may reasonably request, in form and substance satisfactory to counsel for the Company.      As conditions to the exercise of the Option and the obligation of the Company to issue Shares upon the exercise thereof, the proposed recipient of the Shares shall make any representation or warranty to comply with any applicable law or regulation or to confirm any factual matters reasonably requested by the Company or its counsel.      Upon exercise of the Option and the satisfaction of all conditions thereto, the Company shall deliver a certificate or certificates for Shares to the specified person or persons at the specified time upon receipt of the aggregate exercise price for such Shares by any method of payment authorized by the Plan.      4. Termination of Employment. Upon termination of the Holder’s employment with the Company, the Option will be governed by Section 5(b) of the Plan. If, for any reason, the Option is not treated as an Incentive Stock Option (as defined below), the Option will be governed as follows upon termination of the Holder’s employment with the Company:      (a) Termination by Death. If the Holder’s employment with the Company or any Subsidiary or Affiliate terminates by reason of death, the Option shall become immediately and automatically vested and exercisable. If termination of the Holder’s employment is due to death, then the Option may thereafter be exercised by the estate of the Holder (acting through its fiduciary) at any time after the date of the Holder’s death (or as the Committee may specify after grant). Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.      (b) Termination by Reason of Disability. If the Holder’s employment with the Company or any Subsidiary or Affiliate terminates by reason of Disability, the Option shall become immediately and automatically vested and exercisable. If termination of the Holder’s employment is due to Disability, then the Option may thereafter be exercised by the Holder or by the Holder’s duly authorized legal representative if the Holder is unable to exercise the Option as a result of the Holder’s Disability, at any time after the date of such termination of employment (or such other period as the Committee may specify after grant). If the Holder dies before the Option is exercised, any unexercised Option held by the Holder shall thereafter be exercisable by the estate of the Holder (acting through its fiduciary) at any time after the date of the Holder’s death (or such other period as the Committee may specify after grant). Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.      (c) Termination for Retirement. If the Holder’s employment with the Company or any Subsidiary or Affiliate terminates by reason of Retirement, the Option shall become immediately and automatically vested and exercisable. If termination of the Holder’s employment is due to Retirement, then the Option may thereafter be exercised by the Holder at any time after the date of such Retirement   --------------------------------------------------------------------------------   (or such other period as the Committee may specify after grant). If the Holder is unable to exercise the Option as a result of the Holder’s Disability, then the Option may thereafter be exercised by the Holder’s duly authorized legal representative, at any time after the date of such Disability (or such other period as the Committee may specify after grant). If the Holder dies before the Option is exercised, any unexercised Option held by the Holder shall thereafter be exercisable by the estate of the Holder (acting through its fiduciary) at any time after the date of the Holder’s death (or such other period as the Committee may specify after grant). Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. “Retirement” means retirement from active employment with the Company, a Subsidiary or Affiliate at the earlier to occur of: (i) a participant attaining the age of 55, or (ii) a participant attaining the age of 50 and accruing 15 years of credited service for the Company, a Subsidiary or Affiliate.      (d) Termination for Cause. If the Holder’s employment with the Company or any Subsidiary or Affiliate terminates for Cause, the Option will be giverned by Section 5(b) of the Plan.      (e) Other Termination. Unless otherwise determined by the Committee after the time of granting the Option, if the Holder’s employment with the Company or any Subsidiary or Affiliate terminates for any reason other than death, Disability, Retirement, or for Cause, any Vested Shares at the time of termination must be exercised by the Holder within three (3) months after the date the Holder’s employment terminates. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. Unless otherwise determined by the Committee, any Unvested Shares under the Option shall be forfeited upon termination.      (f) Leave of Absence. If the Holder is granted a leave of absence by the Company or any Subsidiary or Affiliate, his or her employment will not be considered terminated, and he or she will continue to be deemed an employee of the Company or Subsidiary or Affiliate during such leave of absence or any exension thereof granted by the Company, Subsidiary or Affiliate for purposes of the Plan.      5. Transferability. The Option and the Holder’s rights therein are not transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Internal Revenue Code or the Employment Retirement Income Security Act of 1974, as amended). If, for any reason, the Option is not treated as an Incentive Stock Option, the Holder may transfer the Option, during his or her lifetime (i) to one or more members of such Holder’s family, (ii) to one or more trusts for the benefit of one or more of such Holder’s family, (iii) to a partnership or partnerships of members of such Holder’s family, or (iv) to a charitable organization as defined in Section 501(c)(3) of the Code, provided that no consideration is paid for the transfer and that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, with respect to any Option. The transferee of any Option will be subject to all restrictions, terms and conditions applicable to the Option prior to its transfer.      6. Taxes. The Holder hereby agrees to pay to the Company, in accordance with the terms of the Plan, any federal, state or local taxes of any kind required by law to be withheld and remitted by the Company with respect to an exercise of the Option. The Holder may satisfy such tax obligation, in whole or in part, by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise of (or the lapse of restrictions relating to) the Option with a Fair Market Value equal to the amount of such taxes, or (ii) delivering to the Company Shares other than Shares issuable upon exercise of (or the lapse of restrictions relating to) the Option with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. If the Holder does not make such payment to the Company, the Company shall have the right to withhold from any payment of any kind otherwise due to the Holder from the Company, any federal, state or local taxes of any kind required by law to be withheld with respect to an exercise of the   --------------------------------------------------------------------------------   Option or the Shares which are the subject of such Option.      7. Deferral. If the Company has adopted a deferred compensation plan with respect to equity-based awards, the Holder may, in his or her sole discretion, elect to particpate under the deferral plan.      8. Subject to the Plan. This Agreement is made and the Option evidenced hereby is granted under and pursuant to, and they are expressly made subject to all of the terms and conditions of, the Plan, notwithstanding anything herein to the contrary. The Holder hereby acknowledges receipt of a copy of the Plan and that the Holder has read and understands the terms and conditions of the Plan.      9. Intent. The Option is intended to be treated as an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code (an “Incentive Stock Option”). The Option shall be construed and exercised consistent with such intention. It is acknowledged that the United States Treasury Department may amend or modify from time to time its regulations governing Incentive Stock Options. Accordingly, it is understood and agreed by the Holder that the Company may amend or modify the Plan and this Agreement in any respect deemed by the Company to be necessary or desirable to comply with such regulations, as amended or modified from time to time or to meet the requirements for an Incentive Stock Option.      10. Securities Law Compliance.      (a) Notwithstanding any provision of this Agreement to the contrary, the Option shall not be exercisable unless, at the time the Holder attempts to exercise the Option, in the opinion of counsel for the Company, all applicable securities laws, rules and regulations have been complied with. The Holder agrees that the Company may impose such restrictions on the Shares as are deemed advisable by the Company, including, without limitation, restrictions relating to listing or trading requirements. The Holder further agrees that certificates representing the Shares may bear such legends and statements as the Company shall deem appropriate or advisable to assure, among other things, compliance with applicable securities laws, rules and regulations.      (b) The Holder agrees that any Shares which the Holder may acquire by virtue of the Option may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by the Holder unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such Shares has become effective so as to permit the sale or other disposition of such Shares by the Holder, or (ii) there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the sale or other proposed disposition of such Shares by the Holder may lawfully be made otherwise than pursuant to an effective registration statement of post-effective amendment to a registration statement relating to such Shares under the Securities Act of 1933, as amended.      11. Rights of the Holder. The granting of the Option shall in and of itself not confer any right on the Holder to continue in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Holder’s employment at any time, subject to the terms of any employment agreement between the Company and the Holder. The Holder shall have no dividend, voting or other rights of a stockholder with respect to the Shares which are subject to the Option prior to the purchase of such Shares upon exercise of the Option and the execution and delivery of all other documents and instruments deemed necessary or desirable by the Company.      12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent otherwise governed by Federal law.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have subscribed their names hereto as of the date first above written.                   DEVELOPERS DIVERSIFIED REALTY         CORPORATION, an Ohio corporation                       By:                                                     Holder’s Signature:                                   Holder’s Social Security Number      

EXHIBIT 10.1 CLINICAL TRIAL MANUFACTURING AGREEMENT This Clinical Trial Manufacturing Agreement  (“Agreement”)  dated this 30th day of October, 2006 (the “Effective Date”) between:          SWISS CAPS AG, of Husenstr. 35, CH-9533 Kirchberg, Switzerland (“Swiss Caps”) – Fax +41 (0)71 931 41 91 And ORAMED PHARMACEUTICALS, INC., of 2 Elza Street, Jerusalem, 93706, Israel (“Oramed” or the “Company”) –Fax +011 972-2-679-2336 WITNESSES THAT WHEREAS A.      Swiss Caps is a manufacturer and business development services partner for the pharmaceutical and healthcare industry;   B.      Oramed is in the business of developing an oral form of insulin; and   C.      Oramed desires to engage the services of Swiss Caps, and Swiss Caps accepts such appointment, to manufacture and deliver the Product (as defined below) to Oramed in accordance with the terms and conditions of this Agreement.   NOW THEREFORE, in consideration of the premises and the covenants and agreements set out herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1.      DEFINITIONS & INTERPRETATION   1.1      All capitalised terms in this Agreement have the following meaning:     (a)      “Agreement” means this agreement for services and includes its schedules and any documents incorporated by reference, as amended from time to time in accordance with its terms.     (b)      “Compensation” means the compensation for the Services as set out in the Statement of Work.     (c)      “Force Majeure Event” means any act of God or act of nature, fire, flood, storm, explosion, sabotage, riot, act of war whether declared or not, act of terrorism, requirement or restriction of governmental authorities, inability or delay in the grant of governmental or other approvals, consents, permits, licenses or authorities or any other like event, any strike, lockout, work stoppage or other industrial dispute of any kind, or any other event or circumstance beyond the reasonable control of the affected party.   CW638406.16 -------------------------------------------------------------------------------- - 2 - (d)      “Intellectual Property” means all inventions, methods, processes, ideas and concepts, whether patentable or not, all literary and other works and all data and databases, whether or not protected by copyright, all trade-marks, trade names and domain names, industrial designs, integrated circuit topographies, trade secrets, know-how and show-how.   (e)      “Intellectual Property Rights” means all world-wide legal protection provided for Intellectual Property, whether under statute, common law, international treaty or in equity, including all protection granted under laws protecting patent, copyright, trade-mark, industrial design, trade secret or integrated circuit topography rights.   (f)      “Loss” means all costs, loss, damage, liability or expenses (including all reasonable legal costs, fees and expenses).   (g)      “Oramed Confidential Information” means all confidential information of Oramed including all Oramed Materials, all know-how, trade secrets, business ideas and concepts of Oramed, all technical, operational, strategic, marketing, financial and business information relating to Oramed, all Intellectual Property of Oramed and any formulas, reports, notes, medical records, test results, patient information and any other information or data provided to Swiss Caps by Oramed that is designated in writing as confidential or that Swiss Caps ought to be reasonably aware is confidential. Oramed Confidential Information does not include information which is: (i) made public other than by a breach of an obligation of confidentiality, (ii) disclosed to Swiss Caps free of any obligation to keep it confidential, or (iii) independently developed by Swiss Caps without use, directly or indirectly, of Oramed Confidential Information received from Oramed.   (h)      “Oramed Materials” means all materials provided by Oramed to Swiss Caps in order to assist Swiss Caps with the provision of the Services including, without limitation, those listed on Schedule 1 attached to this Agreement.   (i)      “Personnel” means directors, officers, employees, agents, contractors, advisers or representatives of a party.   (j)      “Primary Contact” has the meaning given to that term in Section 4.1 of this Agreement.   (k)      “Product” means the product developed as a result of the provision of the Services in accordance with the Specifications, as detailed in the Statement of Work.   (l)      “Representatives” has the meaning given to that term in Section 15.4(b) of this Agreement.   (m)      “Services” means the services which Swiss Caps has agreed to supply to Oramed as detailed in the Statement of Work.   CW638406.16 -------------------------------------------------------------------------------- - 3 - (n)      “Specifications” means the technical specifications for the Product, as specified in the Statement of Work.   (o)      “Swiss Caps Confidential Information” means all confidential information of Swiss Caps including all know-how, trade secrets, business ideas and concepts of Swiss Caps, all technical, operational, strategic, marketing, financial and business information relating to Swiss Caps, all Intellectual Property of Swiss Caps and any other information or data provided to Oramed by Swiss Caps that is designated in writing as confidential or that Oramed ought to be reasonably aware is confidential. Swiss Caps Confidential Information does not include information which is: (i) made public other than by a breach of an obligation of confidentiality, (ii) disclosed to Oramed free of any obligation to keep it confidential, or (iii) independently developed by Oramed without use, directly or indirectly, of Swiss Caps Confidential Information received from Swiss Caps.   (p)      “Statement of Work” means the statement of work attached as Schedule 1 to this Agreement, setting out the Services, the Product, the Specifications and the Compensation, as amended by the parties from time-to-time in accordance with the terms of this Agreement.   (q)      “Term” has the meaning given to that term in Section 3.1 of this Agreement.   1.2      All references to any Section herein is to the Section in this Agreement unless otherwise specified. All references to a Schedule herein is to a Schedule of this Agreement unless otherwise specified.   1.3      The headings in this Agreement are for reference purposes only and will not be deemed a part of the Agreement.   1.4      The term “including” means including without limitation or prejudice to the generality of any description, definition, term or phrase preceding that word, and the word “include” and its derivatives will be construed accordingly.   1.5      The interpretation of any ambiguities will be construed by the principles of fairness and reasonable business practice, and authorship of this Agreement will have no bearing on the construction of any terms hereof.   2.      APPOINTMENT   2.1      Swiss Caps hereby agrees to perform for Oramed and Oramed hereby engages Swiss Caps to perform the Services in accordance with the terms and conditions of this Agreement.   2.2      The parties agree and acknowledge that:     (a)      the manufacturing of the Product under this Agreement is for clinical testing purposes (proof of concept) only; and   CW638406.16 -------------------------------------------------------------------------------- - 4 - (b)      should Oramed elect to engage Swiss Caps to manufacture the Product for commercial distribution, a separate agreement will be entered into by the parties for such purpose.   3.      TERM   3.1      Subject to the express termination rights granted herein, this Agreement will commence on the Effective Date and will remain in full force and effect for a period of six (6) months from the Effective Date (the “Term”). The parties may renew this Agreement by mutual consent.   4.      PRIMARY CONTACTS   4.1      Upon execution of this Agreement, each party will designate a primary contact (“Primary Contact”) who will have the primary responsibility for that party’s relationship with the other party and will have the authority necessary to make the day-to- day decisions on behalf of that party with respect to the implementation of this Agreement.   5.      SERVICES   5.1      Swiss Caps will perform the Services in accordance with the terms of this Agreement and otherwise in a professional and workmanlike manner in accordance with industry best practices and using only appropriately skilled and experienced personnel exercising due care at all times.   5.2      Swiss Caps will commence performing the Services on the Effective Date and will use best commercial efforts to meet the milestones and target dates (if any) specified in the Statement of Work.   5.3      Oramed will, promptly after the Effective Date, deliver to Swiss Caps the Oramed Materials necessary for Swiss Caps to fulfil its obligations herein.   5.4      Oramed will ship the Oramed Materials to Swiss Caps Delivered Duty Paid (DDP) (Incoterms 2000), and Swiss Caps will be responsible for insuring against loss or damage while the Oramed Materials are in the custody, possession or control of Swiss Caps, as required by Section 13.   5.5      Notwithstanding the above clause, Swiss Caps is responsible to provide, at its cost, all materials necessary to carry out the terms of this Agreement and provide the Services and the Product.   5.6      Swiss Caps will ship the Product, FCA Kirchberg (Incoterms 2000), to Oramed’s nominated address promptly on completion of the Services.   CW638406.16 -------------------------------------------------------------------------------- - 5 - 6.      AMENDMENT TO STATEMENT OF WORK   6.1      If the parties jointly determine that the scope of the Services being provided under the Statement of Work, or the assumptions on which those Services are based, has changed during the course of the engagement, then such changes will be described in a written change order (“Change Order”) to be signed by both parties. At the option of Oramed, such additional Services may be addressed in a separate Statement of Work signed by both parties.   6.2      If Oramed wishes at any time to request a change in the Services specified in the Statement of Work, then it will prepare a Change Order. Swiss Caps will evaluate and respond to any change request within 20 business days or such other period as the parties may agree in writing. Swiss Caps’ response will include the amount of any adjustment to the Compensation, if any, and an estimate on any perceived changes to the delivery dates, if applicable, specified for the Product in light of the change to the scope of the Services.     Upon receiving written authorization from Oramed, Swiss Caps will proceed with Oramed’s requested changes and the Statement of Work will be deemed to be amended accordingly.   7.      ORAMED WARRANTIES   7.1      Oramed represents and warrants that:     (a)      it is authorized to enter into this Agreement and be bound by its terms;     (b)      it is not bound by the terms of any agreement which would limit, restrict or conflict with its obligations herein; and     (c)      it possesses all relevant permissions, consents, authorities and licenses to perform its obligations set out in this Agreement.   8.      SWISS CAPS WARRANTIES   8.1      Swiss Caps represents and warrants that:     (a)      it is authorized to enter into this Agreement and be bound by its terms;     (b)      it is not bound by the terms of any agreement which would limit, restrict or conflict with its obligations herein;     (c)      it possesses all relevant permissions, consents, authorities and licenses to perform its obligations set out in this Agreement;     (d)      it will perform its obligations under this Agreement in compliance with all applicable laws, statutes, regulations and codes of conduct;     (e)      its method of manufacturing the Product will not infringe the Intellectual Property Rights of any third party; and   CW638406.16 -------------------------------------------------------------------------------- - 6 -           (f)       the Product delivered to Oramed will conform with the Specifications. 9.      COMPENSATION   9.1      The amount of the Compensation is set out in the Statement of Work.   9.2      Subject to Section 9.3, Oramed will pay the Compensation to Swiss Caps in 2 instalment payments in the amounts set out in the Statement of Work. Swiss Caps will deliver an invoice to Oramed for each instalment payment as follows:     (a)      the first such invoice will be delivered to Oramed on or after the date that Swiss Caps confirms in writing to Oramed that it has commenced performance of the Services; and     (b)      the second such invoice will be delivered to Oramed on or after the date that Oramed advises Swiss Caps in writing that it has received the Product from Oramed.   9.3      In full satisfaction of its obligation to pay each instalment payment of the Compensation to Swiss Caps, Oramed will issue that number of common shares in its capital stock having an aggregate value equal to the amount of that instalment payment. For the purposes of determining the number of common shares to be issued to Swiss Caps pursuant to an instalment payment, the Oramed common shares will be valued at the current trading price of such shares on the U.S. Over the Counter Bulletin Board on the 10th trading day after the invoice in respect of that instalment payment is delivered to Oramed in accordance with Section 9.2. Oramed will issue the applicable number of common shares to Swiss Caps within 30 days after receipt of such invoice.   9.4      Swiss Caps agrees and acknowledges that Oramed’s obligation to pay the Compensation is subject to Oramed’s determination that: (a) the quantity of Product delivered to Oramed meets the requirements set forth in the Statement of Work; and (b) the Product delivered to Oramed is free from visible defects or damage. Within 5 business days after receipt of the Product, Oramed will either: (c) deliver written notice to Swiss Caps that Oramed accepts the Product as delivered; or (d) deliver written notice to Swiss Caps stating, as applicable: (i) that there is a discrepancy between the number of Product actually delivered and the number of Product specified in the Statement of Work; and/or (ii) that there are visible defects or damage to the Product, and specifying such defect or damage in reasonable detail. If Oramed fails to deliver a notice under (c) or (d) above in this Section with such 5 business day period, then it will be deemed to have accepted the Product for the purposes of this Section 9.   9.5      Swiss Caps acknowledges that it is receiving the Compensation outside of the United States and warrants, represents and acknowledges the statements and covenants set out in Schedule 2 attached to this Agreement.   CW638406.16 -------------------------------------------------------------------------------- - 7 - 10.      TERMINATION   10.1      Either party may terminate this Agreement (in whole or in part) at any time with immediate effect by giving written notice to the other party (the “Defaulting Party”), if:     (a)      the Defaulting Party materially breaches any provision of this Agreement that: (i) is not capable of being remedied; or (ii) is capable of being remedied but is not remedied within 15 days after receiving notice from the non-Defaulting Party requiring it to do so;     (b)      a Force Majeure Event substantially adversely affects the ability of the Defaulting Party to perform its obligations under this Agreement continuously for a period of not less than 15 days;     (c)      any proceeding in bankruptcy, receivership, liquidation or insolvency is commenced against the Defaulting Party or its property and is not dismissed within 30 days; or     (d)      the Defaulting Party makes any assignment for the benefit of creditors, becomes insolvent, commits any act of bankruptcy, ceases to do business as a going concern, seeks any arrangement or compromise with its creditors under any statute or otherwise, or is unable to pay its debts as and when they fall due.   10.2      Except as provided in Section 10.1, Swiss Caps will have no right to terminate this Agreement (in whole or in part) during the Term.   11.      CONSEQUENCES OF TERMINATION   11.1      Within 14 days of the expiry of the Term or earlier termination of this Agreement or any part thereof:     (a)      Swiss Caps will immediately return to Oramed all Oramed Materials and Oramed Confidential Information which is in the possession, custody or control of Swiss Caps;     (b)      Oramed will immediately return to Swiss Caps all Swiss Caps Confidential Information which is in the possession, custody or control of Oramed; and     (c)      the parties will use best commercial efforts to co-operate fully with each other in effecting an orderly transition of the Services, if applicable.   11.2      The exercise by Oramed of its right to terminate this Agreement (in whole or in part) under Section 10 will not affect or impair Oramed’s other rights or remedies under this Agreement or otherwise at law or in equity.   CW638406.16 -------------------------------------------------------------------------------- - 8 - 12.      SWISS CAPS INDEMNITY   12.1      Notwithstanding any other term in this Agreement, Swiss Caps hereby covenants and agrees to indemnify and hold Oramed harmless from and against:     (a)      all Loss arising from or relating to personal injury or death to the extent that such Loss is caused by a negligent or wilful act or omission or breach of this Agreement by Swiss Caps or any of its Personnel;     (b)      all Loss arising from any breach or failure of performance by Swiss Caps of any of its warranties, covenants or material obligations in this Agreement;     (c)      any damage to or loss of any tangible property of Oramed or any third party, to the extent that such Loss is caused by a negligent or wilful act or omission or breach of this Agreement by Swiss Caps or any of its Personnel; and     (d)      all Loss arising from or in connection with a claim by a third party against Oramed (including, without limitation, a claim that Swiss Caps’ method of manufacture infringes a third party’s Intellectual Property Rights) to the extent that that such Loss is caused by a negligent or wilful act or omission or breach of this Agreement by Swiss Caps or any of its Personnel.   12.2      For the purposes of this Section 12, Oramed is deemed to include Oramed’s divisions, subsidiaries and affiliates, its shareholders, the assignees of each of the foregoing and their respective directors, officers, shareholders, employees, agents and contractors.   13.      INSURANCE   13.1      Swiss Caps will, at its own expense, obtain and maintain in full force and effect, throughout the Term and for a period of 12 months after the expiry or earlier termination of this Agreement, insurance coverage with a reputable insurance company in an amount not less than US$2,000,000 per occurrence for public liability, product liability, personal injury, death and property damage, naming Oramed as an additional insured.   13.2      Upon request by Oramed, Swiss Caps will promptly furnish Oramed with a copy of a certificate confirming that the insurance specified in Section 13.1 is in place.   14.      INTELLECTUAL PROPERTY   14.1      Oramed will provide the Oramed Materials to Swiss Caps for the sole purpose of enabling Swiss Caps to perform the Services in accordance with the terms of this Agreement.   14.2      All Intellectual Property arising from or relating to the Oramed Materials and the Product and all goodwill associated therewith is, and will at all times remain, the sole property of Oramed and, except for the sole purpose of providing the Services in accordance with the Statement of Work, no rights or licenses are conferred upon Swiss Caps hereunder with respect to such Intellectual Property.   CW638406.16 -------------------------------------------------------------------------------- - 9 - 15.      CONFIDENTIAL INFORMATION   15.1      The Oramed Confidential Information is, and will at all times remain, the sole property of Oramed and, except as set forth in this Agreement, no rights are conferred upon Swiss Caps under this Agreement with respect to the Oramed Confidential Information.   15.2      Swiss Caps will:     (a)      take reasonable steps to enforce the confidentiality obligations imposed by this Agreement including diligently prosecuting at its cost, any breach or threatened or suspected breach of such confidentiality obligations by a person to whom Swiss Caps or any of its Personnel has disclosed the Oramed Confidential Information; and     (b)      co-operate, and provide Oramed with all reasonable assistance, in any action which Oramed may take to protect the confidentiality of the Oramed Confidential Information.   15.3      Swiss Caps will use the Oramed Confidential Information only for the purpose of fulfilling its obligations under this Agreement. In particular, Swiss Caps will not trade in any securities of Oramed while in possession of Oramed Confidential Information.   15.4      Swiss Caps may only disclose the Oramed Confidential Information (and only to the extent reasonably necessary):     (a)      to its legal advisers in relation to Swiss Caps’ rights under this Agreement;     (b)      to its directors, officers and employees (“Representatives”):      (i)      for the sole purpose of assisting Swiss Caps to meet its obligations under this Agreement on a need to know basis only; and      (ii)      upon each Representative undertaking to keep strictly confidential any Oramed Confidential Information disclosed;     (c)      where such disclosure is:      (i)      required by law; or      (ii)      required by the rules of any stock exchange where Swiss Caps securities are listed or quoted; and     (d)      in connection with legal proceedings between the parties relating to the confidentiality provisions of this Agreement. For the avoidance of doubt, unless otherwise provided for in this Agreement, the Oramed Confidential Information may not be disclosed in connection with any dispute or legal proceedings not related to this Agreement.   CW638406.16 -------------------------------------------------------------------------------- - 10 - 15.5      Where Swiss Caps becomes aware of any actual, suspected or threatened unauthorised disclosure or use of the Oramed Confidential Information, it will promptly notify Oramed.   15.6      Swiss Caps acknowledges that a breach of the confidentiality obligations contained herein may cause Oramed irreparable damage for which monetary damages would not be an adequate remedy. Accordingly, in addition to other remedies that may be available, Oramed may seek and obtain injunctive relief against such a breach or threatened or suspected breach.   15.7      The Swiss Caps Confidential Information is, and will at all times remain, the sole property of Swiss Caps and, except as set forth in this Agreement, no rights are conferred upon Oramed under this Agreement with respect to the Swiss Caps Confidential Information.   15.8      Oramed will:     (a)      take reasonable steps to enforce the confidentiality obligations imposed by this Agreement including diligently prosecuting at its cost, any breach or threatened or suspected breach of such confidentiality obligations by a person to whom Oramed has disclosed the Swiss Caps Confidential Information; and     (b)      co-operate, and provide Swiss Caps with all reasonable assistance, in any action which Swiss Caps may take to protect the confidentiality of the Swiss Caps Confidential Information.   15.9      Oramed will use the Swiss Caps Confidential Information only for the purpose of fulfilling its obligations under this Agreement. In particular, Oramed will not trade in any securities of Swiss Caps while in possession of Swiss Caps Confidential Information.   15.10      Oramed may only disclose the Swiss Caps Confidential Information (and only to the extent reasonably necessary):     (a)      to its legal advisers in relation to Oramed’s rights under this Agreement;     (b)      to its Representatives:      (i)      for the sole purpose of assisting Oramed to meet its obligations under this Agreement on a need to know basis only; and      (ii)      upon each Representative undertaking to keep strictly confidential any Swiss Caps Confidential Information disclosed;     (c)      where such disclosure is:      (i)      required by law; or   CW638406.16 -------------------------------------------------------------------------------- - 11 -                          (ii) required by the rules of any stock exchange where Oramed’s securities are listed or quoted; and                (d)      in connection with legal proceedings between the parties relating to the confidentiality provisions of this Agreement. For the avoidance of doubt, unless otherwise provided for in this Agreement, the Swiss Caps Confidential Information may not be disclosed in connection with any dispute or legal proceedings not related to this Agreement.   15.11      Where Oramed becomes aware of any actual, suspected or threatened unauthorised disclosure or use of the Swiss Caps Confidential Information, it will promptly notify Swiss Caps.   15.12      Oramed acknowledges that a breach of the confidentiality obligations contained herein may cause Swiss Caps irreparable damage for which monetary damages would not be an adequate remedy. Accordingly, in addition to other remedies that may be available, Swiss Caps may seek and obtain injunctive relief against such a breach or threatened or suspected breach.   15.13      Neither party will disclose the terms of this Agreement to any third party, except: (a) to its Representatives whose duties reasonably require such disclosure and on the conditions referred to in Section 15.4(b) or Section 15.10(b), as applicable, and (b) as otherwise permitted by Section 15.415.415.10 and Section 15.10, as applicable.   15.14      Swiss Caps will return the Oramed Confidential Information to Oramed immediately upon request or otherwise in accordance with Section 11. Oramed will return the Swiss Caps Confidential Information to Swiss Caps immediately upon request or otherwise in accordance with Section 11.   16.      FORCE MAJEURE   16.1      If a party (“First Party”) is unable to perform an obligation under this Agreement by reason of a Force Majeure Event, that obligation is suspended for the duration of the Force Majeure Event provided that the First Party:     (a)      gives the other party prompt notice of the details of the Force Majeure Event and an estimate of the extent and duration of its inability to perform; and     (b)      takes all reasonable steps to overcome or work around that Force Majeure Event as quickly as possible. Notwithstanding the foregoing in this Section, the parties acknowledge and agree that a Force Majeure Event that substantially adversely affects the ability of a party to perform its obligations under this Agreement continuously for a period of not less than 15 days will constitute a default by that party under Section 10.1(b) . CW638406.16 -------------------------------------------------------------------------------- - 12 - 17.      DISPUTES AND ARBITRATION   17.1      If there is any dispute arising out of or relating to this Agreement, then the parties will use reasonable good faith efforts to resolve such dispute, first by direct negotiation between the Primary Contacts and then, if that is not successful, between their immediate supervisors.   17.2      Any dispute arising out of or relating to this Agreement that is not settled by agreement between the parties within a reasonable time will be referred to and settled exclusively by binding arbitration by a single arbitrator. The location of the arbitration will be St.Gallen/Switzerland (Court of Commerce). The arbitrator will be selected and the arbitration will be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “Rules”), except that the provisions of this Agreement will prevail over the Rules to the extent of any direct conflict. The parties will share equally in the fees and expenses of the arbitrator and the cost of the facilities used for the arbitration hearing, but will otherwise each bear their respective costs incurred in connection with the arbitration. The award of the arbitrator will be final and binding on each party. Judgement upon the award may be entered in any court of competent jurisdiction.   17.3      The dispute resolution procedures described in this Section 17 are the sole and exclusive procedures for the resolution of any disputes which arise out of or are related to this Agreement, except that either party may seek preliminary or temporary injunctive relief from a court if, in that party’s sole judgment, such action is necessary to avoid irreparable harm or to preserve the status quo.   18.      GENERAL   18.1      Governing Law: This Agreement will be governed by and construed in accordance with the laws of Switzerland, excluding its conflict of laws rules. Subject to Section 17 herein, the parties irrevocably consent to the exclusive jurisdiction of the Courts of Switzerland, in St.Gallen, in the event of any dispute or proceeding hereunder. The parties expressly disclaim the application of the United Nations Convention on Contracts for the International Sale of Goods and all implementing legislation thereunder to this Agreement.   18.2      Severability: Any part of this Agreement that is prohibited by or rendered unlawful or unenforceable under any law actually applied by a court of competent jurisdiction or Arbitrator will be severed from this Agreement and the remaining provisions will continue to operate with full force and effect.   18.3      Further Acts: The parties will execute and deliver all such further documents, do or cause to be done all such further acts and things, and give all such further assurances as are necessary to give full force and effect to the provisions and intent of this Agreement.   18.4      Waiver: No waiver by any party of any breach of any provision of this Agreement will constitute a waiver of any other breach of the same or any other provision thereof and no waiver will be effective unless made in writing.   CW638406.16 -------------------------------------------------------------------------------- - 13 - 18.5      Subcontractors: Swiss Caps may not engage the services of third party contractors to perform any of its obligations under this Agreement without the express prior written consent of Oramed and Swiss Caps will at all times remain liable for the performance of such obligations by any approved subcontractor.   18.6      Enurement: This Agreement will bind each of the parties and their respective successors and permitted assigns.   18.7      Costs: Each party will bear its own costs and expenses in connection with the preparation, execution and delivery of the Agreement and all related documents and instruments.   18.8      Entire Agreement: This Agreement embodies the entire agreement between the parties in respect of the subject matter of the Agreement and there is no other understanding, agreement, representation or warranty, whether expressed or implied, in any way extending, modifying or qualifying any of the provisions of this Agreement.   18.9      Assignment: Swiss Caps will have no right to sell, lease, assign, transfer (whether directly or indirectly by way of a change of control of Swiss Caps), license, sublicense or otherwise dispose of any of its rights or obligations under this Agreement, without the prior written consent of Oramed and any attempt to do so will be void. Oramed may assign all or any part of the Agreement at any time upon the provision of written notice to Swiss Caps, provided that Oramed will remain responsible for payment of the Compensation unless otherwise agreed in writing by Swiss Caps.   18.10      Survival: The rights and obligations under Sections 8, 11, 12, 13, 14, 15, 17 and 18 survive expiry or termination of this Agreement. Termination or expiry of this Agreement will not extinguish or otherwise affect any rights of one party against the other party which accrued prior to such expiry or termination.   18.11      Variation: This Agreement may not be varied except in writing signed by both parties.   18.12      Notices: Any notice permitted or required under the Agreement must be in writing. Any such notice will be deemed delivered: (a) on the day of delivery in person; (b) one day after deposit with an overnight courier, fully prepaid; or (c) on the date sent by machine confirmed successful facsimile transmission; to the address or fax number to whom it is directed at the respective addresses and facsimile numbers listed herein. Either party may from time to time send written notice to the other party designating a different address, facsimile number or contact person for notices to it.   18.13      Relationship of Parties: In providing the Services herein, Swiss Caps will be an independent contractor to Oramed. Nothing in this Agreement will be construed as creating an agency, joint venture, partnership or employee/employer relationship.   18.14      Counterparts: This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile   CW638406.16 -------------------------------------------------------------------------------- - 14 - transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement. 18.15      Non-Solicitation of Personnel: In the absence of express prior written permission from Oramed, Swiss Caps will not hire or solicit for employment (or as an independent contractor) any employee or independent contractor of Oramed for a period of 12 months after the date such person’s employment or independent contract with Oramed is terminated. In the event of any breach or threatened breach of this Section by Swiss Caps, Oramed will, in addition to any other rights or remedies which it may have, be entitled to obtain injunctive relief (including interlocutory injunctive relief) from a Court of competent jurisdiction.   18.16      Remedies not Exclusive: Unless expressly stated to the contrary herein, no remedy made available under this Agreement is intended to be exclusive.   18.17      Time of the Essence: Time is of the essence in this Agreement. IN WITNESS WHEREOF, this Agreement is executed and delivered by the parties to have effect from the Effective Date: SWISS CAPS AG by its authorized representative: /s/ Dieter W. Engel                         Signature of Authorized Representative Dieter W. Engel, CEO Name         (please print) October 30, 2006                          Date ORAMED PHARMACEUTICALS, INC. by its authorized representative: /s/ Nadav Kidron                            Signature of Authorized Representative Nadav Kidron                                Name (please print) October 26, 2006                          Date CW638406.16 -------------------------------------------------------------------------------- SCHEDULE 1 STATEMENT OF WORK   Service Description:  Swiss Caps will:  See attached Development Plan dated  27.09.2006    Product:  See attached Development Plan dated  27.09.2006   Specifications:  See attached Development Plan dated  27.09.2006   Target Dates / Milestones:  See attached Development Plan dated  27.09.2006   Oramed Materials:  See attached Development Plan dated  27.09.2006  Compensation:  See attached Development Plan dated  27.09.2006  CW638406.16 -------------------------------------------------------------------------------- SCHEDULE 2 SWISS CAPS REPRESENTATIONS REGARDING ORAMED SHARES ACKNOWLEDGEMENTS OF SWISS CAPS 1.      Swiss Caps acknowledges and agrees that:     (a)      none of the common shares issuable to Swiss Caps pursuant to the Agreement (collectively, the “Shares”) have been registered under the United States Securities Act of 1933, as amended (the “1933 Act”), or under any state securities or "blue sky" laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, as that term is defined in Regulation S under the 1933 Act ("Regulation S"), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable state securities laws;     (b)      Swiss Caps has received and carefully read this Schedule 2 and the Agreement to which it is attached, and has carefully reviewed as much of the Company's books and records as Swiss Caps considers appropriate (collectively the "Company Information");     (c)      the decision to execute the Agreement and acquire the Shares pursuant to the Agreement has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based entirely upon a review of the Company Information. Swiss Caps acknowledges that the Company has not presented a business plan to Swiss Caps;     (d)      Swiss Caps and Swiss Caps' advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the issuance of the Shares under the Agreement, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information contained in the Company Information;     (e)      the Company is entitled to rely on the representations and warranties and the statements and answers of Swiss Caps contained in the Agreement and this Schedule;     (f)      it will indemnify and hold harmless the Company and, where applicable, its respective directors, officers, employees, agents, advisors and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of Swiss Caps contained in this Schedule, or in any other document furnished by Swiss Caps to the Company in connection with the Agreement or this Schedule being untrue in any material respect or any breach or failure by Swiss Caps to comply with any covenant or agreement made by Swiss Caps to the Company in connection with the Agreement or this Schedule;     (g)      the issuance of the Shares to Swiss Caps will not be completed if it would be unlawful. Swiss Caps warrants and represents that the issuance of the Shares by the Company will not be in breach of any laws or regulations in the jurisdiction of residence of Swiss Caps;     (h)      it has been advised to consult its own legal, tax and other advisors with respect to the merits and risks of an investment in the Shares and the Company, and with respect to applicable resale restrictions and it is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions;     (i)      no documents in connection with the sale of the Shares pursuant to the Agreement have been reviewed by the Securities and Exchange Commission or any state securities administrators; and   CW638406.16 -------------------------------------------------------------------------------- - 2 -             (j)          there is no government or other insurance covering any of the Shares. 2.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF SWISS CAPS   2.1      Swiss Caps hereby represents and warrants to and covenants with the Company that:     (a)      Swiss Caps has the legal capacity and competence to enter into and execute the Agreement and to take all actions required pursuant thereto, including under this Schedule;     (b)      Swiss Caps (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Shares for an indefinite period of time;     (c)      Swiss Caps is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment;     (d)      Swiss Caps has made an independent examination and investigation of an investment in the Shares and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for Swiss Caps' decision to invest in the Shares and the Company;     (e)      it has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Shares and the Company;     (f)      it is not a U.S. Person, and is not acquiring the Shares for the account or benefit of, directly or indirectly, any U.S. Person;     (g)      it will not execute the Agreement in the United States;     (h)      it is acquiring the Shares as principal for its own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in such Shares;     (i)      the entering into of the Agreement and the transactions contemplated thereby do not result in the violation of any of the terms and provisions of any law applicable to, or of any agreement, written or oral, to which Swiss Caps may be a party or by which Swiss Caps is or may be bound;     (j)      Swiss Caps has duly executed and delivered the Agreement and it constitutes a valid and binding agreement of Swiss Caps enforceable against Swiss Caps;     (k)      it is able to fend for itself with respect to its investment in the Shares and has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment;     (l)      Swiss Caps is not acquiring the Shares as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and     (m)      no person has made to Swiss Caps any written or oral representations:       (i)      that any person will resell or repurchase any of the Shares;       (ii)      that any person will refund the purchase price of any of the Shares;       (iii)      as to the future price or value of any of the Shares; or   CW638406.16 -------------------------------------------------------------------------------- - 3 -   (iv)           that any of the Shares will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Shares of the Company on any stock exchange or automated dealer quotation system (except that currently certain market makers make market in the common shares of the Company on the Over-the-Counter Bulletin Board service of the National Association of Shares Dealers Inc.).    2.2  In this Agreement, the term "U.S. Person" shall have the meaning ascribed thereto in Regulation S and for the purpose of the Agreement, including this Schedule, includes any person in the United States.    3.      RESALE RESTRICTIONS   3.1      Swiss Caps acknowledges that any resale of the Shares will be subject to resale restrictions contained in the securities legislation applicable to Swiss Caps. The Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all applicable state securities laws or exemptions from such registration requirements are available.   4.      LEGENDING OF SUBJECT SHARES   4.1      Swiss Caps hereby acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Shares will bear a legend in substantially the following form:   “THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.” CW638406.16 --------------------------------------------------------------------------------

Exhibit 10.1 EXECUTION COPY   -------------------------------------------------------------------------------- $835,000,000 CREDIT AGREEMENT Dated as of July 30, 2004, as Amended and Restated as of July 7, 2006, Among FOUNDATION COAL CORPORATION, as Holdings, FOUNDATION PA COAL COMPANY, LLC, as Borrower, THE LENDERS PARTY HERETO, THE ISSUING BANKS PARTY HERETO, CITICORP NORTH AMERICA, INC., as Administrative Agent and as Collateral Agent, BANK OF AMERICA, N.A., LASALLE BANK NATIONAL ASSOCIATION, PNC BANK, NATIONAL ASSOCIATION and THE ROYAL BANK OF SCOTLAND PLC, as Co-Documentation Agents, CITIGROUP GLOBAL MARKETS INC. as Sole Syndication Agent,   -------------------------------------------------------------------------------- CITIGROUP GLOBAL MARKETS INC., as Sole Lead Arranger and Sole Book Manager Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS           Page ARTICLE I DEFINITIONS SECTION 1.01.   Defined Terms   2 SECTION 1.02.   Terms Generally   45 SECTION 1.03.   Effectuation of Transfers   46 SECTION 1.04.   Effect of this Agreement on the Original Credit Agreement and the Other Loan Documents.   46 ARTICLE II THE CREDITS SECTION 2.01.   Commitments   47 SECTION 2.02.   Loans and Borrowings   47 SECTION 2.03.   Requests for Borrowings   48 SECTION 2.04.   Swingline Loans   49 SECTION 2.05.   Letters of Credit   50 SECTION 2.06.   Funding of Borrowings   55 SECTION 2.07.   Interest Elections   56 SECTION 2.08.   Termination and Reduction of Commitments   57 SECTION 2.09.   Repayment of Loans; Evidence of Debt   58 SECTION 2.10.   Repayment of New Term Loans and New Revolving Facility Loans   59 SECTION 2.11.   Prepayment of Loans   60 SECTION 2.12.   Fees   61 SECTION 2.13.   Interest   62 SECTION 2.14.   Alternate Rate of Interest   63 SECTION 2.15.   Increased Costs   64 SECTION 2.16.   Break Funding Payments   65 SECTION 2.17.   Taxes   65 SECTION 2.18.   Payments Generally; Pro Rata Treatment; Sharing of Set-offs   67 SECTION 2.19.   Mitigation Obligations; Replacement of Lenders   69 SECTION 2.20.   Additional Reserve Costs   70 SECTION 2.21.   Increase in New Revolving Facility Commitments and/or New Term Loan Commitments.   70 SECTION 2.22.   Illegality   71   -i- --------------------------------------------------------------------------------         Page ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01.   Organization; Powers   72 SECTION 3.02.   Authorization   72 SECTION 3.03.   Enforceability   73 SECTION 3.04.   Governmental Approvals   73 SECTION 3.05.   Financial Statements   73 SECTION 3.06.   No Material Adverse Change or Material Adverse Effect   73 SECTION 3.07.   Title to Properties; Possession Under Leases   73 SECTION 3.08.   Litigation; Compliance with Laws   75 SECTION 3.09.   Federal Reserve Regulations   76 SECTION 3.10.   Investment Company Act; Public Utility Holding Company Act   76 SECTION 3.11.   Use of Proceeds   76 SECTION 3.12.   Tax Returns   77 SECTION 3.13.   No Material Misstatements   77 SECTION 3.14.   Employee Benefit Plans   78 SECTION 3.15.   Environmental Matters   78 SECTION 3.16.   Security Documents   79 SECTION 3.17.   Location of Real Property and Leased Premises   80 SECTION 3.18.   Solvency   81 SECTION 3.19.   Labor Matters   81 SECTION 3.20.   Insurance   81 SECTION 3.21.   [Intentionally Omitted]   82 SECTION 3.22.   Anti-Terrorism Law   82 ARTICLE IV CONDITIONS OF LENDING SECTION 4.01.   All Credit Events   82 SECTION 4.02.   First Credit Event   83 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01.   Existence; Businesses and Properties   87 SECTION 5.02.   Insurance   88 SECTION 5.03.   Taxes   90 SECTION 5.04.   Financial Statements, Reports, etc.   90 SECTION 5.05.   Litigation and Other Notices   92 SECTION 5.06.   Compliance with Laws   93 SECTION 5.07.   Maintaining Records; Access to Properties and Inspections   93 SECTION 5.08.   Use of Proceeds   93 SECTION 5.09.   Compliance with Environmental Laws   93   -ii- --------------------------------------------------------------------------------         Page SECTION 5.10.   Further Assurances; Additional Mortgages   93 SECTION 5.11.   Fiscal Year; Accounting   95 SECTION 5.12.   [Intentionally Omitted]   95 SECTION 5.13.   Proceeds of Certain Dispositions   95 SECTION 5.14.   Motor Vehicles   96 SECTION 5.15.   New Post-Closing Matters   96 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01.   Indebtedness   96 SECTION 6.02.   Liens   99 SECTION 6.03.   Sale and Lease-Back Transactions   103 SECTION 6.04.   Investments, Loans and Advances   104 SECTION 6.05.   Mergers, Consolidations, Sales of Assets and Acquisitions   106 SECTION 6.06.   Dividends and Distributions   108 SECTION 6.07.   Transactions with Affiliates   110 SECTION 6.08.   Business of Holdings and the Subsidiaries   111 SECTION 6.09.   Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc.   111 SECTION 6.10.   Capital Expenditures   113 SECTION 6.11.   Interest Coverage Ratio   114 SECTION 6.12.   Leverage Ratio   114 SECTION 6.13.   Swap Agreements   114 SECTION 6.14.   Embargoed Person   114 SECTION 6.15.   Anti-Terrorism Law; Anti-Money Laundering   115 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01.   Events of Default   115 SECTION 7.02.   Exclusion of Immaterial Subsidiaries   118 ARTICLE VIII THE AGENTS SECTION 8.01.   Appointment   118 SECTION 8.02.   Nature of Duties   119 SECTION 8.03.   Resignation by the Agents   120 SECTION 8.04.   Each Agent in Its Individual Capacity   120 SECTION 8.05.   Indemnification   120 SECTION 8.06.   Lack of Reliance on Agents   120   -iii- --------------------------------------------------------------------------------           Page ARTICLE IX MISCELLANEOUS SECTION 9.01.    Notices    121 SECTION 9.02.    Survival of Agreement    122 SECTION 9.03.    Binding Effect    123 SECTION 9.04.    Successors and Assigns    123 SECTION 9.05.    Expenses; Indemnity    126 SECTION 9.06.    Right of Set-off    127 SECTION 9.07.    Applicable Law    128 SECTION 9.08.    Waivers; Amendment    128 SECTION 9.09.    Interest Rate Limitation    130 SECTION 9.10.    Entire Agreement    131 SECTION 9.11.    WAIVER OF JURY TRIAL    131 SECTION 9.12.    Severability    131 SECTION 9.13.    Counterparts    131 SECTION 9.14.    Headings    131 SECTION 9.15.    Jurisdiction; Consent to Service of Process    132 SECTION 9.16.    Confidentiality    132 SECTION 9.17.    Citigroup Direct Website Communications    133 SECTION 9.18.    Release of Liens and Guarantees    134 SECTION 9.19.    U.S. Patriot Act    134   EXHIBITS    Exhibit A    Form of Assignment and Acceptance Exhibit B    Form of Administrative Questionnaire Exhibit C-1    Form of Borrowing Request Exhibit C-2    Form of Swingline Borrowing Request ANNEXES    Annex A    [Reserved] Annex B    Covered Properties Annex C    Real Property Collateral SCHEDULES    Schedule 1.01(e)    Mortgaged Non-Covered Properties Schedule 2.01    Commitments Schedule 2.05(a)    Maximum Amount of Letters of Credit Schedule 3.01    Organization and Good Standing Schedule 3.04    Governmental Approvals   -iv- -------------------------------------------------------------------------------- Schedule 3.07(c)    Real Properties Schedule 3.07(d)    Certain Mining Claims Schedule 3.07(e)    Intellectual Property Schedule 3.07(f)    Condemnation Proceedings Schedule 3.07(h)    Subsidiaries Schedule 3.07(i)    Subscriptions Schedule 3.08(a)    Litigation Schedule 3.08(b)    Violations Schedule 3.12    Taxes Schedule 3.15    Environmental Matters Schedule 3.15(vii)    Underground Storage Tanks Schedule 3.19    Labor Matters Schedule 3.20    Insurance Schedule 4.02(B)(b)    Local Counsel Schedule 6.01    Indebtedness Schedule 6.02(a)    Liens Schedule 6.04    Investments Schedule 6.07    Transactions with Affiliates   -v- -------------------------------------------------------------------------------- CREDIT AGREEMENT, dated as of July 30, 2004, as amended and restated as of July 7, 2006 (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), among FOUNDATION COAL CORPORATION, a Delaware corporation (“Holdings”), FOUNDATION PA COAL COMPANY, LLC (formerly known as Foundation PA Coal Company, the successor to S2 Acquisition Corp) (the “Borrower”), the LENDERS party hereto from time to time, the ISSUING BANKS party hereto from time to time, CITICORP NORTH AMERICA, INC., as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Lenders, BANK OF AMERICA, N.A., LASALLE BANK NATIONAL ASSOCIATION, PNC BANK, NATIONAL ASSOCIATION and THE ROYAL BANK OF SCOTLAND PLC, each as a co-documentation agent (each in such capacity, a “Co-Documentation Agent”), CITIGROUP GLOBAL MARKETS INC. (“CGMI”), as sole syndication agent (in such capacity, the “Syndication Agent”), and as sole lead arranger and sole book manager (in such capacity, the “Lead Arranger”). W I T N E S S E T H : WHEREAS, the Borrower, FC 2 Corp., Holdings, the Lenders party thereto from time to time (the “Original Lenders”), Citicorp North America, Inc., as administrative agent and as collateral agent for the Original Lenders, UBS AG, Stamford Branch, Bear Stearns Corporate Lending, Inc. and Natexis Banques Populaires, each as a co-documentation agent, Citigroup Global Markets Inc. and Credit Suisse First Boston, each as a co-syndication agent, and Citigroup Global Markets Inc. and Credit Suisse First Boston, as joint lead arrangers and joint book managers, originally entered into the Credit Agreement, dated as of July 30, 2004, as amended by (i) Amendment No. 1, dated as of November 12, 2004 and (ii) Amendment No. 2, dated as of October 18, 2005 (the “Original Credit Agreement”). WHEREAS, on the Amendment Effective Date (as defined below), (a) the Tranche B Term Loans (as defined in the Original Credit Agreement) in an aggregate principal amount of $335.0 million are outstanding under the Original Credit Agreement and (b) Revolving Facility Loans (as defined in the Original Credit Agreement) in an aggregate principal amount of $0 are outstanding under the Original Credit Agreement. WHEREAS, Holdings, the Borrower, the Lenders party hereto and the other parties hereto desire to amend and restate the Original Credit Agreement on and subject to the terms and conditions set forth herein and in the Amendment Agreement, dated as of the date of this Agreement (the “Amendment Agreement”), among FC 2 Corp., Holdings, the Borrower, the Lenders party thereto, the Administrative Agent, the Collateral Agent and the other parties thereto. WHEREAS, the Borrower desires (a) to create a new class of New Term Loans (as defined below) to refinance and replace the Tranche B Term Loans outstanding under the Original Credit Agreement, (b) to create a new class of New Revolving Facility Commitments (as defined below) to replace the Revolving Facility Commitments under the Original Credit Agreement, and the proceeds of the New Revolving Facility Loans (as defined below) made under the New Revolving Facility Commitments on the Amendment Effective Date shall be applied to refinance and replace the Revolving Facility Loans outstanding under the Original Credit -------------------------------------------------------------------------------- Agreement, (c) to provide for an increase in the amount available for Letters of Credit from $250.0 million to $500.0 million, (d) to release FC 2 Corp from its Guarantee under the Collateral Agreement, (e) to release Coal Gas (as defined below) of the Loan Parties from the Collateral, and (f) to make certain other changes as provided herein. WHEREAS, the Obligations (as defined in the Original Credit Agreement) of Holdings, the Borrower and the other Loan Parties under the Original Credit Agreement and the Security Documents (as defined in the Original Credit Agreement, such Security Documents hereinafter the “Original Security Documents”) are secured by certain Collateral (as defined in the Original Credit Agreement) and are guaranteed or supported or otherwise benefited by the Original Security Documents. WHEREAS, the parties hereto intend that (a) the Obligations of Holdings, the Borrower and the other Loan Parties under the Original Credit Agreement and the other Loan Documents (as defined in the Original Credit Agreement) (the “Original Obligations” and such other Loan Documents are referred to as the “Original Loan Documents”) that remain unpaid and outstanding as of and after giving effect to the Amendment Effective Date shall continue to exist under and be evidenced by this Agreement and the other Loan Documents (as defined below), (b) any letters of credit outstanding under the Original Credit Agreement as of the date of this Agreement (the “Existing Letters of Credit”) shall be Letters of Credit under and as defined herein and (c) subject to Sections 15 and 16 of the Amendment Agreement, the Collateral (as defined in the Original Credit Agreement) and the Original Loan Documents shall continue to secure, guarantee, support and otherwise benefit the Original Obligations and the Obligations of Holdings, the Borrower and the other Loan Parties under this Agreement and the other Loan Documents. WHEREAS, the proceeds of the Loans are to be used in accordance with Section 5.08. WHEREAS, the Lenders hereto are willing to amend and restate the Original Credit Agreement and are willing to continue and extend such credit to the Borrower and each Issuing Bank is willing to issue letters of credit for the account of any Loan Party and the other parties hereto are willing to amend and restate the Original Credit Agreement, in each case on the terms and subject to the conditions set forth herein. NOW THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Original Credit Agreement is hereby amended and restated to read in its entirety as follows and, accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: “ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.   -2- -------------------------------------------------------------------------------- “ABR Loan” shall mean any ABR New Term Loan, ABR New Revolving Loan or Swingline Loan. “ABR New Revolving Facility Borrowing” shall mean a Borrowing comprised of ABR New Revolving Loans. “ABR New Revolving Loan” shall mean any New Revolving Facility Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. “ABR New Term Loan” shall mean any New Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. “Acquisition” shall have the meaning assigned to such term in the definition of the term Acquisition Agreement. “Acquisition Agreement” that certain Stock Purchase Agreement dated May 24, 2004 with RAG Coal International AG, a company organized under the laws of Germany, pursuant to which, among other things, Holdings acquired all of the issued and outstanding shares of each of (i) Foundation Coal West, Inc., a Delaware corporation (“Foundation West”), (ii) Foundation Wyoming Land Company, a Delaware corporation (“Foundation Wyoming”), and (iii) Foundation American Coal Holding, LLC (formerly known as Foundation Coal Holding, Inc., a Delaware corporation) (“Foundation American Coal Holding”) (collectively, the “Acquisition”). “Acquisition Agreement Payments” shall mean cash amounts received by Holdings, the Borrower or any of their Affiliates in respect of any claim under the Acquisition Agreement or as a direct or indirect result of any breach of any term or provision of the Acquisition Agreement or otherwise in respect of any claim by Holdings, the Borrower or any of their Affiliates arising out of the Acquisition (other than any working capital or capital expenditure adjustments under the Acquisition Agreement), in an aggregate amount in excess of $5.0 million; provided, however, that Acquisition Agreement Payments shall not include such cash amounts relating to indemnification of amounts actually paid or reasonably expected to be paid by any of Holdings, the Borrower or any of their Affiliates to persons other than Holdings, the Borrower or any of their Affiliates. “Acquisition Corp.” shall mean Holdings. “Additional New Commitments” shall have the meaning assigned to such term in Section 2.21. “Additional Lender” shall have the meaning assigned to such term in Section 2.21. “Additional Mortgage” shall have the meaning assigned to such term in Section 5.10(c).   -3- -------------------------------------------------------------------------------- “Additional New Revolving Facility Commitments” shall have the meaning assigned to such term in Section 2.21. “Additional New Revolving Facility Lender” shall have the meaning assigned to such term in Section 2.21. “Additional New Term Loan Commitments” shall have the meaning assigned to such term in Section 2.21. “Additional New Term Loan Lender” shall have the meaning assigned to such term in Section 2.21. “Additional New Term Loan” shall have the meaning assigned to such term in Section 2.21. “Adjusted LIBO Rate” shall mean, 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 the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves applicable to such Eurocurrency Borrowing, if any. “Administrative Agent” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.12(c). “Administrative Questionnaire” shall mean an Administrative Questionnaire in the form of Exhibit B. “Affiliate” shall mean, when used 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. “Agent Parties” shall have the meaning assigned to such term in Section 9.17(c). “Agents” shall mean the Administrative Agent and the Collateral Agent. “Agreement” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greater of (a) Citibank, N.A.’s Base Rate, (b) the three-month certificate of deposit plus 1/2 of 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (c) of the preceding sentence until the   -4- -------------------------------------------------------------------------------- circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Effective Rate, respectively. “Amendment Agreement” shall have the meaning assigned to such term in the recitals hereto. “Amendment Effective Date” shall mean the date, not later than July 7, 2006, that the conditions precedent set forth in Section 4.02(B) have been satisfied. “Anti-Terrorism Laws” shall have the meaning assigned to such term in Section 3.22(a). “Applicable Margin” shall mean (i) for any day with respect to any Eurocurrency Loan that is a New Revolving Facility Loan and any ABR Loan that is a New Revolving Facility Loan, the applicable margin per annum set forth below under the caption “New Revolving Facility Loan ABR Spread” and “New Revolving Facility Loan Eurocurrency Spread,” as applicable, based upon the Leverage Ratio as of the most recent determination date, and (ii) for any day with respect to any Eurocurrency Loan that is a New Term Loan and any ABR Loan that is a New Term Loan, the applicable margin per annum set forth below under the caption “New Term Loan ABR Spread” and “New Term Loan Eurocurrency Spread,” as applicable, based upon the Leverage Ratio as of the most recent determination date.   Leverage Ratio:    New Revolving Facility Loan ABR Spread     New Revolving Facility Loan Eurocurrency Spread     New Term Loan ABR Spread     New Term Loan Eurocurrency Spread   Category 1 Greater than 2.50 to 1.00    0.75 %   1.75 %   0.75 %   1.75 % Category 2 Equal to or less than 2.50 to 1.00 but greater than 1.50 to 1.00    0.25 %   1.25 %   0.25 %   1.25 % Category 3 Equal to or less than 1.50 to 1.00 but greater than 1.00 to 1.00    0.00 %   1.00 %   0.00 %   1.00 % Category 4 Equal to or less than 1.00 to 1.00    0.00 %   0.75 %   0.00 %   0.75 % For purposes of the foregoing, (1) the Leverage Ratio shall be determined as of the end of each fiscal quarter of Holdings’ fiscal year based upon the consolidated financial information of Holdings and the Subsidiaries delivered pursuant to Section 5.04(a) or (b) and (2) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the first Business Day after the date of delivery to the Administrative Agent of such consolidated financial information indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that until the Trigger Date, the Leverage Ratio shall be deemed to be in Category 2; provided, further, that   -5- -------------------------------------------------------------------------------- the Leverage Ratio shall be deemed to be in Category 1 at the option of the Administrative Agent or the Required Lenders, at any time during which Holdings fails to deliver the consolidated financial information when required to be delivered pursuant to Section 5.04(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial information is delivered. “Applicant Party” shall mean, with respect to any Letter of Credit issued hereunder, the applicable Loan Party requesting issuance of such Letter of Credit. “Approved Fund” shall have the meaning assigned to such term in Section 9.04(b). “Asset Acquisition” shall mean any Permitted Business Acquisition, the aggregate consideration for which exceeds $25.0 million. “Asset Disposition” shall mean any sale, transfer or other disposition by Holdings or any of the Subsidiaries to any person other than Holdings or any Subsidiary to the extent otherwise permitted hereunder of any asset or group of related assets (other than inventory or other assets sold, transferred or otherwise disposed of in the ordinary course of business) in one or a series of related transactions, the Net Proceeds from which exceed $25.0 million. “Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent and the Borrower (if required by such assignment and acceptance), in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. “Availability Period” shall mean the period from and including the Amendment Effective Date to but excluding the earlier of (i) the New Revolving Facility Maturity Date and (ii) the date of termination of the New Revolving Facility Commitments. “Available Investment Basket Amount” shall mean, on any date of determination, an amount equal to (a) the aggregate amount of proceeds received after the Amendment Effective Date and prior to such date that would have constituted Net Proceeds pursuant to clause (a) of the definition thereof except for the operation of clause (x) or (y) of the second proviso thereof, minus (b) any amounts thereof used to make Investments pursuant to Section 6.04(b) and/or clause (iii) of Section 6.04(m) after the Amendment Effective Date and on or prior to such date, minus (c) the aggregate amount of Capital Expenditures made after the Amendment Effective Date and on or prior to such date pursuant to Section 6.10(c). “Available Unused Commitment” shall mean, with respect to a New Revolving Facility Lender at any time, an amount equal to the amount by which (a) the New Revolving Facility Commitment of such New Revolving Facility Lender at such time exceeds (b) the New Revolving Facility Credit Exposure of such New Revolving Facility Lender at such time. “Base Rate” shall mean the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25% to the next higher 0.25%) of (i) 0.5% per annum, (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money   -6- -------------------------------------------------------------------------------- market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for Citibank, N.A. in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States and (iii) the average during such three-week period of the maximum annual assessment rates estimated by Citibank, N.A. for determining the then current annual assessment payable by Citibank, N.A. to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. Dollar deposits in the United States. “Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America. “Board of Directors” shall mean, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing. “Borrower” shall have the meaning assigned to it in the recitals hereof. “Borrowing” shall mean a group of Loans of a single Type under a single Facility and made on a single date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect. “Borrowing Minimum” shall mean (a) in the case of an ABR New Revolving Facility Borrowing, $5.0 million, (b) in the case of a Eurocurrency New Revolving Facility Borrowing, $5.0 million, and (c) in the case of a Swingline Borrowing, $500,000. “Borrowing Multiple” shall mean (a) in the case of a New Revolving Facility Borrowing $1.0 million as applicable and (b) in the case of a Swingline Borrowing, $500,000. “Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C-1. “Business Day” shall mean 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 when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market.   -7- -------------------------------------------------------------------------------- “Capital Expenditures” shall mean, for any person in respect of any period, the aggregate of all expenditures incurred by such person during such period that, in accordance with GAAP, are or should be included in “additions to property, plant or equipment” or similar items reflected in the statement of cash flows of such person; provided, however, that Capital Expenditures for Holdings and the Subsidiaries shall not include: (a) [intentionally omitted], (b) expenditures of proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire, maintain, develop, construct, improve, upgrade or repair assets or properties useful in the business of the Borrower and the Subsidiaries within 12 months of receipt of such proceeds, (c) interest capitalized during such period, (d) expenditures that are accounted for as capital expenditures of such person and that actually are paid for by a third party (excluding Holdings or any Subsidiary thereof) and for which neither Holdings nor any Subsidiary thereof has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other person (whether before, during or after such period), (e) the book value of any asset owned by such person prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period, provided that (i) any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period that such expenditure actually is made and (ii) such book value shall have been included in Capital Expenditures when such asset was originally acquired, (f) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (i) used or surplus equipment traded in at the time of such purchase and (ii) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, (g) Investments in respect of a Permitted Business Acquisition, (h) the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, or (i) expenditures incurred as a result of the Lease by Application in Powder River Basin.   -8- -------------------------------------------------------------------------------- “Capital Lease Obligations” of any person shall mean 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, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. “Capital Stock Buyback Distributions” shall have the meaning assigned to it in Section 6.06(f). “Capture” shall mean to collect, treat (if necessary), process (if necessary), transport, store (if necessary), market and sell Gas that is available from any well or any bore or vent hole. “Cash Interest Expense” shall mean, with respect to Holdings and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period, less the sum of (a) pay-in-kind Interest Expense or other noncash Interest Expense (including as a result of the effects of purchase accounting), (b) to the extent included in Interest Expense, the amortization of any financing fees paid by, or on behalf of, Holdings or any Subsidiary, including such fees paid in connection with the Transactions, (c) the amortization of debt discounts, if any, or fees in respect of Swap Agreements and (d) cash interest income of Holdings and its Subsidiaries for such period; provided that Cash Interest Expense shall exclude any one-time financing fees paid in connection with the New Transactions or any amendment of this Agreement or upon entering into a Permitted Receivables Financing. “CGMI” has the meaning assigned to such term in the introductory paragraph of this Agreement. A “Change in Control” shall be deemed to occur if: (a) at any time the Public Parent shall fail to own, directly or indirectly, beneficially and of record, 100% of the issued and outstanding Equity Interests of Holdings, Foundation American Coal Holding, Foundation West, Foundation Wyoming and the Borrower; or (b) at any time, a majority of the seats (other than vacant seats) on the Board of Directors of the Public Parent shall at any time be occupied by persons who were neither (A) nominated by the Board of Directors of the Public Parent or (B) appointed by directors so nominated; or (c) a “Change in Control” shall occur under the Senior Note Indenture or under any Permitted Debt Securities; or (d) any “person” or “group” (each as used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Amendment Effective Date) is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act as in effect on the Amendment Effective Date), directly or indirectly, in the aggregate Equity Interests representing 35% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Public Parent; or   -9- -------------------------------------------------------------------------------- (e) Holdings ceases to beneficially own, directly or indirectly, all of the Equity Interests of the Borrower. “Change in Law” shall mean (a) the adoption of any law, rule or regulation after the Amendment Effective Date, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Amendment Effective Date or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any written request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Amendment Effective Date. “Charges” shall have the meaning assigned to such term in Section 9.09. “Coal” shall mean all types of solid naturally occurring hydrocarbons (other than oil shale or Gilsonite), including without limitation, bituminous and sub-bituminous coal, and lignite. “Coal Gas” shall mean occluded methane gas and all associated natural gas and other hydrocarbons of whatever quality or quantity, whether known or unknown, that are, can be, or historically have been produced or emitted from coalbeds, coal formations, coal seams, mined out areas, gob areas, or any related, associated, or adjacent rock material or strata, together with all substances produced with each of the foregoing or refined therefrom. For the avoidance of doubt, the term “Coal Gas” shall expressly include all substances commonly known as “coalbed methane,” “coal mine methane,” and “gob gas”. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. “Co-Documentation Agent” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “Collateral” shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties. “Collateral Agent” shall have the meaning given such term in the introductory paragraph of this Agreement. “Collateral Agreement” shall mean the Guarantee and Collateral Agreement, in the form of Exhibit E to the Original Credit Agreement, dated as of the Original Closing Date, among FC 2 Corp., Holdings, the Borrower, each Domestic Subsidiary Loan Party and the Collateral Agent, as amended, supplemented or otherwise modified from time to time.   -10- -------------------------------------------------------------------------------- “Collateral and Guarantee Requirement” shall mean the requirement that:1 (a) on the Original Closing Date, the Collateral Agent shall have received from FC 2 Corp., Holdings, the Borrower and each Domestic Subsidiary Loan Party a counterpart of the Collateral Agreement duly executed and delivered on behalf of such person; (b) on the Original Closing Date, the Collateral Agent shall have received all the issued and outstanding Equity Interests of (A) Holdings, (B) the Borrower, (C) each Domestic Subsidiary Loan Party and (D) any other Domestic Subsidiary owned on the Original Closing Date directly by or on behalf of FC 2 Corp. or any Domestic Subsidiary Loan Party, except to the extent that a pledge of such Equity Interests would violate applicable law or a contractual obligation binding upon such Equity Interests as of the Original Closing Date and for so long as such restriction exists; and the Collateral Agent shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank; (c) in the case of any person that becomes a Domestic Subsidiary Loan Party after the Original Closing Date, the Collateral Agent shall have received (i) a supplement to the Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such Domestic Subsidiary Loan Party and (ii) if such Subsidiary owns Equity Interests of a Foreign Subsidiary that, as a result the law of the jurisdiction of organization of such Foreign Subsidiary, cannot be pledged under local applicable law to the Collateral Agent under the Collateral Agreement, a foreign pledge agreement with respect to such Equity Interests (provided that in no event shall more than 65% of the issued and outstanding Equity Interests of any Foreign Subsidiary be pledged to secure Obligations), duly executed and delivered on behalf of such Subsidiary; (d) after the Original Closing Date, all the outstanding Equity Interests of (A) any person that becomes a Domestic Subsidiary Loan Party after the Original Closing Date and (B) subject to Section 5.10(f), all the Equity Interests that are acquired by a Loan Party after the Original Closing Date, shall have been pledged pursuant to the Collateral Agreement, as applicable (provided that in no event shall more than 65% of the issued and outstanding Equity Interests of any Foreign Subsidiary be pledged to secure Obligations), and the Collateral Agent shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank; (e) all Indebtedness of Holdings, the Borrower and each other Subsidiary having an aggregate principal amount in excess of $10.0 million (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and its Subsidiaries) that is owing to any Loan Party shall be evidenced by a promissory note or an instrument and shall have been pledged pursuant to the   -------------------------------------------------------------------------------- 1 To be reviewed further and to be reviewed by Real Estate lawyers   -11- -------------------------------------------------------------------------------- Collateral Agreement, and the Collateral Agent shall have received all such promissory notes or instruments, together with note powers or other instruments of transfer with respect thereto endorsed in blank; (f) all documents and instruments, including UCC 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 Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document; (g) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and the performance of its obligations thereunder; and (h) the Collateral Agent shall receive from the applicable Loan Parties the following documents and instruments relating to the Real Property Collateral on the dates specified below: (i) with respect to each Covered Property and each after acquired Real Property to be encumbered by an Additional Mortgage pursuant to Section 5.10, on the Original Closing Date, in the case of Covered Property, and on the date specified in Section 5.10, in the case of such after acquired Real Property, a Mortgage substantially in the form of Exhibit D-1 to the Original Credit Agreement duly authorized and executed, in form for recording in the recording office of each jurisdiction where the Covered Property or such after acquired Real Property to be encumbered thereby is situated, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, together with such other instruments as shall be necessary or appropriate (in the judgment of the Collateral Agent) to create a Lien under applicable law, all of which shall be in form and substance reasonably satisfactory to Collateral Agent, which Mortgage and other instruments is (and after giving effect to the New Transactions, continues to be) effective to create and/or maintain a first priority Lien on such Covered Property or such after acquired Real Property, as the case may be, subject to (i) no Liens other than Prior Liens applicable to such Covered Property or such after acquired Real Property, as the case may be and (ii) in the case of such after acquired Real Property, Permitted Encumbrances; (ii) on the Original Closing Date, with respect to each Non-Covered Property owned by Holdings and the applicable Loan Party as of such Original Closing Date, a Mortgage in the form of Exhibit D-2 to the Original Credit Agreement, duly authorized and executed, in form for recording in the recording office of each jurisdiction where such Real Property encumbered thereby is situated, in favor of the Collateral Agent for its benefit and the benefit of the Secured Parties, together with such other instruments as shall be necessary or appropriate (in the judgment of the Collateral Agent) to create a Lien under applicable law, all of which shall be in form   -12- -------------------------------------------------------------------------------- and substance reasonably satisfactory to Collateral Agent, which Mortgage and other instruments is (and after giving effect to the New Transactions, continues to be) effective to create and/or maintain a first priority Lien on such Non-Covered Property subject to (i) no Liens other than Prior Liens applicable to such Non-Covered Property, (ii) Permitted Encumbrances; and (iii) the inability of the Loan Parties to grant a security interest in unrecorded Real Property interests; provided, however, that the Loan Parties shall endeavor to record such unrecorded instruments in accordance with Section 1.10 of the Mortgage; (iii) on the Original Closing Date, an Intercompany Lease Agreement, duly authorized and executed, assigning each Loan Party’s interest in the Intercompany Leases to the Collateral Agent, for its benefit and the benefit of the Secured Parties, in form for recording in the recording office of each jurisdiction where the Real Property demised under each Intercompany Lease is situated, together with such other instruments as shall be necessary or appropriate (in the judgment of the Collateral Agent) to create a Lien under applicable law, all of which shall be in form and substance reasonably satisfactory to Collateral Agent, which Intercompany Lease Agreement and other instruments is (and after giving effect to the New Transactions, continues to be) effective to create (upon recordation of such instruments at the times contemplated in the Intercompany Lease Agreement) a first priority Lien on such Loan Party’s interests in the Intercompany Leases subject to no Liens other than Prior Liens permitted by the Intercompany Lease Agreement; (iv) with respect to each Covered Property demised under a lease requiring consent to encumber such Covered Property by a Mortgage as set forth in Schedule 1.01(c) to the Original Credit Agreement a landlord consent, substantially in the form of Exhibit H to the Original Credit Agreement, or such other form as is reasonably acceptable to the Administrative Agent, delivered on the Original Closing Date; and with respect to each Real Property listed on Schedule 1.01(h)(1) to the Original Credit Agreement a landlord consent, substantially in the form of Exhibit H to the Original Credit Agreement, or such other form as is reasonably acceptable to the Administrative Agent, delivered within the Original Post-Closing Matters Period, except to the extent such consent cannot be obtained after commercially reasonable efforts to obtain such consent within the Original Post-Closing Matters Period have been made; (v) on the Original Closing Date and on the Amendment Effective Date, with respect to each Real Property (including both Covered Property and Non-Covered Property), policies or certificates of insurance of the type required by Section 5.02; (vi) on the Original Closing Date and on the Amendment Effective Date, with respect to each Real Property (including, without limitation, both Covered Property and Non-Covered Property), UCC, judgment and tax Lien searches in form and substance satisfactory to Administrative Agent;   -13- -------------------------------------------------------------------------------- (vii) on the Original Closing Date and within the Original Post-Closing Matters Period, as applicable, evidence acceptable to Administrative Agent of payment by Borrower of all title insurance premiums, search and examination charges, mortgage recording taxes and related charges required for the recording of the Mortgages and issuance of the title insurance policies referred to in clause (ix) below; (viii) [intentionally omitted]; (ix) within the Original Post-Closing Matters Period, with respect to (a) each Covered Property on which significant surface Improvements are located as indicated on Schedule 1.01(d) to the Original Credit Agreement (other than Covered Properties located in the State of Illinois or the State of West Virginia), a policy of title insurance (or marked up commitment having the effect of a title insurance policy) or a binding commitment from the Title Company to issue such title insurance in the form approved by the Administrative Agent insuring the Lien of the Mortgage encumbering such Covered Property as a valid first priority Lien (subject to this paragraph (x)) on the Real Property and fixtures described therein and (b) each other Covered Property listed on Schedule 1.01(h)(2) to the Original Credit Agreement, a title opinion confirming that the Lien of the Mortgage encumbering such Covered Property constitutes a valid first priority Lien thereon and fixtures described therein. Each policy of title insurance (or marked up commitment having the effect of a title insurance policy) described in this clause (ix) shall be in an amount set forth on Schedule 1.01(f) to the Original Credit Agreement and shall (a) be issued by the Title Company, (b) include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to Administrative Agent, (c) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel or other professionals acceptable to Administrative Agent) as shall be reasonably requested by Administrative Agent and shall be available in the applicable jurisdiction at commercially reasonable rates (including, without limitation, endorsements on matters relating to usury, first loss, last dollar, zoning (or PZR report), revolving credit, doing business, variable rate, address, separate tax lot, subdivision, tie in or cluster, deletion of the creditors’ rights exclusion, and, to the extent the Loan Parties shall, after utilizing commercially reasonable efforts, be successful in inducing the Title Company to accept an instrument of indemnification from the Loan Parties in lieu of a survey to issue such endorsements, contiguity, road access and so-called comprehensive coverage over covenants and restrictions), (d) include such affidavits and instruments of indemnifications by Borrower and the applicable Subsidiary as shall be reasonably required to induce the Title Company to issue the policy or policies (or commitment) and endorsements contemplated in this paragraph and (e) contain no exceptions to title other than exceptions for Prior Liens and other exceptions reasonably acceptable to Administrative Agent. Each title opinion referred to in the foregoing in this clause (ix) shall (a) contain such supplemental opinions as shall be reasonably requested by Administrative Agent and shall be commercially reasonably available (including, without limitation, opinions on matters relating to zoning (or PZR report), contiguity and road access), (b) be accompanied by such affidavits and instruments as shall be reasonably requested by Administrative Agent in connection with such opinions and (c) contain no exceptions   -14- -------------------------------------------------------------------------------- to title other than exceptions for Prior Liens and other exceptions reasonably acceptable to Administrative Agent; it being understood that with respect to the legal descriptions attached to the Mortgages encumbering the Covered Properties insured by the policies of title insurance described by this clause (ix), in the event the Administrative Agent determines that any Mortgage does not include all of the real property which is owned or leased by Borrower or a Subsidiary at that particular site, then upon written notice of the Administrative Agent, Borrower or its Subsidiary shall execute and deliver (at the sole cost and expense of Borrower) all necessary documentation, including without limitation an amendment to the applicable Mortgage, to cause the unencumbered portion of said real property to be included in such Mortgage; (x) within the Original Post-Closing Matters Period, with respect to each Mortgaged Property encumbered pursuant to this clause (h) and in which each mortgagor granted a Mortgage to the Collateral Agent on the Original Closing Date, the applicable Loan Parties shall comply with the requirements of Section 1.10 of each Mortgage and in connection therewith the Loan Parties shall (X) execute and deliver to the Collateral Agent amendments to the Mortgages in form and substance reasonably acceptable to the Collateral Agent to include the recording information of the memoranda of leases recorded in accordance with the provisions of Section 1.10 of each Mortgage, (Y) cause such amendments to be recorded at its sole cost and expense and (Z) deliver to the Collateral Agent an opinion of counsel in form and substance reasonably acceptable to the Collateral Agent as to the enforceability and validity of the mortgage lien, as so amended, and the adequacy of the legal descriptions as so amended; (xi) within the Original Post-Closing Matters Period, the applicable Loan Parties shall, at their sole cost and expense, deliver to the Collateral Agent copies of each certificate of change of name, certified by the appropriate secretary of state, of each mortgagor under each Mortgage and cause such certified certificate to be recorded in each recorder’s office in which each mortgagor granted a Mortgage to the Collateral Agent on the Original Closing Date; (xii) with respect to each Covered Property, all such other items as shall be reasonably necessary in the opinion of counsel to the Lenders to create a valid perfected first priority mortgage Lien on such Covered Property subject only to Prior Liens, delivered within the Original Post-Closing Matters Period, in the case of those matters set forth in clauses (iv), (vii), (ix), (x), (xi) and (xii) of this paragraph (h), and on the Original Closing Date, in all other cases; (i) the Collateral Agent shall have received the items described in Section 4.02(B)(e)(ii) on the Amendment Effective Date; and (j) the applicable Loan Parties shall have delivered to the Administrative Agent the document required to be delivered to the Administrative Agent pursuant to Section 5.15 within the time period provided in such Section 5.15.   -15- -------------------------------------------------------------------------------- “Commitment Fee” shall have the meaning assigned to such term in Section 2.12(a). “Commitments” shall mean (a) with respect to any Lender, such Lender’s New Revolving Facility Commitment and New Term Loan Commitment and (b) with respect to any Swingline Lender, its Swingline Commitment, as applicable. “Communications” shall have the meaning assigned to such term in Section 9.17. “Consolidated Debt” at any date shall mean (without duplication) all Indebtedness consisting of Capital Lease Obligations, Indebtedness for borrowed money (other than letters of credit to the extent undrawn) and Indebtedness in respect of the deferred purchase price of property (excluding the Lease by Application in Powder River Basin) or services of Holdings and its Subsidiaries determined on a consolidated basis on such date plus (ii) any Receivables Net Investment. “Consolidated Net Income” shall mean, with respect to any person for any period, the aggregate of the Net Income of such person and its subsidiaries for such period, on a consolidated basis; provided, however, that (i) any net after-tax extraordinary or nonrecurring gains or losses or income or expenses or charges (including, without limitation, income, expenses and charges attributable to litigation and arbitration settlements, severance, relocation and other restructuring costs), less all fees and expenses relating thereto, and fees, expenses or charges related to any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful); provided that, with respect to each nonrecurring item, Holdings shall have delivered to the Administrative Agent an officers’ certificate specifying and quantifying such item and stating that such item is a nonrecurring item, (ii) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded, (iii) any net after-tax gain or loss (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors of Holdings) shall be excluded, (iv) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness (including obligations under Swap Agreements) shall be excluded, (v) (A) the Net Income for such period of any person that is not a subsidiary of such person, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent person or a subsidiary thereof in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payment in cash received from any person in excess of the amounts included in clause (A),   -16- -------------------------------------------------------------------------------- (vi) the Net Income for such period of any subsidiary (that is not a Guarantor) of such person shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or in similar distributions has been legally waived (provided that the net loss of any such subsidiary shall be included and that the Consolidated Net Income of such person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by such subsidiary in respect of such period to the extent not already, or previously, included therein), (vii) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period, (viii) an amount equal to the amount of Permitted Tax Distributions actually made for such period shall be included as though such amounts had been paid as income taxes, so long as such Permitted Tax Distributions are permitted to be made pursuant to Section 6.06(e), (ix) any increase in depreciation, depletion or amortization or any one-time noncash charges (such as purchased in-process research and development or capitalized manufacturing profit in inventory) resulting from purchase accounting in connection with any acquisition that is consummated prior to or after the Amendment Effective Date shall be excluded, (x) [intentionally omitted], (xi) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141 shall be excluded, and (xii) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such person or any of its subsidiaries shall be excluded. “Consolidated Total Assets” shall mean, as of any date, the total assets of Holdings and the consolidated Subsidiaries, determined in accordance with GAAP, as set forth on the consolidated balance sheet of Holdings as of such date. “Control” shall mean 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 ownership of voting securities, by contract or otherwise, and “Controlling” and “Controlled” shall have meanings correlative thereto.   -17- -------------------------------------------------------------------------------- “Conventional O & G” shall mean all liquid or gaseous hydrocarbons, other than Coal Gas, including, without limitation, condensate, distillate, and other substances produced with each of the foregoing or refined therefrom, in each case, whether known or unknown. For the avoidance of doubt, the term “Conventional O & G” shall expressly include, without limitation, all substances commonly known as “conventional oil and gas.” “Covered Properties” shall mean those Real Properties listed on Annex B. “Credit Event” shall have the meaning assigned to such term in Article IV. “Default” shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default. “Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect. “Documentation Agent” shall have the meaning assigned to such term in the introductory paragraph to this Agreement. “Dollars” or “$” shall mean lawful money of the United States of America. “Domestic Subsidiary Loan Party” or “Subsidiary Loan Party” shall mean (A) each Wholly Owned Subsidiary of Holdings (other than the Borrower) that is not (a) a Foreign Subsidiary or (b) a Special Purpose Receivables Subsidiary and (B) each Domestic Subsidiary of Holdings or the Subsidiaries that guarantees any Indebtedness of Holdings or any of the Subsidiaries. “EBITDA” shall mean, with respect to Holdings and the Subsidiaries on a consolidated basis for any period, the Consolidated Net Income of Holdings and the Subsidiaries for such period plus (a) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (ix) of this clause (a) reduced such Consolidated Net Income for the respective period for which EBITDA is being determined): (i) provision for Taxes based on income, profits or capital of Holdings and the Subsidiaries for such period, including, without limitation, state, franchise and similar taxes (such as the Pennsylvania and West Virginia franchise tax) (including any Permitted Tax Distributions made pursuant to Section 6.06(e) that was taken into account in calculating Consolidated Net Income), (ii) Interest Expense of Holdings and the Subsidiaries for such period (net of interest income of Holdings and its Subsidiaries for such period), (iii) depreciation, depletion and amortization (including amortization of goodwill and other intangibles, deferred financing fees and any amortization included in pension, OPEB or other employee benefit expenses, but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including, without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting but excluding   -18- -------------------------------------------------------------------------------- any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expenses that was paid in a prior period) of Holdings and its Subsidiaries for such period, (iv) business optimization expenses and other restructuring charges; provided that with respect to each business optimization expense or other restructuring charge, Holdings shall have delivered to the Administrative Agent an officers’ certificate specifying and quantifying such expense or charge and stating that such expense or charge is a business optimization expense or other restructuring charge, as the case may be, (v) any other noncash charges (but excluding any such charge which requires an accrual of, or a cash reserve for, anticipated cash charges for any future period); provided that, for purposes of this subclause (v) of this clause (a), any noncash charges or losses shall be treated as cash charges or losses in any subsequent period during which cash disbursements attributable thereto are made, (vi) the income attributable to minority equity interests of third parties in any non-Wholly Owned Subsidiary of Holdings in such period or any prior period, except to the extent of dividends declared or paid on Equity Interests held by third parties, (vii) the noncash portion of “straight-line” rent expense, (viii) [intentionally omitted], and (ix) accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, and any similar accounting in prior periods; and minus (b) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) and (iii) of this clause (b) increased such Consolidated Net Income for the respective period for which EBITDA is being determined): (i) the loss attributable to the minority equity interests of third parties in any non-Wholly Owned Subsidiary of Holdings, (ii) noncash items increasing Consolidated Net Income of Holdings and the Subsidiaries for such period (but excluding any such items (A) in respect of which cash was received in a prior period or will be received in a future period or (B) which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period) and (iii) the cash portion of “straight-line” rent expense which exceeds the amount expensed in respect of such rent expense. “Embargoed Person” or “Embargoed Persons” shall have the meaning given such term in Section 6.14.   -19- -------------------------------------------------------------------------------- “Environment” shall mean ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna, the workplace or as otherwise defined in any Environmental Law. “Environmental Law” shall mean collectively, all laws, including common law, that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment, or of natural resources, including (i) to the extent so related, Mining Laws (other than the Mine Safety and Health Act (30 U.S.C. Section 801 et seq.)), and (ii) all Reclamation Laws, and (b) the generation, handling, treatment, storage, disposal or transportation, the regulation of or exposure to Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et Seq (“CERCLA”), the Endangered Species Act, 16 U.S.C. §§1531 et seq., the Federal Land Policy and Management Act, 43 U.S.C. §§1701 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et seq. (“RCRA”), the Clean Air Act, 42 U.S.C. §§7401 et. seq., the Clean Water Act, 33 U.S.C. §§1251 et seq., the Toxic Substances Control Act, 15 U.S.C. §§2601 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§11001 et seq., each as amended, and their state or local counterparts or equivalents. “Equity Interests” of any person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with Holdings, the Borrower or any other Subsidiary, 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. “ERISA Event” shall mean (a) any Reportable Event; (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, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the incurrence by Holdings, the Borrower, any other Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA; (e) the receipt by Holdings, the Borrower, any other Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA, or the occurrence of any event or condition which could be reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the incurrence by Holdings, the Borrower, any other Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (g) the receipt by Holdings,   -20- -------------------------------------------------------------------------------- the Borrower, any other Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings, the Borrower, a Subsidiary 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; or (h) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to Holdings, the Borrower or any other Subsidiary. “Eurocurrency Borrowing” shall mean a Borrowing comprised of Eurocurrency Loans. “Eurocurrency Loan” shall mean any Eurocurrency New Term Loan or Eurocurrency New Revolving Loan. “Eurocurrency New Revolving Facility Borrowing” shall mean a Borrowing comprised of Eurocurrency New Revolving Loans. “Eurocurrency New Revolving Loan” shall mean any New Revolving Facility Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. “Eurocurrency New Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. “Event of Default” shall have the meaning assigned to such term in Section 7.01. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Existing Letters of Credit” shall have the meaning assigned to such term in the recitals hereof. “Excluded Indebtedness” shall mean all Indebtedness permitted to be incurred under Section 6.01 (other than Sections 6.01(o) and (t)). “Excluded Taxes” shall mean, with respect to the Agents, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income 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 tax or any similar tax that is imposed by any jurisdiction described in clause (a) above and (c) in the case of a Lender making a Loan to the Borrower (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax imposed by the United States that is in effect and would apply to amounts payable hereunder to such Lender at the time such Lender becomes a party to such Loan (or designates a new lending office) or is attributable to such Lender’s failure to comply with Section 2.17(e) with respect to such Loan except to the extent that such 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 a Loan Party with respect to any withholding tax pursuant to Section 2.17(a) or Section 2.17(c).   -21- -------------------------------------------------------------------------------- “Executive Order” shall have the meaning assigned to such term in Section 3.22(a). “Executive Orders” shall have the meaning given such term in Section 6.14. “Facility” shall mean the respective facility and commitments utilized in making Loans and credit extensions hereunder, it being understood that as of the date of this Agreement there are two Facilities, i.e., the New Term Loan Facility and the New Revolving Facility. “FC 2 Corp.” means FC 2 Corp., a Delaware corporation. “Federal Funds Effective Rate” shall mean, for any day, the weighted average (rounded upward, 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 which is a Business Day, the average (rounded upward, if necessary, to the next 1/100 of 1%) of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. “Fee Letter” shall mean that certain Fee Letter dated June 5, 2006 by and among Holdings, the Borrower and CGMI, as amended from time to time. “Fees” shall mean the Commitment Fees, the L/C Participation Fees, the Issuing Bank Fees and the Administrative Agent Fees. “Financial Officer” of any person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such person. “Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than the United States of America. 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 Subsidiary” shall mean any Subsidiary that is incorporated or organized under the laws of any jurisdiction other than the United States of America, any State thereof or the District of Columbia. “Foundation American Coal Holding” shall have the meaning assigned to such term in the definition of the term Acquisition Agreement. “Foundation West” shall have the meaning assigned to such term in the definition of the term Acquisition Agreement.   -22- -------------------------------------------------------------------------------- “Foundation Wyoming” shall have the meaning assigned to such term in the definition of the term Acquisition Agreement. “GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, subject to the provisions of Section 1.02. “Gas” shall mean Conventional O & G and Coal Gas. “Gas Co.” shall mean any Person that is created for the purpose of holding or that otherwise holds, directly or indirectly, Hydrocarbon Property, so long as such Person’s only assets, held directly or indirectly, consist of Hydrocarbon Property. “Gas Properties” shall mean (a) any Hydrocarbon Property, and (b) any capital stock, partnership interests, membership interests, or other ownership interests of any Gas Co. “Governmental Authority” shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body. “Guarantee” of or by any person (the “guarantor”) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of 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, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or- pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (ii) 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, (iii) 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, (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (v) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or other obligation, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other person, whether or not such Indebtedness or other obligation is assumed by the guarantor; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Amendment Effective Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement. “Hazardous Materials” shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including, without limitation, explosive or radioactive substances or petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature, in each case subject to regulation or which can give rise to liability under any Environmental Law.   -23- -------------------------------------------------------------------------------- “Holdings” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “Hydrocarbon Property” shall mean all of the following: (a) all right, title, interest and estate of any Loan Party, whether now owned or hereafter acquired (“Gas Rights”) in and to: (i) any “drilling unit”, as that term is commonly used in the Gas business, including but not limited to those that are established or prescribed by field rules or other regulatory orders, (ii) any well or any vent or bore hole drilled and permitted for the commercial production of Gas and/or degasification of a coalbed, coal formation, coal seam or mine area and any site on which it is located, (iii) equipment that is used or useful solely in connection with the Capture or monitoring of Gas produced from any well or any vent or bore hole described in clause (a)(ii) above, including, without limitation, any wellhead equipment, compressor, treating facility, storage facility, processing plant and gathering or transportation line, and in no event including any equipment which if sold would disrupt or negatively affect the Coal operations of the Loan Parties in any material respect, (iv) all assets associated solely with any item described in clauses (a)(i), (ii) and (iii) above, including, without limitation, Gas reserves, surface rights of way and all geological, geophysical, engineering, accounting, title, legal and other technical or business data concerning Gas, (v) any Gas and any right to Capture Gas, (vi) any lease, agreement, instrument, order, declaration, understanding or other arrangement, as the same may be amended, modified, supplemented, replaced, or amended and restated, relating to (A) the Capture of Gas, or (B) the pooling, utilization or communization of Gas, and (vii) other assets solely used in the ordinary course of business in connection with the operation, administration or management of Gas operations; (b) all tenements, hereditaments, appurtenances and properties now owned or hereafter acquired by any Loan Party to which the Gas Rights described above in paragraph (a) of this definition are, in any way, appertaining, belonging, fixed or incidental, including, without limitation, any and all property, real or personal, now owned or hereafter acquired and situated upon, used, held for use, or useful solely in connection with the operating, working or development of any of such Gas Rights or the lands pooled or unitized therewith including any and all surface leases, rights-of-way, easements, servitudes, licenses and other surface and subsurface rights together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing properties;   -24- -------------------------------------------------------------------------------- (c) all of the rights, titles, and interests of every nature whatsoever now owned or hereafter acquired by any Loan Party in and to (i) the items described above in paragraphs (a) and (b) above of this definition, as the same may be enlarged by the discharge of any payment out of production or by the removal of any charge or Permitted Encumbrance to which any such item described above in paragraphs (a) and (b) above of this definition is subject, and (ii) any and all additional interests of any kind hereafter acquired by and Loan Party in and to Gas Rights; and (d) all accounts, contract rights, inventory, general intangibles, insurance contracts and insurance proceeds constituting a part of, relating to, or arising out of those items that are described in paragraphs (a) through (c) above of this definition and all proceeds and products and payments in lieu of production (such as “take or pay” payments), whether such proceeds or payments are goods, money, documents, instruments, chattel paper, securities, accounts, general intangibles, fixtures, real property or other assets. “Improvements” shall have the meaning assigned to such term in the Mortgages. “Increased Amount Date” shall have the meaning assigned to such term in Section 2.21. “Indebtedness” of any person shall mean, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than current trade liabilities and current intercompany liabilities (but not any refinancings, extensions, renewals or replacements thereof) incurred in the ordinary course of business and maturing within 365 days after the incurrence thereof), (e) all Indebtedness of others secured by any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed or is limited in recourse, but limited to the fair market value of such property, (f) all Guarantees by such person of Indebtedness of others, (g) all Capital Lease Obligations of such person, (h) all payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding Swap Agreements, (i) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit, and (j) the principal component of all obligations of such person in respect of bankers’ acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such person in respect thereof. To the extent not otherwise included, Indebtedness shall include the amount of any Permitted Receivables Financing. “Indemnified Taxes” shall mean all Taxes other than Excluded Taxes.   -25- -------------------------------------------------------------------------------- “Indemnitee” shall have the meaning assigned to such term in Section 9.05(b). “Information” shall have the meaning assigned to such term in Section 3.13(a). “Information Memorandum” shall mean the Confidential Information Memorandum dated June 2006, as modified or supplemented prior to the Amendment Effective Date. “Intercompany Lease Agreement” shall mean a Collateral Assignment of Intercompany Lease, Subordination and Attornment Agreement substantially in the form of Exhibit I to the Original Credit Agreement among the Loan Parties and the Administrative Agent, as the same may be amended in accordance with the terms thereof and hereof or such other agreements reasonably acceptable to the Administrative Agent as shall be effective to grant to the Collateral Agent a Lien on and security interest in the Intercompany Leases. “Intercompany Leases” shall have the meaning assigned to such term in the Intercompany Lease Agreement delivered on the Original Closing Date or thereafter pursuant to Section 5.10 hereof and Sections 10(e) and 17 to the Intercompany Lease Agreement. “Interest Coverage Ratio” shall have the meaning assigned to such term in Section 6.11. “Interest Election Request” shall mean a request by the Borrower to convert or continue a New Term Loan Borrowing or New Revolving Facility Borrowing in accordance with Section 2.07. “Interest Expense” shall mean, with respect to any person for any period, the sum of (a) gross interest expense of such person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Swap Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (iv) commissions, discounts, yield and other fees and charges incurred in connection with any Permitted Receivables Financing which are payable to any person other than Holdings, the Borrower or a Subsidiary Loan Party, and (b) capitalized interest of such person. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received and costs incurred by Holdings and the Subsidiaries with respect to Swap Agreements. “Interest Payment Date” shall mean (a) 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 that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type, (b) with respect to any ABR Loan, the last day of each calendar quarter and (c) with respect to any Swingline Loan, the day that such Swingline Loan is required to be repaid pursuant to Section 2.09(a).   -26- -------------------------------------------------------------------------------- “Interest Period” shall mean, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 9 or 12 months, if at the time of the relevant Borrowing, all Lenders make interest periods of such length available), as the Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.09, 2.10 or 2.11; provided, however, that 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. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. “Issuing Bank” shall mean, as the context may require: (a) Citibank, N.A., (b) PNC Bank, National Association, (c) Bank of America, N.A., (d) National City Bank of Pennsylvania, (e) each other Issuing Bank designated pursuant to Section 2.05(k), in each case in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i), or (f) collectively, all of the foregoing. An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. “Issuing Bank Fees” shall have the meaning assigned to such term in Section 2.12(b). “Investment” shall have the meaning assigned to such term in Section 6.04. “Lead Arranger” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “L/C Disbursement” shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit, including, for the avoidance of doubt, a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit upon or following the reinstatement of such Letter of Credit. “L/C Participation Fee” shall have the meaning assigned such term in Section 2.12(b). “Lender” shall mean each financial institution listed on Schedule 2.01, as well as any person that becomes a “Lender” hereunder pursuant to Section 9.04. “Lender Default” shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing, to acquire participations in a Swingline Loan pursuant to Section 2.04 or to fund its portion of any unreimbursed payment under Section 2.05(e), or (ii) a Lender having notified in writing the Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 2.04, 2.05 or 2.06.   -27- -------------------------------------------------------------------------------- “Letter of Credit” shall mean any letter of credit issued pursuant to Section 2.05. “Leverage Ratio” shall mean, on any date, the ratio of (a) Consolidated Debt as of such date less unrestricted cash and cash equivalents as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of Holdings most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions that require a waiver or a consent of the Required Lenders pursuant to Section 6.04 or Section 6.05) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, EBITDA shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences. “LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum 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 page), for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” shall be the average (rounded upward, if necessary, to the next 1/100 of 1%) of the respective interest rates per annum at which deposits in the currency of such Borrowing are offered for such Interest Period to major banks in the London interbank market by Citicorp North America, Inc. at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period. “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, encumbrance, charge or security interest in or on 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 (other than securities representing an interest in a joint venture that is not a Subsidiary), any purchase option, call or similar right of a third party with respect to such securities. “Loan Documents” shall mean this Agreement, the Amendment Agreement, the Letters of Credit, the Security Documents and any promissory note issued under Section 2.09(e). “Loan Parties” shall mean Holdings, the Borrower and each Domestic Subsidiary Loan Party. “Loans” shall mean the New Term Loans, the New Revolving Facility Loans and the Swingline Loans (and shall include any Replacement New Term Loans and any Loans under the Additional New Revolving Facility Commitments or Additional New Term Loan Commitments). “Local Time” shall mean New York City time. “Majority Lenders” of any Facility shall mean, at any time, Lenders under such Facility having Loans and unused Commitments representing more than 50% of the sum of all Loans outstanding under such Facility and unused Commitments under such Facility at such time.   -28- -------------------------------------------------------------------------------- “Margin Stock” shall have the meaning assigned to such term in Regulation U. “Material Adverse Effect” shall mean the existence of events, conditions and/or contingencies that have had or are reasonably likely to have (a) a materially adverse effect on the business, operations, properties, assets or financial condition of Holdings and the Subsidiaries, taken as a whole, or (b) a material impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders, any Issuing Bank, the Administrative Agent or the Collateral Agent under, any Loan Document. “Material Indebtedness” shall mean Indebtedness (other than Loans and Letters of Credit) of any one or more of Holdings or any Subsidiary in an aggregate principal amount exceeding $20.0 million. “Maximum Rate” shall have the meaning assigned to such term in Section 9.09. “Mine” means any excavation or opening into the earth now and hereafter made from which coal or other minerals are or can be extracted on or from any of the Real Properties in which any Loan Party holds an ownership, leasehold or other interest, including, without limitation, the mines described in the Reserve Reports. “Mining Laws” means any and all applicable federal, state, local and foreign statutes, laws, regulations, guidance, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions or common law causes of action relating to mining operations and activities. Mining Laws shall include, but not be limited to, the Federal Coal Leasing Amendments Act, the Surface Mining Control and Reclamation Act, all other land reclamation and use statutes and regulations relating to coal mining, the Federal Coal Mine Health and Safety Act, the Black Lung Act and the Coal Act, the Mine Safety and Health Act and the Occupational Safety and Health Act, each as amended, and their state and local counterparts or equivalents. “Mining Lease” shall mean a lease, license or other use agreement which provides the Borrower or any other Subsidiary the real property and water rights, other interests in land, including coal, mining and surface rights, easements, rights of way and options, and rights to timber and natural gas (including coalbed methane and gob gas) necessary to recover coal from any Mine (i) currently operated by any Borrower or any other Subsidiary or (ii) part of any of Borrower’s mine plans. Leases which provide Borrower or any other Subsidiary the right to construct and operate a preparation plant and related facilities on the surface of the Real Property containing such reserves shall also be deemed a Mining Lease. “Mining Permits” means any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Mining Law or otherwise necessary to recover coal from any Mine being operated by any Borrower or any other Subsidiary. “Moody’s” shall mean Moody’s Investors Service, Inc.   -29- -------------------------------------------------------------------------------- “Mortgage Amendment” shall have the meaning assigned to such term in Section 4.02(B)(e)(ii)(A). “Mortgaged Properties” shall mean all Real Property which shall be subject to a Mortgage that is, (i) in the case of the Covered Properties, delivered on the Original Closing Date, (ii) in the case of Non-Covered Properties set forth on Schedule 1.01(e) delivered on the Original Closing Date, (iii) in the case of Intercompany Leases, those Intercompany Leases encumbered pursuant to the Intercompany Lease Agreement, delivered on the Original Closing Date or thereafter pursuant to Section 5.10 and the provisions of the Intercompany Lease Agreement and (iv) in the case of each additional Real Property (other than the Intercompany Leases) encumbered by an Additional Mortgage, delivered pursuant to Section 5.10. “Mortgages” shall mean the mortgages, deeds of trust, assignments of leases and rents and other security documents delivered on the Original Closing Date pursuant to Section 4.02(e) of the Original Credit Agreement or after the Original Closing Date pursuant to Section 5.18 of the Original Credit Agreement or Section 5.10, as amended, supplemented or otherwise modified from time to time, with respect to Mortgaged Properties (including as amended by any Mortgage Amendment with respect thereto, if any), (i) in the case of Covered Properties or any after acquired Real Property to be encumbered by an Additional Mortgage pursuant to Section 5.10, each substantially in the form of Exhibit D-1 to the Original Credit Agreement, with such changes thereto as shall be acceptable to the Collateral Agent and (ii) in the case of Non-Covered Properties, each substantially in the form of Exhibit D-2 to the Original Credit Agreement, with such changes thereto as shall be acceptable to the Collateral Agent. “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA with respect to which Holdings, the Borrower, any other Subsidiary or any ERISA Affiliate (a) is making or has an obligation to make contributions, (b) has within any of the preceding six plan years made or had an obligation to make contributions or (c) otherwise could incur liability. “Net Income” shall mean, with respect to any person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends. “Net Proceeds” shall mean: (a) 100% of the cash proceeds actually received by Holdings, or any of its Subsidiaries (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any mortgage or lease of real property) to any person of any asset or assets of Holdings or any Subsidiary (other than those pursuant to Section 6.05(a), (b), (c), (e), (f), (g), (i), (k) or (m)), net of (i) attorneys’ fees, accountants’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations relating to the applicable asset (other than pursuant hereto   -30- -------------------------------------------------------------------------------- or pursuant to the Senior Notes or any Permitted Debt Securities), other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith and (ii) Taxes paid or payable as a result thereof; provided that, if no Event of Default exists and Holdings shall deliver a certificate of a Responsible Officer of Holdings to the Administrative Agent promptly following receipt of any such proceeds setting forth Holdings’ intention to use any portion of such proceeds, to acquire, maintain, develop, construct, improve, upgrade or repair assets useful in the business of Holdings and the Subsidiaries, or make investments pursuant to Section 6.04(m), in each case within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent (1) not so used within such 12-month period and (2) not contracted to be used within such 12-month period and not used within 18 months of such receipt, and provided, further, that (x) no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds unless such proceeds shall exceed $10.0 million and (y) no proceeds shall constitute Net Proceeds in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed $20.0 million, and (b) 100% of the cash proceeds from the incurrence, issuance or sale by Holdings or any Subsidiary of any Indebtedness (other than Excluded Indebtedness), net of all taxes and fees (including investment banking fees), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale. For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and expenses payable to Holdings or the Borrower or any Affiliate of either of them shall be disregarded. “New Revolving Facility” shall mean the New Revolving Facility Commitments and the extensions of credit made hereunder by the New Revolving Facility Lenders. “New Revolving Facility Borrowing” shall mean a Borrowing comprised of New Revolving Facility Loans. “New Revolving Facility Commitment” shall mean, with respect to each New Revolving Facility Lender, the commitment of such New Revolving Facility Lender to make New Revolving Facility Loans pursuant to Section 2.01, expressed as an amount representing the maximum aggregate permitted amount of such New Revolving Facility Lender’s New Revolving Facility Credit 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 under Section 9.04. The initial amount of each New Revolving Facility Lender’s New Revolving Facility Commitment is set forth on Schedule 2.01 under the heading “New Revolving Facility Commitment” opposite such New Revolving Facility Lender’s name, or in the Assignment and Acceptance pursuant to which such New Revolving Facility Lender shall have assumed its New Revolving Facility Commitment, as applicable. The aggregate amount of the New Revolving Facility Commitments on the Amendment Effective Date is $500.0 million. “New Revolving Facility Credit Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of the New Revolving Facility Loans outstanding at such time, (b) the Swingline Exposure at such time and (c) the New Revolving L/C Exposure at such   -31- -------------------------------------------------------------------------------- time. The New Revolving Facility Credit Exposure of any New Revolving Facility Lender at any time shall be the sum of (a) the aggregate principal amount of such New Revolving Facility Lender’s New Revolving Facility Loans outstanding at such time and (b) such New Revolving Facility Lender’s New Revolving Facility Percentage of the Swingline Exposure and New Revolving L/C Exposure at such time. “New Revolving Facility Lender” shall mean a Lender with a New Revolving Facility Commitment or with outstanding New Revolving Facility Loans (including any Additional New Revolving Facility Lenders). “New Revolving Facility Loan” shall mean a Loan made by a New Revolving Facility Lender pursuant to Section 2.01 or an Additional New Revolving Facility Lender pursuant to Section 2.21. Each New Revolving Facility Loan shall be a Eurocurrency Loan or an ABR Loan. “New Revolving Facility Maturity Date” shall mean July 7, 2011. “New Revolving Facility Percentage” shall mean, with respect to any New Revolving Facility Lender, the percentage of the total New Revolving Facility Commitments represented by such Lender’s New Revolving Facility Commitment. If the New Revolving Facility Commitments have terminated or expired, the New Revolving Facility Percentages shall be determined based upon the New Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04. “New Revolving L/C Exposure” shall mean at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time and (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The New Revolving L/C Exposure of any New Revolving Facility Lender at any time shall mean its New Revolving Facility Percentage of the aggregate New Revolving L/C Exposure at such time. “New Security Documents” shall mean the Mortgage Amendments, the amendment to each Intercompany Lease Agreement and each other amendment to any Security Document delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Obligations, and all UCC or other financing statements or instruments of perfection required by this Agreement, the Amended and Restated Security Agreement, any Mortgage Amendments or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the Amended and Restated Security Agreement or any Mortgage Amendment. “New Term Loan Borrowing” shall mean a Borrowing comprised of New Term Loans. “New Term Loan Commitment” shall mean with respect to each Lender, the commitment of such Lender to make New Term Loans hereunder pursuant to Section 2.01. The initial amount of each New Term Loan Lender’s New Term Loan Commitment is set forth on Schedule 2.01 under the heading “New Term Loan Commitment” opposite such New Term Loan Lender’s name, or in the Assignment and Acceptance pursuant to which such New Term Loan Lender shall have assumed its New Term Loan Commitment, as applicable. The aggregate amount of the New Term Loan Commitments on the Amendment Effective Date is $335.0 million.   -32- -------------------------------------------------------------------------------- “New Term Loan Facility” shall mean the New Term Loan Commitments and the New Term Loans made hereunder. “New Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.10(a). “New Term Loan Lender” shall mean a Lender with a New Term Loan Commitment or with outstanding New Term Loans (including any Additional New Term Loan Lender). “New Term Loan Maturity Date” shall mean July 7, 2011. “New Term Loans” shall mean the term loans made by the Lenders to the Borrower pursuant to Section 2.01 or 2.21 (including any Additional New Term Loans). “New Transactions” shall mean, collectively, the transactions to occur substantially concurrently with the effectiveness of this Agreement on the Amendment Effective Date as contemplated hereunder and in the Amendment Agreement, including (a) the execution and delivery of this Agreement and the New Security Documents, (b) the borrowing of the New Term Loans and (to the extent applicable) the borrowing of New Revolving Facility Loans and (c) the payment of all fees and expenses to be paid on or prior to the Amendment Effective Date and owing in connection with the foregoing. “Non-Consenting Lender” shall have the meaning assigned to such term in Section 2.19(c). “Non-Covered Property” shall mean all Real Property of Holdings and the Subsidiaries other than Covered Property. “Obligations” shall mean all amounts owing to any of the Agents or any Lender pursuant to the terms of this Agreement or any other Loan Document. “OFAC” shall have the meaning assigned to such term in Section 3.22(b)(v). “Original Closing Date” shall mean July 30, 2004. “Original Credit Agreement” shall have the meaning assigned to it in the recitals hereof. “Original Lenders” shall have the meaning assigned to it in the recitals hereof. “Original Loan Documents” shall have the meaning assigned to it in the recitals hereof. “Original Obligations” shall have the meaning assigned to it in the recitals hereof.   -33- -------------------------------------------------------------------------------- “Original Post-Closing Matters Period” shall mean “Post-Closing Matters Period”, as such term is defined in the Original Credit Agreement. “Original Security Documents” shall have the meaning assigned to it in the recitals hereof. “Original Transactions” shall mean, collectively, the “Transactions” (as defined in the Original Credit Agreement. “Other List” shall have the meaning given such term in Section 6.14. “Other Taxes” shall mean any and 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 from the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents, and any and all interest and penalties related thereto. “Parent Entity” shall mean the Public Parent and any person who directly or indirectly owns 100% of the issued and outstanding Equity Interests of any subsidiary of the Public Parent. “Participant” shall have the meaning assigned to such term in Section 9.04(c). “Payment Office” shall mean the principal office of Administrative Agent, located on the Amendment Effective Date at 2 Penns Way, 200, New Castle, Delaware 19720, or such other office as may be designated by Administrative Agent from time to time. “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. “Perfection Certificates” shall mean a certificate in the form of Exhibit II to the Collateral Agreement or any other form approved by the Collateral Agent. “Permitted Business Acquisition” shall mean any acquisition of all or substantially all the assets of, or all the Equity Interests (other than directors’ qualifying shares) in, a person or division, line of business, coal mine or other operating facility, of a person (or any subsequent investment made in a person, division, line of business, coal mine or other operating facility, previously acquired in a Permitted Business Acquisition) if (a) such acquisition was not preceded by, or effected pursuant to, an unsolicited or hostile offer and (b) immediately after giving effect thereto: (i) no Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable laws; and (iii) (A) Holdings and the Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of Holdings and the Subsidiaries, and Holdings shall have delivered to the Administrative Agent a certificate of a Responsible Officer of Holdings to such effect, together with all relevant financial information for such Subsidiary or assets, and (B) any acquired or newly formed Subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01).   -34- -------------------------------------------------------------------------------- “Permitted Business Acquisition Step-Up Period” shall mean any period commencing on the first day on which either (x) the Leverage Ratio on a Pro Forma Basis is less than 3.25 to 1.00 and ending on the first day thereafter on which the Leverage Ratio on a Pro Forma Basis is greater than or equal to 3.25 to 1.00, or (y) the Leverage Ratio on a Pro Forma Basis is less than 2.25 to 1.00 and ending on the first day thereafter on which the Leverage Ratio on a Pro Forma Basis is greater than or equal to 2.25 to 1.00 or (z) the Leverage Ratio on a Pro Forma Basis is less than 1.75 to 1.00 and ending on the first day thereafter on which the Leverage Ratio on a Pro Forma Basis is greater than or equal to 1.75 to 1.00. “Permitted Encumbrances” shall mean (i) with respect to each Covered Property (other than any Covered Property with respect to which a policy of title insurance (or marked up commitment having the effect of a title insurance policy) or title opinion is delivered to the Collateral Agent in accordance with the provisions of paragraph (h)(x) of the definition of “Collateral and Guarantee Requirement”) those Liens and other encumbrances permitted by paragraphs (b), (d), (h), (m), (o) and (x) of Section 6.02, (ii) with respect to each Covered Property (other than each Covered Property described in clause (i) of this definition) those Liens and other encumbrances permitted by paragraphs (b) and (m) of Section 6.02 and (iii) with respect to each Non-Covered Property and each Real Property acquired after the Original Closing Date, those Liens and other encumbrances permitted by paragraphs (b), (d), (e), (h), (k), (m), (o) and (x) of Section 6.02; provided, however, that in the case of those Liens and other encumbrances described in clause (o) of clauses (i) and (iii) of this definition, in the event any Loan Party shall constitute the lessor under any such lease or sublease, no Lien created or permitted to be incurred thereby shall be permitted hereunder except to the extent such Lien would otherwise constitute a Permitted Encumbrance. “Permitted Gas Properties Threshold Amount” shall have the meaning set forth in Section 6.04(u). “Permitted Gas Properties Transactions” shall mean a disposition, lease, merger, or distribution of Gas Properties to any party that is not a Loan Party. If the Gas Properties subject to such transaction have a fair market value of $10.0 million or more, whether in an individual transaction or as part of a series of related transactions, with the same party or parties or affiliates thereof, then to constitute a Permitted Gas Properties Transaction, such transaction shall meet all of the following requirements: (i) any liabilities and contractual obligations imposed on any Loan Party in connection with any such transaction are fair and reasonable and arm’s-length (including without limitation that the indemnities are reasonable for a transaction of this type, that there is a reasonable purchase price adjustment, and there are reasonable time periods for representations and warranties); (ii) no right, title or interest in any Coal, Coal reserves, or any facility that is associated with the extraction, loading, handling, processing or preparation of Coal is being sold, transferred, conveyed or encumbered in connection with such transaction; (iii) such transaction will not, presently or in the future, disrupt or negatively affect the Coal operations of the Loan Parties in any material respect;   -35- -------------------------------------------------------------------------------- (iv) the Retained Assets are not, as a result of such transaction, adversely impacted or impaired in any material respect with any encumbrances, rights of first refusal, or restrictions and limitations of any nature; (v) such transaction is not reasonably anticipated to have any material adverse effect on (i) the fair market value of the Retained Assets as compared with the value of such assets immediately prior to such event and (ii) the rights and remedies of the Secured Parties under the Loan Documents; (vi) no Loan Party shall be obligated subsequent to such transaction to pay any material royalties or any other material payments of cash or property to Gas Co. or any other Person in order to conduct its Coal operations; and (vii) except to the extent permitted by Sections 6.01(s) and 6.04(u), no Loan Party shall (A) provide any Indebtedness, Guarantee or otherwise directly or indirectly provide credit support to or for the benefit of Gas Co. or its subsidiaries, (B) suffer to exist any Indebtedness, Guarantee or otherwise directly or indirectly provide credit support, in each case, provided by a Loan Party to or for the benefit of Gas Co. or its subsidiaries, or (C) agree to maintain or preserve Gas Co.’s or its subsidiaries’ financial condition, in each case, subsequent to any such transaction; provided, further, that each of the following additional requirements shall be complied with: (a) the Loan Parties, as soon as reasonably practical, shall advise the Administrative Agent of any pending transaction and shall deliver to the Administrative Agent such other information about such transaction as any Lender may reasonably require; (b) Holdings and the Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of Holdings and the Subsidiaries, and Holdings shall have delivered to the Administrative Agent a certificate of a Responsible Officer of Holdings to such effect, together with all relevant financial information for such Subsidiary or assets, (c) the Loan Parties shall deliver to the Administrative Agent promptly after the consummation of such transaction copies of any material agreements entered into by such Loan Parties in connection with such transaction; (d) no Default or Event of Default shall exist immediately prior to and after giving effect to such transaction; (e) the Loan Parties shall deliver to the Administrative Agent at the time of the consummation of such transaction, a certificate of a Responsible Officer of the Borrower, representing and warranting that with respect to any such transaction, each of the foregoing clauses (i) through (v) is true and accurate and that each of the other requirements has been or will be complied with; (f) in the event any Hydrocarbon Property that is the subject of such transaction constitutes surface Improvements encumbered by a Mortgage, the Administrative Agent shall cause such surface Improvement Hydrocarbon Property to be released from the Lien of the applicable Mortgage, without recourse or warranty at the sole cost and expense of the Borrower; provided, however, that to the extent such release involves the release of only a portion of any Mortgaged Property, the applicable Loan Party shall deliver to the Administrative Agent all documents reasonably requested by the Administrative Agent to confirm the continued perfection, priority and validity of the Lien of the affected Mortgage on the remaining Mortgaged Property prior to any release of the surface Improvements comprising the Hydrocarbon Property that is the subject of the applicable Permitted Gas Properties Transaction; and (g) in the event   -36- -------------------------------------------------------------------------------- any Hydrocarbon Property that is the subject of such transaction shall constitute a right, title or interest other than any surface Improvement, the Administrative Agent shall, at the request and at the sole cost and expense of the Borrower, enter into a subordination, non-disturbance and attornment agreement in form and substance reasonably acceptable to it regarding same. “Permitted Investments” shall mean: (a) direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, in each case with maturities not exceeding two years; (b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, or any state thereof having capital, surplus and undivided profits in excess of $500.0 million and whose long-term debt, or whose parent holding company’s long-term debt, is rated A (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above; (d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of any Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody’s, or A-1 (or higher) according to S&P; (e) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by Moody’s; (f) shares of mutual funds whose investment guidelines restrict 95% of such funds’ investments to those satisfying the provisions of clauses (a) through (e) above; (g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $500.0 million; and (h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of the total assets of Holdings and the Subsidiaries, on a consolidated basis, as of the end of Holdings’ most recently completed fiscal year.   -37- -------------------------------------------------------------------------------- “Permitted Receivables Documents” shall mean all documents and agreements evidencing, relating to or otherwise governing a Permitted Receivables Financing. “Permitted Receivables Financing” shall mean one or more transactions pursuant to which (i) Receivables Assets or interests therein are sold to or financed by one or more Special Purpose Receivables Subsidiaries, and (ii) such Special Purpose Receivables Subsidiaries finance their acquisition of such Receivables Assets or interests therein, or the financing thereof, by selling or borrowing against such Receivables Assets; provided that (A) recourse to Holdings or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) and any obligations or agreements of Holdings or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) in connection with such transactions shall be limited to the extent customary for similar transactions in the applicable jurisdictions (including, to the extent applicable, in a manner consistent with the delivery of a “true sale”/”absolute transfer” opinion with respect to any transfer by Holdings or any Subsidiary (other than a Special Purpose Receivables Subsidiary), and (B) the aggregate Receivables Net Investment since the Closing Date shall not exceed $125.0 million at any time. “Permitted Refinancing Indebtedness” shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium thereon), (b) the average life to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced, (d) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced and (e) if the Indebtedness being Refinanced is secured by any collateral (whether equally and ratably with, or junior to, the Secured Parties or otherwise), such Permitted Refinancing Indebtedness may be secured by such collateral (including in respect of working capital facilities of Foreign Subsidiaries otherwise permitted under this Agreement only, any collateral pursuant to after-acquired property clauses to the extent any such collateral secured the Indebtedness being Refinanced) on terms no less favorable to the Secured Parties than those contained in the documentation governing the Indebtedness being Refinanced. “Permitted Senior Debt Securities” shall mean unsecured senior (or subordinated) notes issued by the Borrower, (i) the terms of which do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the date on which the final maturity of the Senior Notes occurs (as in effect on the Original Closing Date), (ii) the covenants, events of default, Subsidiary guarantees and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to Holdings and the Subsidiaries than those in the Senior Notes and (iii) of which no Subsidiary of Holdings (other than the Borrower or a Domestic Subsidiary Loan Party) is an obligor under such notes that is not an obligor under the Senior Notes.   -38- -------------------------------------------------------------------------------- “Permitted Tax Distributions” shall mean payments by the Borrower or any Subsidiary to Holdings and payments by Holdings to the Public Parent, in amounts required for Holdings or the Public Parent to pay federal, state or local income taxes (as the case may be) imposed directly on Holdings or the Public Parent to the extent such income taxes are attributable to the income of Holdings, the Borrower and the other Subsidiaries (including without limitation, by virtue of the Public Parent being the common parent of a consolidated or combined tax group of which Holdings is a member); provided, however, that the amount of such payments to the Public Parent in respect of any tax year (or portion thereof) does not exceed the excess (if any) of (i) the amount that Holdings, the Borrower and the other Subsidiaries would have been required to pay in respect of federal, state or local income taxes (as the case may be) in respect of such year (or portion) if Holdings, the Borrower and the other Subsidiaries paid such taxes directly as a stand-alone taxpayer (or stand-alone group) over (ii) the amount of such taxes actually paid directly by Holdings, the Borrower, and the other Subsidiaries in respect of such year (or portion). “person” or “Person” shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, individual or family trusts, or any agency or political subdivision thereof. “Plan” shall mean 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 which is maintained or contributed to by Holdings, the Borrower, any other Subsidiary or any ERISA Affiliate or with respect to which Holdings, the Borrower or any other Subsidiary could incur liability (including under Section 4069 of ERISA). “Platform” shall have the meaning assigned to such term in Section 9.17(b). “Pledged Collateral” shall have the meaning assigned to such term in the Collateral Agreement. “primary obligor” shall have the meaning given such term in the definition of the term “Guarantee.” “Prior Liens” shall mean Liens which, pursuant to the provisions of any Security Document, are or may be superior to the Lien of such Security Document. “Pro Forma Basis” shall mean, as to any person, for any events as described in clauses (i) and (ii) below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the “Reference Period”): (i) in making any determination of EBITDA, pro forma effect shall be given to any Asset Disposition and to any Asset Acquisition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), in each case that occurred during the Reference Period (or, in the case of determinations made pursuant to the definition of the term “Asset Acquisition,” occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition is consummated); and   -39- -------------------------------------------------------------------------------- (ii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes and amounts outstanding under any Permitted Receivables Financing, in each case, not to finance any acquisition) incurred or permanently repaid during the Reference Period (or, in the case of determinations made pursuant to the definition of the term “Asset Acquisition,” occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition is consummated) shall be deemed to have been incurred or repaid at the beginning of such period and (y) Interest Expense of such person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such periods. Pro forma calculations made pursuant to the definition of the term “Pro Forma Basis” shall be determined in good faith by a Responsible Officer of Holdings and, for any fiscal period ending on or prior to the first anniversary of an Asset Acquisition or Asset Disposition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), may include adjustments to reflect operating expense reductions and other operating improvements or synergies reasonably expected to result from such Asset Acquisition, Asset Disposition or other similar transaction, to the extent that Holdings delivers to the Administrative Agent (i) a certificate of a Financial Officer of Holdings setting forth such operating expense reductions and other operating improvements or synergies and (ii) information and calculations supporting in reasonable detail such estimated operating expense reductions and other operating improvements or synergies. For purposes of Pro Forma Basis, the purchase of Gas Properties shall be deemed a material Asset Acquisition. “Projections” shall mean the projections of Holdings and the Subsidiaries included in the Information Memorandum and any other projections and any forward-looking statements (including statements with respect to booked business) of such entities furnished to the Lenders or the Administrative Agent by or on behalf of Holdings, the Borrower or any of the other Subsidiaries prior to the Amendment Effective Date. “Public Parent” shall mean Foundation Coal Holdings, Inc., a Delaware corporation. “Quotation Day” shall mean, with respect to any Eurocurrency Borrowing 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.   -40- -------------------------------------------------------------------------------- “Receivables Assets” shall mean accounts receivable (including any bills of exchange) and related assets and property from time to time originated, acquired or otherwise owned by Holdings or any Subsidiary. “Receivables Net Investment” shall mean the aggregate cash amount paid by the lenders or purchasers under any Permitted Receivables Financing in connection with their purchase of, or the making of loans secured by, Receivables Assets or interests therein, as the same may be reduced from time to time by collections with respect to such Receivables Assets or otherwise in accordance with the terms of the Permitted Receivables Documents; provided, however, that if all or any part of such Receivables Net Investment shall have been reduced by application of any distribution and thereafter such distribution is rescinded or must otherwise be returned for any reason, such Receivables Net Investment shall be increased by the amount of such distribution, all as though such distribution had not been made. “Real Property” shall mean, collectively, all right, title and interest of the Borrower or any other Subsidiary (including, without limitation, any leasehold or mineral estate) in and to any and all parcels of real property owned or operated by the Borrower or any other Subsidiary, whether by lease, license or other use agreement, together with, in each case, all Improvements and appurtenant fixtures (including, without limitation, all preparation plants or other coal processing facilities and loadout and other transportation facilities), equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof. “Reclamation Laws” shall mean all laws relating to mining reclamation or reclamation liabilities including the Surface Mining Control and Reclamation Act of 1977, as amended, and applicable Illinois, Kentucky, Pennsylvania, Utah, West Virginia and Wyoming state laws. “Reference Period” shall have the meaning assigned to such term in the definition of the term “Pro Forma Basis.” “Refinance” shall have the meaning assigned to such term in the definition of the term “Permitted Refinancing Indebtedness,” and “Refinanced” shall have a meaning correlative thereto. “Refinanced New Term Loans” shall have the meaning assigned to such term in Section 9.08(e). “Register” shall have the meaning assigned to such term in Section 9.04(b). “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. “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.   -41- -------------------------------------------------------------------------------- “Related Parties” shall mean, 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” shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or depositing in, into or onto the Environment. “Remaining Present Value” shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into. “Replacement New Term Loans” shall have the meaning assigned to such term in Section 9.08(e). “Reportable Event” shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan. “Required Lenders” shall mean, at any time, Lenders having (a) Loans (other than Swingline Loans) outstanding, (b) New Revolving L/C Exposures, (c) Swingline Exposures, and (d) Available Unused Commitments, that taken together, represent more than 50% of the sum of (w) all Loans (other than Swingline Loans) outstanding, (x) New Revolving L/C Exposures, (y) Swingline Exposures, and (z) the total Available Unused Commitments at such time. The Loans, New Revolving L/C Exposures, Swingline Exposures and Available Unused Commitment of any Defaulting Lender shall be disregarded in determining Required Lenders at any time. “Reserve Reports” shall mean the following reports prepared by Norwest Corporation: (i) Reasonableness Review of RAG American Coal Holding, Inc., dated April 8, 2004; (ii) Reserve Audit of RAG American Coal Holding, Inc., dated April 8, 2004; and (iii) RAG American Coal Holding, Inc. Collateral Analysis, dated April 9, 2004; and the Phase I Geological Study and Reserve Evaluation of the No. 6 Seam in Wabash and Edwards counties of the State of Illinois and Gibson County in the State of Indiana, dated March 13, 2006, prepared by Marshall Miller and Associates. “Reset Date” shall have the meaning assigned to such term in Section 1.03(a). “Responsible Officer” of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement. “Retained Assets” shall mean all Collateral retained by the Loan Parties subsequent to a Permitted Gas Properties Transaction. “S&P” shall mean Standard & Poor’s Ratings Group, Inc.   -42- -------------------------------------------------------------------------------- “Sale and Lease-Back Transaction” shall have the meaning assigned to such term in Section 6.03. “SDN List” shall have the meaning assigned to such term in Section 6.14. “SEC” shall mean the Securities and Exchange Commission or any successor thereto. “Secured Parties” shall mean the “Secured Parties” as defined in the Collateral Agreement. “Securities Act” shall mean the Securities Act of 1933, as amended. “Security Documents” shall mean the Mortgages, the Collateral Agreement, the New Security Documents, the Intercompany Lease Agreement and each of the security agreements, Additional Mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.10 of this Agreement or Section 5.18 of the Original Credit Agreement. “Senior Note Documents” shall mean the Senior Notes and the Senior Note Indenture. “Senior Note Indenture” shall mean the Indenture dated as of July 30, 2004 under which the Senior Notes were issued, among the Borrower, FC 2 Corp., Holdings and certain of the Subsidiaries party thereto and the trustee named therein from time to time, as in effect on the Original Closing Date and as amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement. “Senior Notes” shall mean the Borrower’s 7 1/4% Senior Notes due 2014 issued pursuant to the Senior Note Indenture in an aggregate principal amount of $300.0 million and any notes issued by the Borrower in exchange for, and as contemplated by, the Senior Notes and the related registration rights agreement with substantially identical terms as the Senior Notes. “Special Purpose Receivables Subsidiary” shall mean a direct or indirect Subsidiary of Holdings established in connection with a Permitted Receivables Financing for the acquisition of Receivables Assets or interests therein, and which is organized in a manner intended to reduce the likelihood that it would be substantively consolidated with Holdings or any of the Subsidiaries (other than Special Purpose Receivables Subsidiaries) in the event Holdings or any such Subsidiary becomes subject to a proceeding under the U.S. Bankruptcy Code (or other insolvency law). “Statutory Reserves” shall mean, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States of America or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined.   -43- -------------------------------------------------------------------------------- “Subordinated Intercompany Debt” shall have the meaning assigned to such term in Section 6.01(e). “subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held, or (b) that is, at the time any determination is made, 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” shall mean, unless the context otherwise requires, a subsidiary of Holdings. “Swap Agreement” shall mean 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 Holdings or any of its Subsidiaries shall be a Swap Agreement. “Swingline Borrowing” shall mean a Borrowing comprised of Swingline Loans. “Swingline Borrowing Request” shall mean a request by the Borrower substantially in the form of Exhibit C-2. “Swingline Commitment” shall mean, with respect to each Swingline Lender, the commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04. The aggregate amount of the Swingline Commitments on the Amendment Effective Date is $25.0 million. “Swingline Exposure” shall mean at any time the aggregate principal amount of all outstanding Swingline Borrowings at such time. The Swingline Exposure of any New Revolving Facility Lender at any time shall mean its New Revolving Facility Percentage of the aggregate Swingline Exposure at such time. “Swingline Lender” shall mean Citicorp North America, Inc., in its capacity as a lender of Swingline Loans, and/or any other New Revolving Facility Lender designated as such by the Borrower after the Amendment Effective that is reasonably satisfactory to the Borrower and the Administrative Agent and executes a counterpart to this Agreement as a Swingline Lender. “Swingline Loans” shall mean the swingline loans made to the Borrower pursuant to Section 2.04.   -44- -------------------------------------------------------------------------------- “Syndication Agent” shall have the meaning assigned to such term in the introductory paragraph of this Agreement. “Taxes” shall mean any and all present or future taxes, levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges) or withholdings imposed by any Governmental Authority and any and all interest and penalties related thereto. “Test Period” shall mean, on any date of determination, the period of four consecutive fiscal quarters of Holdings then most recently ended (taken as one accounting period). “Title Company” shall mean LandAmerica Inc. or such other title company as shall be approved by the Administrative Agent. “Transaction” shall mean the Original Transactions and the New Transactions, collectively. “Trigger Date” shall mean the date of delivery of financial statements for the first full fiscal quarter ending after the Amendment Effective Date. “Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall include the Adjusted LIBO Rate and the Alternate Base Rate. “UCC” shall mean (i) the Uniform Commercial Code as in effect in the applicable state of jurisdiction and (ii) certificate of title or other similar statutes relating to “rolling stock” or barges as in effect in the applicable jurisdiction. “U.S. Bankruptcy Code” shall mean Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors. “U.S. Patriot Act” has the meaning assigned to such term in Section 3.08(a). “Wholly Owned Subsidiary” of any person shall mean a subsidiary of such person, all of the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person or another Wholly Owned Subsidiary of such person. “Withdrawal Liability” shall mean 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. Terms Generally. The definitions set forth or referred to in Section 1.01 shall apply equally to both 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.” All references herein to Articles, Sections, Exhibits and   -45- -------------------------------------------------------------------------------- Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time. 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 Holdings notifies the Administrative Agent that Holdings requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Amendment Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies Holdings 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. For purposes of determining compliance with Section 6.01 through Section 6.10 with respect to any amount in a currency other than Dollars, such amount shall be determined as of the date of incurrence thereof, and shall not be affected as a result of fluctuations in currency values. SECTION 1.03. Effectuation of Transfers. Each of the representations and warranties of Holdings and the Borrowers contained in this Agreement (and all corresponding definitions) are made after giving effect to the New Transactions, unless the context otherwise requires. SECTION 1.04. Effect of this Agreement on the Original Credit Agreement and the Other Loan Documents. Upon satisfaction of the conditions precedent to the effectiveness of this Agreement set forth in Section 4.02(B), this Agreement shall be binding on Holdings, the Borrower, the Agents, the Lenders and the other parties hereto and the provisions of the Original Credit Agreement shall be replaced by the provisions of this Agreement; provided, that (a) the Original Obligations of Holdings, the Borrower and the other Loan Parties under the Original Credit Agreement and the Original Loan Documents that remain unpaid and outstanding as of and after giving effect to the Amendment Effective Date shall continue to exist under and be evidenced by this Agreement and the other Loan Documents, (b) all Existing Letters of Credit shall continue as Letters of Credit under this Agreement, (c) subject to Sections 15 and 16 of the Amendment Agreement, the Original Collateral and the Original Loan Documents shall continue to secure, guarantee, support and otherwise benefit the Original Obligations and the Obligations of Holdings, the Borrower and the other Loan Parties under this Agreement and the other Loan Documents, and (d) any Person entitled to the benefits of Section 2.15, 2.16, 2.17 or 9.05 of the Original Credit Agreement shall continue to be entitled to the benefits of the corresponding provisions of this Agreement. Upon the effectiveness of this Agreement in accordance with Section 4.02(B), each Loan Document that was in effect immediately prior to the Amendment Effective Date shall continue to be effective and, unless the context otherwise requires, any reference to the Original Credit Agreement contained therein shall be deemed to refer to this Agreement.   -46- -------------------------------------------------------------------------------- ARTICLE II THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make New Term Loans to the Borrower on the Amendment Effective Date in Dollars in a principal amount not to exceed its New Term Loan Commitment, and (b) to make (i) New Revolving Facility Loans denominated in Dollars to the Borrower, at any time and from time to time during the Availability Period in an aggregate principal amount that will not result in (A) such Lender’s New Revolving Facility Credit Exposure exceeding such Lender’s New Revolving Facility Commitment or (B) the New Revolving Facility Credit Exposure exceeding the total New Revolving Facility Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow New Revolving Facility Loans. Amounts repaid or prepaid in respect of New Term Loans may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans under the same Facility and of the same Type made by the Lenders ratably in accordance with their respective Commitments under the applicable Facility (or, in the case of Swingline Loans, in accordance with their respective Swingline Dollar Commitments); provided, however, that New Revolving Facility Loans shall be made by the New Revolving Facility Lenders ratably in accordance with their respective New Revolving Facility Percentages on the date such Loans are made hereunder. 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 Borrowing (other than a Swingline Borrowing) shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith. Each Swingline Borrowing shall be an ABR Borrowing. Each Lender at its option may make any ABR Loan or 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 the Borrower to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.15, 2.17 or 2.20 solely in respect of increased costs resulting from such exercise and existing at the time of such exercise. (c) At the commencement of each Interest Period for any Eurocurrency New Revolving Facility Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR New Revolving Facility Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing   -47- -------------------------------------------------------------------------------- Minimum; provided that an ABR New Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused balance of the New Revolving Facility Commitments or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Each Swingline Borrowing shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type and under more than one Facility may be outstanding at the same time; provided that there shall not at any time be more than a total of (i) five Eurocurrency Borrowings outstanding under the New Term Loan Facility and (ii) 20 Eurocurrency Borrowings outstanding under the New Revolving Facility. (d) Notwithstanding any other provision of this Agreement, no 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 New Revolving Facility Maturity Date or New Term Loan Maturity Date, as applicable. SECTION 2.03. Requests for Borrowings. To request a New Revolving Facility Borrowing and/or a New Term Loan Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local 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, Local Time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR New Revolving Facility Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., Local 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 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 New Revolving Facility Borrowing; (ii) the aggregate amount of the requested Borrowing (expressed in Dollars); (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; (v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto; and (vi) the location and number of the Borrower’s account to which funds are to be disbursed. If no election as to the Type of New Revolving Facility Borrowing is specified, then the requested New Revolving Facility Borrowing shall be an ABR Borrowing. If no Interest Period is   -48- -------------------------------------------------------------------------------- specified with respect to any requested Eurocurrency Borrowing, then the 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, each Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (x) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Commitment or (y) the New Revolving Facility Credit Exposure exceeding the total New Revolving Facility Commitments; provided that no Swingline Lender shall be required to make a Swingline Loan to refinance an outstanding Swingline Borrowing. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Swingline Loans. (b) To request a Swingline Borrowing the Borrower shall notify the Administrative Agent and the Swingline Lenders of such request by telephone (confirmed by a Swingline Borrowing Request by telecopy), not later than 11:00 a.m., Local Time, on the day of a proposed Swingline Borrowing. Each such notice and Swingline Borrowing Request shall be irrevocable and shall specify (i) the requested date (which shall be a Business Day) and (ii) the amount of the requested Swingline Borrowing (expressed in Dollars). Each Swingline Lender shall make each Swingline Loan to be made by it hereunder in accordance with Section 2.02(a) on the proposed date thereof by wire transfer of immediately available funds by 3:00 p.m., Local Time, to the account of the Borrower (or, in the case of a Swingline Borrowing made to finance the reimbursement of an L/C Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank). (c) A Swingline Lender may by written notice given to the Administrative Agent (and to the other Swingline Lenders) not later than 10:00 a.m., Local Time on any Business Day, require the New Revolving Facility Lenders to acquire participations on such Business Day in all or a portion of the outstanding Swingline Loans made by it. Such notice shall specify the aggregate amount of such Swingline Loans in which the New Revolving Facility Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each such Lender, specifying in such notice such Lender’s New Revolving Facility Percentage of such Swingline Loan or Loans. Each New Revolving Facility Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent the Swingline Loan or Loans for the account of the applicable Swingline Lender, such New Revolving Facility Lender’s New Revolving Facility Percentage of such Swingline Loan or Loans. Each New Revolving Facility Lender acknowledges and agrees that its respective 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. Each New Revolving Facility Lender shall comply with its obligation under   -49- -------------------------------------------------------------------------------- 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 New Revolving Facility Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Swingline Lender the amounts so received by it from the New Revolving Facility Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph (c), and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the applicable Swingline Lender. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of such Borrower) in respect of a Swingline Loan after receipt by such 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 New Revolving Facility Lenders that shall have made their payments pursuant to this paragraph and to such Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the 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, any Loan Party may request the issuance of Letters of Credit for its own account in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period and prior to the date that is five Business Days prior to the New Revolving Facility Maturity Date. 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 Applicant Party to, or entered into by the Applicant Party with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Notwithstanding any provision hereof, no Issuing Bank shall be required to issue any Letter of Credit to the extent that as a result of such issuance the aggregate face amount of all outstanding Letters of Credit issued by such Issuing Bank would exceed the amount set forth adjacent to such Issuing Bank’s name on Schedule 2.05(a) or as otherwise agreed by the Borrower and the applicable Issuing Bank and the Administrative Agent from time to time. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic renewal in accordance with paragraph (c) of this Section) or extension of an outstanding Letter of Credit), the Applicant Party shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (two Business Days 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 issue,   -50- -------------------------------------------------------------------------------- amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Applicant Party also shall submit a letter of credit application on such 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 Borrower shall be deemed to represent and warrant that), after giving effect to such issuance amendment, renewal or extension (i) the New Revolving L/C Exposure shall not exceed $500.0 million, and (ii) the New Revolving Facility Credit Exposure shall not exceed the total New Revolving Facility Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (A) 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 (B) the date that is five Business Days prior to the New Revolving Facility Maturity Date; provided that any Letter of Credit with a one-year tenor may provide for the automatic renewal thereof for additional one-year periods (which, in no event, shall extend beyond the date referred to in clause (i)(B) of this paragraph (c)). (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 applicable Issuing Bank or the New Revolving Facility Lenders, such Issuing Bank hereby grants to each New Revolving Facility Lender, and each New Revolving Facility Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such New Revolving Facility Lender’s New Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each New Revolving Facility Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent in Dollars, for the account of the applicable Issuing Bank, such New Revolving Facility Lender’s New Revolving Facility Percentage of each L/C Disbursement made by such Issuing Bank in Dollars not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each New Revolving Facility 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 applicable Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower and the Applicant Party (if other than Borrower) shall be jointly and severally liable for reimbursing such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C Disbursement in Dollars, not later than 5:00 p.m., New York City time, on the Business Day immediately following the date the Borrower receives notice under paragraph (g) of this Section of such L/C Disbursement, provided that 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 New Revolving Facility Borrowing or a Swingline Borrowing, as applicable, in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR New Revolving Facility Borrowing or Swingline Borrowing. If   -51- -------------------------------------------------------------------------------- the Borrower or the Applicant Party (if other than Borrower) fails to reimburse any L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable Issuing Bank and each other New Revolving Facility Lender of the applicable L/C Disbursement, the payment then due from the and, in the case of a New Revolving Facility Lender, such Lender’s New Revolving Facility Percentage thereof. Promptly following receipt of such notice, each New Revolving Facility Lender shall pay to the Administrative Agent in Dollars its New Revolving Facility Percentage of the payment then due from the Borrower, 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 New Revolving Facility Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank in Dollars the amounts so received by it from the New Revolving Facility Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that New Revolving Facility Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a New Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank for any L/C Disbursement (other than the funding of an ABR New Revolving Loan or a Swingline Borrowing as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such L/C Disbursement. (f) Obligations Absolute. The joint and several obligation of the Borrower and the Applicant Party (if other than Borrower) to reimburse L/C 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 applicable 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; provided that, in each case, payment by the Issuing Bank shall not have constituted gross negligence or willful misconduct. Neither the Administrative Agent, the Lenders nor any 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 such Issuing Bank; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived to the extent permitted by applicable law) suffered by the Borrower or the Applicant Party that are determined by a court having jurisdiction to have been caused by (i) such Issuing Bank’s failure to exercise care when determining   -52- -------------------------------------------------------------------------------- whether drafts and other documents presented under a Letter of Credit comply with the terms thereof or (ii) such Issuing Bank’s refusal to issue a Letter of Credit in accordance with the terms of this Agreement. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank shall be deemed to have exercised care in each such determination and each refusal to issue a Letter of Credit. 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 applicable 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 applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent, the Borrower and the Applicant Party (if other than the Borrower) by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make a L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the New Revolving Facility Lenders with respect to any such L/C Disbursement. (h) Interim Interest. If an Issuing Bank shall make any L/C Disbursement, then, unless the Borrower or the Applicant Party shall reimburse such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrower or the Applicant Party reimburses such L/C Disbursement, at the rate per annum then applicable to ABR New Revolving Loans; provided that, if such L/C Disbursement is not reimbursed by the Borrower or the Applicant Party when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply; provided, further, that any L/C Disbursement that is reimbursed after the date such L/C Disbursement is required to be reimbursed under paragraph (e) of this Section, (A) be payable in Dollars, (B) bear interest at the rate per annum then applicable to ABR New Revolving Loans and (C) Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any New Revolving Facility Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such New Revolving Facility Lender to the extent of such payment. (i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect 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 to   -53- -------------------------------------------------------------------------------- any previous Issuing Bank, or to such successor 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 such 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. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, (i) in the case of an Event of Default described in Section 7.01(h) or (i), on the Business Day or (ii) in the case of any other Event of Default, on the third Business Day, in each case, following the date on which the Borrower receives notice from the Administrative Agent (or, if the maturity of the Loans has been accelerated, New Revolving Facility Lenders with New Revolving L/C Exposure representing greater than 50% of the total New Revolving L/C Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower 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 Dollars in cash equal to the New Revolving L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Section 7.01, the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable in Dollars, without demand or other notice of any kind. The Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b). Each such deposit pursuant to this paragraph or pursuant to Section 2.11(b) shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the 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 (i) for so long as an Event of Default shall be continuing, the Administrative Agent and (ii) at any other time, the Borrower, in each case, in Permitted Investments and at the risk and expense of the 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 each Issuing Bank for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the New Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of New Revolving Facility Lenders with New Revolving L/C Exposure representing greater than 50% of the total New Revolving L/C Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower as and to the extent that, after giving effect to such return, the Borrower would remain in compliance with Section 2.11(b) and no Event of Default shall have occurred and be continuing. (k) Additional Issuing Banks. From time to time, the Borrower may by notice to the Administrative Agent designate up to three Lenders (in addition to the Issuing Banks   -54- -------------------------------------------------------------------------------- referred to in clauses (a), (b), (c) and (d) in the definition of “Issuing Bank”) that agree (in their sole discretion) to act in such capacity and are reasonably satisfactory to the Administrative Agent as Issuing Banks. Each such additional Issuing Bank shall execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes. To the extent that any additional Issuing Bank becomes a party to this Agreement, then the Administrative Agent, in consultation with all Issuing Banks, shall amend and replace Schedule 2.05(a) accordingly, notwithstanding anything to the contrary contained in Section 9.08 (it being understood that no consent of the Lenders or Borrower shall be required to amend and replace such schedule). (l) Reporting. Unless otherwise requested by the Administrative Agent, each Issuing Bank shall (i) provide to the Administrative Agent copies of any notice received from the Borrower pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof and (ii) report in writing to the Administrative Agent (A) on or prior to each Business Day on which such Issuing Bank expects to issue, amend, renew or extend any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the aggregate face amount of the Letters of Credit to be issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension occurred (and whether the amount thereof changed), and the Issuing Bank shall be permitted to issue, amend, renew or extend such Letter of Credit if the Administrative Agent shall not have advised the Issuing Bank that such issuance, amendment renewal or extension would not be in conformity with the requirements of this Agreement, (B) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C Disbursement and the amount of such L/C Disbursement and (C) on any other Business Day, such other information as the Administrative Agent shall reasonably request, including but not limited to prompt verification of such information as may be requested by the Administrative Agent. (m) Existing Letters of Credit. The parties hereto agree that the Existing Letters of Credit shall be deemed Letters of Credit for all purposes under this Agreement, without any further action by the Borrower. 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, Local 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 Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City, and designated by the Borrower in the Borrowing Request; provided that ABR New Revolving Loans and Swingline Borrowings made to finance the reimbursement of a L/C Disbursement and reimbursements as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank. (b) Unless the 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   -55- -------------------------------------------------------------------------------- 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 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 (without duplication) such corresponding amount 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 (i) in the case of 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 or (ii) in the case of the 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 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 Borrower 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 Borrower 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 Borrower 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 such Borrower were requesting a 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 Borrower. (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;   -56- -------------------------------------------------------------------------------- (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. If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender to which such Interest Election Request relates of the details thereof and of such Lender’s portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing 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. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency 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, the New Revolving Facility Commitments shall terminate on the New Revolving Facility Maturity Date. The parties hereto acknowledge that the New Term Loan Commitments will terminate at 5 p.m. New York City time on the Amendment Effective Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments under any Facility; provided that (i) each reduction of the Commitments under any Facility shall be in an amount that is an integral multiple of $1.0 million and not less than $5.0 million (or, if less, the remaining amount of the New Revolving Facility Commitments) and (ii) the Borrower shall not terminate or reduce the New Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the New Revolving Facility Loans in accordance with Section 2.11, the New Revolving Facility Credit Exposure would exceed the total New Revolving Facility Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the New Revolving Facility 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 applicable Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the New Revolving Facility Commitments delivered by the Borrower may   -57- -------------------------------------------------------------------------------- state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (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 shall be permanent. Each reduction of the Commitments under any Facility shall be made ratably among the Lenders in accordance with their respective Commitments under such Facility. SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each New Revolving Facility Lender the then unpaid principal amount of each New Revolving Facility Loan to the Borrower on the New Revolving Facility 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 New Revolving Facility 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 five Business Days after such Swingline Loan is made; provided that on each date that a New Revolving Facility Borrowing is made by the Borrower, the Borrower shall repay all Swingline Loans then outstanding. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower 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 Facility and Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) any amount received by such 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 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 any Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower 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 9.04) 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).   -58- -------------------------------------------------------------------------------- SECTION 2.10. Repayment of New Term Loans and New Revolving Facility Loans. (a) Subject to adjustment pursuant to paragraph (c) of this Section, the Borrower shall repay New Term Loan Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date (each such date being referred to as a “New Term Loan Installment Date”):   Date    Amount September 30, 2006    $ 0.00 December 31, 2006    $ 0.00 March 31, 2007    $ 0.00 June 30, 2007    $ 0.00 September 30, 2007    $ 4,187,500.00 December 31, 2007    $ 4,187,500.00 March 31, 2008    $ 4,187,500.00 June 30, 2008    $ 4,187,500.00 September 30, 2008    $ 4,187,500.00 December 31, 2008    $ 4,187,500.00 March 31, 2009    $ 4,187,500.00 June 30, 2009    $ 4,187,500.00 September 30, 2009    $ 8,375,000.00 December 31, 2009    $ 8,375,000.00 March 31, 2010    $ 8,375,000.00 June 30, 2010    $ 8,375,000.00 September 30, 2010    $ 8,375,000.00 December 31, 2010    $ 8,375,000.00 March 31, 2011    $ 8,375,000.00 New Term Loan Maturity Date    $ 242,875,000.00 In the event that any Additional New Term Loans are made on an Increased Amount Date, the amount due on each New Term Loan Installment Date (other than the New Term Loan Maturity Date) occurring after the Increased Amount Date shall increase as follows: (a) for each New Term Loan Installment Date occurring in the second and third years following the Amendment Effective Date, an amount equal to 1.25% of the original principal amount of such Additional New Term Loans, (b) for each New Term Loan Installment Date occurring in the fourth year following the Amendment Effective Date, an amount equal to 2.50% of the original principal amount of such Additional New Term Loans, (c) for each New Term Loan Installment Date occurring in the first nine months of the fifth year following the Amendment Effective Date, an amount equal to 2.50% of the original principal amount of such Additional New Term Loans and (d) for the remaining New Term Loan Installment Date, an amount equal to the remaining principal amount of the Additional New Term Loans being repaid on the New Term Loan Maturity Date.   -59- -------------------------------------------------------------------------------- (b) To the extent not previously paid all New Term Loans shall be due and payable on the New Term Loan Maturity Date. (c) Prepayment of the New Term Loan Borrowings from: (i) all Net Proceeds or Acquisition Agreement Payments pursuant to Section 2.11(c) or 2.11(e), respectively, shall be applied to reduce on a pro rata basis (based on the amount of such amortization payments) the remaining scheduled amortization payments in respect of such New Term Loan Borrowings; and (ii) any optional prepayments pursuant to Section 2.11(a) shall be applied to reduce the remaining scheduled amortization payments in respect of New Term Loan Borrowings as directed by the Borrower. (d) Any Lender holding New Term Loans may elect, on not less than two Business Days’ prior written notice to the Administrative Agent with respect to any mandatory prepayment made pursuant to Section 2.11(c) or Section 2.11(e), not to have such prepayment applied to such Lender’s New Term Loans, in which case, the full amount not so applied shall be retained by the Borrower. (e) Prior to any repayment of any Borrowing under any Facility hereunder, the Borrower shall select the Borrowing or Borrowings under the applicable Facility to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 2:00 p.m., Local Time, (i) in the case of an ABR Borrowing, one Business Day before the scheduled date of such repayment and (ii) in the case of a Eurocurrency Borrowing, three Business Days before the scheduled date of such repayment. Each repayment of a Borrowing (x) in the case of the New Revolving Facility, shall be applied to the New Revolving Facility Loans included in the repaid Borrowing such that each New Revolving Facility Lender receives its ratable share of such repayment (based upon the respective New Revolving Facility Credit Exposures of the New Revolving Facility Lenders at the time of such repayment) and (y) in all other cases, shall be applied ratably to the Loans included in the repaid Borrowing. Notwithstanding anything to the contrary in the immediately preceding sentence, prior to any repayment of a Swingline Borrowing hereunder, the 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 1:00 p.m., Local Time, on the scheduled date of such repayment. Repayments of Borrowings shall be accompanied by accrued interest on the amount repaid. SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in accordance with Section 2.10(e). (b) In the event and on such occasion that the New Revolving Facility Credit Exposure exceeds the total New Revolving Facility Commitments, the Borrowers under the New Revolving Facility shall prepay New Revolving Facility Borrowings or Swingline Borrowings   -60- -------------------------------------------------------------------------------- (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) made to such Borrowers, in an aggregate amount equal to the amount by which the New Revolving Facility Credit Exposure exceeds the total New Revolving Facility Commitments. (c) Holdings and the Borrower shall apply all Net Proceeds upon receipt thereof to prepay New Term Loan Borrowings in accordance paragraphs (c) and (d) of Section 2.10. (d) [Intentionally Omitted]. (e) Following the receipt of any Acquisition Agreement Payments, Holdings and the Subsidiaries shall prepay, or cause to be prepaid, New Term Loan Borrowings in accordance with paragraphs (c) and (d) of Section 2.10. (f) [Intentionally Omitted]. SECTION 2.12. Fees. (a) The Borrower agrees to pay to each Lender (other than any Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of March, June, September and December in each year, and three Business Days after the date on which the New Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a “Commitment Fee”) on the daily amount of the Available Unused Commitment of such Lender during the preceding quarter (or other period commencing with the Amendment Effective Date or ending with the date on which the last of the Commitments of such Lender shall be terminated) at the rate set forth under the caption “Commitment Fee” below based upon the Leverage Ratio as of the most recent determination date; provided that until the Trigger Date, the Leverage Ratio shall be deemed to be Category 2.   Leverage Ratio    Commitment Fee   Category 1 Greater than 2.50 to 1.00    0.375 % Category 2 Equal to or less than 2.50 to 1.00 but greater than 1.50 to 1.00    0.250 % Category 3 Equal to or less than 1.50 to 1.00 but greater than 1.00 to 1.00    0.250 % Category 4 Equal to or less than 1.00 to 1.00    0.200 % All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. For the purpose of calculating any Lender’s Commitment   -61- -------------------------------------------------------------------------------- Fee, the outstanding Swingline Loans during the period for which such Lender’s Commitment Fee is calculated. The Commitment Fee due to each Lender shall begin to accrue on the Amendment Effective Date and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein. (b) The Borrower from time to time agrees to pay (i) to each New Revolving Facility Lender (other than any Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of March, June, September and December of each year and three Business Days after the date on which the New Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fee (an “L/C Participation Fee”) on such Lender’s New Revolving Facility Percentage of the daily aggregate New Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements), during the preceding quarter (or shorter period commencing with the Amendment Effective Date or ending with the New Revolving Facility Maturity Date or the date on which the New Revolving Facility Commitments shall be terminated) at the rate per annum equal to the Applicable Margin for Eurocurrency New Revolving Facility Borrowings effective for each day in such period and (ii) to each Issuing Bank, for its own account, (x) 10 Business Days after the last day of March, June, September and December of each year and three Business Days after the date on which the New Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fronting fee in respect of each Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 0.125% (or such other percentage to be mutually agreed upon between the Borrower and the applicable Issuing Lender) per annum of the daily average stated amount of such Letter of Credit), plus (y) in connection with the issuance, amendment or transfer of any such Letter of Credit or any L/C Disbursement thereunder, such Issuing Bank’s customary documentary and processing charges (collectively, “Issuing Bank Fees”). All L/C Participation Fees and Issuing Bank Fees that are payable on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (c) The Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the fees set forth in the Fee Letter (the “Administrative Agent Fees”). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall 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 Margin. (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 Margin.   -62- -------------------------------------------------------------------------------- (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any Fees or other amount payable by the Borrower 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 Loans as provided in paragraph (a) of this Section; provided that this paragraph (c) shall not apply to any Event of Default that has been waived by the Lenders pursuant to Section 9.08. (d) Accrued interest on each Loan shall be payable in arrears (i) on each Interest Payment Date for such Loan, (ii) in the case of New Revolving Facility Loans, upon termination of the New Revolving Facility Commitments and (iii) in the case of the New Term Loans, on the New Term Loan Maturity Date; 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 New Revolving Loan prior to the end of the 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 interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Base 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 actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or 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 or the LIBO Rate, as applicable, for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders or the Majority Lenders under the New Revolving Facility that the Adjusted LIBO Rate or the LIBO Rate, as applicable, 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 Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower 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 to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto   -63- -------------------------------------------------------------------------------- an ABR Borrowing and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing or shall be made as a Borrowing bearing interest at such rate as the Majority Lenders under the New Revolving Facility shall agree adequately reflects the costs to the New Revolving Facility Lenders of making the Loans comprising such Borrowing. 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 those for which payment has been requested pursuant to Section 2.20) or Issuing Bank; or (ii) impose on any Lender or 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 (except those for which payment has been requested pursuant to Section 2.20); 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 Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower (in the case of a Loan) or the Borrower (in the case of a Letter of Credit) will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered. (b) If any Lender or 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 Issuing Bank’s capital or on the capital of such Lender’s or 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 such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower (in the case of a Loan) or the Borrower (in the case of a Letter of Credit) shall pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered. (c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and   -64- -------------------------------------------------------------------------------- shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies such Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or 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 180-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 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 Eurocurrency Loan on the date specified in any notice delivered pursuant hereto 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 Borrower pursuant to Section 2.19, then, in any such event, such Borrower 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 be the 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 a Eurocurrency Loan, 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 Euros of a comparable amount and period from other banks in the Eurodollar 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 such Borrower and shall be conclusive absent manifest error. Such Borrower 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 any Loan Party hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if a Loan Party 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   -65- -------------------------------------------------------------------------------- payable under this Section) any Agent, Lender or Issuing Bank, as applicable, receives an amount equal to the sum it would have received had no such deductions for Indemnified Taxes and Other Taxes been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Each Loan Party shall indemnify the Agents, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Agent, Lender or Issuing Bank, as applicable, on or with respect to any payment by or on account of any obligation of such Loan Party hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any 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 such Loan Party by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf, on behalf of another Agent or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, such Loan Party 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 Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Borrower (with a copy to the Administrative Agent), to the extent such Lender is legally entitled to do so, at the time or times prescribed by applicable law such properly completed and executed documentation prescribed by applicable law as may reasonably be requested by such Borrower to permit such payments to be made without such withholding tax or at a reduced rate; provided that no Lender shall have any obligation under this paragraph (e) with respect to any withholding Tax imposed by any jurisdiction other than the United States if in the reasonable judgment of such Lender such compliance would subject such Lender to any material unreimbursed cost or expense or would otherwise prejudice such Lender’s interest in any material respect. (f) If an Agent or a Lender determines, in good faith and in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which such Loan Party has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Agent or such Lender (including any Taxes imposed with respect to such refund) as is determined by the Agent or Lender in good faith and in its sole   -66- -------------------------------------------------------------------------------- discretion, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of such Agent or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent or such Lender in the event such Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require any Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Loan Parties or any other person. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Unless otherwise specified, each Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of L/C Disbursements, or of amounts payable under Section 2.15, 2.16, 2.17 or 2.20, or otherwise) prior to 2:00 p.m., Local Time, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, 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 to the applicable account designated to the Borrower by each Administrative Agent, except payments to be made directly to the applicable Issuing Bank or the applicable Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17, 2.20 and 9.05 shall be made directly to the persons entitled thereto. 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 hereunder 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. All payments hereunder of (i) principal or interest in respect of any Loan, (ii) reimbursement obligations with respect to any Letter of Credit or (iii) any other amount due hereunder or under another Loan Document shall be made in Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if such Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by such Administrative Agent to make such payment. (b) If at any time insufficient funds are received by and available to the Administrative Agent from any Borrower to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and fees then due from such Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due from such Borrower 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 L/C Disbursements then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such parties.   -67- -------------------------------------------------------------------------------- (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 Term Loans, New Revolving Facility Loans or participations in L/C Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Term Loans, New Revolving Facility Loans and participations in L/C 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 Term Loans, New Revolving Facility Loans and participations in L/C 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 Term Loans, New Revolving Facility Loans and participations in L/C 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 (c) shall not be construed to apply to any payment made by the 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 L/C Disbursements to any assignee or participant, other than to such Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph (c) shall apply). Each 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 such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation. (d) 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 applicable Issuing Bank hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as applicable, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as applicable, 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 (i) 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) or 2.18(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision 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.   -68- -------------------------------------------------------------------------------- SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15 or 2.20, 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 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 reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15, 2.17 or 2.20, as applicable, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. Each Borrower 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 2.20, 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 2.17, or is a Defaulting Lender, then such 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 Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Borrower shall have received the prior written consent of the Administrative Agent, 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 L/C 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 such Borrower (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 2.20 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. Nothing in this Section 2.19 shall be deemed to prejudice any rights that any Borrower may have against any Lender that is a Defaulting Lender. (c) If any Lender (such Lender, a “Non-Consenting Lender”) has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08 requires the consent of all of the Lenders affected and with respect to which the Required Lenders shall have granted their consent, then provided no Event of Default then exists, the Borrower shall have the right (unless such Non-Consenting Lender grants such consent) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign its Loans, and its Commitments hereunder to one or more assignees reasonably acceptable to the Administrative Agent, provided that: (a) all Obligations of Borrowers owing to such Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment, and (b) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment the Borrower, Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04.   -69- -------------------------------------------------------------------------------- SECTION 2.20. Additional Reserve Costs. (a) For so long as any Lender is required to make special deposits with the Bank of England or comply with reserve assets, liquidity, cash margin or other requirements of the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender’s Eurocurrency Loans, the Borrower shall pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such 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 F to the Original Credit Agreement. (b) Any additional interest owed pursuant to paragraph (a) above shall be determined by the applicable Lender, which determination shall be conclusive absent manifest error, and notified to the Borrower (with a copy to the Administrative Agent) at least five Business Days before each date on which interest is payable for the applicable Loan, and such additional interest so notified to the Borrower by such Lender shall be payable to the Administrative Agent for the account of such Lender on each date on which interest is payable for such Loan. SECTION 2.21. Increase in New Revolving Facility Commitments and/or New Term Loan Commitments. (a) Additional New Commitments. At any time following the completion of the syndication of the Facilities (as reasonably determined by CGMI), the Borrower may by written notice to the Administrative Agent elect to request an increase to the existing New Revolving Facility Commitments (any such increase, the “Additional New Revolving Facility Commitments”) and/or the New Term Loan Commitments (any such increase, the “Additional New Term Loan Commitments” and together with the Additional New Revolving Facility Commitments, if any, the “Additional New Commitments”), by an amount not in excess of $100.0 million in the aggregate or a lesser amount in integral multiples of $10.0 million. Such notice shall (A) specify the date (an “Increased Amount Date”) on which the Borrower proposes that the Additional New Commitments and, in the case of Additional New Term Loan Commitments, the date for borrowing, as applicable, be made available, which shall be a date not less than 5 Business Days after the date on which such notice is delivered to the Administrative Agent, and (B) offer each New Revolving Facility Lender (in the case of Additional New Revolving Facility Commitments) and/or New Term Loan Lender (in the case of Additional New Term Loan Commitments) the right to increase its New Revolving Facility Commitment and/or New Term Loan Commitment, as applicable, on a pro rata basis. The Borrower shall notify the Administrative Agent in writing of the identity of each New Revolving Facility Lender, New Term Loan Lender or other financial institution reasonably acceptable to the Administrative Agent (each, a “Additional New Revolving Facility Lender,” a “Additional New Term Loan Lender” or generally, a “Additional Lender”) to whom the Additional New Commitments have been (in accordance with the prior sentence) allocated and the amounts of such allocations; provided that any Lender approached to provide all or a portion of the Additional New Commitments may elect or decline, in its sole discretion, to provide an Additional New Commitment. Such Additional New Commitments shall become effective as of such Increased Amount Date, and in the case of Additional New Term Loan Commitments, such Additional New Term Loans in respect hereof (“Additional New Term Loans”) shall be made on such Increased Amount Date; provided that (1) no Default or Event of Default shall exist on such Increased Amount Date before or after giving effect to such Additional New Commitments and Loans; (2) such increase in the New Revolving Facility Commitments and/or the New Term Loan Commitments shall be evidenced by one or more joinder   -70- -------------------------------------------------------------------------------- agreements executed and delivered to Administrative Agent by each Additional Lender, as applicable, and each shall be recorded in the register, each of which shall be subject to the requirements set forth in Section 2.17(e); and (3) the Borrower shall make any payments required pursuant to Section 2.16 in connection with the provisions of the Additional New Commitments. (b) On any Increased Amount Date on which Additional New Revolving Facility Commitments are effected, subject to the satisfaction of the foregoing terms and conditions, (i) each of the existing New Revolving Facility Lenders shall assign to each of the Additional New Revolving Facility Lenders, and each of the Additional New Revolving Facility Lenders shall purchase from each of the existing New Revolving Facility Lenders, at the principal amount thereof, such interests in the outstanding New Revolving Facility Loans and participations in Letters of Credit and Swingline Loans outstanding on such Increased Amount Date that will result in, after giving effect to all such assignments and purchases, such New Revolving Facility Loans and participations in Letters of Credit and Swingline Loans being held by existing New Revolving Facility Lenders and Additional New Revolving Facility Lenders ratably in accordance with their New Revolving Facility Commitments after giving effect to the addition of such Additional New Revolving Facility Commitments to the New Revolving Facility Commitments, (ii) each Additional New Revolving Facility Commitment shall be deemed for all purposes a New Revolving Facility Commitment and each Loan made thereunder shall be deemed, for all purposes, a New Revolving Facility Loan and have the same terms as any existing New Revolving Facility Loan and (iii) each Additional New Revolving Facility Lender shall become a Lender with respect to the New Revolving Facility Commitments and all matters relating thereto. (c) On any Increased Amount Date on which Additional New Term Loan Commitments are effected and borrowed, subject to the satisfaction of the foregoing terms and conditions, (i) each Additional New Term Loan Commitment shall be deemed for all purposes a New Term Loan Commitment and each Loan made thereunder shall be deemed, for all purposes, a New Term Loan, (ii) each Additional New Term Loan Lender shall become a Lender with respect to the New Term Loan Commitments and all matters relating thereto and (iii) the Additional New Term Loans shall have the same terms as the existing New Term Loans (except as provided in the last paragraph in Section 2.10(a)) and be made by each Additional New Term Loan Lender on the Increased Amount Date. All Additional New Term Loans made on any Increased Amount Date will be made in accordance with the procedures set forth in Section 2.03. (d) The Administrative Agent shall notify the Lenders promptly upon receipt of the Borrower’s notice of an Increased Amount Date and, in respect thereof, the Additional New Commitments and the Additional Lenders. SECTION 2.22. Illegality. If any Lender reasonably determines that any change in law has made it unlawful, or that any Governmental Authority has asserted after the Amendment Effective Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Loans, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings to Eurocurrency Borrowings 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), convert   -71- -------------------------------------------------------------------------------- all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, such Borrower shall also pay accrued interest on the amount so prepaid or converted. ARTICLE III REPRESENTATIONS AND WARRANTIES Each of Holdings and the Borrower represents and warrants to each of the Lenders that: SECTION 3.01. Organization; Powers. Except as set forth on Schedule 3.01, each of Holdings, the Borrower and each of the other Subsidiaries (a) is a partnership, limited liability company or corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to have a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of each Borrower, to borrow and otherwise obtain credit hereunder. SECTION 3.02. Authorization. The execution, delivery and performance by Holdings, the Borrower, and each of the other Subsidiaries of each of the Loan Documents to which it is a party, and the borrowings hereunder and the New Transactions (a) have been duly authorized by all corporate, stockholder, limited liability company or partnership action required to be obtained by Holdings, the Borrower and such Subsidiaries and (b) will not (i) violate (A) any provision of law, statute, rule or regulation (including, without limitation, any Mining Law), or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, the Borrower or any such Subsidiary, (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority (including, without limitation, any Mining Permit) or (C) any provision of any indenture, lease (including, without limitation, any Mining Lease), agreement or other instrument to which Holdings, the Borrower or any such Subsidiary is a party or by which any of them or any of their respective property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under, any such indenture, lease (including, without limitation, any Mining Lease), agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 3.02, could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, the Borrower or any such Subsidiary, other than the Liens created by the Loan Documents.   -72- -------------------------------------------------------------------------------- SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing. SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the New Transactions except for (a) the filing of UCC financing statements and certificates of title, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office, (c) recordation of the Mortgages and the Mortgage Amendments, (d) such consents, authorizations, filings or other actions that have either (i) been made or obtained and are in full force and effect or (ii) are listed on Schedule 3.04 and (e) such actions, consents and approvals the failure to be obtained or made which could not reasonably be expected to have a Material Adverse Effect. SECTION 3.05. Financial Statements. There has heretofore been furnished to the Lenders: the consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of Holdings (i) as of and for the fiscal years ended December 31, 2004 and December 31, 2005, audited by and accompanied by the unqualified opinion of Ernst & Young LLP, independent public accountants, and (ii) as of and for the three-month period ended March 31, 2006 and for the comparable period of the preceding fiscal year, in each case, certified by the chief financial officer of Holdings. Such financial statements and all financial statements delivered pursuant to Sections 5.04(a) and (b) have been prepared in accordance with GAAP and present fairly and accurately the financial condition and results of operations and cash flows of Holdings as of the dates and for the periods to which they relate. SECTION 3.06. No Material Adverse Change or Material Adverse Effect. Since December 31, 2005, there has been no event or occurrence which has resulted in or would reasonably be expected to result in, individually or in the aggregate, any Material Adverse Effect. SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of Holdings, the Borrower and the other Subsidiaries has good and valid record fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all its properties and assets, including all Mortgaged Properties, subject solely to Permitted Encumbrances and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Holdings, the Borrower and the other Subsidiaries have maintained, in all material respects and in accordance with normal mining industry practice, all of the machinery, equipment, vehicles, preparation plants or other coal processing facilities, loadout and other transportation facilities and other tangible personal   -73- -------------------------------------------------------------------------------- property now owned or leased by Holdings, the Borrower and the other Subsidiaries that is necessary to conduct their business as it is now conducted. All such properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02 or arising by operation of law. (b) Each of Holdings, the Borrower and the other Subsidiaries has complied with all obligations under all leases (including, without limitation, Mining Leases) to which it is a party, except where the failure to comply would not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. Each of Holdings, the Borrower and the other Subsidiaries enjoys peaceful and undisturbed possession under all such leases, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (c) As of the Amendment Effective Date, the estate, title and interest of Holdings, the Borrower and the other Subsidiaries in the Covered Properties and those Real Properties set forth on Schedule 3.07(c) constitute all of the estate, title and interest in Real Properties necessary for the conduct of the business and operations of Holdings, the Borrower and the other Subsidiaries as currently conducted. As of the Amendment Effective Date, the Covered Properties constitute (i) substantially all of the coal reserves and related surface Improvements owned and leased by Holdings and the Subsidiaries in the Commonwealth of Pennsylvania; (ii) substantially all of the coal reserves and related surface Improvements owned and leased by Holdings and the Subsidiaries in the State of Wyoming; (iii) substantially all of the coal reserves and related surface Improvements owned or leased by Holdings and the Subsidiaries in the State of Illinois that will be mined in the five-year period following the Original Closing Date in accordance with the current mine plan of Holdings and the Subsidiaries with respect to coal reserves in such state; and (iv) less than 25% of the coal reserves owned and leased by Holdings and the Subsidiaries in the State of West Virginia. As of the Amendment Effective Date, none of Holdings or any Subsidiary own or lease any material coal reserves in jurisdictions other than those listed in clauses (i) through (iv) of the preceding sentence. All of the Covered Properties are, as of the Amendment Effective Date, encumbered by Mortgages in favor of the Collateral Agent for its benefit and the benefit of the Secured Parties securing the Obligations. Annex C has been prepared in good faith and is a true and correct summary of all the Real Property owned or leased by Holdings and the Subsidiaries to be encumbered in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, as of the Amendment Effective Date. (d) Except as set forth on Schedule 3.07(d), none of Holdings or any of the Subsidiaries has received written or, to the knowledge of Holdings and the Subsidiaries, other notice of claims that Holdings or any Subsidiary has mined any coal that it did not have the right to mine or mined any coal in such a manner as to give rise to any claims for loss, waste or trespass, and, to the knowledge of Holdings and the Subsidiaries, no facts exist upon which such a claim could be based. (e) Each of Holdings, the Borrower and the other Subsidiaries owns or possesses, or could obtain ownership or possession of, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto   -74- -------------------------------------------------------------------------------- necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or except as set forth on Schedule 3.07(e). (f) As of the Amendment Effective Date, none of Holdings, the Borrower and their Subsidiaries has received any notice of any pending or contemplated condemnation proceeding affecting any of the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Amendment Effective Date, except as set forth on Schedule 3.07 (f). (g) None of Holdings, the Borrower and their Subsidiaries is obligated on the Amendment Effective Date under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein, except as permitted under Section 6.02 or 6.05. (h) Schedule 3.07(h) sets forth as of the Amendment Effective Date the name and jurisdiction of incorporation, formation or organization of each Subsidiary of Holdings and, as to each such Subsidiary, the percentage of each class of Equity Interests owned by Holdings or by any such Subsidiary, indicating the ownership thereof. (i) As of the Amendment Effective Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Equity Interests of Holdings or any of the Subsidiaries, except as set forth on Schedule 3.07(i). (j) As of the Amendment Effective Date, there are no Intercompany Leases other than those encumbered pursuant to the Intercompany Lease Agreement by the Collateral Agent for the benefit of the Secured Parties securing the Obligations. (k) With respect to each Covered Property on which significant surface Improvements are located, there are no rights or claims of parties in possession not shown by the public records, encroachments, overlaps, boundary line disputes or other matters which would be disclosed by an accurate survey or inspection of the premises except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.08. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.08(a), there are no actions, suits, investigations or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending against, or, to the knowledge of Holdings or the Borrower, threatened in writing against or affecting, Holdings or the Borrower or any of the other Subsidiaries or any business, property or rights of any such person (i) as of the Amendment Effective Date, that involve any Loan Document or the New Transactions or (ii) which individually could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected, individually or in the aggregate, to materially adversely affect the New Transactions. None of Holdings,   -75- -------------------------------------------------------------------------------- the Borrower or any other Subsidiary has been notified in writing, or, to the knowledge of Holdings and the Subsidiaries, otherwise notified, by the Federal Office of Surface Mining or the agency of any state administering the Surface Mining Control and Reclamation Act of 1977, as amended, or any comparable state statute that it is: (i) ineligible to receive additional surface mining permits; or (ii) under investigation to determine whether their eligibility to receive any Mining Permit should be revoked, i.e., “permit blocked.” To the knowledge of Holdings and the Borrower, no facts exist that presently or upon the giving of notice or the lapse of time or otherwise would render any of Holdings or any Subsidiary ineligible to receive surface mining permits. Neither the Borrower nor, to the knowledge of any of the Loan Parties, any of its Affiliates is in violation of any laws relating to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing, effective September 23, 2001, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (signed into law on October 26, 2001) (the “U.S. Patriot Act”). (b) Except as set forth in Schedule 3.08(b), none of Holdings, the Borrower, the other Subsidiaries and their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any currently applicable law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval, Mining Law, Mining Permit or any building permit) or any restriction of record or agreement affecting any Mortgaged Property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.09. Federal Reserve Regulations. (a) None of Holdings, the Borrower and the other Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X. SECTION 3.10. Investment Company Act; Public Utility Holding Company Act. None of Holdings, the Borrower or any other Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended. SECTION 3.11. Use of Proceeds. The Borrower (a) will use the proceeds from borrowings of the New Term Loans to refinance the outstanding Tranche B Term Loans (as defined in the Original Credit Amendment) on the Amendment Effective Date and (b) will use the proceeds of the New Revolving Facility Loans made on the Amendment Effective Date to refinance the outstanding Revolving Facility Loans (as defined in the Original Credit   -76- -------------------------------------------------------------------------------- Agreement) on the Amendment Effective Date and (c) will use the proceeds from Borrowings of New Revolving Facility Loans after the Amendment Effective Date for working capital and general corporate purposes. SECTION 3.12. Tax Returns. Except as set forth on Schedule 3.12: (a) Each of Holdings, the Borrower and their Subsidiaries (i) has timely filed or caused to be timely filed all federal, state, local and non-U.S. Tax returns required to have been filed by it that are material to such companies taken as a whole and each such Tax return is true and correct in all material respects and (ii) has timely paid or caused to be timely paid all material Taxes shown thereon to be due and payable by it and all other material Taxes or assessments, except Taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which Holdings, the Borrower or any of other Subsidiaries (as the case may be) has set aside on its books adequate reserves; (b) Each of Holdings, the Borrower and the other Subsidiaries has paid in full or made adequate provision (in accordance with GAAP) for the payment of all Taxes due with respect to all periods or portions thereof ending on or before the Amendment Effective Date, which Taxes, if not paid or adequately provided for, could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and (c) Other than as could not be, individually or in the aggregate, reasonably expected to have a Material Adverse Effect: as of the Amendment Effective Date, with respect to each of Holdings, the Borrower and their Subsidiaries, (i) there are no claims being asserted in writing with respect to any Taxes, (ii) no presently effective waivers or extensions of statutes of limitation with respect to Taxes have been given or requested and (iii) no Tax returns are being examined by, and no written notification of intention to examine has been received from, the Internal Revenue Service or any other taxing authority. SECTION 3.13. No Material Misstatements. (a) All written information (other than the Projections, estimates and information of a general economic nature) (the “Information”) concerning Holdings, the Borrower, the other Subsidiaries, the New Transactions and any other transactions contemplated hereby included in the Information Memorandum or otherwise prepared by or on behalf of the foregoing or their representatives (excluding any reserve reports) and made available to any Lenders or the Administrative Agent in connection with the New Transactions or the other transactions contemplated hereby, when taken as a whole, were true and correct in all material respects, as of the date such Information was furnished to the Lenders and as of the Amendment Effective Date and did not contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made. (b) The Projections, the Reserve Reports and estimates and information of a general economic nature prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lenders or the Administrative Agent in connection with the New Transactions or the other transactions contemplated hereby (i) have been prepared   -77- -------------------------------------------------------------------------------- in good faith based upon assumptions believed by the Borrower to be reasonable as of the date thereof, as of the date such Projections and estimates were furnished to the initial Lenders hereunder on the Amendment Effective Date, and as of the Amendment Effective Date, and (ii) as of the Amendment Effective Date, have not been modified in any material respect by the Borrower. SECTION 3.14. Employee Benefit Plans. Each of Holdings, the Borrower, the other Subsidiaries and the ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Plans and the regulations and published interpretations thereunder, except for such noncompliance that could not reasonably be expected to have a Material Adverse Effect. As of the Amendment Effective Date, the excess of the present value of all benefit liabilities under each Plan of Holdings, the Borrower, and each other Subsidiary and the ERISA Affiliates (based on those assumptions used to fund such Plan), as of the last annual valuation date applicable thereto for which a valuation is available, over the value of the assets of such Plan could not reasonably be expected to have a Material Adverse Effect, and the excess of the present value of all benefit liabilities of all underfunded Plans (based on those assumptions used to fund each such Plan) as of the last annual valuation dates applicable thereto for which valuations are available, over the value of the assets of all such under funded Plans could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other ERISA Events which have occurred or for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.15. Environmental Matters. Except as disclosed on Schedule 3.15 and except as to matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (i) no written notice, request for information, order, complaint or penalty has been received by Holdings, the Borrower or any of the other Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or threatened in writing against Holdings, the Borrower or any of the other Subsidiaries which allege a violation of or liability under any Environmental Laws, in each case relating to Holdings, the Borrower or any of the other Subsidiaries, (ii) each of Holdings, the Borrower and the other Subsidiaries has obtained or applied for all material environmental permits necessary for its operations as currently conducted to comply with all applicable Environmental Laws and is, and since June 30, 1999 has been, in compliance with the terms of such permits and with all other applicable Environmental Laws, (iii) Holdings, the Borrower and the other Subsidiaries have made available to the Administrative Agent prior to the Amendment Effective Date the most recent environmental audit, if any, with respect to the operations of each of Holdings, the Borrower and the other Subsidiaries, (iv) to the knowledge of Holdings, the Borrower and the other Subsidiaries, no Hazardous Material is located at any property currently owned, operated or leased by Holdings, the Borrower or any of the other Subsidiaries that would reasonably be expected to give rise to any cost, liability or obligation of Holdings, the Borrower or any of the other Subsidiaries under any Environmental Laws, and no Hazardous Material has been generated, owned or controlled by Holdings, the Borrower or any of the other Subsidiaries and transported to or released at any location in a manner that would reasonably be expected to give rise to any cost, liability or obligation of Holdings, the Borrower or any of the other Subsidiaries under any Environmental Laws, (v) to the knowledge of Holdings, the Borrower and the other Subsidiaries, there are no agreements in effect as of the Amendment Effective Date pursuant to which Holdings, the Borrower or any of the other Subsidiaries has expressly assumed or   -78- -------------------------------------------------------------------------------- undertaken responsibility for any liability or obligation of any other Person arising under or relating to Environmental Laws, which in any such case has not been made available to the Administrative Agent prior to the Amendment Effective Date, (vi) to the knowledge of Holdings, the Borrower and the other Subsidiaries, there are no landfills or disposal areas located at, on, in or under the assets of Holdings or any Subsidiary for which Holdings or any Subsidiary does not hold an authorization pursuant to Mining Laws and which are closed or to be closed and reclaimed pursuant to Reclamation Laws and (vii) to the knowledge of Holdings, the Borrower and the other Subsidiaries as of the Amendment Effective Date, except as listed on Schedule 3.15(vii), there are not currently and since January 1, 1996 there have not been any underground storage tanks “owned,” or “operated” (as defined by applicable Environmental Law) by any of Holdings, the Borrower or any other Subsidiary or present or located on the Holdings’, the Borrower’s or any other Subsidiary’s Real Property. For purpose of Section 7.01(a), each of the representations and warranties contained in clauses (iv), (v), (vi) and (vii) of this Section 3.15 that are qualified by the knowledge of Holdings, the Borrower and the other Subsidiaries shall be deemed not to be so qualified. SECTION 3.16. Security Documents. (a) The Collateral Agreement is (and, after giving effect to the New Transactions, continues to be) 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 described therein and proceeds thereof. In the case of the Pledged Collateral described in the Collateral Agreement, when certificates or promissory notes, as applicable, representing such Pledged Collateral are delivered to the Collateral Agent, and in the case of the other Collateral described in the Collateral Agreement (other than the Intellectual Property (as defined in the Collateral Agreement)), when financing statements and other filings specified on Schedule 6 of the Perfection Certificate dated as of the Original Closing Date in appropriate form are filed in the offices specified on Schedule 7 of the Perfection Certificate dated as of the Original Closing Date , the Liens created by the Collateral Agreement in favor of the Collateral Agent (for the benefit of the Secured Parties) constitute (and, after giving effect to the New Transactions, continues to constitute) fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral and, subject to Section 9-315 of the New York Uniform Commercial Code, the proceeds thereof, as security for the Obligations to the extent perfection can be obtained by filing UCC financing statements, in each case prior and superior in right to any other person (except, in the case of Collateral other than Pledged Collateral, Liens expressly permitted by Section 6.02 and Liens having priority by operation of law). (b) When the Collateral Agreement or a summary thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, and, with respect to Collateral in which a security interest cannot be perfected by such filings, upon the proper filing of the financing statements referred to in paragraph (a) above, the Liens created by the Collateral Agreement in favor of the Collateral Agent (for the benefit of the Secured Parties) constitute (and, after giving effect to the New Transactions, continues to constitute) fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties thereunder in the Intellectual Property, 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 may be necessary to perfect a lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the grantors after the Amendment Effective Date).   -79- -------------------------------------------------------------------------------- (c) The Mortgages executed and delivered on the Original Closing Date pursuant to Section 4.02 of the Original Credit Agreement and the Mortgages executed and delivered after the Original Closing Date pursuant to Section 5.18 of the Original Credit Agreement or Section 5.10 shall be (including after giving effect to the New Transactions and the Mortgage Amendments) effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when such Mortgages and Mortgage Amendments are filed or recorded in the proper real estate filing or recording offices, the Liens created by the Mortgages in favor of the Collateral Agent (for the benefit of the Secured Parties) constitute (and, after giving effect to the New Transactions, continues to constitute) fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Mortgaged Property and, to the extent applicable, subject to Section 9-315 of the UCC, the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of a Person pursuant to Liens expressly permitted by Section 6.02(a) and Liens having priority by operation of law. (d) The Intercompany Lease Agreement executed and delivered on the Original Closing Date pursuant to Section 4.02(A) is (and after giving effect to the New Transactions continues to be) effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Intercompany Leases and any other Collateral pledged thereunder and the proceeds thereof, and when such Intercompany Lease Agreement is filed or recorded in the proper real estate filing or recording offices, the Liens created by the Intercompany Lease Agreement in favor of the Collateral Agent (for the benefit of the Secured Parties) constitute (and, after giving effect to the New Transactions, continues to constitute) fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Intercompany Leases and Collateral pledged thereunder and, to the extent applicable, subject to Section 9-315 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of a Person pursuant to Liens expressly permitted by Section 6.02(a). SECTION 3.17. Location of Real Property and Leased Premises. (a) Schedule 8 to the Perfection Certificate dated as of the Amendment Effective Date lists completely and correctly as of the Amendment Effective Date all Real Property (including, without limitation, each Covered Property) owned by Holdings, the Borrower and the Subsidiary Loan Parties and the addresses or location thereof. (b) Schedule 8 to the Perfection Certificate dated as of the Amendment Effective Date lists completely and correctly as of the Amendment Effective Date all Real Property leased by Holdings, the Borrower and the Domestic Subsidiary Loan Parties (including, without limitation, each leased Covered Property) and the addresses or location thereof.   -80- -------------------------------------------------------------------------------- SECTION 3.18. Solvency. (a) Immediately after giving effect to the New Transactions to occur on the Amendment Effective Date, (i) the fair value of the assets of the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, respectively; (ii) the present fair saleable value of the property of the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, respectively, on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis did not and will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Amendment Effective Date. (b) None of Holdings or the Borrower intend to, and does not believe that it or any of the Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. SECTION 3.19. Labor Matters. There are no strikes pending or threatened against Holdings, the Borrower or any of the other Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and the other Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All material payments due from Holdings, the Borrower or any of the other Subsidiaries or for which any claim may be made against Holdings, the Borrower or any of the other Subsidiaries, 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 Borrower or such Subsidiary to the extent required by GAAP. Except as set forth on Schedule 3.19, consummation of the New Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Borrower or any of the other Subsidiaries (or any predecessor) is a party or by which Holdings, the Borrower or any of the other Subsidiaries (or any predecessor) is bound, other than collective bargaining agreements that, individually or in the aggregate, are not material to Holdings, the Borrower and the other Subsidiaries, taken as a whole. SECTION 3.20. Insurance. Schedule 3.20 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of Holdings, the Borrower or the other Subsidiaries as of the Amendment Effective Date. As of such date, such insurance is in full force and effect. The Borrower believes that the insurance maintained by or on behalf of Holdings, the Borrower and their Subsidiaries is adequate.   -81- -------------------------------------------------------------------------------- SECTION 3.21. [Intentionally Omitted]. SECTION 3.22. Anti-Terrorism Law. (a) No Loan Party and, to the knowledge of Holdings and the Borrower, none of its respective Affiliates is in violation of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) No Loan Party and to the knowledge of the Holdings and the Borrower, no Affiliate or broker or other agent of any Loan Party acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list. (c) No Loan Party and, to the knowledge of Holdings and the Borrower, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 3.22(b), (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. ARTICLE IV CONDITIONS OF LENDING SECTION 4.01. All Credit Events. On the date of each Borrowing and on the date of each issuance, amendment, extension or renewal of a Letter of Credit:   -82- -------------------------------------------------------------------------------- (a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request as required by Section 2.03 (or a Borrowing Request shall have been deemed given in accordance with the last paragraph of Section 2.03) or, in the case of the issuance of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.05(b). (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date). (c) At the time of and immediately after such Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, no Event of Default or Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, extension or renewal of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date of such Borrowing, issuance, amendment, extension or renewal as applicable, as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. First Credit Event. (A) Original Closing Date. The obligations of (a) the Lenders (including the Swingline Lenders) to make Loans and (b) any Issuing Bank to issue Letters of Credit or increase the stated amounts of Letters of Credit requested in each case to be made by them on the Original Closing Date was subject to the satisfaction of all of the conditions precedent set forth in Section 4.02 of the Original Credit Agreement. (B) Amendment Effective Date. The obligation of each New Term Loan Lender to fund a New Term Loan and the obligation of each New Revolving Facility Lender to fund a New Revolving Facility Loan requested to be made by it on the Amendment Effective Date shall be subject to the prior or concurrent satisfaction of each of the following conditions precedent set forth in this Section 4.01(B): (a) Executed Agreement and Amendment Agreement. There shall have been delivered to the Administrative Agent an executed counterpart of each of this Agreement and the New Security Documents each dated as of the Amendment and Restatement Effective Date. The Administrative Agent shall have also received: (i) executed counterparts to the Amendment Agreement executed by (A) New Term Lenders for not less than $335.0 million in New Term Loan Commitments in the aggregate, (B) New Revolving Facility Lenders for $500.0 million in New Revolving Facility Commitments in the aggregate and (C) the other   -83- -------------------------------------------------------------------------------- parties thereto; (ii) executed counterparts to this Agreement by (A) Holdings; (B) the Borrower; (C) the Administrative Agent; (D) the Collateral Agent; (E) the Issuing Banks party hereto on the Amendment Effective Date; (F) each New Term Loan Lender on the Amendment Effective Date; (G) each New Revolving Facility Lender on the Amendment Effective Date; and (H) the other parties to this Agreement on the Amendment Effective Date. (b) Opinions of Counsel. The Administrative Agent shall have received, on behalf of itself, the Collateral Agent, the Lenders and each Issuing Bank on the Amendment Effective Date, a favorable written opinion of (i) Simpson Thacher & Bartlett LLP, special counsel for the Loan Parties, (ii) the general counsel of Holdings, and (iii) local counsel reasonably satisfactory to the Administrative Agent as specified on Schedule 4.02(B)(b) (including the opinions referred to in Section 4.02(B)(e)(ii)(C), in each case (A) dated the Amendment Effective Date, (B) addressed to the Administrative Agent, the Collateral Agent, each Issuing Bank, and the Lenders and (C) in form and substance reasonably satisfactory to the Administrative Agent. (c) Legal Matters. All legal matters incident to this Agreement, the borrowings and extensions of credit hereunder and the other Loan Documents shall be reasonably satisfactory to the Administrative Agent, to the Lenders and to each Issuing Bank on the Amendment Effective Date. (d) Corporate Documents. The Administrative Agent shall have received in the case of each Loan Party each of the items referred to in clauses (i), (ii), (iii) and (iv) below: (i) a copy of the certificate or articles of incorporation, partnership agreement or limited liability agreement, including all amendments thereto, of each Loan Party, (A) in the case of a corporation, certified as of a recent date by the Secretary of State (or other similar official) of the jurisdiction of its organization, and a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of each such Loan Party as of a recent date from such Secretary of State (or other similar official) or (B) in the case of a partnership of or limited liability company, certified by the Secretary or Assistant Secretary of each such Loan Party; (ii) a certificate of the Secretary or Assistant Secretary or similar officer of each Loan Party dated the Amendment Effective Date and certifying to the following: (A) that attached thereto is a true and complete copy of the by-laws (or partnership agreement, limited liability company agreement or other equivalent governing documents) of such Loan Party as in effect on the Amendment Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party (or   -84- -------------------------------------------------------------------------------- its managing general partner or managing member) authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Amendment Effective Date, (C) that the certificate or articles of incorporation, partnership agreement or limited liability agreement of such Loan Party have not been amended since the date of the last amendment thereto disclosed pursuant to clause (i) above, (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party, and (E) as to the absence of any pending proceeding for the dissolution or liquidation of such Loan Party or, to the knowledge of such person, threatening the existence of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary or similar officer executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Administrative Agent, the Lenders and any Issuing Bank on the Amendment Effective Date may reasonably request (including without limitation, tax identification numbers and addresses). (e) Collateral Requirements. (i) The Collateral and Guarantee Requirement shall have been satisfied. (ii) The Collateral Agent shall have received: (A) with respect to each Mortgage encumbering Mortgaged Property, an amendment thereof (each a “Mortgage Amendment”) duly executed and acknowledged by the applicable Loan Party, and in form for recording in the recording office where each such Mortgage was recorded, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof under applicable law, in each case in form and substance reasonably satisfactory to the Collateral Agent; (B) with respect to each Mortgage Amendment, (i) a copy of the existing mortgage title insurance policy and an endorsement with respect thereto relating to the Mortgage encumbering such Mortgaged Property assuring the Collateral Agent that the Mortgage, as amended by the Mortgage Amendment is a valid and enforceable first priority   -85- -------------------------------------------------------------------------------- lien on such Mortgaged Property in favor of the Collateral Agent for the benefit of the Secured Parties free and clear of all defects and encumbrances and liens except as expressly permitted by Section 6.02 of the Original Credit Agreement, and such Mortgage Policy shall otherwise be in form and substance reasonably satisfactory to the Collateral Agent and (ii) evidence acceptable to Administrative Agent of payment by Borrower of all title insurance premiums, search and examination charges, mortgage recording taxes and related charges required for the recording of the Mortgage Amendments and issuance of the endorsements to the title insurance policies; and (C) to the extent reasonably requested by the Administrative Agent, with respect to each Mortgage Amendment, opinions of local counsel to the Loan Parties, which opinions (x) shall be addressed to each Agent, each of the Lenders and each Issuing Bank and be dated the Amendment Effective Date, (y) shall cover the enforceability of the respective Mortgage as amended by the Mortgage Amendment and such other matters incident to the transactions contemplated herein as the Agents may reasonably request and (z) shall be in form and substance reasonably satisfactory to the Administrative Agent. (iii) The Administrative Agent shall have received a completed Perfection Certificate dated the Amendment Effective Date and signed by a Responsible Officer of Holdings, the Borrower and each Domestic Subsidiary Loan Party, together with all attachments contemplated thereby and the following: (A) the results of a search of the UCC (or equivalent) filings made with respect to the Loan Parties in the jurisdictions specified in the Perfection Certificates and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been released or discharged pursuant to documentation reasonably satisfactory to the Administrative Agent; and (B) any necessary termination statements (or similar documents), including UCC termination statements, in form and substance reasonably satisfactory to the Administrative Agent and duly executed or authorized by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective financing statements (or equivalent filings), including UCC financing statements, disclosed in such search (other than any such financing statements in respect of Permitted Encumbrances and Liens permitted by Section 6.02). (iv) The Collateral Agent shall have received an amendment to each Intercompany Lease Agreement duly executed by the applicable Loan Parties, in form and substance reasonably acceptable to the Administrative Agent. (f) Projections. The Administrative Agent shall have received the Borrower’s most recent (as of the Amendment Effective Date) projections through and including the 2011 fiscal year, prepared on a quarterly basis through the end of the 2006 fiscal year.   -86- -------------------------------------------------------------------------------- (g) Material Adverse Change. The absence of any event or occurrence which has resulted in or would reasonably be expected to result in, individually or in the aggregate, any material adverse change in the business, operations, properties, assets or financial condition of the Loan Parties and their respective subsidiaries, taken as a whole, since December 31, 2005. (h) Consents. All requisite material Governmental Authorities and third parties shall have approved or consented to the New Transactions to the extent required, and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on the New Transactions or the other transactions contemplated hereby. (i) No Prohibition. No provision of any applicable law or regulation, including, without limitation, severance, subdivision, Mining Laws or similar laws, and no judgment, injunction, order or decree shall prohibit the consummation of the New Transactions, and all material actions by or in respect of or material filings with any Governmental Authority required to permit the consummation of the New Transactions shall have been taken, made or obtained, except for any such actions or filings the failure to take, make or obtain would not be material to Holdings, Borrower and the other Subsidiaries, taken as a whole. (j) Fees. The Agents shall have received all fees payable thereto or to any Lender on or prior to the Amendment Effective Date and, to the extent invoiced, all other amounts due and payable pursuant to the Loan Documents on or prior to the Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP and local counsel) required to be reimbursed or paid by the Loan Parties hereunder or under any Loan Document. (k) Reserve Report. There shall have been delivered to the Administrative Agent signed and complete copies of the Reserve Report identified in clause (iv) of the definition of “Reserve Report”. ARTICLE V AFFIRMATIVE COVENANTS Each of Holdings and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of the Subsidiaries to: SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under   -87- -------------------------------------------------------------------------------- Section 6.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities are acquired by Holdings or a Wholly Owned Subsidiary of Holdings in such liquidation or dissolution; provided that Subsidiaries that are Loan Parties may not be liquidated into Subsidiaries that are not Loan Parties. (b) Do or cause to be done all things necessary to (i) obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary to the normal conduct of its business, (ii) comply in all material respects with all material applicable laws, rules, regulations (including any zoning, mining, building, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Mortgaged Properties) and judgments, writs, injunctions, decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted and (iii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement). SECTION 5.02. Insurance. (a) Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other reasonable insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses and maintain such other insurance as may be required by law or any other Loan Document. (b) Cause all such property and casualty insurance policies with respect to the Mortgaged Properties to be endorsed or otherwise amended to include a “standard” or “New York” lender’s loss payable endorsement, in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Amendment Effective Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement,” without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably (in light of a Default or a material development in respect of the insured Mortgaged Property) require from time to time to protect their interests; deliver original or certified copies of all such policies or a certificate of an insurance broker to the Collateral Agent; cause each such policy to provide that it shall not be canceled or not renewed upon less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation or nonrenewable of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent), or insurance certificate with respect thereto, together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.   -88- -------------------------------------------------------------------------------- (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount as the Administrative Agent or the Collateral Agent may from time to time reasonably require, and otherwise to ensure compliance with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time. (d) With respect to each Mortgaged Property, carry and maintain comprehensive general liability insurance including the “broad form CGL endorsement” (or equivalent coverage) and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in each case in amounts and against such risks as are customarily maintained by companies engaged in the same or similar industry operating in the same or similar locations naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent. (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by Holdings, the Borrower or any of the Subsidiaries; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies, or an insurance certificate with respect thereto. (f) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that: (i) none of the Agents, the Lenders, the Issuing Bank and their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Borrower and the other Loan Parties shall look solely to their insurance companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Agents, the Lenders, any Issuing Bank or their agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then each of Holdings, and the Borrower hereby agree, to the extent permitted by law, to waive, and to cause each of their Subsidiaries to waive, its right of recovery, if any, against the Agents, the Lenders, any Issuing Bank and their agents and employees; and (ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent, the Collateral Agent under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Administrative Agent, the Collateral Agent or the Lenders that such insurance is adequate for the purposes of the business of Holdings, the Borrower and their Subsidiaries or the protection of their properties.   -89- -------------------------------------------------------------------------------- SECTION 5.03. Taxes. (a) Pay and discharge promptly when due all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings, and Holdings, the Borrower or the affected Subsidiary, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto. (b) Use all commercially reasonable efforts to do or cause to be done all things necessary to prevent any recapture of the excess loss accounts in the stock of the Foundation PA Coal Company (whether as a result of a deconsolidation, worthlessness or other reasons). SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders): (a) within 90 days (or such shorter period as the SEC shall specify for the filing of Annual Reports on Form 10-K) after the end of each fiscal year, commencing with the fiscal year ended December 31, 2006, a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of Holdings and the Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year, all audited by independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of Holdings and the Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery by Holdings of Annual Reports on Form 10-K of Holdings and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such Annual Reports include the information specified herein); (b) commencing with the fiscal quarter ended June 30, 2006, within 45 days (or such shorter period as the SEC shall specify for the filing of Quarterly Reports on Form 10-Q) after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and related statements of operations and cash flows showing the financial position of Holdings and the Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all certified by a Financial Officer of Holdings, on behalf of Holdings, as fairly presenting, in all material respects, the financial position and results of operations   -90- -------------------------------------------------------------------------------- of Holdings and the Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) (it being understood that the delivery by Holdings of Quarterly Reports on Form 10-Q of Holdings and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(b) to the extent such Quarterly Reports include the information specified herein); (c) (x) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of a Financial Officer of Holdings (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) commencing with the fiscal period ending June 30, 2006, setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 and (y) concurrently with any delivery of financial statements under (a) above, a certificate of the accounting firm opining on or certifying such statements stating whether they obtained knowledge during the course of their examination of such statements of any Default or Event of Default (which certificate may be limited to accounting matters and disclaims responsibility for legal interpretations); (d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by Holdings, the Borrower or any of the Subsidiaries with the SEC or distributed to the stockholders of Holdings or the Public Parent generally, as applicable; (e) if, as a result of any change in accounting principles and policies from those as in effect on the Amendment Effective Date, the consolidated financial statements of Holdings and the Subsidiaries delivered pursuant to paragraphs (a) or (b) above will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such clauses had no such change in accounting principles and policies been made, then, together with the first delivery of financial statements pursuant to paragraph (a) and (b) above following such change, a schedule prepared by a Financial Officer on behalf of Holdings reconciling such changes to what the financial statements would have been without such changes; (f) within 90 days after the beginning of each fiscal year, an operating and capital expenditure budget, in form satisfactory to the Administrative Agent prepared by Holdings for each of the four fiscal quarters of such fiscal year prepared in reasonable detail, of Holdings and the Subsidiaries, accompanied by the statement of a Financial Officer of Holdings to the effect that, to the best of his knowledge, the budget is a reasonable estimate for the period covered thereby; (g) upon the reasonable request of the Administrative Agent, updated Perfection Certificates (or, to the extent such request relates to specified information contained in the Perfection Certificates, such information) reflecting all changes since the date of the information most recently received pursuant to this paragraph (g) or Section 5.10(e);   -91- -------------------------------------------------------------------------------- (h) promptly, a copy of all reports submitted to the Board of Directors (or any committee thereof) of any of Holdings, the Borrower or any Subsidiary (x) in connection with any material interim or special audit made by independent accountants of the books of Holdings, the Borrower or any Subsidiary or (y) valuing the coal reserves or constituting, in whole or in part, a material mine plan or material change to any material mining plan; (i) promptly, from time to time, such other information regarding the operations (including as to coal reserves), business affairs and financial condition of Holdings, the Borrower or any of the Subsidiaries, or compliance with the terms of any Loan Document, or such consolidating financial statements, as in each case the Administrative Agent may reasonably request (for itself or on behalf of any Lender); and (j) promptly upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed with the Internal Revenue Service with respect to a Plan; (ii) the most recent actuarial valuation report for any Plan; (iii) all notices received from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan or Multiemployer Plan as the Administrative Agent shall reasonably request. Documents required to be delivered pursuant to Section 5.04(a), 5.04(b) or 5.04(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which Holdings and Borrower posts such documents, or provides a link thereto on the Holding’s website on the Internet at “www.foundationcoal.com”; provided that: (i) Holdings and the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) Holdings and the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance Holdings and the Borrower shall be required to provide paper copies of the certificates required by Section 5.04(c) to the Administrative Agent. SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent written notice of the following promptly after any Responsible Officer of Holdings or the Borrower obtains actual knowledge thereof: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; (b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings, the Borrower or any of the Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;   -92- -------------------------------------------------------------------------------- (c) any other development specific to Holdings, the Borrower or any of the Subsidiaries that is not a matter of general public knowledge and that has had, or could reasonably be expected to have, a Material Adverse Effect; and (d) the occurrence of any ERISA Event, that together with all other ERISA Events that have occurred, could reasonably be expected to have a Material Adverse Effect. SECTION 5.06. Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (owned or leased) and all Mining Laws and Mining Permits, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section 5.03. SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Maintain all financial records in accordance with GAAP and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender to visit and inspect the financial records and the properties of Holdings, the Borrower or any of the Subsidiaries at reasonable times, upon reasonable prior notice to Holdings or the Borrower, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any persons designated by the Agents or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice to Holdings or the Borrower to discuss the affairs, finances and condition of Holdings, the Borrower or any of the Subsidiaries with the officers thereof and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract). SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and the issuance of Letters of Credit solely for the purposes described in Section 3.11. SECTION 5.09. Compliance with Environmental Laws. Comply, and make commercially reasonable efforts to cause all lessees and other persons occupying its properties to comply, with all Environmental Laws applicable to its operations and properties; and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case with respect to this Section 5.09, to the extent the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 5.10. Further Assurances; Additional Mortgages. (a) 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 and other documents and recordings of Liens in stock registries), that may be required under any applicable law, or that the Administrative Agent may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties and provide to the Administrative Agent, from time to time upon reasonable 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.   -93- -------------------------------------------------------------------------------- (b) If any asset (including any real property (other than real property covered by Section 5.10(c) below) or improvements thereto or any interest therein) that has an individual fair market value in an amount greater than $5.0 million is acquired by Holdings, the Borrower or any other Loan Party after the Original Closing Date or owned by an entity at the time it becomes a Subsidiary Loan Party (in each case other than assets constituting Collateral under a Security Document that become subject to the Lien of such Security Document upon acquisition thereof), cause such asset to be subjected to a Lien securing the Obligations and 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, subject to paragraph (f) below. (c) In the case of the Borrower, grant and cause each of the Domestic Subsidiary Loan Parties to grant to the Collateral Agent security interests and Mortgages in such real property of the Borrower or any such Domestic Subsidiary Loan Parties as are not covered by the Mortgages delivered on the Original Closing Date, to the extent acquired after the Original Closing Date and having a value at the time of acquisition in excess of $5.0 million pursuant to documentation substantially in the form of the Mortgages delivered to the Collateral Agent on the Original Closing Date or in such other form as is reasonably satisfactory to the Collateral Agent (each, an “Additional Mortgage”) and constituting valid and enforceable perfected Liens superior to and prior to the rights of all third persons subject to no other Liens except as are permitted by Section 6.02 or arising by operation of law, at the time of perfection thereof, record or file, and cause each such Subsidiary to record or file, the Additional Mortgage or instruments related thereto in such manner and in such places as is required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Mortgages and pay, and cause each such Subsidiary to pay, in full, all Taxes, fees and other charges payable in connection therewith, in each case subject to paragraph (f) below. With respect to each such Additional Mortgage, the Borrower shall deliver to the Collateral Agent contemporaneously therewith an opinion of counsel and such other documents, instruments, certificates and materials to the extent reasonably requested by the Collateral Agent. (d) If any additional direct or indirect Subsidiary of Holdings is formed or acquired after the Original Closing Date and if such Subsidiary is a Domestic Subsidiary Loan Party, within five Business Days after the date such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and, within 20 Business Days after the date such Subsidiary is formed or acquired, cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party. (e) In the case of the Borrower, (i) furnish to the Collateral Agent prompt written notice of any change (A) in any Loan Party’s corporate or organization name, (B) in any Loan Party’s identity or organizational structure or (C) in any Loan Party’s organizational identification number; provided that the Borrower shall not effect or permit any such change unless all filings have been made, or will have been made within any statutory period, under the UCC or otherwise that are required in order for the Collateral Agent to continue at all times following   -94- -------------------------------------------------------------------------------- such change to have a valid, legal and perfected security interest in all the Collateral for the benefit of the Secured Parties and (ii) promptly notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed. (f) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be satisfied with respect to (i) any Real Property held by Holdings, the Borrower or any the other Subsidiaries as a lessee under a lease; provided that the Collateral Agent determines (in its reasonable discretion) that the Real Property subject to such lease is not material to the business or operations of Holdings and the Subsidiaries, taken as a whole, (ii) any Equity Interests acquired after the Original Closing Date in accordance with this Agreement if, and to the extent that, and for so long as (A) doing so would violate applicable law or a contractual obligation binding on such Equity Interests and (B) such law or obligation existed at the time of the acquisition thereof and was not created or made binding on such Equity Interests in contemplation of or in connection with the acquisition of such Subsidiary (provided that the foregoing clause (B) shall not apply in the case of a joint venture, including a joint venture that is a Subsidiary), (iii) any assets acquired after the Original Closing Date, to the extent that, and for so long as, taking such actions would violate a contractual obligation binding on such assets that existed at the time of the acquisition thereof and was not created or made binding on such assets in contemplation or in connection with the acquisition of such assets (except in the case of assets acquired with Indebtedness permitted pursuant to Section 6.01(i) that is secured by a Lien permitted pursuant to Section 6.02(i)), (iv) any asset of a Foreign Subsidiary if the granting of a Lien on such asset would result in materially adverse tax or legal consequences to Holdings and its Subsidiaries (as determined by the Borrower reasonably and in good faith) or (v) any asset of a Foreign Subsidiary if the Borrower demonstrates to the Collateral Agent and the Collateral Agent determines (in its reasonable discretion) that the cost of the satisfaction of the Collateral and Guarantee Requirement of this Section 5.10 with respect thereto exceeds the value of the security offered thereby; provided that, upon the reasonable request of the Collateral Agent, Holdings shall, and shall cause any applicable Subsidiary to, use commercially reasonable efforts to have waived or eliminated any contractual obligation of the types described in clauses (ii) and (iii) above, other than those set forth in a joint venture agreement to which Holdings or any Subsidiary is a party. SECTION 5.11. Fiscal Year; Accounting. In the case of Holdings and the Subsidiaries, cause their fiscal year to end on December 31. SECTION 5.12. [Intentionally Omitted]. SECTION 5.13. Proceeds of Certain Dispositions. If, as a result of the receipt of any cash proceeds by the Borrower or any Subsidiary in connection with any sale, transfer, lease or other disposition of any asset, including any Equity Interest, the Borrower would be required by the terms of the Senior Note Indenture to make an offer to purchase any Senior Notes, as applicable, then, in the case of the Borrower or a Subsidiary, prior to the first day on which the Borrower would be required to commence such an offer to purchase, (i) prepay Loans in accordance with Section 2.11 or (ii) acquire assets, Equity Interests or other securities in a manner that is permitted by Section 6.04 or Section 6.05, in each case in a manner that will eliminate any such requirement to make such an offer to purchase.   -95- -------------------------------------------------------------------------------- SECTION 5.14. Motor Vehicles. Upon request of the Collateral Agent, each Loan Party shall deliver to the Collateral Agent originals of the certificates of title or ownership for the motor vehicles (and any other equipment covered by certificates of title or ownership) owned by it with the Collateral Agent listed as lienholder therein except to the extent such motor vehicles or equipment constitutes inventory as contemplated by Section 9-311(d) of the UCC and the Collateral Agent has obtained a perfected Security Interest pursuant to Section 4.01, in which case such material need not be provided. Such requirement shall apply to such Loan Party only if any such motor vehicle (or any such other Equipment) has a fair market value greater than $1.0 million or is otherwise material to the business and operations of Holdings and the Subsidiaries. SECTION 5.15. New Post-Closing Matters. Execute and deliver the documents and complete the tasks set forth below in each case within thirty (30) days from the Amendment Effective Date; provided that the Administrative Agent may, in its sole discretion, extend such number of days with respect to any such documents or tasks, subject to such conditions as the Administrative Agent may, in its sole discretion, reasonably determine: (a) deliver to the Administrative Agent a legal opinion of Penn, Stuart & Eskridge, Virginia counsel to Neweagle Coal Sales Corp., Neweagle Development Corp., Neweagle Industries, Inc., Neweagle Mining Corp. and Rivereagle Corp., all Virginia corporations, in form and substance reasonably satisfactory to the Administrative Agent; and (b) deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that, with respect to the copyright registrations that are owned by Foundation American Coal Holding, LLC as shown on Schedule 14(b) to the Perfection Certificate dated the Amendment Effective Date, a name change has been filed with the United States Copyright Office to reflect the change of the name of record from RAG American Coal Holdings, Inc. to Foundation American Coal Holding, LLC. ARTICLE VI NEGATIVE COVENANTS Each of Holdings and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, neither Holdings nor the Borrower will, or will cause or permit any of the Subsidiaries to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Amendment Effective Date in an amount not to exceed $1.0 million and (other than in the case of any existing letters of credit to be replaced with Letters of Credit issued hereunder) set forth on Schedule 6.01 and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany Indebtedness Refinanced with Indebtedness owed to a person not affiliated with Holdings or any Subsidiary);   -96- -------------------------------------------------------------------------------- (b) Indebtedness created hereunder and under the other Loan Documents; (c) Indebtedness of Holdings and the Subsidiaries pursuant to Swap Agreements permitted by Section 6.13; (d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance to Holdings or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person; provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations are reimbursed not later than 30 days following such incurrence; (e) Indebtedness of the Borrower to any other Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; provided that (i) Indebtedness of any Subsidiary that is not a Loan Party to the Loan Parties shall be subject to Section 6.04(b) and (ii) Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party (the “Subordinated Intercompany Debt”) shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent; (f) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services in the ordinary course of business, provided that (x) such Indebtedness (other than credit or purchase cards) is extinguished within three Business Days of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence; (h) (i) Indebtedness of a Subsidiary acquired after the Amendment Effective Date or a corporation merged into or consolidated with the Borrower or any Subsidiary after the Amendment Effective Date and Indebtedness assumed in connection with the acquisition of assets, which Indebtedness in each case, exists at the time of such acquisition, merger or consolidation and is not created in contemplation of such event and where such acquisition, merger or consolidation is permitted by this Agreement and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness, provided that the aggregate principal amount of such Indebtedness at the time of, and after giving effect to, such acquisition, merger or consolidation, such assumption or such incurrence, as applicable (together with Indebtedness outstanding pursuant to this paragraph (h), paragraph (i) of this Section 6.01 and the Remaining Present Value of outstanding leases permitted under Section 6.03), would not exceed 7.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such acquisition, merger or consolidation, such assumption or such incurrence, as applicable, for which financial statements have been delivered pursuant to Section 5.04;   -97- -------------------------------------------------------------------------------- (i) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by Holdings or any Subsidiary prior to or within 270 days after the acquisition, lease or improvement of the respective asset permitted under this Agreement in order to finance such acquisition or improvement, and any Permitted Refinancing Indebtedness in respect thereof, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof (together with Indebtedness outstanding pursuant to paragraph (h) of this Section 6.01, this paragraph (i) and the Remaining Present Value of leases permitted under Section 6.03) would not exceed 7.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which financial statements have been delivered pursuant to Section 5.04; (j) Capital Lease Obligations incurred by Holdings or any Subsidiary in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03; (k) other Indebtedness, in an aggregate principal amount at any time outstanding pursuant to this paragraph (k) not in excess of $200.0 million; (l) Indebtedness of the Borrower pursuant to the Senior Notes in an aggregate principal amount that is not in excess of the sum of $300.0 million and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness in the form of Permitted Senior Debt Securities; (m) Guarantees (i) by the Loan Parties of the Indebtedness of the Borrower described in paragraph (l), (ii) by any Loan Party of any Indebtedness of the Borrower or any Loan Party expressly permitted to be incurred under this Agreement, (iii) by the Borrower or any Loan Party of Indebtedness otherwise expressly permitted hereunder of any Subsidiary that is not a Loan Party to the extent permitted by Section 6.04(b), (iv) by any Foreign Subsidiary that is not a Loan Party of Indebtedness of another Foreign Subsidiary that is not a Loan Party; provided that all Foreign Subsidiaries may guarantee obligations of other Foreign Subsidiaries under ordinary course cash management obligations, and (v) by the Borrower of Indebtedness of Foreign Subsidiaries incurred for working capital purposes in the ordinary course of business on ordinary business terms so long as such Indebtedness is permitted to be incurred under 6.01(a), (k) or (u); provided that Guarantees by any Loan Party under this Section 6.01(m) of any other Indebtedness of a person that is subordinated to other Indebtedness of such person shall be expressly subordinated to the Obligations on terms consistent with those used, or to be used, for Subordinated Intercompany Debt; (n) Indebtedness arising from agreements of Holdings or any Subsidiary providing for indemnification, adjustment of purchase price, earn outs or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition;   -98- -------------------------------------------------------------------------------- (o) Indebtedness in connection with Permitted Receivables Financings; provided that the proceeds thereof are applied in accordance with Section 2.11(c); (p) letters of credit or bank guarantees (other than Letters of Credit issued pursuant to Section 2.05) having an aggregate face amount not in excess of $30.0 million; (q) [intentionally omitted]; (r) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit; (s) Guarantee of the Borrower or any Subsidiary of obligations of any Gas Co. in connection with any Permitted Gas Properties Transaction so long as the sum of the aggregate amount outstanding under such Guarantee and the aggregate outstanding amount of Investments made pursuant to Section 6.04(u) shall not exceed at any time the then Permitted Gas Properties Threshold Amount; (t) Indebtedness consisting of Permitted Senior Debt Securities to the extent the Net Proceeds in respect thereof are actually utilized to repay New Term Loan Borrowings; (u) Indebtedness of Foreign Subsidiaries for working capital purposes incurred in the ordinary course of business on ordinary business terms in an aggregate amount not to exceed $10.0 million outstanding at any time; and (v) all premium (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in paragraphs (a) through (u) above. SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person, including any Subsidiary) at the time owned by it or on any income or revenues or rights in respect of any thereof, except: (a) Liens on property or assets of Holdings and the Subsidiaries existing on the Amendment Effective Date and set forth on Schedule 6.02(a); provided that such Liens shall secure only those obligations that they secure on the Amendment Effective Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of Holdings or any Subsidiary; (b) any Lien created under the Loan Documents or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage; (c) any Lien on any property or asset of Holdings or any Subsidiary securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(h), provided that such Lien (i) does not apply to any other property or assets of Holdings or any of the Subsidiaries not securing such Indebtedness at the date of the acquisition of such property or asset (other than after acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such date and which Indebtedness and other obligations are permitted   -99- -------------------------------------------------------------------------------- hereunder that require a pledge of after acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), (ii) such Lien is not created in contemplation of or in connection with such acquisition and (iii) in the case of a Lien securing Permitted Refinancing Indebtedness, any such Lien is permitted, subject to compliance with clause (e) of the definition of the term “Permitted Refinancing Indebtedness”; (d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03; (e) landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, Holdings or any Subsidiary shall have set aside on its books reserves in accordance with GAAP; (f) (i) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers’ compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings or any Subsidiary; (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (h) zoning restrictions, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of Holdings or any Subsidiary or would result in a Material Adverse Effect; (i) purchase money security interests in equipment or other property or improvements thereto hereafter acquired (or, in the case of improvements, constructed) by Holdings or any Subsidiary (including the interests of vendors and lessors under conditional sale and title retention agreements); provided that (i) such security interests secure Indebtedness permitted by Section 6.01(i) (including any Permitted Refinancing Indebtedness in respect thereof), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 270 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such equipment or other property or improvements at the time of such acquisition (or construction), including transaction costs incurred by Holdings or any Subsidiary   -100- -------------------------------------------------------------------------------- in connection with such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of Holdings or any Subsidiary (other than to accessions to such equipment or other property or improvements); provided, further, that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender; (j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions thereto or proceeds thereof and related property; (k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j); (l) other Liens with respect to property or assets of Holdings or any Subsidiary not constituting Collateral for the Obligations with an aggregate fair market value (valued at the time of creation thereof) of not more than $25.0 million at any time; (m) Liens disclosed by the title insurance policies or title opinions delivered within the Original Post-Closing Matters Period to the extent such Liens are reasonably acceptable to the Administrative Agent and any replacement, extension or renewal of any such Lien; provided that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal; provided, further, that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement; provided, further, that the following Liens shall be deemed to be reasonably acceptable to the Administrative Agent (and shall be deemed Permitted Encumbrances without regard to whether a title insurance policy or title opinion has been provided with respect to a particular parcel): (i) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent and (ii) zoning restrictions, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business that do not in the aggregate interfere in any material respect with the ordinary conduct of the business of Holdings or any Subsidiary at the Covered Property effected thereby. (n) Liens in respect of Permitted Receivables Financings; (o) any interest or title of, or Liens created by, a lessor under any leases or subleases entered into by Holdings or any Subsidiary, as tenant, in the ordinary course of business; (p) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of Holdings or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings and the Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of Holdings or any Subsidiary in the ordinary course of business;   -101- -------------------------------------------------------------------------------- (q) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights; (r) Liens securing obligations in respect of trade-related letters of credit permitted under Section 6.01(f) or (p) and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit and the proceeds and products thereof; (s) licenses of intellectual property granted in a manner consistent with past practice; (t) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (u) Liens on the assets of a Foreign Subsidiary that do not constitute Collateral and which secure Indebtedness of such Foreign Subsidiary that is not otherwise secured by a Lien on the Collateral under the Loan Documents and that is permitted to be incurred under Section 6.01(a), (k) or (u); (v) Liens upon specific items of inventory or other goods and proceeds of Holdings or any of the Subsidiaries securing such person’s obligations in respect of bankers’ acceptances issued or created for the account of such person to facilitate the purchase, shipment or storage of such inventory or other goods; (w) Liens solely on any cash earnest money deposits made by Holdings or any of the Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (x) The following encumbrances which do not, in any case, individually or in the aggregate, materially detract from the value of any Mine subject thereto or interfere with the ordinary conduct of the business or operations of any Loan Party as presently conducted on, at or with respect to such Mine and as to be conducted following the Amendment Effective Date, in each case as described in and contemplated by the Reserve Reports: (i) encumbrances typically found upon Real Property used for mining purposes in the applicable jurisdiction in which the applicable Real Property is located to the extent such encumbrances would be permitted or granted by a prudent operator of mining property similar in use and configuration to such Real Property (e.g., surface rights agreements, wheelage agreements and reconveyance agreements); (ii) rights and easements of owners (i) of undivided interests in any of the Real Property where the applicable Loan Party or Subsidary owns less than 100% of the fee interest, (ii) of interests in the surface of any Real Property where the applicable Loan Party or Subsidary does not own or lease such surface interest, (iii) and lessees, if any, of coal or other minerals (including oil, gas and coalbed methane) where the applicable Loan Party or Subsidary does not own such coal or other minerals, and (iv) and lessees of other coal seams and other minerals (including oil, gas and coalbed methane) not owned or leased by such Loan Party   -102- -------------------------------------------------------------------------------- or Subsidary; provided, however, that the rights and easements described in clauses (i) through (iv) of this subclause (x) shall in no event cause any breach of the representations made in Section 3.07(c); (iii) with respect to any Real Property in which Holdings or any Subsidiary holds a leasehold interest, terms, agreements, provisions, conditions, and limitations (other than royalty and other payment obligations which are otherwise permitted hereunder) contained in the leases granting such leasehold interest and the rights of lessors thereunder (and their heirs, executors, administrators, successors, and assigns); (iv) farm, grazing, hunting, recreational and residential leases with respect to which Holdings or any Subsidiary is the lessor encumbering portions of the Real Properties to the extent such leases would be granted or permitted by, and contain terms and provisions that would be acceptable to, a prudent operator of mining properties similar in use and configuration to such Real Properties; (v) royalty and other payment obligations to sellers or transferors of fee coal or lease properties to the extent such obligations constitute a lien not yet delinquent; (vi) rights of others to subjacent or lateral support and absence of subsidence rights or to the maintenance of barrier pillars or restrictions on mining within certain areas as provided by any Mining Lease, unless in each case waived by such other person; and (vii) rights of repurchase or reversion when mining and reclamation are completed. Notwithstanding the foregoing, no Liens shall be permitted to exist, directly or indirectly, on (x) Pledged Collateral, other than Liens in favor of the Collateral Agent and Liens permitted by Section 6.02(d), (e) or (q), or (y) Mortgaged Property, other than Liens in favor of the Collateral Agent, Prior Liens and Permitted Encumbrances. SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter 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 being sold or transferred (a “Sale and Lease-Back Transaction”), provided that a Sale and Lease-Back Transaction shall be permitted so long as at the time the lease in connection therewith is entered into, and after giving effect to the entering into of such Lease, the Remaining Present Value of such lease (together with Indebtedness outstanding pursuant to paragraphs (h) and (i) of Section 6.01 and the Remaining Present Value of outstanding leases previously entered into under this Section 6.03) would not exceed 7.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date such lease is entered into for which financial statements have been delivered pursuant to Section 5.04.   -103- -------------------------------------------------------------------------------- SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire (including pursuant to any merger with a person that is not a Wholly Owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and the Subsidiaries) to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, an “Investment”), in any other person, except: (a) Investments by Holdings or any Subsidiary resulting from capital expenditures incurred as a result of the Lease by Application in Powder River Basin; (b) (i) Investments by Holdings or any Subsidiary in the Equity Interests of any Subsidiary; (ii) intercompany loans from the Borrower to any Subsidiary that is a Loan Party; and (iii) Guarantees by the Borrower or any Loan Party of Indebtedness otherwise expressly permitted hereunder of the Borrower or any Subsidiary; provided that the sum of (A) Investments (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) after the Amendment Effective Date by the Loan Parties pursuant to clause (i) in Subsidiaries that are not Loan Parties, plus (B) intercompany loans after the Amendment Effective Date to Subsidiaries that are not Loan Parties pursuant to clause (ii), plus (C) Guarantees of Indebtedness after the Amendment Effective Date of Subsidiaries that are not Domestic Subsidiary Loan Parties pursuant to clause (iii), shall not exceed an aggregate amount equal to (x) $25.0 million (plus any return of capital actually received by the respective investors in respect of investments theretofore made by them pursuant to this paragraph b(i)), plus (y) the portion, if any, of the Available Investment Basket Amount on the date of such election that Holdings elects to apply to this Section 6.04(b); (c) Permitted Investments and investments that were Permitted Investments when made; (d) [intentionally omitted]; (e) [intentionally omitted]; (f) Investments arising out of the receipt by Holdings or any Subsidiary of noncash consideration for the sale of assets permitted under Section 6.05; (g) (i) loans and advances to employees of Holdings or any Subsidiary in the ordinary course of business not to exceed $2.5 million in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof) and (ii) advances of payroll payments and expenses to employees in the ordinary course of business; (h) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;   -104- -------------------------------------------------------------------------------- (i) Swap Agreements permitted pursuant to Section 6.13; (j) Investments existing on the Amendment Effective Date and set forth on Schedule 6.04; (k) Investments resulting from pledges and deposits referred to in Sections 6.02(f) and (g); (l) other Investments by Holdings or any Subsidiary in an aggregate amount (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not to exceed $100.0 million (plus any returns of capital actually received by the respective investor in respect of investments theretofore made by it pursuant to this paragraph (l)); (m) Investments constituting Permitted Business Acquisitions in an aggregate amount, which shall be deemed to include the principal amount of Indebtedness that is assumed pursuant to Section 6.01 in connection with such Permitted Business Acquisitions, not to exceed (i) $75.0 million (net of any return representing return of capital in respect of any such investment and valued at the time of the making thereof); provided that (x) during any Permitted Business Acquisition Step Up Period, such amount shall be increased to (a) $150.0 million, during any period that is a Permitted Business Acquisition Step Up Period pursuant to clause (x) of the definition thereof, (b) $250.0 million, during any period that is a Permitted Business Acquisition Step Up Period pursuant to clause (y) of the definition thereof or (c) an unlimited amount during any period that is a Permitted Business Acquisition Step Up Period pursuant to clause (z) of the definition thereof, in each case plus (y) the portion, if any, of the Available Investment Basket Amount on the date such election is made that the Borrower elects to apply to this paragraph (m), (ii) if any person acquired in a Permitted Business Acquisition is not merged into the Borrower or a Loan Party or does not become upon consummation of such Permitted Business Acquisition a Loan Party, the aggregate amount expended in respect thereof and for all such similar Permitted Business Acquisitions shall not exceed an amount equal to 50% of the amount of Permitted Business Acquisitions otherwise permitted under this Section 6.04(m) and (iii) if the amount of Investments constituting Permitted Business Acquisitions in accordance with this Section 6.04(m) and outstanding at the time a Permitted Business Acquisition Step-Up Period ends exceeds the amount of Investments constituting Permitted Business Acquisitions that would be permitted under this Section 6.04(m) immediately after the end of such Permitted Business Acquisition Step-Up Period, then the amount of such excess (less the amount by which investments constituting Permitted Business Acquisitions are reduced from such time until the commencement of the next Permitted Business Acquisition Step-Up Period, if any) shall be deemed to be permitted under this Section 6.04(m); provided, further, that such excess, if any, shall be deemed an election by the Borrower to utilize the Available Investment Basket Amount in any amount equal to such excess;; (n) additional Investments may be made from time to time to the extent made with proceeds of Equity Interests of the Public Parent, which proceeds or Investments in turn are contributed (as common equity) to any Loan Party;   -105- -------------------------------------------------------------------------------- (o) intercompany loans between Foreign Subsidiaries that are not Loan Parties or from a Foreign Subsidiary to any Domestic Subsidiary of Holdings that is not a Loan Party and Guarantees permitted by Section 6.01(m)(i), (ii), (iv) and (v); (p) Investments arising as a result of Permitted Receivables Financings; (q) the Transactions; (r) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business; (s) Investments of a Subsidiary acquired after the Amendment Effective Date or of a corporation merged into the Borrower or merged into or consolidated with a Subsidiary in accordance with Section 6.05 after the Amendment Effective Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were inexistence on the date of such acquisition, merger or consolidation; (t) Investments comprising Permitted Gas Properties Transactions permitted by Section 6.05(m); (u) Investments in the form of loans or advances to any Gas Co., or Guarantees of obligations of any Gas Co., by any Loan Party in connection with any Permitted Gas Properties Transaction, so long as the sum of the aggregate amount outstanding of such Investments under this clause (u) and the aggregate outstanding amount of Guarantees made pursuant to Section 6.01(s) shall not exceed at any time an amount equal to $35.0 million plus any returns of capital actually received by the respective Loan Party in respect of investments theretofore made by it pursuant to this Section 6.04(u)) (such amount, the “Permitted Gas Properties Threshold Amount”); and (v) Guarantees by Holdings or any Subsidiary of operating leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by any Subsidiary in the ordinary course of business. SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of Holdings, the Borrower or any other Subsidiary or preferred equity interests of Holdings, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that this Section shall not prohibit: (a) (i) the purchase and sale of inventory in the ordinary course of business by Holdings or any Subsidiary, (ii) the acquisition of any other asset in the ordinary course of business by Holdings or any Subsidiary, (iii) the sale of surplus, obsolete or worn out equipment or other property in the ordinary course of business by Holdings or any Subsidiary or (iv) the sale of Permitted Investments in the ordinary course of business;   -106- -------------------------------------------------------------------------------- (b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, (i) the merger of any Subsidiary into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) the merger or consolidation of any Subsidiary into or with any Loan Party in a transaction in which the surviving or resulting entity is a Loan Party (subject to clause (i) above) and, in the case of each of clauses (i) and (ii) above, no person other than the Borrower or a Loan Party receives any consideration, (iii) the merger or consolidation of any Subsidiary that is not a Loan Party into or with any other Subsidiary that is not a Loan Party or (iv) the liquidation or dissolution (other than the Borrower) if Holdings determines in good faith that such liquidation or dissolution is in the best interests of Holdings and is not materially disadvantageous to the Lenders or change in form of entity of Holdings or any Subsidiary, provided that, in the case of any such change in form of entity, Holdings shall given 30 days prior written notice to the Administrative Agent and the Collateral Agent of such change; (c) sales, transfers, leases or other dispositions to Holdings or a Subsidiary (upon voluntary liquidation or otherwise); provided that any sales, transfers, leases or other dispositions by a Loan Party to a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.07; provided, further that the aggregate gross proceeds of any sales, transfers, leases or other dispositions by a Loan Party to a Subsidiary that is not a Loan Party in reliance upon this paragraph (c) and the aggregate gross proceeds of any or all assets sold, transferred or leased in reliance upon paragraph (h) below shall not exceed, in any fiscal year of Holdings, 5.0% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; (d) Sale and Lease-Back Transactions permitted by Section 6.03; (e) Investments permitted by Section 6.04, Liens permitted by Section 6.02 and Dividends permitted by Section 6.06; (f) the purchase and sale or other transfer (including by capital contribution) of Receivables Assets pursuant to Permitted Receivables Financings; (g) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction; (h) sales, transfers, leases or other dispositions of assets not otherwise permitted by this Section 6.05; provided that the aggregate gross proceeds (including noncash proceeds) of any or all assets sold, transferred, leased or otherwise disposed of in reliance upon this paragraph (h) and in reliance upon the second proviso to paragraph (c) above shall not exceed, in any fiscal year of Holdings, 7.50% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; provided, further, that the Net Proceeds thereof are applied in accordance with Section 2.11(c); (i) any merger or consolidation in connection with a Permitted Business Acquisition, provided that following any such merger or consolidation (i) involving the Borrower, the Borrower is the surviving corporation, (ii) involving a domestic Subsidiary, the surviving or   -107- -------------------------------------------------------------------------------- resulting entity shall be a domestic Loan Party that is a Wholly Owned Subsidiary of Holdings and (iii) involving a Foreign Subsidiary, the surviving or resulting entity shall be a Foreign Subsidiary Loan Party that is a Wholly Owned Subsidiary of Holdings; (j) [intentionally omitted]; (k) licensing and cross-licensing arrangements involving any technology or other intellectual property of the Borrower or any Subsidiary in the ordinary course of business; (l) sales, leases or other dispositions of inventory of Holdings and its Subsidiaries determined by the management of Holdings or the Borrower to be no longer useful or necessary in the operation of the business of Holdings or any of the Subsidiaries; provided that the Net Proceeds thereof are applied in accordance with Section 2.11(c); and (m) transactions pursuant to any Permitted Gas Properties Transactions. Notwithstanding anything to the contrary contained in Section 6.05 above, (i) Holdings shall at all times own, directly or indirectly, 100% of the Equity Interests of the Borrower free and clear of any Liens other than Liens created by the Security Documents, (ii) [intentionally omitted], (iii) [intentionally omitted], (iv) [intentionally omitted], (v) no sale, transfer or other disposition of assets shall be permitted by this Section 6.05 (other than sales, transfers, leases or other dispositions to Loan Parties pursuant to paragraph (c) hereof and purchases, sales or transfers pursuant to paragraph (f) hereof) unless such disposition is for fair market value, (vi) no sale, transfer or other disposition of assets shall be permitted by paragraph (a), (d) or (l) of this Section 6.05 unless such disposition is for at least 75% cash consideration and (vii) no sale, transfer or other disposition of assets in excess of $10.0 million shall be permitted by paragraph (h) of this Section 6.05 unless such disposition is for at least 75% cash consideration; provided that for purposes of clauses (v) and (vi), the amount of any secured Indebtedness or other Indebtedness of a Subsidiary that is not a Loan Party (as shown on Holdings’ or such Subsidiary’s most recent balance sheet or in the notes thereto) of Holdings or any Subsidiary of Holdings that is assumed by the transferee of any such assets shall be deemed cash. SECTION 6.06. Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional shares of Equity Interests of the person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Equity Interests or set aside any amount for any such purpose; provided, however, that: (a) any Subsidiary of Holdings may declare and pay dividends to, repurchase its Equity Interests from or make other distributions to Holdings or to any Wholly Owned Subsidiary of Holdings (or, in the case of non-Wholly Owned Subsidiaries of Holdings, to Holdings or any subsidiary that is a direct or indirect parent of such subsidiary and to each other owner of Equity Interests of such subsidiary on a pro rata basis (or more favorable basis from the perspective of Holdings, or such subsidiary) based on their relative ownership interests);   -108- -------------------------------------------------------------------------------- (b) Holdings and each Subsidiary may declare and pay dividends or make other distributions to any Parent Entity: (x) in respect of overhead of such Parent Entity, including, without limitation, to make distributions under Section 6.06(e) hereof, legal, accounting and professional fees and other fees and expenses in connection with the maintenance of its existence and its ownership of Holdings, in each case, to the extent attributable to the ownership of such Parent Entity in Holdings or such Subsidiary and (y) if no Event of Default has occurred or is continuing, to the extent necessary to pay an ordinary cash dividend on the common stock of the Public Parent, provided that the aggregate of such dividend amount for any quarter (together with the preceding three quarters), shall not exceed $12.5 million; provided, however, that if the Leverage Ratio as of the last day of any two consecutive fiscal quarters is less than or equal to 3.0 to 1.0 (as set forth in the officer’s certificates for such fiscal quarters), then such aggregate permitted dividend amount for the quarter after such two consecutive fiscal quarters (together with the preceding three quarters) shall increase to $30.0 million, and if the Leverage Ratio as of the last day of any two consecutive fiscal quarters is less than or equal to 2.0 to 1.0 (as set forth in the officer’s certificates for such fiscal quarters), then such aggregate permitted dividend amount for the quarter after such two consecutive fiscal quarters (together with the preceding three quarters) shall increase to $45.0 million; (c) Holdings and any of its Subsidiaries may declare and pay dividends or make other distributions, directly or indirectly, to the Public Parent so long as the proceeds thereof are used by the Public Parent to repurchase or redeem the Equity Interests of the Public Parent (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of the Public Parent, Holdings or any of Holding’s Subsidiaries or by any Plan upon such person’s death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued, provided that the aggregate amount of such purchases or redemptions under this paragraph (c) shall not exceed in any fiscal year $2.5 million (plus the amount of net proceeds (x) received by the Public Parent during such calendar year from sales of Equity Interests of Public Parent to directors, consultants, officers or employees of Public Parent, Holdings or any Subsidiary of Holdings in connection with permitted employee compensation and incentive arrangements), which, if not used in any year, may be carried forward to any subsequent calendar year and (y) of any key-man life insurance policies recorded during such calendar year; (d) noncash repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (e) Permitted Tax Distributions by Borrower or any Subsidiary to Holdings and by Holdings to the Public Parent, so long as Holdings or the Public Parent uses such Permitted Tax Distributions to pay income taxes; and (f) Holdings and any of its Subsidiaries may declare and pay dividends or make other distributions, directly or indirectly, to the Public Parent so long as the proceeds thereof are used by the Public Parent to repurchase or redeem the capital stock of the Public Parent held by any person (the “Capital Stock Buyback Distributions”); provided, that (i) the aggregate amount of all Capital Stock Buyback Distributions made under this paragraph (f)   -109- -------------------------------------------------------------------------------- shall not exceed $100.0 million (or, if after giving effect to any such Capital Stock Buyback Distribution, on pro forma basis as if such Capital Stock Buyback Distribution had occurred on the first day of the most recent period of four consecutive fiscal quarters, the Leverage Ratio on the last day of such period would be less than 2.25 to 1.00, $200.0 million) and (ii) no Event of Default shall have then occurred and be continuing or would result from any Capital Stock Buyback Distribution. SECTION 6.07. Transactions with Affiliates. (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates or any known direct or indirect holder of 10% or more of any class of capital stock of Holdings, unless such transaction is (i) otherwise permitted (or required) under this Agreement (including in connection with any Permitted Receivables Financing) or (ii) upon terms no less favorable to Holdings, Borrower or such Subsidiary, as applicable, than would be obtained in a comparable arm’s-length transaction with a person that is not an Affiliate; provided that this clause (ii) shall not apply to the indemnification of directors of Holdings and the other Subsidiaries in accordance with customary practice. (b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement, (i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of Holdings, (ii) loans or advances to employees of Holdings or any of the Subsidiaries in accordance with Section 6.04(g), (iii) transactions among the Borrower and the Loan Parties and transactions among the Loan Parties otherwise permitted by this Agreement, (iv) the payment of fees and indemnities to directors, officers, consultants and employees of Holdings and the Subsidiaries in the ordinary course of business, (v) transactions pursuant to permitted agreements in existence on the Amendment Effective Date and set forth on Schedule 6.07 or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect, (vi) any employment agreement or employee benefit plan entered into by Holdings or any of the Subsidiaries in the ordinary course of business or consistent with past practice, (vii) dividends, redemptions and repurchases permitted under Section 6.06,   -110- -------------------------------------------------------------------------------- (viii) any contribution by Holdings to, or purchase by Holdings of, the equity capital of the Borrower; provided that any Equity Interests of the Borrower purchased by Holdings shall be pledged to the Collateral Agent on behalf of the Lenders pursuant to the Collateral Agreement, (ix) [intentionally omitted], (x) [intentionally omitted], (xi) transactions with Wholly Owned Subsidiaries of Holdings for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business in a manner consistent with past practice, (xii) any transaction in respect of which Holdings delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of Holdings from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is (A) in the good faith determination of Holdings qualified to render such letter and (B) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to Holdings or such Subsidiary, as applicable, than would be obtained in a comparable arm’s-length transaction with a person that is not an Affiliate, (xiii) [intentionally omitted], (xiv) [intentionally omitted], (xv) transactions pursuant to any Permitted Receivables Financing; and (xvi) transactions pursuant to any Permitted Gas Properties Transactions. (c) [intentionally omitted]. SECTION 6.08. Business of Holdings and the Subsidiaries. Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than any business or business activity conducted by it on the Amendment Effective Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including the consummation of the Transactions. SECTION 6.09. Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. (a) Amend or modify in any manner materially adverse to the Lenders, or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Lenders), the articles or certificate of incorporation or by-laws or partnership agreement or limited liability company operating agreement of Holdings, the Borrower or any of the other Subsidiaries or the Acquisition Agreement.   -111- -------------------------------------------------------------------------------- (b) (i) Make, or agree or offer 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 the Senior Notes or any Permitted Senior Debt Securities, 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 the Senior Notes or any Permitted Senior Debt Securities (except for Refinancings permitted by Section 6.01(l)), except for (A) payments of regularly scheduled interest and (B) payments on the account of the repurchase of the Senior Notes; provided, that (1) the aggregate amount of payments made under this clause (B) shall not exceed $100.0 million, (2) no Event of Default shall have then occurred and be continuing or would result therefrom, and (3) after giving effect to such payment on a pro forma basis as if such payments had occurred on the first day of the most recent period of four consecutive fiscal quarters, the Leverage Ratio on the last day of such period would not have been equal to or greater than 2.25 to 1.00; or (ii) Amend or modify, or permit the amendment or modification of, any provision of any Senior Note or any Permitted Debt Securities, any Permitted Receivables Document or any agreement (including any Senior Notes Document or any document relating to any Permitted Debt Securities) relating thereto, other than amendments or modifications that are not in any manner materially adverse to Lenders and that do not affect the subordination provisions thereof (if any) in a manner adverse to the Lenders. (c) Permit any Subsidiary to enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances by such Subsidiary to Holdings or any Subsidiary that is a direct or indirect parent of such Subsidiary or (ii) the granting of Liens by such Subsidiary pursuant to the Security Documents, in each case other than those arising under any Loan Document, except, in each case, restrictions existing by reason of: (A) restrictions imposed by applicable law; (B) restrictions contained in any Permitted Receivables Document with respect to any Special Purpose Receivables Subsidiary; (C) contractual encumbrances or restrictions in effect on the Amendment Effective Date under (x) any Senior Note Document or (y) any agreements related to any permitted renewal, extension or refinancing of any Indebtedness existing on the Amendment Effective Date that does not expand the scope of any such encumbrance or restriction; (D) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition; (E) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business;   -112- -------------------------------------------------------------------------------- (F) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness; (G) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business; (H) customary provisions restricting subletting or assignment of any lease governing a leasehold interest; (I) customary provisions restricting assignment of any agreement entered into in the ordinary course of business; (J) customary restrictions and conditions contained in any agreement relating to the sale of any asset permitted under Section 6.05 pending the consummation of such sale; or (K) any agreement in effect at the time such subsidiary becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary. SECTION 6.10. Capital Expenditures. Permit Holdings or the Subsidiaries to make any Capital Expenditure, except that: (a) During any fiscal year, Holdings and the Subsidiaries may make Capital Expenditures so long as the aggregate amount thereof does not exceed the amount set forth opposite such fiscal year below:   Year   Amount 2006   $205.0 million 2007   $225.0 million 2008   $200.0 million 2009   $200.0 million 2010   $200.0 million 2011   $200.0 million (b) Notwithstanding anything to the contrary contained in paragraph (a) above, to the extent that the aggregate amount of Capital Expenditures made by Holdings and the Subsidiaries in any fiscal year of Holdings pursuant to Section 6.10(a) is less than the amount set forth for such fiscal year, the amount of such difference may be carried forward and used to make Capital Expenditures in the two succeeding fiscal years; provided that in any fiscal year, the amount permitted to be applied to make Capital Expenditures pursuant to this paragraph (b) shall in no event exceed an amount equal to 50% of the amount set forth in Section 6.10(a) for such fiscal year; and (c) In addition to the Capital Expenditures permitted pursuant to the preceding paragraphs (a) and (b), Holdings and the Subsidiaries may make additional Capital Expenditures   -113- -------------------------------------------------------------------------------- at any time in an amount not to exceed the portion, if any, of the Available Investment Basket Amount on the date of such Capital Expenditure that the Borrower elects to apply to this Section 6.10(c). SECTION 6.11. Interest Coverage Ratio. Permit the ratio (the “Interest Coverage Ratio”) on the last day of each fiscal quarter of Holdings, for the four quarter period ended as of such day of (a) EBITDA to (b) Cash Interest Expense to be less than 2.50 to 1.00; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions for which a waiver or a consent of the Required Lenders pursuant to Section 6.05 has been obtained) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Interest Coverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences. SECTION 6.12. Leverage Ratio. Permit the Leverage Ratio on the last day of any fiscal quarter set forth below, to be in excess of the ratio set forth below for such period.   Period Ended    Ratio June 30, 2006    4.25 to 1.00 September 30, 2006    4.25 to 1.00 December 31, 2006    4.25 to 1.00 March 31, 2007    4.00 to 1.00 June 30, 2007    4.00 to 1.00 September 30, 2007    4.00 to 1.00 December 31, 2007    4.00 to 1.00 March 31, 2008    3.75 to 1.00 June 30, 2008    3.75 to 1.00 September 30, 2008    3.75 to 1.00 December 31, 2008    3.75 to 1.00 March 31, 2009 and each fiscal quarter thereafter    3.50 to 1.00 SECTION 6.13. Swap Agreements. Enter into any Swap Agreement, other than (a) Swap Agreements required by any Permitted Receivables Financing, (b) Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which Holdings or any Subsidiary is exposed in the conduct of its business or the management of its liabilities, and (c) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of Holdings or any Subsidiary. SECTION 6.14. Embargoed Person. Cause or permit (a) any of the funds or properties of the Loan Parties that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law (“Embargoed Person” or “Embargoed Persons”) that is identified on (1) the “List of Specially Designated Nationals and Blocked Persons” (the “SDN List”) maintained by OFAC and/or on any other similar list (“Other List”) maintained by OFAC pursuant to   -114- -------------------------------------------------------------------------------- any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders (collectively, “Executive Orders”), or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law. SECTION 6.15. Anti-Terrorism Law; Anti-Money Laundering. (a) Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 3.22, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties’ compliance with this Section 6.15). (b) Cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of law. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. In case of the happening of any of the following events (“Events of Default”): (a) any representation or warranty made or deemed made by Holdings, the Borrower or any other Loan Party in any Loan Document, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished by Holdings, the Borrower or any other Loan Party; (b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C 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 by acceleration thereof or otherwise;   -115- -------------------------------------------------------------------------------- (c) default shall be made in the payment of any interest on any Loan or on any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (d) default shall be made in the due observance or performance by Holdings, the Borrower or any of the other Subsidiaries of any covenant, condition or agreement contained in Section 5.01(a) (with respect to Holdings or the Borrower), 5.05(a), 5.08, 5.10(d) or in Article VI; (e) default shall be made in the due observance or performance by Holdings, the Borrower or any of the other Subsidiaries of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (b), (c) and (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (f) (i) any event or condition occurs that (A) results in any Material Indebtedness becoming due prior to its scheduled maturity or (B) enables or permits (with all applicable grace periods having expired) 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 or (ii) Holdings, any Borrower or any of the other Subsidiaries shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) 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 if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; (g) there shall have occurred a Change in Control; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, any Borrower or any of the other Subsidiaries, or of a substantial part of the property or assets of Holdings, any Borrower or any other Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any of the other Subsidiaries or for a substantial part of the property or assets of Holdings, the Borrower or any of the other Subsidiaries or (iii) the winding-up or liquidation of Holdings, any Borrower or any other Subsidiary (except, in the case of any Subsidiary (other than the Borrower), in a transaction permitted by Section 6.05); and 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 Borrower or any other Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest   -116- -------------------------------------------------------------------------------- in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (h) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any of the other Subsidiaries or for a substantial part of the property or assets of Holdings, the Borrower or any other Subsidiary, (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) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) the failure by Holdings, the Borrower or any other Subsidiary to pay one or more final judgments aggregating in excess of $20.0 million, which judgments are not discharged or effectively waived or stayed for a period of 30 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, the Borrower or any other Subsidiary to enforce any such judgment; (k) one or more ERISA Events shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (l) (i) any Loan Document shall for any reason be asserted in writing by Holdings, the Borrower or any other Subsidiary not to be a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets that are not immaterial to Holdings, the Borrower and the other Subsidiaries on a consolidated basis shall cease to be, or shall be asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest (having the priority required by this Agreement or the relevant Security Document) in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Agreements or to file UCC continuation statements and except to the extent that such loss is covered by a lender’s title insurance policy and the Administrative Agent shall be reasonably satisfied with the credit of such insurer, or (iii) the Guarantees pursuant to the Security Documents by Holdings or the Subsidiary Loan Parties of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof), or shall be asserted in writing by Holdings or the Borrower or any Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations; then, and in every such event (other than an event with respect to the Borrower described in paragraph (h) or (i) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrowers, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding and (iii) demand cash collateral pursuant to Section   -117- -------------------------------------------------------------------------------- 2.05(j); and in any event with respect to the Borrower described in paragraph (h) or (i) above, the Commitments shall automatically terminate, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for cash collateral to the full extent permitted under Section 2.05(j), without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding. SECTION 7.02. Exclusion of Immaterial Subsidiaries. Solely for the purposes of determining whether an Event of Default has occurred under clause (h) or (i) of Section 7.01, any reference in any such clause to any subsidiary (other than the Borrower) shall be deemed not to include any subsidiary (other than the Borrower) affected by any event or circumstance referred to in any such clause that did not, as of the last day of the fiscal quarter of Holdings most recently ended, have assets with a value in excess of 5.0% of the Consolidated Total Assets or 5.0% of total revenues of Holdings and the Subsidiaries as of such date; provided that if it is necessary to exclude more than one Subsidiary from clause (h) or (i) of Section 7.01 pursuant to this Section 7.02 in order to avoid an Event of Default thereunder, all excluded Subsidiaries shall be considered to be a single consolidated Subsidiary for purposes of determining whether the condition specified above is satisfied. ARTICLE VIII THE AGENTS SECTION 8.01. Appointment. (a) In order to expedite the transactions contemplated by this Agreement, (i) Citicorp North America, Inc. is hereby appointed to act as Administrative Agent and Collateral Agent, (ii) Citigroup Global Markets Inc. is hereby appointed to act as a Syndication Agent and (iii) Bank of America, N.A., LaSalle Bank National Association, PNC Bank, National Association and The Royal Bank of Scotland plc, each is hereby appointed to act as Co-Documentation Agents. Each of the Lenders and each assignee of any such Lender hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or assignee and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and each Issuing Bank, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and such Issuing Bank all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders and such Issuing Bank hereunder, and promptly to distribute to each Lender or such Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with the performance of its duties as Administrative Agent hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. Without limiting the generality of the foregoing, the Collateral   -118- -------------------------------------------------------------------------------- Agent is hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents, and all rights and remedies in respect of such Collateral shall be controlled by the Collateral Agent. (b) Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents or other instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to the Borrower or any other Loan Party or any other party hereto or to any Loan Document on account of the failure, delay in performance or breach by, or as a result of information provided by, any Lender or Issuing Bank of any of its obligations hereunder or to any Lender or Issuing Bank on account of the failure of or delay in performance or breach by any other Lender or Issuing Bank or any Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each Agent may execute any and all duties hereunder by or through agents, employees or any sub-agent appointed by it and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. SECTION 8.02. Nature of Duties. The Lenders hereby acknowledge that no Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. The Lenders further acknowledge and agree that so long as an Agent shall make any determination to be made by it hereunder or under any other Loan Document in good faith, such Agent shall have no liability in respect of such determination to any person. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against the Administrative Agent. Each Lender recognizes and agrees that each Co-Documentation Agent, the Syndication Agent and the Lead Arranger shall have no duties or responsibilities under this Agreement or any other Loan Document, or any fiduciary relationship with any Lender, and shall have no functions, responsibilities, duties, obligations or liabilities for acting as such hereunder.   -119- -------------------------------------------------------------------------------- SECTION 8.03. Resignation by the Agents. Subject to the appointment and acceptance of a successor Agent as provided below, any Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld or delayed). If no successor shall have been so appointed by the Required Lenders and approved by the Borrower and shall have accepted such appointment within 45 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders with the consent of the Borrower (not to be unreasonably withheld or delayed), appoint a successor Agent which shall be a bank with an office in New York, New York and an office in London, England (or a bank having an Affiliate with such an office) having a combined capital and surplus that is not less than $500.0 million or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent’s resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. SECTION 8.04. Each Agent in Its Individual Capacity. With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any of the Subsidiaries or other Affiliates thereof as if it were not an Agent. SECTION 8.05. Indemnification. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commitments hereunder (or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans or participations in L/C Disbursements, as applicable)) of any reasonable expenses incurred for the benefit of the Lenders by the Agents, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower, provided that no Lender shall be liable to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such Agent or any of its directors, officers, employees or agents. SECTION 8.06. Lack of Reliance on Agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents and any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis   -120- -------------------------------------------------------------------------------- and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents, 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 or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. ARTICLE IX MISCELLANEOUS     SECTION 9.01. Notices. (a) 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:     (i) if to any Loan Party, to it at 999 Corporate Boulevard, Suite 300 Linthicum Heights, MD 21090-2227 Attention: Treasurer Telecopy: 410-689-7531 with a copy to: 999 Corporate Boulevard, Suite 300 Linthicum Heights, MD 21090-2227 Attention: General Counsel Telecopy: 410-689-7601     (ii) if to the Administrative Agent or the Collateral Agent: Citicorp North America, Inc. 2 Penns Way, Suite 200 New Castle, Delaware 19720 Attention: Carin Seals Telecopy: 212-994-0961 and Citicorp North America, Inc. 388 Greenwich Street, 21st Floor New York, New York 10013 Attention: Daniel Miller Telecopy: 646-291-1778   -121- -------------------------------------------------------------------------------- with a copy to: Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attention: Michael A. Becker, Esq. Telecopy: 212 269-5420 (iii) if to an Issuing Bank, to it at the address or telecopy number set forth separately in writing. (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent, the Collateral Agent and 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, further, that approval of such procedures may be limited to particular notices or communications. (c) 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 if delivered by hand or overnight courier service, sent by telecopy or (to the extent permitted by paragraph (b) above) electronic means or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. (d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower and the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and each Issuing Bank and shall survive the making by the Lenders of the Loans, the execution and delivery of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by such persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.15, 2.17 and 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement.   -122- -------------------------------------------------------------------------------- SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by Holdings, the Borrower and the Agents and when the Administrative Agent shall have received copies 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 Holdings, the Borrower, each Issuing Bank, the Agents and each Lender and their respective permitted successors and assigns. SECTION 9.04. 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 any Issuing Bank that issues any Letter of Credit), except that (i) other than pursuant to a merger permitted by Section 6.05(b) or 6.05(i), the Borrower may not 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 Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. 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 any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, each Issuing Bank, the Lenders, and to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, 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) with the prior written consent (such consent not to be unreasonably withheld or delayed) of: (A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing or during the primary syndication of the Facilities (as reasonably determined by the Administrative Agent), any other assignee (provided that any liability of the Borrower to an assignee that is an Approved Fund or Affiliate of the assigning Lender under Section 2.15, 2.17 or 2.20 shall be limited to the amount, if any, that would have been payable hereunder by the Borrower in the absence of such assignment); and (B) the Administrative Agent and, in the case of New Revolving Facility Commitment, the Swingline Lenders; provided that no consent of the Administrative Agent or the Swingline Lenders, as applicable, shall be required for an assignment of (i) a New Revolving Facility Commitment to an assignee that is a New Revolving Facility Lender immediately prior to giving effect to such assignment, or (ii) a Term Loan to a Lender, an Affiliate of a Lender or Approved Fund immediately prior to giving effect to such assignment.   -123- -------------------------------------------------------------------------------- (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the commitment 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 $1.0 million, unless each of the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Event of Default under paragraph (b), (c), (h) or (i) of Section 7.01 has occurred and is continuing; (B) 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; (C) 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; provided that no such recordation fee shall be due in connection with an assignment to an existing Lender or Affiliate of a Lender or an Approved Fund of such Lender or an assignment by the Administrative Agent; and (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. For purposes of this Section 9.04(b), the term “Approved Fund” shall have the following meaning: “Approved Fund” shall mean any person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender. (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) 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, and the assigning Lender hereunder 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 9.05). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 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 (c) of this Section. (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices 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   -124- -------------------------------------------------------------------------------- of, and principal amount of the Loans and L/C 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 the Borrower, the Agents, each 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 Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (v) 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 purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent, any Issuing Bank or any 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 (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrowers, the Agents, each 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 (oral or written) pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) 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 Section 9.04(a)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 9.08(b) that affects such Participant and (y) no other agreement (oral or written) with respect to such Participant may exist between such Lender and such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees 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 9.06 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (ii) A Participant shall not be entitled to receive any greater payment under Section 2.15, 2.16 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 Borrower’s prior written consent (which shall not be unreasonably withheld). A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as though it were a Lender.   -125- -------------------------------------------------------------------------------- (d) 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. SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses (including Other Taxes) incurred by the Agents in connection with the preparation of this Agreement and the other Loan Documents, or by the Agents in connection with the syndication of the Commitments or the administration of this Agreement (including expenses incurred in connection with due diligence and initial and ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower and the reasonable fees, disbursements and the charges for no more than one counsel in each jurisdiction where Collateral is located) or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated) or incurred by the Agents or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement and the other Loan Documents, in connection with the Loans made or the Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Cahill Gordon & Reindel llp, counsel for the Agents and the Lead Arranger, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel) (including the reasonable allocated costs of internal counsel for the Agents, the Lead Arranger, any Issuing Bank or any Lender (but no more than one such counsel for any Lender). (b) The Borrower agrees to indemnify the Agents, the Lead Arranger, each Issuing Bank, each Lender and each of their respective directors, trustees, officers, employees, investment advisors and agents (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby, (ii) the use of the proceeds of the Loans or the use of any Letter of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not 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 result primarily from the gross negligence or willful misconduct of such Indemnitee (treating, for this purpose only, any Agent, any Joint Lead Arranger, any Issuing Bank, any Lender and any of their respective Related Parties as a single Indemnitee). Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel or consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected   -126- -------------------------------------------------------------------------------- with, or as a result of (A) any Environmental Claim related in any way to Holdings, the Borrower or any of their Subsidiaries, or (B) any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any Property or any property owned, leased or operated by any predecessor of Holdings, the Borrower or any of their Subsidiaries, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of any Agent, any Issuing Bank or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. (c) Unless an Event of Default shall have occurred and be continuing, the Borrower shall be entitled to assume the defense of any action for which indemnification is sought hereunder with counsel of its choice at its expense (in which case the Borrower shall not thereafter be responsible for the fees and expenses of any separate counsel retained by an Indemnitee except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to each such Indemnitee. Notwithstanding the Borrower’s election to assume the defense of such action, each Indemnitee shall have the right to employ separate counsel and to participate in the defense of such action, and the Borrower shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the use of counsel chosen by the Borrower to represent such Indemnitee would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the Borrower and such Indemnitee and such Indemnitee shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Borrower (in which case the Borrower shall not have the right to assume the defense or such action on behalf of such Indemnitee); (iii) the Borrower shall not have employed counsel reasonably satisfactory to such Indemnitee to represent it within a reasonable time after notice of the institution of such action; or (iv) the Borrower shall authorize in writing such Indemnitee to employ separate counsel at the Borrower’s expense. The Borrower will not be liable under this Agreement for any amount paid by an Indemnitee to settle any claims or actions if the settlement is entered into without the Borrower’s consent, which consent may not be withheld or delayed unless such settlement is unreasonable in light of such claims or actions against, and defenses available to, such Indemnitee. (d) Except as expressly provided in Section 9.05(a) with respect to Other Taxes, which shall not be duplicative with any amounts paid pursuant to Section 2.17, this Section 9.05 shall not apply to Taxes. SECTION 9.06. Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of Holdings, the Borrower or any Subsidiary against any of and all the obligations of Holdings   -127- -------------------------------------------------------------------------------- or the Borrower now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have. SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Agents, any Issuing Bank or any Lender in exercising any right or power hereunder or under any 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 Agents, each 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 this Agreement or any other Loan Document or consent to any departure by Holdings, any Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, any Borrower or any other Loan Party in any case shall entitle such person to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrowers and the Required Lenders and (y) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Collateral Agent and consented to by the Required Lenders; provided, however, that no such agreement shall (i) decrease or forgive the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement, without the prior written consent of each Lender directly affected thereby; provided, that any amendment to the financial covenant definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i), (ii) increase or extend the Commitment of any Lender or decrease the Commitment Fees or L/C Participation Fees or other fees of any Lender without the prior written consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate Commitments shall not constitute an increase of the Commitments of any Lender),   -128- -------------------------------------------------------------------------------- (iii) extend or waive any New Term Loan Installment Date or reduce the amount due on any New Term Loan Installment Date or extend any date on which payment of interest on any Loan or any L/C Disbursement or any Fees is due, without the prior written consent of each Lender adversely affected thereby, (iv) amend or modify the provisions of Section 2.18(b) or (c) in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby, (v) amend or modify the provisions of this Section or the definition of the terms “Required Lenders,” “Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender adversely affected thereby (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Amendment Effective Date), (vi) release all or substantially all the Collateral or release any of Holdings or any Subsidiary Loan Party from its Guarantee under the Collateral Agreement, unless, in the case of a Subsidiary Loan Party, all or substantially all the Equity Interests of such Subsidiary Loan Party is sold or otherwise disposed of in a transaction permitted by this Agreement, without the prior written consent of each Lender; (vii) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of Lenders participating in any Facility differently from those of Lenders participating in other Facilities, without the consent of the Majority Lenders participating in the adversely affected Facility (it being agreed that the Required Lenders may waive, in whole or in part, any prepayment or Commitment reduction required by Section 2.11 so long as the application of any prepayment or Commitment reduction still required to be made is not changed); provided, further, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or an Issuing Bank hereunder without the prior written consent of the Administrative Agent or such Issuing Bank acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender. (c) Without the consent of any Lead Arranger, Syndication Agent, Co-Documentation Agent or Lender, the Loan Parties and the Administrative Agent and/or Collateral   -129- -------------------------------------------------------------------------------- Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law. (d) Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the New Term Loans and the New Revolving Facility Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders. (e) In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, Holdings, the Borrower and the Lenders providing the relevant Replacement New Term Loans (as defined below) to permit the refinancing of all outstanding New Term Loans (“Refinanced New Term Loans”) with a replacement term loan tranche hereunder which shall be Loans hereunder (“Replacement New Term Loans”); provided that (a) the aggregate principal amount of such Replacement New Term Loans shall not exceed the aggregate principal amount of such Refinanced New Term Loans, (b) the Applicable Margin for such Replacement New Term Loans shall not be higher than the Applicable Margin for such Refinanced New Term Loans, (c) the weighted average life to maturity of such Replacement New Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced New Term Loans at the time of such refinancing and (d) all other terms applicable to such Replacement New Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement New Term Loans than, those applicable to such Refinanced New Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing (for avoidance of doubt any such less favorable terms shall apply only to the Refinanced New Term Loans and not to the New Revolving Facility Loans). (f) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of Holdings and the Borrower and the Administrative Agent to the extent necessary to integrate any Additional New Term Loan Commitments or Additional New Revolving Facility Commitments on substantially the same basis as the New Term Loans or New Revolving Facility Loans, as applicable. SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the “Charges”), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender or any Issuing Bank, shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or   -130- -------------------------------------------------------------------------------- reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender or such Issuing Bank, shall be limited to the Maximum Rate, provided that such excess amount shall be paid to such Lender or such Issuing Bank on subsequent payment dates to the extent not exceeding the legal limitation. SECTION 9.10. Entire Agreement. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. 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 AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed original. SECTION 9.14. 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 are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.   -131- -------------------------------------------------------------------------------- SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of Holdings and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, 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 any Lender or any Issuing Bank may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against Holdings, any Borrower or any Loan Party or their properties in the courts of any jurisdiction. (b) Each of Holdings and the 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 the other Loan Documents in any New York State or federal court. 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. SECTION 9.16. Confidentiality. Each of the Lenders, each Issuing Bank and each of the Agents agrees that it shall maintain in confidence any information relating to Holdings, the Borrower and the other Loan Parties furnished to it by or on behalf of Holdings, the Borrower or the other Loan Parties (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender, such Issuing Bank or such Agent without violating this Section 9.16 or (c) was available to such Lender, such Issuing Bank or such Agent from a third party having, to such person’s knowledge, no obligations of confidentiality to Holdings, the Borrower or any other Loan Party) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any person that approves or administers the Loans on behalf of such Lender (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to Governmental Authorities or the National Association of Insurance Commissioners, (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D) in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any prospective assignee of, or prospective Participant in, any of its rights under   -132- -------------------------------------------------------------------------------- this Agreement (so long as such person shall have been instructed to keep the same confidential in accordance with this Section 9.16) and (F) to any direct or indirect contractual counterparty in Swap Agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section). SECTION 9.17. Citigroup Direct Website Communications. (a) Delivery. (1) Each Loan Party hereby agrees that it will use all reasonable efforts to provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement and any other Loan Document, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (A) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (B) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (C) provides notice of any Default or Event of Default under this Agreement or (D) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications collectively, the “Communications”), by transmitting the Communications in an electronic/soft medium in a format reasonably acceptable to the Administrative Agent to [email protected]. Nothing in this Section 9.18 shall prejudice the right of the Agents, the Syndication Agent, the Co- Documentation Agents, the Lead Arranger or any Lender or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document. (i) The Administrative Agent agrees that receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform (as defined below) shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (A) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (B) that the foregoing notice may be sent to such e-mail address. (b) Posting. Each Loan Party further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the “Platform”). (c) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Agent Party in connection   -133- -------------------------------------------------------------------------------- with the Communications or the Platform. In no event shall the Administrative Agent or any of its affiliates or any of their respective officers, directors, employees, agents advisors or representatives (collectively, “Agent Parties”) have any liability to the Loan Parties, any Lender or any other person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party’s or the Administrative Agent’s transmission of communications through the internet, except to the extent the liability of any Agent Party is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Agent Party’s gross negligence or willful misconduct. SECTION 9.18. Release of Liens and Guarantees. In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Subsidiary Loan Party (other than the Equity Interests of the Borrower) to a person that is not (and is not required to become) a Loan Party in a transaction not prohibited by Section 6.05, the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by Holdings or the Borrower and at the Borrower’s expense to release any Liens created by any Loan Document in respect of such Equity Interests, and, in the case of a disposition of the Equity Interests of any Subsidiary Loan Party that is not the Borrower in a transaction permitted by Section 6.05 and as a result of which such Subsidiary Loan Party would cease to be a Subsidiary, terminate such Subsidiary Loan Party’s obligations under its Guarantee. In addition, the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably requested by Holdings or the Borrower and at the Borrower’s expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations are paid in full and all Letters of Credit and Commitments are terminated. Any representation, warranty or covenant contained in any Loan Document relating to any such Equity Interests, asset or subsidiary of Holdings shall no longer be deemed to be made once such Equity Interests or asset is so conveyed, sold, leased, assigned, transferred or disposed of. SECTION 9.19. U.S. Patriot Act. Each Lender hereby notifies each Loan Party that pursuant to the requirements of the U.S. Patriot Act, it is required to obtain, verify and record information that identifies Loan Parties, which information includes the name and address of each Loan Party and other information that will allow the Lenders to identify such Loan Party in accordance with the U.S. Patriot Act. [Signature Pages Follow]   -134- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first written above.   FOUNDATION COAL CORPORATION,     as Holdings By:     Name:   Frank J. Wood Title:   Senior Vice President and Chief Financial Officer FOUNDATION PA COAL COMPANY,     LLC, as Borrower By:     Name:   Frank J. Wood Title:   Vice President and Chief Financial Officer   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- CITIGROUP GLOBAL MARKETS INC., as Sole Syndication Agent, Sole Lead Arranger and Sole Book Manager By:     Name:   Arnold Y. Wong Title:   Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- CITICORP NORTH AMERICA, INC., as Administrative Agent and as Collateral Agent By:     Name:   Daniel J. Miller Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- CITICORP NORTH AMERICA, INC., as Lender By:     Name:   Daniel J. Miller Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- CITIBANK, N.A., as an Issuing Bank By:     Name:   Daniel J. Miller Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., as a Lender By:     Name:   Robert D. Valbona Title:   Managing Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., as a Co-Documentation Agent By:     Name:   Robert D. Valbona Title:   Managing Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., as an Issuing Bank By:     Name:   Robert D. Valbona Title:   Managing Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- BNP Paribas, as a Lender By:     Name:   Mark A. Cox Title:   Director By:     Name:   Greg Smothers Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- LaSalle Bank National Association, as a Lender and as a Co-Documentation Agent By:     Name:   Todd Sturza Title:   First Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- PNC Bank, National Association, as a Lender By:     Name:   Christopher N. Moravec Title:   Senior Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- PNC Bank, National Association, as a Co-Documentation Agent By:     Name:   Christopher N. Moravec Title:   Senior Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- PNC Bank, National Association, as an Issuing Bank By:     Name:   Christopher N. Moravec Title:   Senior Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- The Royal Bank of Scotland plc, as a Lender and as a Co-Documentation Agent By:     Name:   Paul McDonagh Title:   Managing Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- CALYON NEW YORK BRANCH as a Lender By:     Name:   Lee E. Greve Title:   Managing Director, Deputy Manager By:     Name:   Joseph A. Philbin Title:   Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Sovereign Bank, as a Lender By:     Name:   Robert D. Lanigan Title:   Senior Vice President By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Union Bank of California, N.A., as a Lender By:     Name:   Bryan Read Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Credit Industriel et Commercial, as a Lender By:     Name:   Brian O’Leary Title:   Vice-President By:     Name:   Marcus Edward Title:   Vice-President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- NATEXIS BANQUES POPULAIRES, as a Lender By:     Name:   Timothy Polvado Title:   Vice President & Group Manager By:     Name:   Louis P. Laville, III Title:   Vice President & Group Manager   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Sumitomo Mitsui Banking Corporation, as a Lender By:     Name:   William M. Ginn Title:   General Manager By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- BAYERISCHE LANDESBANK, New York Branch, as a Lender By:     Name:   Stuart Schulman Title:   Senior Vice President By:     Name:   Norman McClave Title:   First Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- JPMORGAN CHASE BANK, N.A., as a Lender By:     Name:   Stacey Haimes Title:   Vice President By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Landesbank Baden-Wuerttemberg, New York Branch and/or Cayman Islands Branch as a Lender By:     Name:   Karen Richard Title:   VP & Head of Corporate Desk By:     Name:   Carolyn Gutbrod Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Manufacturers and Traders Trust Company, as a Lender By:     Name:   Title:   By:     Name:   Glenn A. Page Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Mizuho Corporate Bank, Ltd., as a Lender By:     Name:   Mr. Takahiko Ueda Title:   Deputy General Manager   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Morgan Stanley Bank, as a Lender By:     Name:   Jaap L. Tonckens Title:   Authorized Signatory   Morgan Stanley Bank   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- National City Bank of Pennsylvania, as a Lender and as an Issuing Bank By:     Name:   Brian Ciaverella Title:   Senior Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Raymond James Bank FSB, as a Lender By:     Name:   Thomas F. Macina Title:   Senior Vice President By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- UBS Loan Finance LLC, as a Lender By:     Name:   Richard L. Tavrow Title:   Director By:     Name:   Irja R. Otsa Title:   Associate Director   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Wachovia Bank, N.A., as a Lender By:     Name:   William F. Fox Title:   Director By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- Bank of Tokyo-Mitsubishi UFJ Trust Company, as a Lender By:     Name:   Anna Giller Title:   Vice President   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- The Norinchukin Bank, New York Branch, as a Lender By:     Name:   Masanori Shoji Title:   General Manager   [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement] -------------------------------------------------------------------------------- The Sumitomo Trust & Banking Co., Ltd., New York Branch, as a Lender By:     Name:   Francis E. Wynne Title:   Senior Director By:     Name:   Title:     [Signature Page to Foundation Coal Corporation/Foundation PA Coal Company, LLC Amended and Restated Credit Agreement]

Exhibit 10.2 INCENTIVE STOCK OPTION non-transferable GRANT TO DAVID H. BERGSTROM (the “Participant”) on December 4, 2006 the right to purchase (“ISO”) from NovaDel Pharma Inc. (the “Company”) 58,479 shares of its common stock, par value $0.001 per share, at the exercise price of $1.71 per share pursuant to and subject to the provisions of the 2006 NovaDel Pharma Inc. Equity Incentive Plan (the “Plan”) and to the terms and conditions set forth hereafter. By accepting the ISO, the Participant, shall be deemed to have agreed to the terms and conditions set forth in this Award Agreement and the Plan. This option is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). IN WITNESS WHEREOF, NovaDel Pharma Inc. acting by and through its duly authorized officer, has caused this Award Agreement to be executed as of the day and year first above written.   NovaDel Pharma Inc. By:/s/ MICHAEL E. SPICER           Its: Chief Financial Officer Accepted by the Participant: /s/ DAVID H. BERGSTROM           David H. Bergstrom -------------------------------------------------------------------------------- 1. Grant of Option. The committee (the “Committee”) appointed by the Board of Directors of the Company to administer the 2006 NovaDel Pharma Inc. Equity Incentive Plan (the “Plan”), hereby grants to the Participant named above, under the Plan, an incentive stock option (the “ISO”) to purchase from the Company, on the terms and conditions set forth in this Award Agreement, the number of shares (“Shares”) indicated above of the Company’s $0.001 par value common stock (“Common Stock”), at the exercise price per share set forth above (the “Exercise Price”). Unless otherwise indicated, any capitalized terms used but not defined herein shall have the meaning ascribed to such term in the Plan. By accepting the ISO, the Participant is deemed to agree to comply with the terms of the Plan, this Award Agreement and all applicable laws and regulations.            2. Tax Matters. The ISO granted hereunder is intended to qualify as an “incentive stock option” under Section 422 of the Code. If the aggregate Fair Market Value of Shares with respect to which the ISO first become exercisable by the Participant in any calendar year exceeds the limit determined in accordance with the provisions of Section 422 of the Code (the “Limit”) taking into account Shares subject to all ISOs granted by the Company which are held by the Participant, the excess will be treated as nonstatutory stock options which shall continue to be subject to all provisions in this Award Agreement and the Plan. To determine whether the Limit is exceeded, the Fair Market Value of Shares subject to an ISO shall be determined as of the Grant Dates of such ISOs. In reducing the number of options treated as ISOs to meet the Limit, the most recently granted options will be reduced first. If a reduction of simultaneously granted options is necessary to meet the Limit, the Committee may designate which Shares are to be treated as Shares acquired pursuant to an ISO.   3. Vesting. The ISO shall become exercisable as provided below, which shall be cumulative. To the extent that the ISO has become exercisable with respect to a number of Shares as provided below, the ISO may thereafter be exercised by the Participant, in whole or in part, at any time or from time to time prior to the expiration of the ISO as provided herein and in accordance with the Plan, including, without limitation, the filing of such written form of exercise notice, if any, as may be required by the Committee and payment in full of the Exercise Price multiplied by the number of Shares so exercised. Upon expiration of the ISO, the ISO shall be cancelled and no longer exercisable. The following table indicates each date upon which the Participant shall be entitled to exercise the ISO with respect to the percentage of Shares vested indicated beside that date provided that the Participant is continuously employed at all times until the applicable vesting date:                        Vesting Date Number of Shares Vested   --------------------------------------------------------------------------------   * 12.5% upon FDA acceptance of NDA submission for zolpidem * 12.5% upon FDA acceptance of NDA submission for sumatriptan * 12.5% upon Board of Directors approval and successful implementation of portfolio plan for next generation compounds * 12.5% upon CEO approval and successful implementation of organization plan to address issues in analytical, clinical and regulatory * 15% upon completion of a Board of Directors approved licensing deal for zolpidem * 15% upon completion of a Board of Directors approved licensing deal for sumatriptan * 20% at Board of Directors discretion upon completion of approved licensing deal for zolpidem or sumatriptan --------------------------------------------------------------------------------          There shall be no proportionate or partial vesting in the periods prior to each vesting date and all vesting shall occur only on the appropriate vesting date.   4. Option Term. The term of the ISO shall be ten (10) years after the Grant Date, subject to earlier termination in the event of the Participant’s termination of employment or service as set forth in Section 5.   5. Termination.               a. For Cause. If the Participant’s employment or service is terminated for Cause any unexercised ISO shall terminate effective immediately.           b. On Account of Death. If the Participant’s employment or service terminates on account of death (or if the Participant dies within ninety (90) days following termination of employment due to Disability), then any unexercised ISO, to the extent exercisable on the date of death, may be exercised, in whole or in part, within the first one hundred eighty (180) days (but only during the Option Term) after the death of the Participant by (A) his or her personal representative or by the person to whom the ISO is transferred by will or the applicable laws of descent and distribution, or (B) the Participant’s designated beneficiary and, to the extent that any such ISO was not exercisable on the date of death, it will immediately terminate.           c. On Account of Disability. If the Participant’s employment or service terminates on account of Disability, then any unexercised ISO, to the extent exercisable on the date of such termination of employment or service due to Disability, may be exercised in whole or in part, within the first ninety (90) days after such termination of employment or service due to Disability (but only during the Option Term) by the Participant, or by his or her legal guardian or representative, and to the extent that any such ISO was not exercisable on the date of such termination of employment due to Disability, it will immediately terminate.           d. Other. If (i) the Participant’s employment is terminated prior to the end of the term under any employment agreement between the Company and the Participant other than as a result of the Participant’s death or Disability and other than for Cause or due to a Change in Control, (ii) the Participant’s employment is terminated by the Participant other than for Good Reason, (iii) the Participant’s employment agreement is not renewed by the Participant at the end of its initial term, or (iv) the Company provides notice to the Participant that his employment agreement will not be renewed, any portion of the ISO that has not vested shall expire as of the termination date or nonrenewal date, and any unexercised portion of a vested ISO shall remain exercisable for a period of three (3) months after the termination date, the date of nonrenewal or the expiration of the ISO, whichever is earlier.     6. Provisions of Plan Control. This Award Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. The Plan is incorporated herein by reference. If and to the extent that this Award Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Award Agreement shall be deemed to be modified accordingly, provided that to the extent the Plan provides the Committee with discretion to determine the terms of the ISO the exercise of such discretion shall not be considered to be inconsistent with the terms of the Plan. This Award Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior agreements between the Company and the Participant with respect to the subject matter hereof.   -------------------------------------------------------------------------------- 7. Notices. All notices or other communications required or permitted to be given under this Award Agreement to the Company shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, postage pre-paid, as follows: (i) if to the Company, at its principal business address to the attention of the Secretary; and (ii) if to the Participant, at the last address of the Participant known to the Company at the time the notice or other communication is sent.            --------------------------------------------------------------------------------

Exhibit 10.2 December 30, 2005 Robin Washington 34 Elrod Ave. Oakland, CA 94618 Dear Robin, We are very pleased to offer you a full-time position with Hyperion as Chief Financial Officer working in our Santa Clara, CA office. As you know, you’ll be reporting directly to me. Few events in a professional career are more exciting than starting a new position with a new company! We are confident that your experience at Hyperion will be professionally challenging and rewarding, and we look forward to beginning this journey with you. We also want to make sure that you get off to a great start and with that goal in mind; this offer letter has important information including your start date, compensation, and other information specific to the terms of your employment with us. As you review the details in this letter, please keep in mind that our offer is contingent upon Hyperion’s satisfactory completion of reference and background checks, and proof of your eligibility to work in the United States prior to your start date. Robin, Hyperion is committed to competitive total compensation packages that pay for performance and enable us to attract, retain and motivate a world-class workforce. We differentiate our compensation packages through incentive programs that reward our employees for driving the growth and success of the business. Your employment at Hyperion will begin on January 17, 2006. You will be compensated at an annual rate of $355,000.00, which Hyperion will pay on a semi-monthly basis at a rate of $14,791.66. You also will be eligible to participate in the Hyperion Executive Compensation Plan with an annual target bonus of 60% of your base salary. This plan currently pays out on an annual basis. These bonus payments are discretionary and are based on company, business unit and individual performance. You also will receive an advance payment of a $20,000.00 bonus payable in a lump sum on your first day of employment. Pending approval by Hyperion’s Board of Directors, you will be granted a Stock Option right to purchase up to 135,000 shares of Hyperion common stock, according to the terms of your stock option grant agreement and the company’s 2004 Equity Incentive Plan. The vesting schedule of your stock option grant is 25% vesting after the first year from the grant date and monthly vesting for the following 36 months, so long as you remain continuously employed by Hyperion. Stock option grants and incentive compensation payments are contingent upon your employment in good standing with Hyperion at the time of the grant approval or incentive compensation payout. Pending approval by Hyperion’s Board of Directors, you will be granted the right to purchase 25,000 shares of restricted stock at a purchase price of $.001 per share. Hyperion will retain the right to repurchase these shares and forgive that right, in four equal annual installments of 6,250 shares per year. Hyperion is pleased to offer our employees and their eligible dependents a number of high quality benefits, most of which you can enroll in effective your date of hire. Please note that all Hyperion benefits are subject to change. Under the U.S. Immigration Reform and Control Act, (IRCA), all employers are required to verify the identity of all new employees as well as an employee’s right to work in the United States within three (3) business days of the employee’s start date. Your offer of employment is contingent on your ability to provide the necessary documentation to comply with the IRCA. On your first day of employment, please present original documents that indicate your eligibility to work in the United States. Proper forms of documentation are listed on the I-9 form, which is included in your pre-employment package. By signing this letter below, you acknowledge that your employment at Hyperion is for an unspecified duration and that neither this letter nor your acceptance of the terms in it constitutes a contract of employment for a specific duration of time. Hyperion is an “at-will” employer, which means that you or Hyperion can terminate your employment relationship with Hyperion with or without notice and with or without cause or justification. The at-will nature of your employment cannot be altered or modified except in writing signed by the Chief Executive Officer of Hyperion. Hyperion may change your title, reporting assignment and duties from time to time at its sole discretion. By signing below, you also acknowledge that you are under no obligations, restrictions or commitments that preclude you from employment at Hyperion. Such restrictions include but are not limited to non-competition obligations you may have with another employer. The terms and conditions contained in this offer letter supersede any other representations made to you, whether oral or written. In the event of any dispute or claim relating to or arising out of this offer letter, your employment relationship with Hyperion or the termination of your employment with Hyperion for any reason, you and Hyperion agree that all such disputes shall be fully, finally and exclusively resolved by binding arbitration to the fullest extent permitted by law. This includes but is not limited to any claims of breach of contract, wrongful termination or age, sex, race, national origin, disability or other discrimination or harassment. The arbitration will be conducted in accordance with the American Arbitration Association’s “National Rules for the Resolution of Employment Disputes” then in effect. You and Hyperion also waive your respective rights to have any and all disputes or claims adjudicated in court or before any administrative agency or tried in court before any administrative agency, judge or jury. If you have not already done so, Robin, Hyperion will require you to complete an online Application for Employment as a condition of your employment. The Application allows us to obtain information on your employment history and other job qualifications. In the event we determine that information on the application is incorrect, incomplete, misleading or false, Hyperion may withdraw this offer for employment or terminate your employment. In consideration of your agreeing to this employment offer with Hyperion, and as a condition of your reporting for work, we ask that you read, sign and comply with the enclosed Employee Agreement. On your start date, your designated Human Resources Business Partner will meet with you to answer any questions you have and to make sure that all of your new hire paperwork is completed. If you have questions in the meantime about any of the information in this letter or what to expect on your first day, please contact me. Hyperion employees are passionate about customer success, innovation and leading through teamwork. Robin, we look forward to having you on the Hyperion team! Sincerely, /s/Godfrey Sullivan Godfrey Sullivan President and CEO Hyperion Solutions Corporation     Accepted and Agreed to: _/s/Robin Washington      12/30/05         Robin Washington Date Social Security number Planned start date Offer letter expires on January 4, 2006 by 5:00 PM-PST.

Exhibit 10(r) VALSPAR CORPORATION NONSTATUTORY STOCK OPTION AGREEMENT UNDER 1991 STOCK OPTION PLAN – OFFICER By action of its shareholders, The Valspar Corporation (“Valspar”) established the 1991 Stock Option Plan (“1991 Plan”) authorizing the issue of not more than 20,000,000 shares of its common stock (50 cents par value) to key employees, designed to stimulate and reward interest and initiative in their employment. Pursuant to the provisions of the 1991 Plan and The Valspar Corporation Key Employee Annual Bonus Plan, Valspar hereby grants _________________ (Optionee”), an officer of Valspar, a nonstatutory option to purchase from Valspar _________ shares of its common stock at a price of $______ per share, all in accordance with and subject to the following terms and conditions:     1.        Period of Exercise – The Option becomes exercisable one year from the date of grant and will expire ten (10) years from the date of this Agreement. The Option may be exercised only while the Optionee is actively employed by Valspar and as provided in Section 6, dealing with termination of employment.     2.        Vesting of Rights – The Option may be exercised for up to, but not in excess of, the amounts of shares subject to the Option as specified below, based on the Optionee’s number of years of continuous employment with Valspar from the date hereof. In applying the following limitations, the amount of shares, if any, previously purchased by Optionee shall be counted in determining the amount of shares the Optionee can purchase at any time in accordance with said limitations. The Optionee may exercise the Option in the amounts and in accordance with the conditions set forth below:   (a) After one (1) year of such continuous employment, the Option may be exercised for one-third of the shares originally subject to the Option;   (b) After two (2) years of such continuous employment, the Option may be exercised for two-thirds of the shares originally subject to the Option;   (c) At the expiration of the third (3rd) year of such continuous employment, the Option may be exercised at any time and from time to time in whole or in part, but it shall not be exercisable after expiration of the exercise period set forth in Section 1 above. Notwithstanding the foregoing, in the event that Optionee’s employment with Valspar terminates as a result of Optionee’s death, disability or retirement after the age of sixty (60), Optionee shall be entitled to purchase all of the stock covered by the Option at the time of such termination of employment.     3.        Definitions – For the purposes of this Option, (i) disability shall mean permanent disability as that term is defined under the long term disability insurance coverage offered by Valspar to its employees at the time the determination is to be made; (ii) retirement shall mean the termination of employment with Valspar at any time after Optionee has attained the age of sixty (60) years for any reason other than cause; and (iii) termination for cause shall mean the termination of employment with Valspar as a result of an illegal act, gross insubordination, or willful violation of a Valspar policy by Optionee.     4.        Method of Exercise – The Optionee shall exercise his rights hereunder by (i) delivering to Valspar a tender letter substantially in the form hereto attached stating the number of shares to be purchased and (ii) payment to Valspar of the full amount of the purchase price for the shares then being purchased. In lieu of cash, all or part of the purchase price may be paid by surrender (or deemed surrender through attestation) to Valspar of previously acquired shares of common stock of Valspar, based on the fair market value at the closing price on the day preceding the date of exercise. Shares surrendered in lieu of cash must have been held by Optionee for a minimum of six (6) months. Upon effective exercise of the Option, Valspar shall promptly cause the shares being purchased to be issued to the Optionee.     5.        Conditions – By Optionee’s acceptance of this Option, the Optionee agrees that Optionee will during Optionee’s employment by Valspar devote Optionee’s full business time, energy and skill on behalf of Valspar, subject to absences permitted in accordance with established Valspar policy.     6.        A – Termination of Employment – This Option shall be exercisable after a termination of Optionee’s employment with Valspar to the following extent, in each event not to exceed the original period of exercise of this Option: (a) If the Optionee’s employment with Valspar is terminated for cause, this Option and all of the Optionee’s rights hereunder shall thereupon terminate to the extent that this Option has not therefore been exercised. (b) In the event of termination of employment of the Optionee under any circumstances other than for cause, disability, or the Optionee’s death, this Option may be exercised at any time within thirty (30) days after such termination of employment to the extent the Optionee was entitled to purchase stock at the time of termination of employment. (c) If termination of employment occurs by reason of the Optionee’s retirement -------------------------------------------------------------------------------- after the age sixty (60), this Option may be exercised at any time within three (3) years after such termination. (d) If termination occurs by reason of the Optionee’s disability, this Option may be exercised at any time within one (1) year Optionee’s rights hereunder. (e) If termination occurs by reason of the Optionee’s death, Optionee’s legal representative may exercise within one (1) year Optionee’s rights hereunder. (f) Nothing herein contained shall confer on the Optionee the right to continue in Valspar’s employ or affect Valspar’s rights to terminate or alter the terms of the Optionee’s employment at any time.     6.        B – Early Retirement – If an Optionee retires on or after age 55, all outstanding options will be 100% vested and he/she shall have up to an additional three (3) years to exercise this option beyond his/her termination date (not to exceed the original option term), provided that during this three (3) year period, the Optionee does not directly or indirectly render services (including consulting or research) to any person or business organization that is engaged in the development, manufacture and sale of a competitive product. Competitive Product means any product, process or service (including any component thereof or research to develop information useful in connection with a product or service) that is being designed, developed, assembled, manufactured, marketed and sold by anyone other than Valspar and which is of the same general type, performs similar functions, competes, with or is used for the same purposes as a Valspar product. In the event the Optionee violates this prohibition on competition for this three (3) year period, all unexercised options that have been granted shall terminate immediately and be forfeited to the Company.     7.        Transferability – The rights of the Optionee hereunder are exercisable during the Optionee’s life only by the Optionee and are not transferable, voluntarily or involuntarily, except (a) at Optionee’s death by Will or applicable law of descent to the extent provided in Section 6 hereof or (b) as otherwise provided in this Section 7. Notwithstanding the preceding sentence, the vested portion of the Option may be transferred by Optionee to Optionee’s spouse, children, grandchildren, parents, stepchildren, former spouse, adoptive relationships, sisters or brothers (collectively, the “Family Members”), to trusts in which Family Members have more than fifty percent of the beneficial interest, to entities in which Family Members own more than fifty percent of the voting interests, to foundations in which the Optionee or Family Members control the management of assets, or to entities exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.     8.        Withholding – In any case where withholding is required or advisable under federal, state or local law in connection with any exercise by Optionee hereunder, the Optionee shall (i) pay cash, (ii) surrender previously acquired shares of common stock or (iii) authorize the withholding of shares from the shares issued upon exercise of any option for all taxes required to be withheld.     9.        Adjustments in Stock – In the event of a change in Valspar common stock as a result of a stock split or stock dividend, this Option may be adjusted by the Compensation Committee in such manner as it deems equitable to prevent dilution or enlargement of the Optionee’s rights hereunder by reason of such change.     10.      Mergers, Acquisition or Other Reorganization – The Compensation Committee may make provision, as it deems equitable, for the protection of Optionees with grants of outstanding Options in the event of (a) merger of the Company into, or the acquisition of substantially all of the stock or assets of the Company by another entity; or (b) liquidation; or (c) other reorganization of the Company.     11.      Change of Control – Upon any Change of Control, each outstanding option shall immediately become exercisable in full for the remainder of its term without regard to any vesting or installment exercise provisions then applicable to the option. The term “Change of Control” shall have the meaning as defined in the 1991 Plan.     12.      Construction – Interpretation and construction of the terms of this Option shall be made by the Compensation Committee in accordance with the provisions of the 1991 Plan and The Valspar Corporation Key Employee Annual Bonus Plan. Dated: THE VALSPAR CORPORATION   Accepted and Confirmed   as of the Above Date By --------------------------------------------------------------------------------   Its President and Chief Executive Officer   --------------------------------------------------------------------------------               (Optionee's Signature)   --------------------------------------------------------------------------------

                                                                                        Exhibit 10.3     PERFORMANCE UNIT AWARD AGREEMENT THIS PERFORMANCE UNIT AWARD AGREEMENT (“Agreement”) is made and entered effective as of the 1st day of April, 2006, by and between TXU CORP., a Texas corporation (“Company”), and «Participant» (“Participant”).   WHEREAS, the Company has adopted the TXU Corp. 2005 Omnibus Incentive Plan (“Plan”), the purpose of which is to assist the Company in attracting, retaining and motivating executive officers and other key employees essential to the success of the Company through performance-related incentives linked to long-range performance goals; and   WHEREAS, the Plan provides for various types of stock and cash based incentive compensation awards, as well as covered employee annual incentive awards to be made to eligible Employees; and   WHEREAS, in accordance with the provisions of the Plan, the Participant has been designated as being eligible to receive an award of performance units payable in, and valued on the basis of, Company common stock as described herein (“Performance Units”) in order to carry out the intent and purposes of the Plan all as set forth herein; and   WHEREAS, this Agreement constitutes part of a prospectus covering the Performance Units which are being awarded hereunder, where Company common stock constituting the value of the Award has been registered under the Securities Act of 1933.   NOW THEREFORE, in consideration of the covenants herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:   1.  Award of Performance Units. The Company hereby awards to Participant «Award» Performance Units, each such Performance Unit having a value equal to one share of the Company’s common stock, without par value (“Company Stock”), pursuant to the terms and subject to the conditions and restrictions set forth herein.   2.  Performance Period and Adjustment of Number of Performance Units. The award of Performance Units shall be subject to comparative total shareholder return performance criteria as described below. For purposes of determining the adjustments to the number of Performance Units under this section, the Target Award (“Target”) shall be the number of Performance Units awarded under Section 1 hereof plus any additional Performance Units added to this Award during the Performance Period by virtue of the “dividends” provisions of Section 6 hereof. (a)  During the period commencing April 1, 2006 and ending March 31, 2009. (“Performance Period”), the Company’s financial performance, measured in terms of total shareholder return, shall be compared to, and measured against, the performance of other companies within a peer group consisting of the Standard & Poor’s 500 Electric Utilities Index (“Peer Group”). Upon the expiration of the Performance Period, the Committee will compare the Company’s total shareholder return with the total shareholder return of the companies within the Peer Group and determine the Company’s percentile ranking within the Peer Group during the Performance Period.   (b)  Based on the Company’s performance within the Peer Group during the Performance Period, the number of Performance Units shall be adjusted in accordance with the methodology set forth below. For purposes of this Agreement, the term Performance Units will include such adjusted number of Performance Units. Performance  Levels Total Shareholder Return Ranges Initial Number of Performance Units Adjusted by the Following:   Maximum   81st Percentile & Above   Maximum payout (200% of Target)   150% of Target   71st - 80.99th Percentiles    Interpolate between 150% of Target & Maximum (150% & 200% of Target)   125% of Target   61st - 70.99th Percentiles   Interpolate between 125% of Target & 150% of Target   Target   51st - 60.99th Percentiles    Interpolate between 100% of Target & 125% of Target   Minimum   41st - 50.99th Percentiles    Interpolate between Minimum & Target (50% to 100% of Target)   Zero   40.99th Percentile & Below   No payout   3.  Vesting, Valuation and Payment of Award.   (a)  The Performance Units, as adjusted in accordance with the provisions of Section 2(b) above, shall become vested upon the expiration of the Performance Period, and shall be valued as of the date of the Committee’s determination of the Company’s performance within the Peer Group during the Performance Period (“Valuation Date”), at which time the adjustment described in Section 2(b) shall be made. In calculating the value of the Award, each Performance Unit will equal the value of the average of the high and low trading price of one (1) share of Company Stock on the Valuation Date.   (b)  This Award shall be paid to Participant in the form of shares of Company Stock having an aggregate value equal to the value of the Award determined in accordance with the valuation methodology described in Section 3(a) above. Such distribution of Company Stock, net of applicable tax withholding, shall be made as soon as reasonably practicable (and in any event within forty-five (45) days) following the Valuation Date. The Valuation Date and the distribution of the Company Stock shall occur within the same calendar year as the expiration of the Performance Period.       4.         Forfeiture of Performance Units Under Certain Circumstances.                                  (a)      Forfeiture Upon Termination of Employment under Certain Circumstances. If Participant’s employment with the Company shall, at any time during the Performance Period, be terminated by the Company for Cause (as defined in that certain Employment Agreement between the Company and Participant dated as of «Date_of_Emp_Agt», (“Employment Agreement”)) or by Participant without Good Reason (as defined in the Employment Agreement), this Award and all Performance Units covered hereunder shall immediately be forfeited by Participant. Upon such forfeiture, Participant shall have no further right, title or interest in or to this Award or any Performance Units.   2          (b)    Continuation Following Termination of Employment Under Certain Circumstances. If Participant’s employment with the Company shall, at any time during the Performance Period, be terminated under circumstances which, pursuant to the terms and conditions of the Employment Agreement, do not result in the forfeiture of this Award, this Award shall not forfeit and shall be paid at the time and in the amount provided for in, and subject to the terms and conditions of, this Agreement, consistent with the provisions of the Employment Agreement. (c)    Consistency With Terms of Employment Agreement. The terms of this Section 4 are intended to be consistent with the terms of the Employment Agreement regarding the forfeiture or the continuation of this Award under the various circumstances described in the Employment Agreement, and this Section 4 shall be so construed. In the event of any conflict between the provisions of this Agreement and the Employment Agreement relating to the terms of this Award, the provisions of the Employment Agreement will control. 5.  Nontransferability. No right of the Participant hereunder may be sold, transferred, pledged, assigned or otherwise alienated, hypothecated or disposed of and any attempt to effect any such sale, transfer, pledge, assignment or disposition shall be null and void and of no force or effect whatsoever.   6.  Dividends. If and when dividends are paid on Company Stock, the number of Performance Units covered by the Award will be increased by: (a) in the case of a dividend paid in cash, the number of full and fractional shares of Company Stock which could have been purchased with the amount of the dividend that would have been paid had each Performance Unit been one (1) share of Company Stock and as if the Performance Units had been invested in the TXU Direct Stock Purchase and Dividend Reinvestment Plan; or (b) in the case of a dividend paid in stock, the number of full and fractional shares of Company Stock which would have been distributed in connection with such dividend had each Performance Unit been one (1) share of Company Stock.   7.  Capital Adjustments. The number of Performance Units covered by this Award shall be subject to adjustment, if any, as the Committee deems appropriate upon the occurrence of certain events and in the manner as described in Section 4.4 of the Plan.   8.  No Right to Employment. Neither this Agreement, nor the Award of the Performance Units provided for herein, shall be construed as giving Participant any right of employment or continued employment with the Company or any affiliated entity of the Company.     3 9.       Withholding. Participant understands and agrees that the Company shall deduct or withhold any taxes required by law to be withheld in connection with the Award provided for herein.   10.  Subject to Plan. The Award of the Performance Units and this Agreement are subject to all of the terms and conditions of the Plan (as the Plan may be amended from time to time). In the event of any conflict between the terms and conditions of the Plan and those set forth herein, the terms and conditions of the Plan shall control.   11.  Governing Law. This Agreement shall be governed, construed, interpreted and administered in accordance with the laws of the State of Texas. This Agreement is being entered into and shall be performed, in whole or in part, in Dallas County, Texas, and the parties hereby acknowledge and agree that, in any dispute involving this Agreement, venue shall be in the appropriate court in Dallas County, Texas.   12.  Severability. In the event any provision of this Agreement shall be held invalid, illegal or unenforceable, in whole or in part, for any reason, such determination shall not affect the validity, legality or enforceability of any remaining provision or portion of provision, which shall remain in full force and effect as if this Agreement had not contained the invalid, illegal or unenforceable provision or portion.   13.  Amendment. The Committee shall have the right at any time and from time to time, without the approval or consent of Participant, to amend this Agreement if additions and/or changes are made to the Internal Revenue Code of 1986, as amended, any federal or state securities law, or other law or regulation applicable to the Award provided for herein. The Committee shall have the right at any time, and from time to time, to amend this Agreement for any other reason with the consent of Participant.   14.  Award Not Benefit Eligible. Participant understands and agrees that the Award of Performance Units shall be considered as extraordinary, special incentive compensation and will not be included as “earnings,” “wages,” “salary” or “compensation” in any pension, welfare, life insurance, or other employee benefit plan or arrangement of the Company.   15.  Notices. 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 the other party hereto at the address shown opposite his, her or its signature below or at such other address as such party may designate by not less than five (5) days’ advance written notice to the other party hereto.   16.  Further Assurances. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.   17.  Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.   18.  Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators, guardians and personal representatives. Nothing in this Agreement shall be construed to give any person or entity other than the parties hereto and their respective successors any legal or equitable right, remedy or claim under this Agreement.     4   19.  Capitalized Terms. Unless otherwise defined herein, each of the capitalized terms used herein shall have the meaning given to such term in the Plan.   20.  Headings. Headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.   IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the day and year first above written.                   TXU CORP. Address:                             By: _____________________________________ 1601 Bryan Street                             M. Riz Chand Dallas, TX 75201                                       Senior Vice President, Attn: Corporate Secretary                                    Human Resources                   PARTICIPANT Address:                             _________________________________________ _____________________________                     «Participant»  _____________________________ _____________________________                                                        5                                                           5

Exhibit 10.4 LOGO [g61105image1.jpg] International Swaps and Derivatives Association, Inc. NOVATION AGREEMENT dated as of June 29, 2006 among: WACHOVIA BANK, NATIONAL ASSOCIATION (the “Remaining Party”), NOVASTAR MORTGAGE, INC. (the “Transferor”) AND NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2006-3 (the “Transferee”). The Transferor and the Remaining Party have entered into one or more Transactions (each an “Old Transaction”), each evidenced by a Confirmation (an “Old Confirmation”) attached hereto as Exhibit I and subject to a 1992 ISDA Master Agreement dated as of September 15, 2003 (the “Old Agreement”). The Remaining Party and the Transferee are simultaneously entering into a 1992 ISDA Master Agreement dated as of the date hereof in the form attached hereto as Exhibit II (the “New Agreement”) relative to the New Transactions (defined below). With effect from and including June 29, 2006 (the “Novation Date”) the Transferor wishes to transfer by novation to the Transferee, and the Transferee wishes to accept the transfer by novation of, all the rights, liabilities, duties and obligations of the Transferor under and in respect of each Old Transaction, with the exception of the Excluded Rights and Obligations referred to below with the effect that the Remaining Party and the Transferee will enter into a new transaction (each a “New Transaction” and, collectively, the “New Transactions”) between them having terms identical to those of each applicable Old Transaction, subject to the same exceptions and as more particularly described below. The Remaining Party wishes to accept the Transferee as its sole counterparty with respect to each of the New Transactions. The Transferor and the Remaining Party wish to have released and discharged, as a result and to the extent of the transfer described above, their respective obligations under and in respect of the Old Transactions. Accordingly, the parties agree as follows: —   1. Definitions. Terms defined in the ISDA Master Agreement (Multicurrency-Cross Border) as published in 1992 by the International Swaps and Derivatives Association, Inc. (the “1992 ISDA Master Agreement”) are used herein as so defined, unless otherwise provided herein. For purposes of this Novation Agreement, “Excluded Rights and Obligations” means all obligations of each of the Transferor and the Remaining Party to Transfer (as defined in the Credit Support Annex to the Old Agreement) Eligible Collateral (as so defined) in respect of the Old Transactions and all related rights of the Remaining Party and the Transferor under the Old Agreement. -------------------------------------------------------------------------------- 2. Transfer, Release, Discharge and Undertakings. Subject to the execution and delivery of the New Agreement by each of the parties thereto to the other, with effect from and including the Novation Date and in consideration of the mutual representations, warranties and covenants contained in this Novation Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties):     (a) on the Novation Date, subject to Section 2(d) of this Novation Agreement, the Transferor hereby transfers all of its rights, liabilities, duties and obligations, with the exception of the Excluded Rights and Obligations, relative to, and in connection with the Old Transactions to the Transferee. For the sake of clarity, all references to Independent Amounts shall be deemed deleted from the confirmations for each New Transaction;     (b) subject to Section 2(d) of this Novation Agreement, the Remaining Party and the Transferor are each hereby released and discharged from further obligations to each other with respect to each Old Transaction and their respective rights against each other thereunder are cancelled, provided that such release and discharge shall not affect any rights, liabilities or obligations of the Remaining Party or the Transferor with respect to payments or other obligations due and payable or due to be performed prior to the Novation Date, and all such payments and obligations shall be paid or performed by the Remaining Party or the Transferor in accordance with the terms of such Old Transaction;     (c) in respect of each New Transaction, the Remaining Party and the Transferee each hereby undertake liabilities and obligations towards the other and acquire rights against each other identical in their terms to each corresponding Old Transaction (and, for the avoidance of doubt, as if the Transferee were the Transferor and with the Remaining Party remaining the Remaining Party, save for the Excluded Rights and Obligations and any other rights, liabilities or obligations of the Remaining Party or the Transferor with respect to payments or other obligations due and payable or due to be performed prior to the Novation Date);     (d) each New Transaction shall be governed by, form part of, and be subject to the New Agreement and the relevant Old Confirmation (which, in conjunction and as deemed modified to be consistent with this Novation Agreement, shall be deemed to be a Confirmation between the Remaining Party and the Transferee), and the offices of the Remaining Party and the Transferee for purposes of each New Transaction shall be their offices at their addresses for notices provided for in the New Agreement; and     (e) on the Novation Date, the Remaining Party shall transfer any and all of the Posted Collateral (as defined in the Credit Support Annex to the Old Agreement) held by it in respect of the Old Transactions to the account or accounts of the Transferor identified by it by notice given to the Remaining Party as provided in the Old Agreement, and the Transferor shall transfer all Posted Collateral held by it in respect of the Old Transactions to the account or accounts of the Remaining Party identified by it by notice given to the Transferor as provided in the Old Agreement, in each case together with all Interest Amount and Distributions thereon (as so defined). The Remaining Party’s or the Transferor’s failure to effect these transfers will continue to constitute Potential Events of Default and may constitute Events of Default under the Old Agreement notwithstanding the transfer by novation contemplated herein.   2 -------------------------------------------------------------------------------- 3. Representations and Warranties.     (a) On the date of this Novation Agreement:     (i) Each of the parties makes to each of the other parties those representations and warranties set forth in Section 3(a) of the 1992 ISDA Master Agreement with references in such Section to “this Agreement” or “any Credit Support Document” being deemed references to this Novation Agreement alone.     (ii) The Remaining Party and the Transferor each makes to the other, and the Remaining Party and the Transferee each makes to the other, the representation set forth in Section 3(b) of the 1992 ISDA Master Agreement, in each case with respect to the Old Agreement or the New Agreement, as the case may be, and taking into account the parties entering into and performing their obligations under this Novation Agreement.     (iii) Each of the Transferor and the Remaining Party represents and warrants to each other and to the Transferee that:     (A) it has made no prior transfer (whether by way of security or otherwise) of the Old Agreement or any interest or obligation in or under the Old Agreement or in respect of any Old Transaction; and     (B) without prejudice to the obligations of the Remaining Party and the Transferor referred to in Section 2(d) of this Novation Agreement, as of the Novation Date, all obligations of the Transferor and the Remaining Party under each Old Transaction required to be performed before the Novation Date have been fulfilled.     (iv) Each party represents to each of the other parties: —     (A) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Novation Agreement and as to whether this Novation Agreement is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other parties as investment advice or as a recommendation to enter into this Novation Agreement; it being understood that information and explanations related to the terms and conditions of this Novation Agreement shall not be considered investment advice or a recommendation to enter into this Novation Agreement. No communication (written or oral) received from any of the other parties shall be deemed to be an assurance or guarantee as to the expected results of this Novation Agreement;     (B) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Novation Agreement. It is also capable of assuming, and assumes, the risks of this Novation Agreement; and     (C) Status of Parties. None of the other parties is acting as a fiduciary for or an adviser to it in respect of this Novation Agreement.     (b) The Transferor makes no representation or warranty and does not assume any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any New Transaction or   3 --------------------------------------------------------------------------------      the New Agreement or any documents relating thereto and assumes no responsibility for the condition, financial or otherwise, of the Remaining Party, the Transferee or any other person or for the performance and observance by the Remaining Party, the Transferee or any other person of any of its obligations under any New Transaction or the New Agreement or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded; provided, however, that nothing in the foregoing shall be construed to relieve the Transferor from any liability it may have for any of its representations, warranties or obligations as the servicer or otherwise under the Pooling and Servicing Agreement among NovaStar Mortgage Funding, Inc., U.S. Bank, National Association, and JPMorgan Chase Bank, National Association dated as of June 1, 2006 (the “Pooling and Servicing Agreement”)   4. Counterparts. This Novation Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.   5. Costs and Expenses. The parties will each pay their own costs and expenses (including legal fees) incurred in connection with this Novation Agreement and as a result of the negotiation, preparation and execution of this Novation Agreement.   6. Amendments. No amendment, modification or waiver in respect of this Novation Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system, and subject to the Rating Agency Condition as defined in the New Agreement.   7. (a)     Governing Law. This Novation Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to the conflict of laws provisions thereof (other than Section 5-1401 of the New York General Obligations Law).     (b) Jurisdiction. The terms of Section 13(b) of the 1992 ISDA Master Agreement shall apply to this Novation Agreement with references in such Section to “this Agreement” being deemed references to this Novation Agreement alone.     (c) Not Acting in Individual Capacity. JPMorgan Chase Bank, National Association is signing this Novation Agreement solely in its capacity as Trustee under the Pooling and Servicing Agreement and not in its individual capacity, and all persons having any claim against the Trustee by reason of the Transactions contemplated by shall look only to the assets of NovaStar Mortgage Supplemental Interest Trust, Series 2006-3 (subject to the availability of funds therefor in accordance with the Flow of Funds as set forth in Article IV of the Pooling and Servicing Agreement) for payment or satisfaction thereof , provided that in no case shall the Trustee (or any person acting as Successor Trustee under the Pooling and Servicing Agreement) be liable for or on account of any statements, representations, warranties, covenants or obligations stated to be those of Party B under the terms of the transaction contemplated hereby, all such liability, being expressly waived by Party A and any other person claiming by, through or under such party.   4 --------------------------------------------------------------------------------      The foregoing may not be construed to give to Majority Certificateholders any rights under this Novation Agreement.     (d) Pooling and Servicing Agreement. Capitalized terms used in this Novation Agreement that are not defined herein and are defined in the Pooling and Servicing Agreement shall have the respective meanings assigned to them in the Pooling and Servicing Agreement.       (e) Calculation Not later than each Reset Date, the Calculation Agent shall deliver in writing to the Trustee the results of any calculations made on such reset date to the Indenture Trustee address as provided in the notices portion of the New Agreement.     (f) Account Details Remaining Party: Wachovia Bank, N.A. CIB Group, ABA 053000219 Ref: Derivative Desk (Trade No: [            ]) Account#: 04659360006116 Transferee: JPMorgan Chase Bank, N.A. ABA # 021000021 Acct # 507947541 Acct Name SFS-NY Incoming Wire Account Attn Ariella Kaminer Ref Novastar 2006-3, Hedge confirm # [            ]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF the parties have executed this Novation Agreement on the respective dates specified below with effect from and including the Novation Date.   WACHOVIA BANK, NATIONAL ASSOCIATION     NOVASTAR MORTGAGE, INC. By:   /s/ Kim V. Farr     By:   /s/ Matt Kaltenrieder Name:   Kim Farr     Name:   Matt Kaltenrider Title:   Director     Title:   Vice President   NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2006-3 By: JPMorgan Chase Bank, National Association, as Trustee under the Pooling and Servicing Agreement, acting not in its individual capacity, but solely in its capacity as Trustee to NovaStar Mortgage Supplemental Interest Trust, Series 2006-3 By:   /s/ Andrew Cooper Name:   Andrew Cooper Title:   Assistant Vice President   6 -------------------------------------------------------------------------------- Exhibit I [Old Hedge Confirmations attached behind this page]   7 -------------------------------------------------------------------------------- Exhibit II [Form of New Agreement attached behind this page]   8

  GUARANTEE      FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with that certain funding agreement (the “Funding Agreement”), entered into by and between Principal Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income Fundings Trust 2006-63, a New York common law trust (the “Trust”), relating to the notes (the “Notes”) issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the indirect parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full and unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:   1.   Guarantee.           (a) The Guarantor hereby fully, irrevocably, absolutely and unconditionally guarantees, as a guarantee of payment and not merely as a guarantee of collection, immediate payment when due to the Trust any payments required to be made by Principal Life to the Trust under the Funding Agreement which shall become due and payable regardless of whether such payment is due at maturity, on an interest payment date or as a result of redemption or otherwise (the “Scheduled Payments”) but shall be unpaid by Principal Life (the “Guaranteed Amounts”). Notwithstanding anything to the contrary contained herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid interest and any other amounts due and owing under the Funding Agreement, less any amounts paid by Principal Life to the Trust.           (b) In the event that Principal Life fails to make a Scheduled Payment in full when due (the “Payment Notice Date”), then the Trust or Citibank, N.A., as indenture trustee for the benefit of the holders of the Notes (the “Indenture Trustee”), pursuant to the indenture (the “Indenture”) between the Trust and the Indenture Trustee, may present the Guarantor with notice (each, a “Payment Notice”) of such failure in writing on or after the Payment Notice Date. The Payment Notice shall identify (1) the Funding Agreement, (2) the Trust, (3) the Payment Notice Date and (4) the amount of the Scheduled Payments not paid by Principal Life to the Trust as of the Payment Notice Date. Upon receipt of such Payment Notice, the Guarantor will immediately pay the Guaranteed Amounts pursuant to Section 7.           (c) In the event that, after receipt of a Payment Notice from the Trust, the Guarantor fails to make immediate payment to the Trust or the Indenture Trustee of the Guaranteed Amounts, then the Trust and the Indenture Trustee may enforce the obligations of the Guarantor under this Guarantee, including by immediately bringing suit directly against the Guarantor (without first bringing suit against Principal Life) for the Guaranteed Amounts not paid to the Trust as of the Payment Notice Date.           (d) This Guarantee is an unsecured, unsubordinated and contingent obligation of the Guarantor and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor. 1 --------------------------------------------------------------------------------        2. Termination. This Guarantee is a continuing and irrevocable guarantee of the Guaranteed Amounts now or hereafter existing and shall terminate and be of no further force and effect with respect to the Funding Agreement and the Notes upon the full payment of the Scheduled Payments or upon the earlier extinguishment of the obligations of Principal Life under the Funding Agreement.      3. Amendments. Subject to the trust agreement relating to the Trust and the Indenture, no provision of this Guarantee may be waived, amended, supplemented or modified, except by a written instrument executed by the Trust and the Guarantor.      4. Assignment; Governing Law. This Guarantee shall inure to the benefit of the Trust and its successors, assigns and pledgees. This Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York without regard to conflict of law principles.      5. Notices. All notices given pursuant to this Guarantee shall be in writing, and shall either be delivered, mailed or telecopied to the locations listed below or at such other address or to the attention of such other persons as such party shall have designated for such purpose in a written notice complying as to delivery with the terms of this Section 5. Each such notice shall be effective (i) if given by telecopy, when transmitted to the applicable number so specified in this Section 5 (such notice shall also be sent by mail, with first class postage prepaid), (ii) if given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if given by any other means, when actually delivered at such address. If to the Guarantor: Principal Financial Group, Inc. 711 High Street Des Moines, Iowa 50392 Attention: General Counsel Telephone: (515) 247-5111 Facsimile: (515) 248-3011 With a copy to: Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392 Attention: Jim Fifield Telephone: (515) 248-9196 Facsimile: (866) 496-6527 If to the Trust: Principal Life Income Fundings Trust (followed by the number of the Trust specified in this Guarantee) 2 --------------------------------------------------------------------------------   c/o U.S. Bank Trust National Association 100 Wall Street, 16th Floor New York, New York 10005 Attention: Thomas E. Tabor Telephone: (212) 361-6184 Facsimile: (212) 809-5459 With a copy to: Citibank, N.A. Citibank Agency and Trust 388 Greenwich Street, 14th Floor New York, New York 10013 Attention: Nancy Forte Telephone: (212) 816-5685 Facsimile: (212) 816-5527      6. Representations and Warranties. The Guarantor represents and warrants that: (i) it is duly organized and in good standing under the laws of the jurisdiction of its organization and has full capacity and right to make and perform this Guarantee, and all necessary authority has been obtained; (ii) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights and general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law; (iii) the making and performance of this Guarantee does not and will not violate the provisions of any applicable law, regulation or order, and does not and will not result in the breach of, or constitute a default under, any material agreement, instrument or document to which it is a party or by which it or any of its property may be bound or affected, except to the extent disclosed in the registration statement registering the issuance of this Guarantee and the Funding Agreement, as amended, supplemented or modified from time to time (the “Registration Statement”), and to the extent that any such violation, breach or default does not result in a material adverse effect on the Guarantor; and (iv) all consents, approvals, licenses and authorizations of, and filings and registrations with, any governmental authority required under applicable law and regulations for the making and performance of this Guarantee have been obtained or made and are in full force and effect, except to the extent disclosed in the Registration Statement and to the extent that the failure to acquire any such consent, approval, license, authorization, filing or registration does not result in a material adverse effect on the Guarantor.      7. Notice of, and Consent to, Security Interest. The Trust hereby notifies the Guarantor that it has granted to the Indenture Trustee, on behalf of the holders of the Notes, a security interest in the Collateral (as defined in the Indenture), including, but not limited to, any and all payment to be made by the Guarantor to the Trust under this Guarantee. The Trust hereby notifies the Guarantor that it has collaterally assigned to the Indenture Trustee, for the benefit of the holders of the Notes, this Guarantee. The Guarantor, by executing this Guarantee, hereby (i) affirms that it has made or simultaneously will make changes to its books and records to reflect such security interest and collateral assignment, (ii) consents to the security interest 3 --------------------------------------------------------------------------------   granted, and collateral assignment made, by the Trust to the Indenture Trustee of this Guarantee, (iii) agrees to make all payments due under this Guarantee to the Collection Account (as defined in the Indenture) or any other account designated in writing to the Guarantor by the Indenture Trustee and (iv) agrees to comply with all orders of the Indenture Trustee with respect to this Guarantee without any further consent from the Trust.      8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING OUT OF THIS GUARANTEE. THIS GUARANTEE REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE TRUST AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.               PRINCIPAL FINANCIAL GROUP, INC.                         By:   /s/ Elizabeth D. Swanson                         Name:   Elizabeth D. Swanson                         Title:   Counsel                         Date:   The Effective Date (as defined in the Funding Agreement) Acknowledged and Agreed:           THE PRINCIPAL LIFE INCOME FUNDINGS TRUST DESIGNATED IN THIS GUARANTEE           By:   U.S. Bank Trust National Association,     not in its individual capacity, but solely in its     capacity as trustee           By:   Bankers Trust Company, N.A.,     under Limited Power of Attorney, dated February 16, 2006           By:   /s/ Diana L. Cook                         Name:   Diana L. Cook                         Title:   Vice President                         Date:   The Effective Date (as defined in the Funding Agreement) 4

Exhibit 10.1 DESCRIPTION OF EXECUTIVE OFFICER CASH BONUS PLAN Maxygen, Inc. (the “Company”) maintains a Cash Bonus Plan for executive officers and certain other officers of the Company that is designed to reward participants based on their individual performance and the Company’s financial and other performance. Under the Cash Bonus Plan, annual bonus amounts are determined based on specified weighting of factors relating to executive officer’s individual performance, the overall financial performance of the Company and other performance targets. The annual financial and other targets for the Cash Bonus Plan are set by the Compensation Committee of the Company’s Board of Directors and are currently based on the company’s financial performance (revenue and cash burn), product development goals and other objectives. The Company’s Chief Executive Officer is eligible to receive an annual cash performance bonus of between 0 and 100% of base salary and the target bonus amount for the Company’s Chief Executive Officer is 40% of base salary. The Company’s executive officers (other than the Chief Executive Officer) are eligible to receive an annual cash performance bonus of between 0 and 50% of base salary and the target bonus amount for these executive officers is 25% of base salary. Bonus payments are paid in one annual payment shortly after the end of each calendar year.

Exhibit 10.2   EXECUTION COPY August 16, 2006 Scott McCurdy Re: Employment Agreement (the “Agreement”) Dear Scott This is to set forth the principal terms of an employment relationship between you and Geokinetics Inc (the “Company” or “Geokinetics”) (the “Employment Agreement” or “Agreement”). This offer is subject to a successful closing of the proposed acquisition of Grant Geophysical (“Grant”) by Geokinetics Inc. and will be effective upon the date of such closing (the “Effective Date”), provided that you are continually employed by Grant through the Effective Date. This Agreement will replace and supersede your current employment agreement with Grant Geophysical, Inc. Please review the following and, if acceptable, please indicate your acceptance in the place marked below. 1.               Your position will be Vice President and CFO of Geokinetics Inc. You will report to the President and CEO of Geokinetics Inc. You will devote substantially all of your business time and attention and best efforts to the affairs of the Company. You will start employment immediately upon closing the proposed acquisition. 2.               In connection with your employment under this Agreement, you shall be based in Houston, Texas or in such other location as may be designated by the Company and mutually acceptable to you. 3.               You will be paid a minimum annual base salary at the rate of $200,000 per annum plus reimbursement of business expenses against proper vouchers in accordance with Company policy. Your salary will be reviewed annually. Increased salary shall become the minimum annual base salary under this Agreement and may not be decreased thereafter without your written consent. 4.               Upon your execution of this Agreement and your employment by the Company, you will be granted 175,000 restricted shares of Geokinetics Common Stock. This grant will be subject to approval by Geokinetics’ shareholders of an increase in the number of shares of Geokinetics’ Common Stock subject to the Geokinetics Inc. 2002 Stock Awards Plan (the “Stock Incentive Plan”) as a result of Geokinetics’ acquisition of the Company. Restrictions on this stock will be lifted in three equal, yearly, installments beginning one (1) year from the Effective Date. The grant will be subject to all of the other provisions of the Stock Incentive Plan (including change of control provisions). Geokinetics and its counsel will assist you in making all required filings under Section 83(b) of the Internal Revenue Code should you, in your sole and absolute discretion, choose to do so. In the event that the shareholders of Geokinetics fail to approve an increase in the number of shares available under the Stock Incentive Plan, Geokinetics and you will attempt to negotiate an acceptable alternative to the grant of restricted stock described above. If Geokinetics and you are unable to agree, you shall be entitled to terminate this Agreement without liability. 5.               In addition to your salary, you will be eligible to participate in the Senior Executive Incentive Program where you could earn additional sums as a bonus based upon the annual performance of Geokinetics   -------------------------------------------------------------------------------- Inc. in relation to its cash flow. Cash flow would be earnings before depreciation, interest and taxes, less Capex budget overages not previously approved by the Board of Directors (“EBITDA” less Capex overages). An annual bonus pool will be established for Executives and key employees consisting of 5% of the difference of EBITDA less CAPEX overages (“Bonus Pool”). If earnings from operations are negative, no bonus will be payable.  The allocation of this pool among the Executives and key employees would be determined by the Board of Directors and would be paid within 90 days after the end of the bonus earning year. The maximum award you can receive is two times your annual base salary. For the 2006 award year, paid in 2007, you will receive a guaranteed minimum bonus of $100,000 less any payments made to you during 2006 under the Grant Geophysical, Inc. 2006 bonus plan. 6.               Should the Company sever your employment for any reason, other than for cause, you would be entitled to receive as compensation a sum equal to your annual base salary plus your most recent non-zero annual cash bonus. Such amount shall be paid in a single lump sum on your employment termination date. The Company also will pay for your medical insurance coverage at your then existing level for a period of one year following your employment termination date. 7.               Following the occurrence of a Change in Control (as defined in the Geokinetics Inc. 2002 Stock Awards Plan) that results in a diminution of your duties, responsibilities or position in the management of the Company and/or results in a material negative impact on your remuneration (“a Material Negative Event”), the Employee shall have the right to terminate the Agreement by written notice to the Company within 90 days following the occurrence of the Material Negative Event by giving 60 days notice. If you make the election to terminate the Agreement under this section and have given the required notice, then you shall be entitled to receive as compensation a sum equal to your annual base salary. Such amount shall be paid in a single lump sum on your employment termination date. 8.               You will agree not to compete in the seismic service industry during your employment and for a period of one year after termination either at the Company’s election or if you voluntarily leave the Company, except under the options described in 7 above and 9 below. The non-compete would be restricted to the areas where the Company is operating at the time of your termination. You will agree to execute Company non-disclosure and confidentiality agreements with respect to disclosure of Company proprietary or confidential information. 9.               You will have the opportunity to make a one time election within 34 days of the execution by all parties of the Letter of Intent (“LOI”) from Geokinetics Inc. to the existing shareholders of Grant Geophysical, Inc. to voluntarily agree to terminate your employment 1 day after the closing of the acquisition of Grant Geophysical, Inc. by Geokinetics Inc. or 60 days from the date of your election whichever is later. In the event you choose to make this election, you will receive 6 months base pay in a single lump sum on your employment termination date. The Company also will pay medical insurance coverage at your then existing level for a period of 6 months following your employment termination date. 10.         You will be entitled to the same employment benefits accorded to executives of the Company generally, including a monthly car allowance of $400, participation in a 401k plan, medical insurance, etc. You will be entitled to 4 weeks of paid vacation, prorated over an annual employment year if less than twelve months.  Any accrued vacation earned through employment with Grant Geophysical in existence at the time of closing of the proposed acquisition will be cashed out upon closing of the proposed acquisition at the rate of your base annual salary with Grant Geophysical, Inc. immediately prior to the closing of the proposed acquisition. --------------------------------------------------------------------------------   11.         The term of this Agreement shall be for a period of three years effective from your date of hire. 12.         Notwithstanding anything to the contrary in this Agreement, to the extent that you, in your individual capacity, or your advisors determine that you are deemed to be a “specified employee” for purposes of Section 409A(a)(2)(B) of the of the Internal Revenue Code of 1986, as amended (the “Code”) and that compliance with Section 409A of the Code so requires, you and the Company agree that any non-qualified deferred compensation payments due to you under this Agreement in connection with a termination of your employment which do not constitute short-term deferrals and would otherwise have been payable to you at any time during the six-month period immediately following such termination of employment shall not be paid prior to, and shall instead be payable in a lump sum immediately following, the expiration of such six-month period. 13.         The parties acknowledge that the closing of the proposed acquisition of Grant Geophysical, Inc. by the Company will trigger a payment due to you under the terms of the Phantom Stock Agreement which is Exhibit A to your current contract with Grant Geophysical, Inc. dated January 1st, 2004, and that the terms of the Phantom Stock Agreement will continue until all obligations of the Company with regards to the purchase of 100% of the stock of Grant Geophysical, Inc. have been satisfied. I look forward to continuing to profitably grow our business together. Agreed and accepted: 16th day of August, 2006   Sincerely,                   /s/ Scott McCurdy     /s/ David A. Johnson   Scott McCurdy   David A. Johnson     President & CEO, Geokinetics   --------------------------------------------------------------------------------

Exhibit 10.1.1   PARAMETRIC TECHNOLOGY CORPORATION 2000 EQUITY INCENTIVE PLAN   1. Purpose.   The purpose of the Parametric Technology Corporation 2000 Equity Incentive Plan (the “Plan”) is to attract and retain directors and key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve performance goals, and to enable them to participate in the growth of the Company by granting Awards with respect to the Company’s Common Stock. Certain capitalized terms used herein are defined in Section 9 below.   2. Administration.   The Plan shall be administered by the Committee; provided, that the Board may in any instance perform any of the functions of the Committee hereunder. The Committee shall select the Participants to receive Awards and shall determine the terms and conditions of the Awards. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee’s decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not Reporting Persons or Covered Employees and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for all such Participants and a maximum for any one Participant.   3. Eligibility.   All directors and all employees and consultants of the Company or any Affiliate capable of contributing to the successful performance of the Company are eligible to be Participants in the Plan. Incentive Stock Options may be granted only to persons eligible to receive such Options under the Code.   4. Stock Available for Awards.   (a) Amount. Up to an aggregate of 14,800,000 shares of Common Stock, subject to adjustment under subsection (b) may be issued pursuant to Awards, including Incentive Stock Options, under the Plan. If any Award expires or is terminated unexercised or is forfeited, the shares subject to such Award, to the extent of such expiration, termination, or forfeiture, shall again be available for award under the Plan. Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan. Shares issued under the Plan may consist of authorized but unissued shares or treasury shares.   (b) Adjustment. In the event of any equity restructuring, whether a stock dividend, recapitalization, split-up or combination of shares, or otherwise, affects the Common Stock such that an adjustment is required in order to preserve the benefits intended to be provided by the Plan, the Committee (subject in the case of Incentive Stock Options to any limitation required under the Code) shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards and (iii) the exercise price with respect to any of the foregoing, provided that the number of shares subject to any Award shall always be a whole number.   (c) Limit on Individual Grants. Subject to adjustment under subsection (b) above, the maximum number of shares of Common Stock that are either subject to Options and Stock Appreciation Rights or are granted as Restricted Stock Units, Restricted Stock or unrestricted stock Awards with respect to which Performance Goals apply under Section 7 below that may be granted to any Participant in the aggregate in any fiscal year shall not exceed 800,000.   5. Stock Options.   (a) Grant of Options. Subject to the provisions of the Plan, the Committee may grant options (“Options”) to purchase shares of Common Stock (i) complying with the requirements of Section 422 of the Code or any successor -------------------------------------------------------------------------------- provision and any regulations thereunder (“Incentive Stock Options”) and (ii) not intended to comply with such requirements (“Nonstatutory Stock Options”). The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant, provided that a Nonstatutory Stock Option granted to a new employee or consultant in connection with the hiring of such person may have a lower exercise price so long as it is not less than 100% of Fair Market Value on the date the person accepts the Company’s offer of employment or the date employment commences, whichever is lower. No Incentive Stock Option may be granted hereunder more than ten years after the effective date of the Plan.   (b) Terms and Conditions. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable grant or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state laws, as it considers necessary or advisable.   (c) Payment. No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the grant of the Option, by delivery of shares of Common Stock owned by the optionee valued at their Fair Market Value on the date of delivery, or such other lawful consideration, including a payment commitment of a financial or brokerage institution, as the Committee may determine.   6. Stock Appreciation Rights.   (a) Grant of SARs. Subject to the provisions of the Plan, the Committee may grant rights to receive any excess in value of shares of Common Stock over the exercise price (“Stock Appreciation Rights” or “SARs”). The Committee shall determine at the time of grant or thereafter whether SARs are settled in cash, Common Stock or other securities of the Company, Awards or other property, and may define the manner of determining the excess in value of the shares of Common Stock.   (b) Exercise Price. The Committee shall fix the exercise price of each SAR or specify the manner in which the price shall be determined. An SAR may not have an exercise price less than 100% of the Fair Market Value of the Common Stock on the date of the grant, provided that an SAR granted to a new employee or consultant in connection with the hiring of such person may have a lower exercise price so long as it is not less than 100% of Fair Market Value on the date the person accepts the Company’s offer of employment or the date employment commences, whichever is lower.   7. Stock and Stock Unit Awards.   (a) Grant of Restricted or Unrestricted Stock Awards. The Committee may grant shares of Common Stock subject to forfeiture (“Restricted Stock”) and determine the duration of the period (the “Restricted Period”) during which, and the conditions under which, the shares may be forfeited to the Company and the other terms and conditions of such Awards. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Committee, during the Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Committee may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and unless otherwise determined by the Committee, deposited by the Participant, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or if the Participant has died, to the Participant’s Designated Beneficiary. The Committee also may make Awards of shares of Common Stock that are not subject to restrictions or forfeiture, on such terms and conditions as the Committee may determine from time to time.   (b) Grant of Restricted Stock Units. The Committee may grant the right to receive in the future shares of Common Stock subject to forfeiture (“Restricted Stock Units”) and determine the duration of the Restricted Period during which, and the conditions under which, the Award may be forfeited to the Company and the other terms and conditions of such Awards. Restricted Stock Unit Awards shall constitute an unfunded and unsecured obligation of the Company, and shall be settled in shares of Common Stock or cash, as determined by the Committee at the time   2 -------------------------------------------------------------------------------- of grant or thereafter. Such Awards shall be made in the form of “units” with each unit representing the equivalent of one share of Common Stock.   (c) Performance Goals; Consideration. The Committee may establish Performance Goals for the granting of Restricted Stock, unrestricted stock Awards, Restricted Stock Units or the lapse of risk of forfeiture of Restricted Stock or Restricted Stock Units. Shares of Restricted Stock or unrestricted stock or Restricted Stock Units may be issued for no cash consideration, such minimum consideration as may be required by applicable law or such other consideration as the Committee may determine.   8. General Provisions Applicable to Awards.   (a) Documentation. Each Award under the Plan shall be evidenced by a writing delivered to the Participant or agreement executed by the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles. No Award to any Participant subject to United States income taxation shall provide for the deferral of compensation that does not comply with Section 409A of the Code.   (b) Committee Discretion. Each type of Award may be made alone, in addition to or in relation to any other Award. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of grant or at any time thereafter.   (c) Dividends and Cash Awards. In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable (in cash or in the form of Awards under the Plan) currently or deferred with or without interest and (ii) cash payments in lieu of or in addition to an Award.   (d) Termination of Service. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of service of a Participant and the extent to which, and the period during which, the Participant’s legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder.   (e) Change in Control. In order to preserve a Participant’s rights under an Award in the event of a change in control of the Company (as defined by the Committee), the Committee in its discretion may, at the time an Award is made or at any time thereafter, take such actions, including without limitation one or more of the following: (i) providing for the acceleration of any time period relating to the exercise or payment of the Award, (ii) providing for payment to the Participant of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise or payment of the Award had the Award been exercised or paid upon the change in control, whereupon the Award shall terminate, (iii) adjusting the terms of the Award in a manner determined by the Committee to reflect the change in control, or (iv) causing the Award to be assumed, or new rights substituted therefor, by another entity, as the Committee may consider equitable to Participants and in the best interests of the Company.   (f) Transferability. In the discretion of the Committee, any Award may be made transferable upon such terms and conditions and to such extent as the Committee determines, provided that Incentive Stock Options may be transferable only to the extent permitted by the Code. The Committee may in its discretion waive any restriction on transferability.   (g) Withholding Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind due to the Participant hereunder or otherwise. In the Committee’s discretion, the minimum tax obligations required by law to be withheld in respect of Awards may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of retention or delivery.     3 -------------------------------------------------------------------------------- (h) Foreign Nationals. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws.   (i) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award, including without limitation changing the date of exercise or realization, causing the Award to be assumed by another entity, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required (a) if such action would terminate, or reduce the number of shares issuable under, an Option, unless any time period relating to the exercise of such Option or the eliminated portion, as the case may be, is accelerated before such termination or reduction, in which case the Committee may provide for the Participant to receive cash or other property equal to the net value that would be received upon exercise of the terminated Option or the eliminated portion, as the case may be, and (b) in any other case, unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. The Committee shall not, without further approval of the stockholders of the Company, authorize the amendment of any outstanding Option to reduce the exercise price. Furthermore, no Option shall be canceled and replaced with Options having a lower exercise price without approval of the stockholders of the Company.   9. Certain Definitions.   “Affiliate” means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee.   “Award” means any Option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit granted under the Plan.   “Board” means the Board of Directors of the Company.   “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor law.   “Committee” means one or more committees each comprised of not less than two members of the Board appointed by the Board to administer the Plan or a specified portion thereof. Unless otherwise determined by the Board, if a Committee is authorized to grant Awards to a Reporting Person or a Covered Employee, each member shall be a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act or an “outside director” within the meaning of Section 162(m) of the Code, respectively.   “Common Stock” or “Stock” means the Common Stock, $.01 par value, of the Company.   “Company” means Parametric Technology Corporation, a Massachusetts corporation.   “Covered Employee” means a “covered employee” within the meaning of Section 162(m) of the Code.   “Designated Beneficiary” means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death. In the absence of an effective designation by a Participant, “Designated Beneficiary” means the Participant’s estate.   “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor law.   “Fair Market Value” means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time.   “Participant” means a person selected by the Committee to receive an Award under the Plan.   “Performance Goals” means one or more objective performance goals based on one or more of the following criteria established by the Committee: revenue; revenue growth; sales; expenses; margins; net income; earnings or earnings   4 -------------------------------------------------------------------------------- per share; cash flow; shareholder return; return on investment; return on invested capital, assets, or equity; profit before or after tax; operating profit; return on research and development investment; market capitalization; new product releases; quality improvements; market share; cycle time reductions; customer satisfaction measures; strategic positioning or marketing programs; business/information systems improvements; expense management; infrastructure support programs; human resource programs; customer programs; technology development programs; or any combination of any of the foregoing, and may be particular to a Participant or may be based, in whole or in part, on the performance of the division, department, line of business, subsidiary, or other business unit, whether or not legally constituted, in which the Participant works or on the performance of the Company generally.   “Reporting Person” means a person subject to Section 16 of the Exchange Act.   10. Miscellaneous.   (a) No Right To Employment. No person shall have any claim or right to be granted an Award. Each employee of the Company or any of its Affiliates is an employee-at-will (that is to say that either the Participant or the Company or any Affiliate may terminate the employment relationship at any time for any reason or no reason at all) unless and only to the extent provided in a written employment agreement for a specified term executed by the chief executive officer of the Company or his duly authorized designee or the authorized signatory of any Affiliate. Neither the adoption, maintenance, nor operation of the Plan nor any Award hereunder shall confer upon any employee or consultant of the Company or of any Affiliate any right with respect to the continuance of his/her employment by or other service with the Company or any such Affiliate nor shall they interfere with the rights of the Company (or Affiliate) to terminate any employee at any time or otherwise change the terms of employment, including, without limitation, the right to promote, demote or otherwise re-assign any employee from one position to another within the Company or any Affiliate.   (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 issued under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award.   (c) Effective Date. The “effective date” of the Plan, from time to time, shall be the most recent date that the Plan was adopted or that it was approved by the stockholders, if earlier (as such terms are used in the regulations under Section 422 of the Code).   (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, subject to such stockholder approval as the Board determines to be necessary or advisable to comply with any tax or regulatory requirement.   (e) Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts.   5

Exhibit 10.1 RAYONIER ANNUAL CORPORATE BONUS PROGRAM (as amended and restated February 27, 2006) -------------------------------------------------------------------------------- Rayonier Annual Corporate Bonus Program   1. Purpose This Rayonier Annual Corporate Bonus Program (“Bonus Program”) is the vehicle through which the Compensation and Management Development Committee (the “Committee”) of the Rayonier Board of Directors will make awards to key personnel that have an impact on the Company’s achievement of annual or other short-term Performance Objectives. The Bonus Program is effective for Performance Periods designated by the Committee until such time as the Bonus Program is modified or terminated.   2. Definitions For purposes of the Bonus Program, the following terms have the indicated definitions. Terms not defined here have the same meaning as under the 2004 Incentive Stock and Management Bonus Plan (the “Plan”).     (a) “Available Bonus Pool” means with respect to any Performance Period, the sum of the Preliminary Bonus Awards for all Executives; provided that, such sum shall not exceed the amount specified in Section 4(a).     (b) “Bonus Award” means the bonus payable in respect of a specified Performance Period to a Designated Employee determined in accordance with Section 4, and which in the case of a Covered Executive is such individual’s “Bonus Award” for purposes of Section 9 of the Plan.     (c) “Bonus Program” means this Rayonier Annual Corporate Bonus Program, as it may be modified from time to time by the Committee.     (d) “Budgeted Net Income” means the Net Income budget as approved by the Board for the applicable Performance Period.     (e) “Corporate Performance Factor” or “CPF” has the meaning set forth in Section 5.     (f) “Covered Executive” (i.e. the Company’s top five executives) has the same meaning as a “Participant” under Section 9 of the Plan.     (g) “Designated Employees” means with respect to any applicable Performance Period, the Covered Executives and other Executives designated, by Salary Grade or otherwise, by the Committee prior to the end of the first quarter of the Performance Period.     (h) “Executive” means any Rayonier employee at Salary Grade 15 or higher, including the Covered Executives.     (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.   1 --------------------------------------------------------------------------------   (j) “Net Income” means, for each Performance Period, the Company’s net income from continuing operations as defined by accounting principles generally accepted in the United States, as reported in the Company’s income statement for the Performance Period, adjusted to eliminate the after-tax effects of any restructuring charges or other unusual items, all as determined by the Company and reported to the Committee.     (k) “Preliminary Bonus Award” means the product of multiplying (i) an Executive’s Target Award for the Performance Period (applying such Executive’s base salary at the end of the Performance Period) times (ii) the actual CPF in respect of that Performance Period.     (l) “Performance Period” means the Company’s fiscal year or any other period designated by the Committee with respect to which Bonus Awards are granted.     (m) “Performance Bonus Award” has the meaning set forth in the Plan and is the Bonus Award determined in accordance with this Bonus Program and the Plan in the case of a Covered Executive.     (n) “Plan” means the Rayonier 2004 Incentive Stock and Management Bonus Plan, pursuant to which this Bonus Program as it applies to Covered Executives is adopted, or any successor thereto.     (o) “Target Award” means with respect to an Executive, the amount that would become such Executive’s Preliminary Bonus Award if the CPF in respect of the applicable Performance Period is 100%, expressed as a percentage of the Executive’s Performance Period end base salary.   3. Administration The Committee shall administer the Bonus Program for all Designated Employees, including in accordance with the Plan, with respect to Covered Executives. Before payment of any Bonus Award is made under this Bonus Program, the Committee shall have complied with the provisions of Section 4.   4. Procedures for Establishing and Determining Bonus Awards     (a) Maximum Bonus Awards for a Performance Period. The aggregate amount payable as Bonus Awards for any Performance Period for all Designated Employees shall not exceed 150% of the sum of the Target Bonus Awards for all Executives.     (b) Setting Performance Goals, Performance Objectives and Target Awards. Not later than the end of the first quarter of each Performance Period (or by such earlier time as may be required in the future by the applicable provisions of the Internal Revenue Code of 1986 in the case of Covered Executives), the Committee shall:     (i) Determine the class of Executives who will participate in the Bonus Program for the particular Performance Period;     (ii) Determine the parameters of the Corporate Performance Factor to be applied for the Performance Period in accordance with Section 5(a), and     (iii) Establish the parameters for the Target Award for the Performance Period for the class of Executives covered by the Bonus Program, including for each Covered   2 --------------------------------------------------------------------------------   Executive, substantially in the form set forth on Exhibit B hereto by Salary Grade or in such other similar format as may be approved by the Committee from time to time.     (c) Certification of CPF and Finalize Bonus Awards. At the end of each Performance Period, the Committee shall:     (i) Review the calculation of the Available Bonus Pool and the Preliminary Bonus Award for Executives covered by the Bonus Program, with specific review of the Preliminary Bonus Awards for the Covered Executives, including the Chief Executive Officer, and for such other Executives identified by the Committee, which may include the direct reports to the Chief Executive Officer whether or not they are Covered Executives;     (ii) Review such adjustments, under Section 5(c) or otherwise, to the Preliminary Bonus Award for any Executive recommended by the Chief Executive Officer or that the Committee, in its discretion, otherwise deems appropriate in establishing the final amount, if any, of the Bonus Award for such Executive; provided that, the Preliminary Bonus Award for any Covered Executive may not be increased or exceed 200% of the Covered Executive’s base salary in effect at the end of the Performance Period, and following all such adjustments, the sum of all Bonus Awards payable in respect of the Performance Period shall not exceed the amount determined in accordance with Section 4(a),     (iii) Establish the form of payment and the payment date for Bonus Awards for the Performance Period for Covered Executives as provided in Section 6; and     (iv) Prior to the payment of a Bonus Award to any Covered Executive, certify by Committee resolution or otherwise in writing, in accordance with the requirements of Section 162(m) of the Code and Section 9(e) of the Plan, whether the Corporate Performance Factor and other material terms for paying such Bonus Award in respect of the Performance Period have been achieved or met. It is anticipated that for Designated Employees other than Covered Executives, if authorized by the Committee, payments of Bonus Awards can be based on preliminary data available in the last month of the Performance Period and made shortly after the end of the Performance Period, subject to confirmation following the close of the Performance Period by report to the Committee at its next regularly scheduled meeting following such payments indicating that payment was made in compliance with the terms of the Bonus Program.   5. Corporate Performance Factor     (a) Criteria for Establishing the CPF. The “Corporate Performance Factor” shall consist of those Performance Goals permitted under Section 9 of the Plan that are selected by the Committee for the specified Performance Period, and weighted as designated by the Committee for such Performance Period so as to reflect Performance Objectives under the Plan. Such selection and weighting in determining the Corporate Performance Factor may be changed from time to time by the Committee consistent with the provisions of Section 9 of the Plan in respect of Covered Executives, provided that with respect to a particular Performance Period, the Corporate Performance Factor shall be established generally prior to the commencement of such Performance Period and in all events not later than the end of the first quarter of any Performance Period.   3 --------------------------------------------------------------------------------   (b) Initial CPF Performance Goals and Parameters. The Corporate Performance Factor shall be computed as specified in Exhibit A hereto until changed by the Committee as provided in Section 5(a), with such adjustments to reported earnings for accounting rule changes, special non-recurring items, discontinued operations, and similar adjustments as are approved by the Committee made so as to provide consistent measurements of continuing corporate performance.     (c) Post-Performance Period Adjustments to CPF for Executives Other Than Covered Executives. Subject to the aggregate amount of Bonus Awards not exceeding the Available Bonus Pool, the Corporate Performance Factor with respect to Bonus Awards for any particular Performance Period may be adjusted for Executives who are not Covered Executives, upon the recommendation of the Chief Executive Officer based on a qualitative judgment as to the effectiveness of the Executives in non-financial areas or as otherwise determined in the discretion of the Committee.   6. Payment of Bonus Awards     (a) Entitlement to Payments Generally. Subject to Sections 4(c)(iii) and (iv) for Covered Executives, Bonus Awards for a Performance Period shall be paid at such time as designated by the Committee following the closing of the Performance Period and its determination of the final Bonus Awards as provided in Section 4(c), to Designated Employees who are employed by the Company on the payment date or whose employment terminated as a result of death, disability or normal retirement following the end of the applicable Performance Period. The Chief Executive Officer shall determine if a pro-rated Bonus Award shall be paid to any Designated Employee, other than a Covered Employee, whose employment terminated as a result of death, disability or normal retirement during the applicable Performance Period. Except as provided in the previous sentence, the Committee shall determine in its sole discretion if a Bonus Award shall be paid to any Designated Employee who is not employed by the Company on the payment date.     (b) Employment After Commencing of a Performance Period. Subject to such modifications as may be approved by the Committee, Executives who commence employment after the start of a Performance Period may be granted a Bonus Award determined pro-rata for the term of such employee’s employment during the Performance Period. To the extent a new Executive may become entitled to a Bonus Award hereunder, a Target Bonus Award shall be computed for such Executive to reflect such pro-rata participation and the Available Bonus Pool shall be adjusted to reflect such Target Bonus.     (c) Form of Payment. Bonus Awards shall be paid in cash, except that Bonus Awards that are Performance Bonus Awards for Covered Executives may be paid in cash, stock, other stock-based or stock-denominated units or any combination thereof as determined by the Committee. Stock or stock-based awards may be granted under the terms and conditions of the Plan applicable to stock awards under the Plan and in compliance with the applicable rules of the Exchange Act.   7. Termination and Amendment Subject to the provisions of the Plan, the Committee may terminate or amend the Bonus Program at any time.   4 -------------------------------------------------------------------------------- 8. Other Provisions     (a) No Designated Employee shall have any claim or right to be granted a Bonus Award under the Bonus Program until such Bonus Award is actually made. Neither the existence of this Bonus Program, nor any action taken hereunder, shall be construed as giving any Designated Employee any right to be retained in the employ of the Company or in any way interfere with or limit the right of the Company to terminate any Designated Employee’s employment at any time. Nothing contained in this Bonus Program shall limit the ability of the Company to make payments or awards to Designated Employees under any other plan, agreement or arrangement in effect at time the Bonus Program is established or upon a subsequent date.     (b) No employee shall, at any time, have a right to become a Designated Employee in the Bonus Program for any Performance Period, for any reason, including notwithstanding the individual’s having previously participated in the Bonus Program.     (c) The Company shall have the right to deduct from a Bonus Award or from any other amounts due the Designated Employee from the Company, any taxes or other amounts required or permitted to be withheld by law.     (d) No Designated Employee or any other party claiming an interest in amounts earned under the Bonus Program shall have any interest whatsoever in any specific asset of the Company. To the extent that any person or entity acquires a right to receive payments under the Bonus Program, such rights shall be that of an unsecured general creditor of the Company.     (e) All questions pertaining to the construction, regulation, validity and effect of the provisions of the Bonus Program shall be determined in the sole discretion of the Committee pursuant to the Plan.     (f) With the exception of payments made following the death of a Designated Employee, the rights and benefits of a Designated Employee hereunder are personal to the Designated Employee and shall not be subject to any voluntary or involuntary alienation, assignment, pledge, transfer, encumbrance, attachment, garnishment or other disposition.     (g) Bonus Awards under this Bonus Program shall not constitute compensation for the purpose of determining participation or benefits under any other plan of the Company unless specifically included as compensation in such plan.     (h) If any provision of this Bonus Program would cause a Performance Bonus Award not to constitute “qualified performance-based compensation” under Section 162(m) with respect to a Covered Executive, that provision shall be severed from, and shall be deemed not to be a part of, the Bonus Program, in respect of such Covered Executive but the other provisions hereof shall remain in full force and effect.     (i) In the event that changes are made to Section 162(m) to permit greater flexibility under the Bonus Program, the Committee may make any adjustments it deems appropriate.   9. Adoption Date This Bonus Program was first adopted by the Committee on December 9, 2004 with application for Performance Periods commencing January 1, 2005, and amended and restated as herein provided on February 27, 2006, with application for Performance Periods commencing January 1, 2006. Administration February 2006   5 -------------------------------------------------------------------------------- Exhibit A RAYONIER ANNUAL CORPORATE BONUS PROGRAM METHODOLOGY FOR COMPUTING THE CORPORATE PERFORMANCE FACTOR FOR THE 2006 PERFORMANCE PERIOD   2006 Performance Goals    Performance Goal Calculation Formula    2006 Weighting Net Income vs. Budget    N.I. minus Budget N.I.   divided by: plus 1 Absolute Value of Budget N.I.    45.0% ROTC vs. Budget    ROTC minus Budget ROTC   divided by: plus 1 Absolute Value of Budget ROTC    15.0% CAD vs. Budget    CAD minus Budget CAD   divided by: plus 1 Absolute Value of Budget CAD   Apply formula separately for actual cumulative CAD vs. budget for each quarter ending 3/31, 6/30, 9/30 and 12/31 within the Performance Period.    40.0% COMPUTATION OF CPF Performance Goal Calculations:     •   Apply the Performance Goal Calculation Formula for each Performance Goal as specified above. Performance Goal Limitation: Following application of each Performance Goal Calculation Formula:     •   If the result of the Calculation Formula is less than zero, record zero for that Performance Goal.     •   If the result of the Calculation Formula is greater than 1.5, record 1.5 for that Performance Goal. Computation of CPF for the Performance Period: CPF for the Performance Period is then determined by applying the applicable Weighting for the Performance Goal to the greater of the result of the Calculation Formula or the Performance Goal Limitation for such Performance Goal, and then taking the average of the result. -------------------------------------------------------------------------------- Exhibit B RAYONIER ANNUAL CORPORATE BONUS PROGRAM TARGET BONUS FOR RAYONIER EXECUTIVES AS A PERCENT OF BASE SALARY*   Salary Grade    Bonus Target % 32    100 31    93 30    87 29    80 28    69 27    65 26    61 25    44 24    41 23    38 22    36 21    33 20    30 19    27 18    18 17    15 16    13 15    10   * Year-end Base Salary or Performance Period ending base salary as may be applicable. Administration February 2006

  Exhibit 10.28 EMPLOYMENT AGREEMENT      THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on January 13, 2006, with an effective date of January 1, 2006, (the “Effective Date”), between Technical Olympic USA, Inc., a Delaware corporation (the “Employer”) and Tommy McAden, an individual (the “Employee”). Agreement      In consideration of the mutual premises, covenants and agreements set forth below, and intending to be legally bound hereby, it is hereby agreed as follows: 1. Definitions. Capitalized terms shall have the meanings defined in this Agreement or on Exhibits A and B attached hereto unless the context otherwise requires. Exhibits A and B are incorporated herein by this reference. 2. Employment Term and Duties.      2.1 Employment Term. The Employer employs the Employee, and the Employee accepts employment by the Employer, on the terms and conditions set forth in this Agreement and for the period of time set forth in Exhibit B (the “Employment Period”), which Employment Period shall be the term of this Agreement.      2.2 Duties.           (a) The Employee will serve in the position set forth on Exhibit B; provided, however, that Employee acknowledges that the CEO of Technical Olympic USA, Inc. (the “CEO”) shall have the right to assign Employee to serve in another position where such assignment is in the best interests of the Employer and where Employer continues to perform in accordance with its obligations under this Agreement. The Employee will devote his/her full business time, attention, skill, and energy exclusively to the business of the Employer, will use his/her best efforts to promote the success of the Employer’s business, and will cooperate fully with the senior management of the Employer in the advancement of the best interests of the Employer.           (b) With the prior written consent of the CEO, which consent may be revoked by the CEO at any time and for any reason, the Employee may engage in the following activities during the Employment Period so long as such activities do not, in the sole judgment of the CEO, interfere or conflict with Employee’s duties to Employer as set forth in Section 2.2(a) above: (i) serve on corporate, civic, religious, educational, and/or charitable boards or committees; (ii) deliver lectures, fulfill speaking engagements, or teach at educational institutions without receiving any compensation other than reimbursement of expenses, nominal stipends, or similar forms of compensation; and (iii) manage his/her personal investments, provided that such investments do not conflict with the Employee’s duties and responsibilities under this Agreement. If the Employee is appointed or elected an officer or director of the Tommy McAden Employment Agreement 1 --------------------------------------------------------------------------------   Employer or any Affiliate, the Employee will fulfill his/her duties as such officer or director without additional compensation. Upon termination of this Agreement for any reason, the Employee automatically resigns as of such date as an officer and director of the Employer and each Affiliate of which he/she is an officer or director, if any.      2.3 Location. The Employee’s primary place of employment hereunder shall be as set forth in Exhibit B. 3. Compensation and Benefits. The compensation and benefits payable and provided to the Employee under this Agreement shall constitute the full consideration to be paid to the Employee for all services to be rendered by the Employee to the Employer and its Affiliates in all capacities.      3.1 Base Salary. During the first year of this Agreement, the Employee will be paid an annual salary as set forth on Exhibit B (“Base Salary”), payable in periodic installments according to the Employer’s customary payroll practices. In subsequent years, Base Salary may be adjusted taking into account Employee’s performance, company operating results, and industry practices.      3.2 Benefits. The Employee (and the Employee’s spouse and dependents, where applicable) shall be permitted to participate in such 401(k) plan (or similar qualified plan) and any welfare benefit plan, program, or fringe benefit made available to other similarly situated employees that may be in effect from time to time, subject to the Employee (and the Employee’s spouse and dependents, where applicable) meeting the eligibility requirements under the terms of each of those plans (collectively, the “Benefits”). However, the Employer may modify or terminate any employee benefit plan or program at any time and in the Employer’s sole discretion, so long as such modification or termination equally affects all of the Employer’s similarly situated employees.      3.3 Annual Bonus. During the term of this Agreement, the Employee shall be eligible to participate in an annual bonus plan. The bonus plan and any amounts payable thereunder may take into consideration personal performance and contribution, operational and financial results, and other achievements attributable to Employee’s accomplishments (“Bonus”). Employee’s participation in and opportunity to receive compensation pursuant to such plan will be consistent with the participation and opportunity of similarly situated employees and shall in any event be subject to the approval of the Board of Directors or relevant Board Committee of Technical Olympic USA, Inc. The bonus plan applicable to Employee under this Agreement is as described in Exhibit B.      3.4 Business Expenses. In accordance with the rules and policies that the Employer may establish from time to time, the Employer shall reimburse the Employee for business expenses reasonably incurred by him/her in the performance of his/her duties hereunder in accordance with the Employer’s documentation guidelines as may be in effect from time to time.      3.5 Vacation. The Employee shall be entitled to the vacation period per calendar year as set forth on Exhibit B (prorated for less than a full year). Unused vacation time not to Tommy McAden Employment Agreement 2 --------------------------------------------------------------------------------   exceed an aggregate of Two (2) weeks for all prior years may be accumulated or carried over from year to year. The Employee shall not be entitled to any compensation for unused vacation time except as provided in Section 4.      3.6 Car Allowance. During the Employment Period, the Employee shall be paid a car allowance as set forth in Exhibit B.      3.7 Office and Support Staff. During the Employment Period, the Employee shall be entitled to an office, furnishings, other appointments, and secretarial or other assistants as Employer shall determine are reasonably necessary to perform the Employee’s duties and obligations as set forth herein and comparable to other similarly situated employees of the Employer and its Affiliates. 4. Termination.      4.1 Death; Disability. This Agreement will terminate automatically upon the death or Disability of the Employee.      4.2 Termination Notice. Any termination of the Employee’s employment other than a termination pursuant to Section 4.1 hereof shall be by written notice to the other party, indicating the specific termination provision in this Agreement relied upon, if any, and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination of the Employee’s employment under the provision so indicated. The date of the Employee’s termination of employment shall be specified in such notice; provided, however, that such date may not be earlier than any applicable cure periods as set forth herein and, if a termination is being effected by the Employee for any reason, such date shall in any event not be less than six (6) months from the date the written notice is given to the Employer (the “Required Notice”), during which period Employee shall continue to perform in accordance with this Agreement unless such performance is waived by the Employer by written notice to the Employee. Failure to provide the Required Notice or to perform in accordance with in this Agreement during this period shall be deemed a material breach of this Agreement by the Employee.      4.3 Termination Pay. Upon termination of the Employee’s employment, the Employer will be obligated to pay or provide the Employee or the Employee’s estate, as the case may be, only such compensation and Benefits as are provided in this Section 4.3 and, if applicable, in Section 5.3 hereof.           (a) Termination by the Employer for Cause; Resignation of the Employee without Good Reason or Required Notice; Resignation of the Employee by Election of Non-Continuation. If (i) the Employer terminates the Employee’s employment for Cause; (ii) the Employee terminates his/her employment for any reason other than Good Reason; (iii) the Employee terminates his/her employment for any reason without the Required Notice; or (iv) the Employee terminates his/her employment by Election of Non-Continuation, then: the Employee shall be entitled to receive the Accrued Obligations from the Employer, payable to Employee within thirty (30) Business Days after the date of termination. Except as specifically provided herein, the Employee shall not be entitled to any other payments or Benefits pursuant to this Agreement. Tommy McAden Employment Agreement 3 --------------------------------------------------------------------------------             (b) Termination due to Disability or upon Death. If the Employee’s employment is terminated due to Disability or upon the Employee’s death, the Employee or the Employee’s estate, as the case may be, shall be entitled to receive from the Employer the sum of the following, payable to Employee or Employee’s legal representative within thirty (30) Business Days after the date of termination: (i) the Accrued Obligations and (ii) the Pro-Rata Bonus.           (c) Termination by the Employee due to Good Reason or by the Employer without Cause. If the Employee’s employment is terminated by the Employer without Cause or by the Employee for Good Reason, the Employee shall be entitled to receive from the Employer: (i) the Termination Payment, and (ii) if the Employee timely elects continuation coverage under the Employer’s group health plan, an amount equal to the monthly premium charge for such coverage for the then remaining term of the Employment Period at the active employee premium rate for similar coverage.      4.4 Release and Waiver. Notwithstanding anything in Section 4.3 to the contrary, the Employee shall not be entitled to any payment or Benefit pursuant to Section 4.3, except for Accrued Obligations as required by law, unless the Employee has delivered to the Employer a general release, signed and in a form acceptable to the Employer, that releases the Employer and its Affiliates, and all their respective officers, directors, employees, and agents from any and all claims of any kind that the Employee may have arising out of the Employee’s relationship with the Employer or any of its Affiliates or the termination of employment, but excluding any claims arising under this Agreement, and such release has become irrevocable. 5. Non-Competition and Non-Interference.      5.1 Acknowledgements. The Employee acknowledges that (a) the services to be performed by him/her under this Agreement are of a special, unique, unusual, extraordinary, and intellectual character and (b) the provisions of this Section 5 are reasonable and necessary to protect the Confidential Information, goodwill, and other business interests of the Employer and its Affiliates.      5.2 Covenants of the Employee. The Employee covenants that he/she will not, directly or indirectly:           (a) during the Non-Compete Period, without the express prior written consent of the Board of Directors, as owner, officer, director, employee, stockholder, principal, consultant, agent, lender, guarantor, cosigner, investor, or trustee of any corporation, partnership, proprietorship, joint venture, association, or any other entity of any nature, engage, directly or indirectly, in the Business in (i) any county in any state, or any county contiguous with a county, in which the Employer or any of its Affiliates is conducting Business activities or has conducted Business activities in the twelve (12) months prior to termination, and (ii) any county in which the Employer or any of its Affiliates is conducting other business; provided, however, that the Tommy McAden Employment Agreement 4 --------------------------------------------------------------------------------   Employee may purchase or otherwise acquire for passive investment up to three percent (3%) of any class of securities of any such enterprise under Section 12(g) of the Securities Exchange Act of 1934;           (b) whether for the Employee’s own account or for the account of any other person at any time during his/her employment with the Employer or its Affiliates (except for the account of the Employer and its Affiliates) and the Non-Compete Period, solicit Business of the same or similar type being carried on by the Employer or its Affiliates, whether or not the Employee had personal contact with such person or entity during the Employee’s employment with the Employer;           (c) whether for the Employee’s own account or the account of any other person and at any time during his/her employment with the Employer or its Affiliates and the Non-Compete Period, (i) solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is an employee of the Employer or an Affiliate, or in any manner induce, or attempt to induce, any employee of the Employer or its Affiliates to terminate his/her employment with the Employer or its Affiliate; or (ii) interfere with the Employer’s or its Affiliate’s relationship with any person or entity that, at any time during the Employment Period, was an employee, contractor, supplier, or customer of the Employer or its Affiliate; or           (d) at any time after the termination of his/her employment, disparage the Employer or its Affiliates or any shareholders, directors, officers, employees, or agents of the Employer or any of its Affiliates, so long as the Employer does not disparage the Employee; provided, however, that notwithstanding the foregoing, paragraphs (a) and (b) of this Section 5.2 shall not apply if the Employee’s employment is terminated pursuant to Section 4.3(c) hereof. If any covenant in this Section 5.2 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Employee. The Employee hereby agrees that this covenant is a material and substantial part of this Agreement and that: (i) the geographic limitations are reasonable; (ii) the term of the covenant is reasonable; and (iii) the covenant is not made for the purpose of limiting competition per se and is reasonably related to a protectable business interest of the Employer. The period of time applicable to any covenant in this Section 5.2 will be extended by the duration of any violation by the Employee of such covenant.      5.3 Covenants of the Employer. The Employer covenants and agrees that, during the Non-Compete Period, the following provisions shall apply:           (a) if the Employee’s employment is terminated due to the death or Disability of the Employee, for Cause by the Employer, or by the Employee without having provided the Required Notice, no additional compensation shall be payable or Benefits provided to the Employee during the Non-Compete Period except as specifically provided for in Section 4.3 hereof. Tommy McAden Employment Agreement 5 --------------------------------------------------------------------------------             (b) In addition to the compensation payable or Benefits to be provided to the Employee as provided in Section 4.3 hereof, if the Employee’s employment is terminated for any reason other than as set forth in Section 5.3(a) hereof, the Employer shall continue to (i) pay to the Employee during the Non-Compete Period the Base Salary as provided herein and (ii) provide all the Benefits to the Employee (and the Employee’s spouse and dependents, as applicable) that the Employer would have provided pursuant to this Agreement, in both cases as if the Employee remained employed by the Employer during the Non-Compete Period, unless the Employer is prohibited from providing any such Benefits pursuant to applicable law.           (c) Notwithstanding the foregoing provisions of this Section 5.3, (i) the Employer may pay to the Employee the cash equivalent of any Benefit that the Employer is otherwise obligated to provide the Employee in lieu of providing such Benefit, and (ii) the Employer shall have the right, at any time, to release the Employee from the covenants contained in this Section 5, at which time the Employee’s right to receive and the Employer’s obligation to make any payments or provide any Benefits under this Section 5.3 shall terminate upon the payment by the Employer to the Employee of all amounts due under this Section 5.3 up to and including the date of such release. 6. Non-Disclosure Covenant      6.1 Acknowledgments by the Employee. The Employee acknowledges that (a) the Employee will be afforded access to Confidential Information; (b) public disclosure of such Confidential Information would have an adverse effect on the Employer and its Affiliates and its business; and (c) the provisions of this Section 6 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information.      6.2 Covenants of the Employee. The Employee covenants as follows:           (a) Confidentiality. During and after his/her employment with the Employer and its Affiliates, the Employee will hold in confidence the Confidential Information and will not disclose such Confidential Information to any person other than in connection with the performance of his/her duties and obligations hereunder, except with the specific prior written consent of the Board of Directors or the CEO; provided, however, that the parties agree that this Agreement does not prohibit the disclosure of Confidential Information where applicable law requires in response to subpoenas and/or orders of a governmental agency or court of competent jurisdiction. In the event that the Employee is requested or becomes legally compelled under the terms of a subpoena or order issued by a court of competent jurisdiction or by a governmental body to disclose Confidential Information, the Employee agrees that he/she will (i) immediately provide the Employer with written notice of the existence, terms, and circumstances, surrounding such request(s) so that the Employer may seek an appropriate protective order or other appropriate remedy, (ii) cooperate with the Employer in its efforts to decline, resist, or narrow such requests, and (iii) if disclosure of such Confidential Information is required in the opinion of counsel, exercise reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such disclosed information. Tommy McAden Employment Agreement 6 --------------------------------------------------------------------------------             (b) Trade Secrets. Any and all trade secrets of the Employer and its Affiliates will be entitled to all the protections and benefits under the federal and state trade secret and intellectual property laws and any other applicable law. If any information that the Employer or any of its Affiliates deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for the purposes of this Agreement, so long as it otherwise meets the definition of Confidential Information. The Employee hereby waives any requirement that the Employer or any of its Affiliates submit proof of the economic value of any trade secret or post a bond or other security.           (c) Removal. The Employee will not remove from the premises of the Employer or any of its Affiliates (except to the extent such removal is for purposes of the performance of the Employee’s duties at home or while traveling, or except otherwise specifically authorized by the Employer or the applicable Affiliate) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form belonging to the Employer or any of its Affiliates or used in the business of the Employer or of any of its Affiliates (collectively, the “Proprietary Items”). All of the Proprietary Items, whether or not developed by the Employee, are the exclusive property of the Employer or its applicable Affiliate. Upon termination of his/her employment, or upon the request of the Employer during the Employment Period, the Employee will return to the Employer all of the Proprietary Items and Confidential Information in the Employee’s possession or subject to the Employee’s control, and the Employee shall not retain any copies, abstracts, sketches, or other physical embodiments in electronic form or otherwise, of any such Proprietary Items or Confidential Information.           (d) Development of Intellectual Property. Any and all writings, inventions, improvements, plans, designs, architectural work papers, drawings, processes, procedures, and/or techniques (“Intellectual Property”) which the Employee (i) made, conceived, discovered, or developed, either solely or jointly with any other person or persons, at any time when the Employee was an employee of the Employer or any of its Affiliates whether pursuant to this Agreement or otherwise, whether or not during working hours, and whether or not at the request or upon the suggestion of the Employer or any of its Affiliates, which relate to or were useful in connection with any business now or hereafter carried on or contemplated by the Employer or any of its Affiliates, including developments or expansions of its fields of operations, or (ii) may make, conceive, discover, or develop, either solely or jointly with any other person or persons, at any time when the Employee is an employee of the Employer or its Affiliates, whether or not during working hours and whether or not at the request or upon the suggestion of the Employer or any of its Affiliates, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Employer or any of its Affiliates, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of the Employer and its Affiliates. The Employee shall make full disclosure to the Employer of all such Intellectual Property and shall do everything necessary or desirable to vest the absolute title thereto in the Employer. The Employee shall write and prepare all specifications and procedures regarding such Intellectual Property and otherwise aid and assist the Employer so that the Employer can prepare and present applications for copyright, patent, or trademark protection therefor and can secure such copyright, patent, or trademark wherever Tommy McAden Employment Agreement 7 --------------------------------------------------------------------------------   possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyrights, patents, or trademarks so that the Employer or its designated Affiliate shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright, patent, or trademark protection. The Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such Intellectual Property. 7. General Provisions of Sections 5 and 6.      7.1 Injunctive Relief and Additional Remedy. The Employee acknowledges that the injury that would be suffered by the Employer and its Affiliates as a result of a breach of the provisions of Sections 5 and 6 of this Agreement would be irreparable and that an award of monetary damages to the Employer for such a breach may be an inadequate remedy. Consequently, the Employer will have the right, in addition to all other rights, to seek injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement. The Employee waives any requirement that the Employer secures or posts any bond in conjunction with any such remedies. The Employee further agrees to and hereby does submit to in personam jurisdiction before each and every court for that purpose. Without limiting the rights of the Employer or of any of its Affiliates under this Section 7 or any other remedies available to the Employer or its Affiliates, if the Employee breaches any other provisions of Sections 5 and 6 and such breach is proven in a court of competent jurisdiction, the Employer will have the right to cease making any payments or providing Benefits otherwise due to the Employee under this Agreement.      7.2 Covenants of Sections 5 and 6 are Essential and Independent Covenants. The covenants of the Employee in Sections 5 and 6 hereof are essential elements of this Agreement, and without the Employee’s agreement to comply with such covenants, the Employer would not have entered into this Agreement or continued the employment of the Employee. The Employer and the Employee have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by the Employer and its Affiliates. In addition, the Employee’s covenants in Sections 5 and 6 are independent covenants and the existence of any claim by the Employee against the Employer under this Agreement or otherwise will not excuse the Employee’s breach of any covenant in Sections 5 or 6. Notwithstanding anything in the Agreement to the contrary, the covenants and agreements of the Employee in Sections 5 and 6 shall survive the termination of the Agreement, except as provided below. 8. General Provisions.      8.1 Indemnification. The Employer shall indemnify and hold harmless the Employee to the fullest extent permitted by applicable law against all costs (including reasonable attorneys’ fees and costs), judgments, penalties, fines, amounts paid in settlements, interest, and all other liabilities incurred or paid by the Employee in connection with the investigation, defense, prosecution, settlement, or appeal of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and to which the Employee was or is a party or is threatened to be made a party by reason of the fact that the Employee is or was an officer, employee, director or agent of the Employer or its Affiliates, Tommy McAden Employment Agreement 8 --------------------------------------------------------------------------------   including any property owner or condominium association that the Employee has been asked to serve on by the Employer, or by reason of anything done or not done by the Employee in any such capacity or capacities, provided that the Employee acted in good faith and in a manner the Employee reasonably believed to be in or not opposed to the best interests of the Employer or any of its Affiliates, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his/her conduct was unlawful. The Employer also shall pay any and all expenses (including reasonable attorney’s fees) incurred by the Employee as a result of the Employee being called as a witness in connection with any matter involving the Employer and/or any of its officers or directors. Nothing herein shall limit or reduce any rights of indemnification to which the Employee might be entitled under the organizational documents of the Employer or as allowed by applicable law.      8.2 Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right or privilege under this Agreement will operate as a waiver of such right or privilege, and no single or partial exercise of any such right or privilege will preclude any other or further exercise of any right or privilege. To the maximum extent permitted by applicable law, any claim or right arising out of this Agreement may only be discharged by a waiver or renunciation of the claim or right in writing signed by the other party.      8.3 Successors.           (a) This Agreement is personal to the Employee and shall not be assignable by the Employee, other than economic rights that may be assigned by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s legal representatives.           (b) This Agreement shall inure to the benefit of and be binding upon the Employer and its successors and assigns. Any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of Technical Olympic USA, Inc. shall perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place. The Employer agrees to fully disclose this Agreement and its binding effect to any successor or potential successor and will require any successor to expressly acknowledge its assumption of this Agreement and such successor’s obligation to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place.           (c) As used in this Agreement, “Employer” shall mean the Employer as defined above and any successor to its business and/or assets by operation of law or otherwise.      8.4 Notices. All notices, consents, waivers and other communication required under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of delivery), provided that a copy is mailed by certified mail, return receipt requested, the same day or the next Business Day, or (c) when received by the addressee, if sent Tommy McAden Employment Agreement 9 --------------------------------------------------------------------------------   by a nationally recognized overnight delivery service, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): If to the Employer: Technical Olympic USA, Inc. 4000 Hollywood Blvd., Suite 500-N Hollywood, FL 33021 Attn: Clint Ooten, VP Administration & Director of Human Resources Facsimile No.: (954) 364-4038      With a copy to Patricia Petersen, General Counsel of Technical Olympic USA, Inc., at the same address. If to the Employee: Tommy McAden 600 Silver Spur Drive Roanoke, TX 76262      8.5 Entire Agreement; Supersedure. This Agreement, together with the Exhibits attached hereto, contains the entire agreement between the parties with respect to the subject matter hereof, and expressly terminates, rescinds, replaces, and supersedes all prior and contemporaneous agreements and understandings, oral or written, between the parties with respect to the subject matter hereof.      8.6 Governing Law; Submission to Jurisdiction; Mediation.           (a) THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURT IN BROWARD COUNTY, FLORIDA, FOR THE PURPOSES OF ANY PROCEEDINGS ARISING OUT OF THIS AGREEMENT, AND HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY AND AGREES THAT ANY PROCEEDING SHALL INSTEAD BE DECIDED BY A JUDGE SITTING WITHOUT A JURY.           (b) If a party initiates legal proceedings to enforce this Agreement, the non-prevailing party in the proceedings shall pay to the prevailing party, upon demand, all costs and expenses (including reasonable legal fees and costs) incurred by the prevailing party as a result of the proceedings (i.e., “loser pays”).           (c) Prior to commencement of any legal proceeding or at any time after commencement of any legal proceeding, Employee agrees that, upon request of Employer, and at the expense of the Employer, any dispute between Employee and Employer shall be presented Tommy McAden Employment Agreement 10 --------------------------------------------------------------------------------   for non-binding mediation by a third party mediator. In the event that Employee fails to comply with his/her obligation to participate in mediation as required herein, such failure shall constitute a breach of this Agreement by Employee entitling Employer to damages.      8.7 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect, unless the absence of such invalid or unenforceable provision materially alters the rights or obligations of either party hereto. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable, unless the absence of such invalid or unenforceable portion of such provision materially alters the rights or obligations of either party hereto.      8.8 Tax Withholding and Reporting. The Employer shall withhold from all payments hereunder all applicable taxes that it is required to withhold with respect to payments and Benefits provided under this Agreement and shall report all such payments and withholdings to the appropriate taxing authorities as required by applicable law.      8.9 Amendments and Waivers. This Agreement may not be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Employee and the CEO, subject to authorization of the Board of Directors. Any waiver by either party hereto shall be specific to the event and shall not be deemed a waiver of any other event.      8.10 Survival. The provision of provisions of Sections 4, 5, 6, 7, and 8 shall survive the termination of this Agreement.      8.11 Counterparts. This Agreement may be executed in any number of counterparts, by original or facsimile signatures, each of which shall constitute an original and all of which taken together shall constitute one and the same instrument.      IN WITNESS WHEREOF, the parties have executed and delivered this Agreement effective for all purposes as of the Effective Date. Technical Olympic USA, Inc.       By: / s / Antonio B. Mon   Name: Antonio B. Mon Title: Chief Executive Officer   / s / Tommy McAden   Name: Tommy McAden Tommy McAden Employment Agreement 11 --------------------------------------------------------------------------------   Exhibit A Definitions “Accrued Obligations” means, at the relevant date, the sum of the following: (i) the Employee’s earned or accrued, but unpaid, Base Salary through the date of termination of the Employee’s employment; (ii) any Bonus earned or accrued and vested, but unpaid; (iii) the economic value of any of the Employee’s accrued, but unused, vacation time; and (iv) any unreimbursed business expenses incurred by the Employee. “Affiliate” means a person or entity who or which, (i) with respect to an entity, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity; or (ii) with respect to the Employee, is a parent, spouse, or issue of the Employee, including persons in an adopted or step relationship. “Board of Directors” means the board of directors of Technical Olympic USA, Inc. “Business” means the business of buying, developing, marketing, or selling land appropriate for residential development or construction, or the business of design, construction, promotion, marketing, or sale of, single-family residences, townhouses, and condominiums. “Business Day” shall mean any day other than a Saturday, Sunday or bank holiday recognized in Hollywood, Florida. “Cause” means:      (a) an act of fraud, misappropriation, or personal dishonesty taken by the Employee at the expense of the Employer or an Affiliate, including, but not limited to, the willful engaging by the Employee in illegal conduct or gross misconduct that is or reasonably could be injurious to the Employer;      (b) the material violation by the Employee of any obligation of the Employee under this Agreement, including but not limited to, the willful or continued failure of the Employee to perform substantially the Employee’s duties with the Employer or its Affiliates (other than such failure resulting from Disability) or the failure of the Employee to meet the financial or other business objectives incumbent upon Employee as a result of Employee’s position, which violation or failure is not remedied within ten (10) Business Days after receipt of written notice or demand for substantial performance or corrective action is delivered to the Employee by the CEO which identifies the manner in which the CEO believes that the Employee has not substantially performed the Employee’s duties or has violated an obligation under this Agreement;      (c) the conviction, or plea of nolo contendere, of the Employee for any felony or any misdemeanor involving moral turpitude; Tommy McAden Employment Agreement 12 --------------------------------------------------------------------------------        (d) a material violation of any express direction of the Board of Directors, the CEO, or supervisor of the Employee, or a material violation of any rule, regulation, policy or plan established or approved by the Board of Directors or the CEO from time to time regarding the conduct of the Employer’s employees and/or its business, or      (e) failure of the Employee to provide the Required Notice to Employer and to fully comply with all requirements of Section 4.2 of this Agreement. “Confidential Information” means any and all intellectual property of the Employer (or any of its Affiliates), including but not limited to:      (a) trade secrets concerning the business and affairs of the Employer (or any of its Affiliates), product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current and planned research development, current and planned manufacturing or distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures, and architectures (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information), and any other information, however documented, that is a trade secret under federal, state or other applicable law; and      (b) information concerning the business and affairs of the Employer (or any of its Affiliates) (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials), however documented; and notes, analysis, compilations, studies, summaries, and other material prepared by or for the Employer (or any of its Affiliates) containing or based, in whole or in part, on any information included in the foregoing. Notwithstanding the foregoing, Confidential Information shall not include information otherwise lawfully known generally by or readily accessible to the trade or general public other than by the improper disclosure, directly or indirectly, by the Employee or an Affiliate of the Employee. “Disability” means the inability of the Employee, due to the injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Employer as contemplated by Section 2.2 herein, such Disability to be determined by the Board of Directors upon receipt and in reliance on competent medical advice from one or more individuals, selected by the Board of Directors, who are qualified to give such professional medical advice. The Employee must submit to a reasonable number of examinations by the medical doctor making the determination of Disability, and the Employee hereby authorizes the disclosure and release to the Employer of such determination and all supporting medical records. If the Employee is not legally competent, the Employee’s legal guardian or duly authorized attorney-in-fact will act in the Employee’s stead for the purposes of submitting the Employee to the examinations, and providing the authorization of disclosure required hereunder. Tommy McAden Employment Agreement 13 --------------------------------------------------------------------------------   It is expressly understood that the Disability of the Employee for a period of one hundred twenty (120) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his/her Disability will exist for more than such a period of time, shall not constitute a failure by him/her to perform his/her duties hereunder and shall not be deemed a breach or default and the Employee shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement. “Election of Non-Continuation” means election by the Employee to terminate his/her employment with Employer in the event that: (a) Employee’s Base Salary or Annual Bonus is adjusted after the first year of employment under this Agreement pursuant to Section 3.1 and 3.3, (b) such adjustment results in a significant reduction of Employee’s total compensation, and (c) Employee does not agree to the adjusted compensation schedule. In such instances, and in the absence of any circumstances that constitutes Cause, the Employee may terminate employment with the Employer by written notice to the Employer in compliance with the requirements of Section 4.2 this Agreement. The date of termination set forth in such notice shall not be less than six (6) months from the date of such notice. “Employment Period” means the term of the Employee’s employment under this Agreement. “Fiscal Year” means the fiscal year of Employer. “Good Reason” means:      (a) that without the Employee’s prior written consent and in the absence of Cause, one or more of the following events occur:           (i) any material and adverse change in the Employee’s authority, duties, or responsibilities as set forth in Section 2, provided, however, that an assignment of Employee by CEO to serve in another position where such assignment is in the best interests of the Employer and where Employer continues to perform in accordance with its obligations under Section 3 this Agreement shall not constitute a material or adverse change in Employee’s authority, duties, or responsibilities within the definition of Good Reason;           (ii) the Employer requiring the Employee to be primarily based at any office more than fifty (50) miles outside the metropolitan area of the Location as set forth in Exhibit B, excluding travel reasonably required in the performance of the Employee’s responsibilities;           (iii) failure by the Employer to comply with and satisfy Section 8.3(b) of this Agreement; or           (iv) the material violation by the Employer of a material obligation of the Employer under this Agreement, which violation or failure is not remedied within ten (10) Business Days (or such additional reasonable period of time if additional time is necessary to remedy) after receipt of written notice or demand for substantial performance or corrective Tommy McAden Employment Agreement 14 --------------------------------------------------------------------------------   action is delivered to the Employer by the Employee, delivered as required by this Agreement, which specifically identifies the manner in which Employee believes that the Employer has not substantially performed the Employer’s duties or violated an obligation under this Agreement; and      (b) within sixty (60) Business Days of learning of the occurrence of any such event, and in the absence of any circumstances that constitutes Cause, the Employee terminates employment with the Employer by written notice to the Employer in the manner required by this Agreement; provided, however, that the events set forth in subparagraphs (a)(i, ii or iii) shall not constitute Good Reason for purposes of this Agreement unless, within twenty (20) Business Days of Employee’s learning of such event, the Employee gives written notice of the event to the Employer and the Employer fails to remedy such event within thirty (30) Business Days (or such additional reasonable period of time if additional time is necessary to remedy) of receipt of such notice. The date of termination set forth in such notice shall not be less than six (6) months from the date notice is given to Employer as required by Section 4.2 of this Agreement. “Non-Compete Period” means the period beginning on the Effective Date and ending on the first anniversary of the Employee’s termination of employment with the Employer. “Pro Rata Bonus” shall mean a Bonus pro rated for the year in which the Employee’s employment terminates for the year during which such termination occurs. “Termination Payment” shall mean the following: (A) Base Salary for the greater of Two (2) full years or the then-remaining term of the Employment Period (as it may be increased from time to time pursuant to this Agreement); (B) Bonus for the year in which Employee’s employment terminates, determined in accordance with that set forth in Exhibit B of this Agreement; (C) Bonus for the greater of Two (2) full years or the then-remaining term of the Employment Period (other than the year in which the Employee’s employment terminates), calculated by multiplying the average Bonus paid to the Employee in the prior Three (3) fiscal years by the number of years remaining in the Employment Period (excluding the year in which the Employee’s employment terminates); (D) the Accrued Obligations, excluding any Bonus amount which is captured in (B) above; and (E) the fair market value of any Benefits and perquisites (other than health benefits, if paid to the Employee pursuant to subparagraph (ii) of Section 4.3(c) of this Agreement) to be provided to the Employee for the then remaining term of the Employment Period. The Termination Payment shall be payable to the Employee in accordance with the Employer’s normal payroll practices for the remaining term of the Employment Period, all as if the Employee remained actively employed by Employer; provided, however, at Employer’s discretion, some or all of such Termination Payment may be paid to Employee at an earlier date. Tommy McAden Employment Agreement 15 --------------------------------------------------------------------------------   Exhibit B Employment Agreement Terms For Tommy McAden 1.   Employment Period. The Employment Period referenced in Section 2.1 of the Agreement shall begin on the Effective Date and end on December 31, 2008, unless terminated earlier in accordance with the provisions of Section 4.   2.   Position. The Employee will serve as Executive Vice President of the Employer. In this capacity, Employee will have such duties and responsibilities as are reasonably consistent with such position or as may be assigned or delegated to the Employee from time to time by the CEO or another executive or officer of the Employer identified by the CEO to the Employee.   3.   Location. The Employee’s primary place of employment hereunder shall be at the offices of the Employer or its Affiliates in the greater Dallas/Ft. Worth, Texas metropolitan area, unless the Employee consents otherwise in writing; provided, however, that the Employee shall travel as reasonably necessary to perform his/her obligations and duties to the Employer.   4.   Base Salary. Employee will be paid an annual salary of Five Hundred Twenty-Five Thousand Dollars ($525,000), which Base Salary may be increased from time to time during the Employment Period as set forth in Section 3.1 of the Agreement.   5.   Annual Bonus. Employee is eligible to earn an annual target bonus, subject to approval of the Board of Directors or relevant Board Committee. The details of the target bonus the Employee is eligible to earn, and its calculation, are shown in Exhibit C to this Employment Agreement.   6.   Performance Unit Program. Employee will be eligible to participate in the Company’s Performance Unit Program (PUP). Participation and awards are determined solely by and are subject to the discretion and approval of the Board of Directors or relevant Board Committee.   7.   Car Allowance. During the Employment Period, the Employee shall be paid a car allowance in the amount of One Thousand Dollars ($1,000.00) per month and will be reimbursed for auto operating expenses up to Five-Hundred Dollars ($500.00) per month.   8.   Vacation. Employee shall be entitled to Four (4) weeks of vacation per calendar year in accordance with Section 3.5 of the Agreement.   9.   Notices. Any notices to be given to Employee as set forth in Section 8.4 of the Agreement shall be to the address and facsimile number set forth in Section 8.4 of the Agreement. Tommy McAden Employment Agreement 16 --------------------------------------------------------------------------------   10.   Amendments to Exhibit A Definitions. Exhibit A of this Agreement shall be amended and modified as follows:       “Death Benefit” means an amount equal to $2,000,000, less applicable taxes, to be paid to the Employee’s estate within 90 days of the Employee’s death, as long as the Employee’s death occurred during the term of this agreement.       “Good Reason” – the definition of “Good Reason” shall be amended to include as an additional item (c) the occurrence of the event of a Change of Control, as set forth below.       “Change of Control” means the occurrence of any of the following events, each of which shall be determined independently of the others:      (a) any “Person” (as defined below) becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or more of the stock of any member of the Consolidated Group (as defined below) entitled to vote in the election of directors. For purposes of this Exhibit A, the term “Person” is used as such term is used in Sections 13(d) and 14(d) of the Exchange Act; provided, however that the term shall not include any member of the Consolidated Group, any trustee or other fiduciary holding securities under an employee benefit plan of any member of the Consolidated Group, or any corporation owned, directly or indirectly, by the shareholders of any member of the Consolidated Group;      (b) shareholders of any member of the Consolidated Group adopt a plan of complete or substantial (eighty-five percent (85%) or more) liquidation or an agreement providing for the distribution of all or substantially all of the assets of such member;      (c) any member of the Consolidated Group is party to a merger, consolidation, other form of business combination or a sale of all or substantially all (eighty-five percent (85%) or more) of its assets, unless the business of such member is continued following any such transaction by a resulting entity (which may be, but need not be, such member) and the shareholders of such member immediately prior to such transaction (the “Prior Shareholders”) hold, directly or indirectly, at least forty percent (40%) of the voting power of the resulting entity (there being excluded from the voting power held by the Prior Shareholders, but not from the total voting power of the resulting entity, any voting power received by Affiliates of a party to the transaction (other than such member) in their capacities as shareholders of such member); provided, however, that a merger or consolidation effected to implement a recapitalization of such member (or similar transaction) in which no Person acquires more than thirty percent (30%) of the combined voting power of such member’s then outstanding securities shall not constitute a Change in Control; or Tommy McAden Employment Agreement 17 --------------------------------------------------------------------------------        (d) any member of the Consolidated Group is a subject of a “Rule 13e-3 transaction” as that term is defined in Exchange Act Rule 13e-3, and the first purchase has been made pursuant to such transaction. Notwithstanding the foregoing, if, immediately after the occurrence of any event enumerated above, the Continuing Directors control the majority of the Board of Directors of the Company (or, in the case of any merger or combination in which the Company is not the surviving entity, continue to constitute a majority of the board of directors of such successor entity), such event shall not constitute a Change of Control for purposes of this Agreement until such time as the Continuing Directors no longer constitute a majority of the Board of Directors of the Company (or the successor entity, if applicable). “Continuing Directors” for this purpose means the members of the Board of Directors of the Company on the Effective Date, provided that any person becoming a member of the Board of Directors of the Company subsequent to such date whose election or nomination for election was supported by a majority of the directors who at the time of the election or nomination for election comprised the Continuing Directors shall be considered to be a Continuing Director. In the event of a Change of Control, Employee may, within sixty (60) Business Days of learning of the occurrence the event, terminate employment with the Employer by written notice to the Employer (which definition shall include Employer’s successor as set forth in Section 8.3(c) of this Agreement). The date of the Employee’s termination of employment shall be specified in such notice, provided, however, that such date shall not be less than one (1) month from the date written notice is given to the Employer, notwithstanding anything to the contrary in this Agreement. “Consolidated Group” shall mean (i) the group of companies composed of Technical Olympic S.A. or the Company, and (ii) any successor or surviving company of any of the foregoing entities. “Termination Payment” the definition of Termination Payment shall be amended to include the following: in the event of termination by the Employee due to a Change of Control, the Termination Payment shall be paid in cash to the Employee within 60 days of the date of the Employee’s termination. 11.   Certain Additional Payments by the Employer. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Options or otherwise, but determined without regard to any additional payments required under this Exhibit Paragraph 11) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such Tommy McAden Employment Agreement 18 --------------------------------------------------------------------------------   interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Employee shall be entitled to receive an additional payment (a “Gross-Up Payment” ) in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest or penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of this Exhibit Paragraph 11(c), all determinations required to be made under this Exhibit Paragraph 11, 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 the Employer’s independent certified accountant or such other certified public accounting firm as may be designated by the Employee (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Employer and the Employee within fifteen (15) Business Days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Employer. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a change of control, the Employee 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 Employer. Any Gross-Up Payment, as determined pursuant to this Exhibit Paragraph 11, shall be paid by the Employer to the Employee within five (5) Business Days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Employer and the Employee. 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 Employer should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Employer exhausts its remedies pursuant to this Exhibit Paragraph 11(c) and the Employee 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 Employer to or for the benefit of the Employee. (c) The Employee shall notify the Employer in writing of any claim by the Internal Revenue Service that if successful, would require the payment by the Employer of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) Business Days after the Employee is informed in writing of such claim and shall apprise the Employer of the nature of such claim and the date on which such claim is requested to be paid. The Employer 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 Employer (or such shorter Tommy McAden Employment Agreement 19 --------------------------------------------------------------------------------   period ending on the date that any payment of taxes with respect to such claim is due). If the Employer notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:      (i) give the Employer any information reasonably requested by the Employer relating to such claim;      (ii) take such action in connection with contesting such claim as the Employer 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 Employer;      (iii) cooperate with the Employer in good faith in order effectively to contest such claim; and      (iv) permit the Employer to participate in any proceedings relating to such claim; provided, however, that the Employer 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 Employee 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 of the foregoing provisions of this Exhibit Paragraph 11(c), the Employer 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 Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee 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 Employer shall determine; provided, however, that if the Employer directs the Employee to pay such claim and sue for a refund, the Employer shall, to the extent permitted by law, advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee 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 Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Employer’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee 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. Tommy McAden Employment Agreement 20 --------------------------------------------------------------------------------        (a) If, after the receipt by the Employee of an amount advanced by the Employer pursuant to this Exhibit Paragraph 11(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Employer’s complying with the requirements of this Exhibit Paragraph 11 (c)) promptly pay to the Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Employer pursuant to this Exhibit Paragraph 11(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Employer does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (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. 12. Section 4.3(b) (Termination due to Disability or Upon Death) of the Agreement shall be replaced in its entirety with the following: “If the Employee’s employment is terminated due to Disability or upon the Employee’s death, the Employee or the Employee’s estate, as the case may be, shall be entitled to receive from the Employer, payable to the Employee or Employee’s legal representative within thirty (30) days of termination, the following: (i) the Accrued Obligations, (ii) the Pro-Rata Bonus, and (iii) if termination is due to death of the Employee, the Death Benefit, payable as set forth in its definition.” Initials:   /s/ TM Tommy McAden /s/ ABM Antonio B. Mon Tommy McAden Employment Agreement 21 --------------------------------------------------------------------------------   Exhibit C Target Annual Bonus for Tommy McAden      As set forth in Section 3.3 of the Employment Agreement, the Employee shall be eligible to earn an annual bonus for each year of employment with the Company (each, a “Bonus Year”), subject to the approval of the Board of Directors or relevant Board Committee.      Determination of Employee’s annual bonus shall involve the following two steps: (I) calculation of the target bonus for the Bonus Year by applying the formulas set out in Section I below, and (II) application of the performance factors described in Section II below to the target bonus to determine the actual amount of bonus to be paid to Employee for the Bonus Year. I. CALCULATION OF TARGET BONUS FOR THE BONUS YEAR      A. Basic Bonus      1. If the Company’s Return on Equity (“ROE”) for the applicable Bonus Year is 6% or less, Employee shall not be eligible for a Basic Bonus for such Bonus Year. As used herein, “ROE” means Adjusted Net Income (as defined below), divided by the average of the shareholders’ total equity as of the beginning of the first day of the fiscal year and the end of each month of such fiscal year.      2. If the Company’s ROE for the Bonus Year is in excess of 6%, but not in excess of 15%, Employee shall be eligible for a Basic Bonus equal to the product of (i) 0.5% and (ii) the Company’s Adjusted Net Income for such Bonus Year in excess of 6%, but not in excess of 15%. As used herein, “Adjusted Net Income” means the Company’s net income for the fiscal year as determined in accordance with U.S. generally accepted accounting principles, adjusted for the following:   (i)   charges or credits related to any stock-based compensation expenses;     (ii)   charges for the cost of payments made under the Management Services Agreement; and     (iii)   the impact of any changes in accounting principles and policies from those that existed on December 31, 2001.     (iv)   The net income impact of (i) through (iii) is determined by multiplying the sum of such items for each fiscal year by the reciprocal of Company’s effective tax rate as shown in the Company’s audited financial statement for the pertinent fiscal year. Tommy McAden Employment Agreement 22 --------------------------------------------------------------------------------        3. If the Company’s ROE for the Bonus Year is in excess of 15%, Employee shall be eligible for an additional Basic Bonus, i.e., in addition to that amount payable under A.2. above, equal to the product of (i) 1.00% and (ii) the Company’s Adjusted Net Income for such Bonus Year in excess of 15%.      B. Kicker Bonus      If the Company’s Adjusted Net Income for the applicable Bonus Year exceeds the average of the Adjusted Net Income for the three years immediately preceding the applicable Bonus Year, Employee shall be eligible for a Kicker Bonus equal to the product of (i) .375% and (ii) the amount of the Adjusted Net Income for such Bonus Year in excess of such three-year average Adjusted Net Income. If the Company has a net loss in any of the three years immediately preceding the applicable Bonus Year, such net loss year(s) shall be treated as a zero in calculating the average Adjusted Net Income for the applicable three-year period. All calculations under this Agreement shall be based on the certified audited financial statements of the Company.      C. Additional Bonus      If the Company’s ROE for the applicable Bonus Year is 6% or higher, Employee shall be eligible for an additional bonus following the end of such Bonus Year of 9.375% of Employee’s annual rate of base salary as in effect at the beginning of the Bonus Year, subject to a reduction in such bonus percentage, in the Committee’s sole discretion, based on the level of achievement in the Bonus Year of one or more performance goals to be established by the Human Resource, Compensation and Benefits Committee prior to the beginning of such Bonus Year; provided, however, the Committee may not reduce the bonus percentage otherwise payable to a lower percentage of your base salary than that indicated by the Minimum Bonus Percentage below for the level achieved. Such goals, when established for such a Bonus Year (which may be after the date of this Agreement), shall be attached to this Agreement as Attachment ___and shall be made a part hereof.           Level of   Minimum Achievement   Bonus Percentage Maximum (1.5 x Target)     9.375 % Target     6.25 % Threshold (0.5 x Target)     3.125 % Below Threshold     0 % For results between Maximum and Target and between Target and Threshold, the percentage shall be determined by linear interpolation between the two applicable percentages. II. CALCULATION OF EARNED BONUS FOR BONUS YEAR BASED UPON PERFORMANCE RESULTS      The amount calculated as set forth in Section I above shall represent the target bonus for each Bonus Year. In determining the actual bonus earned by and to be paid to Tommy McAden Employment Agreement 23 --------------------------------------------------------------------------------   the Employee for each Bonus Year, weighting factors shall be applied each year as determined by the Human Resources, Compensation and Benefits Committee no later than January 31 of each Bonus Year. For 2006 the weighting factors to be used in determining what percentage of the target bonus is earned and paid are as follows:   A.   60% based upon Company results as determined by the Target bonus calculations         and,     B.   40% based on TOUSA’s share of the Transeastern Joint Venture recorded by TOUSA in accordance with US GAAP as follows:           TOUSA share of JV Earnings as a % of Plan   % of Factor Earned Less than 70 %     -0-   70 % to 85 %     50 % 85 % or Over     100 % III. PROCEDURES FOR CALCULATIONS AND PAYMENTS      All calculations under this Agreement shall be made by the Company and approved by the Company’s Human Resources Department and the Human Resources, Compensation and Benefits Committee of the Board of Directors. Committee approval and full payment shall be made in cash no later than sixty (60) days after the end of the applicable Bonus Year, except where the Employee has elected to defer all or a portion of the payment pursuant to the Company’s Non-Qualified Deferred Compensation Plan. All such compensation deferrals must comply with the Plan’s requirements and provisions and with then-applicable law. Upon termination of employment, all withdrawals shall comply with the Plan’s provisions and with then-applicable law and shall be duly reported to the relevant taxing authorities, including the U.S. Internal Revenue Service, as required by law. IV. GENERAL      Notwithstanding any other provisions of the Plan or this Agreement to the contrary, if Employee’s employment terminates on or following a Change of Control (as defined in the Employment Agreement) and such termination occurs during a Bonus Year, such Bonus Year shall end as of the date of such termination and no further Bonus Years shall begin after such date.      In the event of a conflict between the terms of this Agreement and the Company’s Long-Term Incentive Plan, the Plan shall be the controlling document. Tommy McAden Employment Agreement 24

Exhibit 10.3 [Date]   [Name] [Address]   Dear [Name]: The Board considers the operation of the Company to be of critical importance to the Parent Company and therefore the establishment and maintenance of a sound and vital management team of the Company is essential to protecting and enhancing the best interests of the Parent Company and its stockholders.  In this connection, the Board recognizes that the possibility of a Change in Control of the Parent Company may arise and that such possibility and the uncertainty and questions which such transaction may raise among key management personnel of the Company and its subsidiaries could result in the departure or distraction of such management personnel to the detriment of the Parent Company and its stockholders. Accordingly, the Board has determined that appropriate actions should be taken to minimize the risk that Company management will depart prior to a Change in Control of the Parent Company, thereby leaving the Company without adequate management personnel during such a critical period, and to reinforce and encourage the continued attention and dedication of key members of Company’s management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control of the Parent Company.  In particular, the Board believes it important, should the Parent Company or its stockholders receive a proposal for transfer of control of the Parent Company that you be able to continue your management responsibilities without being influenced by the uncertainties of your own personal situation. The Board recognizes that continuance of your position with the Subsidiary involves a substantial commitment to the Company in terms of your personal life and professional career and the possibility of foregoing present and future career opportunities, for which the Company receives substantial benefits.  Therefore, to induce you to remain in the employ of the Subsidiary, this Agreement, which has been approved by the Board, sets forth the benefits which the Company agrees will be provided to you in the event your employment with the Subsidiary or its successor is terminated in connection with a Change in Control of the Parent Company under the circumstances described below. 1.             DEFINITIONS.  THE FOLLOWING TERMS WILL HAVE THE MEANING SET FORTH BELOW UNLESS THE CONTEXT CLEARLY REQUIRES OTHERWISE.  TERMS DEFINED ELSEWHERE IN THIS AGREEMENT WILL HAVE THE SAME MEANING THROUGHOUT THIS AGREEMENT. (A)           “AFFILIATE” MEANS WITH RESPECT TO ANY PERSON (WITHIN THE MEANING OF SECTIONS 13(D) AND 14(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) SHALL MEAN ANY OTHER PERSON THAT, DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES, CONTROLS, IS CONTROLLED BY OR IS UNDER COMMON CONTROL WITH SUCH PERSON. -------------------------------------------------------------------------------- (B)           “AGREEMENT” MEANS THIS LETTER AGREEMENT AS AMENDED, EXTENDED OR RENEWED FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS. (C)           “BASE PAY” MEANS YOUR ANNUAL BASE SALARY FROM THE SUBSIDIARY AT THE RATE IN EFFECT IMMEDIATELY PRIOR TO A CHANGE IN CONTROL OR AT THE TIME NOTICE OF TERMINATION IS GIVEN, WHICHEVER IS GREATER.  BASE PAY INCLUDES ONLY REGULAR CASH SALARY AND IS DETERMINED BEFORE ANY REDUCTION FOR DEFERRALS PURSUANT TO ANY NONQUALIFIED DEFERRED COMPENSATION PLAN OR ARRANGEMENT, QUALIFIED CASH OR DEFERRED ARRANGEMENT OR CAFETERIA PLAN. (D)           “BENEFIT PLAN” MEANS ANY (I)            EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED; (II)           CAFETERIA PLAN DESCRIBED IN CODE SECTION 125; (III)          PLAN, POLICY OR PRACTICE PROVIDING FOR PAID VACATION, OTHER PAID TIME OFF OR SHORT- OR LONG-TERM PROFIT SHARING, BONUS OR INCENTIVE PAYMENTS; OR (IV)          STOCK OPTION, STOCK PURCHASE, RESTRICTED STOCK, PHANTOM STOCK, STOCK APPRECIATION RIGHT OR OTHER EQUITY-BASED COMPENSATION PLAN THAT IS SPONSORED, MAINTAINED OR CONTRIBUTED TO BY THE COMPANY FOR THE BENEFIT OF EMPLOYEES (AND/OR THEIR FAMILIES AND DEPENDENTS) GENERALLY OR YOU (AND/OR YOUR FAMILY AND DEPENDENTS) IN PARTICULAR, INCLUDING, WITHOUT LIMITATION, ANY OF THE STOCK INCENTIVE PLANS. (E)           “BONUS PLAN PAYMENT” MEANS THE FULL AMOUNT OF THE ANNUAL TARGET BONUS PAYMENT WHICH IS PAYABLE BY THE SUBSIDIARY TO YOU PURSUANT TO THE SUBSIDIARY’S COMPANY-WIDE BONUS PLAN OR EQUIVALENT PLAN OF THE SUCCESSOR,  BASED ON THE ASSUMPTION THAT ALL OF THE ANNUAL PERFORMANCE MILESTONES WILL HAVE BEEN SATISFIED FOR SUCH YEAR. (F)            “BOARD” MEANS THE BOARD OF DIRECTORS OF THE PARENT COMPANY.  ON AND AFTER THE DATE OF A CHANGE IN CONTROL, ANY DUTY OF THE BOARD IN CONNECTION WITH THIS AGREEMENT IS NONDELEGABLE AND ANY ATTEMPT BY THE BOARD TO DELEGATE ANY SUCH DUTY IS INEFFECTIVE. (G)           “CAUSE” MEANS: (I) YOUR GROSS MISCONDUCT; (II) YOUR WILLFUL AND CONTINUED FAILURE TO PERFORM SUBSTANTIALLY YOUR DUTIES WITH THE SUBSIDIARY (OTHER THAN A FAILURE RESULTING FROM YOUR INCAPACITY DUE TO BODILY INJURY OR PHYSICAL OR MENTAL ILLNESS) AFTER A DEMAND FOR SUBSTANTIAL PERFORMANCE IS DELIVERED TO YOU BY THE CHAIR OF THE BOARD WHICH SPECIFICALLY IDENTIFIES THE MANNER IN WHICH YOU HAVE NOT SUBSTANTIALLY PERFORMED YOUR DUTIES AND PROVIDES FOR A REASONABLE PERIOD OF TIME WITHIN WHICH YOU MAY TAKE CORRECTIVE MEASURES; OR (III) YOUR CONVICTION (INCLUDING A PLEA OF NOLO CONTENDERE) OF WILLFULLY ENGAGING IN ILLEGAL CONDUCT CONSTITUTING A FELONY OR GROSS MISDEMEANOR UNDER FEDERAL OR STATE LAW WHICH IS MATERIALLY AND DEMONSTRABLY INJURIOUS TO THE SUBSIDIARY OR WHICH IMPAIRS YOUR ABILITY TO PERFORM SUBSTANTIALLY YOUR DUTIES FOR THE SUBSIDIARY.  AN ACT OR FAILURE TO ACT WILL BE CONSIDERED “GROSS” OR “WILLFUL” FOR THIS PURPOSE ONLY IF DONE, OR OMITTED TO BE DONE, BY YOU IN BAD FAITH AND WITHOUT REASONABLE BELIEF THAT IT WAS IN, OR NOT OPPOSED TO, THE BEST INTERESTS OF THE SUBSIDIARY.  ANY ACT, OR FAILURE TO ACT, BASED UPON AUTHORITY GIVEN PURSUANT TO A RESOLUTION DULY ADOPTED BY THE SUBSIDIARY’S BOARD (OR A COMMITTEE THEREOF) OR BASED UPON THE ADVICE OF COUNSEL FOR THE SUBSIDIARY WILL BE CONCLUSIVELY PRESUMED TO BE DONE, OR OMITTED TO BE DONE, BY YOU IN GOOD FAITH AND IN THE BEST INTERESTS OF THE SUBSIDIARY.  NOTWITHSTANDING THE FOREGOING, YOU MAY NOT BE TERMINATED FOR CAUSE UNLESS AND UNTIL THERE HAS 2 -------------------------------------------------------------------------------- BEEN DELIVERED TO YOU A COPY OF A RESOLUTION DULY ADOPTED BY THE AFFIRMATIVE VOTE OF NOT LESS THAN A MAJORITY OF THE ENTIRE MEMBERSHIP OF THE BOARD AT A MEETING OF THE BOARD CALLED AND HELD FOR THE PURPOSE (AFTER REASONABLE NOTICE TO YOU AND AN OPPORTUNITY FOR YOU, TOGETHER WITH YOUR COUNSEL, TO BE HEARD BEFORE THE BOARD), FINDING THAT IN THE GOOD FAITH OPINION OF THE BOARD YOU WERE GUILTY OF THE CONDUCT SET FORTH ABOVE IN CLAUSES (I), (II) OR (III) OF THIS DEFINITION AND SPECIFYING THE PARTICULARS THEREOF IN DETAIL. (H)           (I) “CHANGE IN CONTROL”  MEANS ANY OF THE FOLLOWING:  (I) THE SALE, LEASE, EXCHANGE OR OTHER TRANSFER, DIRECTLY OR INDIRECTLY, OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE PARENT COMPANY, IN ONE TRANSACTION OR IN A SERIES OF RELATED TRANSACTIONS, TO ANY THIRD PARTY; (II) ANY THIRD PARTY, OTHER THAN A “BONA FIDE UNDERWRITER,” IS OR BECOMES THE “BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF SECURITIES (X) REPRESENTING 50% OR MORE OF THE COMBINED VOTING POWER OF THE PARENT COMPANY’S OUTSTANDING SECURITIES ORDINARILY HAVING THE RIGHT TO VOTE AT ELECTIONS OF DIRECTORS, OR (Y) RESULTING IN SUCH THIRD PARTY BECOMING AN AFFILIATE OF THE PARENT COMPANY, INCLUDING PURSUANT TO A TRANSACTION DESCRIBED IN CLAUSE (III) BELOW; (III) THE CONSUMMATION OF ANY TRANSACTION OR SERIES OF TRANSACTIONS UNDER WHICH THE PARENT COMPANY IS MERGED OR CONSOLIDATED WITH ANY OTHER COMPANY, OTHER THAN A MERGER OR CONSOLIDATION WHICH WOULD RESULT IN THE STOCKHOLDERS OF THE PARENT COMPANY IMMEDIATELY PRIOR THERETO CONTINUING TO OWN (EITHER BY REMAINING OUTSTANDING OR BY BEING CONVERTED INTO VOTING SECURITIES OF THE SURVIVING ENTITY) MORE THAN 50% OF THE COMBINED VOTING POWER OF THE VOTING SECURITIES OF THE SURVIVING ENTITY OUTSTANDING IMMEDIATELY AFTER SUCH MERGER OR CONSOLIDATION; OR (IV) THE CONTINUITY DIRECTORS CEASE FOR ANY REASON TO CONSTITUTE AT LEAST A MAJORITY THE BOARD.  FOR PURPOSES OF THIS SECTION 1(H), A “CONTINUITY DIRECTOR” MEANS AN INDIVIDUAL WHO, AS OF DATE OF THIS AGREEMENT, IS A MEMBER OF THE BOARD OF DIRECTORS OF THE PARENT COMPANY, AND ANY OTHER INDIVIDUAL WHO BECOMES A DIRECTOR SUBSEQUENT TO THE AS OF DATE OF THIS AGREEMENT WHOSE ELECTION, OR NOMINATION FOR ELECTION BY THE PARENT COMPANY’S STOCKHOLDERS, WAS APPROVED BY A VOTE OF AT LEAST A MAJORITY OF THE DIRECTORS THEN COMPRISING THE CONTINUITY DIRECTORS, BUT EXCLUDING FOR THIS PURPOSE ANY 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 OR ENTITY OTHER THAN THE BOARD OF DIRECTORS OF THE PARENT COMPANY.  FOR PURPOSES OF THIS SECTION 1(H), A “BONA FIDE UNDERWRITER” MEANS A THIRD PARTY ENGAGED IN BUSINESS AS AN UNDERWRITER OF SECURITIES THAT ACQUIRES SECURITIES OF THE PARENT COMPANY THROUGH SUCH THIRD PARTY’S PARTICIPATION IN GOOD FAITH IN A FIRM COMMITMENT UNDERWRITING UNTIL THE EXPIRATION OF 40 DAYS AFTER THE DATE OF SUCH ACQUISITION.  FOR THE AVOIDANCE OF DOUBT, CHANGE IN CONTROL DOES NOT INCLUDE ANY OF THE FOREGOING EVENTS OCCURRING WITH RESPECT TO THE SUBSIDIARY, AND THIS AGREEMENT IS NOT INTENDED TO BE INTERPRETED TO PROVIDE ANY BENEFITS TO YOU UPON A CHANGE IN CONTROL OF THE SUBSIDIARY. (I)            “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO TIME. (J)            “COMPANY” MEANS THE PARENT COMPANY, ANY SUCCESSOR AND ANY AFFILIATE. (K)           “DATE OF TERMINATION” FOLLOWING A CHANGE IN CONTROL (OR PRIOR TO A CHANGE IN CONTROL IF YOUR TERMINATION WAS EITHER A CONDITION OF THE CHANGE IN CONTROL OR WAS AT THE REQUEST OR INSISTENCE OF ANY THIRD PARTY RELATING THE CHANGE IN CONTROL) MEANS: (I) IF YOUR EMPLOYMENT IS TO BE TERMINATED BY YOU FOR GOOD REASON, THE DATE SPECIFIED IN THE NOTICE OF TERMINATION WHICH IN NO EVENT MAY BE A DATE MORE THAN 15 DAYS AFTER THE DATE ON WHICH NOTICE OF TERMINATION IS GIVEN UNLESS THE COMPANY AGREES IN WRITING TO A LATER DATE; (II) IF YOUR EMPLOYMENT IS TO BE TERMINATED BY THE SUBSIDIARY FOR CAUSE, THE DATE SPECIFIED IN THE NOTICE OF TERMINATION; (III) IF YOUR EMPLOYMENT IS TERMINATED BY REASON OF YOUR DEATH, THE DATE OF YOUR DEATH; OR (IV) IF YOUR 3 -------------------------------------------------------------------------------- EMPLOYMENT IS TO BE TERMINATED BY THE SUBSIDIARY FOR ANY REASON OTHER THAN CAUSE OR YOUR DEATH, THE DATE SPECIFIED IN THE NOTICE OF TERMINATION, WHICH IN NO EVENT MAY BE A DATE EARLIER THAN 15 DAYS AFTER THE DATE ON WHICH A NOTICE OF TERMINATION IS GIVEN, UNLESS YOU EXPRESSLY AGREE IN WRITING TO AN EARLIER DATE.  IN THE CASE OF TERMINATION BY THE SUBSIDIARY OF YOUR EMPLOYMENT FOR CAUSE, THEN WITHIN THE 30 DAYS AFTER YOUR RECEIPT OF THE NOTICE OF TERMINATION, YOU MAY NOTIFY THE SUBSIDIARY THAT A DISPUTE EXISTS CONCERNING THE TERMINATION, IN WHICH EVENT THE DATE OF TERMINATION WILL BE THE DATE SET EITHER BY MUTUAL WRITTEN AGREEMENT OF THE PARTIES OR BY THE JUDGE OR ARBITRATOR IN A PROCEEDING AS PROVIDED IN SECTION 9 OF THIS AGREEMENT.  IN ALL CASES, YOUR TERMINATION OF EMPLOYMENT MUST CONSTITUTE A “SEPARATION FROM SERVICE” WITHIN THE MEANING OF SECTION 409A OF THE CODE. (L)            “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED FROM TIME TO TIME. (M)          “GOOD REASON” MEANS: (I)            A SUBSTANTIAL CHANGE IN YOUR STATUS, POSITION(S), DUTIES OR RESPONSIBILITIES AS AN EXECUTIVE OF THE SUBSIDIARY AS IN EFFECT IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL WHICH, IN YOUR REASONABLE JUDGMENT, IS ADVERSE WITH RESPECT TO ANY OF THE FOREGOING; PROVIDED, HOWEVER, THAT GOOD REASON DOES NOT INCLUDE A CHANGE IN YOUR STATUS, POSITION(S), DUTIES OR RESPONSIBILITIES CAUSED BY AN INADVERTENT ACTION THAT IS REMEDIED BY THE SUBSIDIARY PROMPTLY AFTER RECEIPT OF NOTICE OF YOUR OBJECTION TO SUCH CHANGE, AND IT ALSO BEING AGREED THAT SMALL AND INSUBSTANTIAL CHANGES WILL NOT BE CONSIDERED GOOD REASON UNLESS THE CHANGES IN TOTALITY WOULD BE SUBSTANTIAL; (II)           A REDUCTION BY THE SUBSIDIARY IN YOUR BASE PAY, A MATERIAL CHANGE IN THE ANNUAL BONUS PLAN PAYMENT EXPECTATIONS, OR AN ADVERSE CHANGE IN THE FORM OR TIMING OF THE PAYMENTS THEREOF, AS IN EFFECT IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL OR AS THEREAFTER INCREASED; (III)          THE FAILURE BY THE SUBSIDIARY TO COVER YOU UNDER BENEFIT PLANS THAT, IN THE AGGREGATE, PROVIDE SUBSTANTIALLY SIMILAR BENEFITS TO YOU AND/OR YOUR FAMILY AND DEPENDENTS AT A SUBSTANTIALLY SIMILAR TOTAL COST TO YOU (E.G., PREMIUMS, DEDUCTIBLES, CO-PAYS, OUT OF POCKET MAXIMUMS, REQUIRED CONTRIBUTIONS AND THE LIKE) RELATIVE TO THE BENEFITS AND TOTAL COSTS UNDER THE BENEFIT PLANS IN WHICH YOU (AND/OR YOUR FAMILY OR DEPENDENTS) WERE PARTICIPATING AT ANY TIME DURING THE 90-DAY PERIOD IMMEDIATELY PRECEDING THE CHANGE IN CONTROL; (IV)          THE SUBSIDIARY’S REQUIRING YOU TO BE BASED MORE THAN 50 MILES FROM WHERE YOUR OFFICE IS LOCATED IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL, EXCEPT FOR REQUIRED TRAVEL ON THE SUBSIDIARY’S BUSINESS; (V)           THE FAILURE BY THE SUBSIDIARY OR THE PARENT COMPANY TO OBTAIN FROM ANY SUCCESSOR THE ASSENT TO THIS AGREEMENT AS SOON AS REASONABLY PRACTICABLE IN THE CIRCUMSTANCES AND IN ANY EVENT WITHIN THE TIMES REQUIRED BY SECTION 6 HEREOF; OR (VI)          ANY PURPORTED TERMINATION BY THE SUBSIDIARY OF YOUR EMPLOYMENT THAT IS NOT PROPERLY EFFECTED PURSUANT TO A NOTICE OF TERMINATION AND PURSUANT TO ANY OTHER REQUIREMENTS OF THIS AGREEMENT, AND, FOR PURPOSES OF THIS AGREEMENT, NO SUCH PURPORTED TERMINATION WILL BE EFFECTIVE. 4 -------------------------------------------------------------------------------- Your continued employment does not constitute consent to, or waiver of any rights arising in connection with, any circumstances constituting Good Reason.  Your termination of employment for Good Reason as defined in this Section 1(m) will constitute Good Reason for all purposes of this Agreement notwithstanding that you may also thereby be deemed to have retired under any applicable retirement programs of the Subsidiary and/or Parent Company. (N)           “NOTICE OF TERMINATION” MEANS A WRITTEN NOTICE (EXCEPT IN THE CASE OF A DEEMED NOTICE OF TERMINATION PURSUANT TO SECTION 3(A) HEREAFTER) GIVEN ON OR AFTER THE DATE OF A CHANGE IN CONTROL (UNLESS YOUR TERMINATION BEFORE THE DATE OF THE CHANGE IN CONTROL WAS EITHER A CONDITION OF THE CHANGE IN CONTROL OR WAS AT THE REQUEST OR INSISTENCE OF ANY THIRD PARTY RELATED TO THE CHANGE IN CONTROL) WHICH INDICATES THE SPECIFIC TERMINATION PROVISION IN THIS AGREEMENT PURSUANT TO WHICH THE NOTICE IS GIVEN.  ANY PURPORTED TERMINATION BY THE SUBSIDIARY OR BY YOU FOR GOOD REASON ON OR AFTER THE DATE OF A CHANGE IN CONTROL (OR BEFORE THE DATE OF A CHANGE IN CONTROL IF YOUR TERMINATION WAS EITHER A CONDITION OF THE CHANGE IN CONTROL OR WAS AT THE REQUEST OR INSISTENCE OF ANY THIRD PARTY RELATED TO THE CHANGE IN CONTROL) MUST BE COMMUNICATED BY WRITTEN NOTICE OF TERMINATION TO BE EFFECTIVE; PROVIDED, THAT YOUR FAILURE TO PROVIDE NOTICE OF TERMINATION WILL NOT LIMIT ANY OF YOUR RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT THE COMPANY DEMONSTRATES THAT IT SUFFERED MATERIAL ACTUAL DAMAGES BY REASON OF SUCH FAILURE. (O)           “PARENT COMPANY” MEANS EV3 INC., A DELAWARE CORPORATION. (P)           “SUBSIDIARY” MEANS [EV3 ENDOVASCULAR, INC., A DELAWARE CORPORATION/MICRO THERAPEUTICS, INC., A DELAWARE CORPORATION]. (Q)           “STOCK INCENTIVE PLAN” MEANS (I) THE EV3 LLC 2003 INCENTIVE PLAN, AS AMENDED, (II) THE EV3 INC. AMENDED AND RESTATED 2005 INCENTIVE STOCK PLAN OR (III) ANY SUCCESSOR OR ADDITIONAL STOCK OPTION, STOCK AWARD, OR OTHER INCENTIVE PLANS OF THE PARENT COMPANY OR SUBSIDIARY. (R)            “STOCK OPTION AGREEMENTS” MEANS IN ANY OF THE NON-STATUTORY STOCK OPTION AGREEMENTS, INCENTIVE STOCK OPTIONS AGREEMENTS, RESTRICTED STOCK AWARDS OR OTHER SIMILAR AGREEMENTS YOU MAY HAVE ENTERED INTO WITH THE COMPANY PURSUANT TO THE STOCK INCENTIVE PLANS. (S)           “SUCCESSOR” MEANS ANY THIRD PARTY THAT SUCCEEDS TO, OR HAS THE ABILITY TO CONTROL (EITHER IMMEDIATELY OR WITH THE PASSAGE OF TIME), THE PARENT COMPANY’S OR THE SUBSIDIARY’S, AS APPLICABLE, BUSINESS DIRECTLY, BY MERGER, CONSOLIDATION OR OTHER FORM OF BUSINESS COMBINATION, OR INDIRECTLY, BY PURCHASE OF THE PARENT COMPANY’S OUTSTANDING SECURITIES ENTITLING THE HOLDER THEREOF TO BE ALLOCATED A PORTION OF THE PARENT COMPANY’S NET INCOME, NET LOSS OR DISTRIBUTIONS OR PURCHASES OF THE SUBSIDIARY’S OUTSTANDING SECURITIES ORDINARILY HAVING THE RIGHT TO VOTE AT THE ELECTION OF DIRECTORS OR ALL OR SUBSTANTIALLY ALL OF ITS ASSETS OR OTHERWISE (T)            “THIRD PARTY” MEANS ANY PERSON, OTHER THAN THE PARENT COMPANY, ANY AFFILIATE OF THE PARENT COMPANY, OR ANY BENEFIT PLAN(S) SPONSORED BY THE PARENT COMPANY OR AN AFFILIATE. 2.             TERM OF AGREEMENT.  THIS AGREEMENT IS EFFECTIVE IMMEDIATELY AND WILL CONTINUE IN EFFECT ONLY SO LONG AS YOU REMAIN EMPLOYED BY THE SUBSIDIARY OR, IF LATER, UNTIL THE DATE ON WHICH THE SUBSIDIARY’S OBLIGATIONS TO YOU ARISING UNDER THIS AGREEMENT HAVE BEEN SATISFIED IN FULL.  NOTWITHSTANDING THE FOREGOING, THIS AGREEMENT SHALL TERMINATE IMMEDIATELY IN THE EVENT, PRIOR TO A CHANGE IN CONTROL, EITHER CEASES TO BE AN AFFILIATE OF THE PARENT COMPANY OR SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS, IN ONE OR A SERIES OF RELATED TRANSACTIONS, TO A THIRD PARTY. 5 -------------------------------------------------------------------------------- 3.             BENEFITS UPON A CHANGE IN CONTROL.  YOU WILL BECOME ENTITLED TO THE BENEFITS DESCRIBED IN THIS SECTION 3 AS OF THE DATE OF A CHANGE IN CONTROL. (A)           AS OF THE DATE OF SUCH CHANGE IN CONTROL, THE COMPANY AND THE SUBSIDIARY WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR PAYING TO YOU ALL OF THE BASE PAY OWED THROUGH SUCH DATE AND A PRO RATA PORTION OF YOUR BONUS PLAN PAYMENT BASED UPON THE NUMBER OF MONTHS IN THE CURRENT YEAR WHICH YOU HAVE WORKED PRIOR TO THE DATE OF THE CHANGE IN CONTROL, ASSUMING FOR THIS SECTION 3(A) THAT YOU HAVE WORKED THE FULL MONTH OF THE MONTH IN WHICH THE CHANGE IN CONTROL OCCURS. (B)           THE FOLLOWING TERMS SHALL CONTROL NOTWITHSTANDING ANY CONFLICTING TERMS CONTAINED IN ANY EMPLOYMENT AGREEMENT, OR STOCK OPTION AGREEMENTS.  IN ADDITION TO THE PAYMENTS UNDER SECTION 3(A), YOU WILL BE ENTITLED TO THE FOLLOWING: (I)            CASH PAYMENTS.  AT THE DATE OF THE CHANGE IN CONTROL, IF YOU HAVE NOT BEEN MADE A WRITTEN OFFER OF EMPLOYMENT WITH THE SUCCESSOR, OR RECEIVED WRITTEN CONFIRMATION FOR CONTINUED EMPLOYMENT WITH THE SUBSIDIARY IF IT SURVIVES THE CHANGE IN CONTROL, ON TERMS SUBSTANTIALLY IDENTICAL TO YOUR CURRENT EMPLOYMENT TERMS, INCLUDING THE BENEFITS SET FORTH HEREIN, FOR ANY REASON WHATSOEVER, THEN YOU SHALL BE DEEMED TO HAVE RECEIVED A NOTICE OF TERMINATION EFFECTIVE ON THE DATE OF THE CHANGE IN CONTROL AND NO LATER THAN 10 DAYS AFTER YOUR DATE OF TERMINATION, THE COMPANY AND THE SUBSIDIARY (AND ANY SUCCESSOR THERETO) WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR MAKING A LUMP SUM PAYMENT TO YOU EQUAL TO 12 MONTHS OF YOUR THEN CURRENT BASE PAY, AND THE FULL AMOUNT OF A BONUS PLAN PAYMENT FOR THE NEXT 12 MONTHS, DETERMINED BY ASSUMING FOR THIS PURPOSE THAT SUCH BONUS PLAN PAYMENT AMOUNT IS EQUAL TO YOUR BONUS PLAN PAYMENT FOR THE CURRENT YEAR.    FURTHERMORE, IF YOU ELECT TO ACCEPT THE OFFER OF EMPLOYMENT WITH THE SUCCESSOR OR CONTINUE YOUR EMPLOYMENT WITH THE SUBSIDIARY, AS THE CASE MAY BE, AS PROVIDED FOR ABOVE, THE SUCCESSOR OR COMPANY, AS THE CASE MAY BE, SHALL BE THEN OBLIGATED TO MAKE A LUMP SUM CASH PAYMENT TO YOU WITHIN 10 DAYS AFTER YOUR DATE OF TERMINATION EQUAL TO 12 MONTHS OF YOUR THEN CURRENT BASE PAY AND THE FULL ANNUALIZED AMOUNT DUE UNDER YOUR THEN CURRENT BONUS PLAN PAYMENT COMMITMENT WHICH IS PAYABLE WITHIN THE NEXT 12 MONTHS, IN THE EVENT ANY TIME WITHIN THE FIRST 24 MONTHS OF SUCH NEW EMPLOYMENT RELATIONSHIP AFTER THE CHANGE IN CONTROL, EITHER (A) YOUR EMPLOYMENT IS TERMINATED BY THE SUCCESSOR OR THE COMPANY, AS THE CASE MAY BE, FOR ANY REASON OTHER THAN YOUR DEATH OR CAUSE, OR (B) YOU TERMINATE YOUR EMPLOYMENT WITH THE SUCCESSOR OR THE COMPANY FOR GOOD REASON.  IF YOU DECLINE THE OFFER OF EMPLOYMENT HEREIN, NO FURTHER BENEFITS PURSUANT TO SECTION 3(B)(I), (II) OR (III) WILL BE PAYABLE. (II)           GROUP HEALTH PLANS.  DURING THE CONTINUATION PERIOD (AS DEFINED BELOW), THE COMPANY AND THE SUBSIDIARY (AND ANY SUCCESSOR THERETO) WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR EITHER (A) MAINTAINING A GROUP HEALTH PLAN(S) WHICH BY ITS TERMS COVERS YOU (AND YOUR FAMILY MEMBERS AND THOSE DEPENDENTS ELIGIBLE TO BE COVERED DURING THE 90 DAYS IMMEDIATELY PRECEDING A CHANGE IN CONTROL) UNDER THE SAME OR SIMILAR TERMS AS PROVIDED TO YOU DURING THE 90 DAYS IMMEDIATELY PRECEDING SUCH CHANGE IN CONTROL (WITHOUT REGARD TO ANY REDUCTION IN SUCH BENEFITS THAT CONSTITUTES GOOD REASON), OR (B) PROVIDING COMPARABLE MEDICAL BENEFITS PURSUANT TO AN ALTERNATIVE ARRANGEMENT, SUCH AS AN INDIVIDUAL MEDICAL INSURANCE CONTRACT.  THE “CONTINUATION PERIOD” IS THE PERIOD BEGINNING ON YOUR DATE OF TERMINATION, WHETHER SUCH DATE IS AT OR PRIOR TO THE CHANGE IN CONTROL AS PROVIDED FOR IN THE DEFINITION OF CHANGE IN CONTROL OR WITHIN 12 MONTHS AFTER ACCEPTING EMPLOYMENT WITH THE SUCCESSOR OR THE SUBSIDIARY, AS THE CASE MAY BE, AS PROVIDED FOR IN SECTION 3(B)(I) ABOVE, AND ENDING ON THE EARLIER OF (A) THE LAST DAY OF THE 18TH MONTH THAT 6 -------------------------------------------------------------------------------- BEGINS AFTER YOUR DATE OF TERMINATION OR (B) THE DATE ON WHICH YOU FIRST BECOME ELIGIBLE TO PARTICIPATE AS AN EMPLOYEE IN A PLAN OF ANOTHER EMPLOYER PROVIDING GROUP HEALTH BENEFITS TO YOU AND YOUR ELIGIBLE FAMILY MEMBERS AND DEPENDENTS.  IF YOU TIMELY ELECT CONTINUED COVERAGE UNDER SUCH GROUP HEALTH PLAN(S) PURSUANT TO SECTION 4980B OF THE INTERNAL REVENUE CODE OF 1986 AND PART 6 OF SUBTITLE B OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“COBRA”), IN ACCORDANCE WITH ORDINARY PLAN PRACTICES, FOR THE CONTINUATION PERIOD, THE COMPANY WILL REIMBURSE YOU ON AN INCOME TAX GROSSED-UP BASIS FOR A PORTION OF THE AMOUNT YOU PAY FOR SUCH COBRA CONTINUATION COVERAGE (OR IF COBRA COVERAGE IS NOT AVAILABLE, SUCH ALTERNATIVE MEDICAL COVERAGE), SO THAT ON AN AFTER-TAX BASIS YOU ARE PAYING THE AMOUNT YOU PAID (OR WOULD HAVE PAID) FOR THE SAME LEVEL OF COVERAGE PRIOR TO THE CHANGE IN CONTROL.  IN ORDER TO RECEIVE REIMBURSEMENTS PURSUANT TO THIS SECTION, YOU MUST COMPLY WITH ANY REIMBURSEMENT POLICIES AND PROCEDURES SPECIFIED BY THE COMPANY. (III)          GROSS-UP PAYMENTS.  FOLLOWING A CHANGE IN CONTROL, IF THE SUBSIDIARY’S INDEPENDENT AUDITORS DETERMINE THAT ANY PAYMENT OR DISTRIBUTION BY THE PARENT COMPANY AND/OR THE SUBSIDIARY TO YOU (THE “PAYMENTS”) WILL RESULT IN AN EXCISE TAX IMPOSED BY CODE SECTION 4999 OR ANY COMPARABLE STATE OR LOCAL LAW, OR ANY INTEREST OR PENALTIES WITH RESPECT THERETO, THE COMPANY AND THE SUBSIDIARY (AND ANY SUCCESSOR THERETO) WILL BE RESPONSIBLE FOR MAKING AN ADDITIONAL CASH PAYMENT (A “GROSS-UP PAYMENT”) TO YOU WITHIN 10 DAYS AFTER SUCH DETERMINATION EQUAL TO AN AMOUNT SUCH THAT, AFTER PAYMENT BY YOU OF ALL TAXES (INCLUDING ANY INTEREST OR PENALTIES IMPOSED WITH RESPECT TO SUCH TAXES), INCLUDING ANY EXCISE TAX, IMPOSED UPON THE GROSS-UP PAYMENT, YOU WOULD RETAIN AN AMOUNT OF THE GROSS-UP PAYMENT EQUAL TO THE EXCISE TAX IMPOSED UPON THE PAYMENTS.  YOU WILL PROVIDE THE SUCCESSOR OR THE COMPANY WITH A WRITTEN CERTIFICATION THAT YOU WILL PAY ALL TAXES DUE ON THE PAYMENTS AND THE GROSS-UP PAYMENT.  THE GROSS-UP PAYMENT WILL BE MADE NOT LATER THAN THE MARCH 15 FOLLOWING THE CALENDAR YEAR IN WHICH THE PAYMENT GIVING RISE TO THE GROSS-UP PAYMENT IS RECEIVED BY YOU. (IV)          OUTPLACEMENT SERVICES.  IN THE EVENT ANY LUMP SUM PAYMENTS ARE MADE TO YOU PURSUANT TO SECTION 3(B)(I), THE COMPANY SHALL THEN PROVIDE YOU WITH UP TO $20,000 OF REASONABLE OUTPLACEMENT SERVICES ACTUALLY INCURRED BY YOU AND DIRECTLY RELATED TO YOUR TERMINATION OF EMPLOYMENT UNDER SECTION 3()(B)(I), INCLUDING OUTPLACEMENT CONSULTANT’S SERVICES, TRAVEL AND HOTEL EXPENSE REIMBURSEMENTS, OFFICE EXPENSE REIMBURSEMENTS OR SIMILAR COSTS YOU INCUR IN SEEKING AND OBTAINING NEW EMPLOYMENT, THE ALLOCATION OF WHICH AMONG THE CATEGORIES TO BE WITHIN YOUR SOLE DISCRETION, PROVIDED, HOWEVER, SUCH EXPENSES MUST BE INCURRED BY YOU AND REIMBURSED HEREUNDER NO LATER THAN THE DECEMBER 31 OF THE SECOND CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH YOUR TERMINATION OF EMPLOYMENT OCCURS.  YOU WILL BE REQUIRED TO PROVIDE RECEIPTS OR INVOICES FOR THE COSTS AND EXPENSES INCURRED UNDER THIS SECTION 3(B)(IV). 4.             STOCK OPTION ACCELERATION.  IN THE EVENT OF A CHANGE IN CONTROL, IF THE ACQUIRING ENTITY OR SUCCESSOR DOES NOT ASSUME OR REPLACE THE UNVESTED STOCK OPTIONS OR STOCK AWARDS THEN GRANTED TO YOU PURSUANT TO ANY OF THE STOCK INCENTIVE PLANS, THE VESTING SCHEDULES UNDER THE APPLICABLE STOCK OPTION AGREEMENTS WILL BE ACCELERATED AND ALL SUCH STOCK OPTIONS WILL BECOME FULLY VESTED AND IMMEDIATELY EXERCISABLE UPON THE CLOSING OF THE CHANGE IN CONTROL.  FURTHERMORE, EVEN IF THE STOCK OPTIONS AGREEMENTS ARE ASSUMED OR REPLACED WITH SUBSTANTIALLY SIMILAR STOCK OPTIONS, IF YOU ARE NOT OFFERED EMPLOYMENT BY THE SUCCESSOR OR CONTINUED EMPLOYMENT WITH THE COMPANY OR IF YOUR EMPLOYMENT IS SUBSEQUENTLY TERMINATED UNDER CIRCUMSTANCES IN WHICH YOU WILL RECEIVE A LUMP SUM CASH PAYMENT 7 -------------------------------------------------------------------------------- PURSUANT TO SECTION 3(B(I) HEREOF, YOUR THEN UNVESTED STOCK OPTIONS AS OF THE CHANGE IN CONTROL OR DATE OF TERMINATION, AS THE CASE MAY BE, SHALL BECOME FULLY VESTED AND IMMEDIATELY EXERCISABLE. 5.             INDEMNIFICATION.  FOLLOWING A CHANGE IN CONTROL, THE PARENT COMPANY AND THE SUBSIDIARY SHALL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR INDEMNIFYING AND ADVANCING EXPENSES TO YOU TO THE FULL EXTENT PERMITTED BY LAW FOR DAMAGES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, JUDGMENTS, FINES, PENALTIES, SETTLEMENTS AND REASONABLE FEES AND EXPENSES OF YOUR COUNSEL) INCURRED BY YOU AS A RESULT OF YOUR SERVICE TO OR STATUS AS AN OFFICER AND EMPLOYEE WITH THE PARENT COMPANY OR THE SUBSIDIARY OR ANY OTHER CORPORATION, EMPLOYEE BENEFIT PLAN OR OTHER ENTITY WITH WHOM YOU SERVED AT THE REQUEST OF THE PARENT COMPANY OR THE SUBSIDIARY PRIOR TO THE CHANGE IN CONTROL, PROVIDED THAT SUCH DAMAGES, COSTS AND EXPENSES DID NOT ARISE AS A RESULT OF YOUR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  THE INDEMNIFICATION UNDER THIS AGREEMENT SHALL BE IN ADDITION TO ANY SIMILAR OBLIGATION OF THE PARENT COMPANY OR THE SUBSIDIARY UNDER ANY OTHER SEPARATE AGREEMENT, OR UNDER THE PARENT COMPANY’S OPERATING AGREEMENT OR THE SUBSIDIARY’S CERTIFICATE OF INCORPORATION OR BYLAWS, OR AS THEY BE AMENDED FROM TIME TO TIME, PROVIDED HOWEVER, YOU MAY ONLY BE REIMBURSED OR RECOVER ONCE FOR ANY SUCH DAMAGES, COSTS AND EXPENSES, FROM WHATEVER SOURCE. 6.             SUCCESSORS.  THE PARENT COMPANY WILL SEEK TO HAVE ANY SUCCESSOR TO THE PARENT COMPANY, BY AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO YOU, ASSUME AND ASSENT TO THE FULFILLMENT BY SUCH SUCCESSOR OF THE PARENT COMPANY’S OBLIGATIONS UNDER THIS AGREEMENT.  FAILURE OF THE PARENT COMPANY TO OBTAIN SUCH ASSENT AND ASSUMPTION AT LEAST THREE (3) BUSINESS DAYS PRIOR TO THE TIME A THIRD PARTY BECOMES A SUCCESSOR (OR WHERE THE PARENT COMPANY DOES NOT HAVE AT LEAST THREE (3) BUSINESS DAYS’ ADVANCE NOTICE THAT A THIRD PARTY MAY BECOME A SUCCESSOR, WITHIN ONE (1) BUSINESS DAY AFTER HAVING NOTICE THAT SUCH THIRD PARTY MAY BECOME OR HAS BECOME A SUCCESSOR) WILL CONSTITUTE GOOD REASON FOR TERMINATION BY YOU OF YOUR EMPLOYMENT.  THE DATE ON WHICH ANY SUCH SUCCESSION BECOMES EFFECTIVE WILL BE DEEMED THE DATE OF TERMINATION, AND NOTICE OF TERMINATION WILL BE DEEMED TO HAVE BEEN GIVEN TO YOU ON THAT DATE.  A SUCCESSOR HAS NO RIGHTS, AUTHORITY OR POWER WITH RESPECT TO THIS AGREEMENT PRIOR TO A CHANGE IN CONTROL. 7.             BINDING AGREEMENT.  THIS AGREEMENT INURES TO THE BENEFIT OF, AND IS ENFORCEABLE BY, YOU, YOUR PERSONAL AND LEGAL REPRESENTATIVES, EXECUTORS, ADMINISTRATORS, SUCCESSORS, HEIRS, DISTRIBUTEES, DEVISEES AND LEGATEES. IF YOU DIE AFTER A CHANGE IN CONTROL WHILE ANY AMOUNT WOULD STILL BE PAYABLE TO YOU UNDER THIS AGREEMENT, ALL SUCH AMOUNTS, UNLESS OTHERWISE PROVIDED IN THIS AGREEMENT, WILL BE PAID IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT TO YOUR DEVISEE, LEGATEE OR OTHER DESIGNEE OR, IF THERE BE NO SUCH DESIGNEE, TO YOUR ESTATE. 8.             NOTICES.  FOR THE PURPOSES OF THIS AGREEMENT, NOTICES AND OTHER COMMUNICATIONS PROVIDED FOR IN THIS AGREEMENT MUST BE IN WRITING AND WILL BE DEEMED TO HAVE BEEN DULY GIVEN WHEN PERSONALLY DELIVERED OR WHEN MAILED BY UNITED STATES REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID AND ADDRESSED TO EACH PARTY’S RESPECTIVE ADDRESS SET FORTH ON THE FIRST PAGE OF THIS AGREEMENT, OR TO SUCH OTHER ADDRESS AS EITHER PARTY MAY HAVE FURNISHED TO THE OTHER IN WRITING IN ACCORDANCE WITH THESE PROVISIONS, EXCEPT THAT NOTICE OF CHANGE OF ADDRESS WILL BE EFFECTIVE ONLY UPON RECEIPT. 9.             DISPUTES.  IF YOU SO ELECT, ANY DISPUTE, CONTROVERSY OR CLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT WILL BE HEARD AND SETTLED EXCLUSIVELY BY BINDING ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION IN MINNEAPOLIS, MINNESOTA BEFORE A SINGLE ARBITRATOR IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT.  JUDGMENT MAY BE ENTERED ON THE ARBITRATOR’S AWARD IN ANY COURT HAVING JURISDICTION; PROVIDED, THAT YOU MAY SEEK SPECIFIC PERFORMANCE IN A COURT OF COMPETENT JURISDICTION OF YOUR RIGHT TO RECEIVE BENEFITS UNTIL THE DATE OF TERMINATION DURING THE PENDENCY OF ANY DISPUTE OR CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.  IF ANY DISPUTE, CONTROVERSY OR CLAIM FOR DAMAGES ARISING UNDER OR IN CONNECTION WITH THIS 8 -------------------------------------------------------------------------------- AGREEMENT IS SETTLED BY ARBITRATION, THE COMPANY AND THE SUBSIDIARY WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR PAYING, OR IF ELECTED BY YOU, REIMBURSING, ALL FEES, COSTS AND EXPENSES INCURRED BY YOU RELATED TO SUCH ARBITRATION.  IF YOU DO NOT ELECT ARBITRATION, YOU MAY PURSUE ALL AVAILABLE LEGAL REMEDIES.  THE COMPANY AND THE SUBSIDIARY WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR PAYING, OR IF ELECTED BY YOU, REIMBURSING YOU FOR, ALL FEES, COSTS AND EXPENSES INCURRED BY YOU IN CONNECTION WITH ANY ACTUAL, THREATENED OR CONTEMPLATED LITIGATION RELATING TO THIS AGREEMENT TO WHICH YOU ARE OR REASONABLY EXPECT TO BECOME A PARTY, WHETHER OR NOT INITIATED BY YOU, IF BUT ONLY IF YOU ARE SUCCESSFUL IN RECOVERING ANY BENEFIT UNDER THIS AGREEMENT AS A RESULT OF SUCH LEGAL ACTION.  THE PARTIES AGREE THAT ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT MUST BE BROUGHT IN A COURT OF COMPETENT JURISDICTION IN THE STATE OF MINNESOTA, AND BOTH PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF SAID COURTS FOR THIS PURPOSE AND AGREE NOT TO ASSERT THAT SUCH COURTS ARE AN INCONVENIENT FORUM.  NEITHER THE PARENT COMPANY NOR THE SUBSIDIARY WILL ASSERT IN ANY DISPUTE OR CONTROVERSY WITH YOU ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT YOUR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES. 10.           RELATED AGREEMENTS.  TO THE EXTENT THAT ANY PROVISION OF ANY OTHER BENEFIT PLAN OR AGREEMENT BETWEEN THE PARENT COMPANY AND YOU OR THE SUBSIDIARY AND YOU LIMITS, QUALIFIES OR IS INCONSISTENT WITH ANY PROVISION OF THIS AGREEMENT, THE PROVISION OF THIS AGREEMENT WILL CONTROL. NOTHING IN THIS AGREEMENT PREVENTS OR LIMITS YOUR CONTINUING OR FUTURE PARTICIPATION IN, AND RIGHTS UNDER, ANY BENEFIT PLAN PROVIDED BY THE PARENT COMPANY OR THE SUBSIDIARY AND FOR WHICH YOU MAY QUALIFY.  AMOUNTS WHICH ARE VESTED BENEFITS OR TO WHICH YOU ARE OTHERWISE ENTITLED UNDER ANY BENEFIT PLAN OR OTHER AGREEMENT WITH THE PARENT COMPANY OR THE SUBSIDIARY AT OR SUBSEQUENT TO THE DATE OF TERMINATION WILL BE PAYABLE IN ACCORDANCE WITH THE TERMS THEREOF.  FURTHERMORE, NOTHING IN THIS AGREEMENT WILL PREVENT THE PARENT COMPANY, THE SUBSIDIARY OR THE SUCCESSOR TO THE PARENT COMPANY OR THE SUBSIDIARY FROM SEEKING ENFORCEMENT OF AND DAMAGES ARISING UNDER ANY CONFIDENTIALITY, INVENTION ASSIGNMENT OR NON-COMPETITION PROVISION OR BREACH THEREOF CONTAINED IN ANY OTHER AGREEMENT WITH THE PARENT COMPANY OR THE SUBSIDIARY OR ANY SUCCESSOR TO THE PARENT COMPANY OR THE SUBSIDIARY. 11.           NO EMPLOYMENT OR SERVICE CONTRACT.  NOTHING IN THIS AGREEMENT IS INTENDED TO PROVIDE YOU WITH ANY RIGHT TO CONTINUE IN THE EMPLOY OF THE SUBSIDIARY FOR ANY PERIOD OF SPECIFIC DURATION OR INTERFERE WITH OR OTHERWISE RESTRICT IN ANY WAY YOUR RIGHTS OR THE RIGHTS OF THE SUBSIDIARY, WHICH RIGHTS ARE HEREBY EXPRESSLY RESERVED BY EACH, TO TERMINATE YOUR EMPLOYMENT AT ANY TIME FOR ANY REASON OR NO REASON WHATSOEVER, WITH OR WITHOUT CAUSE. 12.           SURVIVAL.  THE RESPECTIVE OBLIGATIONS OF, AND BENEFITS AFFORDED TO, THE PARENT COMPANY, THE SUBSIDIARY AND YOU WHICH BY THEIR EXPRESS TERMS OR CLEAR INTENT SURVIVE TERMINATION OF YOUR EMPLOYMENT WITH THE SUBSIDIARY OR TERMINATION OF THIS AGREEMENT, AS THE CASE MAY BE, WILL SURVIVE TERMINATION OF YOUR EMPLOYMENT WITH THE SUBSIDIARY OR TERMINATION OF THIS AGREEMENT, AS THE CASE MAY BE, AND WILL REMAIN IN FULL FORCE AND EFFECT ACCORDING TO THEIR TERMS. 13.           MISCELLANEOUS.  NO PROVISION OF THIS AGREEMENT MAY BE MODIFIED, WAIVED OR DISCHARGED OTHER THAN IN A WRITING SIGNED BY YOU, THE PARENT COMPANY AND THE SUBSIDIARY.  NO WAIVER BY ANY PARTY TO THIS AGREEMENT AT ANY TIME OF ANY BREACH BY ANOTHER PARTY OF ANY PROVISION OF THIS AGREEMENT WILL BE DEEMED A WAIVER OF ANY OTHER PROVISIONS AT THE SAME OR AT ANY OTHER TIME.  THIS AGREEMENT REFLECTS THE FINAL AND COMPLETE AGREEMENT OF THE PARTIES AND SUPERSEDES ALL PRIOR AND SIMULTANEOUS AGREEMENTS WITH RESPECT TO THE SUBJECT MATTER HEREOF, INCLUDING WITHOUT LIMITATION ANY CHANGE IN CONTROL OR SIMILAR AGREEMENT BETWEEN ANY PAST, CURRENT OR FUTURE AFFILIATE OF THE PARENT COMPANY OR THE SUBSIDIARY AND YOU.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF ANY JURISDICTION).  THE INVALIDITY OR UNENFORCEABILITY OF ALL OR ANY PART OF ANY PROVISION OF THIS AGREEMENT WILL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF SUCH PROVISION OR OF ANY OTHER PROVISION OF THIS AGREEMENT.  THIS AGREEMENT MAY BE 9 -------------------------------------------------------------------------------- EXECUTED IN SEVERAL COUNTERPARTS, EACH OF WHICH WILL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH TOGETHER WILL CONSTITUTE ONE AND THE SAME INSTRUMENT. If this letter correctly sets forth our agreement on the subject matter discussed above, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.   Sincerely,       ev3 Inc.         By:        Name:       Title:         [ev3 Endovascular, Inc./Micro Therapeutics, Inc.]         By:        Name:       Title:               Agreed to and Accepted as of this    th day of                  , 2006:           10 --------------------------------------------------------------------------------

Exhibit 10.2(g)(iii) FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT UNDER THE CENTURYTEL, INC. 2005 MANAGEMENT INCENTIVE COMPENSATION PLAN (2006 Grants to Section 16 Officers)   THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this (“Agreement”) is entered into as of February 21, 2006, by and between CenturyTel, Inc., a Louisiana corporation (“CenturyTel”), and _________________ (“Optionee”).   WHEREAS, CenturyTel maintains the 2005 Management Incentive Compensation Plan (the “Plan”), under which the Compensation Committee of the Board of Directors of CenturyTel (the “Committee”) may, directly or indirectly, among other things, grant options to purchase shares of CenturyTel’s common stock, $1.00 par value per share (the “Common Stock”), to key employees of CenturyTel or its subsidiaries (collectively, the “Company”), on terms and conditions as it may deem appropriate; and   WHEREAS, pursuant to the Plan the Committee has awarded to the Optionee an option to purchase shares of Common Stock on the terms and conditions specified below;   NOW, THEREFORE, in consideration of the premises, it is agreed as follows:   1.  GRANT OF OPTION   1.01  In consideration of future services, CenturyTel hereby grants to Optionee, effective February 21, 2006 (the “Date of Grant”), the right, privilege and option to purchase _______ shares of Common Stock (the “Option”) at an exercise price of $35.41 per share.   1.02  The Option is a non-qualified stock option and shall not be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).   2.  TIME OF EXERCISE   2.01  Subject to the provisions of the Plan and the other provisions of this Agreement, the Optionee shall be entitled to exercise the Option as follows:   With respect to one-third of the shares covered by the Option   March 15, 2007       With respect to two-thirds of the shares covered by the Option, less any shares previously issued   March 15, 2008       With respect to all of the shares covered by the Option, less any shares previously issued.   March 15, 2009       The Option shall expire and may not be exercised later than ten years after the Date of Grant.   2.02  Notwithstanding the foregoing, the Option shall become accelerated and immediately exercisable in full (a) if Optionee dies while he is employed by the Company, (b) if Optionee becomes disabled within the meaning of Section 22(e)(3) of the Code (“Disability”) while he is employed by the Company, (c) if Optionee retires from employment with the Company on or after attaining the age of 55 (“Retirement”) or (d) pursuant to the provisions of the Plan.   3. CONDITIONS FOR EXERCISE OF OPTION   During Optionee’s lifetime, the Option may be exercised only by him or by his legal representative. The Option must be exercised while Optionee is employed by the Company, or, to the extent exercisable at the time of termination of employment, within 190 days of the date on which he ceases to be an employee, except that (a) if he ceases to be an employee because of Retirement, the Option may be exercised within three years from the date on which he ceases to be an employee, (b) if an Optionee’s employment is terminated for cause, the unexercised portion of the Option is immediately terminated, and (c) in the event of Optionee’s Disability or death, the Option may be exercised by the Optionee or, in the case of death, by his estate or by the person to whom such right devolves from him by reason of his death within two years after the date of his Disability or death; provided, however, that the Option and all option gain, as defined in Section 4.01, shall at all times be subject to the forfeiture provisions of Section 4 hereof; and provided further that no rights to purchase Common Stock under this Option may be exercised later than ten years after the Date of Grant.   4. FORFEITURE OF OPTION AND OPTION GAIN   4.01  If, at any time during Optionee’s employment by the Company or within 18 months after termination of employment, Optionee engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including but not limited to: (a) conduct relating to Optionee’s employment for which either criminal or civil penalties against Optionee may be sought, (b) conduct or activity that results in termination of Optionee’s employment for cause, (c) violation of Company policies, including, without limitation, the Company’s insider trading policy and corporate compliance program, (d) accepting employment with, acquiring a 5% or more equity or participation interest in, serving as a consultant, advisor, director or agent of, directly or indirectly soliciting or recruiting any employee of the Company who was employed at any time during Optionee’s tenure with the Company, or otherwise assisting in any other capacity or manner any company or enterprise that is directly or indirectly in competition with or acting against the interests of the Company or any of its lines of business (a “competitor”), except for (A) any isolated, sporadic accommodation or assistance provided to a competitor, at its request, by Optionee during Optionee’s tenure with the Company, but only if provided in the good faith and reasonable belief that such action would benefit the Company by promoting good business relations with the competitor and would not harm the Company’s interests in any substantial manner or (B) any other service or assistance that is provided at the request or with the written permission of the Company, (e) disclosing or misusing any confidential information or material concerning the Company, (f) engaging in, promoting, assisting or otherwise participating in a hostile takeover attempt of the Company or any other transaction or proxy contest that could reasonably be expected to result in a Change of Control (as defined in the Plan) not approved by CenturyTel’s Board of Directors or (g) making any statement or disclosing any information to any customers, suppliers, lessors, lessees, licensors, licensees, regulators, employees or others with whom the Company engages in business that is defamatory or derogatory with respect to the business, operations, technology, management, or other employees of the Company, or taking any other action that could reasonably be expected to injure the Company in its business relationships with any of the foregoing parties or result in any other detrimental effect on the Company, then (i) the Option shall automatically terminate without any payment to Optionee effective the date on which Optionee engages in such activity, unless terminated sooner by operation of another term or condition of this Agreement or the Plan, and (ii) Optionee shall pay in cash to the Company, without interest, any option gain realized by Optionee from exercising all or a portion of the Option during the period beginning one year prior to termination of employment (or one year prior to the date Optionee first engages in such activity if no termination occurs) and ending on the date on which the Option terminates. For purposes hereof, “option gain” shall mean the difference between the closing market price of the Common Stock on the date of exercise minus the exercise price, multiplied by the number of shares purchased.   4.02  If Optionee owes any amount to the Company under Section 4.01 above, Optionee acknowledges that the Company may deduct such amount from any amounts the Company owes Optionee from time to time for any reason (including without limitation amounts owed to Optionee as salary, wages, reimbursements or other compensation, fringe benefits, retirement benefits or vacation pay). Whether or not the Company elects to make any such set-off in whole or in part, if the Company does not recover by means of set-off the full amount Optionee owes it, Optionee hereby agrees to pay immediately the unpaid balance to the Company.   4.03  Optionee may be released from Optionee’s obligations under Sections 4.01 and 4.02 above only if the Committee determines in its sole discretion that such action is in the best interests of the Company.   5. PREFERENCE SHARE PURCHASE RIGHTS   Upon exercise of an Option at a time when preference share purchase rights to purchase shares of Series BB Participating Cumulative Preference Stock or other securities or property of the Company (the “Rights” and each a “Right”) remain outstanding pursuant to that certain Rights Agreement dated as of August 27, 1996 between CenturyTel and the Rights Agent named therein, as amended through the date of such exercise, or pursuant to any successor Rights Agreement, then Optionee shall receive Rights in conjunction with Optionee’s receipt of shares of Common Stock on the terms and conditions of the applicable Rights Agreement.   6. ADDITIONAL CONDITIONS   Anything in this Agreement to the contrary notwithstanding, if at any time CenturyTel further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of the shares of Common Stock issuable pursuant to the exercise of an Option is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such shares of Common Stock shall not be issued, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to CenturyTel. CenturyTel agrees to use commercially reasonable efforts to issue all shares of Common Stock issuable hereunder on the terms provided herein.   7. ATTORNEYS’ FEES AND EXPENSES   Should any party hereto retain counsel for the purpose of enforcing, or preventing the breach of, any provision hereof, including, but not limited to, the institution of any action or proceeding in court to enforce any provision hereof, to enjoin a breach of any provision of this Agreement, to obtain specific performance of any provision of this Agreement, to obtain monetary or liquidated damages for failure to perform any provision of this Agreement, or for a declaration of such parties’ rights or obligations hereunder, or for any other judicial remedy, then the prevailing party shall be entitled to be reimbursed by the losing party for all costs and expenses incurred thereby, including, but not limited to, attorneys’ fees (including costs of appeal).   8. NO CONTRACT OF EMPLOYMENT INTENDED   Nothing in this Agreement shall confer upon Optionee any right to continue in the employment of the Company or to interfere in any way with the right of the Company to terminate Optionee’s employment relationship with the Company at any time.   9. WITHHOLDING TAXES   The Company may make such provisions as it may deem appropriate for the withholding of any federal, state and local taxes that it determines are required to be withheld on any exercise of the Option. In accordance with and subject to the terms of the Plan, Optionee may satisfy the tax withholding obligation in whole or in part by delivering currently owned shares of Common Stock or electing to have CenturyTel withhold from the shares Optionee otherwise would receive hereunder shares of Common Stock having a value equal to the minimum amount required to be withheld (as determined under the Plan).   10. BINDING EFFECT   This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representatives and successors. Without limiting the generality of the foregoing, whenever the term “Optionee” is used in any provision of this Agreement under circumstances where the provision appropriately applies to the heirs, executors, administrators or legal representatives to whom this Option may be transferred by will or by the laws of descent and distribution, the term “Optionee” shall be deemed to include such person or persons.   11. INCONSISTENT PROVISIONS   Optionee agrees that the Option granted hereby is subject to the terms, conditions, restrictions and other provisions of the Plan as fully as if all such provisions were set forth in their entirety in this Agreement. If any provision of this Agreement conflicts with a provision of the Plan, the Plan provision shall control. Optionee acknowledges that a copy of the Plan and a prospectus summarizing the Plan was distributed or made available to Optionee and that Optionee was advised to review such materials prior to entering into this Agreement. Optionee waives the right to claim that the provisions of the Plan are not binding upon Optionee and Optionee’s heirs, executors, administrators, legal representatives and successors.   12. ADJUSTMENTS TO OPTIONS   The parties acknowledge that (i) appropriate adjustments shall be made to the number and class of shares of Common Stock subject to the Option and to the exercise price in certain situations described in Section 4.5 of the Plan and (ii) adjustments to the rights of the Optionee might be made in the event of a Change of Control, as defined in Section 11.12 of the Plan.   13. TERMINATION OF OPTION   The Committee, in its sole discretion, may terminate the Option. However, no termination may adversely affect the rights of Optionee to the extent that the Option is currently exercisable on the date of such termination.   14. GOVERNING LAW   This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana.   15. SEVERABILITY   If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Optionee and CenturyTel intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.   16. ENTIRE AGREEMENT; MODIFICATION   The Plan and this Agreement contain the entire agreement between the parties with respect to the subject matter contained herein and may not be modified, except as provided in the Plan, as it may be amended from time to time in the manner provided therein, or in this Agreement, as it may be amended from time to time by a written document signed by each of the parties hereto. Any oral or written agreements, representations, warranties, written inducements, or other communications with respect to the subject matter contained herein made prior to the execution of the Agreement shall be void and ineffective for all purposes.   IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the day and year first above written.   CenturyTel, Inc.   By:  _____________________________           Glen F. Post, III        Chairman and Chief Executive Officer           ____________________________                        {insert name}                            Optionee  

  Exhibit 10.4 10-Q, 7/31/06 Mitcham Industries, Inc. Stock Awards Plan Restricted Stock Agreement           Grantee:                                                          Date of Grant:                                                          Number of Restricted Shares Granted:                                                          Performance Period and Goals:     See Attachment A        1. Notice of Grant. I am pleased to inform you that you have been granted restricted shares of Common Stock (“Restricted Stock”) of Mitcham Industries, Inc. (the “Company”) pursuant to the Mitcham Industries, Inc. Stock Awards Plan (the “Plan”) as provided above, subject to the terms and conditions of the Plan and this Agreement.      2. Vesting Provisions.      (a) Forfeitures. In the event of your termination of employment with the Company prior to the end of the Performance Period for any reason other than your death or a disability that entitles you to benefits under the Company’s long-term disability plan, all             shares of Restricted Stock then subject to the Forfeiture Restrictions automatically shall be forfeited to the Company without payment. The prohibitions against transfer of the Restricted Stock set forth in Section 4 and the obligations to forfeit and surrender the Restricted Stock to the Company set forth in this Section 2 are referred to herein as the “Forfeiture Restrictions.” For purposes of this Agreement, “employment with the Company” shall include being an employee or a Director of, or a Consultant to, the Company or an Affiliate.      (b) Performance Vesting. To the extent the applicable performance vesting criteria set forth on Attachment A are achieved, the Forfeiture Restrictions shall lapse as to shares of Restricted Stock on the date(s) set forth in Attachment A. Any shares of Restricted Stock that do not become performance vested during the Performance Period, as provided in Attachment A, automatically shall be forfeited to the Company without payment.      (c) Early Vesting. The Forfeiture Restrictions shall lapse, and you shall become vested, as to the Restricted Stock without regard to the achievement of the performance goals set forth on Attachment A on (i) the termination of your employment with the Company due to your death or a disability that entitles you to benefits under the Company’s long-term disability plan or (ii) a Change of Control.   --------------------------------------------------------------------------------        3. Certificates. A certificate evidencing the shares of Restricted Stock shall be issued by the Company in your name, pursuant to which you shall have all of the rights of a shareholder of the Company with respect to the shares of Restricted Stock, including, without limitation, voting rights and the right to receive dividends (provided, however, that any dividends or other distributions paid with respect to Restricted Stock shall be subject to the Forfeiture Restrictions and shall vest only if and when the related share of Restricted Stock vests). The certificate shall contain an appropriate endorsement reflecting the Forfeiture Restrictions. The certificate shall be delivered upon issuance to the Secretary of the Company or to such other depository as may be designated by the Committee as a depository for safekeeping until the forfeiture of such Restricted Stock occurs or the Forfeiture Restrictions lapse pursuant to the terms of the Plan and this Agreement. You shall, if required by the Committee, deliver to the Company a stock power, endorsed in blank, relating to the Restricted Stock. Upon the lapse of the Forfeiture Restrictions without forfeiture of the Restricted Stock, the Company shall cause a new certificate or certificates to be issued without legend (except for any legend required pursuant to applicable securities laws or any other agreement to which you are a party) in your name in exchange for the certificate evidencing the Restricted Stock.      4. Nontransferability of Restricted Stock. You may not sell, transfer, pledge, exchange, hypothecate or dispose of the Restricted Stock in any manner otherwise than by will or by the laws of descent or distribution until the Forfeiture Restrictions have expired. The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of the shares of Restricted Stock.      5. Withholding of Tax. To the extent that the receipt of the shares of Restricted Stock (or dividends or distributions on such Restricted Stock) or the lapse of any Forfeiture Restrictions results in compensation to you with respect to which the Company or an Affiliate has a tax withholding obligation pursuant to applicable law, the Company shall withhold and cancel from the number of shares of Restricted Stock awarded you (or cash dividend or distribution) such number of shares of Restricted Stock (or cash) necessary to satisfy the tax required to be withheld by the Company.      6. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this 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 you with respect to the subject matter hereof, and may not be modified adversely to your interest except by means of a writing signed by the Company and you. This Agreement is governed by the internal substantive laws, but not the choice of law rules, of the State of Texas.      7. Amendment. This Agreement may be modified only by a written agreement signed by you and an officer of the Company who is expressly authorized by the Company to execute such document; provided, however, notwithstanding the foregoing, the Company may make any change to this grant, in writing, without your consent if such change is not adverse to your rights under this Agreement.      8. General. These shares of Restricted Stock are granted under and governed by the terms and conditions of the Plan and this Agreement. In the event of any conflict, the terms of - 2 - --------------------------------------------------------------------------------   the Plan shall control. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Agreement.                       MITCHAM INDUSTRIES, INC.                           By:                               Name:                               Title:                           - 3 -

Exhibit 10.103 WAIVER AND NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS WAIVER AND NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of April 10, 2006, by and among TELOS CORPORATION, a Maryland corporation (“Parent”), XACTA CORPORATION, a Delaware corporation (“Xacta”; Parent and Xacta are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), TELOS DELAWARE, INC., a Delaware corporation (“Telos-Delaware”), UBIQUITY.COM, INC., a Delaware corporation (“Ubiquity”), TELOS.COM, INC., a Delaware corporation (“Telos.com”), TELOS INTERNATIONAL CORP., a Delaware corporation (“TIC”), TELOS INTERNATIONAL ASIA, INC., a Delaware corporation (“TIA”), SECURE TRADE, INC., a Delaware corporation (“STI”), KUWAIT INTERNATIONAL, INC., a Delaware corporation (“KII”), TELOS INFORMATION SYSTEMS, INC., a Delaware corporation (“TIS”), TELOS FIELD ENGINEERING, INC., a Delaware corporation (“TFE”), and TELOS FEDERAL SYSTEMS, INC., a Delaware corporation (“TFS”; Telos-Delaware, Ubiquity, Telos.com, TIC, TIA, STI, KII, TIS, TFE and TFS are referred to hereinafter each individually as a “Credit Party” and collectively, jointly and severally, as the “Credit Parties”), and WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation), as agent (“Agent”) for the Lenders (defined below) and as a Lender. WHEREAS, Borrowers, Credit Parties, Agent and certain other financial institutions from time to time party thereto (the “Lenders”) are parties to that certain Loan and Security Agreement dated as of October 21, 2002 (as amended from time to time, the “Loan Agreement”); WHEREAS, the Companies failed to maintain minimum EBITDA for the 12 month periods ended October 31, 2005, November 30, 2005, December 31, 2005, January 31, 2006 and February 28, 2006, which resulted in breaches of Section 7.20(a)(i) of the Loan Agreement and therefore Events of Default under Section 8.2 of the Loan Agreement (collectively, the “Existing Defaults”); and WHEREAS, subject to the terms and conditions contained herein, Agent and Lenders have agreed to waive the Existing Defaults and the Borrowers, Credit Parties, Agent and Lenders have agreed to amend the Loan Agreement in certain respects. NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. Waiver. Subject to the satisfaction of the conditions set forth in Section 5 hereof, Agent and Lenders hereby waive the Existing Defaults. The foregoing -------------------------------------------------------------------------------- shall not constitute a waiver of any other Event of Default that may exist, or a waiver of any future Event of Default that may occur. 3. Amendments to Loan Agreement. Subject to the satisfaction of the conditions set forth in Section 5 hereof, the Loan Agreement is amended in the following respects: (a) The definition of “Availability Block” as set forth in Section 1.1 of the Loan Agreement is amended and restated in its entirety, as follows: “Availability Block” means an amount equal to $500,000; provided, that Availability Block shall mean an amount equal to $0 for the period from April 10, 2006 through and including July 30, 2006. (b) The following defined terms are added to Section 1.1 of the Loan Agreement in their respective alphabetical orders therein: “Additional Availability Amount” means an amount equal to (i) $2,500,000 during the period commencing April 10, 2006 and ending May 30, 2006, (ii) $1,000,000 during the period commencing May 31, 2006 and ending June 15, 2006, (iii) $500,000 during the period commencing June 16, 2006 and ending June 29, 2006, and (iv) zero at all times on and after June 30, 2006. “Sales’” means, with respect to a particular period, all of the sales and services billed by Borrowers to their customers during such period. (c) The second sentence of Section 2.1(a) of the Loan Agreement is amended and restated in its entirety as follows: For purposes of this Agreement, “Borrowing Base,” as of any date of determination, shall mean the result of: (x) the lesser of     (i) 85% of the amount of Eligible Accounts (net of the Deferred Revenue Reserve), less the amount, if any, of the Dilution Reserve, and     (ii) an amount equal to Borrowers’ Collections with respect to Accounts for the immediately preceding 60 day period, plus (y) commencing April 10, 2006, the Additional Availability Amount, minus   -2- -------------------------------------------------------------------------------- (z) the sum of (i) the Bank Products Reserve, (ii) the Availability Block, and (iii) the aggregate amount of reserves, if any, established by Agent under Section 2.l(b). (d) Section 2.6(a) of the Loan Agreement is amended and restated in its entirety as follows: (a) Interest Rates. Except as provided in clause (c) below, all Obligations (except for undrawn Letters of Credit and except for Bank Product Obligations) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows: (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin; provided, that notwithstanding anything contained herein to the contrary, the portion of the Advances predicated on the Additional Availability Amount shall bear interest on the Daily Balance thereof at a per annum rate equal to 5 percentage points plus the Base Rate. For purposes of determining whether Advances are predicated on the Additional Availability Amount or Eligible Accounts, Advances will be deemed to be predicated last on the Additional Availability Amount. (e) Section 6.3 of the Loan Agreement is hereby amended by (i) deleting the word “and” at the end of clause (f) thereof and (ii) amending and restating clause (g) thereof and adding a new clause (h) at the end thereof as follows: (g) (i) no later than April 28, 2006, a forecast of weekly projected cash flow covering Parent’s and its Subsidiaries’ operations for the 13 week period beginning May 1, 2006 and ending on July 31, 2006 and (ii) no later than May 31, 2006, a forecast of weekly projected cash flow covering Parent’s and its Subsidiaries’ operations for the 13 week period beginning June 1, 2006 and ending on August 31, 2006; and (h) upon the request of Agent, any other report reasonably requested relating to the financial condition of Companies. (f) Section 7.20(a)(i) of the Loan Agreement is hereby amended and restated in its entirety as follows: (i) Minimum EBITDA. EBITDA, measured on a fiscal month-end basis, for each period set forth below, of not less than the required amount set forth in the following table for the applicable period set forth opposite thereto;   -3- -------------------------------------------------------------------------------- Applicable Amount    Applicable Period ($3,407,965)    For the 3 month period ending March 31, 2006 ($3,513,451)    For the 4 month period ending April 30, 2006 ($4,462,838)    For the 5 month period ending May 31, 2006 ($4,213,173)    For the 6 month period ending June 30, 2006 ($2,636,162)    For the 7 month period ending July 31, 2006 ($2,103,578)    For the 8 month period ending August 31, 2006 ($339,231)    For the 9 month period ending September 30, 2006 $1,215,689    For the 10 month period ending October 31, 2006 $2,813,765    For the 11 month period ending November 30, 2006 85% of EB1TDA for such period as reflected in the most recent Projections delivered to Agent pursuant to Section 6.3(c) and approved by Required Lenders but in no event less than $4,250,230    For the 12 month period ending December 31, 2006 and the 12 month period ending on the last day of each fiscal month thereafter   -4- -------------------------------------------------------------------------------- (g) The following new clause (iii) is added immediately after Section 7.20(a)(ii) of the Loan Agreement: (iii) Minimum Sales. Gross amount of Sales, in any period set forth below, of not less than the required amount set forth in the following table opposite such period:   Applicable Amount    Applicable Period $7,016,462    For the 5 week period ending March 24, 2006 $7,215,753    For the 5 week period ending March 31, 2006 $8,450,467    For the 5 week period ending April 7, 2006 $7,463,421    For the 5 week period ending April 14, 2006 $7,622,500    For the 5 week period ending April 21, 2006 $9,722,500    For the 5 week period ending April 28, 2006 $10,172,500    For the 5 week period ending May 5, 2006 $9,672,500    For the 5 week period ending May 12, 2006 $9,711,250    For the 5 week period ending May 19, 2006 $10,813,250    For the 5 week period ending May 26, 2006 $10,563,250    For the 5 week period ending June 2, 2006 $9,563,251    For the 5 week period ending June 9, 2006 $9,563,251    For the 5 week period ending June 16, 2006 $9,813,251    For the 5 week period ending June 23, 2006 $10,000,000    For the 5 week period ending June 30, 2006   -5- -------------------------------------------------------------------------------- Notwithstanding the foregoing, Agent may, in its sole discretion, increase the covenant levels for any of the 5 week periods set forth above commencing with the period ending on or after May 5, 2006, to an amount not to exceed 85% of the gross amount of Sales for such period reflected in the most recent cash flow forecast delivered to Agent pursuant to Section 6.3(g). 4. Ratification. This Amendment, subject to satisfaction of the conditions provided below, shall constitute a waiver and amendment to the Loan Agreement and all of the Loan Documents as appropriate to express the agreements contained herein. Except as specifically set forth herein, the Loan Agreement and the Loan Documents shall remain unchanged and in full force and effect in accordance with their original terms. 5. Conditions to Effectiveness. This Amendment shall become effective as of the date hereof and upon the satisfaction of the following conditions precedent: (a) Each party hereto shall have executed and delivered this Amendment to Agent; (b) Agent shall have received the Additional Availability Fee described in Section 5 hereof; (c) Borrowers shall have delivered to Agent such documents, agreements and instruments as may be requested or required by Agent in connection with this Amendment, each in form and content acceptable to Agent; (d) No Default or Event of Default other than the Existing Defaults shall have occurred and be continuing on the date hereof or as of the date of the effectiveness of this Amendment; and (e) All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel. 6. Additional Availability Fee. To induce Agent and Lenders to enter into this Amendment, Borrowers shall pay to Agent, for the benefit of Lenders, a non-reiundable fee equal to $100,000 (the “Additional Availability Fee”), which shall be due and payable on the date hereof.   -6- -------------------------------------------------------------------------------- 7. Miscellaneous. (a) Warranties and Absence of Defaults. To induce Agent and Lenders to enter into this Amendment, each Company hereby represents and warrants to Agent and Lenders that: (i) The execution, delivery and performance by it of this Amendment and each of the other agreements, instruments and documents contemplated hereby are within its corporate power, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to it, its articles of incorporation and by-laws, any order, judgment or decree of any court or governmental agency, or any agreement, instrument or document binding upon it or any of its property; (ii) Each of the Loan Agreement and the other Loan Documents, as amended by this Amendment, are the legal, valid and binding obligation of it enforceable against it in accordance with its terms, except as the enforcement thereof may be subject to (A) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor’s rights generally, and (B) general principles of equity; (iii) The representations and warranties contained in the Loan Agreement and the other Loan Documents are true and accurate as of the date hereof with the same force and effect as if such had been made on and as of the date hereof; and (iv) It has performed all of its obligations under the Loan Agreement and the Loan Documents to be performed by it on or before the date hereof and as of the date hereof, it is in compliance with all applicable terms and provisions of the Loan Agreement and each of the Loan Documents to be observed and performed by it and no event of default or other event which upon notice or lapse of time or both would constitute an event of default has occurred. (b) Expenses. Companies, jointly and severally, agree to pay on demand all costs and expenses of Agent (including the reasonable fees and expenses of outside counsel for Agent) in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. In addition, Companies agree, jointly and severally, to pay, and save Agent harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Amendment or the Loan Agreement, as amended hereby, and the execution and delivery of any instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided herein shall survive any termination of the Loan Agreement as amended hereby. (c) Governing Law. This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois. (d) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment.   -7- -------------------------------------------------------------------------------- 8. Release. (a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Company, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which such Company or any of its successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, including, without limitation, for or on account of, or in relation to, or in any way in connection with any of the Loan Agreement, or any of the other Loan Documents or transactions thereunder or related thereto. (b) Each Company understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release. (c) Each Company agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above. [signature pages follow]   -8- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized and delivered as of the date first above written.   BORROWERS: TELOS CORPORATION, a Maryland corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO XACTA CORPORATION, a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO CREDIT PARTIES: TELOS DELAWARE, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO UBIQUITY.COM, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO Signature Page to Waiver and Ninth Amendment to Loan and Security Agreement -------------------------------------------------------------------------------- TELOS.COM, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO TELOS INTERNATIONAL CORP., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO TELOS INTERNATIONAL ASIA, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO SECURE TRADE, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO KUWAIT INTERNATIONAL, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO Signature Page to Waiver and Ninth Amendment to Loan and Security Agreement -------------------------------------------------------------------------------- TELOS INFORMATION SYSTEMS, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO TELOS FIELD ENGINEERING, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO TELOS FEDERAL SYSTEMS, INC., a Delaware corporation By   /s/ Michael P. Flaherty Title   EVP, General Counsel, CAO AGENT AND LENDER: WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation) By      Title      Signature Page to Waiver and Ninth Amendment to Loan and Security Agreement -------------------------------------------------------------------------------- TELOS INFORMATION SYSTEMS, INC., a Delaware corporation By      Title      TELOS FIELD ENGINEERING, INC., a Delaware corporation By      Title      TELOS FEDERAL SYSTEMS, INC., a Delaware corporation By      Title      AGENT AND LENDER: WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation) By   /s/ David J. Sanchez Title   V.P. Signature Page to Waiver and Ninth Amendment to Loan and Security Agreement

Exhibit 10.2   SEPARATION AND RELEASE AGREEMENT This Separation and Release Agreement (the “Agreement”) is entered into as of September 13, 2006, by and among Russell C. Mix (“Mix”), and Spectre Gaming, Inc., a Minnesota corporation (the “Company”), with respect to the separation of Mix from employment with the Company and the termination of certain obligations among the parties. INTRODUCTION A.  Mix and the Company are parties to a certain Employment Agreement dated April 16, 2004 (the “Employment Agreement”), and a certain Stock Option Agreement dated on or about March 22, 2004, relating to the grant of options to purchase up to 600,000 shares of the Company’s common stock at $1.50 per share, as described in the Employment Agreement (such agreement, the “Existing Option Agreement”). B.  The parties have agreed to terminate the Employment Agreement and the Existing Option Agreement on the terms and conditions set forth herein. C.  In furtherance of Mix’s separation from the Company and the termination of the Employment Agreement and the Existing Option Agreement, and simultaneously with the execution and delivery of this Agreement, the parties will enter into a New Stock Option Agreement as set forth in Sections 1 and 2 of this Agreement. In addition, the parties have agreed to other terms and conditions related to Mix’s separation from the Company, including mutual releases of potential claims against each other. D.  In order to effectuate the separation, the parties desire to enter into this Agreement and set forth in writing their respective rights, obligations, duties and remedies pertaining to the separation of Mix from the Company and the other matters contemplated hereby. AGREEMENT Now, Therefore, in consideration of the foregoing facts and premises hereby made a part of this Agreement, the mutual covenants set forth herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:   1.  Obligations of Mix.   (a)  Mix hereby resigns from his position as the Company’s Chief Executive Officer. (b)  Mix hereby acknowledges that he has executed and delivered the New Stock Option Agreement attached hereto as Exhibit A (the “New Stock Option Agreement”), prior to the execution and delivery of this Agreement. (c)  Mix hereby agrees to execute and deliver the Consulting Agreement, in the form attached hereto as Exhibit B (the “Consulting Agreement”), simultaneously with the execution and delivery of this Agreement.       --------------------------------------------------------------------------------     (d)  Mix hereby provides the release set forth in Section 3(b) of this Agreement, the employment-related releases set forth in Section 5 of this Agreement, and the covenants set forth in Sections 6 and 7 of this Agreement.   2.  Obligations of the Company.   (a)  The Company hereby agrees to pay Mix, on the first business day after the lapse of Mix’s recission rights described in Section 5 below, a total of Fifteen Thousand and No/100 Dollars ($15,000.00) as full payment for Mix’s accrued but unpaid vacation time under the Employment Agreement, together with all reasonable Company-related expenses submitted to the Company by Mix by such time (in the manner consistent with past practice and policies of the Company). (b)  The Company hereby acknowledges that it has executed and delivered the New Stock Option Agreement prior to the execution and delivery of this Agreement. (c)  The Company hereby agrees to execute and deliver the Consulting Agreement simultaneously with the execution and delivery of this Agreement. (d)  The Company hereby provides the release set forth in Section 3(a) of this Agreement, and the covenants set forth in Section 8 of this Agreement. 3.  Mutual Releases. The parties hereby provide the following releases:   (a)  The Company hereby releases and forever discharges Mix of and from any and all past, present and future claims, demands, liabilities, judgments and causes of action, at law or in equity, known or unknown, asserted or unasserted, liquidated or unliquidated, absolute or contingent, accrued or not accrued, which the Company ever had, presently has, might have in the future, claim to have, or claim to have had against Mix arising out of, touching upon, relating to or in any manner connected with: (i) Mix’s affiliation with the Company prior to and including the date of this Agreement, including but not limited to his position as an employee, officer and director of the Company; and (ii) the Company or the operation and conduct of the Company’s business prior to and including the date of this Agreement; provided, however, that Mix’s obligation and liability for the observation and performance of this Agreement, the New Stock Option Agreement and the Consulting Agreement is specifically excluded from the foregoing release.   (b)  Mix hereby releases and forever discharges the Company and its employees, agents, affiliates and representatives (collectively, the “Company Released Parties”) of and from any and all past, present and future claims, demands, liabilities, judgments and causes of action, at law or in equity, known or unknown, asserted or unasserted, liquidated or unliquidated, absolute or contingent, accrued or not accrued, which Mix ever had, presently has, might have in the future, claim to have, or claim to have had against any of the Company Released Parties arising out of, touching upon, relating to or in any manner connected with: (i) any of the Company Released Parties’ affiliation with the Company prior to and including the date of this Agreement, including but not limited to any of their positions as an employee, shareholder, officer and/or director of the Company; (ii) the Company or the operation and conduct of the Company’s business prior to and including the date of this Agreement; and (iii) any and all claims under the ADEA and MHRA as indicated in Section 5 below; provided, however, that obligation and liability of the Company for the observation and performance of this Agreement, the New Stock Option Agreement and the Consulting Agreement is specifically excluded from the foregoing release.   2 --------------------------------------------------------------------------------   4.  Non-Admission. Even though Company has given Mix valuable consideration for the release set forth in Section 3(a) above, the Company does not admit that it is responsible or legally obligated to Mix, and in fact the Company denies that it is responsible or legally obligated to Mix except as specifically provided under this Agreement. Similarly, even though Mix has given the Company valuable consideration for the release set forth in Section 3(b) above, Mix does not admit that he is responsible or legally obligated to the Company, and in fact Mix denies that he is responsible or legally obligated to the Company except as specifically provided under this Agreement.   5.  Employment-Related Releases. Mix understands, acknowledges and agrees to the following paragraphs: (a)  The release set forth above in Section 3(b) extends to all of Mix’s rights and claims for (i) alleged discrimination and any other rights and claims under the federal Age Discrimination in Employment Act (the “ADEA”), Minnesota Human Rights Act (the “MHRA”), or any other federal, state or local law, (ii) all claims arising out of his employment or separation from employment with the Company, including but not limited to any alleged breach of contract, wrongful termination, defamation, invasion of privacy, tortious interference with contract, and/or infliction of emotional distress (intentional or otherwise), (iii) all claims for any other alleged unlawful employment practices arising out of or relating to Mix’s employment or termination of employment with and separation from the Company, and (iv) all claims for any other form of pay, including but not limited to holiday pay, vacation pay and sick pay (except as provided in Section 2(a) above). (b)  The Company has advised Mix to consult an attorney prior to signing this Agreement. Mix understands that he has 21 days to consider his release of age discrimination claims under the ADEA, beginning on the date of this Agreement. Further, Mix understands that if he signs this Agreement, he will then be entitled to revoke such release of any rights and claims of age discrimination under the ADEA within seven days of executing this Agreement; and the release of his ADEA rights and claims shall not become effective or enforceable until the seven-day period has expired. (c)  Mix further understands that he has the right to rescind his release of discrimination rights and claims under the MHRA within 15 calendar days of the date of this Agreement. Mix understands that if he desires to rescind his release of discrimination rights and claims under the MHRA, he must put his rescission request in writing and deliver it to the Company by hand or by mail within 15 calendar days of executing this Agreement. Mix understands that if he delivers any rescission request by mail, it must be: (i) postmarked within 15 calendar days of the day on which he signs this Agreement; (ii) addressed to the Company at 14200 23rd Avenue N., Minneapolis, Minnesota 55447, attention: Chief Financial Officer; and (iii) sent by certified mail, return-receipt requested. Mix understands that, if he revokes or rescinds his releases as provided above, all of the Company’s obligations under this Agreement (including the release of claims granted by the Company under Section 3(a) above) will immediately terminate, and the Company will not pay or provide Mix any of the benefits accorded him under this Agreement.     3 --------------------------------------------------------------------------------   6.  Confidentiality and Inventions. (a)  Mix recognizes and acknowledges that in the course of his employment with the Company, he has received confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has (or have) an obligation of confidentiality. Accordingly, Mix agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. For purposes of this Agreement, “Confidential and Proprietary Information” shall include but not be limited to confidential or proprietary technical information, data, formulae and concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. Mix hereby expressly acknowledges that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. (b)  Except with the Company’s prior written authorization, Mix agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, scientific, technical or business information of any other party to whom the Company or any of its affiliates owes an obligation of confidence, at any time after entering into this Agreement. (c)  Mix acknowledges that, during the course of his employment with the Company, Mix may have located, identified and/or evaluated patented or patentable inventions having commercial potential in fields which may be of potential interest to the Company or one of its affiliates (the “Inventions”). Mix understands, acknowledges and agrees that all rights to, interests in or opportunities regarding all Inventions shall be and remain the sole and exclusive property of the Company and that Mix shall have no rights whatsoever to such Inventions and will not pursue for himself or for others any transaction relating to the Inventions. The Company hereby advises Mix that, pursuant to Minn. Statutes §§ 181.78, this provision does not apply to any Invention for which for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on Mix’s own time, and (i) which does not relate (A) directly to the business of the Company or (B) to the Company’s actual or demonstrably anticipated research or development, or (ii) which does not result from any work performed by Mix for the Company. (d)  The Company acknowledges that, in the course of its relationship with Mix, the Company has received personal non-public information about Mix. Accordingly, the Company agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose (except as may be required by law), any such personal non-public information possessed by, or in the future received by or on behalf of, the Company.   7.  Non-Competition. Mix recognizes that he has had a responsibility in the development of goodwill for the purposes of marketing and selling the Company’s amusement-with-prize products, and that he has had access to the Company’s Confidential and Proprietary Information. Accordingly, from and after the date hereof until the expiration of a one-year period after the date of the termination or expiration of the Consulting Agreement, Mix will not use Confidential and Proprietary Information to: (a) encourage or induce any Company customer (including any supplier) to cease doing business with the Company, (b) solicit, or participate in or promote the solicitation of any Company customer (including any supplier) to purchase, use or prescribe or product or service that competes with the Company, or (c) conduct, participate in or promote research into products or technology intended to produce or result in the production of products or services that compete with the Company.     4 --------------------------------------------------------------------------------   8.  Termination of Employment Agreement; Amendment of Existing Option Agreement. The parties hereby terminate: (i) the Employment Agreement and all obligations of the parties thereunder; and (ii) the Existing Option Agreement and all obligations of the parties thereunder. 9.  Representations and Warranties. The parties to this Agreement hereby represent and warrant to each other that such representing and warranting party (i) has full power and authority to enter into this Agreement and perform all of its obligations under this Agreement, has duly executed and delivered this Agreement, and this Agreement is legally binding on it and is enforceable in accordance with its terms (subject to the recission rights specified in Section 5 above); (ii) the execution, delivery and performance of the transactions contemplated herein do not conflict with or violate, or result in a breach of or constitute a default under, any contract or agreement to which it is a party or by which it is bound; (iii) it has relied solely upon its own judgment, belief and knowledge, and the advice and recommendations of its own independently selected counsel, in executing this Agreement; and (iv) no consent or approval from any person, firm or entity, or any other consent, approval, order or authorization of, or registration, declaration or filing with any governmental authority or court, is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. All of the foregoing representations and warranties shall forever survive this Agreement and the effectiveness of the transactions contemplated hereby. 10.  Indemnification. Each party shall indemnify and hold each other party harmless from, against, and in respect of any and all loss, liability and expense (including without limitation reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding, including proceedings necessary to enforce this covenant for indemnification) (collectively, “Damages”) suffered or incurred by reason of or in connection with (a) any breach of a representation or warranty by such indemnifying party, or (b) failure of such indemnifying party to perform any obligation contained herein. In addition, Mix shall indemnify and hold harmless the Company from, against, and in respect of any and all Damages suffered or incurred in connection with any employment-related third-party claim the underlying facts of which involve the actions or conduct of Mix outside the scope of his employment; and the Company shall indemnify and hold harmless Mix from, against, and in respect of any and all Damages suffered or incurred in connection with any other employment-related third-party claim. 11.  Dispute Resolution. (a)  The parties will resolve any disputes relating to the Agreement through amicable negotiations. Failing an amicable settlement, any controversy, claim or dispute arising under or relating to this Agreement, including the existence, validity, interpretation, performance, termination or breach of this Agreement, will finally be settled by binding arbitration before a single arbitrator (the “Arbitration Tribunal”) which will be jointly appointed by the parties. The Arbitration Tribunal shall self-administer the arbitration proceedings utilizing the Commercial Rules of the American Arbitration Association (“AAA”); provided, however, the AAA shall not be involved in administration of the arbitration. The arbitrator must be a retired judge of a state or federal court of the United States or a licensed lawyer with at least ten years of corporate or commercial law experience.   5 --------------------------------------------------------------------------------   (b)  The arbitration will be held in Denver, Colorado. Each party will have discovery rights as provided by the Federal Rules of Civil Procedure within the limits imposed by the arbitrator; provided, however, that all such discovery will be commenced and concluded within 60 days of the selection of the arbitrator. It is the intent of the parties that any arbitration will be concluded as quickly as reasonably practicable. The arbitrator will use all reasonable efforts to issue the final written report containing award or awards within a period of five business days after closure of the proceedings. Failure of the arbitrator to meet such time limits will not be a basis for challenging the award. The Arbitration Tribunal will not have the authority to award punitive damages to either party. Each party will bear its own expenses, but the parties will share equally the expenses of the Arbitration Tribunal. The Arbitration Tribunal may award attorneys’ fees and other related costs payable by the losing party to the successful party as it deems equitable. This Agreement will be enforceable, and any arbitration award will be final and non-appealable, and judgment thereon may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, claims for injunctive relief may be brought in a state or federal court in Minneapolis, Minnesota. 12.  General Provisions. (a)  In the event that Mix revokes, pursuant to Section 5 (or otherwise), any of his releases delivered hereunder, this Agreement, the New Stock Option Agreement and the Consulting Agreement shall immediately terminate and all of their respective provisions shall become null and void and of no legal effect whatsoever. (b)  This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, successors and assigns; provided, however, that this Agreement may not be assigned by any party without the written consent of all other parties, which consent may be granted or withheld in the sole and absolute discretion of such parties. (c)  This Agreement may be executed in any number of counterparts, all of which will be considered one and the same agreement. Signatures to this Agreement may be delivered by facsimile or other means of electronic transmission, and signatures so delivered shall be fully valid and binding expressions of intent to be bound to the same extent as the delivery of original signatures. (d)  The headings of Sections hereunder are for convenience and reference only, and shall not be deemed a part of this Agreement or otherwise affect the interpretation hereof. (e)  This Agreement, together will all exhibits hereto (which are hereby incorporated into this Agreement by this reference), sets forth the parties’ final and entire agreement with respect to its subject matter and supersedes any and all prior understandings and agreements, whether oral or written. This Agreement shall not be modified or amended in any fashion except by an instrument in writing signed by the parties. (f)  Other than as expressly set forth herein, this Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder, and no third party shall be entitled to rely on the provisions hereof. (g)  This Agreement shall be construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed within Minnesota, without regard to its conflicts-of-law principles. (h)  All parties agree to execute and deliver any documents or instruments (including legal instruments of conveyance or otherwise) that may be reasonably requested by another party in order to effectuate the transactions contemplated hereby, or to provide reasonable assurance to such requesting party that any of such transactions has been completed.   6 --------------------------------------------------------------------------------   (i)  If any provision of this Agreement is held by any court of competent jurisdiction to be illegal, invalid, or not enforceable, such provision will be construed and enforced as if it was narrowly drawn so as not to be illegal, invalid, or not enforceable, and any such illegality, invalidity, or unenforceability will have no effect upon, and will not impair the enforceability of, any other provision in this Agreement. (j)  The parties agree that this Agreement has been jointly drafted and negotiated by the parties and their respective attorneys and advisors and that no party may assert an ambiguity in the construction of this Agreement against another party because the other party allegedly drafted the allegedly ambiguous provision. (k)  In view of the purposes of this Agreement, it is agreed that the remedy at law for failure of any party to perform would be inadequate and that the injured party or parties, at its option, shall have the right to compel the specific performance of this Agreement in a court of competent jurisdiction, to the extent permitted by applicable law and not expressly prohibited by this Agreement. (l)  No consent under and no waiver of any provision of this Agreement on any one occasion shall constitute a consent under or waiver of any other provision on such occasion or on any other occasion, nor shall it constitute a consent under or waiver of the consented-to or waived provision on any other occasion. No consent or waiver shall be enforceable unless it is in writing and signed by the party against whom such consent or waiver is sought to be enforced. *  *  *  *  *     7 --------------------------------------------------------------------------------     In Witness Whereof, the parties have executed this Separation and Release Agreement as of the date first written above.   SPECTRE GAMING, INC.:                     By: /s/ D. Bradly Olah                                              D. BRADLY OLAH, President                           /s/ Russell C. Mix                                              RUSSELL C. MIX           8 --------------------------------------------------------------------------------  

Exhibit 10.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (“Agreement”), effective as of the 13th day of October, 2006 (“Effective Date”), by and among Antares Pharma AG (the “Corporation”), Gewerbestrasse 18, 4123 Allschwil, Switzerland, a wholly-owned subsidiary of Antares Pharma, Inc., Antares Pharma, Inc. (“Antares”) and Dario Carrara (“Employee”). WITNESSETH: WHEREAS, Employee, the Corporation and Antares desire to enter into this Agreement to define their continued relationship, including the terms of Employee’s continued employment by the Corporation. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows: 1.Employment. As of the Effective Date, the Corporation shall continue to employ Employee as its Managing Director and President of Antares Pharma AG and Antares Pharma IPL AG and as Vice President of Antares Pharma Inc, to perform the duties and functions as are reasonably and lawfully specified from time-to-time by the Corporation and or Antares’ Chief Executive Officer, and/or its Board of Directors. Employee hereby accepts such continued employment and, during the Employment Term, as hereinafter provided, Employee agrees to devote his full business time, skill, energy and attention, in a diligent, trustworthy, loyal, businesslike and efficient manner, to advancing the Corporation’s and Antares’ interests and to performing such duties and functions in accordance with Employee’s experience and skills. The primary place of employment shall be in the Basel-, Switzerland-Area. Employee recognizes that his continued employment pursuant to the terms hereof requires him to extensively travel, including internationally, on behalf of the Corporation and Antares.   2. Compensation. 2.1.        Base-Salary. For all services rendered by Employee pursuant to this Agreement, the Corporation shall pay Employee a monthly salary, subject to withholding and other applicable employment taxes and other proper payroll deductions, of Twenty Three Thousand Four Hundred Sixty-Two Swiss francs (CHF 23’462) (as the Corporation in its sole discretion may increase during the Employment Term) in monthly installments. Such monthly salary shall be paid in accordance with the Corporation’s established pay policies and procedures. A 13th payment amounting to one month’s salary is payable in November (pro rata temporis). In addition, the Corporation shall provide Employee Ten Thousand Swiss francs (CHF 10’000.--) per year for flat expense reimbursement, Seven Thousand Two Hundred Swiss francs (CHF 7’200.--) per year for child care expenses and Three Thousand Swiss francs (CHF 3’000--) per month for a housing allowance. Including the 13th payment, the reimbursement for expenses, childcare and the monthly housing allowance, the gross annual compensation amounts to CHF 358’206.--.     -------------------------------------------------------------------------------- 2.2.         Performance Bonus. For each calendar year commencing on or after January 1, 2006 in which the Corporation employs the Employee, the Employee shall be eligible to receive an annual bonus targeted at twenty percent (20%) with a maximum of thirty five percent (35%) of his Base Salary for each such calendar year, the exact amount to be established by the CEO of the Corporation (the “CEO”) with the approval of the Compensation Committee (the “Discretionary Bonus”), provided however, that the amount of such Discretionary Bonus may be reduced or eliminated if, upon the determination of the Corporation’s independent compensation consultants, Employee’s total aggregate compensation for such calendar year (including, without limitation, the amount of such Discretionary Bonus) is determined to be unreasonable and/or significantly above the target aggregate compensation established by the Committee for the Employee if such reduction or elimination did not occur. The Discretionary Bonus shall be payable based upon achieving business objectives to be determined by the CEO and approved by the Compensation Committee. The business objectives shall be made available to the Executive in writing before the beginning of each calendar year. The Discretionary Bonus shall be payable in cash, shares of the Company stock or in some combination thereof, as determined by the Board in its sole discretion, and shall be paid as soon as reasonably practicable after the end of the calendar year to which it relates but not later than March 15 of the calendar year following the calendar year to which it relates. 2.3.        Benefits. Subject to the Corporation’s and Antares’ policies and practices, Employee shall be entitled, to participate in the Corporation’s and/or Antares’ established benefits plans, including health and dental insurance plans, provided that with respect to any insurance benefits, such participation shall be subject to approval by the Corporation’s and/or Antares’ respective insurance provider. Employee acknowledges that he is not entitled to any further benefits other than set forth herein or as the Corporation’s or Antares’ Board of Directors, in its sole discretion, shall determine to grant Employee, and that, from time to time, the Corporation and/or Antares may change the benefits it offers its employees, including Employee. The Corporation shall also reimburse Employee for his life insurance-related expenses according to the insurance policy 7.310.878 of Zürich Versicherungen in the aggregate amount of currently 318 Swiss francs per month (as may be increased annually during the Employment Term). 2.4.        Vacation. Employee shall be entitled, during the Employment Term, to twenty-five (25) vacation days per year, in addition to other customary office holidays, during which time his compensation shall be paid in full. Employee shall be entitled to take such vacation days at any time and in any combination; provided, however, that Employee agrees to take into consideration the needs and exigencies of the business of the Corporation and Antares, and shall not take such vacation days at such times or in such combinations as will substantially impair his ability to carry out his duties hereunder. 2.5.        Expenses. Consistent with the Corporation’s expenses regulations, the Corporation reimburse the Employee for all business-related expenses that he incurs in connection with his duties hereunder. 2.6.         School allowance. The Corporation will pay the annual school allowance for the private school of the three children of the Employee. The Corporation will make an annual contribution of currently CHF 66’250.-- (as may be increased annually during   -2-   -------------------------------------------------------------------------------- the Employment Term), under a Cooperation Agreement with the International School of Basel for the Employment Term. 2.7.        Deductions. Statutory premiums for social security, insurances, Pension-fund and income tax withholding will be deducted from the salary each month. 2.8.        Tax Return Allowance. The Corporation shall reimburse the Employee for the cost he incurs in connection with having his tax return declaration completed by a professional accounting firm that is reasonably satisfactory to the Corporation (but which firm shall not include the Corporation’s or Antares’ then current or immediately prior audit firm); provided, however, that such reimbursement shall not exceed Two Thousand Five-Hundred Swiss francs (CHF 2’500.--) (as the Corporation in its sole discretion may increase during the Employment Term). 2.9.        Relocation expenses. If Employee’s primary place of Employment, pursuant to the foregoing, is changed to a location more than 50 kilometres from Basel, Switzerland, as a precursor to any such location, the Corporation shall agree to reimburse Employee for any reasonable relocation related expenses, the amount and manner of which shall be consistent with Antares’ and/or the Corporation’s then current policies and procedures. 2.10.      Company Car. During the Employment Term, Company will pay the equivalent of or Employee will receive an annual allowance not to exceed Twenty-Eight Thousand Five-Hundred Swiss francs (CHF 28’500).-- (as the Corporation in its sole discretion may increase during the Employment Term), to be applied against automobile leasing, insurance and operating expenses. 2.11.      Home-Leave. The Corporation will pay for the costs, not to exceed Eighteen Thousand Five-Hundred (CHF 18’500).-- in the aggregate (as the Corporation in its sole discretion may increase during the Employment Term), of two round trips Switzerland-Buenos Aires-Switzerland (coach class) per year for the Employee and his direct family members.   3. Term and Termination. 3.1.        Employment Term. The “Employment Term,” as that term is used throughout this Agreement, shall commence on the Effective Date and end with the termination of either party of this agreement. The notice period of the termination is six months as per the end of the respective month.   3.2. Termination. (a)          Immediately for Cause. Notwithstanding the provisions of Section 3.1 above, either the Corporation or Antares may immediately terminate Employee’s continued employment hereunder for “Cause,” which shall include the following: (i) Employee’s dishonesty, fraud or misrepresentation in connection with his employment pursuant to the terms hereof, or Employee’s breach of his fiduciary duty owed to the Corporation or Antares, (ii) theft, misappropriation or embezzlement by Employee of the Corporation’s or Antares’ funds or resources, (iii) Employee’s conviction of or a plea of guilty or nolo contendere (or a similar plea)   -3-   -------------------------------------------------------------------------------- in connection with any felony, crime involving fraud or misrepresentation, or any other crime, or (iv) a breach by Employee of any material term hereof. In the event of any termination pursuant to this subsection, the Corporation shall be obligated to pay Employee only those portions of his compensation provided by Section 2.1 hereof which shall accrue to Employee up to and including the date upon which such termination becomes effective. (b)          Termination Without Cause. Notwithstanding anything in this Agreement to the contrary, should the Corporation terminate Employee’s employment hereunder at any time without Cause as a condition to any such termination, the Corporation shall (i) pay Employee those portions of his compensation provided by Sections 2.1, 2.3 , 2.5, 2.6, 2.7, 2.8, 2.10 and 2.11. hereof which shall accrue to Employee up to and including the date upon which such termination becomes effective, and (ii) pay Employee an amount equal to six-month’ base pay in accordance with the payment amounts and terms provided in Section 2.1. In addition, the Corporation shall also pay the foregoing amounts to Employee if Employee’s employment pursuant to the terms hereof is terminated by the Corporation, Antares or any successor (other than for Cause, as described above) in connection with any merger of the Corporation or Antares with or into another person or entity or the sale by the Corporation or Antares of all or substantially all of its respective business, assets or stock (collectively, a “Merger”). In the event of a Merger pursuant to which Employee’s employment pursuant to the terms hereof is terminated by the Corporation, Antares or any such successor (other than for Cause, as described above), the Corporation shall also continue, and shall cause any such successor to continue, Employee’s then current benefits provided by the terms of Section 2.3 hereof for a period not to exceed six (6) months. (c)          Immediately Due to Disability or Death. Subject to the following, and notwithstanding anything in this Agreement to the contrary, the Corporation or Antares may immediately terminate Employee’s employment hereunder upon Employee’s disability (as determined below) or death, provided that in the event the Corporation or Antares terminates Employee’s employment under this subsection due to Employee’s (i) disability, the Corporation shall be obligated to pay Employee only that portion of his compensation provided for by Section 2.1 hereof which shall accrue to Employee up to and including the date upon which Employee became disabled; and (ii) death, the Corporation shall be obligated to pay Employee’s estate only that portion of his compensation provided by Section 2.1 hereof which shall accrue to Employee up to and including the date upon which Employee died. For the purposes of this Agreement, Employee shall be deemed to be suffering from a disability if Employee, in the reasonable judgment of Antares’ Board of Directors (with Employee abstaining from any such vote if Employee is elected to serve on the Corporation’s Board of Directors, about which no representation is made herein or otherwise), is unable to perform his duties, as specified in Section 1 hereof, by reason of illness or incapacity for a period of more than 180 days in any 12-month period. (d)          Termination by Employee. In the event Employee terminates this Agreement, the Corporation shall be obligated to pay Employee only that portion   -4-   -------------------------------------------------------------------------------- of his compensation provided by Section 2.1-2.11 hereof which shall accrue to Employee up to and including the date upon which such termination becomes effective.   4. Options; Restricted Stock. 4.1.         Option Grant. Upon execution and delivery by Employee of this Agreement, Antares shall issue at the next regularly scheduled Compensation Committee meeting to Employee three-year qualified options to purchase an aggregate of eighty thousand (80,000) shares of Antares’ common stock at an exercise price equal to the closing price of Antares’ common stock on the American Stock Exchange on that day. This option grant shall, in all cases, be subject to the terms of Antares’ Stock Option Plan for Employees, and the form of agreement reflecting such options shall be in the form customarily used by Antares or reasonably required by the Committee. 4.2.        Additional Awards. At the sole discretion of Antares’ Board of Directors, Employee may be entitled to participate in such other equity incentive plans or programs as such board may, from time-to-time, implement, provided that nothing herein shall obligate Antares to allow Employee to participate in any such plan or program. 4.3.         Special Stock Grant. To the extent approved by the Antares’ Board of Directors, Employee shall be eligible to receive a special restricted stock award grant of 280’000 shares (or a portion thereof) contingent upon the accomplishment of specific defined and agreed upon goals as determined at the discretion of the CEO and approved by the Compensation Committee. Any such shares issued to the Employee shall be vested upon issuance and subject to such additional terms and conditions imposed thereon at the time of issuance (including, without limitation, the terms and conditions imposed by the applicable equity compensation plan maintained by the Company pursuant to which such shares are issued and the terms of the applicable award agreement). 5.     Confidentiality Agreement and Covenant Not to Compete; Nonsolicitation. 5.1.         Confidentiality Agreement. Employee acknowledges the interest of the Corporation and Antares in maintaining the confidentiality of information related to its respective business and shall not at any time during the Employment Term or thereafter, regardless of the reason for or circumstances of termination of employment, directly or indirectly, reveal or cause to be revealed to any person or entity the production processes, inventions, trade secrets, customer lists or other confidential business information obtained by him as a result of his employment pursuant to the terms hereof, including information received by him prior to the Effective Date, except when specifically authorized in writing to do so by Antares’ Board of Directors; provided, however, that the parties acknowledge that it is not the intent of this Section 5.1 to include within its subject matter (i) information not proprietary to the Corporation or Antares, or (ii) information which is in the public domain. 5.2.         Covenant Not to Compete; Nonsolicitation. During the Employment Term and for one (1) year immediately following the termination of Employee’s employment (the “Noncompete Period”), regardless of the reason, if any, for any such   -5-   -------------------------------------------------------------------------------- termination, Employee shall not, on his behalf or on behalf of or in conjunction with any other person, persons, firm or partnership, corporation, entity or company: (a)          compete, directly or indirectly, with the Corporation or Antares or engage or participate, directly or indirectly, in any business or businesses substantially similar to the business conducted by the Corporation or Antares as of the Effective Date or as may thereafter be conducted by the Corporation or Antares at any time during the Noncompete Period. (b)          solicit or cause to be solicited any customers of the Corporation or Antares in manner prohibited by the terms hereof. (c)          recruit or cause any other person to recruit any employee of the Corporation or Antares to any of said business or businesses. (d)          Employee acknowledges that he has been acting as the Corporation’s Managing Director prior to the Effective Date. Employee agrees that the benefits conferred on him by this Agreement, including, without limitation, the benefits provided for in Sections 2.2, 2.3 and 4 hereof, constitute new and valuable consideration sufficient for his covenants contained in this Section 5.   6. Miscellaneous. 6.1.         Notices. All notices and other communications under this Agreement will be sufficient if written and sent by registered or certified mail, return receipt requested, in the case of Employee, to his residence as shown on the Corporation’s records, and in the case of the Corporation, to c/o Antares Pharma, Inc. at its offices at Princeton Crossroads Corporate Center, 250 Phillips Boulevard, Suite 290, Ewing, NJ 08618, with a copy to attention Jonathan A. Clark, Esq. Pepper Hamilton LLP, 3000 Two Logan Square, 18th and Arch Streets, Philadelphia, PA 19103-2799; provided, however, that any notice of change of address shall be effective only upon receipt. 6.2.         Obligations and Benefits. The obligations and benefits set forth in this Agreement shall be binding and inure to the benefit of the respective parties hereto and their personal representatives, successors and permitted assigns. 6.3.        Assignment. Absent Antares’ express written consent, which may be withheld at Antares’ discretion, Employee may not assign any obligations or benefits under this Agreement; each of the Corporation and Antares is free to assign its obligations or benefits under this Agreement. 6.4.         Waiver. A waiver by the Corporation, Antares or Employee of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach. 6.5.        Amendment. This Agreement shall be amended only in writing, signed by each party hereto.   -6-   -------------------------------------------------------------------------------- 6.6.        Governing Law; Venue. This Agreement shall in all respects be interpreted, construed and governed by and in accordance with the laws of Switzerland , and shall be submitted to the exclusive jurisdiction of the courts in the Kanton of Basel-Land (Switzerland). 6.7.        Entire Agreement. This Agreement contains the entire agreement of the parties. This Agreement supersedes any and all prior agreements between the parties hereto, whether oral or written, including, without limitation that certain term sheet previously discussed and reviewed by the parties. All of such other agreements, whether oral or written, are hereby null and void and of no further force and effect. 6.8.         Severability. If any portion or portions of this Agreement shall be, for any reason, invalid or unenforceable, the remaining portion or portions shall nevertheless be valid and enforceable. 6.9.         Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.   -7-   -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement effective the day and year first above written.       ANTARES PHARMA AG By:  /s/ Thomas Bergmen               Its:   Director, Antares Pharma AG ANTARES PHARMA, INC. By:  /s/ Jack Stover                         Its:    President and CEO                   /s/ Dario Carrara                           Dario Carrara           -8-    

Exhibit 10.1   [NCI Letterhead]   February 2, 2006   Richard F. Klein NCI Building Systems, Inc. 10943 N. Sam Houston Parkway West Houston, Texas 77064   Re: Resignation as President and Chief Operating Officer of the Metal Coil Coating Division of NCI   Dear Dick:   This letter will memorialize our discussion and agreement today regarding your decision to resign your current position as an officer of NCI Building Systems, Inc., as President and Chief Operating Officer of the Metal Coil Coating Division of NCI Building Systems, Inc. and any and all related entities (collectively, the “Company” or “NCI”), although you will remain an employee of the Company through December 9, 2007. On behalf of the Company, I regretfully accept your decision, effective as of February 1, 2006 (the “Effective Date”). We have agreed upon the following terms:   Salary and Bonus   Beginning as of the Effective Date, your annual base salary shall be reduced to $100,000, payable in accordance with NCI’s regular payroll practices. You will be eligible to continue to participate in the group health and medical benefit programs through December 9, 2007, that are generally made available to active NCI employees at the applicable active employee premium rate and any other group insurance plans, if any, which are made available to NCI employees, subject to the terms and conditions of such coverage upon the payment of applicable premiums. Following December 9, 2007, you will have the right to convert your health insurance coverage under the COBRA laws (a subsequent letter will be mailed to you explaining your rights thereunder).   In accordance with our discussions, you will be eligible to receive a bonus under the NCI Cash Bonus Plan (the “Bonus Plan”) for fiscal years 2006 and 2007; provided, however, that there is no guarantee that the Company will pay bonuses. The payment of bonuses shall be determined in accordance with the standards as set forth in the Bonus Plan. Your bonus, if any, shall be calculated as follows:   Period --------------------------------------------------------------------------------   Bonus Rate --------------------------------------------------------------------------------   Base Salary for Bonus Computation -------------------------------------------------------------------------------- FY2006   25% (Matrix)   $ 235,000 FY2007   75% (Matrix)   $ 100,000 -------------------------------------------------------------------------------- Richard F. Klein February 2, 2006 Page 2 of 3   You will not be eligible to receive any further semi-annual grants of stock options under the 2003 Long-Term Stock Incentive Plan, as amended.   Time Commitment   In accordance with our discussions, beginning on the Effective Date and continuing through and including January 31, 2007, you have agreed to work up to a maximum of sixty (60) work days. For the period of February 1, 2007, through and including December 9, 2007, you have agreed to work up to a maximum of fifty (50) work days. For the purposes of this provision, it is agreed that your participation in telephone calls and email communications shall not be construed to be or count against the maximum work day commitment referenced above. Effective as of the Effective Date through and including December 9, 2007, you will not be required to report to NCI’s Corporate Headquarters or other Company facilities other than as specifically requested. From time to time, the Company may become involved in special projects, such as the evaluation of a potential acquisition. In such event, the Company may request and you hereby agree that you will make yourself available for an extended period of time (including consecutive days of service); provided, however, that you shall not be required to perform services beyond the maximum work day commitments for the periods referenced herein. Similarly, to the extent that your assistance is requested in connection with legal proceedings, you agree to make yourself reasonably available to assist in or provide testimony on behalf of the Company.   Cooperation and Assistance   During the term of this agreement, you agree to provide such services as are reasonably necessary to assist the Company in an orderly transition of your responsibilities as President and Chief Operating Officer of the Metal Coil Coating Division of NCI to Brad Robeson or any such other successor to such responsibilities and to perform such other services for the Company as shall be reasonably requested by the Chief Executive Officer of the Company and are not inconsistent with your prior duties and responsibilities as an officer of the Company.   Miscellaneous   The Company shall reimburse you for reasonable and necessary out of pocket expenses incurred in connection with traveling to a Company plant facility or other Company function that requires travel. -------------------------------------------------------------------------------- Richard F. Klein February 2, 2006 Page 3 of 3   You agree to send an email to the Chief Executive Officer of the Company indicating your personal travel itinerary and contact information prior to any extended periods during which you will be away from the Houston Metropolitan Area.   You agree that you will provide advance written notice to either Frances Powell or Todd Moore of your intention to trade in NCI shares, including exercising options.   On a personal note, I look forward to working with you during your continuing time at NCI and wish you the best of luck and prosperity in your new endeavors.   Sincerely, /s/ A.R. Ginn, Jr. -------------------------------------------------------------------------------- A.R. Ginn, Jr. ARG/rl ACCEPTED BY: /s/ Richard F. Klein -------------------------------------------------------------------------------- Richard F. Klein   c: Norman C. Chambers Frances Powell Todd R. Moore